Preferred Bank Reports Second Quarter Results

Rhea-AI Summary

Preferred Bank (NASDAQ: PFBC) reported Q2 2025 net income of $32.8 million or $2.52 per diluted share, representing a $2.8 million increase from Q1 2025 but a slight decrease of $745,000 year-over-year. The Bank's performance showed notable improvements with net interest margin rising to 3.85% from 3.75% in Q1.

Key metrics include total loans increasing by $105.2 million (1.9%) quarter-over-quarter, while credit quality improved with non-accrual loans decreasing to $51.2 million from $78.9 million in Q1. The Bank maintained strong capital ratios with a total capital ratio of 14.43% and achieved an efficiency ratio of 31.79%.

Notable developments include a $200 million FHLB borrowing invested in U.S. Treasuries and a $1.3 million write-down of the Bank's Santa Barbara OREO property.

Positive

• Net income increased by $2.8 million quarter-over-quarter to $32.8 million
• Net interest margin improved to 3.85% from 3.75% in Q1 2025
• Total loans grew by $105.2 million (1.9%) quarter-over-quarter
• Non-accrual loans decreased significantly from $78.9M to $51.2M
• Strong efficiency ratio of 31.79%
• Total criticized loans decreased to $104.5M from $129.2M

Negative

• $1.3 million write-down on Santa Barbara OREO property
• Net income decreased by $745,000 year-over-year
• Noninterest expense increased by $2.8 million year-over-year
• Capital ratios declined from December 2024 (total capital ratio down from 15.11% to 14.43%)

Insights

Banking Financial Analyst

Preferred Bank posted solid Q2 results with improved net income, stronger asset quality, and steady loan growth despite margin pressures.

Preferred Bank reported net income of $32.8 million ($2.52 per diluted share) for Q2 2025, representing a 9.3% increase from the previous quarter's $30.0 million but a slight 2.2% decrease year-over-year. The sequential improvement primarily stemmed from higher net interest income, while the year-over-year decline resulted from increased noninterest expenses.

The bank's net interest margin improved to 3.85% from 3.75% in Q1 2025, though still below the 3.96% from Q2 2024. This improvement came despite a strategic move to borrow $200 million from the FHLB to invest in Treasury securities, which compressed margins but added to net interest income.

Asset quality showed substantial improvement, with non-accrual loans decreasing by 35.1% from $78.9 million to $51.2 million quarter-over-quarter. The bank successfully sold one large non-accrual loan at par, while management remains confident about resolving another $37.1 million non-accrual loan without losses despite its bankruptcy status. Total criticized loans declined to $104.5 million from $129.2 million in the previous quarter.

Loan growth remained positive at 1.9% quarter-over-quarter ($105.2 million), bringing the total loan portfolio to $5.74 billion. However, deposit growth was minimal in Q2, though deposits have increased by $161.5 million or 2.7% since year-end 2024.

The bank's efficiency ratio stands at an impressive 31.79%, significantly better than industry averages, reflecting strong cost management despite a $1.3 million write-down on an OREO property in Santa Barbara. Capital ratios remain solid with a tangible capital ratio of 10.26% and total capital ratio of 14.43%, though both metrics have declined slightly from year-end 2024 levels.

The 1.29% allowance for credit losses provides adequate coverage, especially considering the improving asset quality trends. Management's comments suggest optimism about the operating environment as uncertainties around tariffs and budget matters have cleared up.

LOS ANGELES, July 21, 2025 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended June 30, 2025. Preferred Bank (“the Bank”) reported net income of $32.8 million or $2.52 per diluted share for the second quarter of 2025. This represents an increase in net income of $2.8 million from the prior quarter and a small decrease of $745,000 from the same quarter last year. The increase compared to the prior quarter was mainly due to an increase in net interest income as there was a $2.8 million reversal of interest income which occurred in the first quarter of 2025. The decrease from the same quarter last year was due mainly to an increase in noninterest expense, which was up by $2.8 million, which was due to a $1.3 million write down of the Bank’s Santa Barbara OREO property.

