Preferred Bank Reports First Quarter Results

Rhea-AI Summary

Preferred Bank (PFBC) reported Q1 2025 net income of $30.0 million or $2.23 per diluted share, showing a slight decrease of $197,000 from the previous quarter and $3.4 million year-over-year. The decline was primarily attributed to reduced net interest income, which fell to $62.7 million, down $6.5 million quarter-over-quarter.

Key impacts included $2.8 million in reversed interest income from nonaccrual loans and $208,000 from a fire-damaged property loan. Total deposits increased by $155.9 million (2.6%) to $6.07 billion, while gross loans slightly decreased to $5.63 billion. The bank's net interest margin declined to 3.75% from 4.06% in the previous quarter.

Notable metrics include:

• Return on average assets: 1.76%
• Return on beginning equity: 15.96%
• Efficiency ratio: 35.1%
• Total capital ratio: 15.15%

Positive

• Strong deposit growth of $155.9 million (2.6%) quarter-over-quarter
• Efficient operations with 35.1% efficiency ratio
• Robust capital position with 15.15% total capital ratio
• Net recoveries of $97,000 in Q1 2025
• Decrease in criticized loans to $129.2 million from $158.1 million

Negative

• Net income decreased by $3.4 million year-over-year
• Net interest margin declined to 3.75% from 4.06% quarter-over-quarter
• Net interest income decreased by $6.5 million quarter-over-quarter
• $2.8 million in reversed interest income from nonaccrual loans
• Non-accrual loans increased to $78.9 million

Insights

Financial Analyst (Banking Specialist)

Preferred Bank reports solid Q1 2025 earnings despite interest income reversals, maintaining strong capitalization and deposit growth amid isolated credit challenges.

Preferred Bank reported $30.0 million in Q1 2025 net income ($2.23 per diluted share), showing a minor $197,000 decrease from the previous quarter and a $3.4 million decline year-over-year. The results were notably impacted by $2.8 million in interest income reversals from nonaccrual loans and an additional $208,000 reversal from a loan secured by property damaged in the Palisades fire.

The bank's net interest margin contracted to 3.75% from 4.06% in Q4 2024, but management emphasized this was primarily due to the interest reversals. Without these one-time items, the margin would have remained relatively stable.

Asset quality metrics present a mixed picture. Nonaccrual loans totaled $78.9 million, primarily comprised of two loans totaling $65.6 million that management describes as "well-secured" with no anticipated losses. One of these loans involves a bankruptcy process while the other is being sold at par. Total criticized loans decreased to $129.2 million from $158.1 million, reflecting improving risk trends.

The bank's provision for credit losses was $700,000, down significantly from $2.0 million in Q4 2024 and $4.4 million a year earlier, indicating management's increased confidence in the loan portfolio despite isolated challenges.

Deposit growth was robust at 2.6% ($155.9 million) quarter-over-quarter, while loans decreased slightly. The bank maintains strong capital ratios with a tangible capital ratio of 10.96% and a total capital ratio of 15.15%, providing substantial loss-absorption capacity.

Management expressed caution regarding the uncertain impact of potential import tariffs on their trade finance portfolio, initiating enhanced monitoring processes. This proactive risk management approach demonstrates awareness of emerging economic challenges.

LOS ANGELES, April 25, 2025 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended March 31, 2025. Preferred Bank (“the Bank”) reported net income of $30.0 million or $2.23 per diluted share for the first quarter of 2025. This represents a small decrease in net income of $197,000 from the prior quarter and a decrease of $3.4 million from the same quarter last year. The decrease compared to both periods was mainly due to a decrease in net interest income. In the first quarter of 2025, the incremental impact to interest income from loans placed on nonaccrual status was approximately $2.8 million. In addition, a property securing one of our loans was damaged in the Palisades fire in January and as a result, the Bank has reversed out the $208,000 interest receivable on this loan although we expect to recoup this amount after the property is sold. In addition to a lowering of overall interest rates, these were the main factors in the decrease in net interest income.

