Preferred Bank Reports Quarterly and Annual Earnings

Bay Street

6 years ago

LOS ANGELES, Jan. 17, 2019 (GLOBE NEWSWIRE) — Preferred Bank (NASDAQ: PFBC), an independent commercial bank, today reported results for the quarter and year ended December 31, 2018. Preferred Bank (“the Bank”) reported net income of $18.7 million or $1.22 per diluted share for the fourth quarter of 2018. This compares favorably to net income of $7.7 million or $0.52 per diluted share for the fourth quarter of 2017 and to net income of $18.3 million or $1.20 per diluted share for the third quarter of 2018. The fourth quarter of 2017 was negatively impacted by a charge to the Bank’s deferred tax asset of $6.7 million due to the passage of the Tax Cut and Jobs Act in December of 2017. Net income for the year ended December 31, 2018 was $71.0 million or $4.64 per diluted share compared to net income of $43.4 million or $2.96 per diluted share for 2017. Again, the year 2017 was negatively impacted by the deferred tax asset charge.

Highlights from the fourth quarter of 2018:

Return on Assets	1.82%
Return on Beginning Equity	18.50%
Linked quarter deposit growth	3.44%
Linked quarter loan growth	1.77%
Efficiency ratio	29.84%
Net interest margin	4.13%

Li Yu, Chairman and CEO, commented, “For the fourth quarter, Preferred Bank’s net income was $18.7 million or $1.22 per diluted share. We ended the year 2018 with net income of $71.0 million or $4.64 per diluted share which represented increases of 63.6% and 56.7% over 2017, respectively.”

Fourth quarter net income included the following extraordinary items:

We sold the OREO property in Las Vegas for a net gain of $2.04 million.

We made a sizeable provision for loan loss of $5,550,000. The increase is mostly related to our New York nonperforming loan relationship.

Through bankruptcy proceedings, we acquired the title to the above-mentioned New York multi-family properties on January 16, 2019. As these properties had not been properly managed and stabilized, together with a recent New York condo market headwind, the appraisal value came in much less than the previous valuation. Therefore, in December we recorded a charge-off on these loans to reflect the lower valuation, less estimated selling costs. These loans were transferred to OREO on January 16, 2019.

During the quarter, we continued to experience elevated pay-off activity as evidenced by the slightly lower growth rate in loans. Loan growth for the quarter was $58 million or 1.77% and for the year total loans grew by $392 million or 13.34%.

Deposits increased by $121 million or 3.44% on a linked quarter basis and for the year, total deposits grew by $377 million or 11.55%.

During the fourth quarter, the net interest margin (“NIM”) improved to 4.13%, a 9 basis point improvement over the third quarter of 2018. Likewise, the Bank’s efficiency ratio also improved to 29.8%. Our return on equity (“ROE”) and our efficiency ratio are among the top of our peer group, both locally and nationwide.

We are approaching 2019 with extreme caution. There are a great diversity of forecasts with regard to a potential recession, a credit cycle, a trade war, interest rates and overall economic growth. Our focus will be to keep our business model uncomplicated, maintain a low efficiency ratio and keep our margin healthy.”

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $41.4 million for the fourth quarter of 2018. This compares favorably to the $34.6 million recorded in the fourth quarter of 2017 and to the $39.2 million recorded in the third quarter of 2018. The comparisons to both prior periods is favorable due to both loan growth and higher loan rates partially offset by an increase in interest expense on deposits. The Bank’s taxable equivalent net interest margin was 4.13% for the fourth quarter of 2018, a 9 basis point increase over the 4.04% achieved in the third quarter of 2018 and a 27 basis point increase from the 3.86% posted in the fourth quarter of 2017. The margin has benefitted greatly from the last few Fed rate hikes. With 78% of the loan portfolio tied to the Prime rate, and with the sizeable cash position, the margin expanded even in the face of higher deposit costs.

Noninterest Income. For the fourth quarter of 2018, noninterest income was $4,405,000 compared with $1,215,000 for the same quarter last year and compared to $1,676,000 for the third quarter of 2018. The increase over both periods is primarily due to the aforementioned gain on sale of OREO which was $2.04 million. In addition to that, the Bank received a legal fee recovery of $610,000 on a recession-era loan. Service charges on deposits were $290,000, an increase over the prior quarter but down from the fourth quarter of 2017. Letter of credit fees were $956,000 for the fourth quarter, a decrease from the $1,091,000 recorded in the third quarter of 2018 but up significantly over the $627,000 posted in the same quarter last year.

