Preferred Bank Provides Update on Loan Relationship

Rhea-AI Summary

Preferred Bank (NASDAQ: PFBC) updated investors that a large borrower relationship has been reclassified to nonaccrual, covering $2.0 million of C&I loans and $115,604,510 of real estate loans.

The bank reports appraised collateral value of $219,300,000 (aggregate LTV 52.7%), has ordered a new appraisal, and expects no significant impact to 2026 earnings based on collateral valuations.

Positive

• $219.3M appraised collateral vs $115.6M loan balance (LTV 52.7%)
• Bank ordered a new appraisal to refine collateral valuation
• Management expects no significant 2026 earnings impact based on collateral

Negative

• Large borrower relationship reclassified to nonaccrual
• Payment disruptions due to principals' lawsuits caused sluggish cash flow
• Total reclassified loans include $115.6M real estate and $2.0M C&I

Key Figures

C&I loans downgraded: $2.0M Real estate loans downgraded: $115.6M Total current real estate balance: $115,604,510 +5 more

8 metrics

C&I loans downgraded $2.0M Commercial and industrial loans in downgraded relationship

Real estate loans downgraded $115.6M Real estate loans in downgraded relationship

Total current real estate balance $115,604,510 Current balance of related real estate loans

Total appraised collateral value $219,300,000 Appraised value of collateral for real estate loans

Aggregate loan-to-value 52.7% Overall LTV for the relationship’s real estate loans

Loan 1 current balance $9,398,531 CRE-Neighborhood Center current loan balance

Loan 1 appraised value $24,990,000 Appraised value of collateral for Loan 1

Loan 1 LTV 37.6% Loan-to-value ratio on Loan 1

Market Reality Check

Price: $89.07 Vol: Volume 74,500 is at 0.7x ...

normal vol

$89.07 Last Close

Volume Volume 74,500 is at 0.7x the 20-day average of 105,696, indicating subdued trading. normal

Technical Shares at $92.21 are trading above the 200-day MA at $91.00 and about 10.5% below the 52-week high of $103.05.

Peers on Argus

Regional bank peers like BFC, OBK, PEBO, HOPE, and WABC show gains between 0.71%...

Regional bank peers like BFC, OBK, PEBO, HOPE, and WABC show gains between 0.71% and 1.10%, while PFBC is nearly flat at 0.08%, suggesting a more stock-specific reaction versus stronger peer strength.

Historical Context

5 past events · Latest: Jan 22 (Positive)

Pattern 5 events

Date	Event	Sentiment	Move	Catalyst
Jan 22	Quarterly earnings	Positive	-7.0%	Q4 2025 results with solid profitability and loan growth reported.
Jan 08	Earnings call notice	Neutral	-0.7%	Announcement of Q4 2025 earnings release date and conference call.
Dec 11	Dividend increase	Positive	+2.3%	Annual dividend raised from $3.00 to $3.20 per share.
Oct 20	Record earnings	Positive	+1.5%	Record Q3 2025 earnings with higher NIM and growing loans and deposits.
Oct 06	Earnings call notice	Neutral	-1.3%	Announcement of Q3 2025 earnings release timing and conference call.

Pattern Detected

Earnings and dividend news have generally seen aligned moves, but the most recent quarterly results prompted a notable negative divergence.

Recent Company History

Over the past few months, PFBC has reported strong financial results, including record third-quarter 2025 earnings and solid fourth-quarter 2025 net income of $34.8M or $2.79 per share, alongside robust returns on assets and equity. The bank also increased its annual dividend to $3.20 per share. Despite these positives, the stock dropped 7% on the latest earnings release. Today’s update about reclassifying a large loan relationship to nonaccrual fits within this ongoing credit and earnings narrative.

Market Pulse Summary

This announcement details a large loan relationship, with about $2.0M in C&I loans and $115.6M in re...

Analysis

This announcement details a large loan relationship, with about $2.0M in C&I loans and $115.6M in real estate loans reclassified to nonaccrual. Management highlights collateral appraisals totaling roughly $219.3M, implying substantial coverage versus current balances and indicating they do not expect a significant hit to 2026 earnings. Investors may watch for updated appraisals, future credit quality metrics, and how this relationship evolves alongside PFBC’s broader loan portfolio performance.

Key Terms

commercial and industrial (c&i) loans, substandard classification, nonaccrual status, loan production office, +1 more

5 terms

commercial and industrial (c&i) loans financial

"relationship totaling $2.0 million in commercial and industrial (C&I) loans and"

Commercial and industrial (c&i) loans are loans banks make to businesses to fund everyday operations, buy equipment, expand facilities, or finance short-term needs — think of them as a company’s business credit card or commercial mortgage. They matter to investors because the amount, repayment health, and interest rates on these loans affect a lender’s income and risk exposure and also signal broader business activity and credit conditions in the economy.

substandard classification financial

"real estate loans to substandard classification. Due to the principals of the"

A substandard classification is a regulatory label banks and lenders use for a loan or asset that shows clear signs of credit weakness and is at higher risk of not being repaid. Think of it like a car with serious mechanical issues: it still runs but needs immediate attention because the chance of breakdown is materially higher; for investors, a rising share of substandard assets signals greater potential losses and pressure on a lender’s profitability and capital.

nonaccrual status financial

"the Bank is now further reclassifying these loans to nonaccrual status."

