Preferred Bank Reports Preliminary Fourth Quarter Results

Jan 27, 2010, 16:01 ET from Preferred Bank

LOS ANGELES, Jan. 27 /PRNewswire-FirstCall/ -- Preferred Bank (Nasdaq: PFBC), an independent commercial bank focusing on the Chinese-American and diversified Southern California mainstream market, today reported preliminary results for the quarter and year ended December 31, 2009. Preferred Bank reported net income of $803,000 or $0.05 per diluted share for the quarter compared to a net loss of $5.0 million or $0.51 per diluted share for the fourth quarter of 2008 and compared to a net loss of $37.0 million or $3.38 per diluted share for the third quarter of 2009. (The results for the third quarter of 2009 reflect those amounts intended to be included in the 3rd quarter 10-Q/A which is expected to be filed soon).

  • Highlights from the quarter include:
    • Net income of $803,000
    • OREO sales resulted in net gains of $357,000
    • Other-than-temporary-impairment charge (credit-related) of $684,000
  • Continued decrease of exposure in housing, construction and land development loans as most construction loans are now near completion.
  • Loans 30-89 days past due continue to decrease; now stand at $13.4 million from $28.5 million as of September 30, 2009.

Li Yu, Chairman, President and CEO commented, "We are pleased to report net income for the fourth quarter 2009 of $803,000. Our operating income although relatively modest by past standards, is truly precious in the current environment.

"During the quarter, we noted some good signs of credit quality improvements.  The most important of all is the reduction of loans that are 30 – 89 days delinquent which went from $87 million at June 30, 2009 to $28 million at September 30, 2009 and is now further reduced to $13 million at December 31, 2009.  Improvement in this area generally means smaller amount of migration of loans into non-performing status as well as reduced future loan loss provisions.

"As of December 31, 2009, approximately $64 million of our housing construction loans were now on the market for sale by our borrowers.  Escrow prices of units or properties were above the carrying amount of our loans.  We therefore expect significant reduction of construction loans in the next two quarters.

"During the quarter, appraisal reports received also signal that the market value of underlying collateral has begun to stabilize.  In a few cases, appraised values actually improved slightly.  More activities were also noted in the liquidation of troubled assets.  During the quarter, we disposed a total of $18.8 million in loans and OREO with several other assets currently in the sales negotiation stage.

"The year 2009 as a whole was very disappointing and we have many challenges awaiting us in 2010.  We hope the credit trend continues to stabilize and improve.  With that, we will be optimistic with our asset quality and operating results as well."

Operating Results for the Quarter

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses decreased to $8.8 million, compared to $11.2 million for the fourth quarter of 2008.  The 21.3% decrease was due primarily to lower loan totals as well as a significant increase in nonaccrual loans in 2009.  The Company's taxable equivalent net interest margin was 2.58% for the fourth quarter of 2009, down from the 3.31% achieved in the fourth quarter of 2008 but up from the 2.35% for the third quarter of 2009.

Noninterest Income. For the fourth quarter of 2009 noninterest income was $1,118,000 compared with $2,401,000 for the same quarter last year and $3,355,000 for the third quarter of 2009. The decrease in noninterest income this quarter compared to the fourth quarter of 2008 was due to the receipt of $1.6 million in December 2008 in life insurance proceeds due to the passing of a former Bank executive in November 2008. The difference in non-interest income for the fourth quarter of 2009 to the third quarter of 2009 was due to gain on sales of securities of $2,597,000 in the third quarter of 2009.