Highlights for the Quarter:

• Return on average assets was 1.85%
• Return on average equity was 17.55%
• Total loans increased by $105.2 million or 1.9%, linked quarter
• The efficiency ratio was 31.79%

Li Yu, Chairman and CEO, commented, “We are pleased to report our results for the second quarter of 2025. We recorded net income of $32.8 million or $2.52 per fully diluted share. This quarter we had an increase in our loan portfolio of 1.8% (linked quarter), however, deposits only increased slightly. The Bank’s net interest margin improved to 3.85%. Last quarter we reported a net interest margin of 3.75% which was negatively impacted by an outsized interest reversal.

Our credit quality is trending positively, non-accrual loans decreased from $78.9 million as of March 31, 2025 to $51.2 million at June 30, 2025. Total criticized loans also decreased by a similar amount. Likewise, 30 – 89 days past due loans are trending positively, too.

The uncertainty caused by the tariffs is beginning to clear up, and together with a new budget we now have a better picture of our operating environment. We look forward to be able to plan for the Bank’s future.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $66.9 million for the second quarter of 2025. This represents a $4.2 million increase over the $62.7 million recorded in the prior quarter and a $767,000 increase over the same quarter last year. The increase compared to the prior quarter was due to a $2.8 million reversal of interest income in the prior quarter due to the recognition of two non-accrual loans. The increase over the same period last year was due primarily to loan growth and growth in the investment portfolio, partially offset by growth in deposits. Interest expense decreased by $7.6 million from the second quarter of 2024 due to lower deposit rates but increased over the prior quarter due to deposit growth and FHLB borrowings expense. During the second quarter of 2025, the Bank borrowed $200 million in term borrowings from the FHLB and invested the funds in U.S. Treasuries to lock in an interest spread. Because the spread on the borrowings and the U.S. Treasuries was less than the Bank’s net interest margin, it has the effect of compressing the margin but does increase net interest income. The Bank’s net interest margin came in at 3.85% for the quarter, this is up from the 3.75% posted last quarter but down from the 3.96% margin achieved in the second quarter of the prior year.

Noninterest Income. For the second quarter of 2025, noninterest income was $3.8 million compared with $3.4 million for the same quarter last year and compared to $4.0 million for the first quarter of 2025. The increase over the same quarter last year was due to letter of credit (LC) fee income which was up by $584,000. In comparison to the prior quarter, other income was down by $142,000 and gains on SBA loan sales were down by $103,000.

Noninterest Expense. Total noninterest expense was $22.5 million for the second quarter of 2025 compared to $23.4 million for the first quarter of 2025 and compared to the $19.7 million recorded in the same period last year. The primary reason for the decrease from the prior quarter was mainly due to personnel expense which decreased by $592,000. The decrease was due to payroll taxes which spike in the first quarter due to the payout of incentive compensation. In comparing to the same quarter last year, personnel expense was up by $1.3 million, occupancy expense was up by $555,000 and OREO expense was up by $1.5 million due to a valuation charge of $1.3 million related to the OREO property in Santa Barbara. Salary expenses increased over the same quarter last year due mainly to an increase in personnel and merit increases as well as a decrease in loan origination cost deferrals.

Income Taxes. The Bank recorded a provision for income taxes of $13.7 million for the second quarter of 2025. This represents an effective tax rate (“ETR”) of 29.5% which is up from the 29.0% ETR for the same quarter last year and the same as the 29.5% ETR recorded in the prior quarter. 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 June 30, 2025 were $5.74 billion, an increase of $99.0 million from the total of $5.64 billion as of December 31, 2024. Total deposits were $6.08 billion, an increase of $161.5 million from the $5.92 billion as of December 31, 2024. Total assets were $7.28 billion, an increase of $355.3 million over the total of $6.92 billion as of December 31, 2024.

Asset Quality

Non-accrual loans and loans 90 days or more past due and still accruing totaled $52.3 million as of June 30, 2025. This represents a decrease from the prior quarter of $26.6 million as the Bank sold one of the two larger non-accrual loans during the quarter, at par. The other significant non-accrual loan of $37.1 million is in bankruptcy and as previously mentioned, the Bank does not expect any loss content on the resolution of this loan. Total net charge-offs (recoveries) for the quarter were $44,000 compared to net recoveries of ($97,000) in the prior quarter. In addition to that, the Bank wrote down the value of its OREO property in Santa Barbara by $1.3 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 $104.5 million from $129.2 million reported in the prior quarter.

