OREANDA-NEWS. July 21, 2016. Preferred Bank (NASDAQ:PFBC), an independent commercial bank, today reported results for the quarter ended June 30, 2016. Preferred Bank (“the Bank”) reported net income of \\$8.6 million or \\$0.61 per diluted share for the second quarter of 2016. This compares to net income of \\$7.6 million or \\$0.55 per diluted share for the second quarter of 2015 and compares to net income of \\$7.8 million or \\$0.56 per diluted share for the first quarter of 2016.

Highlights from the second quarter of 2016:

          
Total assets
        \\$2.92 billion
Linked quarter loan growth  
        \\$114.2 million or 5.3%
Linked quarter deposit growth
        \\$158.0 million or 6.7%
Return on average assets
         1.26%
Return on beginning equity
         12.62%
Efficiency ratio
         39.4%
Net interest margin
         3.87%
            

Li Yu, Chairman and CEO commented, “The Bank recently completed a \\$72.5 million private placement of subordinated debentures.  \\$62.5 million was received on June 13, 2016 and an additional \\$10 million was received on July 8, 2016.  This new capital has substantially improved our tier 2 capital ratio and significantly reduced our CRE concentration ratio which allows for the growth momentum to continue.  The interest expense on the debt was approximately \\$186,000 for the quarter and so in order to minimize the overall cost to the Bank going forward, we have deployed \\$34 million of these funds in early July to purchase a home mortgage portfolio.  Further purchases like this one are under consideration, as they allow for continued diversification of our loan portfolio. 

“Preferred Bank’s second quarter loan growth was strong at \\$114 million, or 5.3%.  We are very pleased with these results as market conditions are favorable and our staff’s effort has been consistent.

“Deposit growth was even more significant for the quarter.  Total deposits have increased \\$158 million or 6.7% on a linked quarter basis.  The large deposit growth is partly the result of public recognition of Preferred Bank’s performance.  Recently, S&P Global Market Intelligence ranked Preferred Bank 3rd  best in the nation among all banks with \\$1 to \\$10 billion in assets, with the top two being privately held.  Preferred Bank is therefore considered the top publicly-traded bank in the \\$1 to \\$10 billion asset group.  Our deposits were recently rated “A-” by Kroll Bond Rating Agency.

“Net income for the quarter was \\$8.6 million or \\$0.61 per diluted share, which compares favorably with the \\$7.8 million earned in the first quarter of this year.  An improved net interest margin and higher average outstanding loans were the main reasons.  During the quarter, our efficiency ratio of 39.4% was also an improvement from the 44.1% for the first quarter of 2016.  As in the past few years, we plan to continue increasing our compliance staff in order to meet new and more complex laws and regulations.  Meanwhile, we also continue to add front line staff on an opportunistic basis to sustain our growth.  Our Bank maintains a highly asset sensitive balance sheet which will benefit from an increase in short term rates when it occurs.

“Amid all of the positive results of the quarter, there was one setback.  A Syndicated National Credit (“SNiC”) loan was downgraded to non-accrual status during the quarter.  We have determined the event was an isolated case as we have underwritten the loan in accordance with our standards based upon the information provided.  A larger than normal provision for loan loss was made in addition to the loan loss recovery we received during the quarter.  The silver lining here is that it serves as a reminder that we need to be even more cautious going forward.”

Net Interest Income and Net Interest Margin. Net interest income before provision for loan and lease losses was \\$25.7 million for the second quarter of 2016. This compares favorably to the \\$20.6 million recorded in the second quarter of 2015 and to the \\$23.9 million recorded in the first 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 3.87% for the second quarter of 2016, a 14 basis point decrease from the 4.01% achieved in the second quarter of 2015 but was an 8 basis point increase from the 3.79% recorded in the first quarter of 2016.

Noninterest Income. For the second quarter of 2016, noninterest income was \\$1,660,000 compared with \\$1,131,000 for the same quarter last year and compared to \\$1,163,000 for the first quarter of 2016. The increase over both periods is primarily due to trade finance income as letter of credit activity has increased. Service charges on deposits were primarily flat compared to the same period last year but were up by \\$44,000 over the first quarter of 2016. Trade finance income was \\$835,000 for the second quarter of 2016, an increase of \\$344,000 compared to the same period last year and an increase of \\$418,000 compared to the first quarter of 2016. Other income was \\$398,000, an increase of \\$178,000 over the second quarter of 2015 and an increase of \\$67,000 over the first quarter of 2016. The increase over both comparable periods was due to an increase in unutilized line fees on loans.