Noninterest Expense. Total noninterest expense was $8.7 million for the fourth quarter of 2009, compared to $11.9 million for the same period in 2008 and $26.1 million for the third quarter of 2009.  Salaries and benefits decreased slightly by 6.7% from the fourth quarter of 2008 due primarily to staff reductions. Occupancy expense increased by $245,000 over the same period in 2008 due to a one-time credit to rent expense booked in the fourth quarter of 2008. Professional services expense increased by $129,000 due primarily to an increase in legal costs associated with non-performing loans and OREO. Credit-related other-than-temporary-impairment charges were $684,000 for the fourth quarter of 2009 and were related to two trust preferred collateralized debt obligations ("CDO's"). This compares to $4.5 million in the same period of 2008 and $587,000 in the third quarter of 2009. OREO related expenses totaled $2.0 million for the fourth quarter of 2009 (consisting of $95,000 in valuation charges and over $1.1 million in property tax expense) and were essentially flat compared to the $2.0 million in OREO expense posted in the fourth quarter of 2008 and were down significantly compared to the $18.1 million posted in the third quarter of 2009. Other expenses were $1.8 million in the fourth quarter of 2009, an increase of $580,000 over the same period in 2008 and a decrease of $1,485,000 from the third quarter of 2009.  The decrease mainly resulted from additional FDIC premium expense recorded in the third quarter of 2009 which related to prior periods.

Balance Sheet Summary

Total gross loans and leases at December 31, 2009 were $1.05 billion, down from $1.23 billion as of December 31, 2008.  Comparing balances as of December 31, 2008 to December 31, 2009: Residential real estate loans decreased from $177.9 million to $164.9 million; total land loans decreased from $127.0 million to $74.8 million; commercial real estate loans increased from $287.8 million to $325.7 million; for-sale housing construction loans decreased from $191.1 million to $147.9 million; other construction loans decreased from $99.7 million to $58.3 million and total commercial loans decreased from $347.7 million to $277.6 million.

Total deposits as of December 31, 2009 were $1.16 billion, a decrease of $97 million from the $1.26 billion at December 31, 2008. As of December 31, 2009 compared to December 31, 2008;  noninterest-bearing demand deposits increased by $8.1 million or 4.1%, interest-bearing demand and savings deposits decreased by $25.9 million or 13.7% and time deposits decreased by $79.1 million or 9.1%. Total assets were $1.33 billion, a $148.2 million or 10.0% decrease from the total of $1.48 billion as of December 31, 2008. Total borrowings decreased from $58 million as of December 31, 2008 to $49 million as of December 31, 2009. The net loan-to-deposit ratio as of December 31, 2009 was 86.4% compared to 95.8% as of December 31, 2008.

Asset Quality

As of December 31, 2009 total nonaccrual loans were $141.8 million compared to $66.6 million as of December 31, 2008 and $169.9 million as of September 30, 2009.  Total loans 90 days past due and still accruing were $7.6 million compared to $0 as of December 31, 2008 and $263,000 as of September 30, 2009. Total net charge-offs (recoveries) for the fourth quarter of 2009 were ($3.6 million) compared to $34.8 million for the third quarter of 2009. The net recovery in the fourth quarter of 2009 was due to a legal settlement with another financial institution on a participation loan that had previously been charged off. Based on a detailed analysis of all impaired and classified loans, as well as an analysis of other qualitative factors, the Bank did not record a provision for loan losses for the fourth quarter of 2009 compared to $14.6 million in the fourth quarter of 2008 and $48.3 million for the third quarter of 2009. The allowance for loan loss at December 31, 2009 was $47.7 million or 4.54% of total loans compared to $26.9 million or 2.19% of total loans at December 31, 2008.

Nonaccrual Loans

    
    
    Nonaccrual Loan Migration – Q4 2009
    
    ($in millions)           Previously     Examination
                              Reported        Results              Total
    -----------------------------------------------------------------------
    As of 9/30/09               $95.5 *        $75.4              $170.9
    Loans Resolved               51.5           22.8                74.3
    Additional Nonaccruals       17.8           25.7                43.5
                              ---------------------------------------------
    As of 12/31/09              $61.8          $78.3              $141.8
                              ---------------------------------------------
                                      
    * 9/30/09 amount shown net of $12.7 million in examination charge-offs,
    reported amount was $108.2 million

Previously Reported Nonaccruals

As noted in the table above, during the fourth quarter of 2009, management resolved sixteen nonaccrual loan relationships amounting to $51.5 million or 54% of the nonaccrual amount previously reported as of September 30, 2009.  However, management also placed an additional seven loan relationships totaling $18 million on nonaccrual, resulting in a net figure of $62 million as of December 31, 2009.  Management expects the resolution of credits amounting to between $25 million to $40 million in the first quarter of 2010, with a majority of the remaining nonaccruals to be resolved in the second and third quarters of 2010.    