Nonaccrual status is when a lender stops recording interest income on a loan because payments are late or the borrower’s ability to pay is in serious doubt. For investors this is a red flag: it signals deteriorating loan quality, can reduce reported earnings and may require the lender to set aside more reserves, much like marking a damaged product off the books until its value is clear.

loan production office financial

"as well as a Loan Production Office in Sunnyvale, California."

A loan production office is a bank or finance company location set up primarily to find, meet with, and originate loans, but it typically does not handle full retail services like deposits or cash transactions. For investors, an LPO is a way for a lender to grow loan volume and reach new customers with lower overhead, which can boost revenue but also concentrates credit risk in specific markets—like opening a pop-up shop that only sells one product.

fdic regulatory

"its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to"

The Federal Deposit Insurance Corporation (FDIC) is a U.S. government agency that protects individual and business bank deposits by insuring accounts up to a set limit, acting like a safety net for savers if a bank fails. It matters to investors because FDIC insurance reduces the chance of sudden losses for depositors, supports confidence in the banking system, and can influence the perceived risk and stock value of banks and financial firms.

AI-generated analysis. Not financial advice.

LOS ANGELES, Feb. 23, 2026 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), (“the Bank”), an independent commercial bank, provided an update on a large loan relationship. In the fourth quarter of 2025, the Bank announced that it had downgraded a large relationship totaling $2.0 million in commercial and industrial (C&I) loans and $115.6 million of real estate loans to substandard classification. Due to the principals of the relationship being involved in several complicated lawsuits with other banks which caused sluggish cash flow and unacceptable payment patterns, the Bank is now further reclassifying these loans to nonaccrual status.

Below is an outline of the loan balances and the current valuation of the real estate loans. Based upon the value of the collateral, the Bank believes the resolution of these loans will not result in any significant impact to the Bank’s 2026 earnings.

				Property
	Loan	Current		Appraised		Appraisal
	Type	Balance		Value		Date	LTV
Loan 1	CRE-Neighborhood Center	$	9,398,531	$	24,990,000	2/25/2025	37.6	%
Loan 2	CRE-Shopping Center *		48,458,994		72,660,000	11/13/2024	66.7	%
Loan 3	Multifamily		7,914,950		13,220,000	2/15/2026	59.9	%
Loan 4	Multifamily		19,950,000		41,200,000	11/7/2025	48.4	%
Loan 5	CRE-Neighborhood Center		29,882,035		67,230,000	2/15/2026	44.4	%
		$	115,604,510	$	219,300,000		52.7	%

• New appraisal has been ordered
  
  

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)). The Bank also operates a branch in Flushing, New York and in the Houston suburb of Sugar Land, Texas as well as 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.

AT THE COMPANY: Edward J. Czajka Executive Vice President Chief Financial Officer (213) 891-1188

AT FINANCIAL PROFILES: Jeffrey Haas General Information (310) 622-8240 PFBC@finprofiles.com

FAQ

What did Preferred Bank (PFBC) announce about the loan reclassification on Feb 23, 2026?

The bank said it reclassified a large relationship to nonaccrual, including $115.6M real estate loans and $2.0M C&I loans. According to the company, collateral appraisals total $219.3M with aggregate LTV of 52.7%.

Will the PFBC nonaccrual loans materially affect Preferred Bank's 2026 earnings?

Preferred Bank expects no significant impact to 2026 earnings based on current collateral valuations. According to the company, recovery value and appraisals support this outlook, and a new appraisal has been ordered.

How large are the collateral appraisals vs loan balances for PFBC's affected real estate loans?

Aggregate appraised value is $219.3M versus real estate loan balances of $115.6M (aggregate LTV 52.7%). According to the company, appraisals indicate substantial collateral coverage for the loans.

Why did Preferred Bank move the relationship to nonaccrual status for PFBC on Feb 23, 2026?

The bank cited sluggish cash flow and unacceptable payment patterns tied to the relationship's principals, who are involved in lawsuits. According to the company, those issues prompted the downgrade to nonaccrual.

What immediate actions did Preferred Bank (PFBC) take after reclassifying the loans?

Preferred Bank ordered a new appraisal and reclassified the loans to nonaccrual for accounting and monitoring. According to the company, these steps follow review of collateral and payment performance.