Net interest income was $62.7 million, a decrease of $6.5 million from the previous quarter and a decrease of $5.8 million compared to the same quarter last year. Noninterest income was $4.0 million, an increase of $361,000 over the prior quarter and an increase of $933,000 over the same quarter last year. Noninterest expense was $23.4 million, a decrease of $4.9 million from the previous quarter and an increase of $3.3 million over the same quarter last year.

Highlights for the Quarter:

• Return on average assets was 1.76%
• Return on beginning equity of 15.96%
• Total deposits increased by $155.9 million or 2.6%, linked quarter
• Efficiency ratio was 35.1%

Li Yu, Chairman and CEO, commented, “Preferred Bank’s net income for the first quarter, 2025 was $30.0 million or $2.23 per fully diluted share. This quarter, there was an outsized impact to interest income of approximately $2.8 million on nonaccrual loans. We have also written down the value of our one OREO property by $1.3 million.

Non-accrual loans totaled $78.9 million as of March 31, 2025 and are mostly comprised of two loans totaling $65.6 million. These two loans are well-secured, and we do not anticipate any losses associated with these two credits. Overall criticized loans have decreased to $129.2 million from $158.2 million at year-end. There were very few new migrations into the criticized loan category.

The large interest reversal of $2.8 million significantly affected the reported net interest margin, which was 3.75% for the quarter. Without that, the margin would have been much closer to the 4.06% reported in the fourth quarter of 2024. Deposit growth for the quarter was $155.9 million or 2.6% on a linked quarter basis. However, total loans reduced slightly from December 31, 2024. We do not feel there will be material changes in the loan demand in the near future under the shadow of the import tariff uncertainty.

The import tariff impositions and threats are truly unprecedented. At this time, we are still completely uncertain as to the size of the tariffs and which countries will ultimately be tariffed. In short, every American’s economic well-being will likely be impacted. Even if an agreement can be reached within the “90 days”, there seems to be no certainty that the issue will be completely resolved and this uncertainty may persist for a year or possibly more. We at Preferred Bank will stay alert and constantly monitoring our activities.

As a starting point, we have began a “deep-dive” within our relatively small “trade finance” portfolio and will continue to widen the scope of our credit monitoring activities related to trade.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $62.7 million for the first quarter of 2025. This represents a $6.5 million decrease from the $69.2 million recorded in the prior quarter and a $5.8 million decrease from the same quarter last year. The decrease compared to both comparable quarters was primarily due to the reversal of interest income of $2.8 million associated with the nonaccrual loans. In addition, there was a property in the Palisades fire that secured a construction loan financed by the Bank. As part of that restructuring, the Bank elected to reverse $208,000 out of interest income that had accrued on that loan. Interest expense decreased compared to both comparable periods despite growth in deposits during the quarter. The Bank’s net interest margin came in at 3.75% for the quarter, this is down from the 4.06% recorded last quarter and from the 4.19% margin achieved in the first quarter of the prior year. The loan interest reversals played a major role in the decrease of the net interest margin in the first quarter. Management believes that efforts to reduce the Bank’s deposit costs have been largely effective as evidenced by the decreases in interest expense.

Noninterest Income. For the first quarter of 2025, noninterest income was $4.0 million compared with $3.1 million for the same quarter last year and compared to $3.6 million for the fourth quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fee income which was up by $268,000 and gains on sales of SBA loans which increased by $163,000. In comparing to the same quarter last year, fee income was down but LC fee income increased by $741,000 and gains on sales of SBA loans increased by $172,000.