Although the Bank will report nonaccrual loans totaling $141.8 million, as outlined in the table below, many of the loans reported as nonaccrual are actually current loans. In the case of five loan relationships amounting to $48.7 million, the customer is making payments out of pocket. The $141.8 million figure also includes three construction projects amounting to $16.8 million with monthly payments coming from a Bank-funded interest reserve. In each case, the project is progressing in an adequate manner; however, recent appraisals indicate a higher than normal loan to value ratio. Given the recent evidence of stabilization of real estate values, in each case we expect the future net sales proceeds to be more than sufficient to fully repay all contractually due principal and interest.

Loans Past Due 30-89 Days

Loans 30-89 days past due at December 31,2009 were $13.4 million, down 53% from the total of $28.5 million as of September 30, 2009.

Real Estate Owned

Total OREO increased to $59.9 million compared to $31.5 million as of September 30, 2009 and $35.1 million as of December 31, 2008. During the fourth quarter of 2009, the Bank sold 5 OREO properties with a book value of $7.3 million.

    
    
    NPA Summary Table
    
                                   90+ Still
    ($in thousands)    30-89 Days   Accruing       Nonaccrual       OREO
                       #      $     #      $        #       $      #     $
                      ------------------------------------------------------
    Land-Residential    -       $-   -      $-     4    $25,389  11  $27,731
    Land Commercial     -        -   -       -     4     14,727   3    7,683
    Construction:        
      Residential       -        -   -       -     9     65,755   2      933
      Commercial        1    8,759   -       -     2      5,138   1    1,611
    R/E-Housing for
     Sale               1    1,095   -       -     -          -   1    1,073
    CRE-Commercial      2    3,177   2   7,570     9     28,826   2   20,885
    C&I/Trade Finance   1      359   -       -     6      1,939   -        -
                      ------------------------------------------------------
      Totals            5  $13,390   2  $7,570    34   $141,774  20  $59,916
                      ------------------------------------------------------
    Total nonaccrual
     loans that are
     paid current                                (8)    (65,500)
                      ------------------------------------------------------
    Delinquent
     Nonaccruals                                  26    $76,274
                      ------------------------------------------------------

Capitalization

Due to the fact that work is ongoing relative to the Bank's deferred tax asset and tax receivable calculations, we do not yet have final capital ratios for December 31, 2009. These will be published as soon as they are complete. The Bank expects to be 'adequately capitalized' as of December 31, 2009 but no assurances can be made at this time.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank's fourth quarter 2009 financial results will be held today, January 27, at 5:00 p.m. Eastern / 2:00 p.m. Pacific.  Interested participants and investors may access the conference call by dialing (888) 561-1799 (domestic) or (480) 629-9869 (international).  There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's web site at www.preferredbank.com.  Web participants are encouraged to go to the web site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Preferred Bank's Chairman, President and CEO Li Yu and Chief Financial Officer Edward Czajka 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 web site.  A replay of the call will be available at (800) 406-7325 (domestic) or (303) 590-3030 (international) through February 3, 2010; the pass code is 4204732.

