Preferred Bank Reports Quarterly and Annual Earnings

Rhea-AI Summary

Preferred Bank (NASDAQ: PFBC) reported a strong performance for Q4 and the full year 2021. The Bank's net income for Q4 was $26.4 million ($1.80 per diluted share), up 26.5% year-over-year. For the full year, net income reached a record $95.2 million ($6.41 per diluted share), marking a 37.1% increase from 2020. Key metrics include a loan growth of 10.5% and deposit growth of 17.6%. However, despite the positive figures, concerns about inflation and rising operating costs were noted by management. The leverage ratio stood at 9.49%, indicating strong capitalization.

Positive

• Q4 net income of $26.4 million ($1.80/share), up 26.5% YoY.
• Record full-year net income of $95.2 million ($6.41/share), 37.1% increase YoY.
• Loan growth of 10.5% for the year.
• Deposit growth of 17.6%, with $783 million increase in 2021.
• Efficiency ratio improved to 28.82%, a record for the Bank.

Negative

• Net interest margin decreased to 3.28% from 3.36% in the previous quarter.
• Concerns over inflation impacting future operating costs.
• Potential risks associated with the Omicron variant.

LOS ANGELES, Jan. 19, 2022 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter and year ended December 31, 2021. Preferred Bank (“the Bank”) reported net income of $26.4 million or $1.80 per diluted share for the fourth quarter of 2021. This is an increase of $5.5 million or 26.5% over the same quarter last year and up from the $26.1 million or $1.76 per share posted in the third quarter of 2021. The primary reasons for the increase compared to the prior year was a $4.2 million provision for credit losses recorded in the fourth quarter of last year as compared to a reversal of $900,000 in allowance for credit losses (“ACL”) this quarter, a difference of $5.1 million. In comparison to the third quarter of 2021, net interest income increased $1.7 million, noninterest income was down $818,000 and noninterest expense decreased $564,000.

Fourth Quarter 2021 highlights:

• Net income of $26.4 million, or $1.80 per diluted share (company all-time high)
• Linked quarter loan growth (Ex-PPP) of 2.9%
• Return on average assets (“ROA”) of 1.72%
• Return on beginning equity (“ROBE”) of 18.65%
• Pre-provision, pre-tax (“PPPT”) ROBE of 25.82% ¹
• Efficiency ratio of 28.82%

¹ This is a non-GAAP measure and linking to the reconciliation on page 5.

Full Year 2021 highlights:

• Net income of $95.2 million, or $6.41 per diluted share (company all-time high)
• Loan growth (Ex-PPP) of 10.5%
• Deposit growth of 17.6%
• Return on average assets (“ROA”) of 1.74%
• Return on beginning equity (“ROBE”) of 18.13%
• Efficiency ratio of 31.40%

Li Yu, Chairman and CEO, commented, “I am very pleased to report fourth quarter 2021 earnings of $26.4 million or $1.80 per diluted share and record full year earnings of $95.2 million or $6.41 per diluted share. Pre-provision, pre-tax revenue (“PPPT”) also was a record this year for Preferred Bank.

“In the midst of this COVID-19 pandemic, the Bank recorded strong growth in loans, deposits and total assets. Loan growth for the quarter, excluding PPP, was 2.9% and for the year was 10.5%. Deposit growth was only 0.6% for the quarter but was a robust 17.6% for the year. Of the $783 million in deposit growth in 2021, almost 90% was in DDA and money market accounts.

“The net interest margin for the fourth quarter was 3.28%, down from last quarter’s 3.36% but this was due to loan growth in the fourth quarter mostly taking place in the latter part of the quarter. The larger asset base and our highly asset sensitive balance sheet bode well for NIM expansion for 2022 and 2023.

“During the quarter, we successfully resolved a $9.2 million nonperforming loan which did not require the use of the set aside allowance for credit loss that was anticipated. Also, in early January of 2022, a $23 million loan which was deemed a troubled debt restructuring (“TDR”) paid off in full. With these two loans resolved, the Bank’s credit quality is close to pristine levels.

