Preferred Bank Reports Fourth Quarter and Annual Results

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Preferred Bank

Mon, Jan 27, 2025, 2:01 PM 22 min read

LOS ANGELES, Jan. 27, 2025 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended December 31, 2024. Preferred Bank (“the Bank”) reported net income of $30.2 million or $2.25 per diluted share for the fourth quarter of 2024. This represents a decrease in net income of $3.2 million from the prior quarter and a decrease of $5.6 from the same quarter last year. The decrease compared to both periods was mainly due to a one-time $8.1 million increase in occupancy expense this quarter due to the previously disclosed error in the calculation of ASC 842, Accounting for Leases. As previously disclosed, this calculation error goes back to the adoption of ASC 842 in 2019 and the $8.1 million item represents the cumulative erroneous calculation through the years from 2019 to present.

Net interest income was $69.2 million, up by $325,000 compared to last quarter’s $68.8 million and down slightly from the $69.4 million recorded one year ago. Noninterest expense was $28.2 million, an increase of $6.2 million from the previous quarter and an increase of $10.4 million over the same quarter last year. These increases were due to the aforementioned non-recurring occupancy expense item. The provision for credit losses was $2.0 million this quarter compared to $3.2 million last quarter and compared to $3.5 million this quarter last year. Despite the non-recurring expense item, Preferred Bank continues to deliver top-of-peer group profitability metrics and long term shareholder returns.

Highlights for the Quarter:

Return on average assets was 1.74%
Return on beginning equity of 16.03%
Net interest margin (NIM) held strong at 4.06%
Total loans increased by $71 million or 1.3%
Efficiency ratio was 38.8%

Highlights for the Year:

Return on average assets was 1.91%
Return on beginning equity of 18.80%
The NIM was 4.08%
Total loans increased by $369 million or 7.0%
Efficiency ratio was 31.47%

Li Yu, Chairman and CEO, commented, “We completed the year 2024 with net income of $130.7 million or $9.64 per diluted share. Return on assets was 1.91% for the year and return on beginning equity was 18.8%, which should be well above peer group and the industry average.

”Fourth quarter net income of $30.2 million or $2.25 per diluted share was negatively impacted by a correction to our lease expense of $8.1 million. This correction was previously announced and is non-recurring in nature. The after-tax effect of this item was approximately $0.42.

“Under a high interest rate and high inflation environment, Preferred Bank’s loan growth and deposit growth were less than our historical performance. 2024 loan growth of 7.0% and deposit growth of 3.6% were still in- line with industry averages.

“At December 31, 2024, our credit metrics improved from September 30, 2024. Non-performing loans decreased by $10.0 million or 52% and criticized loans decreased by $76.7 million or 32.6%. The Bank’s allowance for credit losses to total loans was 1.27% as of December 31, 2024.

“The recent wildfires in the Los Angeles area have wrought unprecedented damage to our community. We at Preferred Bank will be dedicated to making the utmost effort to help rebuild the homes and businesses lost in this tragedy. At this time, the Bank has confirmed the existence of one property that secures a commercial loan which was affected by the fires but we can confirm the property had the appropriate insurance. We are most grateful that none of our residential home mortgage borrowers have been affected and that none of our employees have been directly impacted.

“In December, our Board of Directors announced an increase in the quarterly dividend from $0.70 per quarter to $0.75 per quarter, the first of which is payable in January of 2025. For the year, we also repurchased 464,314 shares of our common stock for total consideration of $34.3 million. At December 31, 2024, the Bank’s tier 1 leverage ratio improved to 11.33% from 10.85% as of December 31, 2023. Tangible book value per common share increased from $50.54 at the end of 2023 to $57.86 as of December 31, 2024, a 13.1% increase.

“We look forward to continue our consistently strong financial performance into 2025.”

