Preferred Bank Reports Third Quarter Results

GlobeNewswire10-21

LOS ANGELES, Oct. 21, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2024. Preferred Bank (“the Bank”) reported net income of $33.4 million or $2.46 per diluted share for the third quarter of 2024. This represents a slight decrease in net income of $209,000 from the prior quarter and down by $4.8 million from the same quarter last year. The decrease in net income from the prior year was due to a decrease in net interest income of $4.1 million due to higher deposit costs as well as an increase in noninterest expense of $3.1 million. These were partially offset by lower provision for credit losses and an increase in noninterest income. The decrease from the prior quarter was due to an increase in noninterest expense of $2.4 million, an increase in the provision for credit losses of $700,000 partially offset by an increase in net interest income of $2.7 million. Preferred Bank continues to deliver top-of-peer group profitability metrics and long term shareholder returns.

Highlights for the Quarter:

  • Return on average assets was 1.95%
  • Return on beginning equity of 18.37%
  • Net interest margin (NIM) expanded to 4.10%
  • Total loans increased by $143 million or 2.6% for the quarter
  • Efficiency ratio was 30.6%

Li Yu, Chairman and CEO, commented, “I am pleased to report our third quarter 2024 net income was $33.4 million or $2.46 a share. Highlights of the quarter include the successful reduction of $21.2 million in non-performing loans, with no charge-offs. Interest recovery related to this was $800,000. Criticized loans, however, have increased but we believe it may be temporary in nature. Separately, the OREO property is currently in escrow, scheduled to close later this month. The valuation allowance we recorded of $1.7 million is included in the quarter’s non-interest expense.

Loan demand was strong this quarter. We had a net increase of $143 million, or 2.6% on a linked quarter basis. The September’s rate cut seems to have spurred borrower interest in general. Deposits for the quarter had a very small decrease, as we have been careful in monitoring our deposit costs.

At September 30, 2024, Preferred Bank’s loan portfolio was 26% fixed rate loans and 74% floating rate loans with floor rates for most of them. We believe it is well-balanced with the sensitivity of our deposits. However, the time certificates of deposits do have a cost adjustment pattern of slower reduction in the beginning but increasing gradually.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $68.8 million for the third quarter of 2024. This was a decrease from the $73.0 million recorded in the same quarter last year and an increase over the $66.1 million posted in the second quarter of 2024. A higher cost of deposits was to blame for the decrease in net interest income versus the prior year and a curing of a nonaccrual loan in the third quarter of 2024 was the reason for the increase in net interest income over the second quarter of 2024. A loan that was placed into nonaccrual status in the second quarter of 2024 was paid down significantly and the interest was brought current in the third quarter of 2024. This interest recovery of $800,000 helped to increase the Bank’s net interest margin to 4.10% for the quarter from 3.96% in the prior quarter. This compares to a margin of 4.39% one year ago. Also very importantly, the Bank’s total interest expense decreased for the first time since the first quarter of 2022. This was the result of the Bank’s efforts to replace higher cost brokered MMDA accounts with traditional brokered CD’s which carry a lower coupon. This is why, during this quarter, there is a fairly sizeable decrease in money market accounts and a corresponding increase in certificates of deposit.

Noninterest Income. For the third quarter of 2024, noninterest income was $3.5 million compared with $3.0 million for the same quarter last year and compared to $3.4 million for the second quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fees which increased by $210,000 and other income partially offset by a decrease in gains on sales of SBA loans of $263,000. In comparing to the same quarter last year; LC fee income was up by $547,000 partially offset by a decrease in service charges of $192,000.

Noninterest Expense. Total noninterest expense was $22.1 million for the third quarter of 2024 compared to $19.7 million for the second quarter of 2024 and compared to the $19.0 million recorded in the same period last year. The primary reason for the increase from the prior year and over the prior quarter was the $1.7 million valuation allowance recorded this quarter on the Bank’s other real estate owned (OREO) property. In comparing to the prior quarter; personnel expense increased by $581,000 and occupancy expense increased by $167,000. This was partially offset by a decrease in promotion expense of $162,000. In comparing to same quarter last year; personnel expense was up by $517,000, occupancy expense was up by $320,000 and professional services was up by $393,000. The increase in professional services expense was due to increased legal costs which were associated with a number of nonperforming loans. For the quarter ended September 30, 2024, the Bank’s efficiency ratio was 30.6%, higher than the 28.3% posted last quarter and higher than the 25.04% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $13.6 million for the third quarter of 2024. This represents an effective tax rate (“ETR”) of 29.0% which is identical to the ETR for last quarter and up from the 28.5% ETR recorded in the same period last year. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.