Noninterest Expense. Total noninterest expense was \\$10.8 million for the second quarter of 2016, an increase of \\$2.3 million over the same period last year and down from the \\$11.0 million recorded in the first quarter of 2016. Salaries and benefits expense totaled \\$6.1 million for the second quarter of 2016, an increase over the \\$5.5 million recorded for the same period last year and a decrease from the \\$7.0 million recorded in the first quarter of 2016. The increase over the same period last year was due primarily to staffing/merit increases, much of that due to the acquisition of United International Bank (“UIB”), and the decrease from the first quarter of 2016 was due to heightened payroll taxes in the first quarter of 2016 as well as a higher level of capitalized loan origination costs. Occupancy expense totaled \\$1.3 million compared to the \\$899,000 recorded in the same period in 2015 and the \\$1.2 million recorded in the first 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 \\$1.4 million for the second quarter of 2016 compared to \\$1.2 million for the same quarter of 2015 and \\$962,000 recorded in the first quarter of 2016. The Bank incurred \\$243,000 in costs related to its one OREO property. This compares to a gain of \\$552,000 in the second quarter of 2015 and expense of \\$199,000 in the first quarter of 2016. Other expenses were \\$1.3 million for the second quarter of 2016 compared to \\$1.0 million for the same period last year and \\$1.1 million for the first quarter of 2016.

Income Taxes

The Bank recorded a provision for income taxes of \\$5.7 million for the second quarter of 2016. This represents an effective tax rate (“ETR”) of 40.0% for the quarter. This is down from the ETR of 40.4% for the second quarter of 2015 and down from the 40.6% ETR recorded in the first quarter of 2016. 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 various Low Income Housing Income Tax Credit (“LIHTC”) funds.

Balance Sheet Summary

Total gross loans and leases at June 30, 2016 were \\$2.27 billion, an increase of \\$212.8 million or 10.3% over the total of \\$2.06 billion as of December 31, 2015. Total deposits reached \\$2.52 billion, an increase of \\$229.3 million or 10.0% over the total of \\$2.29 billion as of December 31, 2015. Total assets reached \\$2.92 billion as of June 30, 2016, an increase of \\$316.8 million or 12.2% over the total of \\$2.60 billion as of December 31, 2015. 

Asset Quality

As of June 30, 2016 nonaccrual loans totaled \\$3.3 million, an increase of \\$1.3 million over the \\$2.0 million total as of December 31, 2015. Total net charge-offs for the second quarter of 2016 were \\$2.0 million compared to a net recovery of \\$223,000 in the first quarter of 2016 and compared to a net charge off of \\$130,000 for the second quarter of 2015. The Bank recorded a provision for loan loss of \\$2.3 million for the second quarter of 2016 which was impacted by the new nonaccrual loan which was deemed such in the second quarter. Although this is a new nonperforming loan, all trends and all other factors relative to the quality of the loan portfolio, as well as the economic conditions in the areas in which we operate, continue to remain strong and thrive. The \\$2.3 million provision is an increase from the \\$500,000 provision recorded in the same quarter last year and to the \\$800,000 provision recorded in the first quarter of 2016. The allowance for loan loss at June 30, 2016 was \\$24.0 million or 1.06% of total loans compared to \\$22.7 million or 1.10% of total loans at December 31, 2015.

OREO

As of June 30, 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 June 30, 2016, the Bank’s leverage ratio was 10.05%, the common equity tier 1 capital ratio was 10.41% and the total capital ratio was 13.65%. 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 second quarter 2016 financial results will be held tomorrow, July 21st 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 August 4, 2016; the passcode is 10089672.

