Preferred Bank Reports Record Quarterly Earnings

LOS ANGELES, Jan. 22, 2018 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ:PFBC), an independent commercial bank, today reported results for the quarter and year ended December 31, 2017. Preferred Bank (“the Bank”) reported net income of $7.7 million or $0.52 per diluted share for the fourth quarter of 2017. The results included a one-time, after tax charge totaling $6.7 million due to the passage of the Tax Cuts and Jobs Act of 2017. The charge consisted of a $6.04 million charge to the carrying value of the Bank’s deferred tax asset (“DTA”) and a $615,000 charge to reflect a depreciation adjustment related to the Bank’s investments in low income housing tax credit (“LIHTC”) funds. These were both necessitated as a result of the reduction in the corporate income tax rates from 35% to 21% due to the December 22, 2017 passage of the Tax Cuts and Jobs Act of 2017. These adjustments had the effect of reducing diluted EPS by $0.45 per diluted share for the quarter and the year. The reported net income for the fourth quarter of 2017 compares to net income of $10.1 million or $0.70 per diluted share for the fourth quarter of 2016 and compares to net income of $13.7 million or $0.94 per diluted share for the third quarter of 2017. Net income for the full year 2017 was $43.4 million or $2.96 per diluted share, an increase in net income of $7.0 million or 19.3% over 2016.

Highlights from the fourth quarter of 2017:

  • Total assets
$3.77 billion
  • Linked quarter deposit growth
2.1%
  • Linked quarter loan growth
2.2%
  • Efficiency ratio
32.9%
  • Net interest margin
3.86%

Highlights from the year 2017:

  • Diluted EPS Growth
15.6%
  • Loan growth
$397.5 million or 15.6%
  • Deposit growth
$499.0 million or 18.1%
  • Efficiency ratio
36.6%
  • Net interest margin
3.80%

Li Yu, Chairman and CEO commented, “We had a good quarter. Net income was $7.7 million or $0.52 per diluted share. This was after non-recurring charges of $6.7 million or $0.45 per diluted share for impairment of our DTA ($6.04 million) and a depreciation adjustment on our LIHTC investment ($615,000) resulting from the new tax law signed on December 22, 2017. Without these charges, we estimate that net income would have been $14.3 million or $0.97 per diluted share, an all-time record for our Bank.

“Deposit growth in the fourth quarter was $68 million or 2.1% growth on a linked quarter basis. This growth rate is lower than prior quarters and one of the reasons is that we chose not to renew approximately $45 million of rate listing service deposits. We believe the Bank has more than sufficient liquidity to meet upcoming funding needs for lending activities.

“Loan growth for the quarter was $62.0 million or 2.2% on a linked quarter basis, which was also much lower than in recent prior quarters. During the quarter, pay-off activities were greater than in past quarters which contributed to the lower growth totals.

“The net interest margin for the quarter was 3.86%, an improvement of 7 basis points from the estimated adjusted NIM of 3.79% in the third quarter (adjusted due to exclude a one-time interest recovery). Increased leverage during the quarter, the rate hike in December and discipline on deposit interest all contributed to the improvement.

“As of year-end 2017, we have raised $33.5 million of capital using the 'at-the market' (ATM) method. The Bank’s Tier 1 leverage ratio at year-end was 9.52% an improvement from the 8.54% as of September 30, 2017. We plan to issue another $16.5 million in the first quarter of 2018, and that would complete the entire $50 million in new capital as specified in our Stock Permit granted by the California Department of Business Oversight. Our capital levels should be sufficient to meet future growth.

“2017 has been a good year for Preferred Bank. For the year, total assets grew 17%, loans grew 16% and deposits grew by 18%. On a pre-tax basis, income increased by approximately 39% from 2016 and is more indicative of our performance against 2016 and previous years. All of these numbers substantially exceeded our internal expectations as well as market consensus. During the year, we also increased our work force by 11% largely in administrative areas such as compliance, electronic banking and BSA to prepare ourselves for 2018 and beyond.

"With good profit metrics, a highly asset-sensitive balance sheet and a lower corporate tax rate, we are quite optimistic for the year 2018.”

