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Preferred Bank Reports Quarterly Earnings
ソース: Nasdaq GlobeNewswire / 20 4 2021 15:30:28 America/Chicago
LOS ANGELES, April 20, 2021 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended March 31, 2021. Preferred Bank (“the Bank”) reported net income of $21.2 million or $1.42 per diluted share for the first quarter of 2021. This is up from net income of $20.9 million or $1.40 per diluted share for the fourth quarter of 2020 and easily tops recorded net income of $16.2 million or $1.08 per diluted share for the first quarter of 2020. The primary reasons for the increase compared to the prior year is a $3.9 million decrease in the provision for credit losses this quarter, an increase in net interest income of $3.6 million, partially offset by a decrease in noninterest income of $325,000 as well as an increase in non-interest expense of $468,000. When compared to the prior quarter, the provision for credit losses decreased by $2.8 million but that was partially offset by a decrease in net interest income as well as an increase in noninterest expense.
First Quarter 2021 Highlights:
- Net income of $21.2 million, or $1.42 per diluted share
- Linked quarter loan growth (non - PPP) of 2.6%
- Linked quarter deposit growth of 6.3%
- NIM held fairly steady at 3.61%
- Return on average assets (“ROA”) of 1.65%
- Return on beginning equity (“ROE”) of 16.36%
Li Yu, Chairman and CEO, commented, “We are pleased to report another record quarter of earnings for our Bank. For the first quarter of 2021, our net income was $21.2 million or $1.42 per share.
“The quarter features significant growth in total assets of 5.9%, resulting from deposit growth of $280 million or 6.30% from year-end totals. This outsized growth in deposits increased the Bank’s excess cash on hand but moderately compressed capital ratios, ROA, net interest income and net interest margin. It does, however, provide the Bank with more opportunities to grow.
“First quarter loan growth was $104 million excluding PPP or 2.6% from year end. We can’t help but take note of how our customers have become more optimistic about the nation’s economy and thus are increasing their business or expansion activities. Likewise, we are also planning for increased efforts to serve our customers. During the quarter, we opened a loan production office in Houston, Texas and will continue to look for opportunities in new markets. In California, we have also added several relationship officers.
“You may recall that beginning in the fourth quarter of 2020, we started discussing potential inflation and its potential impact on the yield curve. We are convinced, going forward that interest rates overall will be trending upward. Therefore, we have been preparing and will continue to work to generate more asset sensitivity in our balance sheet.
“At March 31, 2021, credit metrics are stable. Total loans on payment deferral from COVID is down to $25.8 million. Operation expenses were elevated this quarter but for very specific reasons. We are now preparing ourselves for post-pandemic normalized operations to begin in the summer.”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $45.3 million for the first quarter of 2021. This was down slightly from the $46.1 million recorded in the fourth quarter of 2020 but was well ahead of the $41.8 million recorded in the first quarter of 2020. The decrease from last quarter was due primarily to two items that increased fourth quarter 2020 loan interest. One was a non-recurring fee collected in the Main Street Lending Program and the second was interest we had collected on a purchased credit deteriorated loan. These two items added $972,000 to fourth quarter loan interest. The increase over first quarter of 2020 was due to a substantial decrease in interest expense ($7.1 million) partially offset by a decrease in interest income of $3.5 million. The Bank’s taxable equivalent net interest margin was 3.61% for the first quarter of 2021, down slightly from the 3.66% achieved in the fourth quarter of 2020 and a 9 basis point decrease from the 3.70% posted in the first quarter of 2020.
Noninterest Income. For the first quarter of 2021, noninterest income was $1,347,000 compared with $1,672,000 for the same quarter last year and compared to $1,356,000 for the fourth quarter of 2020. The decrease compared to last year was due to loss on sales of loans of $379,000 this quarter. Although total noninterest income was relatively flat compared to last quarter, there were variances; letter of credit (“LC”) fee income was down by $197,000 this quarter and last quarter the Bank recorded a $663,000 loss on sale of investment securities.