Noninterest Expense. Total noninterest expense was $13.7 million for the fourth quarter of 2018, an increase of $1.9 million over the fourth quarter of 2017 and an increase of $100,000 from the $13.6 million recorded in the third quarter of 2018. Salaries and benefits expense totaled $8.6 million for the fourth quarter of 2018, an increase of $1.66 million over the $7.0 million recorded in the fourth quarter of 2017 and down slightly compared to the $8.7 million recorded in the third quarter of 2018. The increase over the prior year is due mainly to staffing increases as well as an increase in bonus expense, commensurate with our higher profitability. Occupancy expense totaled $1.3 million for the quarter and was fairly even with the prior quarter and was up slightly over the same period last year. Professional services expense was $1.5 million for the fourth quarter of 2018 compared to $1.2 million for the same quarter of 2017 and $1.3 million recorded in the third quarter of 2018. The increase over the prior quarter and the prior year is due primarily to higher legal fees. Other expenses were $1.4 million for the fourth quarter of 2018 compared to $1.6 million for the fourth quarter of 2017 and $1.5 million in the third quarter of 2018.

Income Taxes

The Bank recorded a provision for income taxes of $8.0 million for the fourth quarter of 2018. This represents an effective tax rate (“ETR”) of 29.9% and an increase from the ETR of 28.0% for the third quarter of 2018 but down significantly from the 65.7% recorded in the fourth quarter of 2017. The fourth quarter of 2017 included a special charge to the Bank’s deferred tax asset of $6.7 million in connection with the passage of the Tax Cut and Jobs Act in December 2017. Aside from that charge, the Bank’s ETR would have been approximately 35.7% for the fourth quarter of 2017.

Balance Sheet Summary

Total gross loans and leases (both held for sale and held for investment) at December 31, 2018 were $3.33 billion, an increase of $58.0 million or 1.8% over the total of $3.28 billion as of September 30, 2018. Total deposits increased by $120.9 over the $3.52 billion as of September 30, 2018. Total assets reached $4.22 billion as of December 31, 2018, an increase of $139.3 million or 3.4% over the total of $4.08 billion as of September 30, 2018. For the year, total loans increased by $392.3 million of 13.3%, total deposits grew by $377.0 million or 11.6% and total assets grew by $445.6 million or 11.8%.

Asset Quality

As of December 31, 2018, nonaccrual loans totaled $44.8 million, up from the total of $6.5 million as of December 31, 2017 and down from the $50.4 million as of September 30, 2018. The increase over year end 2017 is due to the addition of the aforementioned New York loans. On January 16, 2019, the New York multi-family loans totaling $36.9 million were moved into OREO status.

Total net charge-offs for the fourth quarter of 2018 were $6.5 million compared to net recoveries of $314,000 in the third quarter of 2018 and compared to net charge-offs of $334,000 for the fourth quarter of 2017. The Bank recorded a provision for loan loss of $5.55 million for the fourth quarter of 2018, compared to $1.5 million in the fourth quarter of 2017 and compared to $1.88 million recorded in the third quarter of 2018. The allowance for loan loss at December 31, 2018 was $31.1 million or 0.93% of total loans compared to $29.9 million or 1.02% of total loans at December 31, 2017.

As of December 31, 2018 total classified loans stood at $46.2 million compared to $52.0 million as of September 30, 2018 and $9.0 million as of December 31, 2017. Upon the transfer of the N.Y. loans to OREO, the Bank’s total classified loans will drop back down to $9.3 million, comparable to year-end 2017 levels.