“Looking to 2022, we see potential concerns. Inflation is running at levels not seen in decades and thus will result in higher operating costs. The Omicron variant is another major concern although ultimately the data regarding the severity of this variant appears to be encouraging. We must remain confident that our Country will deal with these issues effectively. Meanwhile, we will apply our best efforts to meet these new challenges.”

Results of Operations - Quarter

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $49.4 million for the fourth quarter of 2021. This was an increase from the $47.8 million recorded in the third quarter of 2021 and was well ahead of the $46.1 million recorded in the fourth quarter of 2020. Loan growth was the primary driver of the increase in net interest income as was an increase in investment securities along with a decline in interest expense. The taxable equivalent margin was 3.28% for the fourth quarter of 2021, as compared to 3.36% in the third quarter of 2021 and versus 3.66% for the same period last year.

Noninterest Income. For the fourth quarter of 2021, noninterest income was $1,966,000 compared with $1,356,000 for the same quarter last year and compared to $2,784,000 for the third quarter of 2021. The increase compared to last year was due to a $663,000 loss on sale of securities recorded in the fourth quarter of last year. The decrease from the third quarter of 2021 was mainly due to letter of credit (“LC”) fees which were down by $858,000 from the third quarter of 2021.

Noninterest Expense. Total noninterest expense was $14.8 million for the fourth quarter of 2021. This is up compared to the $14.2 million recorded in the same quarter last year but a decline on a linked-quarter basis of $564,000 from the third quarter of 2021. Salaries and benefits expense totaled $10.3 million for the fourth quarter of 2021, an increase of $838,000 from the fourth quarter of 2020 and a decrease of $642,000 from the $10.9 million recorded in the third quarter of 2021. The increase over the prior year was due mainly to staff expansion and a corresponding increase in the Bank’s payroll tax expense and the decrease from the third quarter of 2021 was primarily due lower incentive compensation expense. Occupancy expense totaled $1.4 million for the quarter which was relatively flat compared to both the prior quarter and when compared to the same quarter last year. Professional services expense was $1.1 million for the fourth quarter of 2021, essentially flat when comparted to both prior periods. Other expenses were $1.3 million for the fourth quarter of 2021, down from the $1.4 million recorded last quarter and also a decline from the $1.6 million posted in the fourth quarter of 2020. Lower FDIC premiums were the primary reason for the decrease compared to both periods. For the quarter ended December 31, 2021, the Bank’s efficiency ratio was a record 28.8%, down from last quarter’s 30.4% mark and slightly below the 29.9% ratio achieved in the same period last year.

Income Taxes. The Bank recorded a provision for income taxes of $11.1 million for the fourth quarter of 2021. This represents an effective tax rate (“ETR”) of 29.5% and slightly above the ETR of 28.7% in the prior quarter and also up from the ETR of 28.1% 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.

Results of Operations - Year

Net income for 2021 was $95.2 million, or $6.41 per diluted share. This compares to $69.5 million or $4.65 per diluted share for the year 2020. This represents an increase in net income of $25.8 million or 37.1% and an increase in diluted EPS of $1.75 per share or 37.7%. The primary drivers for the large increase year over year is a reversal of provision for credit losses of $1.0 million in 2021 versus a provision for credit losses in 2020 of $26.0 million. In addition, net interest income increased by $11.7 million or 6.7% over 2020 levels. Also, noninterest income increased by $1.7 million or 27.7% over 2020 and offsetting these was an increase in noninterest expense of $3.4 million or 6.0%. The Bank’s net interest margin was 3.46% for 2021 compared to 3.62% in 2020.

Balance Sheet Summary

Total gross loans at December 31, 2021 were $4.42 billion, an increase of $390 million or 9.7% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $5.23 billion, an increase of $783 million or 17.6% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $6.04 billion, an increase of $901 million or 17.5% over the total of $5.14 billion as of December 31, 2020.

Asset Quality

As of December 31, 2021, nonaccrual loans totaled $14.8 million, well off of the $20.9 million reported as of September 30, 2021 and down from the $20.5 million as of December 31, 2020. Total net charge-offs for the fourth quarter of 2021 were $267,000 as compared to $1.0 million in the prior quarter and compared to net charge-offs of $2.0 million in the fourth quarter of 2020.

