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Preferred Bank Reports Third Quarter Results
Источник: Nasdaq GlobeNewswire / 21 окт 2024 07:00:01 America/Chicago
LOS ANGELES, Oct. 21, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2024. Preferred Bank (“the Bank”) reported net income of $33.4 million or $2.46 per diluted share for the third quarter of 2024. This represents a slight decrease in net income of $209,000 from the prior quarter and down by $4.8 million from the same quarter last year. The decrease in net income from the prior year was due to a decrease in net interest income of $4.1 million due to higher deposit costs as well as an increase in noninterest expense of $3.1 million. These were partially offset by lower provision for credit losses and an increase in noninterest income. The decrease from the prior quarter was due to an increase in noninterest expense of $2.4 million, an increase in the provision for credit losses of $700,000 partially offset by an increase in net interest income of $2.7 million. Preferred Bank continues to deliver top-of-peer group profitability metrics and long term shareholder returns.
Highlights for the Quarter:
- Return on average assets was 1.95%
- Return on beginning equity of 18.37%
- Net interest margin (NIM) expanded to 4.10%
- Total loans increased by $143 million or 2.6% for the quarter
- Efficiency ratio was 30.6%
Li Yu, Chairman and CEO, commented, “I am pleased to report our third quarter 2024 net income was $33.4 million or $2.46 a share. Highlights of the quarter include the successful reduction of $21.2 million in non-performing loans, with no charge-offs. Interest recovery related to this was $800,000. Criticized loans, however, have increased but we believe it may be temporary in nature. Separately, the OREO property is currently in escrow, scheduled to close later this month. The valuation allowance we recorded of $1.7 million is included in the quarter’s non-interest expense.
Loan demand was strong this quarter. We had a net increase of $143 million, or 2.6% on a linked quarter basis. The September’s rate cut seems to have spurred borrower interest in general. Deposits for the quarter had a very small decrease, as we have been careful in monitoring our deposit costs.
At September 30, 2024, Preferred Bank’s loan portfolio was 26% fixed rate loans and 74% floating rate loans with floor rates for most of them. We believe it is well-balanced with the sensitivity of our deposits. However, the time certificates of deposits do have a cost adjustment pattern of slower reduction in the beginning but increasing gradually.”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $68.8 million for the third quarter of 2024. This was a decrease from the $73.0 million recorded in the same quarter last year and an increase over the $66.1 million posted in the second quarter of 2024. A higher cost of deposits was to blame for the decrease in net interest income versus the prior year and a curing of a nonaccrual loan in the third quarter of 2024 was the reason for the increase in net interest income over the second quarter of 2024. A loan that was placed into nonaccrual status in the second quarter of 2024 was paid down significantly and the interest was brought current in the third quarter of 2024. This interest recovery of $800,000 helped to increase the Bank’s net interest margin to 4.10% for the quarter from 3.96% in the prior quarter. This compares to a margin of 4.39% one year ago. Also very importantly, the Bank’s total interest expense decreased for the first time since the first quarter of 2022. This was the result of the Bank’s efforts to replace higher cost brokered MMDA accounts with traditional brokered CD’s which carry a lower coupon. This is why, during this quarter, there is a fairly sizeable decrease in money market accounts and a corresponding increase in certificates of deposit.
Noninterest Income. For the third quarter of 2024, noninterest income was $3.5 million compared with $3.0 million for the same quarter last year and compared to $3.4 million for the second quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fees which increased by $210,000 and other income partially offset by a decrease in gains on sales of SBA loans of $263,000. In comparing to the same quarter last year; LC fee income was up by $547,000 partially offset by a decrease in service charges of $192,000.
Noninterest Expense. Total noninterest expense was $22.1 million for the third quarter of 2024 compared to $19.7 million for the second quarter of 2024 and compared to the $19.0 million recorded in the same period last year. The primary reason for the increase from the prior year and over the prior quarter was the $1.7 million valuation allowance recorded this quarter on the Bank’s other real estate owned (OREO) property. In comparing to the prior quarter; personnel expense increased by $581,000 and occupancy expense increased by $167,000. This was partially offset by a decrease in promotion expense of $162,000. In comparing to same quarter last year; personnel expense was up by $517,000, occupancy expense was up by $320,000 and professional services was up by $393,000. The increase in professional services expense was due to increased legal costs which were associated with a number of nonperforming loans. For the quarter ended September 30, 2024, the Bank’s efficiency ratio was 30.6%, higher than the 28.3% posted last quarter and higher than the 25.04% posted this quarter last year.