Balance Sheet Summary

Total gross loans at September 30, 2024 were $5.57 billion, an increase of $298.1 million from the total of $5.27 billion as of December 31, 2023. Total deposits decreased during the quarter by $11 million but still increased year-to-date to $5.87 billion, up $158.4 million from the $5.71 billion as of December 31, 2023. Total assets were $6.87 billion, an increase of $213.3 million over the total of $6.66 billion as of December 31, 2023.

Asset Quality

Non-accrual loans as of September 30, 2024, was $19.4 million, a decrease of $21.2 million from $40.6 million on June 30, 2024. There were no charge-offs related to the reduction. Interest recoveries were $800,000 for this quarter

The increase in total criticized loans of $161.2 for the quarter was largely due to the downgrade of a relationship with seven real estate related loans. These seven loans totaling $182.1 were secured by retail or multifamily properties that have late payment irregularities. At September 30, 2024, four of the seven loans totaling $86.5 million have been brought current and are expected to be out of criticized status in the fourth quarter. The three loans that have not been brought to current have a combined weighted average LTV of 64% and DCR of 0.98. All these loans have adequate guarantor support. Combined amount outstanding for these three loans is $95.6 million.

Allowance for Credit Losses

The provision for credit losses for the third quarter of 2024 was $3.2 million compared to $2.5 million last quarter and compared to $3.5 million in the same quarter last year. The Bank’s allowance coverage ratio increased to 1.36% of loans as compared to 1.34% in the prior quarter.

Capitalization

As of September 30, 2024, the Bank’s leverage ratio was 11.28%, the common equity tier 1 capital ratio was 11.66% and the total capital ratio stood at 15.06%. As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 ratio was 11.57% and the total capital ratio was 15.18%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2024 financial results will be held this afternoon, October 21, 2024 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing “Preferred Bank.” There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's website at www.preferredbank.com.

Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 4, 2024; the passcode is 7955778.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. In addition, the Bank also operates a loan production office in Sunnyvale, California. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy
shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2023 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

AT THE COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188
AT FINANCIAL PROFILES:
Jeffrey Haas
General Information
(310) 622-8240
PFBC@finprofiles.com
  

Financial Tables to Follow

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
           
           
     For the Quarter Ended
     September 30, June 30, September 30, 
      2024  2024  2023 
Interest income:       
 Loans, including fees $114,112 $109,451 $106,695 
 Investment securities  15,032  17,552  18,556 
 Fed funds sold  280  291  278 
  Total interest income  129,424  127,294  125,529 
           
Interest expense:       
 Interest-bearing demand  23,211  24,205  20,257 
 Savings  84  79  67 
 Time certificates  35,956  35,578  29,369 
 FHLB borrowings  -  -  1,557 
 Subordinated debt  1,325  1,325  1,325 
  Total interest expense  60,576  61,187  52,575 
  Net interest income  68,848  66,107  72,954 
Provision for credit losses  3,200  2,500  3,500 
  Net interest income after provision for       
   credit losses  65,648  63,607  69,454 
           
Noninterest income:       
 Fees & service charges on deposit accounts  747  819  939 
 Letters of credit fee income  1,959  1,749  1,412 
 BOLI income  108  105  103 
 Net gain on sale of loans  91  353  21 
 Other income  554  378  497 
  Total noninterest income  3,459  3,404  2,972 
           
Noninterest expense:       
 Salary and employee benefits  13,525  12,944  13,008 
 Net occupancy expense  1,883  1,716  1,563 
 Business development and promotion expense  241  403  193 
 Professional services  1,816  1,832  1,423 
 Office supplies and equipment expense  435  477  395 
 Loss on sale of OREO, valuation allowance and related expense  1,915  29  140 
 Other   2,274  2,296  2,287 
  Total noninterest expense  22,089  19,697  19,009 
  Income before provision for income taxes  47,018  47,314  53,417 
Income tax expense  13,635  13,722  15,225 
  Net income $33,383 $33,592 $38,192 
           
