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Preferred Bank Reports Quarterly Earnings
Source: Nasdaq GlobeNewswire / 20 Jul 2022 16:05:01 America/New_York
LOS ANGELES, July 20, 2022 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended June 30, 2022. Preferred Bank (“the Bank”) reported net income of $28.1 million or $1.87 per diluted share for the second quarter of 2022. This represents an increase of $6.6 million or 30.7% over the same quarter last year and also an increase over the $26.0 million or $1.74 per share posted in the first quarter of 2022. The primary reasons for the increase compared to the prior year was an increase in net interest income of $13.1 million or 30.1% primarily driven by higher interest rates on interest-earning assets, loan growth and in the second quarter of 2021, the Bank recorded debt extinguishment costs of $614,000. The increase over the first quarter of 2022 was also due to an increase in net interest income of $6.4 million or 12.8% partially offset by a higher provision for credit losses and higher non-interest expense.
Second quarter 2022 highlights:
- Linked quarter loan growth (Ex-PPP) of 7.4%
- Return on average assets (“ROA”) of 1.84%
- Return on beginning equity (“ROBE”) of 18.91%
- Pre-provision, pre-tax (“PPPT”) ROBE of 28.22% 1
- Efficiency ratio of 29.0%
Li Yu, Chairman and CEO, commented, “We had a record quarter in terms of; net income, earnings per share, total loans, total deposits, and net interest income for the second quarter of 2022.
Net income for the quarter was $28.1 million or $1.87 per diluted share and $54.1 million or $3.61 per diluted share for the first half of 2022. With our very asset sensitive balance sheet, we have benefited from the recent interest rate hikes.
Loan growth was $328.6 million or 28.6% annualized. For the first half of year, loan growth was $495.1 million or 22.4% annualized. Second quarter loan growth was positively impacted by reduced pay-offs and stronger origination activities.
Deposits grew $98.3 million or 7.4% annualized in the second quarter of 2022. For the first six months of 2022, deposit growth was $182.4 million or 7.0 % annualized. During the latter part of the quarter, we saw an increased level of competition and we believe deposit costs will accelerate in the second half of the year.
With a recession potentially looming ahead, the Bank is very focused on asset quality. Underwriting standards have been tightened and we have begun to dive deep into our loan portfolio. Today, we have not noted any deterioration. In fact, classified assets and loans past due have improved as of June 30, 2022 compared to earlier quarters.
As for interest rate sensitivity, 87% of the Bank’s loans are floating or adjustable rate. Many of them have a floor rate requirement. At June 30, 2022, 74% were fully floating. With the additional rate hike anticipated, all 87% of our total loan portfolio will be fully floating at the end of July. Therefore, our interest income is expected to increase for the remainder of the year. Hopefully the increase in interest income will more than enough cover the anticipated deposit cost increase.
The $32 million stock repurchase is progressing as scheduled. As of June 30, 2022, we have repurchased 192,159 shares of our stock using $12,971,000. We plan to complete the program in the third quarter of 2022.”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $56.4 million for the second quarter of 2022. This was an increase from the $43.4 million recorded in the same quarter last year and also an increase over the $50.0 million posted in the first quarter of 2022. Rising interest rates and strong loan growth were the primary drivers of the increase in net interest income over both comparable quarters. The taxable equivalent margin was 3.77% for the second quarter of 2022, as compared to 3.42% in the first quarter of 2022 and versus 3.25% for the same period last year.
Noninterest Income. For the second quarter of 2022, noninterest income was $2.6 million compared with $1.6 million for the same quarter last year and compared to $2.3 million for the first quarter of 2022. The increase compared to last year was due to a $518,000 increase in letter of credit (“LC”) fees, an increase in service charges of $199,000 and a $261,000 loss on sale of loans recorded in the second quarter of last year. The increase compared to the prior quarter was due to an increase in LC fees of $396,000 partially offset by a decrease in other income of $114,000.