Noninterest Expense. Total noninterest expense was $15.7 million for the first quarter of 2021. This is up compared to the $15.2 million recorded in the same quarter last year and is also up from the $14.2 million posted in the fourth quarter of 2020. Salaries and benefits expense totaled $11.1 million for the first quarter of 2021, an increase of $221,000 from the first quarter of 2020 and an increase of $1.7 million from the fourth quarter of 2020. The increase over the prior quarter was due mainly to higher incentive compensation expense and the increase over the prior year was due to increased payroll tax expense, increased vacation accrual and lowered capitalized loan origination costs versus the fourth quarter of 2020. Occupancy expense totaled $1.4 million for the quarter which was relatively flat compared to both comparable periods. Business development and promotion expense was $73,000 for the quarter, a decrease from both comparable periods. The decrease from the fourth quarter of 2020 was due to the fact that our annual donations typically are paid out in the fourth quarter each year. The decrease from the first quarter of last year was due primarily to fewer opportunities to engage in person with clients for events such as lunches and entertainment. Professional services expense was $981,000 for the first quarter of 2021, a slight decrease from the $1.0 million posted in the same period last year and a $103,000 decrease from the previous quarter. The decrease from the fourth quarter of 2020 was due to lower legal fees. Other expenses were $1.6 million for the first quarter of 2021, an increase of $405,000 over the same period last year and essentially flat compared to the fourth quarter of 2020. The increase over the prior year was due to FDIC insurance premiums which were significantly lower in the first quarter of 2020. For the quarter ended March 31, 2021, the Bank’s efficiency ratio was 33.5%, a small increase from the two comparable periods.
Income Taxes. The Bank recorded a provision for income taxes of $8.4 million for the first quarter of 2021. This represents an effective tax rate (“ETR”) of 28.5% and a slight increase from the ETR of 28.1% for the prior quarter but a decrease from the ETR of 29.7% 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 March 31, 2021 were $4.16 billion, an increase of $128.8 million or 3.2% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $4.72 billion, an increase of $280.0 million or 6.3% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $5.45 billion, an increase of $304.4 million or 5.9% over the total of $5.14 billion as of December 31, 2020.
Asset Quality
As of March 31, 2021, nonaccrual loans totaled $22.0 million, up slightly from the $20.5 million reported as of December 31, 2020. A $2.3 million CRE loan on nonaccrual status was paid off, however a C&I loan of $3.8 million, related to the C&I loan already on nonaccrual status, was placed on nonaccrual status. Total net charge-offs (recoveries) for the first quarter of 2021 were ($57,000) compared to $0 in the first quarter of 2020 and compared $2.0 million in the fourth quarter of 2020.
At March 31, 2021, total dollar amount of loans that were in COVID-19 deferral status were equal to 0.6% of the Bank’s loan portfolio. Of the total modifications at present, approximately 62% are for the deferral of principal only and 38% are for principal and interest deferral.
Allowance for Credit Losses
The provision for credit losses for the first quarter of 2021 was $1.4 million compared to $5.3 million for the same period last year and to $4.2 million for the fourth quarter of 2020. In the first quarter of 2020, the Bank implemented the current expected credit losses (“CECL”) methodology under Accounting Standards Codification ("ASC") 326, in which the allowance for credit losses now reflects expected credit losses over the life of loans and held-to-maturity debt securities, and incorporates macroeconomic forecasts as well as historical loss rates. Between the adoption of CECL in the first quarter of last year, and the heightened provisions for credit losses in 2020, the Bank’s allowance coverage ratio has increased to 1.59% of total non-PPP loans as of March 31, 2021 from a total coverage level of 0.94% as of December 31, 2019.
Capitalization
As of March 31, 2021, the Bank’s leverage ratio was 10.26% the common equity tier 1 capital ratio was 11.34% and the total capital ratio was 14.73%. 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%.Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s first quarter 2021 financial results will be held tomorrow, April 21, 2021 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 May 5, 2021; the passcode is 10155105.
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. 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.