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was $34.6 million for the fourth quarter of 2017. This compares favorably to the $28.1 million recorded in the fourth quarter of 2016 but is slightly below the $35.4 million recorded in the third quarter of 2017 as that quarter was aided by a $1.4 million interest recovery on a previously charged-off loan. The increase over last year is due primarily to growth in interest income on loans partially offset by an increase in interest expense on deposits. The Bank’s taxable equivalent net interest margin was 3.86% for the fourth quarter of 2017, a 19 basis point increase over the 3.67% achieved in the fourth quarter of 2016. This was primarily due to an increase in overall loan yields as the Prime rate increased three times over the course of 2017. Last quarter, the Bank recorded a 3.95% margin but that was aided by the aforementioned loan interest recovery. Excluding that recovery, the margin would have been 3.79% in the third quarter of 2017 and would have meant a 7 basis point increase in the net interest margin in the fourth quarter of 2017.

Noninterest Income. For the fourth quarter of 2017, noninterest income was $1,215,000 compared with $1,286,000 for the same quarter last year and compared to $1,243,000 for the third quarter of 2017. The decrease from the fourth quarter of 2016 is primarily due to a gain on a called security of $133,000 in the fourth quarter of 2016. Service charges on deposits and letter of credit income both increased over the fourth quarter of 2016 but were relatively flat when compared to the third quarter of 2017.

Noninterest Expense. Total noninterest expense was $11.8 million for the fourth quarter of 2017, an increase of $553,000 over the same period last year and a decrease of $403,000 from the $12.2 million recorded in the third quarter of 2017. Salaries and benefits expense totaled $7.0 million for the fourth quarter of 2017, an increase of $321,000 over the $6.7 million recorded for the same period last year but a decrease of $897,000 from the $7.9 million recorded in the third quarter of 2017. The increase over the same period last year is due to staffing increases, growth of the Bank, as well as regular merit increases. The decrease from the third quarter of 2017 is primarily due to a decrease in the accrual of our bonus expense. Occupancy expense totaled $1.3 million for the quarter, an increase of $90,000 over the $1.2 million recorded in the same period in 2016 and relatively flat when compared to the third quarter of 2017. The increase over the prior year was due to normal rent increases as well as the new administrative offices the Bank opened in November 2016 in El Monte, California. Professional services expense was $1.2 million for the fourth quarter of 2017 compared to $1.5 million for the same quarter of 2016 and $963,000 recorded in the third quarter of 2017. The increase over the third quarter of 2017 was due to increased legal fees and the decrease from the same period last year was also due to legal fees. The Bank incurred $169,000 in costs related to its one OREO property. This compares to $187,000 in the fourth quarter of 2016 and $168,000 in the third quarter of 2017. Other expenses were $1.6 million for the fourth quarter of 2017 compared to $1.1 million for the same period last year and $1.3 million for the third quarter of 2017. The increase over last year was mainly due to an increase in FDIC assessments of $325,000 and the increase over the third quarter of 2017 was due to a recovery in the third quarter of $250,000 on a loan which was previously charged down as a loan held for sale and subsequently sold. In addition, the Bank recorded an off balance sheet reserve for unfunded loans of $120,000 during the fourth quarter of 2017.

Income Taxes

The Bank recorded a provision for income taxes of $8.1 million for the fourth quarter of 2017. In addition to that, the Bank also recorded a charge to its DTA of $6.04 million and also recorded a tax charge related to its investments in LIHTC funds of $615,000. These charges were both necessitated by the signing of the Federal Tax Act on December 22, 2017 which lowered the Federal corporate tax rate from 35% to 21%. Excluding these charges, the Bank’s effective tax rate (“ETR”) would have been 35.7% for the quarter. This is down from the ETR of 38.0% for the fourth quarter of 2016 and down from the 41% ETR recorded in the third quarter of 2017. The decrease from both periods is due to the recognition this quarter, of certain past compensation costs not being subject to Internal Revenue Code (“IRC”) Section 162(m).