Results of Operations - Quarter

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $69.2 million for the fourth quarter of 2024. This was a $325,000 increase from the $68.8 million recorded in the prior quarter and a $223,000 decrease from the same quarter last year. Compared to the prior quarter, interest income was down by $3.6 million but interest expense also decreased by $3.9 million. In comparison to the same quarter last year, interest income increased by $894,000 but interest expense increased by $1.1 million. The Bank’s net interest margin came in at 4.06% for the quarter, this is down slightly from the 4.10% recorded last quarter and was down by 18 basis points from the 4.24% margin achieved in the fourth quarter of the prior year. Management believes that efforts to reduce the Bank’s asset sensitivity have been largely effective as the margin has held up much better than originally anticipated when the first rate cut occurred in September of 2024.

Noninterest Income. For the fourth quarter of 2024, noninterest income was $3.6 million compared with $2.1 million for the same quarter last year and compared to $3.5 million for the third quarter of 2024. The increase over the prior quarter was primarily due to other income and fees which increased by $131,000. In comparing to the same quarter last year, letter of credit (LC) fee income was up by $491,000 and last year the Bank recorded a loss on sale of investment securities of $929,000. Finally, other income was up by $303,000 over last year.

Noninterest Expense. Total noninterest expense was $28.2 million for the fourth quarter of 2024 compared to $22.1 million for the third quarter of 2024 and compared to the $17.9 million recorded in the same period last year. The primary reason for the increase over the prior year and over the prior quarter was the $8.1 million occupancy expense adjustment related to accounting pronouncement ASC 842 mentioned earlier. In comparing to the prior quarter; personnel expense was down by $246,000, business development expense was up by $99,000 and OREO expense was lower by $1.8 million due to a $1.6 million valuation allowance recorded last quarter. In comparing to same quarter last year; personnel expense was up by $1.2 million due to additional personnel, professional services was up by $251,000 and other expense was up by $360,000. For the quarter ended December 31, 2024, the Bank’s efficiency ratio was 38.8%, higher than the 30.6% posted last quarter and higher than the 25.0% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $12.3 million for the fourth quarter of 2024. This represents an effective tax rate (“ETR”) of 29.0% which is identical to the ETR for last quarter and up from the 28.5% ETR recorded in the same period last year. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.

Balance Sheet Summary

Total gross loans at December 31, 2024 were $5.64 billion, an increase of $369 million from the total of $5.27 billion as of December 31, 2023. Total deposits were $5.92 billion, an increase of $207.5 million from the $5.71 billion as of December 31, 2023. Total assets were $6.92 billion, an increase of $264.2 million over the total of $6.66 billion as of December 31, 2023.

Results of Operations – Year

The Bank’s net income for the year ended December 31, 2024 was $130.7 million or $9.64 per diluted share. This is down from $150.0 million or $10.52 per diluted share for 2023. The decrease was due to net interest income which was down by $16.7 million as well as noninterest expense which increased by $13.4 million. This was partially offset by noninterest income which increased in 2024 by $6.5 million over 2023. Despite this decline, the Bank’s earnings metrics still remain top-of-class as ROA was 1.91%, ROBE was 18.8% and the Bank’s efficiency ratio was 31.5%. Also, during 2024 the Bank repurchased 464,314 shares at an average price of $73.76 which contributed approximately $0.17 per diluted share for 2024.

Asset Quality

Non-accrual loans and loans 90 days past due and still accruing totaled $9.4 million as of December 31, 2024, a decrease of $10.0 million from $19.4 million on September 30, 2024 and a decrease of $19.3 million from the $28.7 million in nonperforming loans as of December 31, 2023. Total net charge-offs for the quarter were $6.6 million and all were previously fully reserved.

Total criticized loans decreased to $158.1 million from $234.8 million last quarter. The Bank expects to upgrade a number of the remaining credits in this cohort once more collateral is in place.

Allowance for Credit Losses

The provision for credit losses for the fourth quarter of 2024 was $2.0 million compared to $3.2 million last quarter and compared to $3.5 million in the same quarter last year. The Bank’s allowance coverage ratio declined to 1.27% of loans as compared to 1.36% in the prior quarter.