PREFERRED BANK Condensed Consolidated Statements of Operations (unaudited) (in thousands, except for net income per share and shares) For the Quarter Ended March 31, December 31, March 31, 2021 2020 2020 Interest income: Loans, including fees $ 49,859 $ 51,299 $ 51,564 Investment securities 2,277 2,320 3,979 Fed funds sold 24 30 124 Total interest income 52,160 53,649 55,667 Interest expense: Interest-bearing demand 1,437 1,499 3,368 Savings 19 21 14 Time certificates 3,827 4,534 8,962 Subordinated debit 1,531 1,532 1,531 Total interest expense 6,814 7,586 13,876 Net interest income 45,346 46,063 41,791 Provision for credit losses 1,400 4,200 5,300 Net interest income after provision for credit losses 43,946 41,863 36,491 Noninterest income: Fees & service charges on deposit accounts 426 456 405 Letters of credit fee income 808 1,004 848 BOLI income 96 96 94 Net gain (loss) on called and sale of investment securities - (663 ) - Net gain (loss) on sale of loans (379 ) - - Other income 396 463 325 Total noninterest income 1,347 1,356 1,672 Noninterest expense: Salary and employee benefits 11,123 9,440 10,902 Net occupancy expense 1,401 1,378 1,396 Business development and promotion expense 73 204 151 Professional services 981 1,084 1,014 Office supplies and equipment expense 438 454 489 Other real estate owned expense - - 1 Other 1,636 1,617 1,231 Total noninterest expense 15,652 14,177 15,184 Income before provision for income taxes 29,641 29,042 22,979 Income tax expense 8,447 8,162 6,825 Net income $ 21,194 $ 20,880 $ 16,154 Dividend and earnings allocated to participating securities (3 ) (42 ) (51 ) Net income available to common shareholders $ 21,191 $ 20,838 $ 16,103 Income per share available to common shareholders Basic $ 1.42 $ 1.40 $ 1.08 Diluted $ 1.42 $ 1.40 $ 1.08 Weighted-average common shares outstanding Basic 14,950,019 14,895,925 14,870,715 Diluted 14,950,019 14,895,925 14,870,715 Cash dividends per common share $ 0.38 $ 0.30 $ 0.30
PREFERRED BANK Condensed Consolidated Statements of Financial Condition (unaudited) (in thousands) March 31, December 31, 2021 2020 (Unaudited) (Audited) Assets Cash and due from banks $ 921,626 $ 739,465 Fed funds sold 21,500 20,000 Cash and cash equivalents 943,126 759,465 Securities held to maturity, at amortized cost 6,039 6,568 Securities available-for-sale, at fair value 228,635 239,682 Loans 4,164,241 4,035,394 Less allowance for credit losses (64,883 ) (63,426 ) Less amortized deferred loan fees, net (4,872 ) (4,574 ) Loans, net 4,094,486 3,967,394 Customers' liability on acceptances 9,670 3,596 Bank furniture and fixtures, net 11,571 11,825 Bank-owned life insurance 9,893 9,828 Accrued interest receivable 23,095 23,692 Investment in affordable housing partnerships 59,824 62,521 Federal Home Loan Bank stock, at cost 15,000 15,000 Deferred tax assets 25,573 24,466 Operating lease right-of-use assets 17,141 16,106 Other assets 3,951 3,498 Total assets $ 5,448,004 $ 5,143,641 Liabilities and Shareholders' Equity Deposits: Non-interest bearing demand deposits $ 1,026,260 $ 938,911 Interest-bearing deposits: 1,751,951 1,700,818 Savings 37,551 34,702 Time certificates of $250,000 or