Balance Sheet Summary

Total gross loans and leases at December 31, 2017 were $2.94 billion, an increase of $397.5 million or 15.6% over the total of $2.54 billion as of December 31, 2016. Total deposits reached $3.26 billion, an increase of $499 million or 18.1% over the total of $2.76 billion as of December 31, 2016. Total assets reached $3.77 billion as of December 31, 2017, an increase of $548.3 million or 17.0% over the total of $3.22 billion as of December 31, 2016.

Asset Quality

Loans

As of December 31, 2017 nonaccrual loans totaled $6.5 million, a decrease of $1.1 million over the $7.6 million total as of December 31, 2016. Total net charge-offs for the fourth quarter of 2017 were $334,000 compared to net charge-offs of $408,000 in the third quarter of 2017 and compared to net recoveries of $22,000 for the fourth quarter of 2016. The Bank recorded a provision for loan loss of $1.5 million for the fourth quarter of 2017, compared to a provision of $1.9 million recorded in the same quarter last year and compared to the $1.3 million provision recorded in the third quarter of 2017. The allowance for loan loss at December 31, 2017 was $29.9 million or 1.02% of total loans compared to $26.5 million or 1.04% of total loans at December 31, 2016.

OREO

As of December 31, 2017 and December 31, 2016, the Bank held one OREO property, a $4.1 million multi-family property located outside of California.

Capitalization
As of December 31, 2017, the Bank’s leverage ratio was 9.52%, the common equity tier 1 capital ratio was 10.07% and the total capital ratio was 13.83%. As of December 31, 2016, the Bank’s leverage ratio was 9.43%, the common equity tier 1 ratio was 9.83% and the total risk based capital ratio was 14.09%.

Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter and full year 2017 financial results will be held tomorrow, January 23, 2018 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 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 6, 2018; the passcode is 10115802.

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 eleven 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 (2), 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 2016 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) 891-1188

AT FINANCIAL PROFILES:
Kristen Papke
General Information
(310) 663-8007
kpapke@finprofiles.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,
2017
2017
2016
Interest income:
Loans, including fees $38,456 $39,362 $31,248
Investment securities 3,198 3,172 2,570
Fed funds sold 347 320 162
Total interest income 42,001 42,854 33,980
Interest expense:
Interest-bearing demand 2,229 2,263 1,320
Savings 17 17 21
Time certificates 3,641 3,601 2,982
FHLB borrowings 21 21 67
Subordinated debit 1,531 1,530 1,526
Total interest expense 7,439 7,432 5,916
Net interest income 34,562 35,422 28,064
Provision for loan losses 1,500 1,300 1,900
Net interest income after provision for
loan losses 33,062 34,122 26,164
Noninterest income:
Fees & service charges on deposit accounts 312 299 258
Letters of credit fee income 627 632 599
BOLI income 89 88 87
Net gain on sale of investment securities 4 - 133
Other income 183 224 209
Total noninterest income 1,215 1,243 1,286
Noninterest expense:
Salary and employee benefits 6,981 7,878 6,660
Net occupancy expense 1,289 1,257 1,199
Business development and promotion expense 204 251 242
Professional services 1,227 963 1,492
Office supplies and equipment expense 344 334 350
Other real estate owned related expense 169 168 187
Other 1,562 1,328 1,093
Total noninterest expense ��11,776 12,179 11,223
Income before provision for income taxes 22,501 23,186 16,227
Income tax expense 14,775 9,516 6,166
Net income $7,726 $13,670 $10,061
Dividend and earnings allocated to participating securities (89) (162) (132)
Net income available to common shareholders $7,637 $13,508 $9,929
Income per share available to common shareholders
Basic $0.52 $0.94 $0.71
Diluted $0.52 $0.94 $0.70
Weighted-average common shares outstanding
Basic 14,710,680 14,378,552 13,984,346
Diluted 14,751,145 14,426,522 14,066,596
Dividends per share $0.22 $0.20 $0.18