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, Anaheim, 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 
     June 30, March 31, June 30,
      2016   2016   2015 
 Interest income:       
  Loans, including fees  \\$  27,892  \\$  25,460  \\$  21,276 
  Investment securities     1,722     1,784     1,731 
  Fed funds sold     109     77     46 
   Total interest income     29,723     27,321     23,053 
          
 Interest expense:       
  Interest-bearing demand     1,051     1,050     709 
  Savings     18     18     15 
  Time certificates     2,660     2,315     1,727 
  FHLB borrowings     67     59     35 
  Subordinated debt issuance     186     -     - 
   Total interest expense     3,982     3,442     2,486 
   Net interest income     25,741     23,879     20,567 
 Provision for loan losses     2,300     800     500 
   Net interest  income after provision for       
    loan losses     23,441     23,079     20,067 
          
 Noninterest income:       
  Fees & service charges on deposit accounts     338     294     336 
  Trade finance income     835     417     491 
  BOLI income     89     85     84 
  Net gain on sale of investment securities     -     36     - 
  Other income     398     331     220 
   Total noninterest income     1,660     1,163     1,131 
          
 Noninterest expense:       
  Salary and employee benefits     6,065     7,021     5,507 
  Net occupancy expense     1,267     1,203     899 
  Business development and promotion expense     152     222     124 
  Professional services     1,409     962     1,175 
  Office supplies and equipment expense     376     351     263 
  Other real estate owned related (income) expense  and valuation allowance on LHFS     243     199     (552)
  Other      1,279     1,080     1,046 
   Total noninterest expense     10,791     11,038     8,462 
   Income before provision for income taxes     14,310     13,204     12,736 
 Income tax expense     5,724     5,361     5,147 
   Net income  \\$  8,586  \\$  7,843  \\$  7,589 
          
 Income per share available to common shareholders       
   Basic  \\$  0.61  \\$  0.56  \\$  0.55 
   Diluted  \\$  0.61  \\$  0.56  \\$  0.55 
          
 Weighted-average common shares outstanding       
   Basic     13,851,081     13,796,892     13,480,609 
   Diluted     13,957,117     13,911,195     13,659,167 
          
 Dividends per share  \\$  0.15  \\$  0.15  \\$  0.12 
          
 PREFERRED BANK 
 Condensed Consolidated Statements of Operations 
 (unaudited) 
 (in thousands, except for net income per share and shares) 
          
          
     For the Six Months Ended  
     June 30, June 30,  Change 
      2016   2015  %
 Interest income:       
  Loans, including fees  \\$  53,352  \\$  41,631   28.2%
  Investment securities     3,506     3,188   10.0%
  Fed funds sold     186     80   131.9%
   Total interest income     57,044     44,899   27.1%
          
 Interest expense:       
  Interest-bearing demand     2,101     1,495   40.5%
  Savings     36     30   19.9%
  Time certificates     4,975     3,377   47.3%
  FHLB borrowings     126     66   90.1%
  Subordinated debt issuance     186     -   100.0%
   Total interest expense     7,424     4,968   49.4%
   Net interest income     49,620     39,931   24.3%
 Provision for credit losses     3,100     1,000   210.0%
   Net interest  income after provision for       
    loan losses     46,520     38,931   19.5%
          
 Noninterest income:       
  Fees & service charges on deposit accounts     632     635   -0.5%
  Trade finance income     1,252     797   57.0%
  BOLI income     174     168   3.3%
  Net gain on sale of investment securities     36     -   100.0%
  Other income     729     399   82.8%
   Total noninterest income     2,823     1,999   41.2%
          
 Noninterest expense:       
  Salary and employee benefits     13,086     10,819   21.0%
  Net occupancy expense     2,470     1,749   41.2%
  Business development and promotion expense     374     233   60.3%
  Professional services     2,371     2,259   5.0%
  Office supplies and equipment expense     727     517   40.6%
  Other real estate owned related expense (income) and valuation allowance on LHFS     442     (463)  -195.5%
  Other      2,359     1,966   20.0%
   Total noninterest expense     21,829     17,080   27.8%
   Income before provision for income taxes     27,514     23,850   15.4%
 Income tax expense     11,085     9,571   15.8%
   Net income  \\$  16,429  \\$  14,279   15.1%
          
 Income per share available to common shareholders       
   Basic  \\$  1.17  \\$  1.04   12.5%
   Diluted  \\$  1.16  \\$  1.03   12.7%
          
 Weighted-average common shares outstanding       
   Basic     13,823,986     13,290,258   4.0%
   Diluted     13,933,721     13,620,027   2.3%
          