Allowance for Credit Losses

The (reversal of) provision for credit losses for the fourth quarter of 2021 was ($900,000) as compared to a reversal of ($1.5 million) in the prior quarter and compared to the $4.2 million provision for credit losses posted in the fourth quarter of 2020. A consistently improving economic outlook, among other factors such as credit quality led to a lower allowance requirement. The Bank’s allowance coverage ratio now stands at 1.37% of total loans (excluding PPP loans).

Capitalization

As of December 31, 2021, the Bank’s leverage ratio was 9.49%, the common equity tier 1 capital ratio was 11.21% and the total capital ratio stood at 15.32%. As of December 31, 2020, the Bank’s leverage ratio was 10.08%, the common equity tier 1 ratio was 11.21% and the total risk-based capital ratio was 14.64%.

GAAP – Non-GAAP Reconciliation -Fourth Quarter 2021 PPPT ROBE
Net Income	$	26,421
Add: Reversal of provision for credit losses		(900	)
Add: Income tax expense		11,056
Pre-provision and pre-tax income	$	36,577
Total equity - 9/30/21	$	562,021
Pre-provision and pre-tax ROBE		25.82	%

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2021 financial results will be held tomorrow, January 20, 2022 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. Web participants are encouraged to go to the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Preferred Bank's Chairman and Chief Executive Officer 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 be present to discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will remain available in 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 February 3, 2022; the passcode is 4300401.

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 eleven full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)) and one branch in Flushing, New York. In addition, the Bank operates a Loan Production Office in the Houston, Texas suburb of Sugar Land. 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 2020 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.

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
		December 31,				September 30,				December 31,
			2021				2021				2020
Interest income:
Loans, including fees		$	51,906			$	50,866			$	51,299
Investment securities			2,867				2,725				2,320
Fed funds sold			18				20				30
Total interest income			54,791				53,611				53,649
Interest expense:
Interest-bearing demand			1,511				1,486				1,499
Savings			17				3				21
Time certificates			2,521				3,045				4,534
Subordinated debt			1,325				1,324				1,532
Total interest expense			5,374				5,858				7,586
Net interest income			49,417				47,753				46,063
(Reversal of) provision for credit losses			(900	)			(1,500	)			4,200
Net interest income after (reversal of) provision for credit losses
			50,317				49,253				41,863
Noninterest income:
Fees & service charges on deposit accounts			581				581				456
Letters of credit fee income			719				1,576				1,004
BOLI income			99				98				96
Net gain on called and sale of investment securities			-				41				(663	)
Other income			567				488				463
Total noninterest income			1,966				2,784				1,356
Noninterest expense:
Salary and employee benefits			10,278				10,920				9,440
Net occupancy expense			1,396				1,430				1,378
Business development and promotion expense			280				98				204
Professional services			1,075				1,075				1,084
Office supplies and equipment expense			498				467				454
Other			1,279				1,380				1,617
Total noninterest expense			14,806				15,370				14,177
Income before provision for income taxes			37,477				36,667				29,042
Income tax expense			11,056				10,522				8,162
Net income		$	26,421			$	26,145			$	20,880
Dividend and earnings allocated to participating securities			(3	)			(3	)			(42	)
Net income available to common shareholders		$	26,418			$	26,142			$	20,838
Income per share available to common shareholders
Basic		$	1.80			$	1.76			$	1.40
Diluted		$	1.80			$	1.76			$	1.40
Weighted-average common shares outstanding
Basic			14,677,515				14,884,570				14,895,925
Diluted			14,677,515				14,884,570				14,895,925
Cash dividends per common share		$	0.43			$	0.38			$	0.30

