Preferred Bank Reports Fourth Quarter and Annual Results

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 BANKCondensed 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 2023Interest 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 BANKCondensed 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 BANKCondensed 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 BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) For the Quarter Ended December 31,September 30,June 30,March 31,December 31, 20242024202420242023Unaudited 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 7.64x 3.92x 1.79x 4.33x 2.73x 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 BANKSelected 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 BANKSelected 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 2023Unaudited 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 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 BANKQuarter-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 InterestAverage InterestAverage InterestAverage AverageIncome orYield/ AverageIncome orYield/ AverageIncome orYield/ BalanceExpenseRate BalanceExpenseRate BalanceExpenseRateASSETS(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 BANKYear-to-Date Average Balances, Yield and Rates(unaudited) Twleve Months ended December 31, 2024 2023 InterestAverage InterestAverage AverageIncome orYield/ AverageIncome orYield/ BalanceExpenseRate BalanceExpenseRateASSETS(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 BankLoan 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. CzajkaJeffrey HaasExecutive Vice PresidentGeneral InformationChief Financial Officer(310) 622-8240(213) 891-1188PFBC@finprofiles.com

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