Capitalization

As of December 31, 2024, the Bank’s leverage ratio was 11.33%, the common equity tier 1 capital ratio was 11.80% and the total capital ratio stood at 15.11%. As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 ratio was 11.57% and the total capital ratio was 15.18%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s fourth quarter 2024 financial results will be held tomorrow, January 28, 2025 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.

Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at 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 11, 2025; the passcode is 6335378.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks headquartered 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 Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. In addition, the Bank also operates a loan production office in Sunnyvale, 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. 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 2023 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

Financial Tables to Follow


PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)

	For the Quarter Ended
	December 31,		September 30,		December 31,
	2024		2024		2023
Interest income:
Loans, including fees	$	111,596	$	114,112	$	107,709
Investment securities		14,013		15,032		16,973
Fed funds sold		249		280		282
Total interest income		125,858		129,424		124,964

Interest expense:
Interest-bearing demand		18,245		23,211		21,716
Savings		85		84		72
Time certificates		37,030		35,956		32,455
Subordinated debt		1,325		1,325		1,325
Total interest expense		56,685		60,576		55,568
Net interest income		69,173		68,848		69,396
Provision for credit losses		2,000		3,200		3,500
Net interest income after provision for credit losses		67,173		65,648		65,896

Noninterest income:
Fees & service charges on deposit accounts		761		747		857
Letters of credit fee income		1,977		1,959		1,486
BOLI income		102		108		105
Net loss on called and sale of investment securities		-		-		(929	)
Net gain on sale of loans		112		91		205
Other income		685		554		382
Total noninterest income		3,637		3,459		2,106

Noninterest expense:
Salary and employee benefits		13,279		13,525		12,058
Net occupancy expense		10,110		1,883		1,536
Business development and promotion expense		340		241		239
Professional services		1,606		1,816		1,355
Office supplies and equipment expense		396		435		391
OREO valuation allowance and related expense		155		1,915		294
Other		2,360		2,274		2,000
Total noninterest expense		28,246		22,089		17,873
Income before provision for income taxes		42,564		47,018		50,129
Income tax expense		12,343		13,635		14,290
Net income	$	30,221	$	33,383	$	35,839

Income per share available to common shareholders
Basic	$	2.29	$	2.50	$	2.63
Diluted	$	2.25	$	2.46	$	2.60

Weighted-average common shares outstanding
Basic		13,190,696		13,327,848		13,617,225
Diluted		13,442,294		13,544,273		13,804,315

Cash dividends per common share	$	0.75	$	0.70	$	0.70

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)

	For the Twelve Months Ended
	December 31,		December 31,			Change
	2024		2023			%
Interest income:
Loans, including fees	$	445,139	$	412,505			7.9	%
Investment securities		62,854		64,427			-2.4	%
Fed funds sold		1,103		1,056			4.5	%
Total interest income		509,096		477,988			6.5	%

Interest expense:
Interest-bearing demand		87,951		75,417			16.6	%
Savings		323		225			43.5	%
Time certificates		142,894		103,853			37.6	%
FHLB borrowings		0		3,819			-100.0	%
Subordinated debt		5,300		5,300			0.0	%
Total interest expense		236,468		188,614			25.4	%
Net interest income		272,628		289,374			-5.8	%
Provision for credit losses		12,100		10,000			21.0	%
Net interest income after provision for credit losses		260,528		279,374			-6.7	%

Noninterest income:
Fees & service charges on deposit accounts		3,172		3,333			-4.8	%
Letters of credit fee income		7,188		5,798			24.0	%
BOLI income		420		412			2.1	%
Net loss on called and sale of investment securities		-		(5,046	)		-100.0	%
Net gain on sale of loans		659		752			-12.4	%
Other income		2,126		1,864			14.0	%
Total noninterest income		13,565		7,113			90.7	%

