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Preferred Bank Reports Record Quarterly Earnings

LOS ANGELES, Jan. 19, 2017 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ:PFBC), an independent commercial bank, today reported results for the quarter and year ended December 31, 2016. Preferred Bank (“the Bank”) reported net income of $10.1 million or $0.71 per diluted share for the fourth quarter of 2016. This compares to net income of $7.6 million or $0.54 per diluted share for the fourth quarter of 2015 and compares to net income of $9.9 million or $0.69 per diluted share for the third quarter of 2016. Net income for the full year 2016 was $36.4 million, or $2.56 per diluted share, an increase in net income of $6.6 million or 22.3% over 2015.

Highlights from the fourth quarter of 2016:

Total assets $3.22 billion
Linked quarter loan growth $110.9 million or 4.6%
Linked quarter deposit growth $103.7 million or 3.9%
Return on average assets 1.28%
Return on beginning equity 13.74%
Efficiency ratio 38.2%
Net interest margin 3.67%

Highlights from the year 2016:

Diluted EPS Growth 19.9%
Loan growth $484.2 million or 23.5%
Deposit growth $477.2 million or 20.9%
Return on average assets 1.27%
Return on beginning equity 13.77%
Efficiency ratio 39.7%
Net interest margin 3.72%

Li Yu, Chairman and CEO commented, “2016 was one of the most successful years in Preferred Bank’s 25 year history. First and foremost, total shareholder return exceeded 60% for the year. Other financial highlights include year over year increases in total assets of 24.0%, total loans of 23.5% and total deposits of 20.9%. Of most importance was the 19.9% increase in diluted earnings per share. The Bank’s efficiency ratio also improved from 40.7% in 2015 to 39.7% in 2016. However, the net interest margin decreased to 3.72% in 2016 from 3.92% in 2015, the result of continuous loan pricing competition and the Bank’s issuance of $100 million in subordinated debt. For years now, we have been diligent in maintaining an asset sensitive balance sheet and as of 12/31/16, 80.3% of our loan portfolio is floating with the Prime rate and a further 13% is adjustable rate with LIBOR or other indices. We now sit in a most favorable position under a rising interest rate environment.

“For the fourth quarter of 2016, total loans increased $111 million or 4.6%, and total deposits increased $104 million or 3.9% on a linked quarter basis.

“End of the year loan funding and payoff activities seemed to be within our range of expectations. The loan pipeline appears to be consistent with prior quarters.

“The net interest margin improved from 3.59% for the third quarter to 3.67% for the fourth quarter, and is largely the result of change in leverage, or loan and deposit mix. The efficiency ratio, already among the industry’s best, ticked up slightly from 37.7% in the third quarter but still remains under 40%.

“Net income for the fourth quarter was $10.1 million or $0.71 per diluted share which was slightly higher than our expectations.

“2016 was a year in which we executed well but we also set in motion plans to prepare the Bank for the challenges ahead. We formed a new mortgage lending group which will enable us to diversify the loan portfolio and we expect this unit to be fully operational by the end of the first quarter of 2017. We also added $100 million of tier 2 capital in the form of subordinated debt which will allow the Bank to continue to grow the CRE portfolio.

“We were encouraged by the December FOMC rate increase. Entering the new year, we expect further growth and profitability, but remain always mindful of the many challenges that our industry faces.”

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $28.1 million for the fourth quarter of 2016. This compares favorably to the $22.3 million recorded in the fourth quarter of 2015 and to the $26.5 million recorded in the third quarter of 2016. The increase over both comparable periods is due primarily to growth in interest income on loans partially offset by an increase in interest expense on deposits and borrowings. The Bank’s taxable equivalent net interest margin was 3.67% for the fourth quarter of 2016, a 21 basis point decrease from the 3.88% achieved in the fourth quarter of 2015 and an 8 basis point increase from the 3.59% recorded in the third quarter of 2016. The decrease compared to the fourth quarter of 2015 is primarily due to the $100 million in subordinated debt issued in 2016 and the increase over the third quarter of 2016 was mainly due to loan growth and generally lower cash balances in the fourth quarter of 2016.