Capitalization

As of December 31, 2018, the Bank’s leverage ratio was 10.11%, the common equity tier 1 capital ratio was 10.38% and the total capital ratio was 13.72%. As of December 31, 2017, the Bank’s leverage ratio was 9.52%, the common equity tier 1 ratio was 10.07% and the total risk based capital ratio was 13.83%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2018 financial results will be held tomorrow, January 18, 2019 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, and Chief Credit Officer Nick Pi 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 1, 2019; the passcode is 10127745.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks 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 Company conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in the California cities of Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco (2), and one office in Flushing, New York. 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 2017 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,
			2018			2018			2017
Interest income:
	Loans, including fees		$	49,027		$	46,130		$	38,456
	Investment securities			4,892			3,734			3,198
	Fed funds sold			454			528			347
		Total interest income		54,373			50,392			42,001

Interest expense:
	Interest-bearing demand			4,258			3,911			2,229
	Savings			13			15			17
	Time certificates			7,117			5,684			3,641
	Fed funds purchased			0			–			0
	FHLB borrowings			12			14			21
	Subordinated debit			1,531			1,531			1,531
		Total interest expense		12,931			11,155			7,439
		Net interest income		41,442			39,237			34,562
Provision for loan losses				5,550			1,880			1,500
		Net interest income after provision for loan losses		35,892			37,357			33,062

Noninterest income:
	Fees & service charges on deposit accounts			290			240			312
	Letters of credit fee income			956			1,091			627
	BOLI income			91			91			89
	Net gain on sale of other real estate owned			2,038			–			–
	Net gain on called and sale of investment securities			–			–			4
	Other income			1,030			254			183
		Total noninterest income		4,405			1,676			1,215

Noninterest expense:
	Salary and employee benefits			8,640			8,666			6,981
	Net occupancy expense			1,326			1,340			1,289
	Business development and promotion expense			282			203			204
	Professional services			1,485			1,337			1,227
	Office supplies and equipment expense			373			349			344
	Other real estate owned related expense			181			221			169
	Other			1,396			1,468			1,562
		Total noninterest expense		13,683			13,584			11,776
		Income before provision for income taxes		26,614			25,449			22,501
Income tax expense				7,960			7,126			14,775
		Net income	$	18,654		$	18,323		$	7,726

Dividend and earnings allocated to participating securities				(313	)		(312	)		(89	)
Net income available to common shareholders			$	18,341		$	18,011		$	7,637

Income per share available to common shareholders
		Basic	$	1.22		$	1.20		$	0.52
		Diluted	$	1.22		$	1.20		$	0.52

Weighted-average common shares outstanding
		Basic		15,064,578			15,063,685			14,710,680
		Diluted		15,064,578			15,063,685			14,751,056

Dividends per share			$	0.30		$	0.25		$	0.22

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
			2018			2017			%
Interest income:
	Loans, including fees		$	178,420		$	144,678		23.3	%
	Investment securities			14,877			11,792		26.2	%
	Fed funds sold			1,868			1,130		65.3	%
		Total interest income		195,165			157,600		23.8	%

Interest expense:
	Interest-bearing demand			13,934			7,901		76.4	%
	Savings			60			72		-16.5	%
	Time certificates			20,753			13,633		52.2	%
	FHLB borrowings			65			167		-61.0	%
	Subordinated debit			6,124			6,123		100.0	%
		Total interest expense		40,936			27,896		46.7	%
		Net interest income		154,229			129,704		18.9	%
Provision for loan losses				10,130			5,500		84.2	%
		Net interest income after provision for loan losses		144,099			124,204		16.0	%

Noninterest income:
	Fees & service charges on deposit accounts			1,201			1,269		-5.4	%
	Letters of credit fee income			3,927			2,635		49.0	%
	BOLI income			361			351		2.7	%
	Net gain on sale of other real estate owned			2,038			–		100.0	%
	Net gain on called and sale of investment securities			112			4		100.0	%
	Other income			1,762			1,565		12.6	%
		Total noninterest income		9,401			5,824		61.4	%

Noninterest expense:
	Salary and employee benefits			34,741			30,041		15.6	%
	Net occupancy expense			5,299			4,942		7.2	%
	Business development and promotion expense			816			883		-7.6	%
	Professional services			5,989			4,390		36.4	%
	Office supplies and equipment expense			1,464			1,340		9.3	%
	Other real estate owned related expense			615			563		9.2	%
	Other			5,878			7,389		-20.5	%
		Total noninterest expense		54,802			49,548		10.6	%
		Income before provision for income taxes		98,698			80,480		22.6	%
Income tax expense				27,705			37,086		-25.3	%
		Net income	$	70,993		$	43,394		63.6	%