Income Taxes. The Bank recorded a provision for income taxes of $13.6 million for the third quarter of 2024. This represents an effective tax rate (“ETR”) of 29.0% which is identical to the ETR for last quarter and up from the 28.5% ETR recorded 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.
Balance Sheet Summary
Total gross loans at September 30, 2024 were $5.57 billion, an increase of $298.1 million from the total of $5.27 billion as of December 31, 2023. Total deposits decreased during the quarter by $11 million but still increased year-to-date to $5.87 billion, up $158.4 million from the $5.71 billion as of December 31, 2023. Total assets were $6.87 billion, an increase of $213.3 million over the total of $6.66 billion as of December 31, 2023.
Asset Quality
Non-accrual loans as of September 30, 2024, was $19.4 million, a decrease of $21.2 million from $40.6 million on June 30, 2024. There were no charge-offs related to the reduction. Interest recoveries were $800,000 for this quarter
The increase in total criticized loans of $161.2 for the quarter was largely due to the downgrade of a relationship with seven real estate related loans. These seven loans totaling $182.1 were secured by retail or multifamily properties that have late payment irregularities. At September 30, 2024, four of the seven loans totaling $86.5 million have been brought current and are expected to be out of criticized status in the fourth quarter. The three loans that have not been brought to current have a combined weighted average LTV of 64% and DCR of 0.98. All these loans have adequate guarantor support. Combined amount outstanding for these three loans is $95.6 million.
Allowance for Credit Losses
The provision for credit losses for the third quarter of 2024 was $3.2 million compared to $2.5 million last quarter and compared to $3.5 million in the same quarter last year. The Bank’s allowance coverage ratio increased to 1.36% of loans as compared to 1.34% in the prior quarter.
Capitalization
As of September 30, 2024, the Bank’s leverage ratio was 11.28%, the common equity tier 1 capital ratio was 11.66% and the total capital ratio stood at 15.06%. As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 ratio was 11.57% and the total capital ratio was 15.18%.
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2024 financial results will be held this afternoon, October 21, 2024 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.
Preferred Bank's Chairman and CEO 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 discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at 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 November 4, 2024; the passcode is 7955778.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. In addition, the Bank also operates a loan production office in Sunnyvale, California. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy
shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2023 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.AT THE COMPANY:
Edward J. Czajka
Executive Vice President
Chief Financial Officer
(213) 891-1188AT FINANCIAL PROFILES:
Jeffrey Haas
General Information
(310) 622-8240