more 927,043 912,546 Other time certificates 979,694 855,503 Total deposits 4,722,499 4,442,480 Acceptances outstanding 9,670 3,596 Subordinated debt issuance, net 99,365 99,334 Commitments to fund investment in affordable housing partnerships 27,918 30,715 Operating lease liabilities 19,331 18,682 Accrued interest payable 2,619 1,245 Other liabilities 27,333 22,142 Total liabilities 4,908,735 4,618,194 Shareholders' equity 539,269 525,447 Total liabilities and shareholders' equity $ 5,448,004 $ 5,143,641 Book value per common share $ 36.07 $ 31.47 Number of common shares outstanding 14,951,838 14,931,861
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) For the Quarter Ended March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Unaudited historical quarterly operations data: Interest income $ 52,160 $ 53,649 $ 52,782 $ 52,164 $ 55,667 Interest expense 6,814 7,586 8,663 9,983 13,876 Interest income before provision for credit losses 45,346 46,063 44,119 42,181 41,791 Provision for credit losses 1,400 4,200 9,000 7,500 5,300 Noninterest income 1,347 1,356 1,605 1,430 1,672 Noninterest expense 15,652 14,177 13,663 14,334 15,184 Income tax expense 8,447 8,162 5,936 6,468 6,825 Net income $ 21,194 $ 20,880 $ 17,125 $ 15,309 $ 16,154 Earnings per share Basic $ 1.42 $ 1.40 $ 1.15 $ 1.03 $ 1.08 Diluted $ 1.42 $ 1.40 $ 1.15 $ 1.03 $ 1.08 Ratios for the period: Return on average assets 1.65 % 1.63 % 1.34 % 1.26 % 1.40 % Return on beginning equity 16.36 % 16.49 % 13.94 % 13.00 % 13.82 % Net interest margin (Fully-taxable equivalent) 3.61 % 3.66 % 3.54 % 3.57 % 3.70 % Noninterest expense to average assets 1.22 % 1.10 % 1.07 % 1.18 % 1.31 % Efficiency ratio 33.52 % 29.90 % 29.88 % 32.87 % 34.93 % Net charge-offs (recoveries) to average loans (annualized) -0.01 % 0.20 % 0.35 % -0.01 % 0.00 % Ratios as of period end: Tier 1 leverage capital ratio 10.26 % 10.08 % 9.75 % 9.87 % 10.05 % Common equity tier 1 risk-based capital ratio 11.34 % 11.21 % 11.02 % 10.39 % 10.80 % Tier 1 risk-based capital ratio 11.34 % 11.21 % 11.02 % 10.39 % 10.80 % Total risk-based capital ratio 14.73 % 14.64 % 14.51 % 13.80 % 14.26 % Allowances for credit losses to loans at end of period 1.56 % 1.57 % 1.55 % 1.41 % 1.24 % Allowance for credit losses to non-performing loans 294.74 % 308.96 % 243.56 % 211.08 % 2263.66 % Average balances: Total securities $ 242,200 $ 251,284 $ 237,801 $ 250,134 $ 247,689 Total loans $ 4,044,800 $ 3,971,537 $ 3,956,145 $ 3,919,674 $ 3,717,175 Total earning assets $ 5,102,291 $ 5,018,031 $ 4,975,005 $ 4,768,537 $ 4,548,512 Total assets $ 5,200,079 $ 5,110,065 $ 5,073,548 $ 4,868,356 $ 4,651,956 Total time certificate of deposits $ 1,820,461 $ 1,764,528 $ 1,841,901 $ 1,757,531 $ 1,765,816 Total interest bearing deposits $ 3,531,358 $ 3,508,276 $ 3,501,275 $ 3,399,924 $ 3,244,711 Total deposits $ 4,486,399 $ 4,426,326 $ 4,408,882 $ 4,220,197 $ 4,010,629 Total interest bearing liabilities $ 3,630,705 $ 3,607,592 $ 3,600,560 $ 3,499,178 $ 3,343,933 Total equity $ 538,282 $ 518,567 $ 503,421 $ 486,931 $ 475,409