About Preferred Bank

Preferred Bank is one of the largest independent commercial banks in California focusing on the Chinese-American market. 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 Alhambra, Century City, Chino Hills, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Santa Monica, Anaheim and Pico Rivera, 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.  Preferred Bank continues to benefit from the significant migration to Southern California of ethnic Chinese from China and other areas of East Asia.  While its business is not solely dependent on the Chinese-American market, it represents an important element of the bank's operating strategy, especially for its branch network and deposit products and services. Preferred Bank believes it is well positioned to compete effectively with the smaller Chinese-American community banks, the larger commercial banks and other major banks operating in Southern California by offering a high degree of personal service and responsiveness, experienced multi-lingual staff and substantial lending limits.

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 2008 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.

For Further Information:

AT THE COMPANY:

AT FINANCIAL RELATIONS BOARD:

Edward J. Czajka

Lasse Glassen

Executive Vice President

General Information

Chief Financial Officer

(213) 486-6546

(213) 891-1188

lglassen@mww.com

Financial Tables to Follow

    
    
    
    
                                  PREFERRED BANK                              
                  Condensed Consolidated Statements of Operations             
                                    (unaudited)                               
         (in thousands, except for net (loss) income per share and shares)    
                                                                              
                                             For the Three Months Ended       
                                     -----------------------------------------
                                                                     
                                     December 31,  September 30,  December 31,
                                         2009          2009          2008 
                                     ------------  -------------  ------------
    Interest income:                                                         
      Loans, including fees               $12,118      $10,773       $17,040 
      Investment securities                 1,296        1,338         1,610 
      Fed funds sold                            3            -            39 
                                       ----------   ----------     --------- 
        Total interest income              13,417       12,111        18,689 
                                       ----------   ----------     --------- 
                                                                             
    Interest expense:                                                        
      Interest-bearing demand                $195          211           255 
      Savings                                 115          149           252 
      Time certificates of $100,000                                          
       or more                              1,696        2,408         3,504 
      Other time certificates               2,236        1,481         2,878 
      Fed funds purchased                       -            -             8 
      FHLB borrowings                         336          517           632 
      Senior debt                             189          190             - 
                                       ----------   ----------     --------- 
        Total interest expense             $4,767        4,956         7,529 
                                       ----------   ----------     --------- 
        Net interest income                 8,650        7,155        11,160 
    Provision for loan losses                   -       48,250        14,600 
                                       ----------   ----------     --------- 
        Net interest (loss) income
         after provision for                       
         loan losses                        8,650      (41,095)       (3,440)
                                                                             
    Noninterest income:                                                      
      Fees & service charges on                                              
       deposit accounts                       545          531           467 
      Trade finance income                     78           72           112 
      BOLI  income                             81           80            92 
      Net gain (loss) on sale of                                             
       investment securities                   85        2,597             - 
      Other income                            329           75         1,731 
                                       ----------   ----------     --------- 
        Total noninterest income            1,118        3,355         2,402 
                                                                             
    Noninterest expense:                                                     
      Salary and employee benefits          1,868        1,816         2,060 
      Net occupancy expense                   901          903           655 
      Business development and                                               
       promotion expense                       10           98           196 
      Professional services                 1,049        1,030           921 
      Office supplies and equipment                                          
       expense                                343          304           362 
      Total other-than-temporary                                             
       impairment losses                      684          587         4,472 
      Portion of loss recognized in                                          
       other comprehensive income               -            -             - 
      Other real estate owned                                                
       related expense                      1,994       18,098         2,040 
      Other                                 1,799        3,284         1,219 
                                       ----------   ----------     --------- 
        Total noninterest expense           8,648       26,120        11,925 
        Loss (income) before                                                 
         provision for income                                                
         taxes                              1,120      (63,860)      (12,963)
    Income tax (benefit) expense              317      (26,844)       (7,956)
                                       ----------   ----------     --------- 
        Net (loss) income                    $803      (37,016)       (5,007)
                                       ==========   ==========     =========
                                                                             
                                                                             
    Net (loss) income per share -                                            
     basic                                  $0.05       $(3.38)       $(0.51)
    Net (loss) income per share -                                            
     diluted                                $0.05       $(3.38)       $(0.51)
                                                                             