Noninterest Expense. Total noninterest expense was $23.4 million for the first quarter of 2025 compared to $28.2 million for the fourth quarter of 2024 and compared to the $20.0 million recorded in the same period last year. The primary reason for the decrease over the prior quarter was the $8.1 million occupancy expense adjustment recorded in the fourth quarter of 2024. This was related to accounting pronouncement ASC 842, accounting for leases. Partially offsetting that was an increase in personnel expense of $1.6 million and an increase in OREO expense of $1.4 million. In the first quarter of 2025, the Bank recorded a valuation charge of $1.3 million related to the OREO property in Santa Barbara. In comparing to the same quarter last year; personnel expense was up by $939,000, occupancy expense was up by $583,000 and OREO expense was up by $1.4 million due to the aforementioned OREO valuation charge recorded in the first quarter of 2025. Salary expense increased over the same quarter last year due mainly to an increase in personnel and merit increases. The increase in personnel expense over the prior quarter was primarily due to employer paid taxes as during the first quarter, incentive compensation is paid out to employees.

Income Taxes. The Bank recorded a provision for income taxes of $12.6 million for the first quarter of 2025. This represents an effective tax rate (“ETR”) of 29.5% which is up from the 29.0% ETR for last quarter and up from the 29.0% 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 March 31, 2025 were $5.63 billion, a decrease of $6.2 million from the total of $5.64 billion as of December 31, 2024. Total deposits were $6.07 billion, an increase of $155.9 million from the $5.92 billion as of December 31, 2024. Total assets were $7.1 billion, an increase of $176.7 million over the total of $6.92 billion as of December 31, 2024.

Asset Quality

Non-accrual loans and loans 90 days past due and still accruing totaled $78.9 million as of March 31, 2025. The bulk of the nonaccrual loans comprised of two loans totaling $65.6 million. One of the loans is a multi-family loan which is well-secured and the other loan is now vacant, entitled land in a prime area of Orange County. Again, this loan is also well-secured. The loans were part of the same relationship and one is now working its way through the bankruptcy court while the other loan is in the process of being sold, at par. Management is confident that there will be no loss associated with these two loans. Total net charge-offs (recoveries) for the quarter were ($97,000) compared to net charge-offs of $6.6 million in the prior quarter. In addition to that, the Bank wrote down the value of its OREO property in Santa Barbara by $1.34 million, reflecting the proposed net proceeds of the most recent sales contract that the Bank was involved in, which sale did not materialize.

Total criticized loans decreased to $129.2 million from $158.1 million reported in the prior quarter.

Allowance for Credit Losses

The provision for credit losses for the first quarter of 2025 was $700,000 compared to $2.0 million last quarter and compared to $4.4 million in the same quarter last year. The Bank’s allowance coverage ratio increased to 1.28% of loans as compared to 1.27% in the prior quarter.

Capitalization

As of March 31, 2025, the Bank’s tangible capital ratio was 10.96%, the leverage ratio was 11.52%, the common equity tier 1 capital ratio was 11.86% and the total capital ratio stood at 15.15%. As of December 31, 2024, the Bank’s tangible capital ratio was 11.02%, the Bank’s leverage ratio was 11.33%, the common equity tier 1 ratio was 11.80% and the total capital ratio was 15.11%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s first quarter 2025 financial results will be held this afternoon April 25, 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 May 2, 2025; the passcode is 8939265.

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)), two branches in New York (Manhattan and Flushing, Queens) 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 2024 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.