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
		For the Year Ended
		December 31,				December 31,				Change
			2021				2020			%
Interest income:
Loans, including fees		$	200,537			$	203,093			-1.3	%
Investment securities			10,417				10,954			-4.9	%
Fed funds sold			81				215			-62.4	%
Total interest income			211,035				214,262			-1.5	%
Interest expense:
Interest-bearing demand			5,964				7,761			-23.2	%
Savings			57				72			-20.1	%
Time certificates			12,812				26,151			-51.0	%
Subordinated debt			6,325				6,124			3.3	%
Total interest expense			25,158				40,108			-37.3	%
Net interest income			185,877				174,154			6.7	%
(Reversal of) provision for credit losses			(1,000	)			26,000			-103.8	%
Net interest income after (reversal of) provision for credit losses
			186,877				148,154			26.1	%
Noninterest income:
Fees & service charges on deposit accounts			2,113				1,627			29.9	%
Letters of credit fee income			3,914				3,284			19.2	%
BOLI income			391				381			2.5	%
Net (loss) gain on called and sale of investment securities			41				(761	)		-105.4	%
Net (loss) gain on sale of loans			(640	)			15			-4363.5	%
Other income			1,924				1,517			26.8	%
Total noninterest income			7,743				6,063			27.7	%
Noninterest expense:
Salary and employee benefits			42,606				39,563			7.7	%
Net occupancy expense			5,656				5,525			2.4	%
Business development and promotion expense			568				564			0.7	%
Professional services			4,127				4,078			1.2	%
Office supplies and equipment expense			1,879				1,845			1.8	%
Other			5,956				5,783			3.0	%
Total noninterest expense			60,792				57,358			6.0	%
Income before provision for income taxes			133,828				96,859			38.2	%
Income tax expense			38,588				27,391			40.9	%
Net income		$	95,240			$	69,468			37.1	%
Dividend and earnings allocated to participating securities		$	(11	)		$	(194	)		-94.1	%
Net income available to common shareholders		$	95,229			$	69,274			37.5	%
Income per share available to common shareholders
Basic		$	6.41			$	4.65			37.6	%
Diluted		$	6.41			$	4.65			37.6	%
Weighted-average common shares outstanding
Basic			14,866,000				14,885,230			-0.1	%
Diluted			14,866,000				14,885,230			-0.1	%
Dividends per share		$	1.57			$	1.20			30.8	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
	December 31,				December 31,
		2021				2020
	(Unaudited)				(Audited)
Assets
Cash and due from banks	$	1,030,610			$	739,465
Fed funds sold		20,000				20,000
Cash and cash equivalents		1,050,610				759,465
Securities held to maturity, at amortized cost		13,962				6,568
Securities available-for-sale, at fair value		451,911				239,682
Loans		4,424,992				4,035,394
Less allowance for credit losses		(59,969	)			(63,426	)
Less amortized deferred loan fees, net		(6,316	)			(4,574	)
Loans, net		4,358,707				3,967,394
Customers' liability on acceptances		10,188				3,596
Bank furniture and fixtures, net		10,533				11,825
Bank-owned life insurance		10,088				9,828
Accrued interest receivable		14,646				23,692
Investment in affordable housing partnerships		59,018				62,521
Federal Home Loan Bank stock, at cost		15,000				15,000
Deferred tax assets		25,288				24,466
Operating lease right-of-use assets		21,969				16,106
Other assets		2,997				3,498
Total assets	$	6,044,917			$	5,143,641
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing demand deposits	$	1,305,691			$	938,911
Interest-bearing deposits:		2,032,820				1,700,818
Savings		37,839				34,702
Time certificates of $250,000 or more		934,444				912,546
Other time certificates		914,717				855,503
Total deposits		5,225,511				4,442,480
Acceptances outstanding		10,188				3,596
Subordinated debt issuance, net		147,758				99,334
Commitments to fund investment in affordable housing partnerships		22,606				30,715
Operating lease liabilities		22,861				18,682
Accrued interest payable		715				1,245
Other liabilities		31,545				22,142
Total liabilities		5,461,184				4,618,194
Shareholders' equity		583,733				525,447
Total liabilities and shareholders' equity	$	6,044,917			$	5,143,641
Book value per common share	$	39.76			$	35.19
Number of common shares outstanding		14,679,769				14,931,861