    Weighted-average common
     shares outstanding                               
        Basic                          15,767,126   10,935,554     9,755,207 
        Diluted                        15,767,126   10,935,554     9,761,160 
    
    
    
                                 PREFERRED BANK                            
                Condensed Consolidated Statements of Operations            
                                  (unaudited)                              
       (in thousands, except for net (loss) income per share and shares)   
                                                                           
                                           For the Twelve Months Ended 
                                     ------------------------------------- 
                                     December 31,   December 31,    Change  
                                         2009           2008          %    
                                      ----------      ---------     ----- 
    Interest income:                                                      
      Loans, including fees              $53,055        $75,120     -29.4%
      Investment securities                5,784         10,743     -46.2%
      Fed funds sold                          37             96     -61.6%
                                      ----------      ---------     ----- 
        Total interest income             58,876         85,959     -31.5%
                                      ----------      ---------     ----- 
                                                                          
    Interest expense:                                                     
      Interest-bearing demand                842          1,364     -38.3%
      Savings                                687          1,433     -52.0%
      Time certificates of $100,000                                       
       or more                            10,521         20,047     -47.5%
      Other time certificates              8,080          8,349      -3.2%
      Fed funds purchased                      -            533    -100.0%
      FHLB borrowings                      2,014          2,908     -30.8%
      Senior debt                            668              -     100.0%
                                      ----------      ---------     ----- 
        Total interest expense            22,812         34,634     -34.1%
                                      ----------      ---------     ----- 
        Net interest income               36,064         51,325     -29.7%
    Provision for credit losses           70,250         30,560     129.9%
                                      ----------      ---------     ----- 
        Net interest (loss)
         income after provision
         for loan losses                 (34,186)        20,765    -264.6%
                                                                          
    Noninterest income:                                                   
      Fees & service charges on                                           
       deposit accounts                    2,189          1,764      24.1%
      Trade finance income                   384            652     -41.0%
      BOLI  income                           318            362     -12.3%
      Net gain (loss) on sale of                                          
       investment securities               3,142            (11)      NM  
      Other income                           643          2,174     -70.4%
                                      ----------      ---------     ----- 
        Total noninterest income           6,676          4,941      35.1%
                                      ----------      ---------     ----- 
                                                                          
    Noninterest expense:                                                  
      Salary and employee benefits         7,629          8,557     -10.9%
      Net occupancy expense                3,415          2,822      21.0%
      Business development and                                            
       promotion expense                     201            424     -52.6%
      Professional services                4,063          3,023      34.4%
      Office supplies and equipment                                       
       expense                             1,246          1,269      -1.8%
      Total other-than-temporary                                          
       impairment losses                   4,774         12,371     -61.4%
      Portion of loss recognized in                                       
       other comprehensive income         (2,727)             -    -100.0%
      Other real estate owned                                             
       related expense                    22,546          3,016       NM  
      Other                                8,430          4,112     105.0%
                                      ----------      ---------     ----- 
        Total noninterest expense         49,577         35,594      39.3%
                                      ----------      ---------     ----- 
        (Loss) income before                                              
         provision for income                                             
         taxes                           (77,087)        (9,888)      NM  
    Income tax (benefit) expense         (33,754)        (4,876)      NM  
                                      ----------      ---------     ----- 
        Net (loss) income               $(43,332)       $(5,012)      NM  
                                      ==========      =========     =====
                                                                          
                                                                          
    Net (loss) income per share -                                         
     basic                                $(3.73)        $(0.51)      NM  
    Net (loss) income per share -                                         
     diluted                              $(3.73)        $(0.51)      NM  
                                                                          
    Weighted-average common shares
     outstanding                            
        Basic                         11,601,685      9,790,858      18.5%
        Diluted                       11,601,685      9,810,391      18.3%
    
    
    
