Preferred Bank Reports Quarterly and Annual Earnings

Source: Nasdaq GlobeNewswire / 19 Jan 2022 16:17:47 America/Chicago

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

Preferred Bank Reports Quarterly and Annual Earnings

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