Income per share available to common shareholders       
  Basic $2.50 $2.51 $2.74 
  Diluted $2.46 $2.48 $2.71 
           
Weighted-average common shares outstanding       
  Basic  13,327,848  13,362,522  13,925,994 
  Diluted  13,544,273  13,548,400  14,105,915 
           
Cash dividends per common share $0.70 $0.70 $0.55 
           
PREFERRED BANK 
Condensed Consolidated Statements of Operations 
(unaudited) 
(in thousands, except for net income per share and shares) 
           
           
     For the Nine Months Ended   
     September 30, September 30, Change 
      2024  2023  % 
Interest income:       
 Loans, including fees $333,543 $304,796  9.4 
 Investment securities  48,841  47,454  2.9 
 Fed funds sold  854  774  10.4 
  Total interest income  383,238  353,024  8.6 
           
Interest expense:       
 Interest-bearing demand  69,706  53,701  29.8 
 Savings  238  153  55.6 
 Time certificates  105,864  71,399  48.3 
 FHLB borrowings  -  3,819  -100.0%
 Subordinated debt  3,975  3,975  0.0 
  Total interest expense  179,783  133,046  35.1 
  Net interest income  203,455  219,978  -7.5%
Provision for credit losses  10,100  6,500  55.4 
  Net interest income after provision for credit losses  193,355  213,478  -9.4%
           
Noninterest income:       
 Fees & service charges on deposit accounts  2,411  2,477  -2.7%
 Letters of credit fee income  5,211  4,312  20.8%
 BOLI income  318  307  3.3%
 Net loss on called and sale of investment securities  -  (4,117) -100.0%
 Net gain on sale of loans  547  547  -0.1%
 Other income  1,441  1,481  -2.7%
  Total noninterest income  9,928  5,007  98.3%
           
Noninterest expense:       
 Salary and employee benefits  40,369  39,256  2.8%
 Net occupancy expense  5,310  4,513  17.7%
 Business development and promotion expense  910  498  82.7%
 Professional services  5,105  3,915  30.4%
 Office supplies and equipment expense  1,385  1,197  15.7%
 Loss on sale of OREO, valuation allowance and related expense  2,079  3,050  -31.8%
 Other   6,656  6,332  5.1%
  Total noninterest expense  61,814  58,761  5.2%
  Income before provision for income taxes  141,469  159,724  -11.4%
Income tax expense  41,028  45,523  -9.9%
  Net income $100,441 $114,201  -12.0%
           
Income per share available to common shareholders       
  Basic $7.50 $8.01  -6.4%
  Diluted $7.39 $7.92  -6.7%
           
Weighted-average common shares outstanding       
  Basic  13,399,487  14,257,005  -6.0%
  Diluted  13,587,820  14,418,939  -5.8%
           
Dividends per share $2.10 $1.65  27.3%
           
PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
        
        
    September 30, December 31, 
     2024   2023  
    (Unaudited) (Audited) 
Assets    
Cash and due from banks$782,394  $890,852  
Fed funds sold 22,600   20,000  
 Cash and cash equivalents 804,994   910,852  
        
Securities held-to-maturity, at amortized cost 20,311   21,171  
Securities available-for-sale, at fair value 337,363   313,842  
        
Loans held for sale, at lower of cost or fair value 225   360  
        
Loans 5,571,579   5,273,498  
 Less allowance for credit losses (76,051)  (78,355) 
 Less amortized deferred loan fees, net (10,414)  (11,079) 
 Loans, net 5,485,114   5,184,064  
        
Other real estate owned and repossessed assets 15,082   16,716  
Customers' liability on acceptances -   315  
Bank furniture and fixtures, net 9,195   9,694  
Bank-owned life insurance 10,364   10,632  
Accrued interest receivable 35,562   33,892  
Investment in affordable housing partnerships 58,009   65,276  
Federal Home Loan Bank stock, at cost 15,000   15,000  
Deferred tax assets 46,209   48,991  
Income tax receivable 1,013   2,391  
Operating lease right-of-use assets 30,489   22,050  
Other assets 3,414   4,030  
 Total assets$6,872,344  $6,659,276  
        
Liabilities and Shareholders' Equity    
Deposits:    
 Noninterest bearing demand deposits$682,859  $786,995  
 Interest bearing deposits: 1,994,288   2,075,156  
  Savings 29,793   29,167  
  Time certificates of $250,000 or more 1,478,500   1,317,862  
  Other time certificates 1,682,324   1,500,162  
  Total deposits 5,867,764   5,709,342  
        