Noninterest Income. For the fourth quarter of 2016, noninterest income was $1,286,000 compared with $954,000 for the same quarter last year and compared to $1,350,000 for the third quarter of 2016. The increase over the fourth quarter of 2015 is primarily due to a gain on a called security of $133,000 in the fourth quarter of 2016. In addition, trade finance income, service charges on deposits and other income all posted modest increases over the third quarter of 2016. The decrease from the third quarter of 2016 was due to lower service charges and trade finance income in the fourth quarter.

Noninterest Expense. Total noninterest expense was $11.2 million for the fourth quarter of 2016, an increase of $1.3 million over the same period last year and an increase of $737,000 over the $10.5 million recorded in the third quarter of 2016. Salaries and benefits expense totaled $6.7 million for the fourth quarter of 2016, an increase of $1.4 million over the $5.2 million recorded for the same period last year and $593,000 over the $6.1 million recorded in the third quarter of 2016. The increase over the same period last year is partly due to the mid-Q4 2015 acquisition of United International Bank (“UIB”), growth of the Bank, as well as regular merit increases. In addition, the Bank recorded a one-time $350,000 charge for payroll taxes related to the termination and payout of the Bank’s Deferred Compensation Plan. Occupancy expense totaled $1.2 million for the quarter, an increase of $175,000 over the $1.0 million recorded in the same period in 2015 and flat compared to the third quarter of 2016. The increase over the prior year was due mainly to the addition of the New York office with the UIB acquisition as well as a new administrative office which the Bank opened in November 2015 in El Monte, California. Professional services expense was $1.5 million for the fourth quarter of 2016 compared to $1.4 million for the same quarter of 2015 and $1.4 million recorded in the third quarter of 2016. The Bank incurred $187,000 in costs related to its one OREO property. This compares to $1,000 in the fourth quarter of 2015 and $196,000 in the third quarter of 2016. Other expenses were $1.1 million for the fourth quarter of 2016 compared to $1.7 million for the same period last year and $1.1 million for the third quarter of 2016. The decrease from last year was mainly due to the recording of $415,000 in acquisition related costs in the fourth quarter of 2015.

Income Taxes

The Bank recorded a provision for income taxes of $6.2 million for the fourth quarter of 2016. This represents an effective tax rate (“ETR”) of 38.0% for the quarter. This is down from the ETR of 42.2% for the fourth quarter of 2015 and the same as the 38.1% ETR recorded in the third quarter of 2016. The decrease from both periods is due to adjustments made to the provision calculation as a result of the finalization and filing of the Bank’s 2015 tax returns. The Bank expects that the ETR will be slightly higher heading into 2017, closer to the Bank’s long-term historical average of just under 40%. Typically, the difference between the statutory rate (Federal and State combined) of 42.05% and the ETR is due to tax deductible items as well as the Bank’s investments in municipal bonds and various Low Income Housing Income Tax Credit (“LIHTC”) funds.

Balance Sheet Summary

Total gross loans and leases at December 31, 2016 were $2.54 billion, an increase of $484.2 million or 23.5% over the total of $2.06 billion as of December 31, 2015. Total deposits reached $2.76 billion, an increase of $477.2 million or 20.9% over the total of $2.29 billion as of December 31, 2015. Total assets reached $3.22 billion as of December 31, 2016, an increase of $622.8 million or 24.0% over the total of $2.60 billion as of December 31, 2015.

Asset Quality

As of December 31, 2016 nonaccrual loans totaled $7.6 million, an increase of $5.7 million over the $2.0 million total as of December 31, 2015. In October, it was determined that a C&I loan relationship of approximately $10 million be downgraded and placed on nonaccrual status. Accordingly, nonperforming loans have increased as of December 31, 2016 from the prior quarter. This relationship has been with the Bank for 8 years and has consistently paid as agreed. After the downgrade, the borrower has made approximately $2 million in scheduled paydowns and another $1.5 million in repayments just prior to year end. As the borrowing entity is operating with sufficient profitability, we anticipate the ultimate collection of all principal and interest.