Noninterest expense:
Salary and employee benefits		53,648		51,314			4.5	%
Net occupancy expense		15,420		6,049			154.9	%
Business development and promotion expense		1,250		737			69.6	%
Professional services		6,711		5,270			27.3	%
Office supplies and equipment expense		1,781		1,588			12.2	%
OREO valuation allowance and related expense		2,234		3,344			-33.2	%
Other		9,016		8,332			8.2	%
Total noninterest expense		90,060		76,634			17.5	%
Income before provision for income taxes		184,033		209,853			-12.3	%
Income tax expense		53,371		59,813			-10.8	%
Net income	$	130,662	$	150,040			-12.9	%

Income per share available to common shareholders
Basic	$	9.79	$	10.64			-8.0	%
Diluted	$	9.64	$	10.52			-8.4	%

Weighted-average common shares outstanding
Basic		13,347,004		14,095,745			-5.3	%
Diluted		13,554,266		14,261,644			-5.0	%

Dividends per share	$	2.85	$	2.35			21.3	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)

	December 31,			December 31,
	2024			2023
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	765,515		$	890,852
Fed funds sold		20,000			20,000
Cash and cash equivalents		785,515			910,852

Securities held-to-maturity, at amortized cost		20,021			21,171
Securities available-for-sale, at fair value		348,706			313,842

Loans held for sale, at lower of cost or fair value		2,214			360

Loans		5,640,615			5,273,498
Less allowance for credit losses		(71,477	)		(78,355	)
Less amortized deferred loan fees, net		(9,234	)		(11,079	)
Loans, net		5,559,904			5,184,064

Other real estate owned and repossessed assets		14,991			16,716
Customers' liability on acceptances		-			315
Bank furniture and fixtures, net		8,462			9,694
Bank-owned life insurance		10,433			10,632
Accrued interest receivable		33,561			33,892
Investment in affordable housing partnerships		58,346			65,276
Federal Home Loan Bank stock, at cost		15,000			15,000
Deferred tax assets		47,316			48,991
Income tax receivable		2,281			2,391
Operating lease right-of-use assets		13,182			22,050
Other assets		3,497			4,030
Total assets	$	6,923,429		$	6,659,276

Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand deposits	$	704,859		$	786,995
Interest bearing deposits:		2,026,965			2,075,156
Savings		30,150			29,167
Time certificates of $250,000 or more		1,477,931			1,317,862
Other time certificates		1,676,943			1,500,162
Total deposits		5,916,848			5,709,342

Acceptances outstanding		-			315
Subordinated debt issuance, net		148,469			148,232
Commitments to fund investment in affordable housing partnerships		21,623			30,824
Operating lease liabilities		16,990			19,766
Accrued interest payable		16,517			16,124
Other liabilities		39,830			39,568
Total liabilities		6,160,277			5,964,171

Shareholders' equity		763,152			695,105
Total liabilities and shareholders' equity		6,923,429			6,659,276

Book value per common share	$	57.86		$	50.54
Number of common shares outstanding		13,188,776			13,753,246

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,
	2024			2024			2024			2024			2023
Unaudited historical quarterly operations data:
Interest income	$	125,858		$	129,424		$	127,294		$	126,520		$	124,964
Interest expense		56,685			60,576			61,187			58,020			55,568
Interest income before provision for credit losses		69,173			68,848			66,107			68,500			69,396
Provision for credit losses		2,000			3,200			2,500			4,400			3,500
Noninterest income		3,637			3,459			3,404			3,065			2,106
Noninterest expense		28,246			22,089			19,697			20,028			17,873
Income tax expense		12,343			13,635			13,722			13,671			14,290
Net income	$	30,221		$	33,383		$	33,592		$	33,466		$	35,839

Earnings per share
Basic	$	2.29		$	2.50		$	2.51		$	2.48		$	2.63
Diluted	$	2.25		$	2.46		$	2.48		$	2.44		$	2.60