Acceptances outstanding -   315  
Subordinated debt issuance, net 148,410   148,232  
Commitments to fund investment in affordable housing partnerships 23,617   30,824  
Operating lease liabilities 26,730   19,766  
Accrued interest payable 16,001   16,124  
Other liabilities 39,705   39,568  
 Total liabilities 6,122,227   5,964,171  
        
Shareholders' equity 750,117   695,105  
 Total liabilities and shareholders' equity$6,872,344  $6,659,276  
        
Book value per common share$56.54  $50.54  
Number of common shares outstanding 13,267,852   13,753,246  
PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
         
         
         
    For the Quarter Ended
         
    September 30,June 30,March 31,December 31,September 30,
     2024  2024  2024  2023  2023 
Unaudited historical quarterly operations data:     
 Interest income$129,424 $127,294 $126,520 $124,964 $125,529 
 Interest expense 60,576  61,187  58,020  55,568  52,575 
  Interest income before provision for credit losses 68,848  66,107  68,500  69,396  72,954 
 Provision for credit losses 3,200  2,500  4,400  3,500  3,500 
 Noninterest income 3,459  3,404  3,065  2,106  2,972 
 Noninterest expense 22,089  19,697  20,028  17,873  19,009 
 Income tax expense 13,635  13,722  13,671  14,290  15,225 
  Net income$33,383 $33,592 $33,466 $35,839 $38,192 
         
 Earnings per share     
  Basic$2.50 $2.51 $2.48 $2.63 $2.74 
  Diluted$2.46 $2.48 $2.44 $2.60 $2.71 
         
Ratios for the period:     
 Return on average assets 1.95% 1.97% 2.00% 2.15% 2.25%
 Return on beginning equity 18.37% 19.44% 19.36% 21.21% 22.66%
 Net interest margin (Fully-taxable equivalent) 4.10% 3.96% 4.19% 4.24% 4.39%
 Noninterest expense to average assets 1.29% 1.15% 1.20% 1.07% 1.12%
 Efficiency ratio 30.55% 28.34% 27.99% 25.00% 25.04%
 Net charge-offs (recoveries) to average loans (annualized) -0.00% 0.68% 0.26% -0.00% 0.01%
         
Ratios as of period end:     
 Tangible common equity ratio 10.92% 10.55% 10.35% 10.43% 10.10%
 Tier 1 leverage capital ratio 11.28% 10.89% 10.80% 10.85% 10.46%
 Common equity tier 1 risk-based capital ratio 11.66% 11.52% 11.50% 11.57% 11.63%
 Tier 1 risk-based capital ratio 11.66% 11.52% 11.50% 11.57% 11.63%
 Total risk-based capital ratio 15.06% 14.93% 15.08% 15.18% 15.32%
 Allowances for credit losses to loans at end of period 1.36% 1.34% 1.49% 1.49% 1.46%
 Allowance for credit losses to non-performing loans3.92x1.79x4.33x2.73x3.86x
         
Average balances:     
 Total securities$356,590 $353,357 $348,961 $349,863 $368,968 
 Total loans 5,458,613  5,320,360  5,263,562  5,126,918  5,086,241 
 Total earning assets 6,684,766  6,728,498  6,585,853  6,499,469  6,597,557 
 Total assets 6,817,979  6,863,829  6,718,018  6,627,349  6,719,859 
 Total time certificate of deposits 2,874,985  2,884,259  2,852,860  2,767,385  2,680,854 
 Total interest bearing deposits 5,124,245  5,203,034  5,004,834  4,906,947  4,800,227 
 Total deposits 5,828,227  5,901,976  5,761,488  5,689,713  5,654,350 
 Total interest bearing liabilities 5,272,617  5,351,347  5,153,089  5,055,143  5,069,014 
 Total equity 747,222  715,190  704,996  683,141  678,020 
         
PREFERRED BANK 
Selected Consolidated Financial Information 
(unaudited) 
(in thousands, except for ratios) 
        
        
        
    For the Nine Months Ended 
    September 30, September 30, 
     2024   2023  
        
 Interest income$383,238  $353,024  
 Interest expense 179,783   133,046  
  Interest income before provision for credit losses 203,455   219,978  
 Provision for credit losses 10,100   6,500  
 Noninterest income 9,928   5,007  
 Noninterest expense 61,814   58,761  
 Income tax expense 41,028   45,523  
  Net income$100,441  $114,201  
        