Total net recoveries for the fourth quarter of 2016 were $22,000 compared to net charge-offs of $827,000 in the third quarter of 2016 and compared to net charge-offs of $1.7 million for the fourth quarter of 2015. The Bank recorded a provision for loan loss of $1.9 million for the fourth quarter of 2016, compared to a provision of $300,000 recorded in the same quarter last year and compared to the $1.4 million provision recorded in the third quarter of 2016. The allowance for loan loss at December 31, 2016 was $26.5 million or 1.04% of total loans compared to $22.7 million or 1.10% of total loans at December 31, 2015.

OREO

As of December 31, 2016 and December 31, 2015, the Bank held one OREO property, a $4.1 million multi-family property located outside of California.

Capitalization
As of December 31, 2016, the Bank’s leverage ratio was 9.43%, the common equity tier 1 capital ratio was 9.83% and the total capital ratio was 14.09%. As of December 31, 2015, the Bank’s leverage ratio was 10.46%, the common equity tier 1 ratio was 11.03% and the total risk based capital ratio was 12.00%.

Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2016 financial results will be held tomorrow, January 20th at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 866-652-5200 (domestic) or 412-317-6060 (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 CEO Li Yu, President and COO Wellington Chen, Chief Financial Officer Edward J. Czajka, and Chief Credit Officer Nick Pi will be present to discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will remain available in the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through February 3, 2017; the passcode is 10099649.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks in California. The bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Company conducts its banking business from its main office in Los Angeles, California, and through ten full-service branch banking offices in the California cities of Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana and San Francisco, and one office in Flushing New York. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2015 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,
2016 2016 2015
Interest income:
Loans, including fees $ 31,248 $ 29,548 $ 23,792
Investment securities 2,570 2,216 1,585
Fed funds sold 162 125 46
Total interest income 33,980 31,889 25,423
Interest expense:
Interest-bearing demand 1,320 1,309 871
Savings 21 19 14
Time certificates 2,982 2,897 2,150
FHLB borrowings 67 66 70
Subordinated debit issuance 1,526 1,102 -
Total interest expense 5,916 5,394 3,105
Net interest income 28,064 26,495 22,318
Provision for loan losses 1,900 1,400 300
Net interest income after provision for
loan losses 26,164 25,095 22,018
Noninterest income:
Fees & service charges on deposit accounts 258 322 254
Trade finance income 599 686 453
BOLI income 87 85 86
Net gain on sale of investment securities 133 - -
Other income 209 257 161
Total noninterest income 1,286 1,350 954
Noninterest expense:
Salary and employee benefits 6,660 6,067 5,248
Net occupancy expense 1,199 1,161 1,024
Business development and promotion expense 242 230 227
Professional services 1,492 1,434 1,359
Office supplies and equipment expense 350 345 336
Other real estate owned related expense and valuation allowance on LHFS 187 196 1
Other 1,093 1,053 1,696
Total noninterest expense 11,223 10,486 9,890
Income before provision for income taxes 16,227 15,959 13,081
Income tax expense 6,166 6,080 5,518
Net income $ 10,061 $ 9,879 $ 7,563
Dividend and earnings allocated to participating securities (131) (155) (139)
Net income available to common shareholders $ 9,930 $ 9,724 $ 7,424
Income per share available to common shareholders
Basic $ 0.71 $ 0.70 $ 0.55
Diluted $ 0.71 $ 0.69 $ 0.54
Weighted-average common shares outstanding
Basic 13,984,346 13,899,966 13,547,197
Diluted 14,066,596 13,997,343 13,743,157
Dividends per share $ 0.18 $ 0.15 $ 0.15