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
	For the Quarter Ended
	December 31,			September 30,			June 30,			March 31,			December 31,
		2021			2021			2021			2021			2020
Unaudited historical quarterly operations data:
Interest income	$	54,791		$	53,611		$	50,473		$	52,160		$	53,649
Interest expense		5,374			5,858			7,112			6,814			7,586
Interest income before provision for credit losses		49,417			47,753			43,361			45,346			46,063
(Reversal of) provision for credit losses		(900	)		(1,500	)		-			1,400			4,200
Noninterest income		1,966			2,784			1,646			1,347			1,356
Noninterest expense		14,806			15,370			14,964			15,652			14,177
Income tax expense		11,056			10,522			8,563			8,447			8,162
Net income	$	26,421		$	26,145		$	21,480		$	21,194		$	20,880
Earnings per share
Basic	$	1.80		$	1.76		$	1.44		$	1.42		$	1.40
Diluted	$	1.80		$	1.76		$	1.44		$	1.42		$	1.40
Ratios for the period:
Return on average assets		1.72	%		1.80	%		1.58	%		1.65	%		1.63	%
Return on beginning equity		18.65	%		18.56	%		15.98	%		16.36	%		16.49	%
Net interest margin (Fully-taxable equivalent)		3.28	%		3.36	%		3.25	%		3.61	%		3.66	%
Noninterest expense to average assets		0.97	%		1.06	%		1.10	%		1.22	%		1.10	%
Efficiency ratio		28.82	%		30.41	%		33.25	%		33.52	%		29.90	%
Net charge-offs (recoveries) to average loans (annualized)		0.03	%		0.10	%		0.12	%		-0.01	%		0.20	%
Ratios as of period end:
Tier 1 leverage capital ratio		9.49	%		9.64	%		10.07	%		10.26	%		10.08	%
Common equity tier 1 risk-based capital ratio		11.21	%		11.19	%		11.28	%		11.34	%		11.21	%
Tier 1 risk-based capital ratio		11.21	%		11.19	%		11.28	%		11.34	%		11.21	%
Total risk-based capital ratio		15.32	%		15.47	%		15.61	%		14.73	%		14.64	%
Allowances for credit losses to loans at end of period		1.36	%		1.41	%		1.49	%		1.56	%		1.57	%
Allowance for credit losses to non-performing loans		404.55	%		292.84	%		290.58	%		294.74	%		308.96	%
Average balances:
Total securities	$	470,811		$	401,641		$	269,000		$	242,200		$	251,284
Total loans		4,218,699			4,156,289			4,130,190			4,044,800			3,971,537
Total earning assets		5,984,055			5,659,678			5,364,598			5,102,291			5,018,031
Total assets		6,079,919			5,760,056			5,467,678			5,200,079			5,110,065
Total time certificate of deposits		1,915,117			1,959,514			1,893,247			1,820,461			1,764,528
Total interest bearing deposits		3,945,276			3,783,704			3,704,771			3,531,358			3,508,276
Total deposits		5,277,508			4,971,607			4,724,104			4,486,399			4,426,326
Total interest bearing liabilities		4,093,003			3,931,375			3,815,964			3,630,705			3,607,595
Total equity		576,462			569,624			553,561			538,282			518,567

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
	For the Year Ended
	December 31,				December 31,
		2021				2020
Interest income	$	211,035			$	214,262
Interest expense		25,158				40,108
Interest income before provision for credit losses		185,877				174,154
(Reversal of) provision for credit losses		(1,000	)			26,000
Noninterest income		7,743				6,063
Noninterest expense		60,792				57,358
Income tax expense		38,588				27,391
Net income	$	95,240			$	69,468
Earnings per share
Basic	$	6.41			$	4.65
Diluted	$	6.41			$	4.65
Ratios for the period:
Return on average assets		1.74	%			1.41	%
Return on beginning equity		18.13	%			14.78	%
Net interest margin (Fully-taxable equivalent)		3.46	%			3.62	%
Noninterest expense to average assets		1.11	%			1.16	%
Efficiency ratio		31.40	%			31.83	%
Net charge-offs to average loans		0.06	%			0.14	%
Average balances:
Total securities	$	304,865			$	246,715
Total loans		4,110,835				3,891,530
Total earning assets		5,377,565				4,828,445
Total assets		5,477,989				4,926,887
Total time certificate of deposits		1,891,583				1,782,558
Total interest bearing deposits		3,674,201				3,414,045
Total deposits		4,729,147				4,267,334
Total interest bearing liabilities		3,793,782				3,513,315
Total equity		553,937				496,164