Ratios for the period:
Return on average assets		1.74	%		1.95	%		1.97	%		2.00	%		2.15	%
Return on beginning equity		16.03	%		18.37	%		19.44	%		19.36	%		21.21	%
Net interest margin (Fully-taxable equivalent)		4.06	%		4.10	%		3.96	%		4.19	%		4.24	%
Noninterest expense to average assets		1.62	%		1.29	%		1.15	%		1.20	%		1.07	%
Efficiency ratio		38.79	%		30.55	%		28.34	%		27.99	%		25.00	%
Net charge-offs to average loans (annualized)		0.47	%		-0.00	%		0.68	%		0.26	%		-0.00	%

Ratios as of period end:
Tangible common equity ratio		11.02	%		10.92	%		10.55	%		10.35	%		10.43	%
Tier 1 leverage capital ratio		11.33	%		11.28	%		10.89	%		10.80	%		10.85	%
Common equity tier 1 risk-based capital ratio		11.80	%		11.66	%		11.52	%		11.50	%		11.57	%
Tier 1 risk-based capital ratio		11.80	%		11.66	%		11.52	%		11.50	%		11.57	%
Total risk-based capital ratio		15.11	%		15.06	%		14.93	%		15.08	%		15.18	%
Allowances for credit losses to loans at end of period		1.27	%		1.36	%		1.34	%		1.49	%		1.49	%
Allowance for credit losses to non-performing loans		7.64	x		3.92	x		1.79	x		4.33	x		2.73	x

Average balances:
Total securities	$	350,732		$	356,590		$	353,357		$	348,961		$	349,863
Total loans		5,542,558			5,458,613			5,320,360			5,263,562			5,126,918
Total earning assets		6,788,487			6,684,766			6,728,498			6,585,853			6,499,469
Total assets		6,920,325			6,817,979			6,863,829			6,718,018			6,627,349
Total time certificate of deposits		3,144,523			2,874,985			2,884,259			2,852,860			2,767,385
Total interest bearing deposits		5,220,655			5,124,245			5,203,034			5,004,834			4,906,947
Total deposits		5,905,127			5,828,227			5,901,976			5,761,488			5,689,713
Total interest bearing liabilities		5,369,092			5,272,617			5,351,347			5,153,089			5,055,143
Total equity		760,345			747,222			715,190			704,996			683,141

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)

	For the Twelve Months Ended
	December 31,			December 31,
	2024			2023

Interest income	$	509,096		$	477,988
Interest expense		236,468			188,614
Interest income before provision for credit losses		272,628			289,374
Provision for credit losses		12,100			10,000
Noninterest income		13,565			7,113
Noninterest expense		90,060			76,634
Income tax expense		53,371			59,813
Net income	$	130,662		$	150,040

Earnings per share
Basic	$	9.79		$	10.64
Diluted	$	9.64		$	10.52

Ratios for the period:
Return on average assets		1.91	%		2.28	%
Return on beginning equity		18.80	%		23.80	%
Net interest margin (Fully-taxable equivalent)		4.08	%		4.49	%
Noninterest expense to average assets		1.32	%		1.17	%
Efficiency ratio		31.47	%		25.85	%
Net charge-off to average loans		0.35	%		0.00	%

Average balances:
Total securities	$	352,416		$	389,584
Total loans		5,396,844			5,068,486
Total earning assets		6,697,118			5,067,870
Total assets		6,830,252			6,452,661
Total time certificate of deposits		2,939,543			6,577,690
Total interest bearing deposits		5,849,300			2,570,706
Total deposits		5,849,300			4,678,893
Total interest bearing liabilities		5,849,300			5,577,155
Total equity		732,058			4,902,616

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)