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

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
	March 31,				December 31,				March 31,
		2025				2024				2024
Interest income:
Loans, including fees	$	101,491			$	111,596			$	109,980
Investment securities		12,810				14,013				16,257
Fed funds sold		228				249				283
Total interest income		114,529				125,858				126,520
Interest expense:
Interest-bearing demand		16,590				18,245				22,290
Savings		69				85				75
Time certificates		33,887				37,030				34,330
Subordinated debt		1,325				1,325				1,325
Total interest expense		51,871				56,685				58,020
Net interest income		62,658				69,173				68,500
Provision for credit losses		700				2,000				4,400
Net interest income after provision for credit losses		61,958				67,173				64,100
Noninterest income:
Fees & service charges on deposit accounts		716				761				845
Letters of credit fee income		2,244				1,977				1,503
BOLI income		103				102				105
Net gain on sale of loans		275				112				103
Other income		660				685				509
Total noninterest income		3,998				3,637				3,065
Noninterest expense:
Salary and employee benefits		14,839				13,279				13,900
Net occupancy expense		2,294				10,110				1,711
Business development and promotion expense		462				340				266
Professional services		1,651				1,606				1,457
Office supplies and equipment expense		386				396				473
OREO valuation allowance and related expense		1,531				155				135
Other		2,206				2,360				2,086
Total noninterest expense		23,369				28,246				20,028
Income before provision for income taxes		42,587				42,564				47,137
Income tax expense		12,563				12,343				13,671
Net income	$	30,024			$	30,221			$	33,466
Income per share available to common shareholders
Basic	$	2.27			$	2.29			$	2.48
Diluted	$	2.23			$	2.25			$	2.44
Weighted-average common shares outstanding
Basic		13,226,582				13,190,696				13,508,878
Diluted		13,453,176				13,442,294				13,736,986
Cash dividends per common share	$	0.75			$	0.75			$	0.70

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
	March 31,				December 31,
		2025				2024
	(Unaudited)				(Audited)
Assets
Cash and due from banks	$	905,183			$	765,515
Fed funds sold		20,000				20,000
Cash and cash equivalents		925,183				785,515
Securities held-to-maturity, at amortized cost		19,745				20,021
Securities available-for-sale, at fair value		390,096				348,706
Loans held for sale, at lower of cost or fair value		-				2,214
Loans		5,634,413				5,640,615
Less allowance for credit losses		(72,274	)			(71,477	)
Less amortized deferred loan fees, net		(9,652	)			(9,234	)
Loans, net		5,552,487				5,559,904
Other real estate owned and repossessed assets		13,650				14,991
Bank furniture and fixtures, net		8,276				8,462
Bank-owned life insurance		10,502				10,433
Accrued interest receivable		31,775				33,561
Investment in affordable housing partnerships		63,612				58,346
Federal Home Loan Bank stock, at cost		15,000				15,000
Deferred tax assets		46,280				47,402
Income tax receivable		-				2,195
Operating lease right-of-use assets		20,281				13,182
Other assets		3,205				3,497
Total assets	$	7,100,092			$	6,923,429
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand deposits	$	730,270			$	704,859
Interest bearing deposits:		2,099,987				2,026,965
Savings		32,631				30,150
Time certificates of $250,000 or more		1,531,715				1,477,931
Other time certificates		1,678,132				1,676,943
Total deposits		6,072,735				5,916,848
Subordinated debt issuance, net		148,529				148,469
Commitments to fund investment in affordable housing partnerships		20,956				21,623
Operating lease liabilities		24,021				16,990
Accrued interest payable		14,634				16,517
Other liabilities		40,613				39,830
Total liabilities		6,321,488				6,160,277
Shareholders' equity		778,604				763,152
Total liabilities and shareholders' equity	$	7,100,092			$	6,923,429
Book value per common share	$	59.30			$	57.86
Number of common shares outstanding		13,130,296				13,188,776