                                 PREFERRED BANK                              
            Condensed Consolidated Statements of Financial Condition         
                                   (unaudited)                               
                                 (in thousands)                              
                                                                             
                                                   December 31,  December 31,
                                                      2009          2008 
                                                  ----------      ---------- 
    Assets                                                                   
                                                                             
    Cash and due from banks                          $14,071         $19,386 
    Fed funds sold                                    54,000          50,200 
                                                  ----------      ---------- 
      Cash and cash equivalents                       68,071          69,586 
    
    Securities available-for-sale, at fair                                   
     value                                           114,464         104,406 
    Loans and leases                               1,049,145       1,231,232 
    Less allowance for loan and lease losses         (47,658)        (26,935)
    Less net deferred loan fees                          588            (167)
                                                  ----------      ---------- 
      Net loans and leases                         1,002,075       1,204,130 
                                                  ----------      ---------- 
                                                                             
    Loans held for sale, at lower of cost or                                 
     market                                                -               - 
    Other real estate owned                           59,916          35,127 
    Customers' liability on acceptances                    -             786 
    Bank furniture and fixtures, net                   6,325           7,157 
    Bank-owned life insurance                          7,304           8,454 
    Accrued interest receivable                        5,582           7,807 
    Federal Home Loan Bank stock                       4,996           4,996 
    Deferred tax assets                               32,435          25,903 
    Other asset                                       33,558          14,879 
                                                  ----------      ---------- 
      Total assets                                $1,334,726      $1,483,231 
                                                  ==========      ========== 
                                                                             
    Liabilities and Shareholders' Equity                                     
                                                                             
    Liabilities:                                                             
    Deposits:                                                                
      Demand                                        $204,545        $196,408 
      Interest-bearing demand                        119,168         126,251 
      Savings                                         44,033          62,883 
      Time certificates of $100,000 or more          328,597         464,085 
      Other time certificates                        464,069         407,696 
                                                  ----------      ---------- 
          Total deposits                          $1,160,412      $1,257,323 
      Acceptances outstanding                              -             786 
      Advances from Federal Home Loan Bank            23,000          58,000 
      Senior debt issuance                            25,996               - 
      Fed funds purchased                                  -               - 
      Accrued interest payable                         2,949           5,446 
      Other liabilities                                8,609          24,185 
                                                  ----------      ---------- 
        Total liabilities                          1,220,966       1,345,740 
                                                  ----------      ---------- 
                                                                             
    Commitments and contingencies                                            
    Shareholders' equity:                                                    
      Preferred stock. Authorized 5,000,000
       shares; no share issued and 
       outstanding at December 31, 2009
       and December 31, 2008                               -               - 
      Common stock, no par value. Authorized                                 
       100,000,000 shares; issued                     
       and outstanding 15,767,126 and                                       
        9,755,207 shares at December 31,                                    
        2009, December 31, 2008, respectively         89,038          72,009
      Treasury stock                                 (19,115)        (19,115)
      Additional paid-in-capital                       6,291           4,582 
      Retained earnings                               42,469          84,996 
      Accumulated other comprehensive loss:                                  
        Non-credit portion of loss recognized,                               
         net of tax                                   (1,580)              - 
        Unrealized loss on securities                                        
         available-for-sale, net of tax               (3,343)         (4,981)
                                                  ----------      ---------- 
        Total shareholders' equity                   113,760         137,491 
                                                  ----------      ---------- 
      Total liabilities and shareholders'                                    
       equity                                     $1,334,726      $1,483,231 
                                                  ==========      ========== 
    
    
    
                                  PREFERRED BANK                              
                    Selected Consolidated Financial Information               
                                    (unaudited)                               
                         (in thousands, except for ratios)                    
                                                                              
