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INVESTOR RELATIONS PRESS RELEASE Preferred Bank Reports Quarterly Earnings Company Release - 7/20/2021 LOS ANGELES , July 20 , 2021 ( GLOBE NEWSWIRE ) -- Preferred Bank ( NASDAQ : PFBC ) , one of the larger independent California banks , today report ended June 30 , 2021. Preferred Bank ( " the Bank " ) reported net income of $ 21.5 million or $ 1.44 per diluted share for the second quarter of 2021. This is income of $ 21.2 million or $ 1.42 per diluted share for the first quarter of 2021 and easily tops recorded net income of $ 15.3 million or $ 1.03 per diluted sh of 2020. The primary reasons for the increase compared to the prior year is a $ 7.5 million decrease in the provision for credit losses this quarter , an incre of $ 1.2 million , partially offset by an increase in noninterest expense of $ 630,000 . When compared to the prior quarter , the provision for credit losses decr noninterest income increased by $ 299,000 and noninterest expense decreased by $ 689,000 . Net interest income however , decreased from the prior quai accrual adjustment of $ 2.29 million . Second quarter 2021 Highlights : • Net income of $ 21.4 million , or $ 1.44 per diluted share • Linked quarter loan growth ( non - PPP ) of 2.7 % • Linked quarter deposit growth of 1.6 % • Return on average assets ( " ROA " ) of 1.58 % • Return on beginning equity ( " ROE " ) of 15.98 % Li Yu , Chairman and CEO , commented , " Preferred Bank's second quarter 2021 net income was $ 21.5 million or $ 1.44 a share . " Second quarter net income was negatively impacted by a reversal of interest income of $ 2.29 million and a charge of $ 614,000 for unamortized issuance of subordinated notes which we called on June 18 , 2021. Net interest income and loan revenue continue their positive trend , excluding these items . " The current low interest rate environment has continued to pressure the Bank's net interest margin ( " NIM " ) . Second quarter NIM was 3.47 % normalized , reconciliation ) compared to 3.61 % for the first quarter . Excluding the two previously mentioned charges , the Bank however , has been able to increase net " Loan growth for the second quarter was $ 114 million ( excl . PPP ) or 2.7 % sequentially . We have seen increased loan origination activities but see increas well . Deposit growth was $ 74 million or 1.6 % on a linked quarter basis . Going forward , we look to continue to increase our deployment of excess liquidity . Expenses remain in control with efficiency ratio at 33.2 % . We are now seeing inflationary pressures in personnel and other expense items . While we may increases to customers , we were able to keep our peer - group leading assets per full time employee ( FTE ) at $ 19.5 million and revenue per FTE at appro : Recent Federal Reserve Open Market Committee minutes revealed that our economy is " expanding at a record pace " . We share this optimism and are pi opportunities presented to us . " Results of Operations Net Interest Income and Net Interest Margin . Net interest income before provision for credit losses was $ 43.4 million for the second quarter of 2021. Th the $ 45.3 million recorded in the first quarter of 2021 and was slightly ahead of the $ 42.2 million recorded in the second quarter of 2020. This quarter's lo negatively impacted by a $ 2.29 million adjustment to the accrued interest on our troubled debt restructured loan . This amount was reversed in the seconc the reason for the lowered net interest income against expectations . Also negatively impacting net interest income this quarter , the Bank called its $ 100 m notes ( " sub debt " ) as of June 18 , 2021. Simultaneously , the Bank issued $ 150 million of subordinated notes due June 15 , 2031 at a coupon rate of 3.375 ' call of the existing $ 100 million of notes , the Bank incurred a charge of $ 614,000 to interest expense related to the unamortized issuance costs of the old incurred the charge this quarter for the calling of the sub debt , the far lower coupon of the new notes ( 3.375 % versus 6.0 % ) will result in over $ 900,000 of while increasing the size of the borrowing by $ 50 million . The aforementioned items ( loan interest reversal and recognition of unamortized debt issuance taxable equivalent net interest margin down to 3.25 % . Excluding these two items the taxable equivalent margin would have been 3.47 % , versus 3.61 % fo 3.57 % for the same period last year . Noninterest Income . For the second quarter of 2021 , noninterest income was $ 1,646,000 compared with $ 1,430,000 for the same quarter last year and for the first quarter of 2021. The increase compared to last year was due to service charges on deposits which increased by $ 186,000 over last year . This increase in the loss on sale of loans which was $ 261,000 in the second quarter of 2021 versus a loss on sale of investment securities of $ 113,000 in the On a linked quarter basis , service charges on deposits increased by $ 98,000 while the loss on sale of loans decreased from a loss of $ 379,000 last quart this quarter . Noninterest Expense . Total noninterest expense was $ 15.0 million for the second quarter of 2021. This is up compared to the $ 14.3 million recorded in but is a decrease from the $ 15.7 million posted in the first quarter of 2021. Salaries and benefits expense totaled $ 10.3 million for the second quarter of 2 $ 190,000 from the second quarter of 2020 but a decline from the $ 11.1 million posted in the first quarter of 2021. The increase over the prior year was du increases and the decrease from the first quarter of 2021 was mainly due to higher payroll taxes posted in the first quarter due to incentive compensation expense totaled $ 1.4 million for the quarter which relatively flat from the prior quarter's $ 1.4 million and up over the $ 1.3 million recorded in the second qu new Houston office and annual lease rate increases are responsible for the year - over - year change . Professional services expense was $ 996,000 for the flat compared to last quarter's $ 981,000 and flat compared to the $ 1.0 million recorded in the second quarter of 2020. Significant I.T initiatives or large leç variations in this line item and there have been none in the periods compared . Other expenses were $ 1.7 million for the second quarter of 2021 , fairly clo : recorded last quarter and up from the $ 1.4 over the same period last year . The increase over last year was mainly due to FDIC premiums increasing com Bank's asset size . For the quarter ended June 30 , 2021 , the Bank's efficiency ratio was 33.2 % , down slightly from last quarter and a small increase from 1 same period last year . Income Taxes . The Bank recorded a provision for income taxes of $ 8.6 million for the second quarter of 2021. This represents an effective tax rate ( " ETF consistent with the ETR of 28.5 % for the prior quarter but a decrease from the ETR of 29.7 % in the same period last year . The Bank's ETR will fluctuate s quarter within a fairly small range due to the timing of taxable events throughout the year . Balance Sheet Summary