 Earnings per share    
  Basic$7.50  $8.01  
  Diluted$7.39  $7.92  
        
Ratios for the period:    
 Return on average assets 1.97%  2.33% 
 Return on beginning equity 19.30%  24.22% 
 Net interest margin (Fully-taxable equivalent) 4.08%  4.58% 
 Noninterest expense to average assets 1.21%  1.20% 
 Efficiency ratio 28.97%  26.12% 
 Net charge-off (recoveries) to average loans 0.31%  0.00% 
        
Average balances:    
 Total securities$352,982  $402,971  
 Total loans 5,347,918   5,048,452  
 Total earning assets 6,666,439   5,047,971  
 Total assets 6,800,008   6,436,889  
 Total time certificate of deposits 2,870,717   6,560,955  
 Total interest bearing deposits 5,110,755   2,504,426  
 Total deposits 5,830,555   4,602,039  
 Total interest bearing liabilities 5,259,068   5,539,223  
 Total equity 722,560   4,851,214  
        
PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
             
             
             
    As of
             
    September 30, June 30, March 31, December 31, September 30,
     2024   2024   2024   2023   2023 
Unaudited quarterly statement of financial position data:         
Assets:         
 Cash and cash equivalents$804,994  $917,677  $936,600  $910,852  $1,021,108 
 Securities held-to-maturity, at amortized cost 20,311   20,605   20,904   21,171   21,474 
 Securities available-for-sale, at fair value 337,363   331,909   333,411   313,842   335,608 
 Loans:         
  Real estate – Mortgage:         
   Real estate—Residential$753,453  $732,251  $724,101  $688,058  $663,021 
   Real estate—Commercial 2,882,506   2,833,430   2,777,608   2,760,761   2,688,148 
   Total Real Estate – Mortgage 3,635,959   3,565,681   3,501,709   3,448,819   3,351,169 
  Real estate – Construction:         
   R/E Construction — Residential 274,214   238,062   236,596   246,201   226,482 
   R/E Construction — Commercial 290,308   247,582   213,727   179,775   164,666 
   Total real estate construction loans 564,522   485,644   450,323   425,976   391,148 
  Commercial and industrial 1,365,550   1,369,617   1,369,529   1,394,871   1,377,675 
  SBA 5,649   5,463   3,914   3,469   2,424 
  Consumer and others 124   118   379   363   285 
   Gross loans 5,571,804   5,428,600   5,325,854   5,273,498   5,128,242 
 Allowance for credit losses on loans (76,051)  (72,848)  (79,311)  (78,355)  (74,849)
 Net deferred loan fees (10,414)  (10,502)  (10,460)  (11,079)  (10,240)
  Net loans, excluding loans held for sale$5,485,339  $5,345,250  $5,236,083  $5,184,064  $5,043,153 
 Loans held for sale$225  $955  $605  $360  $- 
  Net loans$5,485,564  $5,346,205  $5,236,688  $5,184,424  $5,043,153 
             
 Other real estate owned and repossessed assets$15,082  $16,716  $16,716  $16,716  $16,716 
 Investment in affordable housing partnerships 58,009   60,432   62,854   65,276   54,679 
 Federal Home Loan Bank stock, at cost 15,000   15,000   15,000   15,000   15,000 
 Other assets 136,021   138,036   134,040   131,995   124,793 
  Total assets$6,872,344  $6,846,580  $6,756,213  $6,659,276  $6,632,530 
             
Liabilities:         
 Deposits:         
  Demand$682,859  $675,767  $709,767  $786,995  $838,300 
  Interest bearing demand 1,994,288   2,326,214   2,159,948   2,075,156   2,091,384 
  Savings 29,793   28,251   29,261   29,167   30,427 
  Time certificates of $250,000 or more 1,478,500   1,406,149   1,349,927   1,317,862   1,283,461 
  Other time certificates 1,682,324   1,442,381   1,552,805   1,500,162   1,439,699 
  Total deposits$5,867,764  $5,878,762  $5,801,708  $5,709,342  $5,683,271 
             