Noninterest Expense. Total noninterest expense was $17.1 million for the second quarter of 2022. This is up compared to the $15.0 million recorded in the same quarter last year and an increase over the $16.2 million posted in the first quarter of 2022. Comparing this quarter to the second quarter of last year; personnel expense increased by $1.4 million or 13.6%, OREO expense was $463,000 this quarter compared to $0 last year and professional services increased by $386,000 this quarter. The personnel expense increase was primarily due to new hires and merit increases. Last year, the Bank did not own any OREO so this years’ expenses were all an increase. In comparing to the prior quarter; personnel expense was essentially flat from the first quarter, OREO expense increased by $447,000 and other expense increased by $285,000. For the quarter ended June 30, 2022, the Bank’s efficiency ratio was 29.0%, besting the 30.9% posted last quarter and also down from the same quarter of last year’s 33.2%.
Income Taxes. The Bank recorded a provision for income taxes of $10.9 million for the second quarter of 2022. This represents an effective tax rate (“ETR”) of 28.0% and slightly below the ETR of 28.5% in both the prior quarter and 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 June 30, 2022 were $4.92 billion, an increase of $495 million or 11.2% over the total of $4.42 billion as of December 31, 2021. Total deposits increased to $5.41 billion, an increase of $182 million or 3.5% over the $5.23 billion as of December 31, 2021. Total assets ended the quarter at $6.23 billion, an increase of $187 million or 3.1% over the total of $6.05 billion as of December 31, 2021.
Asset Quality
As of June 30, 2022, nonaccrual loans totaled $10.6 million, down from $14.8 million as of the end of 2021. In addition, OREO and repossessed assets totaled $21.4 million as of June 30, 2022. Total net charge-offs for the second quarter of 2022 were zero as compared to both $1.2 million in the prior quarter and the same quarter of 2021.
Allowance for Credit Losses
The provision for credit losses for the second quarter of 2022 was $2.9 million as compared to a reversal of ($250,000) in the prior quarter and compared to the $0 provision for credit losses posted in the second quarter of 2021. 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 1.25% of total loans (excluding PPP loans).
Capitalization
As of June 30, 2022, the Bank’s leverage ratio was 9.92%, the common equity tier 1 capital ratio was 10.61% and the total capital ratio stood at 14.31%. As of December 31, 2021, the Bank’s leverage ratio was 9.54%, the common equity tier 1 ratio was 11.26% and the total risk-based capital ratio was 15.37%.
GAAP – Non-GAAP Reconciliation -Second quarter 2022 PPPT ROBE Net Income $ 28,069 Add: Provision for credit losses 2,900 Add: Income tax expense 10,916 Pre-provision and pre-tax income $ 41,885 Total equity - 3/31/22 $ 595,285 Pre-provision and pre-tax ROBE 28.22 % Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2022 financial results will be held tomorrow, July 21, 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 August 4, 2022; the passcode is 7884414.