 Dividends per share  \\$  0.30  \\$  0.24   25.0%
 
 PREFERRED BANK 
 Condensed Consolidated Statements of Financial Condition 
 (unaudited) 
 (in thousands) 
         
         
     June 30, December 31, 
      2016   2015  
     (Unaudited) (Audited) 
Assets       
         
Cash and due from banks\\$316,985  \\$296,175  
Fed funds sold 59,500   13,000  
Cash and cash equivalents 376,485   309,175  
         
Securities held to maturity, at amortized cost 5,143   5,830  
Securities available-for-sale, at fair value 201,256   169,502  
Loans and leases 2,272,230   2,059,392  
Less allowance for loan and lease losses (23,983)  (22,658) 
Less net deferred loan fees (3,682)  (3,012) 
Net loans and leases 2,244,565   2,033,722  
         
Other real estate owned 4,112   4,112  
Customers' liability on acceptances 108   897  
Bank furniture and fixtures, net 5,572   5,601  
Bank-owned life insurance 8,709   8,763  
Accrued interest receivable 8,220   8,128  
Investment in affordable housing 24,886   16,052  
Federal Home Loan Bank stock 9,332   7,162  
Deferred tax assets 23,049   23,802  
Income tax receivable -   299  
Other asset 4,204   5,801  
Total assets\\$2,915,641  \\$2,598,846  
         
         
 Liabilities and Shareholders' Equity     
         
Liabilities:      
Deposits:      
Demand\\$540,374  \\$558,906  
Interest-bearing demand 855,661   748,918  
Savings 29,031   30,703  
Time certificates of \\$250,000 or more 398,736   321,537  
Other time certificates 692,063   626,495  
Total deposits\\$2,515,865  \\$2,286,559  
Acceptances outstanding 108   897  
Advances from Federal Home Loan Bank 26,573   26,635  
Subordinated debt issuance 61,475   -  
Commitments to fund investment in affordable housing partnership 11,199   3,958  
Accrued interest payable 2,562   1,919  
Other liabilities 15,507   14,733  
Total liabilities 2,633,289   2,334,701  
         
Commitments and contingencies        
Shareholders' equity:        
Preferred stock. Authorized 25,000,000 shares; no issued and outstanding    
   shares at June 30, 2016 and December 31, 2015
 -   -  
Common stock, no par value. Authorized 100,000,000 shares; issued    
   and outstanding 14,116,474 and 13,884,942 shares at June 30, 2016  and December 31, 2015, respectively
 167,892   166,560  
Treasury stock (19,115)  (19,115) 
Additional paid-in-capital 38,435   34,672  
Accumulated income 93,119   81,046  
Accumulated other comprehensive income:    
Unrealized gain on securities, available-for-sale, net of tax of \\$1,467 and \\$713 at June 30, 2016 and December 31, 2015, respectively     2,021   982  
Total shareholders' equity 282,352   264,145  
Total liabilities and shareholders' equity\\$2,915,641  \\$2,598,846  
         
 PREFERRED BANK 
 Selected Consolidated Financial Information 
 (unaudited) 
 (in thousands, except for ratios) 
               
               
               
    For the Quarter Ended
               
    June 30, March 31, December 31, September 30, June 30,  
     2016   2016   2015   2015   2015   
Unaudited historical quarterly operations data:            
 Interest income\\$29,723  \\$27,321  \\$25,423  \\$24,380  \\$23,053   
 Interest expense 3,982   3,442   3,105   2,783   2,486   
  Interest income before provision for credit losses 25,741   23,879   22,318   21,597   20,567   
 Provision for credit losses 2,300   800   300   500   500   
 Noninterest income 1,660   1,163   954   940   1,131   
 Noninterest expense 10,791   11,038   9,890   8,740   8,462   
 Income tax expense 5,724   5,361   5,518   5,396   5,147   
  Net income 8,586   7,843   7,563   7,901   7,589   
               
 Earnings per share           
  Basic\\$0.61  \\$0.56  \\$0.55  \\$0.57  \\$0.55   
  Diluted\\$0.61  \\$0.56  \\$0.54  \\$0.57  \\$0.55   
               