                                     For the Three Months  Ended              
                        ------------------------------------------------------
                        December 30,  September 30,   June 30,   December 31, 
                            2009          2009          2009        2008 
                        ------------  -------------   --------   ------------
    For the period:                                                          
      Return on                                                              
       average assets          0.22%        -10.47%      -1.62%        -1.38%
      Return on                                                              
       average equity          2.74%       -100.78%     -17.09%       -13.70%
      Net interest                                                           
       margin (Fully-                                                        
       taxable                                                               
       equivalent)             2.58%          2.35%       3.33%         3.31%
      Noninterest                                                            
       expense to                                                            
       average assets          2.38%          7.39%       2.30%         3.28%
      Efficiency                                                             
       ratio                  88.54%        248.52%      71.65%        87.93%
      Net charge-offs                                                        
       (recoveries) to                                                       
       average loans                                                         
       (annualized)           -1.32%         12.13%       5.27%         0.95%
                                                                             
                                                                             
    Period end:                                                              
      Tier 1 leverage                                                        
       capital ratio            TBD            TBD        9.46%         9.76%
      Tier 1 risk-                                                           
       based capital                                                         
       ratio                    TBD            TBD       10.86%        10.39%
      Total risk-based                                                        
       capital ratio            TBD            TBD       12.13%        11.65%
      Allowances for                                                         
       credit losses to                                                       
       loans and leases                                                       
       at end of period                                                       
       **                      4.54%          4.12%       2.67%         2.19%
      Allowance for                                                          
       credit losses to                                                       
       non-performing                                                            
       loans and leases       31.83%         23.78%      37.85%        40.33%
                                                                             
    Average balances:                                                        
      Total loans and                                                        
       leases*           $1,089,820     $1,139,149  $1,197,274    $1,225,986 
      Earning assets     $1,366,020     $1,245,234  $1,300,528    $1,367,862 
      Total assets       $1,444,273     $1,403,177  $1,433,340    $1,447,892 
      Total deposits     $1,257,229     $1,177,855  $1,201,475    $1,205,901 
                                                                             
    Period end:                                                              
    Loans and Leases:**                                                      
      Real estate -                                                          
       Single and multi-                                                       
       family                                                                
       residential         $164,906       $169,045    $191,021      $177,890 
      Real estate -                                                          
       Land for                                                              
       housing               36,515         49,469      65,658        74,816 
      Real estate -                                                          
       Land for income                                                       
       properties            38,254         38,050      41,999        52,232 
      Real estate -                                                          
       Commercial           325,734        337,584     299,165       287,759 
      Real estate -                                                          
       For sale housing                                                       
       construction         147,869        130,772     141,196       191,073 
      Real estate -                                                          
       Other                                                                 
       construction          58,282         69,011     113,122        99,730 
      Commercial and                                                         
       industrial           228,960        234,626     239,420       273,890 
      Trade finance                                                          
       and other             48,625         40,006      54,514        73,842 
                         ----------     ----------  ----------    ---------- 
        Total gross                                                          
         loans and                                                           
         leases           1,049,145      1,068,563   1,146,095     1,231,232 
      Allowance for                                                          
       loan and lease                                                        
       losses               (47,658)       (44,041)    (30,611)      (26,935)
      Net deferred                                                           
       loan fees                588            700         330          (167)
                         ----------     ----------  ----------    ---------- 
        Net loans and                                                        
         leases          $1,002,075     $1,025,222  $1,115,814    $1,204,130 
                         ==========     ==========  ==========    ========== 
                                                                             
    Deposits:                                                                
      Noninterest-                                                           
       bearing demand      $204,545       $207,957    $195,146      $196,408 
      Interest-                                                              
       bearing demand                                                        
       and savings          163,201        171,762     161,676       189,134 
                         ----------     ----------  ----------    ---------- 
        Total core                                                           
         deposits           367,746        379,719     356,822       385,542 
      Time deposits         792,666        816,153     783,037       871,781 
                         ----------     ----------  ----------    ---------- 
        Total                                                                
         deposits        $1,160,412     $1,195,872  $1,139,859    $1,257,323 
                         ==========     ==========  ==========    ========== 
                                                                             