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 2021 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: 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 PREFERRED BANK Condensed Consolidated Statements of Operations (unaudited) (in thousands, except for net income per share and shares) For the Quarter Ended June 30, March 31, June 30, 2022 2022 2021 Interest income: Loans, including fees $ 58,541 $ 52,119 $ 47,906 Investment securities 3,972 2,886 2,548 Fed funds sold 46 19 19 Total interest income 62,559 55,024 50,473 Interest expense: Interest-bearing demand 2,448 1,431 1,530 Savings 20 19 18 Time certificates 2,342 2,217 3,419 Subordinated debt 1,325 1,325 2,145 Total interest expense 6,135 4,992 7,112 Net interest income 56,424 50,032 43,361 Provision for (reversal of) credit losses 2,900 (250 ) - Net interest income after provision for (reversal of) credit losses 53,524 50,282 43,361 Noninterest income: Fees & service charges on deposit accounts 723 671 525 Letters of credit fee income 1,329 933 811 BOLI income 100 99 98 Net loss on sale of loans - - (261 ) Other income 449 563 473 Total noninterest income 2,601 2,266 1,646 Noninterest expense: Salary and employee benefits 11,688 11,640 10,285 Net occupancy expense 1,441 1,422 1,429 Business development and promotion expense 176 101 117 Professional services 1,382 1,243 996 Office supplies and equipment expense 459 489 476 Other real estate owned expense 463 16 - Other 1,531 1,246 1,661 Total noninterest expense 17,140 16,157 14,964 Income before provision for income taxes 38,985 36,391 30,043 Income tax expense 10,916 10,364 8,563 Net income $ 28,069 $ 26,027 $ 21,480 Dividend and earnings allocated to participating securities - (1 ) (3 ) Net income available to common shareholders $ 28,069 $ 26,026 $ 21,477 Income per share available to common shareholders Basic $ 1.90 $ 1.76 $ 1.44 Diluted $ 1.87 $ 1.74 $ 1.44 Weighted-average common shares outstanding Basic 14,792,298 14,765,337 14,954,688 Diluted 15,006,801 14,978,667 14,954,688 Cash dividends per common share $ 0.43 $ 0.43 $ 0.38 PREFERRED BANK Condensed Consolidated Statements of Operations (unaudited) (in thousands, except for net income per share and shares) For the Six Months Ended June 30, June 30, Change 2022 2021 % Interest income: Loans, including fees $ 110,660 $ 97,765 13.2 % Investment securities 6,858 4,825 42.1 % Fed funds sold 65 43 53.2 % Total interest income 117,583 102,633 14.6 % Interest expense: Interest-bearing demand 3,880 2,967 30.8 % Savings 39 37 6.2 % Time certificates 4,558 7,246 -37.1 % Subordinated debt 2,650 3,676 -27.9 % Total interest expense 11,127 13,926 -20.1 % Net interest income 106,456 88,707 20.0 % Provision for credit losses 2,650 1,400 89.3 % Net interest income after provision for credit losses 103,806 87,307 18.9 % Noninterest income: Fees & service charges on deposit accounts 1,395 951 46.7 % Letters of credit fee income 2,261 1,619 39.7 % BOLI income 199 194 2.2 % Net loss on sale of loans - (640 ) -100.0 % Other income 1,012 869 16.5 % Total noninterest income 4,867 2,993 62.6 % Noninterest expense: Salary and employee benefits 23,328 21,408 9.0 % Net occupancy expense 2,863 2,830 1.2 % Business development and promotion expense 277 190 45.8 % Professional services 2,625 1,977 32.8 % Office supplies and equipment expense 948 914 3.8 % Other 2,777 3,297 -15.8 % Total noninterest expense 33,297 30,616 8.8 % Income before provision for income taxes 75,376 59,684 26.3 % Income tax expense 21,280 17,010 25.1 % Net income $ 54,096 $ 42,674 26.8 % Dividend and earnings allocated to participating securities $ (2 ) $ (5 ) -69.6 % Net income available to common shareholders $ 54,094 $ 42,669 26.8 % Income per share available to common shareholders Basic $ 3.66 $ 2.85 28.3 % Diluted $ 3.61 $ 2.85 26.4 % Weighted-average common shares outstanding Basic 14,778,892 