				As of
				December 31,			September 30,			June 30,			March 31,			December 31,
				2024			2024			2024			2024			2023
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	785,515		$	804,994		$	917,677		$	936,600		$	910,852
	Securities held-to-maturity, at amortized cost				20,021			20,311			20,605			20,904			21,171
	Securities available-for-sale, at fair value				348,706			337,363			331,909			333,411			313,842
	Loans:
		Real estate – Mortgage:
			Real estate—Residential	$	790,069		$	753,453		$	732,251		$	724,101		$	688,058
		&nb...sp;	Real estate—Commercial		2,840,771			2,882,506			2,833,430			2,777,608			2,760,761
			Total Real Estate – Mortgage		3,630,840			3,635,959			3,565,681			3,501,709			3,448,819
		Real estate – Construction:
			R/E Construction — Residential		296,580			274,214			238,062			236,596			246,201
			R/E Construction — Commercial		287,185			290,308			247,582			213,727			179,775
			Total real estate construction loans		583,765			564,522			485,644			450,323			425,976
		Commercial and industrial			1,418,930			1,365,550			1,371,694			1,369,529			1,394,871
		SBA			6,833			5,424			5,463			3,914			3,469
		Consumer and others			247			124			118			379			363
			Gross loans		5,640,615			5,571,579			5,428,600			5,325,854			5,273,498
	Allowance for credit losses on loans				(71,477	)		(76,051	)		(72,848	)		(79,311	)		(78,355	)
	Net deferred loan fees				(9,234	)		(10,414	)		(10,502	)		(10,460	)		(11,079	)
		Net loans, excluding loans held for sale		$	5,559,904		$	5,485,114		$	5,345,250		$	5,236,083		$	5,184,064
	Loans held for sale			$	2,214		$	225		$	955		$	605		$	360
		Net loans		$	5,562,118		$	5,485,339		$	5,346,205		$	5,236,688		$	5,184,424

	Other real estate owned and repossessed assets			$	14,991		$	15,082		$	16,716		$	16,716		$	16,716
	Investment in affordable housing partnerships				58,346			58,009			60,432			62,854			65,276
	Federal Home Loan Bank stock, at cost				15,000			15,000			15,000			15,000			15,000
	Other assets				118,732			136,246			138,036			134,040			131,995
		Total assets		$	6,923,429		$	6,872,344		$	6,846,580		$	6,756,213		$	6,659,276

Liabilities:
	Deposits:
		Demand		$	704,859		$	682,859		$	675,767		$	709,767		$	786,995
		Interest bearing demand			2,026,965			1,994,288			2,326,214			2,159,948			2,075,156
		Savings			30,150			29,793			28,251			29,261			29,167
		Time certificates of $250,000 or more			1,477,931			1,478,500			1,406,149			1,349,927			1,317,862
		Other time certificates			1,676,943			1,682,324			1,442,381			1,552,805			1,500,162
		Total deposits		$	5,916,848		$	5,867,764		$	5,878,762		$	5,801,708		$	5,709,342

	Acceptances outstanding			$	-		$	-		$	-		$	-		$	315
	Subordinated debt issuance, net				148,469			148,410			148,351			148,292			148,232
	Commitments to fund investment in affordable housing partnerships				21,623			23,617			27,946			29,647			30,824
	Other liabilities				73,337			82,436			68,394			77,008			75,458
		Total liabilities		$	6,160,277		$	6,122,227		$	6,123,453		$	6,056,655		$	5,964,171

Equity:
	Net common stock, no par value			$	105,501		$	109,928		$	113,509		$	115,915		$	134,534
	Retained earnings				685,108			664,808			640,675			616,417			592,325
	Accumulated other comprehensive income				(27,457	)		(24,619	)		(31,057	)		(32,774	)		(31,754	)
		Total shareholders' equity		$	763,152		$	750,117		$	723,127		$	699,558		$	695,105
		Total liabilities and shareholders' equity		$	6,923,429		$	6,872,344		$	6,846,580		$	6,756,213		$	6,659,276

PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(unaudited)