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
	For the Quarter Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2025			2024			2024			2024			2024
Unaudited historical quarterly operations data:
Interest income	$	114,529		$	125,858		$	129,424		$	127,294		$	126,520
Interest expense		51,871			56,685			60,576			61,187			58,020
Interest income before provision for credit losses		62,658			69,173			68,848			66,107			68,500
Provision for credit losses		700			2,000			3,200			2,500			4,400
Noninterest income		3,998			3,637			3,459			3,404			3,065
Noninterest expense		23,369			28,246			22,089			19,697			20,028
Income tax expense		12,563			12,343			13,635			13,722			13,671
Net income	$	30,024		$	30,221		$	33,383		$	33,592		$	33,466
Earnings per share
Basic	$	2.27		$	2.29		$	2.50		$	2.51		$	2.48
Diluted	$	2.23		$	2.25		$	2.46		$	2.48		$	2.44
Ratios for the period:
Return on average assets		1.76	%		1.74	%		1.95	%		1.97	%		2.00	%
Return on beginning equity		15.96	%		16.03	%		18.37	%		19.31	%		19.36	%
Net interest margin (Fully-taxable equivalent)		3.75	%		4.06	%		4.10	%		3.96	%		4.19	%
Noninterest expense to average assets		1.37	%		1.62	%		1.29	%		1.15	%		1.20	%
Efficiency ratio		35.06	%		38.79	%		30.55	%		28.34	%		27.99	%
Net (recoveries) charge-offs to average loans (annualized)		-0.01	%		0.47	%		-0.00	%		0.68	%		0.26	%
Ratios as of period end:
Tangible common equity ratio		10.96	%		11.02	%		10.92	%		10.55	%		10.35	%
Tier 1 leverage capital ratio		11.52	%		11.33	%		11.28	%		10.89	%		10.80	%
Common equity tier 1 risk-based capital ratio		11.86	%		11.80	%		11.66	%		11.52	%		11.50	%
Tier 1 risk-based capital ratio		11.86	%		11.80	%		11.66	%		11.52	%		11.50	%
Total risk-based capital ratio		15.15	%		15.11	%		15.06	%		14.93	%		15.08	%
Allowances for credit losses to loans at end of period		1.28	%		1.27	%		1.36	%		1.34	%		1.49	%
Allowance for credit losses to non-performing loans	0.91		x	1.89		x		3.92	x		1.79	x		4.33	x
Average balances:
Total securities	$	402,754		$	350,732		$	356,590		$	353,357		$	348,961
Total loans		5,555,010			5,542,558			5,458,613			5,320,360			5,263,562
Total earning assets		6,780,438			6,788,487			6,684,766			6,728,498			6,585,853
Total assets		6,905,249			6,920,325			6,817,979			6,863,829			6,718,018
Total time certificate of deposits		3,164,766			3,144,523			2,874,985			2,884,259			2,852,860
Total interest bearing deposits		5,244,243			5,220,655			5,124,245			5,203,034			5,004,834
Total deposits		5,886,163			5,905,127			5,828,227			5,901,976			5,761,488
Total interest bearing liabilities		5,392,735			5,369,092			5,272,617			5,351,347			5,153,089
Total equity		779,339			760,345			747,222			715,190			704,996