 Ratios for the period:            
 Return on average assets 1.26%  1.21%  1.28%  1.42%  1.44%  
 Return on beginning equity 12.62%  11.94%  11.67%  12.55%  12.49%  
 Net interest margin (Fully-taxable equivalent) 3.87%  3.79%  3.88%  4.00%  4.01%  
 Noninterest expense to average assets 1.58%  1.70%  1.67%  1.58%  1.60%  
 Efficiency ratio 39.38%  44.08%  42.50%  38.78%  39.00%  
 Net charge-offs (recoveries) to average loans (annualized) 0.36%  -0.04%  0.36%  0.05%  0.03%  
               
 Ratios as of period end:            
 Tier 1 leverage capital ratio (1) 10.05%  10.29%  10.46%  11.47%  11.59%  
 Common equity tier 1 risk-based capital ratio (1) 10.41%  10.74%  11.03%  11.80%  11.91%  
 Tier 1 risk-based capital ratio (1) 10.41%  10.74%  11.03%  11.80%  11.91%  
 Total risk-based capital ratio (1) 13.65%  11.70%  12.00%  12.93%  13.07%  
 Allowances for credit losses to loans and leases at end of period 1.06%  1.10%  1.10%  1.31%  1.36%  
 Allowance for credit losses to non-performing           
  loans and leases 722.47%  2346.18%  1140.29%  303.27%  299.06%  
               
 Average balances:            
 Total loans and leases\\$2,248,652  \\$2,067,047  \\$1,876,544  \\$1,741,762  \\$1,673,710   
 Earning assets\\$2,687,435  \\$2,550,821  \\$2,297,154  \\$2,160,075  \\$2,070,542   
 Total assets\\$2,746,031  \\$2,605,907  \\$2,345,319  \\$2,201,060  \\$2,117,610   
 Total deposits\\$2,400,756  \\$2,291,764  \\$2,039,567  \\$1,907,719  \\$1,832,688   
    
 (1) Risk-based capital ratios were calculated under BASEL III rules, which became effective on January 1, 2015.  Ratios for the prior periods were calculated under Basel I rules.  
   
 PREFERRED BANK  
 Selected Consolidated Financial Information  
 (in thousands, except for ratios)  
        
        
        
    For the Six Months Ended 
    June 30, June 30, 
     2016   2015  
 Interest income\\$57,044  \\$44,899  
 Interest expense 7,424   4,968  
  Interest income before provision for credit losses     49,620   39,931  
 Provision for credit losses 3,100   1,000  
 Noninterest income 2,823   1,999  
 Noninterest expense 21,829   17,080  
 Income tax expense 11,085   9,571  
  Net income 16,429   14,279  
        
 Earnings per share    
  Basic\\$1.17  \\$1.04  
  Diluted\\$1.16  \\$1.03  
        
 Ratios for the period:     
 Return on average assets 1.23%  1.31% 
 Return on beginning equity 12.51%  11.88% 
 Net interest margin (Fully-taxable equivalent) 3.83%  3.89% 
 Noninterest expense to average assets 1.64%  1.62% 
 Efficiency ratio 41.62%  40.76% 
 Net charge-offs (recoveries) to average loans 0.17%  -0.01% 
        
 Average balances:     
 Total loans and leases\\$2,158,158  \\$1,438,122  
 Earning assets\\$2,619,287  \\$1,836,375  
 Total assets\\$2,676,158  \\$1,880,019  
 Total deposits\\$2,346,462  \\$1,620,709  
 PREFERRED BANK 
 Selected Consolidated Financial Information 
 (unaudited) 
 (in thousands, except for ratios) 
             
             
             