14,952,366 -1.2 % Diluted 14,990,989 14,952,366 0.3 % Dividends per share $ 0.86 $ 0.76 13.2 % PREFERRED BANK Condensed Consolidated Statements of Financial Condition (unaudited) (in thousands) June 30, December 31, 2022 2021 (Unaudited) (Audited) Assets Cash and due from banks $ 748,658 $ 1,030,610 Fed funds sold 20,000 20,000 Cash and cash equivalents 768,658 1,050,610 Securities held to maturity, at amortized cost 12,784 13,962 Securities available-for-sale, at fair value 400,597 451,911 Loans 4,920,141 4,424,992 Less allowance for credit losses (61,396 ) (59,969 ) Less amortized deferred loan fees, net (9,525 ) (6,316 ) Loans, net 4,849,220 4,358,707 Other real estate owned and repossessed assets 21,449 - Customers' liability on acceptances 11,053 10,188 Bank furniture and fixtures, net 9,764 10,533 Bank-owned life insurance 10,221 10,088 Accrued interest receivable 16,241 14,646 Investment in affordable housing partnerships 54,874 59,018 Federal Home Loan Bank stock, at cost 15,000 15,000 Deferred tax assets 36,703 26,674 Operating lease right-of-use assets 21,024 21,969 Other assets 5,453 2,997 Total assets $ 6,233,041 $ 6,046,303 Liabilities and Shareholders' Equity Deposits: Non-interest bearing demand deposits $ 1,385,934 $ 1,305,692 Interest-bearing deposits: 2,239,501 2,032,819 Savings 39,784 37,839 Time certificates of $250,000 or more 870,376 934,444 Other time certificates 872,357 914,717 Total deposits 5,407,952 5,225,511 Acceptances outstanding 11,053 10,188 Subordinated debt issuance, net 147,877 147,758 Commitments to fund investment in affordable housing partnerships 20,036 22,606 Operating lease liabilities 21,115 22,861 Accrued interest payable 752 715 Other liabilities 32,664 29,946 Total liabilities 5,641,449 5,459,585 Shareholders' equity 591,592 586,718 Total liabilities and shareholders' equity $ 6,233,041 $ 6,046,303 Book value per common share $ 40.44 $ 39.97 Number of common shares outstanding 14,628,942 14,679,769 PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Quarter Ended June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Unaudited historical quarterly operations data: Interest income $ 62,559 $ 55,024 $ 54,791 $ 53,611 $ 50,473 Interest expense 6,135 4,992 5,374 5,858 7,112 Interest income before provision for credit losses 56,424 50,032 49,417 47,753 43,361 (Reversal of) provision for credit losses 2,900 (250 ) (900 ) (1,500 ) - Noninterest income 2,601 2,266 1,966 2,784 1,646 Noninterest expense 17,140 16,157 14,806 15,370 14,964 Income tax expense 10,916 10,364 11,056 10,522 8,563 Net income $ 28,069 $ 26,027 $ 26,421 $ 26,145 $ 21,480 Earnings per share Basic $ 1.90 $ 1.76 $ 1.80 $ 1.76 $ 1.44 Diluted $ 1.87 $ 1.74 $ 1.80 $ 1.76 $ 1.44 Ratios for the period: Return on average assets 1.84 % 1.75 % 1.72 % 1.80 % 1.58 % Return on beginning equity 18.91 % 17.99 % 18.65 % 18.56 % 15.98 % Net interest margin (Fully-taxable equivalent) 3.77 % 3.42 % 3.28 % 3.36 % 3.25 % Noninterest expense to average assets 1.12 % 1.08 % 0.97 % 1.06 % 1.10 % Efficiency ratio 29.04 % 30.89 % 28.82 % 30.41 % 33.25 % Net charge-offs to average loans (annualized) 0.00 % 0.11 % 0.03 % 0.10 % 0.12 % Ratios as of period end: Tier 1 leverage capital ratio 9.92 % 9.92 % 9.54 % 9.64 % 10.07 % Common equity tier 1 risk-based capital ratio 10.61 % 11.20 % 11.26 % 11.19 % 11.28 % Tier 1 risk-based capital ratio 10.61 % 11.20 % 11.26 % 11.19 % 11.28 % Total risk-based capital ratio 14.31 % 15.12 % 15.37 % 15.47 % 15.61 % Allowances for credit losses to loans at