PFBC@finprofiles.comFinancial 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 September 30, June 30, September 30, 2024 2024 2023 Interest income: Loans, including fees $ 114,112 $ 109,451 $ 106,695 Investment securities 15,032 17,552 18,556 Fed funds sold 280 291 278 Total interest income 129,424 127,294 125,529 Interest expense: Interest-bearing demand 23,211 24,205 20,257 Savings 84 79 67 Time certificates 35,956 35,578 29,369 FHLB borrowings - - 1,557 Subordinated debt 1,325 1,325 1,325 Total interest expense 60,576 61,187 52,575 Net interest income 68,848 66,107 72,954 Provision for credit losses 3,200 2,500 3,500 Net interest income after provision for credit losses 65,648 63,607 69,454 Noninterest income: Fees & service charges on deposit accounts 747 819 939 Letters of credit fee income 1,959 1,749 1,412 BOLI income 108 105 103 Net gain on sale of loans 91 353 21 Other income 554 378 497 Total noninterest income 3,459 3,404 2,972 Noninterest expense: Salary and employee benefits 13,525 12,944 13,008 Net occupancy expense 1,883 1,716 1,563 Business development and promotion expense 241 403 193 Professional services 1,816 1,832 1,423 Office supplies and equipment expense 435 477 395 Loss on sale of OREO, valuation allowance and related expense 1,915 29 140 Other 2,274 2,296 2,287 Total noninterest expense 22,089 19,697 19,009 Income before provision for income taxes 47,018 47,314 53,417 Income tax expense 13,635 13,722 15,225 Net income $ 33,383 $ 33,592 $ 38,192 Income per share available to common shareholders Basic $ 2.50 $ 2.51 $ 2.74 Diluted $ 2.46 $ 2.48 $ 2.71 Weighted-average common shares outstanding Basic 13,327,848 13,362,522 13,925,994 Diluted 13,544,273 13,548,400 14,105,915 Cash dividends per common share $ 0.70 $ 0.70 $ 0.55
PREFERRED BANK Condensed Consolidated Statements of Operations (unaudited) (in thousands, except for net income per share and shares) For the Nine Months Ended September 30, September 30, Change 2024 2023 % Interest income: Loans, including fees $ 333,543 $ 304,796 9.4 Investment securities 48,841 47,454 2.9 Fed funds sold 854 774 10.4 Total interest income 383,238 353,024 8.6 Interest expense: Interest-bearing demand 69,706 53,701 29.8 Savings 238 153 55.6 Time certificates 105,864 71,399 48.3 FHLB borrowings - 3,819 -100.0 % Subordinated debt 3,975 3,975 0.0 Total interest expense 179,783 133,046 35.1 Net interest income 203,455 219,978 -7.5 % Provision for credit losses 10,100 6,500 55.4 Net interest income after provision for credit losses 193,355 213,478 -9.4 % Noninterest income: Fees & service charges on deposit accounts 2,411 2,477 -2.7 % Letters of credit fee income 5,211 4,312 20.8 % BOLI income 318 307 3.3 % Net loss on called and sale of investment securities - (4,117 ) -100.0 % Net gain on sale of loans 547 547 -0.1 % Other income 1,441 1,481 -2.7 % Total noninterest income 9,928 5,007 98.3 % Noninterest expense: Salary and employee benefits 40,369 39,256 2.8 % Net occupancy expense 5,310 4,513 17.7 % Business development and promotion expense 910 498 82.7 % Professional services 5,105 3,915 30.4 % Office supplies and equipment expense 1,385 1,197 15.7 % Loss on sale of OREO, valuation allowance and related expense 2,079 3,050 -31.8 % Other 6,656 6,332 5.1 % Total noninterest expense 61,814 58,761 5.2 % Income before provision for income taxes 141,469 159,724 -11.4 % Income tax expense 41,028 45,523 -9.9 % Net income $ 100,441 $ 114,201 -12.0 % Income per share available to common shareholders Basic $ 7.50 $ 8.01 -6.4 % Diluted $ 7.39 $ 7.92 -6.7 % Weighted-average common shares outstanding Basic 13,399,487 14,257,005 -6.0 % Diluted 13,587,820 14,418,939 -5.8 % Dividends per share $ 2.10 $ 1.65 27.3 %