 Acceptances outstanding$-  $-  $-  $315  $103 
 Subordinated debt issuance, net 148,410   148,351   148,292   148,232   148,173 
 Commitments to fund investment in affordable housing partnerships   23,617   27,946   29,647   30,824   20,824 
 Other liabilities 82,436   68,394   77,008   75,458   109,651 
  Total liabilities$6,122,227  $6,123,453  $6,056,655  $5,964,171  $5,962,022 
             
Equity:          
 Net common stock, no par value$109,928  $113,509  $115,915  $134,534  $143,584 
 Retained earnings 664,808   640,675   616,417   592,325   566,027 
 Accumulated other comprehensive income (24,619)  (31,057)  (32,774)  (31,754)  (39,103)
  Total shareholders' equity$750,117  $723,127  $699,558  $695,105  $670,508 
  Total liabilities and shareholders' equity$6,872,344  $6,846,580  $6,756,213  $6,659,276  $6,632,530 
             
PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(Unaudited)
              
            
   Three months ended September 30, Three months ended June 30, Three months ended September 30,
    2024   2024   2023 
    InterestAverage  InterestAverage  InterestAverage
   AverageIncome orYield/ AverageIncome orYield/ AverageIncome orYield/
   BalanceExpenseRate BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest earning assets:           
 Loans (1,2)$5,459,842 $114,1128.31% $5,324,410 $109,4518.27% $5,086,302 $106,6958.32%
 Investment securities (3) 356,590  3,6104.03%  353,357  3,6524.16%  368,968  3,4223.68%
 Federal funds sold 20,164  2805.52%  20,866  2915.61%  20,111  2785.48%
 Other earning assets 848,170  11,5215.40%  1,029,865  13,9995.47%  1,122,176  15,2355.39%
  Total interest earning assets 6,684,766  129,5237.71%  6,728,498  127,3937.61%  6,597,557  125,6307.55%
 Deferred loan fees, net (10,248)    (10,459)    (10,071)  
 Allowance for credit losses on loans (72,899)    (79,119)    (71,503)  
Noninterest earning assets:           
 Cash and due from banks 10,826     10,626     12,101   
 Bank furniture and fixtures 9,419     9,787     8,814   
 Right of use assets 22,496     22,886     21,491   
 Other assets 173,619     181,610     161,470   
  Total assets$6,817,979    $6,863,829    $6,719,859   
              
LIABILITIES AND SHAREHOLDERS' EQUITY           
Interest bearing liabilities:           
 Deposits:           
  Interest bearing demand and savings$2,249,260 $23,2954.12% $2,318,775 $24,2844.21% $2,119,373 $20,3243.80%
  TCD $250K or more 1,412,073  17,8665.03%  1,379,116  17,2955.04%  1,251,397  14,0854.47%
  Other time certificates 1,462,912  18,0904.92%  1,505,143  18,2834.89%  1,429,457  15,2844.24%
  Total interest bearing deposits 5,124,245  59,2514.60%  5,203,034  59,8624.63%  4,800,227  49,6934.11%
Advance from Federal Home Loan Bank -  -0.00%  -  -0.00%  120,652  1,5575.12%
Subordinated debt, net 148,372  1,3253.55%  148,313  1,3253.59%  148,135  1,3253.55%
  Total interest bearing liabilities 5,272,617  60,5764.57%  5,351,347  61,1874.60%  5,069,014  52,5754.11%
Noninterest bearing liabilities:           
 Demand deposits 703,982     698,942     854,123   
 Lease liability 18,882     19,828     19,759   
 Other liabilities 75,276     78,522     98,943   
  Total liabilities 6,070,757     6,148,639     6,041,839   
Shareholders’ equity 747,222     715,190     678,020   
  Total liabilities and shareholders’ equity$6,817,979    $6,863,829    $6,719,859   
Net interest income $68,947   $66,206   $73,055 
Net interest spread  3.14%   3.02%   3.44%
Net interest margin  4.10%   3.96%   4.39%
              
Cost of Deposits:           
 Noninterest bearing demand deposits$703,982    $698,942    $854,123   
 Interest bearing deposits 5,124,245  59,2514.60%  5,203,034  59,8624.63%  4,800,227  49,6934.11%
  Total Deposits$5,828,227 $59,2514.04% $5,901,976 $59,8624.08% $5,654,350 $49,6933.49%
              