end of period 1.25 % 1.27 % 1.36 % 1.41 % 1.49 % Allowance for credit losses to non-performing loans 5.27x 27.15x 4.05x 2.93x 2.91x Average balances: Total securities $ 430,203 $ 455,899 $ 470,811 $ 401,641 $ 269,000 Total loans 4,777,353 4,367,095 4,218,699 4,156,289 4,130,190 Total earning assets 6,008,024 5,938,519 5,984,055 5,659,678 5,364,598 Total assets 6,133,703 6,044,155 6,079,934 5,760,056 5,467,678 Total time certificate of deposits 1,810,886 1,869,654 1,915,116 1,959,514 1,893,247 Total interest bearing deposits 3,982,888 3,947,616 3,945,275 3,783,704 3,704,771 Total deposits 5,301,370 5,215,810 5,277,507 4,971,607 4,724,104 Total interest bearing liabilities 4,130,729 4,095,399 4,093,002 3,931,375 3,815,964 Total equity 606,260 597,214 576,495 569,624 553,561 PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Six Months Ended June 30, June 30, 2022 2021 Interest income $ 117,583 $ 102,633 Interest expense 11,127 13,926 Interest income before provision for credit losses 106,456 88,707 Provision for credit losses 2,650 1,400 Non-interest income 4,867 2,993 Non-interest expense 33,297 30,616 Income tax expense 21,280 17,010 Net income $ 54,096 $ 42,674 Earnings per share Basic $ 3.66 $ 2.85 Diluted $ 3.61 $ 2.85 Ratios for the period: Return on average assets 1.79 % 1.61 % Return on beginning equity 18.59 % 16.38 % Net interest margin (Fully-taxable equivalent) 3.60 % 3.43 % Non-interest expense to average assets 1.10 % 1.16 % Efficiency ratio 29.91 % 33.39 % Net charge-offs to average loans 0.05 % 0.06 % Average balances: Total securities $ 442,981 $ 255,675 Total loans 4,573,357 4,087,731 Total earning assets 5,973,364 5,234,170 Total assets 6,089,176 5,334,618 Total time certificate of deposits 1,840,108 1,857,055 Total interest-bearing deposits 3,965,349 3,618,543 Total deposits 5,258,826 4,605,908 Total interest-bearing liabilities 4,113,161 3,723,846 Total equity 601,762 545,964 PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) As of June 30, March 31, December 31, September 30, June 30, 2022 2022 2021 2021 2021 Unaudited quarterly statement of financial position data: Assets: Cash and cash equivalents $ 768,658 $ 985,162 $ 1,050,610 $ 1,082,634 $ 896,474 Securities held-to-maturity, at amortized cost 12,784 13,496 13,962 15,294 15,749 Securities available-for-sale, at fair value 400,597 430,280 451,911 461,356 278,460 Loans: Real estate – Mortgage: Real estate—Residential $ 581,412 $ 539,614 $ 536,286 $ 540,725 $ 558,147 Real estate—Commercial 2,583,484 2,367,862 2,267,063 2,093,692 2,019,995 Total Real Estate – Mortgage 3,164,896 2,907,476 2,803,349 2,634,417 2,578,142 Real estate – Construction: R/E Construction — Residential 168,420 141,218 130,842 122,382 120,363 R/E Construction — Commercial 203,217 209,726 202,482 213,833 224,323 Total real estate construction loans 371,637 350,944 333,324 336,215 344,686 Commercial and industrial 1,336,631 1,300,478 1,245,734 1,286,995 1,259,668 PPP 22,186 32,554 42,467 63,897 95,765 Consumer and others 24,791 115 118 6 143 Gross loans 4,920,141 4,591,567 4,424,992 4,321,529 4,278,403 Allowance for credit losses on loans (61,396 ) (58,496 ) (59,969 ) (61,135 ) (63,635 ) Net deferred loan fees (9,525 ) (8,573 ) (6,316 ) (5,498 ) (5,329 ) Net loans $ 4,849,220 $ 4,524,498 $ 4,358,707 $ 4,254,896 $ 4,209,439 Other real estate owned and repossessed assets $ 21,449 $ 15,547 $ - $ - $ - Investment in affordable housing partnerships 54,874 56,946 59,018 53,399 55,452 Federal Home Loan Bank stock, at cost 15,000 15,000 