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
			2021				2021				2021				2021				2020
Unaudited quarterly statement of financial position data:
Assets:
Cash and cash equivalents		$	1,050,610			$	1,082,634			$	896,474			$	943,126			$	759,465
Securities held-to-maturity, at amortized cost			13,962				15,294				15,749				6,039				6,568
Securities available-for-sale, at fair value			451,911				461,356				278,460				228,635				239,682
Loans:
Real estate – Mortgage:
Real estate—Residential		$	536,286			$	540,725			$	558,147			$	541,313			$	523,789
Real estate—Commercial			2,267,063				2,093,692				2,019,995				1,925,554				1,911,485
Total Real Estate – Mortgage			2,803,349				2,634,417				2,578,142				2,466,867				2,435,274
Real estate – Construction:
R/E Construction — Residential			130,842				122,382				120,363				123,302				148,825
R/E Construction — Commercial			202,482				213,833				224,323				229,933				215,032
Total real estate construction loans			333,324				336,215				344,686				353,235				363,857
Commercial and industrial			1,245,734				1,286,995				1,259,668				1,248,550				1,165,990
PPP			42,467				63,897				95,765				95,434				70,234
Consumer and others			118				6				143				155				39
Gross loans			4,424,992				4,321,529				4,278,403				4,164,241				4,035,394
Allowance for credit losses on loans			(59,969	)			(61,135	)			(63,635	)			(64,883	)			(63,426	)
Net deferred loan fees			(6,316	)			(5,498	)			(5,329	)			(4,872	)			(4,574	)
Net loans		$	4,358,707			$	4,254,896			$	4,209,439			$	4,094,486			$	3,967,394
Investment in affordable housing partnerships			59,018				53,399				55,452				59,824				62,521
Federal Home Loan Bank stock, at cost			15,000				15,000				15,000				15,000				15,000
Other assets			95,709				97,261				105,334				100,894				93,011
Total assets		$	6,044,917			$	5,979,840			$	5,575,908			$	5,448,004			$	5,143,641
Liabilities:
Deposits:
Demand		$	1,305,691			$	1,349,114			$	1,063,472			$	1,026,260			$	938,911
Interest-bearing demand			2,032,820				1,861,334				1,774,668				1,751,951				1,700,818
Savings			37,839				33,417				32,560				37,551				34,702
Time certificates of $250,000 or more			934,444				959,826				930,976				927,043				912,546
Other time certificates			914,717				990,228				994,630				979,694				855,503
Total deposits		$	5,225,511			$	5,193,919			$	4,796,306			$	4,722,499			$	4,442,480
Acceptances outstanding		$	10,188			$	7,697			$	7,797			$	9,670			$	3,596
Subordinated debt issuance, net			147,758				147,699				147,787				99,365				99,334
Commitments to fund investment in affordable housing partnerships			22,606				17,900				19,197				27,918				30,715
Other liabilities			55,121				50,604				45,852				49,283				42,069
Total liabilities		$	5,461,184			$	5,417,819			$	5,016,939			$	4,908,735			$	4,618,194
Equity:
Net common stock, no par value		$	205,855			$	203,844			$	219,958			$	218,593			$	217,444
Retained earnings			372,952				352,843				332,276				316,481				300,969
Accumulated other comprehensive income			4,926				5,334				6,735				4,195				7,034
Total shareholders' equity		$	583,733			$	562,021			$	558,969			$	539,269			$	525,447
Total liabilities and shareholders' equity		$	6,044,917			$	5,979,840			$	5,575,908			$	5,448,004			$	5,143,641