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				As of
				March 31,				December 31,				September 30,				June 30,				March 31,
				2025				2024				2024				2024				2024
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	925,183			$	785,515			$	804,994			$	917,677			$	936,600
	Securities held-to-maturity, at amortized cost				19,745				20,021				20,311				20,605				20,904
	Securities available-for-sale, at fair value				390,096				348,706				337,363				331,909				333,411
	Loans:
		Real estate – Mortgage:
			Real estate—Residential	$	779,462			$	790,069			$	753,453			$	732,251			$	724,101
			Real estate—Commercial		2,897,956				2,840,771				2,882,506				2,833,430				2,777,608
			Total Real Estate – Mortgage		3,677,418				3,630,840				3,635,959				3,565,681				3,501,709
		Real estate – Construction:
			R/E Construction — Residential		306,283				296,580				274,214				238,062				236,596
			R/E Construction — Commercial		269,065				287,185				290,308				247,582				213,727
			Total real estate construction loans		575,348				583,765				564,522				485,644				450,323
		Commercial and industrial			1,374,379				1,418,930				1,365,550				1,371,694				1,369,529
		SBA			7,104				6,833				5,424				5,463				3,914
		Consumer and others			164				247				124				118				379
			Gross loans		5,634,413				5,640,615				5,571,579				5,428,600				5,325,854
	Allowance for credit losses on loans				(72,274	)			(71,477	)			(76,051	)			(72,848	)			(79,311	)
	Net deferred loan fees				(9,652	)			(9,234	)			(10,414	)			(10,502	)			(10,460	)
		Net loans, excluding loans held for sale		$	5,552,487			$	5,559,904			$	5,485,114			$	5,345,250			$	5,236,083
	Loans held for sale			$	-			$	2,214			$	225			$	955			$	605
		Net loans		$	5,552,487			$	5,562,118			$	5,485,339			$	5,346,205			$	5,236,688
	Other real estate owned and repossessed assets			$	13,650			$	14,991			$	15,082			$	16,716			$	16,716
	Investment in affordable housing partnerships				63,612				58,346				58,009				60,432				62,854
	Federal Home Loan Bank stock, at cost				15,000				15,000				15,000				15,000				15,000
	Other assets				120,319				118,732				136,246				138,036				134,040
		Total assets		$	7,100,092			$	6,923,429			$	6,872,344			$	6,846,580			$	6,756,213
Liabilities:
	Deposits:
		Demand		$	730,270			$	704,859			$	682,859			$	675,767			$	709,767
		Interest bearing demand			2,099,987				2,026,965				1,994,288				2,326,214				2,159,948
		Savings			32,631				30,150				29,793				28,251				29,261
		Time certificates of $250,000 or more			1,531,715				1,477,931				1,478,500				1,406,149				1,349,927
		Other time certificates			1,678,132				1,676,943				1,682,324				1,442,381				1,552,805
		Total deposits		$	6,072,735			$	5,916,848			$	5,867,764			$	5,878,762			$	5,801,708
	Subordinated debt issuance, net				148,529				148,469				148,410				148,351				148,292
	Commitments to fund investment in affordable housing partnerships				20,956				21,623				23,617				27,946				29,647
	Other liabilities				79,268				73,337				82,436				68,394				77,008
		Total liabilities		$	6,321,488			$	6,160,277			$	6,122,227			$	6,123,453			$	6,056,655
Equity:
	Net common stock, no par value			$	96,079			$	105,501			$	109,928			$	113,509			$	115,915
	Retained earnings				705,360				685,108				664,808				640,675				616,417
	Accumulated other comprehensive income				(22,835	)			(27,457	)			(24,619	)			(31,057	)			(32,774	)
		Total shareholders' equity		$	778,604			$	763,152			$	750,117			$	723,127			$	699,558
		Total liabilities and shareholders' equity		$	7,100,092			$	6,923,429			$	6,872,344			$	6,846,580			$	6,756,213

PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(Unaudited)
			Three months ended March 31,									Three months ended December 31,									Three months ended March 31,
			2025									2024									2024
						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)		$	5,556,521		$	101,491		7.41	%		$	5,543,215		$	111,596		8.01	%		$	5,265,940		$	109,980		8.40	%
	Investment securities (3)			402,754			4,093		4.12	%			350,732			3,566		4.04	%			348,961			3,430		3.95	%
	Federal funds sold			20,222			228		4.57	%			20,172			249		4.91	%			20,390			283		5.58	%
	Other earning assets			800,941			8,816		4.46	%			874,368			10,546		4.80	%			950,562			12,928		5.47	%
		Total interest earning assets		6,780,438			114,628		6.86	%			6,788,487			125,957		7.38	%			6,585,853			126,621		7.73	%
	Deferred loan fees, net			(9,189	)								(9,808	)								(10,694	)
	Allowance for credit losses on loans			(71,550	)								(75,474	)								(78,349	)
Noninterest earning assets:
	Cash and due from banks			11,513									10,626									11,244
	Bank furniture and fixtures			8,439									8,866									10,084
	Right of use assets			15,201									28,570									22,003
	Other assets			170,397									169,058									177,877
		Total assets	$	6,905,249								$	6,920,325								$	6,718,018
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand and savings	$	2,079,477		$	16,659		3.25	%		$	2,076,132		$	18,330		3.51	%		$	2,151,974		$	22,365		4.18	%
		TCD $250K or more		1,482,324			15,640		4.28	%			1,481,219			17,514		4.70	%			1,341,298			16,501		4.95	%
		Other time certificates		1,682,442			18,247		4.40	%			1,663,304			19,516		4.67	%			1,511,562			17,829		4.74	%
		Total interest bearing deposits		5,244,243			50,546		3.91	%			5,220,655			55,360		4.22	%			5,004,834			56,695		4.56	%
Short-term borrowings				-			-		0.00	%			3			0		3.31	%			-			-		0.00	%
Subordinated debt, net				148,492			1,325		3.62	%			148,434			1,325		3.55	%			148,255			1,325		3.59	%
		Total interest bearing liabilities		5,392,735			51,871		3.90	%			5,369,092			56,685		4.20	%			5,153,089			58,020		4.53	%
Noninterest bearing liabilities:
	Demand deposits			641,920									684,472									756,654
	Lease liability			18,963									25,486									19,500
	Other liabilities			72,292									80,930									83,779
		Total liabilities		6,125,910									6,159,980									6,013,022
Shareholders’ equity				779,339									760,345									704,996
		Total liabilities and shareholders’ equity	$	6,905,249								$	6,920,325								$	6,718,018
Net interest income						$	62,757								$	69,272								$	68,601
Net interest spread									2.96	%								3.18	%								3.20	%
Net interest margin									3.75	%								4.06	%								4.19	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	641,920								$	684,472								$	756,654
	Interest bearing deposits			5,244,243			50,546		3.91	%			5,220,655			55,360		4.22	%			5,004,834			56,695		4.56	%
		Total Deposits	$	5,886,163		$	50,546		3.48	%		$	5,905,127		$	55,360		3.73	%		$	5,761,488		$	56,695		3.96	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $865,000, $1.2 million, and $1.1 million for the quarter ended March 31, 2025, December 31, 2024 and March 31, 2024, 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
				Quarter Ended				Year Ended
				March 31, 2025				December 31, 2024
				(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period				$	71,477			$	78,355
	Charge-Offs
		Commercial & Industrial			-				19,028
		Total Charge-Offs			-				19,028
	Recoveries
		Commercial & Industrial			97				50
		Total Recoveries			97				50
	Net (Recoveries) Charge-Offs				(97	)			18,978
	Provision for Credit Losses:				700				12,100
Balance at End of Period				$	72,274			$	71,477
Average Loans Held for Investment				$	5,555,010			$	5,396,844
Loans Held for Investment at End of Period				$	5,634,413			$	5,640,615
Net (Recoveries) Charge-Offs to Average Loans					-0.01%				0.35%
Allowances for Credit Losses to Loans at End of Period					1.28%				1.27%

FAQ

What caused Preferred Bank (PFBC) earnings to decline in Q1 2025?

The decline was primarily due to decreased net interest income, with $2.8 million in reversed interest income from nonaccrual loans and $208,000 from a fire-damaged property loan.

How much did Preferred Bank (PFBC) deposits grow in Q1 2025?

Total deposits increased by $155.9 million or 2.6% quarter-over-quarter, reaching $6.07 billion.

What is Preferred Bank's (PFBC) current net interest margin?

The net interest margin was 3.75% for Q1 2025, down from 4.06% in the previous quarter.

How much are Preferred Bank's (PFBC) non-accrual loans as of Q1 2025?

Non-accrual loans totaled $78.9 million, primarily consisting of two loans totaling $65.6 million which are well-secured.

What is Preferred Bank's (PFBC) capital position in Q1 2025?

The bank reported a tangible capital ratio of 10.96%, leverage ratio of 11.52%, common equity tier 1 ratio of 11.86%, and total capital ratio of 15.15%.