(1)Includes non-accrual loans and loans held for sale          
(2)Net loan fee income of $991,000, $1.1 million and $1.3 million for the quarter ended September 30, 2024, June 30, 2024 and September 30, 2023, respectively, are included in the yield computations
(3)Yields on securities have been adjusted to a tax-equivalent basis         
PREFERRED BANK
Year-to-Date Average Balances, Yield and Rates
(Unaudited)
          
          
   Nine Months ended September 30,
    2024
   2023 
    InterestAverage  InterestAverage
   AverageIncome orYield/ AverageIncome orYield/
   BalanceExpenseRate BalanceExpenseRate
ASSETS(Dollars in thousands)
Interest earning assets:       
 Loans (1,2)$5,350,465 $333,5438.33% $5,048,452 $304,7968.07%
 Investment securities (3) 352,982  10,6914.05%  402,971  11,1253.69%
 Federal funds sold 20,472  8545.57%  20,111  7745.14%
 Other earning assets 942,520  38,4485.45%  965,355  36,6335.07%
  Total interest earning assets 6,666,439  383,5367.68%  6,436,889  353,3287.34%
 Deferred loan fees, net (10,466)    (10,142)  
 Allowance for credit losses on loans (76,775)    (69,653)  
Noninterest earning assets:       
 Cash and due from banks 10,693     11,912   
 Bank furniture and fixtures 9,762     8,931   
 Right of use assets 22,462     21,780   
 Other assets 177,893     161,238   
  Total assets$6,800,008    $6,560,955   
          
LIABILITIES AND SHAREHOLDERS' EQUITY       
Interest bearing liabilities:       
 Deposits:       
  Interest bearing demand/ savings$2,240,038 $69,9444.17% $2,097,613 $53,8543.43%
  TCD $250K or more 1,377,621  51,6625.01%  1,258,870  37,6003.99%
  Other time certificates 1,493,096  54,2024.85%  1,245,556  33,7983.63%
  Total interest \bearing deposits 5,110,755  175,8084.59%  4,602,039  125,2523.64%
Advance from Federal Home Loan Bank -  -0.00%  101,099  3,8195.05%
Subordinated debt, net 148,313  3,9753.58%  148,076  3,9753.59%
  Total interest bearing liabilities 5,259,068  179,7834.57%  4,851,214  133,0463.67%
Noninterest bearing liabilities:       
 Demand deposits 719,800     937,184   
 Lease liability 19,401     20,482   
 Other liabilities 79,179     83,213   
  Total liabilities 6,077,448     5,892,093   
Shareholders’ equity 722,560     668,862   
  Total liabilities and shareholders’ equity$6,800,008    $6,560,955   
Net interest income $203,753   $220,282 
Net interest spread  3.12%   3.67%
Net interest margin  4.08%   4.58%
          
Cost of Deposits:       
 Noninterest bearing demand deposits$719,800    $937,184   
 Interest bearing deposits 5,110,755  175,8084.59%  4,602,039  125,2523.64%
  Total Deposits$5,830,555 $175,8084.03% $5,539,223 $125,2523.02%
          
(1)Includes non-accrual loans and loans held for sale       
(2)Net loan fee income of $3.4 million and $3.2 million for the year ended September 30, 2024 and 2023, respectively, are included in the yield computations
(3)Yields on securities have been adjusted to a tax-equivalent basis      
PREFERRED BANK 
Loan and Credit Quality Information 
         
Allowance For Credit Losses History 
     Nine Months EndedYear ended 
     September 30, 2024 December 31, 2023 
     (Dollars in 000's) 
Allowance For Credit Losses     
Balance at Beginning of Period $78,355  $68,472  
 Charge-Offs     
  Commercial & Industrial  12,409   124  
  Mini-perm Real Estate  -   -  
  Total Charge-Offs  12,409   124  
         
 Recoveries     
  Commercial & Industrial  5   7  
  Mini-perm Real Estate  -   -  
  Total Recoveries  5   7  
         
 Net Charge-Offs  12,404   117  
 Provision for Credit Losses:  10,100   10,000  
Balance at End of Period $76,051  $78,355  
         
Average Loans Held for Investment $5,347,918  $5,067,870  
Loans Held for Investment at End of Period $5,571,579  $5,273,498  
Net Charge-Offs to Average Loans  0.31%  0.00% 
Allowances for Credit Losses to Loans at End of Period  1.36%  1.49% 
         

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