Dividend and earnings allocated to participating securities				(1,174	)		(499	)	135.3	%
Net income available to common shareholders			$	69,819		$	42,895		62.8	%

Income per share available to common shareholders
		Basic	$	4.64		$	2.97		56.1	%
		Diluted	$	4.64		$	2.96		56.7	%

Weighted-average common shares outstanding
		Basic		15,056,844			14,438,964		4.3	%
		Diluted		15,059,770			14,492,671		3.9	%

Dividends per share			$	1.02		$	0.80		27.5	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)


			December 31,			December 31,
			2018			2017
			(Unaudited)			(Audited)
Assets

Cash and due from banks			$	526,759		$	446,822
Fed funds sold				76,000			108,500
	Cash and cash equivalents			602,759			555,322

Securities held to maturity, at amortized cost				8,007			8,780
Securities available-for-sale, at fair value				182,413			188,203
Loans and leases				3,333,377			2,941,093
Less allowance for loan and lease losses				(31,065	)		(29,921	)
Less net deferred loan fees				(2,323	)		(3,099	)
	Net loans and leases			3,299,989			2,908,073

Loans held for sale, at lower of cost or fair value				–			440

Other real estate owned				–			4,112
Customers’ liability on acceptances				10,074			7,272
Bank furniture and fixtures, net				7,497			5,684
Bank-owned life insurance				9,317			9,066
Accrued interest receivable				14,266			11,291
Investment in affordable housing				43,849			34,708
Federal Home Loan Bank stock				11,933			11,077
Deferred tax assets				18,706			17,476
Income tax receivable				–			2,713
Other assets				6,692			5,642
	Total assets		$	4,215,502		$	3,769,859


Liabilities and Shareholders’ Equity

Liabilities:
Deposits:
	Demand		$	730,096		$	659,487
	Interest-bearing demand			1,397,006			1,353,974
	Savings			20,369			24,429
	Time certificates of $250,000 or more			738,626			621,648
	Other time certificates			753,588			603,152
	Total deposits			3,639,685			3,262,690
	Acceptances outstanding			10,074			7,272
	Advances from Federal Home Loan Bank			1,307			6,401
	Subordinated debt issuance			99,087			98,963
	Commitments to fund investment in affordable housing partnership			19,530			18,523
	Accrued interest payable			6,839			3,833
	Other liabilities			24,567			17,143
		Total liabilities		3,801,089			3,414,825

Commitments and contingencies
Shareholders’ equity:
	Preferred stock. Authorized 25,000,000 shares; issued and no outstanding shares at December 31, 2018 and December 31, 2017			–			–
	Common stock, no par value. Authorized 100,000,000 shares; issued and outstanding 15,308,688 at December 31, 2018 and 15,122,313 at December 31, 2017, respectively.			210,882			207,948
	Treasury stock			(34,529	)		(33,233	)
	Additional paid-in-capital			45,187			39,462
	Accumulated income			194,855			139,684
	Accumulated other comprehensive income (loss):
		Unrealized gain (loss) on securities, available-for-sale, net of tax of $(725) and $504 at December 31, 2018 and December 31, 2017, respectively		(1,982	)		1,173
		Total shareholders’ equity		414,413			355,034
	Total liabilities and shareholders’ equity		$	4,215,502		$	3,769,859

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,
			2018			2018			2018			2018			2017
Unaudited historical quarterly operations data:
	Interest income		$	54,373		$	50,392		$	46,748		$	43,652		$	42,001
	Interest expense			12,931			11,155			9,342			7,508			7,439
		Interest income before provision for credit losses		41,442			39,237			37,406			36,144			34,562
	Provision for credit losses			5,550			1,880			1,200			1,500			1,500
	Noninterest income			4,405			1,676			1,756			1,564			1,215
	Noninterest expense			13,683			13,584			13,805			13,730			11,776
	Income tax expense			7,960			7,126			6,752			5,867			14,775
		Net income	$	18,654		$	18,323		$	17,405		$	16,611		$	7,726

	Earnings per share
		Basic	$	1.22		$	1.20		$	1.14		$	1.09		$	0.52
		Diluted	$	1.22		$	1.20		$	1.14		$	1.09		$	0.52