PREFERRED BANK Condensed Consolidated Statements of Financial Condition (unaudited) (in thousands) September 30, December 31, 2024 2023 (Unaudited) (Audited) Assets Cash and due from banks $ 782,394 $ 890,852 Fed funds sold 22,600 20,000 Cash and cash equivalents 804,994 910,852 Securities held-to-maturity, at amortized cost 20,311 21,171 Securities available-for-sale, at fair value 337,363 313,842 Loans held for sale, at lower of cost or fair value 225 360 Loans 5,571,579 5,273,498 Less allowance for credit losses (76,051 ) (78,355 ) Less amortized deferred loan fees, net (10,414 ) (11,079 ) Loans, net 5,485,114 5,184,064 Other real estate owned and repossessed assets 15,082 16,716 Customers' liability on acceptances - 315 Bank furniture and fixtures, net 9,195 9,694 Bank-owned life insurance 10,364 10,632 Accrued interest receivable 35,562 33,892 Investment in affordable housing partnerships 58,009 65,276 Federal Home Loan Bank stock, at cost 15,000 15,000 Deferred tax assets 46,209 48,991 Income tax receivable 1,013 2,391 Operating lease right-of-use assets 30,489 22,050 Other assets 3,414 4,030 Total assets $ 6,872,344 $ 6,659,276 Liabilities and Shareholders' Equity Deposits: Noninterest bearing demand deposits $ 682,859 $ 786,995 Interest bearing deposits: 1,994,288 2,075,156 Savings 29,793 29,167 Time certificates of $250,000 or more 1,478,500 1,317,862 Other time certificates 1,682,324 1,500,162 Total deposits 5,867,764 5,709,342 Acceptances outstanding - 315 Subordinated debt issuance, net 148,410 148,232 Commitments to fund investment in affordable housing partnerships 23,617 30,824 Operating lease liabilities 26,730 19,766 Accrued interest payable 16,001 16,124 Other liabilities 39,705 39,568 Total liabilities 6,122,227 5,964,171 Shareholders' equity 750,117 695,105 Total liabilities and shareholders' equity $ 6,872,344 $ 6,659,276 Book value per common share $ 56.54 $ 50.54 Number of common shares outstanding 13,267,852 13,753,246
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Unaudited historical quarterly operations data: Interest income $ 129,424 $ 127,294 $ 126,520 $ 124,964 $ 125,529 Interest expense 60,576 61,187 58,020 55,568 52,575 Interest income before provision for credit losses 68,848 66,107 68,500 69,396 72,954 Provision for credit losses 3,200 2,500 4,400 3,500 3,500 Noninterest income 3,459 3,404 3,065 2,106 2,972 Noninterest expense 22,089 19,697 20,028 17,873 19,009 Income tax expense 13,635 13,722 13,671 14,290 15,225 Net income $ 33,383 $ 33,592 $ 33,466 $ 35,839 $ 38,192 Earnings per share Basic $ 2.50 $ 2.51 $ 2.48 $ 2.63 $ 2.74 Diluted $ 2.46 $ 2.48 $ 2.44 $ 2.60 $ 2.71 Ratios for the period: Return on average assets 1.95 % 1.97 % 2.00 % 2.15 % 2.25 % Return on beginning equity 18.37 % 19.44 % 19.36 % 21.21 % 22.66 % Net interest margin (Fully-taxable equivalent) 4.10 % 3.96 % 4.19 % 4.24 % 4.39 % Noninterest expense to average assets 1.29 % 1.15 % 1.20 % 1.07 % 1.12 % Efficiency ratio 30.55 % 28.34 % 27.99 % 25.00 % 25.04 % Net charge-offs (recoveries) to average loans (annualized) -0.00 % 0.68 % 0.26 % -0.00 % 0.01 % Ratios as of period end: Tangible common equity ratio 10.92 % 10.55 % 10.35 % 10.43 % 10.10 % Tier 1 leverage capital ratio 11.28 % 10.89 % 10.80 % 10.85 % 10.46 % Common equity tier 1 risk-based capital ratio 11.66 % 11.52 % 11.50 % 11.57 % 11.63 % Tier 1 risk-based capital ratio 11.66 % 11.52 % 11.50 % 11.57 % 11.63 % Total risk-based capital ratio 15.06 % 14.93 % 15.08 % 15.18 % 15.32 % Allowances for credit losses to loans at end of period 1.36 % 1.34 % 1.49 % 1.49 % 1.46 % Allowance for credit losses to non-performing loans 3.92x 1.79x 4.33x 2.73x 