PREFERRED BANK Selected Consolidated Financial Information (unaudited) (in thousands, except for ratios) As of March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 Unaudited quarterly statement of financial position data: Assets: Cash and cash equivalents $ 943,126 $ 759,465 $ 807,791 $ 656,183 $ 484,869 Securities held-to-maturity, at amortized cost 6,039 6,568 6,727 6,922 7,077 Securities available-for-sale, at fair value 228,635 239,682 219,778 270,667 235,097 Loans: Real estate – Mortgage: Real estate—Residential $ 541,313 $ 523,789 $ 528,371 $ 511,354 $ 493,226 Real estate—Commercial 1,925,554 1,911,485 1,808,200 1,781,660 1,730,017 Total Real Estate – Mortgage 2,466,867 2,435,274 2,336,571 2,293,014 2,223,243 Real estate – Construction: R/E Construction — Residential 123,302 148,825 170,773 187,083 177,364 R/E Construction — Commercial 229,933 215,032 223,706 217,729 223,385 Total real estate construction loans 353,235 363,857 394,480 404,812 400,749 Commercial and industrial 1,248,550 1,165,990 1,144,051 1,192,056 1,269,242 PPP 95,434 70,234 74,551 73,524 - Consumer and others 155 39 68 241 91 Gross loans 4,164,241 4,035,394 3,949,721 3,963,647 3,893,325 Allowance for credit losses on loans (64,883 ) (63,426 ) (61,262 ) (55,762 ) (48,130 ) Net deferred loan fees (4,872 ) (4,574 ) (4,411 ) (5,097 ) (3,084 ) Net loans, excluding loans held for sale $ 4,094,486 $ 3,967,394 $ 3,884,048 $ 3,902,788 $ 3,842,111 Loans held for sale $ - $ - $ - $ - $ - Net loans $ 4,094,486 $ 3,967,394 $ 3,884,048 $ 3,902,788 $ 3,842,111 Investment in affordable housing partnerships 59,824 62,521 47,917 49,658 51,400 Federal Home Loan Bank stock, at cost 15,000 15,000 15,000 15,000 13,101 Other assets 100,894 93,011 104,313 103,239 93,979 Total assets $ 5,448,004 $ 5,143,641 $ 5,085,574 $ 5,004,457 $ 4,727,634 Liabilities: Deposits: Demand $ 1,026,260 $ 938,911 $ 926,166 $ 934,764 $ 753,750 Interest-bearing demand 1,751,951 1,700,818 1,620,495 1,594,682 1,503,618 Savings 37,551 34,702 32,830 27,737 23,035 Time certificates of $250,000 or more 927,043 912,546 977,821 970,649 1,030,282 Other time certificates 979,694 855,503 857,113 822,404 775,792 Total deposits $ 4,722,499 $ 4,442,480 $ 4,414,425 $ 4,350,236 $ 4,086,477 Acceptances outstanding $ 9,670 $ 3,596 $ 7,463 $ 6,112 $ 6,507 Subordinated debt issuance, net 99,365 99,334 99,304 99,273 99,242 Commitments to fund investment in affordable housing partnerships 2,619 30,715 16,689 17,536 21,195 Other liabilities 74,582 42,069 43,826 42,571 40,428 Total liabilities $ 4,908,735 $ 4,618,194 $ 4,581,707 $ 4,515,728 $ 4,253,849 Equity: Net common stock, no par value $ 218,593 $ 217,444 $ 213,519 $ 212,187 $ 210,091 Retained earnings 316,481 300,969 284,568 271,923 261,095 Accumulated other comprehensive income 4,195 7,034 5,780 4,619 2,599 Total shareholders' equity $ 539,269 $ 525,447 $ 503,867 $ 488,729 $ 473,785 Total liabilities and shareholders' equity $ 5,448,004 $ 5,143,641 $ 5,085,574 $ 5,004,457 $ 4,727,634