    As of
             
    June 30, March 31, December 31, September 30, June 30,
     2016   2016   2015   2015   2015 
 Unaudited quarterly statement of financial position data:          
Assets:          
 Cash and cash equivalents\\$376,485  \\$293,547  \\$309,175  \\$232,707  \\$208,015 
 Securities held-to-maturity, at amortized cost 5,143   5,550   5,830   6,307   6,806 
 Securities available-for-sale, at fair value 201,256   162,654   169,502   164,378   161,775 
 Loans and Leases:         
  Real estate - Single and multi-family residential          \\$393,076  \\$401,708  \\$415,003  \\$328,124  \\$290,186 
  Real estate - Land for housing 14,817   14,838   14,408   14,429   13,102 
  Real estate - Land for income properties 6,316   1,816   1,795   1,876   1,891 
  Real estate - Commercial 995,213   924,913   861,317   770,494   712,383 
  Real estate - For sale housing construction 95,519   82,153   73,858   79,406   71,945 
  Real estate - Other construction 72,963   66,636   57,546   48,438   49,413 
  Commercial and industrial 659,701   626,599   596,887   555,680   570,408 
  Trade finance and other 34,625   39,323   38,578   38,602   40,403 
   Gross loans 2,272,230   2,157,986   2,059,392   1,837,049   1,749,731 
 Allowance for loan and lease losses (23,983)  (23,681)  (22,658)  (24,055)  (23,758)
 Net deferred loan fees (3,682)  (3,065)  (3,012)  (2,476)  (2,179)
  Total loans, net\\$2,244,565  \\$2,131,240  \\$2,033,722  \\$1,810,518  \\$1,723,794 
             
 Other real estate owned  \\$4,112  \\$4,112  \\$4,112  \\$-  \\$- 
 Investment in affordable housing   24,886   25,499   16,052   16,589   17,059 
 Federal Home Loan Bank stock   9,332   6,965   7,162   6,677   6,677 
 Other assets   49,862   53,783   53,291   45,370   46,030 
  Total assets \\$2,915,641  \\$2,683,350  \\$2,598,846  \\$2,282,546  \\$2,170,156 
             
Liabilities:          
 Deposits:         
  Demand\\$540,374  \\$528,126  \\$558,906  \\$477,523  \\$519,501 
  Interest-bearing demand 855,661   803,374   748,918   697,402   568,243 
  Savings 29,031   30,002   30,703   21,159   23,855 
  Time certificates of \\$250,000 or more 398,736   339,971   321,537   263,949   260,205 
  Other time certificates 692,063   656,386   626,495   527,602   510,394 
  Total deposits\\$2,515,865  \\$2,357,859  \\$2,286,559  \\$1,987,635  \\$1,882,198 
             
 Advances from Federal Home Loan Bank  \\$26,573  \\$26,601  \\$26,635  \\$20,000  \\$20,000 
 Subordinated debt issuance 61,475   -   -   -   - 
 Commitments to fund investment in affordable housing partnership 11,454   11,454   3,958   4,139   4,139 
 Other liabilities   17,922   13,862   17,549   13,590   13,954 
  Total liabilities\\$2,633,289  \\$2,409,776  \\$2,334,701  \\$2,025,364  \\$1,920,291 
             
Equity:           
 Net common stock, no par value\\$187,212  \\$185,780  \\$182,118  \\$180,310  \\$179,360 
 Retained earnings 93,119   86,716   81,046   75,629   69,431 
 Accumulated other comprehensive income 2,021   1,079   982   1,243   1,074 
  Total shareholders' equity\\$282,352  \\$273,574  \\$264,145  \\$257,182  \\$249,865 
  Total liabilities and shareholders' equity\\$2,915,641  \\$2,683,350  \\$2,598,846  \\$2,282,546  \\$2,170,156 
 
Preferred Bank   
Loan and Credit Quality Information   
           
Allowance For Credit Losses & Loss History   
     Six Months Ended Year Ended   
     June 30, 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  2,663   1,475    
  Mini-perm Real Estate  -   1,793    
  Construction - Residential  -   -    
  Construction - Commercial  -   -    
  Land - Residential  -   -    
  Land - Commercial  -   -    
  Others  -   -    
  Total Charge-Offs  2,663   3,268    
           
 Recoveries       
  Commercial & Industrial  198   131    
  Mini-perm Real Estate  -   144    
  Construction - Residential  -   -    
  Construction - Commercial  -   20    
  Land - Residential  -   100    
  Land - Commercial  690   757    
  Total Recoveries  888   1,152    
           
 Net Loan Charge-Offs  1,775   2,116    
 Provision for Credit Losses  3,100   1,800    
Balance at End of Period \\$23,983  \\$22,658    
Average Loans and Leases \\$2,158,158  \\$1,731,871    
Loans and Leases at end of Period \\$2,272,230  \\$2,059,392    
Net Charge-Offs to Average Loans and Leases  0.17%  0.12%   
Allowances for credit losses to loans and leases at end of period      1.06%  1.10%