3.86x Average balances: Total securities $ 356,590 $ 353,357 $ 348,961 $ 349,863 $ 368,968 Total loans 5,458,613 5,320,360 5,263,562 5,126,918 5,086,241 Total earning assets 6,684,766 6,728,498 6,585,853 6,499,469 6,597,557 Total assets 6,817,979 6,863,829 6,718,018 6,627,349 6,719,859 Total time certificate of deposits 2,874,985 2,884,259 2,852,860 2,767,385 2,680,854 Total interest bearing deposits 5,124,245 5,203,034 5,004,834 4,906,947 4,800,227 Total deposits 5,828,227 5,901,976 5,761,488 5,689,713 5,654,350 Total interest bearing liabilities 5,272,617 5,351,347 5,153,089 5,055,143 5,069,014 Total equity 747,222 715,190 704,996 683,141 678,020
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Nine Months Ended September 30, September 30, 2024 2023 Interest income $ 383,238 $ 353,024 Interest expense 179,783 133,046 Interest income before provision for credit losses 203,455 219,978 Provision for credit losses 10,100 6,500 Noninterest income 9,928 5,007 Noninterest expense 61,814 58,761 Income tax expense 41,028 45,523 Net income $ 100,441 $ 114,201 Earnings per share Basic $ 7.50 $ 8.01 Diluted $ 7.39 $ 7.92 Ratios for the period: Return on average assets 1.97 % 2.33 % Return on beginning equity 19.30 % 24.22 % Net interest margin (Fully-taxable equivalent) 4.08 % 4.58 % Noninterest expense to average assets 1.21 % 1.20 % Efficiency ratio 28.97 % 26.12 % Net charge-off (recoveries) to average loans 0.31 % 0.00 % Average balances: Total securities $ 352,982 $ 402,971 Total loans 5,347,918 5,048,452 Total earning assets 6,666,439 5,047,971 Total assets 6,800,008 6,436,889 Total time certificate of deposits 2,870,717 6,560,955 Total interest bearing deposits 5,110,755 2,504,426 Total deposits 5,830,555 4,602,039 Total interest bearing liabilities 5,259,068 5,539,223 Total equity 722,560 4,851,214
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) As of September 30, June 30, March 31, December 31, September 30, 2024 2024 2024 2023 2023 Unaudited quarterly statement of financial position data: Assets: Cash and cash equivalents $ 804,994 $ 917,677 $ 936,600 $ 910,852 $ 1,021,108 Securities held-to-maturity, at amortized cost 20,311 20,605 20,904 21,171 21,474 Securities available-for-sale, at fair value 337,363 331,909 333,411 313,842 335,608 Loans: Real estate – Mortgage: Real estate—Residential $ 753,453 $ 732,251 $ 724,101 $ 688,058 $ 663,021 Real estate—Commercial 2,882,506 2,833,430 2,777,608 2,760,761 2,688,148 Total Real Estate – Mortgage 3,635,959 3,565,681 3,501,709 3,448,819 3,351,169 Real estate – Construction: R/E Construction — Residential 274,214 238,062 236,596 246,201 226,482 R/E Construction — Commercial 290,308 247,582 213,727 179,775 164,666 Total real estate construction loans 564,522 485,644 450,323 425,976 391,148 Commercial and industrial 1,365,550 1,369,617 1,369,529 1,394,871 1,377,675 SBA 5,649 5,463 3,914 3,469 2,424 Consumer and others 124 118 379 363 285 Gross loans 5,571,804 5,428,600 5,325,854 5,273,498 5,128,242 Allowance for credit losses on loans (76,051 ) (72,848 ) (79,311 ) (78,355 ) (74,849 ) Net deferred loan fees (10,414 ) (10,502 ) (10,460 ) (11,079 ) (10,240 ) Net loans, excluding loans held for sale $ 5,485,339 $ 5,345,250 $ 5,236,083 $ 5,184,064 $ 5,043,153 Loans held for sale $ 225 $ 955 $ 605 $ 360 $ - Net loans $ 5,485,564 $ 5,346,205 $ 5,236,688 $ 5,184,424 $ 5,043,153 Other real estate owned and repossessed assets $ 15,082 $ 16,716 $ 16,716 $ 16,716 $ 16,716 Investment in affordable housing partnerships 58,009 