Ratios for the period:
	Return on average assets			1.82	%		1.84	%		1.83	%		1.85	%		0.83	%
	Return on beginning equity			18.50	%		18.87	%		18.82	%		18.97	%		9.67	%
	Net interest margin (Fully-taxable equivalent)			4.13	%		4.04	%		4.07	%		4.14	%		3.86	%
	Noninterest expense to average assets			1.33	%		1.37	%		1.46	%		1.53	%		1.27	%
	Efficiency ratio			29.84	%		33.20	%		35.25	%		36.41	%		32.92	%
	Net charge-offs (recoveries) to average loans (annualized)			0.80	%		-0.04	%		0.00	%		0.39	%		0.05	%

Ratios as of period end:
	Tier 1 leverage capital ratio			10.11	%		10.07	%		10.04	%		10.07	%		9.52	%
	Common equity tier 1 risk-based capital ratio			10.38	%		10.23	%		10.14	%		10.03	%		10.07	%
	Tier 1 risk-based capital ratio			10.38	%		10.23	%		10.14	%		10.03	%		10.07	%
	Total risk-based capital ratio			13.72	%		13.65	%		13.62	%		13.58	%		13.83	%
	Allowances for credit losses to loans and leases at end of period			0.93	%		0.98	%		0.95	%		0.92	%		1.02	%
	Allowance for credit losses to non-performing loans and leases			69.29	%		63.42	%		58.92	%		861.44	%		461.28	%

Average balances:
	Total loans and leases		$	3,217,850		$	3,184,527		$	3,092,571		$	2,958,382		$	2,853,134
	Earning assets		$	3,988,970		$	3,861,346		$	3,696,854		$	3,550,333		$	3,572,826
	Total assets		$	4,068,581		$	3,946,924		$	3,804,557		$	3,648,857		$	3,678,237
	Total deposits		$	3,498,226		$	3,392,878		$	3,268,490		$	3,131,660		$	3,179,679

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)



			For the Year Ended
			December 31,			December 31,
			2018			2017
	Interest income		$	195,165		$	157,600
	Interest expense			40,936			27,896
		Interest income before provision for credit losses		154,229			129,704
	Provision for credit losses			10,130			5,500
	Noninterest income			9,401			5,824
	Noninterest expense			54,802			49,548
	Income tax expense			27,705			37,086
		Net income	$	70,993		$	43,394

	Earnings per share
		Basic	$	4.64		$	2.97
		Diluted	$	4.64		$	2.96

Ratios for the period:
	Return on average assets			1.84	%		1.24	%
	Return on beginning equity			20.00	%		14.56	%
	Net interest margin (Fully-taxable equivalent)			4.08	%		3.80	%
	Noninterest expense to average assets			1.42	%		1.41	%
	Efficiency ratio			33.49	%		36.56	%
	Net charge-offs (recoveries) to average loans			0.29	%		0.08	%

Average balances:
	Total loans and leases		$	3,114,132		$	2,733,369
	Earning assets		$	3,790,757		$	3,431,985
	Total assets		$	3,868,576		$	3,509,775
	Total deposits		$	3,323,295		$	3,038,910

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)



				As of

				December 31,			September 30,			June 30,			March 31,			December 31,
				2018			2018			2018			2018			2017
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	602,759		$	531,240		$	493,521		$	421,024		$	555,322
	Securities held-to-maturity, at amortized cost				8,007			8,203			8,370			8,556			8,780
	Securities available-for-sale, at fair value				182,413			173,953			176,930			177,823			188,203
	Securities equity, at fair value				–			–			–			4,667			–
	Loans and Leases:
		Real estate – Single and multi-family residential			587,562			559,050			508,470			552,828			513,953
		Real estate – Land			10,646			10,725			11,133			10,766			10,863
		Real estate – Commercial			1,358,821			1,337,794			1,319,664			1,315,296			1,244,486
		Real estate – For sale housing construction			138,815			122,225			112,236			95,884			85,199
		Real estate – Other construction			207,849			246,815			231,276			216,571			198,602
		Commercial and industrial, trade finance and other			1,029,684			998,781			955,663			904,798			887,990
			Gross loans		3,333,377			3,275,390			3,138,442			3,096,143			2,941,093
	Allowance for loan and lease losses				(31,065	)		(31,966	)		(29,772	)		(28,570	)		(29,921	)
	Net deferred loan fees				(2,323	)		(2,571	)		(2,287	)		(1,935	)		(3,099	)
		Net loans, excluding loans held for sale		$	3,299,989		$	3,240,853		$	3,106,383		$	3,065,638		$	2,908,073
	Loans held for sale			$	–		$	–		$	47,337		$	–		$	440
		Net loans and leases		$	3,299,989		$	3,240,853		$	3,153,720		$	3,065,638		$	2,908,513

