Preferred Bank Announces Additional Q4 Expense
Preferred Bank (NASDAQ: PFBC) has disclosed an accounting error in its calculation of right of use asset and lease liabilities. The bank will record an $8.1 million pre-tax occupancy expense in Q4 2024, reducing quarterly diluted earnings per share by approximately $0.43. The error stems from incorrect lease term calculations when adopting ASC 842 in 2019, resulting in understated occupancy expenses averaging $1.35 million pre-tax annually from 2019 to 2024. Future occupancy expenses are expected to increase by approximately $1.6 million annually on a pre-tax basis. The bank has determined these adjustments are not material to its overall operations or balance sheet.
Preferred Bank (NASDAQ: PFBC) ha comunicato un errore contabile nel calcolo dell'attività di diritto d'uso e delle passività di leasing. La banca registrerà una spesa di occupazione ante imposte di 8,1 milioni di dollari nel quarto trimestre del 2024, riducendo l'utile diluito per azione di circa 0,43 dollari. L'errore deriva da calcoli errati della durata del leasing durante l'adozione dell'ASC 842 nel 2019, con conseguente sottovalutazione delle spese di occupazione che sono state in media di 1,35 milioni di dollari ante imposte all'anno dal 2019 al 2024. Le spese di occupazione future sono attese in aumento di circa 1,6 milioni di dollari annualmente su base ante imposte. La banca ha determinato che questi adeguamenti non sono materiali per le sue operazioni complessive o il bilancio.
Preferred Bank (NASDAQ: PFBC) ha declarado un error contable en su cálculo de activo por derecho de uso y pasivos de arrendamiento. El banco registrará un gasto de ocupación de 8,1 millones de dólares antes de impuestos en el cuarto trimestre de 2024, reduciendo las ganancias diluidas por acción en aproximadamente 0,43 dólares. El error se origina de cálculos incorrectos de la duración del arrendamiento al adoptar el ASC 842 en 2019, lo que resultó en gastos de ocupación subestimados que promedian 1,35 millones de dólares antes de impuestos anualmente desde 2019 hasta 2024. Se espera que los gastos de ocupación futuros aumenten en aproximadamente 1,6 millones de dólares anualmente antes de impuestos. El banco ha determinado que estos ajustes no son materiales para sus operaciones generales o su balance.
Preferred Bank (NASDAQ: PFBC)는 사용권 자산 및 리스 부채의 계산에서 회계 오류를 공개했습니다. 이 은행은 2024년 4분기에 810만 달러의 세전 점유 비용을 기록할 예정이며, 이로 인해 분기당 희석 주당 이익이 약 0.43 달러 감소하게 됩니다. 이 오류는 2019년에 ASC 842를 도입할 때 잘못된 리스 기간 계산에서 발생했으며, 2019년부터 2024년까지 연평균 135만 달러의 세전 점유 비용이 저평가되었습니다. 향후 점유 비용은 연간 약 160만 달러 증가할 것으로 예상됩니다. 은행은 이러한 조정이 전체 운영이나 대차대조표에 중요하지 않다고 판단했습니다.
Preferred Bank (NASDAQ: PFBC) a divulgué une erreur comptable dans son calcul des actifs de droit d'usage et des passifs de leasing. La banque enregistrera une charge d'occupation avant impôt de 8,1 millions de dollars au quatrième trimestre 2024, réduisant le bénéfice dilué par action d'environ 0,43 dollar. L'erreur provient de calculs incorrects de la durée de leasing lors de l'adoption de l'ASC 842 en 2019, entraînant une sous-estimation des charges d'occupation d'un montant moyen de 1,35 million de dollars avant impôt par an entre 2019 et 2024. Les charges d'occupation futures devraient augmenter d'environ 1,6 million de dollars par an avant impôt. La banque a déterminé que ces ajustements ne sont pas significatifs pour ses opérations globales ou son bilan.
Preferred Bank (NASDAQ: PFBC) hat einen Buchhaltungsfehler bei der Berechnung des Nutzungsrechtsvermögens und der Leasingverbindlichkeiten bekannt gegeben. Die Bank wird im 4. Quartal 2024 einen Mietaufwand von 8,1 Millionen Dollar vor Steuern verbuchen, was den verwässerten Gewinn pro Aktie um etwa 0,43 Dollar verringert. Der Fehler resultiert aus falschen Berechnungen der Leasingdauer bei der Einführung des ASC 842 im Jahr 2019, was zu einer Unterschätzung der Mietkosten von durchschnittlich 1,35 Millionen Dollar vor Steuern jährlich von 2019 bis 2024 führte. Zukünftige Mietkosten werden voraussichtlich jährlich um etwa 1,6 Millionen Dollar vor Steuern steigen. Die Bank hat festgestellt, dass diese Anpassungen für ihre gesamten Betriebsabläufe oder die Bilanz nicht wesentlich sind.
- Bank determined the accounting adjustments are not material to overall operations
- $8.1 million pre-tax occupancy expense charge in Q4 2024
- Q4 2024 diluted EPS to decrease by $0.43
- Future occupancy expenses to increase by $1.6 million annually pre-tax
- Historical understatement of expenses from 2019-2024 averaging $1.35 million annually
Insights
LOS ANGELES, Dec. 19, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), (“the Bank”), an independent commercial bank, today announced that the Bank had uncovered an unreconciled difference in its calculation of its right of use asset (“ROU”) and lease liabilities. As a result of this error, the Bank will record
In January of 2019, the Bank adopted ASC 842, Accounting for Leases. This accounting statement requires entities capitalize leases that are longer than one year. The effect being that lease expense is recognized more evenly over the life of the lease, rather than recording lease expense as incurred. When the Bank adopted ASC 842, a number of the Bank’s leases were analyzed and capitalized based on an incorrect term, resulting in an understatement of occupancy expense for the years 2019 – YTD 2024. The understatement of expense in each year impacted was no more than
As for the impact of ASC 842 in future years, it is expected that the correct calculation of lease expense will increase occupancy expense by approximately
We have evaluated the impact to income for each of the periods involved as well as the cumulative impact to 2024’s results and have determined the understatement in the prior years as well as the impact to the results for 2024 are not material to the Bank’s results of operations or its balance sheet.
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)). The Bank also operates a branch in Flushing, New York and in the Houston suburb of Sugar Land, Texas as well as 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 |
FAQ
How much will PFBC's Q4 2024 earnings be impacted by the lease accounting error?
What is the future annual impact of the lease accounting correction on PFBC's expenses?
How long has the PFBC lease accounting error been occurring?
What was the average annual understatement of PFBC's expenses from 2019-2024?