60,432 62,854 65,276 54,679 Federal Home Loan Bank stock, at cost 15,000 15,000 15,000 15,000 15,000 Other assets 136,021 138,036 134,040 131,995 124,793 Total assets $ 6,872,344 $ 6,846,580 $ 6,756,213 $ 6,659,276 $ 6,632,530 Liabilities: Deposits: Demand $ 682,859 $ 675,767 $ 709,767 $ 786,995 $ 838,300 Interest bearing demand 1,994,288 2,326,214 2,159,948 2,075,156 2,091,384 Savings 29,793 28,251 29,261 29,167 30,427 Time certificates of $250,000 or more 1,478,500 1,406,149 1,349,927 1,317,862 1,283,461 Other time certificates 1,682,324 1,442,381 1,552,805 1,500,162 1,439,699 Total deposits $ 5,867,764 $ 5,878,762 $ 5,801,708 $ 5,709,342 $ 5,683,271 Acceptances outstanding $ - $ - $ - $ 315 $ 103 Subordinated debt issuance, net 148,410 148,351 148,292 148,232 148,173 Commitments to fund investment in affordable housing partnerships 23,617 27,946 29,647 30,824 20,824 Other liabilities 82,436 68,394 77,008 75,458 109,651 Total liabilities $ 6,122,227 $ 6,123,453 $ 6,056,655 $ 5,964,171 $ 5,962,022 Equity: Net common stock, no par value $ 109,928 $ 113,509 $ 115,915 $ 134,534 $ 143,584 Retained earnings 664,808 640,675 616,417 592,325 566,027 Accumulated other comprehensive income (24,619 ) (31,057 ) (32,774 ) (31,754 ) (39,103 ) Total shareholders' equity $ 750,117 $ 723,127 $ 699,558 $ 695,105 $ 670,508 Total liabilities and shareholders' equity $ 6,872,344 $ 6,846,580 $ 6,756,213 $ 6,659,276 $ 6,632,530
PREFERRED BANK Quarter-to-Date Average Balances, Yield and Rates (Unaudited) Three months ended September 30, Three months ended June 30, Three months ended September 30, 2024 2024 2023 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) $ 5,459,842 $ 114,112 8.31 % $ 5,324,410 $ 109,451 8.27 % $ 5,086,302 $ 106,695 8.32 % Investment securities (3) 356,590 3,610 4.03 % 353,357 3,652 4.16 % 368,968 3,422 3.68 % Federal funds sold 20,164 280 5.52 % 20,866 291 5.61 % 20,111 278 5.48 % Other earning assets 848,170 11,521 5.40 % 1,029,865 13,999 5.47 % 1,122,176 15,235 5.39 % Total interest earning assets 6,684,766 129,523 7.71 % 6,728,498 127,393 7.61 % 6,597,557 125,630 7.55 % Deferred loan fees, net (10,248 ) (10,459 ) (10,071 ) Allowance for credit losses on loans (72,899 ) (79,119 ) (71,503 ) Noninterest earning assets: Cash and due from banks 10,826 10,626 12,101 Bank furniture and fixtures 9,419 9,787 8,814 Right of use assets 22,496 22,886 21,491 Other assets 173,619 181,610 161,470 Total assets $ 6,817,979 $ 6,863,829 $ 6,719,859 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Deposits: Interest bearing demand and savings $ 2,249,260 $ 23,295 4.12 % $ 2,318,775 $ 24,284 4.21 % $ 2,119,373 $ 20,324 3.80 % TCD $250K or more 1,412,073 17,866 5.03 % 1,379,116 17,295 5.04 % 1,251,397 14,085 4.47 % Other time certificates 1,462,912 18,090 4.92 % 1,505,143 18,283 4.89 % 1,429,457 15,284 4.24 % Total interest bearing deposits 5,124,245 59,251 4.60 % 5,203,034 59,862 4.63 % 4,800,227 49,693 4.11 % Advance from Federal Home Loan Bank - - 0.00 % - - 0.00 % 120,652 1,557 5.12 % Subordinated debt, net 148,372 1,325 3.55 % 148,313 1,325 3.59 % 148,135 1,325 3.55 % Total interest bearing liabilities 5,272,617 60,576 4.57 % 5,351,347 61,187 4.60 % 5,069,014 52,575 4.11 % Noninterest bearing liabilities: Demand deposits 703,982 698,942 854,123 Lease liability 18,882 19,828 19,759 Other liabilities 75,276 78,522 98,943 Total liabilities 6,070,757 6,148,639 6,041,839 Shareholders’ equity 747,222 715,190 678,020 Total liabilities and shareholders’ equity $ 6,817,979 $ 