	Three months ended December 31,								Three months ended September 30,								Three months ended December 31,
	2024								2024								2023
				Interest		Average						Interest		Average						Interest		Average
	Average			Income or		Yield/			Average			Income or		Yield/			Average			Income or		Yield/
	Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
ASSETS	(Dollars in thousands)
Interest earning assets:
Loans ^(1,2)	$	5,543,215		$	111,596		8.01	%	$	5,459,842		$	114,112		8.31	%	$	5,127,935		$	107,709		8.33	%
Investment securities ⁽³⁾		350,732			3,566		4.04	%		356,590			3,610		4.03	%		349,863			3,335		3.78	%
Federal funds sold		20,172			249		4.91	%		20,164			280		5.52	%		20,028			282		5.58	%
Other earning assets		874,368			10,546		4.80	%		848,170			11,521		5.40	%		1,001,643			13,739		5.44	%
Total interest earning assets		6,788,487			125,957		7.38	%		6,684,766			129,523		7.71	%		6,499,469			125,065		7.63	%
Deferred loan fees, net		(9,808	)							(10,248	)							(10,421	)
Allowance for credit losses on loans		(75,474	)							(72,899	)							(74,965	)
Noninterest earning assets:
Cash and due from banks		10,626								10,826								12,376
Bank furniture and fixtures		8,866								9,419								9,243
Right of use assets		28,570								22,496								20,338
Other assets		169,058								173,619								171,309
Total assets	$	6,920,325							$	6,817,979							$	6,627,349

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Interest bearing demand and savings	$	2,076,132		$	18,330		3.51	%	$	2,249,260		$	23,295		4.12	%	$	2,139,562		$	21,788		4.04	%
TCD $250K or more		1,481,219			17,514		4.70	%		1,412,073			17,866		5.03	%		1,294,531			15,600		4.78	%
Other time certificates		1,663,304			19,516		4.67	%		1,462,912			18,090		4.92	%		1,472,854			16,855		4.54	%
Total interest bearing deposits		5,220,655			55,360		4.22	%		5,124,245			59,251		4.60	%		4,906,947			54,243		4.39	%
Short-term borrowings		3			0		3.31	%		-			-		0.00	%		2			0		6.08	%
Subordinated debt, net		148,434			1,325		3.55	%		148,372			1,325		3.55	%		148,194			1,325		3.55	%
Total interest bearing liabilities		5,369,092			56,685		4.20	%		5,272,617			60,576		4.57	%		5,055,143			55,568		4.36	%
Noninterest bearing liabilities:
Demand deposits		684,472								703,982								782,766
Lease liability		25,486								18,882								18,179
Other liabilities		80,930								75,276								88,120
Total liabilities		6,159,980								6,070,757								5,944,208
Shareholders’ equity		760,345								747,222								683,141
Total liabilities and shareholders’ equity	$	6,920,325							$	6,817,979							$	6,627,349
Net interest income				$	69,272							$	68,947							$	69,497
Net interest spread							3.18	%							3.14	%							3.27	%
Net interest margin							4.06	%							4.10	%							4.24	%

Cost of Deposits:
Noninterest bearing demand deposits	$	684,472							$	703,982							$	782,766
Interest bearing deposits		5,220,655			55,360		4.22	%		5,124,245			59,251		4.60	%		4,906,947			54,243		4.39	%
Total Deposits	$	5,905,127		$	55,360		3.73	%	$	5,828,227		$	59,251		4.04	%	$	5,689,713		$	54,243		3.78	%

⁽¹⁾	Includes non-accrual loans and loans held for sale
⁽²⁾	Net loan fee income of $1.2 million, $991,000, and $1.0 million for the quarter ended December 31, 2024, September 30, 2024 and December 31, 2023, respectively, are included in the yield computations
⁽³⁾	Yields on securities have been adjusted to a tax-equivalent basis

PREFERRED BANK
Year-to-Date Average Balances, Yield and Rates
(unaudited)