			PREFERRED BANK
			Quarter-To-Date Average Balances, Yield And Rates
			(Unaudited)
			Three months ended December 31,								Three months ended September 30,								Three months ended December 31,
				2021								2021								2020
						Interest		Average						Interest		Average						Interest		Average
			Average			Income or		Yield/			Average			Income or		Yield/			Average			Income or		Yield/
			Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
ASSETS			(Dollars in thousands)
Interest-earning assets:
	Loans (1,2)		$	4,218,699			51,906	4.88	%		$	4,156,289		$	50,866	4.86	%			3,974,599		$	51,299	5.13	%
	Investment securities (3)			470,811			2,228	1.88	%			401,641			2,163	2.14	%			251,284			1,936	3.07	%
	Federal funds sold			20,380			18	0.36	%			21,837			20	0.36	%			22,939			30	0.51	%
	Other earning assets			1,274,165			752	0.23	%			1,079,911			679	0.25	%			769,209			487	0.25	%
		Total interest-earning assets		5,984,055			54,904	3.64	%			5,659,678			53,728	3.77	%			5,018,031			53,752	4.26	%
	Deferred loan fees, net			(5,530	)							(5,176	)							(4,162	)
	Allowance for credit losses on loans			(61,123	)							(63,608	)							(60,875	)
Noninterest earning assets:
	Cash and due from banks			11,933								14,457								8,214
	Bank furniture and fixtures			10,810								11,123								11,892
	Right of use assets			21,150								21,136								16,272
	Other assets			118,624								122,446								120,693
		Total assets	$	6,079,919							$	5,760,056							$	5,110,065
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
	Deposits:
		Interest-bearing demand and savings		2,030,159		$	1,528	0.30	%			1,824,190		$	1,489	0.32	%		$	1,743,748		$	1,520	0.35	%
		TCD $250K or more		942,201			1,151	0.48	%			964,656			1,542	0.63	%			923,079			2,298	0.99	%
		Other time certificates		972,916			1,370	0.56	%			994,858			1,503	0.60	%			841,449			2,236	1.06	%
		Total interest-bearing deposits		3,945,276			4,049	0.41	%			3,783,704			4,534	0.48	%			3,508,276			6,054	0.69	%
Short-term borrowings				3			0	0.22	%			-			-	0.00	%			3			0	0.20	%
Subordinated debt, net				147,724			1,325	3.56	%			147,671			1,324	3.56	%			99,316			1,532	6.14	%
		Total interest-bearing liabilities		4,093,003			5,374	0.52	%			3,931,375			5,858	0.59	%			3,607,595			7,586	0.84	%
Non-interest bearing liabilities:
	Demand deposits			1,332,232								1,187,903								918,050
	Lease Liability			22,298								22,747								18,936
	Other liabilities			55,924								48,407								46,917
		Total liabilities		5,503,457								5,190,432								4,591,498
Shareholders’ equity				576,462								569,624								518,567
		Total liabilities and shareholders’ equity	$	6,079,919							$	5,760,056							$	5,110,065
Net interest income						$	49,530							$	47,870							$	46,166
Net interest spread								3.12	%							3.18	%							3.42	%
Net interest margin								3.28	%							3.36	%							3.66	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	1,332,232							$	1,187,903							$	918,050
	Interest bearing deposits			3,945,276			4,049	0.41	%			3,783,704			4,534	0.48	%			3,508,276			6,054	0.69	%
		Total Deposits	$	5,277,508		$	4,049	0.30	%		$	4,971,607		$	4,534	0.36	%		$	4,426,326		$	6,054	0.54	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $1.1 million, $823,000 and $1.1 million for the quarter ended December 31, 2021, September 30, 2021 and December 31, 2020, 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)
			Year ended December 31,
				2021								2020
						Interest		Average						Interest		Average
			Average			Income or		Yield/			Average			Income or		Yield/
			Balance			Expense		Rate			Balance			Expense		Rate
ASSETS			(Dollars in thousands)
Interest-earning assets:
	Loans (1,2)		$	4,111,596		$	200,537	4.88	%		$	3,892,811		$	203,093	5.22	%