15,000 15,000 15,000 Other assets 110,459 101,427 97,095 97,261 105,334 Total assets $ 6,233,041 $ 6,142,356 $ 6,046,303 $ 5,979,840 $ 5,575,908 Liabilities: Deposits: Demand $ 1,385,934 $ 1,251,613 $ 1,305,692 $ 1,349,114 $ 1,063,472 Interest-bearing demand 2,239,501 2,159,178 2,032,819 1,861,334 1,774,668 Savings 39,784 39,946 37,839 33,417 32,560 Time certificates of $250,000 or more 870,376 924,317 934,444 959,826 930,976 Other time certificates 872,357 934,615 914,717 990,228 994,630 Total deposits $ 5,407,952 $ 5,309,669 $ 5,225,511 $ 5,193,919 $ 4,796,306 Acceptances outstanding $ 11,053 $ 8,222 $ 10,188 $ 7,697 $ 7,797 Subordinated debt issuance, net 147,877 147,818 147,758 147,699 147,787 Commitments to fund investment in affordable housing partnerships 20,036 22,606 22,606 17,900 19,197 Other liabilities 54,531 58,756 53,522 50,604 45,852 Total liabilities $ 5,641,449 $ 5,547,071 $ 5,459,585 $ 5,417,819 $ 5,016,939 Equity: Net common stock, no par value $ 197,997 $ 209,065 $ 208,840 $ 203,844 $ 219,958 Retained earnings 414,393 392,610 372,952 352,843 332,276 Accumulated other comprehensive income (20,798 ) (6,390 ) 4,926 5,334 6,735 Total shareholders' equity $ 591,592 $ 595,285 $ 586,718 $ 562,021 $ 558,969 Total liabilities and shareholders' equity $ 6,233,041 $ 6,142,356 $ 6,046,303 $ 5,979,840 $ 5,575,908 PREFERRED BANK Quarter-to-Date Average Balances, Yield and Rates (Unaudited) Three months ended June 30, Three months ended March 31, Three months ended June 30, 2022 2022 2021 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) $ 4,777,353 58,541 4.92 % $ 4,367,095 $ 52,119 4.84 % 4,132,451 $ 47,906 4.65 % Investment securities (3) 430,203 2,370 2.21 % 455,899 2,224 1.98 % 269,000 2,058 3.07 % Federal funds sold 20,088 46 0.92 % 20,122 19 0.38 % 20,437 19 0.36 % Other earning assets 780,380 1,708 0.88 % 1,095,403 770 0.29 % 942,710 597 0.25 % Total interest-earning assets 6,008,024 62,665 4.18 % 5,938,519 55,132 3.77 % 5,364,598 50,580 3.78 % Deferred loan fees, net (9,084 ) (6,322 ) (4,924 ) Allowance for credit losses on loans (58,568 ) (59,951 ) (64,842 ) Non-interest earning assets: Cash and due from banks 11,363 11,589 10,620 Bank furniture and fixtures 10,028 10,440 11,468 Right of use assets 21,287 21,754 19,735 Other assets 150,653 128,126 131,023 Total assets $ 6,133,703 $ 6,044,155 $ 5,467,678 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Interest-bearing demand and savings 2,172,002 $ 2,468 0.46 % 2,077,962 $ 1,450 0.28 % $ 1,811,524 $ 1,548 0.34 % TCD $250K or more 892,410 1,211 0.54 % 929,170 1,027 0.45 % 926,161 1,688 0.73 % Other time certificates 918,476 1,131 0.49 % 940,484 1,190 0.51 % 967,086 1,731 0.72 % Total interest-bearing deposits 3,982,888 4,810 0.48 % 3,947,616 3,667 0.38 % 3,704,771 4,967 0.54 % Subordinated debt, net 147,841 1,325 3.59 % 147,783 1,325 3.64 % 111,193 2,145 7.74 % Total interest-bearing liabilities 4,130,729 6,135 0.60 % 4,095,399 4,992 0.49 % 3,815,964 7,112 0.75 % Non-interest bearing liabilities: Demand deposits 1,318,482 1,268,194 1,019,333 Lease Liability 21,602 22,463 21,765 Other liabilities 56,630 60,885 57,055 Total liabilities 5,527,443 5,446,941 4,914,117 Shareholders’ equity 606,260 597,214 553,561 Total liabilities and shareholders’ equity $ 6,133,703 $ 6,044,155 $ 5,467,678 Net interest income $ 56,530 $ 50,140 $ 43,468 Net interest spread 3.59 % 3.27 % 3.03 % Net interest margin 3.77 % 3.42 % 3.25 % Cost of Deposits: Non-interest bearing demand deposits $ 1,318,482 $ 1,268,194 $ 1,019,333 Interest-bearing deposits 3,982,888 4,810 0.48 % 3,947,616 3,667 0.38 % 3,704,771 4,967 0.54 % Total Deposits $ 5,301,370 $ 4,810 0.36 % $ 5,215,810 $ 3,667 0.29 % $ 4,724,104 $ 4,967 0.42 % ______________________________