	Twleve Months ended December 31,
	2024								2023
				Interest		Average						Interest		Average
	Average			Income or		Yield/			Average			Income or		Yield/
	Balance			Expense		Rate			Balance			Expense		Rate
ASSETS	(Dollars in thousands)
Interest earning assets:
Loans ^(1,2)	$	5,398,916		$	445,139		8.24	%	$	5,068,486		$	412,505		8.14	%
Investment securities ⁽³⁾		352,416			14,257		4.05	%		389,584			14,461		3.71	%
Federal funds sold		20,397			1,103		5.41	%		20,090			1,056		5.26	%
Other earning assets		925,389			48,994		5.29	%		974,501			50,372		5.17	%
Total interest earning assets		6,697,118			509,493		7.61	%		6,452,661			478,394		7.41	%
Deferred loan fees, net		(10,301	)							(10,212	)
Allowance for credit losses on loans		(76,448	)							(70,992	)
Noninterest earning assets:
Cash and due from banks		10,624								11,978
Bank furniture and fixtures		9,537								9,010
Right of use assets		23,997								21,417
Other assets		175,725								163,828
Total assets	$	6,830,252							$	6,577,690

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Deposits:
Interest bearing demand/ savings	$	2,198,837		$	88,274		4.01	%	$	2,108,187		$	75,642		3.59	%
TCD $250K or more		1,403,663			69,176		4.93	%		1,267,859			53,200		4.20	%
Other time certificates		1,535,880			73,718		4.80	%		1,302,847			50,653		3.89	%
Total interest \bearing deposits		5,138,380			231,168		4.50	%		4,678,893			179,495		3.84	%
Short-term borrowings		1			0		2.50	%		1			0		3.06	%
Advance from Federal Home Loan Bank		-			0		0.00	%		75,616			3,819		5.05	%
Subordinated debt, net		148,344			5,300		3.57	%		148,106			5,300		3.58	%
Total interest bearing liabilities		5,286,725			236,468		4.47	%		4,902,616			188,614		3.85	%
Noninterest bearing liabilities:
Demand deposits		710,920								898,262
Lease liability		20,931								19,902
Other liabilities		79,618								84,449
Total liabilities		6,098,194								5,905,229
Shareholders’ equity		732,058								672,461
Total liabilities and shareholders’ equity	$	6,830,252							$	6,577,690
Net interest income				$	273,025							$	289,780
Net interest spread							3.13	%							3.57	%
Net interest margin							4.08	%							4.49	%

Cost of Deposits:
Noninterest bearing demand deposits	$	710,920							$	898,262
Interest bearing deposits		5,138,380			231,168		4.50	%		4,678,893			179,495		3.84	%
Total Deposits	$	5,849,300		$	231,168		3.95	%	$	5,577,155		$	179,495		3.22	%

⁽¹⁾	Includes non-accrual loans and loans held for sale
⁽²⁾	Net loan fee income of $4.6 million and $4.2 million for the year ended December 31, 2024 and 2023, respectively, are included in the yield computations
⁽³⁾	Yields on securities have been adjusted to a tax-equivalent basis

Preferred Bank
Loan and Credit Quality Information

Allowance For Credit Losses History
	Year ended
	December 31, 2024			December 31, 2023
	(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period	$	78,355		$	68,472
Charge-Offs
Commercial & Industrial		19,028			124
Total Charge-Offs		19,028			124

Recoveries
Commercial & Industrial		50			7
Total Recoveries		50			7

Net Charge-Offs		18,978			117
Provision for Credit Losses:		12,100			10,000
Balance at End of Period	$	71,477		$	78,355

Average Loans Held for Investment	$	5,396,844		$	5,067,870
Loans Held for Investment at End of Period	$	5,640,615		$	5,273,498
Net Charge-Offs to Average Loans		0.35	%		0.00	%
Allowances for Credit Losses to Loans at End of Period		1.27	%		1.49	%

AT THE COMPANY:	AT FINANCIAL PROFILES:
Edward J. Czajka	Jeffrey Haas
Executive Vice President	General Information
Chief Financial Officer	(310) 622-8240
(213) 891-1188	PFBC@finprofiles.com

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