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
2017
2016
%
Interest income:
Loans, including fees $144,678 $114,148 26.7%
Investment securities 11,792 8,292 42.2%
Fed funds sold 1,130 473 138.9%
Total interest income 157,600 122,913 28.2%
Interest expense:
Interest-bearing demand 7,901 4,730 67.0%
Savings 72 76 -5.3%
Time certificates 13,633 10,855 25.6%
FHLB borrowings 167 259 -35.2%
Subordinated debit issuance 6,123 2,814 100.0%
Total interest expense 27,896 18,734 48.9%
Net interest income 129,704 104,179 24.5%
Provision for credit losses 5,500 6,400 -14.1%
Net interest income after provision for
loan losses 124,204 97,779 27.0%
Noninterest income:
Fees & service charges on deposit accounts 1,269 1,212 4.7%
Letters of credit fee income 2,635 2,371 11.2%
BOLI income 351 346 1.4%
Net gain on sale of investment securities 4 169 100.0%
Other income 1,565 1,361 15.0%
Total noninterest income 5,824 5,459 6.7%
Noninterest expense:
Salary and employee benefits 30,041 25,813 16.4%
Net occupancy expense 4,942 4,830 2.3%
Business development and promotion expense 883 845 4.4%
Professional services 4,390 5,297 -17.1%
Office supplies and equipment expense 1,340 1,422 -5.8%
Other real estate owned related expense 563 825 -31.8%
Other 7,389 4,506 64.0%
Total noninterest expense 49,548 43,538 13.8%
Income before provision for income taxes 80,480 59,700 34.8%
Income tax expense 37,086 23,331 59.0%
Net income $43,394 $36,369 19.3%
Dividend and earnings allocated to participating securities (499) (547) -8.7%
Net income available to common shareholders $42,895 $13,508 217.6%
Income per share available to common shareholders
Basic $2.97 $2.58 15.2%
Diluted $2.96 $2.56 15.6%
Weighted-average common shares outstanding
Basic 14,438,964 13,883,497 4.0%
Diluted 14,492,712 13,987,257 3.6%
Dividends per share $0.80 $0.63 27.0%



PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
December 31, December 31,
2017
2016
(Unaudited) (Audited)
Assets
Cash and due from banks$446,822 $306,330
Fed funds sold 108,500 97,500
Cash and cash equivalents 555,322 403,830
Securities held to maturity, at amortized cost 8,780 10,337
Securities available-for-sale, at fair value 188,203 199,833
Loans and leases 2,941,093 2,543,549
Less allowance for loan and lease losses (29,921) (26,478)
Less net deferred loan fees (3,099) (1,682)
Net loans and leases 2,908,073 2,515,389
Loans held for sale, at lower of cost or fair value 440 -
Other real estate owned 4,112 4,112
Customers' liability on acceptances 7,272 772
Bank furniture and fixtures, net 5,684 5,313
Bank-owned life insurance 9,066 8,825
Accrued interest receivable 11,291 9,550
Investment in affordable housing 34,708 23,670
Federal Home Loan Bank stock 11,077 9,331
Deferred tax assets 17,476 26,605
Income tax receivable 2,713 -
Other asset 5,642 4,031
Total assets$3,769,859 $3,221,598
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Demand$659,487 $586,272
Interest-bearing demand 1,353,974 1,019,058
Savings 24,429 34,067
Time certificates of $250,000 or more 621,648 427,172
Other time certificates 603,152 697,155
Total deposits$3,262,690 $2,763,724
Acceptances outstanding 7,272 772
Advances from Federal Home Loan Bank 6,401 26,516
Subordinated debt issuance 98,963 98,839
Commitments to fund investment in affordable housing partnership 18,523 10,632
Accrued interest payable 3,833 3,199
Other liabilities 17,143 19,851
Total liabilities 3,414,825 2,923,533
Commitments and contingencies
Shareholders' equity:
Preferred stock. Authorized 25,000,000 shares; issued and no outstanding shares at December 31, 2017 and December 31, 2016
Common stock, no par value. Authorized 100,000,000 shares; issued and outstanding 15,122,313 at December 31, 2017 and 14,232,907 at December 31, 2016, respectively. 207,948 169,861
Treasury stock (33,233) (19,115)
Additional paid-in-capital 39,462 39,929
Accumulated income 139,684 108,261
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on securities, available-for-sale, net of tax of $504 and $(632) at December 31, 2017 and December 31, 2016, respectively 1,173 (871)
Total shareholders' equity 355,034 298,065
Total liabilities and shareholders' equity$3,769,859 $3,221,598