(1) Includes non-accrual loans and loans held for sale
(2) Net loan fee income of $442,000, $765,000 and $669,000 for the quarter ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively, are included in the yield computations
(3) Yields on securities have been adjusted to a tax-equivalent basisPREFERRED BANK Year-to-Date Average Balances, Yield and Rates (Unaudited) Six months ended June 30, 2022 2021 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) $ 4,573,357 $ 110,660 4.88 % $ 4,088,879 $ 97,765 4.82 % Investment securities (3) 442,981 4,594 2.09 % 255,675 3,942 3.11 % Federal funds sold 20,105 65 0.65 % 20,953 43 0.41 % Other earning assets 936,921 2,478 0.53 % 868,663 1,090 0.25 % Total interest-earning assets 5,973,364 117,797 3.98 % 5,234,170 102,840 3.96 % Deferred loan fees, net (7,710 ) (4,636 ) Allowance for credit losses on loans (59,255 ) (64,150 ) Non-interest earning assets: Cash and due from banks 11,474 10,273 Bank furniture and fixtures 10,233 11,619 Right of use assets 21,519 18,299 Other assets 139,550 129,042 Total assets $ 6,089,176 $ 5,334,618 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Interest-bearing demand/ savings 2,125,241 $ 3,919 0.37 % 1,761,488 $ 3,004 0.34 % TCD $250K or more 910,689 2,238 0.50 % 922,677 3,606 0.79 % Other time certificates 929,419 2,320 0.50 % 934,378 3,640 0.79 % Total interest-bearing deposits 3,965,349 8,477 0.43 % 3,618,543 10,250 0.57 % Subordinated debt, net 147,812 2,650 3.62 % 105,303 3,676 7.04 % Total interest-bearing liabilities 4,113,161 11,127 0.55 % 3,723,846 13,926 0.75 % Non-interest bearing liabilities: Demand deposits 1,293,477 987,365 Lease Liability 22,030 20,534 Other liabilities 58,746 56,909 Total liabilities 5,487,414 4,788,654 Shareholders’ equity 601,762 545,964 Total liabilities and shareholders’ equity $ 6,089,176 $ 5,334,618 Net interest income $ 106,670 $ 88,914 Net interest spread 3.43 % 3.21 % Net interest margin 3.60 % 3.43 % Cost of Deposits: Non-interest bearing demand deposits $ 1,293,477 $ 987,365 Interest-bearing deposits 3,965,349 8,477 0.43 % 3,618,543 10,250 0.57 % Total Deposits $ 5,258,826 $ 8,477 0.33 % $ 4,605,908 $ 10,250 0.45 % ______________________________
(1) Includes non-accrual loans and loans held for sale
(2) Net loan fee income of $1.7 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively, are included in the yield computations
(3) Yields on securities have been adjusted to a tax-equivalent basisPreferred Bank Loan and Credit Quality Information Allowance For Credit Losses History Six Months Ended Year ended June 30, 2022 December 31, 2021 (Dollars in 000's) Allowance For Credit Losses Balance at Beginning of Period $ 59,969 $ 63,426 Charge-Offs Commercial & Industrial 1,222 1,697 Mini-perm Real Estate 1 817 Total Charge-Offs 1,223 2,514 Recoveries Commercial & Industrial - 57 Total Recoveries - 57 Net Charge-Offs 1,223 2,457 Provision for (reversal of) Credit Losses: 2,650 (1,000 ) Balance at End of Period $ 61,396 $ 59,969 Average Loans Held for Investment $ 4,573,357 $ 4,138,023 Loans Held for Investment at End of Period $ 4,920,141 $ 4,424,992 Net Charge-Offs to Average Loans 0.05 % 0.06 % Allowances for Credit Losses to Loans at End of Period 1.25 % 1.36 %
1 This is a non-GAAP measure and linking to the reconciliation on page 5.