                                                                             
    * Loans held for sale are included                                       
    ** Loans held for sale are excluded                                      
    
    
    
                                  Preferred Bank                              
                        Loan and Credit Quality Information                   
                                                                              
    Allowance For Credit Losses & Loss History                                
                                             Year Ended          Year Ended   
                                         December 31, 2009   December 31, 2008
                                         -----------------   -----------------
                                                            (Dollars in 000's)
    Allowance For Credit Losses                                               
    Balance at Beginning of Period               $26,935              $14,896 
      Charge-Offs                                                             
        Commercial & Industrial                    9,215                4,686 
        Mini-perm Real Estate                     10,138                  688 
        Construction - Residential                16,803                8,636 
        Construction - Commercial                  3,526                    - 
        Land - Residential                        13,771                4,518 
        Land - Commercial                            410                    - 
           Total Charge-Offs                      53,863               18,528 
                                                                              
      Recoveries                                                              
        Commercial & Industrial                    3,924                    - 
        Mini-perm Real Estate                         15                    - 
        Construction - Residential                   397                    - 
        Construction - Commercial                      -                    - 
        Land - Residential                             -                    7 
        Land - Commercial                              -                    - 
           Total Recoveries                        4,336                    7 
                                                                              
      Net Loan Charge-Offs                        49,527               18,521 
      Provision for Credit Losses                 70,250               30,560 
                                              ----------           ---------- 
    Balance at End of Period                     $47,658              $26,935 
    Average Loans and Leases*                 $1,164,538           $1,220,348 
    Loans and Leases at end of Period*        $1,049,145           $1,231,232 
    Net Charge-Offs to Average Loans                                          
     and Leases                                     4.25%                1.52%
    Allowances for credit losses to                                           
     loans and leases at end of period                                        
     **                                             4.54%                2.19%
    
    
    
                                                                              
                    30-89 Days     90+ Still                            
    Asset Quality    Past Due      Accruing      Non-Accrual       OREO
                    #       $      #      $      #       $      #        $
                   -----------------------------------------------------------
    Commercial &                                                              
     Industrial     1    $359,000  -         $-  6   $1,939,000  -          $-
    Mini-perm
     Real                                                               
     Estate         3   4,272,000  2  7,570,000  9   28,826,000  2  21,958,000
    Construction -                                                            
     Commercial     1   8,759,000  -          -  2    5,138,000  1   1,611,000
    Construction
     - Residential  -           -  -          -  9   65,755,000  1     933,000
    Land -
     Residential    -           -  -          -  4   25,389,000 12  27,731,000
    Land -
     Commercial     -           -  -          -  4   14,727,000  3   7,683,000
                   -----------------------------------------------------------
      Total         5 $13,390,000  2 $7,570,000 34 $141,774,000 19 $59,916,000
                   ===========================================================
    
    
    
                                 Preferred Bank                            
                      Loan and Credit Quality Information                  
                                                                           
    Commercial Real Estate Portfolio *                                     
    (Dollars in Thousands)                                                 
                                                      # Loans  # Loans   Avg 
                                LTV @        DCR @      Over     Over    Loan
                  $ Size     Origination  Origination   $10mm    $5mm    Size
                 ------------------------------------------------------------
                                                                           
    Office                                                                 
     Building     $56,476        51.7%        1.87        1        1   $1,614
    Retail        113,435        60.3%        1.47        3        3   $2,315
    Industrial     61,785        62.6%        1.39        -        2   $1,626
    Hospitality    32,819        59.1%        1.54        -        2   $3,647
    Medical                                                                
     Office        27,616        62.6%        1.22        1        -   $5,523
    Hospital       15,370        50.1%        2.43        -        2   $5,123
    Other Use      18,233        56.8%        1.68        -        1   $2,026
                 ------------------------------------------------------------
                 $325,734        58.6%        1.55        5       11    2,201
    
    
    

SOURCE Preferred Bank



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