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
2016 2015 %
Interest income:
Loans, including fees $ 114,148 $ 88,236 29.4%
Investment securities 8,292 6,304 31.5%
Fed funds sold 473 163 189.4%
Total interest income 122,913 94,702 29.8%
Interest expense:
Interest-bearing demand 4,730 3,160 49.7%
Savings 76 58 30.0%
Time certificates 10,855 7,455 45.6%
FHLB borrowings 259 182 42.1%
Subordinated debit issuance 2,814 - 100.0%
Total interest expense 18,734 10,856 72.6%
Net interest income 104,179 83,846 24.3%
Provision for credit losses 6,400 1,800 255.6%
Net interest income after provision for
loan losses 97,779 82,046 19.2%
Noninterest income:
Fees & service charges on deposit accounts 1,212 1,178 2.8%
Trade finance income 2,371 1,630 45.4%
BOLI income 346 339 2.0%
Net gain on sale of investment securities 169 - 100.0%
Other income 1,361 745 82.7%
Total noninterest income 5,459 3,892 40.2%
Noninterest expense:
Salary and employee benefits 25,813 20,960 23.2%
Net occupancy expense 4,830 3,681 31.2%
Business development and promotion expense 845 593 42.4%
Professional services 5,297 4,906 8.0%
Office supplies and equipment expense 1,422 1,119 27.1%
Other real estate owned related expense(income) and valuation allowance on LHFS 825 (480) -271.8%
Other 4,506 4,931 -8.6%
Total noninterest expense 43,538 35,710 21.9%
Income before provision for income taxes 59,700 50,228 18.9%
Income tax expense 23,331 20,485 13.9%
Net income $ 36,369 $ 29,743 22.3%
Dividend and earnings allocated to participating securities (543) (536) 1.3%
Net income available to common shareholders $ 35,826 $ 29,207 22.7%
Income per share available to common shareholders
Basic $ 2.58 $ 2.17 19.1%
Diluted $ 2.56 $ 2.14 19.9%
Weighted-average common shares outstanding
Basic 13,883,497 13,484,216 3.0%
Diluted 13,987,257 13,677,892 2.3%
Dividends per share $ 0.63 $ 0.51 23.5%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
December 31, December 31,
2016 2015
(Unaudited) (Audited)
Assets
Cash and due from banks $ 306,330 $ 296,175
Fed funds sold 97,500 13,000
Cash and cash equivalents 403,830 309,175
Securities held to maturity, at amortized cost 10,337 5,830
Securities available-for-sale, at fair value 199,833 169,502
Loans and leases 2,543,549 2,059,392
Less allowance for loan and lease losses (26,478) (22,658)
Less net deferred loan fees (1,682) (3,012)
Net loans and leases 2,515,389 2,033,722
Other real estate owned 4,112 4,112
Customers' liability on acceptances 772 897
Bank furniture and fixtures, net 5,313 5,601
Bank-owned life insurance 8,825 8,763
Accrued interest receivable 9,550 8,128
Investment in affordable housing 23,670 16,052
Federal Home Loan Bank stock 9,331 7,162
Deferred tax assets 26,605 23,802
Income tax receivable - 299
Other asset 4,031 5,801
Total assets $ 3,221,598 $ 2,598,846
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand $ 586,272 $ 558,906
Interest-bearing demand 1,019,058 748,918
Savings 34,067 30,703
Time certificates of $250,000 or more 427,172 321,537
Other time certificates 697,155 626,495
Total deposits $ 2,763,724 $ 2,286,559
Acceptances outstanding 772 897
Advances from Federal Home Loan Bank 26,516 26,635
Subordinated debt issuance 98,839 -
Commitments to fund investment in affordable housing partnership 10,632 3,958
Accrued interest payable 3,199 1,919
Other liabilities 19,851 14,733
Total liabilities 2,923,533 2,334,701
Commitments and contingencies
Shareholders' equity:
Preferred stock. Authorized 25,000,000 shares; no issued and outstanding
shares at December 31, 2016 and December 31, 2015
Common stock, no par value. Authorized 100,000,000 shares; issued
and outstanding 14,232,907 and 13,884,942 shares at December 31, 2016
and December 31, 2015 , respectively
169,861 166,560
Treasury stock (19,115) (19,115)
Additional paid-in-capital 39,929 34,672
Accumulated income 108,261 81,046
Accumulated other comprehensive income:
Unrealized gain on securities, available-for-sale, net of tax benefit of $632
and net of tax of $713 at December 31, 2016 and December 31, 2015,
respectively
(871) 982
Total shareholders' equity 298,065 264,145
Total liabilities and shareholders' equity $ 3,221,598 $ 2,598,846