	Investment securities (3)			304,865			8,333	2.73	%			246,715			8,130	3.30	%
	Federal funds sold			21,251			81	0.38	%			25,301			215	0.85	%
	Other earning assets			939,853			2,520	0.27	%			663,618			3,223	0.49	%
		Total interest-earning assets		5,377,565			211,471	3.93	%			4,828,445			214,661	4.45	%
	Deferred loan fees, net			(4,818	)							(3,788	)
	Allowance for credit losses on loans			(63,967	)							(51,971	)
Noninterest earning assets:
	Cash and due from banks			11,683								7,545
	Bank furniture and fixtures			11,452								12,002
	Right of use assets			19,255								16,648
	Other assets			126,819								118,006
		Total assets	$	5,477,989							$	4,926,887
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
	Deposits:
		Interest-bearing demand/ savings		1,782,618		$	6,021	0.34	%			1,631,487		$	7,833	0.48	%
		TCD $250K or more		936,825			6,299	0.67	%			956,269			13,767	1.44	%
		Other time certificates		954,758			6,513	0.68	%			826,289			12,384	1.50	%
		Total interest-bearing deposits		3,674,201			18,833	0.51	%			3,414,045			33,984	1.00	%
Subordinated debt, net				119,581			6,325	5.29	%			99,269			6,124	6.17	%
		Total interest-bearing liabilities		3,793,782			25,158	0.66	%			3,513,315			40,108	1.14	%
Non-interest bearing liabilities:
	Demand deposits			1,054,946								853,289
	Lease Liability			21,280								19,620
	Other liabilities			54,044								44,499
		Total liabilities		4,924,052								4,430,723
Shareholders’ equity				553,937								496,164
		Total liabilities and shareholders’ equity	$	5,477,989							$	4,926,887
Net interest income						$	186,313							$	174,553
Net interest spread								3.27	%							3.31	%
Net interest margin								3.46	%							3.62	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	1,054,946							$	853,289
	Interest bearing deposits			3,674,201			18,833	0.51	%			3,414,045			33,984	1.00	%
		Total Deposits	$	4,729,147		$	18,833	0.40	%		$	4,267,334		$	33,984	0.80	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $3.1 million and $3.0 million for the year ended December 31, 2021 and 2020, 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
		Year Ended				Year Ended
		December 31, 2021				December 31, 2020
		(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period		$	63,426			$	34,830
Charge-Offs
Commercial & Industrial			1,697				1,661
Mini-perm Real Estate			817				1,900
Others			-				-
Total Charge-Offs			2,514				3,561
Recoveries
Commercial & Industrial			57				-
Construction - Commercial			-				193
Total Recoveries			57				193
Net Charge-Offs			2,457				3,368
(Reversal of) Provision for Credit Losses:
CECL Cumulative Effect Adjustment			-				8,000
Current (Reversal) Provision			(1,000	)			21,800
Balance at End of Period		$	59,969			$	61,262
Average Loans Held for Investment		$	4,110,835			$	3,864,667
Loans Held for Investment at End of Period		$	4,424,992			$	3,949,721
Net Charge-Offs (Recoveries) to Average Loans			0.06	%			0.12	%
Allowances for Credit Losses to Loans at End of Period			1.36	%			1.55	%

 

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

FAQ

What were Preferred Bank's Q4 2021 earnings results?

Preferred Bank reported net income of $26.4 million, or $1.80 per diluted share, for Q4 2021.

How did Preferred Bank perform in the full year 2021?

Preferred Bank achieved a record net income of $95.2 million, or $6.41 per diluted share, for the full year 2021.

What was the loan growth percentage for Preferred Bank in 2021?

Preferred Bank recorded a loan growth of 10.5% for the year 2021.

What is the expected impact of inflation on Preferred Bank?

Management expressed concerns that inflation could lead to higher operating costs in 2022.

What was the efficiency ratio for Preferred Bank in Q4 2021?

The efficiency ratio for Q4 2021 was a record low of 28.82%.