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,
2017
2017
2017
2017
2016
Unaudited historical quarterly operations data:
Interest income $ 42,001 $ 42,854 $ 38,113 $ 34,632 $ 33,980
Interest expense 7,439 7,432 6,835 6,190 5,916
Interest income before provision for credit losses 34,562 35,422 31,278 28,442 28,064
Provision for credit losses 1,500 1,300 1,200 1,500 1,900
Noninterest income 1,215 1,243 1,275 2,090 1,286
Noninterest expense 11,776 12,179 12,414 13,178 11,223
Income tax expense 14,775 9,516 7,222 5,573 6,166
Net income 7,726 13,670 11,717 10,281 10,061
Earnings per share
Basic $ 0.52 $ 0.94 $ 0.81 $ 0.71 $ 0.71
Diluted $ 0.52 $ 0.94 $ 0.80 $ 0.71 $ 0.70
Ratios for the period:
Return on average assets 0.83% 1.48% 1.36% 1.29% 1.28%
Return on beginning equity 9.67% 17.77% 15.96% 13.99% 13.74%
Net interest margin (Fully-taxable equivalent) 3.86% 3.95% 3.75% 3.67% 3.67%
Noninterest expense to average assets 1.27% 1.32% 1.44% 1.66% 1.43%
Efficiency ratio 32.92% 33.22% 38.13% 43.16% 38.24%
Net charge-offs (recoveries) to average loans (annualized) 0.05% 0.06% 0.18% 0.02% 0.00%
Ratios as of period end:
Tier 1 leverage capital ratio 9.52% 8.54% 8.69% 9.01% 9.43%
Common equity tier 1 risk-based capital ratio 10.07% 9.24% 9.13% 9.15% 9.83%
Tier 1 risk-based capital ratio 10.07% 9.24% 9.13% 9.15% 9.83%
Total risk-based capital ratio 13.83% 13.08% 13.04% 13.21% 14.09%
Allowances for credit losses to loans and leases at end of period 1.02% 1.00% 1.00% 1.04% 1.04%
Allowance for credit losses to non-performing
loans and leases 461.28% 415.32% 426.43% 357.09% 346.22%
Average balances:
Total loans and leases $ 2,853,134 $ 2,817,271 $ 2,695,208 $ 2,563,473 $ 2,465,492
Earning assets $ 3,572,826 $ 3,579,578 $ 3,401,193 $ 3,167,031 $ 3,066,189
Total assets $ 3,678,237 $ 3,658,833 $ 3,466,094 $ 3,228,142 $ 3,124,984
Total deposits $ 3,179,679 $ 3,190,344 $ 3,002,583 $ 2,775,830 $ 2,666,878



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
For the Year Ended
December 31, December 31,
2017
2016
Interest income$157,600 $122,913
Interest expense 27,896 18,734
Interest income before provision for credit losses 129,704 104,179
Provision for credit losses 5,500 6,400
Noninterest income 5,824 5,459
Noninterest expense 49,548 43,538
Income tax expense 37,086 23,331
Net income 43,394 36,369
Earnings per share
Basic$2.97 $2.58
Diluted$2.96 $2.56
Ratios for the period:
Return on average assets 1.24% 1.26%
Return on beginning equity 14.56% 13.30%
Net interest margin (Fully-taxable equivalent) 3.80% 3.74%
Noninterest expense to average assets 1.41% 1.55%
Efficiency ratio 36.56% 40.25%
Net charge-offs (recoveries) to average loans 0.08% 0.16%
Average balances:
Total loans and leases$2,733,369 $2,220,438
Earning assets$3,431,985 $2,731,363
Total assets$3,509,769 $2,787,977
Total deposits$3,038,910 $2,428,402



PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
As of
December 31, September 30, June 30, March 31, December 31,
2017
2017
2017
2017
2016
Unaudited quarterly statement of financial position data:
Assets:
Cash and cash equivalents$555,322 $503,240 $502,534 $450,355 $403,830
Securities held-to-maturity, at amortized cost 8,780 9,076 9,611 9,912 10,337
Securities available-for-sale, at fair value 188,203 193,890 192,474 197,455 199,833
Loans and Leases:
Real estate - Single and multi-family residential 513,953 507,738 $494,725 $479,279 $490,683
Real estate - Land 10,863 15,723 16,512 16,546 16,575
Real estate - Commercial 1,244,486 1,279,981 1,217,254 1,160,077 1,047,321
Real estate - For sale housing construction 85,199 94,033 95,462 109,703 104,960
Real estate - Other construction 198,602 165,244 148,580 150,322 128,434
Commercial and industrial, trade finance and other 887,990 815,880 817,481 771,676 755,576
Gross loans 2,941,093 2,878,599 2,790,014 2,687,603 2,543,549
Allowance for loan and lease losses (29,921) (28,756) (27,863) (27,857) (26,478)
Net deferred loan fees (3,099) (3,376) (3,245) (2,572) (1,682)
Net loans, excluding loans held for sale$2,908,073 $2,846,467 $2,758,906 $2,657,174 $2,515,389
Loans held for sale$440 - - - -
Net loans and leases$2,908,513 $2,846,467 $2,758,906 $2,657,174 $2,515,389
Other real estate owned $4,112 $4,112 $4,112 $4,112 $4,112
Investment in affordable housing 34,708 35,939 37,029 22,904 23,670
Federal Home Loan Bank stock 11,077 11,077 11,078 9,330 9,331
Other assets 59,144 61,671 63,651 61,687 55,096
Total assets $3,769,859 $3,665,472 $3,579,395 $3,412,929 $3,221,598
Liabilities:
Deposits:
Demand$659,487 $599,722 $641,153 $576,060 $586,272
Interest-bearing demand 1,353,974 1,298,895 1,231,595 1,137,145 1,019,058
Savings 24,429 27,132 27,870 34,434 34,067
Time certificates of $250,000 or more 621,648 617,231 535,211 495,177 427,172
Other time certificates 603,152 651,502 685,445 707,830 697,155
Total deposits$3,262,690 $3,194,482 $3,121,274 $2,950,646 $2,763,724
Advances from Federal Home Loan Bank $7,272 $6,431 $6,459 $26,487 $26,516
Subordinated debt issuance 98,963 98,932 98,901 98,870 98,839
Commitments to fund investment in affordable housing partnership 18,523 20,684 20,966 10,354 10,632
Other liabilities 27,377 27,918 26,570 32,189 23,822
Total liabilities$3,414,825 $3,348,447 $3,274,170 $3,118,546 $2,923,533
Equity:
Net common stock, no par value$214,177 $180,700 $180,110 $178,884 $190,675
Retained earnings 139,684 135,497 124,740 115,931 108,261
Accumulated other comprehensive income 1,173 828 375 (432) (871)
Total shareholders' equity$355,034 $317,025 $305,225 $294,383 $298,065
Total liabilities and shareholders' equity$3,769,859 $3,665,472 $3,579,395 $3,412,929 $3,221,598



Preferred Bank
Loan and Credit Quality Information
Allowance For Credit Losses & Loss History
Year Ended Year Ended
December 31, 2017 December 31, 2016
(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period $26,478 $22,658
Charge-Offs
Commercial & Industrial 2,274 4,323
Mini-perm Real Estate - -
Construction - Residential - -
Construction - Commercial - -
Land - Residential - -
Land - Commercial - -
Others - -
Total Charge-Offs 2,274 4,323
Recoveries
Commercial & Industrial 55 985
Mini-perm Real Estate - -
Construction - Residential - -
Construction - Commercial 17 26
Land - Residential - -
Land - Commercial 145 732
Total Recoveries 217 1,743
Net Loan Charge-Offs 2,057 2,580
Provision for Credit Losses 5,500 6,400
Balance at End of Period $29,921 $26,478
Average Loans and Leases $3,431,985 $2,282,074
Loans and Leases at end of Period $2,941,533 2,543,549
Net Charge-Offs to Average Loans and Leases 0.08% 0.11%
Allowances for credit losses to loans and leases at end of period 1.02% 1.04%

Source:Preferred Bank