6,863,829 $ 6,719,859 Net interest income $ 68,947 $ 66,206 $ 73,055 Net interest spread 3.14 % 3.02 % 3.44 % Net interest margin 4.10 % 3.96 % 4.39 % Cost of Deposits: Noninterest bearing demand deposits $ 703,982 $ 698,942 $ 854,123 Interest bearing deposits 5,124,245 59,251 4.60 % 5,203,034 59,862 4.63 % 4,800,227 49,693 4.11 % Total Deposits $ 5,828,227 $ 59,251 4.04 % $ 5,901,976 $ 59,862 4.08 % $ 5,654,350 $ 49,693 3.49 % (1) Includes non-accrual loans and loans held for sale (2) Net loan fee income of $991,000, $1.1 million and $1.3 million for the quarter ended September 30, 2024, June 30, 2024 and September 30, 2023, 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) Nine Months ended September 30, 2024 2023 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) $ 5,350,465 $ 333,543 8.33 % $ 5,048,452 $ 304,796 8.07 % Investment securities (3) 352,982 10,691 4.05 % 402,971 11,125 3.69 % Federal funds sold 20,472 854 5.57 % 20,111 774 5.14 % Other earning assets 942,520 38,448 5.45 % 965,355 36,633 5.07 % Total interest earning assets 6,666,439 383,536 7.68 % 6,436,889 353,328 7.34 % Deferred loan fees, net (10,466 ) (10,142 ) Allowance for credit losses on loans (76,775 ) (69,653 ) Noninterest earning assets: Cash and due from banks 10,693 11,912 Bank furniture and fixtures 9,762 8,931 Right of use assets 22,462 21,780 Other assets 177,893 161,238 Total assets $ 6,800,008 $ 6,560,955 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Deposits: Interest bearing demand/ savings $ 2,240,038 $ 69,944 4.17 % $ 2,097,613 $ 53,854 3.43 % TCD $250K or more 1,377,621 51,662 5.01 % 1,258,870 37,600 3.99 % Other time certificates 1,493,096 54,202 4.85 % 1,245,556 33,798 3.63 % Total interest \bearing deposits 5,110,755 175,808 4.59 % 4,602,039 125,252 3.64 % Advance from Federal Home Loan Bank - - 0.00 % 101,099 3,819 5.05 % Subordinated debt, net 148,313 3,975 3.58 % 148,076 3,975 3.59 % Total interest bearing liabilities 5,259,068 179,783 4.57 % 4,851,214 133,046 3.67 % Noninterest bearing liabilities: Demand deposits 719,800 937,184 Lease liability 19,401 20,482 Other liabilities 79,179 83,213 Total liabilities 6,077,448 5,892,093 Shareholders’ equity 722,560 668,862 Total liabilities and shareholders’ equity $ 6,800,008 $ 6,560,955 Net interest income $ 203,753 $ 220,282 Net interest spread 3.12 % 3.67 % Net interest margin 4.08 % 4.58 % Cost of Deposits: Noninterest bearing demand deposits $ 719,800 $ 937,184 Interest bearing deposits 5,110,755 175,808 4.59 % 4,602,039 125,252 3.64 % Total Deposits $ 5,830,555 $ 175,808 4.03 % $ 5,539,223 $ 125,252 3.02 % (1) Includes non-accrual loans and loans held for sale (2) Net loan fee income of $3.4 million and $3.2 million for the year ended September 30, 2024 and 2023, 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 Nine Months Ended Year ended September 30, 2024 December 31, 2023 (Dollars in 000's) Allowance For Credit Losses Balance at Beginning of Period $ 78,355 $ 68,472 Charge-Offs Commercial & Industrial 12,409 124 Mini-perm Real Estate - - Total Charge-Offs 12,409 124 Recoveries Commercial & Industrial 5 7 Mini-perm Real Estate - - Total Recoveries 5 7 Net Charge-Offs 12,404 117 Provision for Credit Losses: 10,100 10,000 Balance at End of Period $ 76,051 $ 78,355 Average Loans Held for Investment $ 5,347,918 $ 5,067,870 Loans Held for Investment at End of Period $ 5,571,579 $ 5,273,498 Net Charge-Offs to Average Loans 0.31 % 0.00 % Allowances for Credit Losses to Loans at End of Period 1.36 % 1.49 % 