	Other real estate owned			$	–		$	4,112		$	4,112		$	4,112		$	4,112
	Investment in affordable housing				43,849			45,555			47,201			33,650			34,708
	Federal Home Loan Bank stock				11,933			11,933			12,158			11,076			11,077
	Other assets				66,552			60,339			62,792			55,378			59,144
		Total assets		$	4,215,502		$	4,076,188		$	3,958,804		$	3,781,924		$	3,769,859

Liabilities:
	Deposits:
		Demand		$	730,096		$	745,861		$	713,492		$	677,629		$	659,487
		Interest-bearing demand			1,397,006			1,360,237			1,372,771			1,346,479			1,353,974
		Savings			20,369			21,490			21,918			25,373			24,429
		Time certificates of $250,000 or more			738,626			737,465			683,561			627,031			621,648
		Other time certificates			753,588			653,697			618,493			585,165			603,152
		Total deposits		$	3,639,685		$	3,518,750		$	3,410,235		$	3,261,677		$	3,262,690

	Advances from Federal Home Loan Bank			$	10,074		$	6,256		$	8,313		$	4,272		$	7,272
	Subordinated debt issuance				99,087			99,056			99,025			98,994			98,963
	Commitments to fund investment in affordable housing partnership				19,530			21,514			29,116			17,861			18,523
	Other liabilities				32,713			30,643			26,889			28,092			27,377
		Total liabilities		$	3,801,089		$	3,676,219		$	3,573,578		$	3,410,896		$	3,414,825

Equity:
	Net common stock, no par value			$	221,540		$	221,518		$	220,669		$	219,423		$	214,177
	Retained earnings				194,855			180,793			166,302			152,728			139,684
	Accumulated other comprehensive income				(1,982	)		(2,342	)		(1,745	)		(1,123	)		1,173
		Total shareholders’ equity		$	414,413		$	399,969		$	385,226		$	371,028		$	355,034
		Total liabilities and shareholders’ equity		$	4,215,502		$	4,076,188		$	3,958,804		$	3,781,924		$	3,769,859

Preferred Bank
Loan and Credit Quality Information

Allowance For Credit Losses & Loss History
			Year Ended			Year ended
			December 31, 2018			December 31, 2017


			(Dollars in 000’s)
Allowance For Credit Losses
Balance at Beginning of Period			$	29,921		$	26,478
	Charge-Offs
		Commercial & Industrial		4,040			2,274
		Mini-perm Real Estate		5,742			–
		Construction – Residential		–			–
		Construction – Commercial		–			–
		Land – Residential		–			–
		Land – Commercial		–			–
		Others		–			–
		Total Charge-Offs		9,782			2,274

	Recoveries
		Commercial & Industrial		796			55
		Mini-perm Real Estate		–			–
		Construction – Residential		–			–
		Construction – Commercial		–			17
		Land – Residential		–			–
		Land – Commercial		–			145
		Total Recoveries		796			217

	Net Loan Charge-Offs			8,986			2,057
	Provision for Credit Losses			10,130			5,500
Balance at End of Period			$	31,065		$	29,921
Average Loans and Leases			$	3,790,757		$	3,431,985
Loans and Leases at end of Period			$	3,333,377			2,941,533
Net Charge-Offs to Average Loans and Leases				0.29	%		0.08	%
Allowances for credit losses to loans and leases at end of period				0.93	%		1.02	%

AT THE COMPANY:	AT FINANCIAL PROFILES:
Edward J. Czajka	Tony Rossi
Executive Vice President	General Information
Chief Financial Officer	(310) 622-8221
(213) 891-1188	PFBC@finprofiles.com