PREFERRED BANK Quarter-To-Date Average Balances, Yield And Rates (Unaudited) Three months ended March 31, Three months ended December 31, Three months ended March 31, 2021 2020 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) $ 4,044,823 49,859 5.00 % $ 3,974,599 $ 51,299 5.13 % $ 3,717,212 $ 51,564 5.58 % Investment securities (3) 242,200 1,884 3.16 % 251,284 1,936 3.07 % 247,689 2,127 3.45 % Federal funds sold 21,474 24 0.45 % 22,939 30 0.51 % 30,153 124 1.66 % Other earning assets 793,794 493 0.25 % 769,209 487 0.25 % 553,458 1,946 1.41 % Total interest-earning assets 5,102,291 52,260 4.15 % 5,018,031 53,752 4.26 % 4,548,512 55,761 4.93 % Deferred loan fees, net (4,344 ) (4,162 ) (3,079 ) Allowance for credit losses on loans (63,450 ) (60,875 ) (42,800 ) Noninterest earning assets: Cash and due from banks 9,923 8,214 6,334 Bank furniture and fixtures 11,772 11,892 12,269 Right of use assets 16,847 16,272 17,006 Other assets 127,040 120,693 113,714 Total assets $ 5,200,079 $ 5,110,065 $ 4,651,956 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing liabilities: Deposits: Interest-bearing demand and savings 1,710,897 $ 1,456 0.35 % 1,743,748 $ 1,520 0.35 % $ 1,478,895 $ 3,382 0.92 % TCD $250K or more 919,155 1,918 0.85 % 923,079 2,298 0.99 % 969,343 4,852 2.01 % Other time certificates 901,306 1,909 0.86 % 841,449 2,236 1.06 % 796,473 4,111 2.08 % Total interest-bearing deposits 3,531,358 5,283 0.61 % 3,508,276 6,054 0.69 % 3,244,711 12,345 1.53 % Short-term borrowings - - 0.00 % 3 0 0.20 % - - 0.00 % Subordinated debt, net 99,347 1,531 6.25 % 99,316 1,532 6.14 % 99,222 1,531 6.21 % Total interest-bearing liabilities 3,630,705 6,814 0.76 % 3,607,595 7,586 0.84 % 3,343,933 13,876 1.67 % Non-interest bearing liabilities: Demand deposits 955,041 918,050 765,918 Lease Liability 19,289 18,936 20,314 Other liabilities 56,762 46,917 463,382 Total liabilities 4,661,797 4,591,498 4,176,547 Shareholders’ equity 538,282 518,567 475,409 Total liabilities and shareholders’ equity $ 5,200,079 $ 5,110,065 $ 4,651,956 Net interest income $ 45,446 $ 46,166 $ 41,885 Net interest spread 3.39 % 3.42 % 3.26 % Net interest margin 3.61 % 3.66 % 3.70 % Cost of Deposits: Noninterest bearing demand deposits $ 955,041 $ 918,050 $ 765,918 Interest bearing deposits 3,531,358 5,283 0.61 % 3,508,276 6,054 0.69 % 3,244,711 12,345 1.53 % Total Deposits $ 4,486,399 $ 5,283 0.48 % $ 4,426,326 $ 6,054 0.54 % $ 4,010,629 $ 12,345 1.24 % (1) Includes non-accrual loans and loans held for sale (2) Net loan fee income of $539,000, $1.1 million and $670,000 for the quarter ended March 31, 2021, December 31, 2020 and March 31, 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 Three Months Ended Year ended March 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 - 3,700 Mini-perm Real Estate - 1,900 Others - 7 Total Charge-Offs - 5,607 Recoveries Commercial & Industrial 57 - Mini-perm Real Estate - - Construction - Commercial - 194 Land - Commercial - 9 Total Recoveries 57 203 Net Charge-Offs (Recoveries) (57 ) 5,404 Provision for Credit Losses: CECL Cumulative Effect Adjustment - 8,000 Current Provision 1,400 26,000 Balance at End of Period $ 64,883 $ 63,426 Average Loans Held for Investment $ 4,044,823 $ 3,892,811 Loans Held for Investment at End of Period $ 4,164,241 $ 4,035,394 Net Charge-Offs (Recoveries) to Average Loans -0.01 % 0.14 % Allowances for Credit Losses to Loans at End of Period 1.56 % 1.57 % 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 