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,
2016 2016 2016 2016 2015
Unaudited historical quarterly operations data:
Interest income$ 33,980 $ 31,889 $ 29,723 $ 27,321 $ 25,423
Interest expense 5,916 5,394 3,982 3,442 3,105
Interest income before provision for credit losses 28,064 26,495 25,741 23,879 22,318
Provision for credit losses 1,900 1,400 2,300 800 300
Noninterest income 1,286 1,350 1,660 1,163 954
Noninterest expense 11,223 10,486 10,791 11,038 9,890
Income tax expense 6,166 6,080 5,724 5,361 5,518
Net income 10,061 9,879 8,586 7,843 7,563
Earnings per share
Basic$ 0.71 $ 0.70 $ 0.61 $ 0.56 $ 0.55
Diluted$ 0.71 $ 0.69 $ 0.61 $ 0.56 $ 0.54
Ratios for the period:
Return on average assets 1.28% 1.31% 1.26% 1.21% 1.28%
Return on beginning equity 13.74% 13.92% 12.49% 11.94% 11.67%
Net interest margin (Fully-taxable equivalent) 3.67% 3.59% 3.87% 3.79% 3.88%
Noninterest expense to average assets 1.43% 1.39% 1.58% 1.70% 1.67%
Efficiency ratio 38.24% 37.66% 39.38% 44.08% 42.50%
Net charge-offs (recoveries) to average loans (annualized) 0.00% 0.14% 0.36% -0.04% 0.36%
Ratios as of period end:
Tier 1 leverage capital ratio 9.43% 9.47% 10.05% 10.29% 10.46%
Common equity tier 1 risk-based capital ratio 9.83% 9.96% 10.41% 10.74% 11.03%
Tier 1 risk-based capital ratio 9.83% 9.96% 10.41% 10.74% 11.03%
Total risk-based capital ratio 14.09% 14.36% 13.65% 11.70% 12.00%
Allowances for credit losses to loans and leases at end of period 1.04% 1.01% 1.06% 1.10% 1.10%
Allowance for credit losses to non-performing
loans and leases 346.22% 1460.49% 722.47% 2346.18% 1140.29%
Average balances:
Total loans and leases $ 2,465,492 $ 2,344,102 $ 2,248,652 $ 2,067,047 $ 1,876,544
Earning assets$ 3,066,189 $ 2,953,325 $ 2,687,435 $ 2,550,821 $ 2,297,154
Total assets$ 3,124,984 $ 3,009,457 $ 2,746,031 $ 2,605,917 $ 2,345,319
Total deposits$ 2,666,878 $ 2,590,702 $ 2,400,756 $ 2,291,764 $ 2,039,567



PREFERRED BANK
Selected Consolidated Financial Information
(in thousands, except for ratios)
For the Year Ended
December 31, December 31,
2016 2015
Interest income $ 122,913 $ 94,702
Interest expense 18,734 10,856
Interest income before provision for credit losses 104,179 83,846
Provision for credit losses 6,400 1,800
Noninterest income 5,459 3,892
Noninterest expense 43,538 35,710
Income tax expense 23,331 20,485
Net income 36,369 29,743
Earnings per share
Basic $ 2.58 $ 2.17
Diluted $ 2.56 $ 2.14
Ratios for the period:
Return on average assets 1.27% 1.35%
Return on beginning equity 13.77% 12.66%
Net interest margin (Fully-taxable equivalent) 3.72% 3.92%
Noninterest expense to average assets 1.52% 1.62%
Efficiency ratio 39.71% 40.70%
Net charge-offs (recoveries) to average loans 0.11% 0.12%
Average balances:
Total loans and leases $ 2,282,074 $ 1,731,871
Earning assets $ 2,815,543 $ 2,154,355
Total assets $ 2,872,707 $ 2,200,557
Total deposits $ 2,488,368 $ 1,909,721


PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
As of
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Unaudited quarterly statement of financial position data:
Assets:
Cash and cash equivalents $ 403,830 $ 405,522 $ 376,485 $ 293,547 $ 309,175
Securities held-to-maturity, at amortized cost 10,337 4,812 5,143 5,550 5,830
Securities available-for-sale, at fair value 199,833 203,272 201,256 162,654 169,502
Loans and Leases:
Real estate - Single and multi-family residential $ 490,683 $ 493,489 $ 393,076 $ 401,708 $ 415,003
Real estate - Land for housing 14,774 14,796 14,817 14,838 14,408
Real estate - Land for income properties 1,801 1,809 6,316 1,816 1,795
Real estate - Commercial 1,047,321 1,037,687 995,213 924,913 861,317
Real estate - For sale housing construction 104,960 104,973 95,519 82,153 73,858
Real estate - Other construction 128,434 96,147 72,963 66,636 57,546
Commercial and industrial 733,709 659,306 659,701 626,599 596,887
Trade finance and other 21,867 24,460 34,625 39,323 38,578
Gross loans 2,543,549 2,432,667 2,272,230 2,157,986 2,059,392
Allowance for loan and lease losses (26,478) (24,556) (23,983) (23,681) (22,658)
Net deferred loan fees (1,682) (1,913) (3,682) (3,065) (3,012)
Total loans, net $ 2,515,389 $ 2,406,198 $ 2,244,565 $ 2,131,240 $ 2,033,722
Other real estate owned $ 4,112 $ 4,112 $ 4,112 $ 4,112 $ 4,112
Investment in affordable housing 23,670 24,278 24,886 25,499 16,052
Federal Home Loan Bank stock 9,331 9,331 9,332 6,965 7,162
Other assets 55,096 52,899 49,862 53,783 53,291
Total assets $ 3,221,598 $ 3,110,424 $ 2,915,641 $ 2,683,350 $ 2,598,846
Liabilities:
Deposits:
Demand $ 586,272 $ 575,388 $ 540,374 $ 528,126 $ 558,906
Interest-bearing demand 1,019,058 945,358 855,661 803,374 748,918
Savings 34,067 31,344 29,031 30,002 30,703
Time certificates of $250,000 or more 427,172 416,807 398,736 339,971 321,537
Other time certificates 697,155 691,099 692,063 656,386 626,495
Total deposits $ 2,763,724 $ 2,659,996 $ 2,515,865 $ 2,357,859 $ 2,286,559
Advances from Federal Home Loan Bank $ 26,516 $ 26,544 $ 26,573 $ 26,601 $ 26,635
Subordinated debt issuance 98,839 98,851 61,475 - -
Commitments to fund investment in affordable housing partnership 10,632 11,015 11,454 11,454 3,958
Other liabilities 23,822 22,760 17,922 13,862 17,549
Total liabilities $ 2,923,533 $ 2,819,166 $ 2,633,289 $ 2,409,776 $ 2,334,701
Equity:
Net common stock, no par value $ 190,675 $ 188,430 $ 187,212 $ 185,780 $ 182,118
Retained earnings 108,261 100,804 93,119 86,716 81,046
Accumulated other comprehensive income (871) 2,024 2,021 1,079 982
Total shareholders' equity $ 298,065 $ 291,258 $ 282,352 $ 273,574 $ 264,145
Total liabilities and shareholders' equity $ 3,221,598 $ 3,110,424 $ 2,915,641 $ 2,683,350 $ 2,598,846

Preferred Bank
Loan and Credit Quality Information
Allowance For Credit Losses & Loss History
Year Ended Year Ended
December 31, 2016 December 31, 2015
(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period $ 22,658 $ 22,974
Charge-Offs
Commercial & Industrial 4,323 1,475
Mini-perm Real Estate - 1,793
Construction - Residential - -
Construction - Commercial - -
Land - Residential - -
Land - Commercial - -
Others - -
Total Charge-Offs 4,323 3,268
Recoveries
Commercial & Industrial 985 131
Mini-perm Real Estate - 144
Construction - Residential - -
Construction - Commercial 26 20
Land - Residential - 100
Land - Commercial 732 757
Total Recoveries 1,743 1,152
Net Loan Charge-Offs 2,580 2,116
Provision for Credit Losses 6,400 1,800
Balance at End of Period $ 26,478 $ 22,658
Average Loans and Leases $ 2,282,074 $ 1,731,871
Loans and Leases at end of Period $ 2,543,549 $ 2,059,392
Net Charge-Offs to Average Loans and Leases 0.11% 0.12%
Allowances for credit losses to loans and leases at end of period 1.04% 1.10%




AT THE COMPANY: Edward J. Czajka Executive Vice President Chief Financial Officer (213) 891-1188 AT FINANCIAL PROFILES: Kristen Papke General Information (310) 663-8007 kpapke@finprofiles.com

Source:Preferred Bank