Allowance for Credit Losses

The provision for credit losses for the second quarter of 2025 was $1.6 million compared to $700,000 last quarter and compared to $2.5 million in the same quarter last year. The Bank’s allowance coverage ratio increased to 1.29% of loans as compared to 1.28% in the prior quarter.

Capitalization

As of June 30, 2025, the Bank’s tangible capital ratio was 10.26%, the leverage ratio was 10.73%, the common equity tier 1 capital ratio was 11.18% and the total capital ratio stood at 14.43%. 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 second quarter 2025 financial results will be held this afternoon July 21, 2025 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 888-243-4451 (domestic) or 412-542-4135 (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 July 28, 2025; the passcode is 9171084.

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 Executive Vice President Chief Financial Officer (213) 891-1188	Jeffrey Haas General Information (310) 622-8240 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
					June 30,			March 31,			June 30,
					2025			2025			2024
Interest income:
	Loans, including fees				$	105,884		$	101,491		$	109,451
	Investment securities					14,326			12,810			17,552
	Fed funds sold					233			228			291
		Total interest income				120,443			114,529			127,294
Interest expense:
	Interest-bearing demand					16,171			16,590			24,205
	Savings					71			69			79
	Time certificates					34,932			33,887			35,578
	FHLB borrowings					1,070			-			-
	Subordinated debt					1,325			1,325			1,325
		Total interest expense				53,569			51,871			61,187
		Net interest income				66,874			62,658			66,107
Provision for credit losses						1,600			700			2,500
		Net interest income after provision for credit losses				65,274			61,958			63,607
Noninterest income:
	Fees & service charges on deposit accounts					635			716			819
	Letters of credit fee income					2,333			2,244			1,749
	BOLI income					104			103			105
	Net gain on sale of other real estate owned					12			-			-
	Net gain on sale of loans					172			275			353
	Other income					518			660			378
		Total noninterest income				3,774			3,998			3,404
Noninterest expense:
	Salary and employee benefits					14,247			14,839			12,944
	Net occupancy expense					2,271			2,294			1,716
	Business development and promotion expense					240			462			403
	Professional services					1,507			1,651			1,832
	Office supplies and equipment expense					419			386			477
	OREO valuation allowance and related expense					1,491			1,531			29
	Other					2,282			2,206			2,296
		Total noninterest expense				22,457			23,369			19,697
		Income before provision for income taxes				46,591			42,587			47,314
Income tax expense						13,744			12,563			13,722
		Net income			$	32,847		$	30,024		$	33,592
Income per share available to common shareholders
		Basic			$	2.56		$	2.27		$	2.51
		Diluted			$	2.52		$	2.23		$	2.48
Weighted-average common shares outstanding
		Basic				12,833,453			13,226,582			13,362,522
		Diluted				13,038,937			13,453,176			13,548,400
Cash dividends per common share					$	0.75		$	0.75		$	0.70

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
					For the Six Months Ended
					June 30,			June 30,			Change
					2025			2024			%
Interest income:
	Loans, including fees				$	207,375			219,431		-5.5	%
	Investment securities					27,136			33,809		-19.7	%
	Fed funds sold					461			574		-19.7	%
		Total interest income				234,972			253,814		-7.4	%
Interest expense:
	Interest-bearing demand					32,761			46,495		-29.5	%
	Savings					140			154		-8.8	%
	Time certificates					68,819			69,908		-1.6	%
	FHLB borrowings					1,070			-		100.0	%
	Subordinated debt					2,650			2,650		0.0	%
		Total interest expense				105,440			119,207		-11.5	%
		Net interest income				129,532			134,607		-3.8	%
Provision for credit losses						2,300			6,900		-66.7	%
		Net interest income after provision for credit losses				127,232			127,707		-0.4	%
Noninterest income:
	Fees & service charges on deposit accounts					1,351			1,664		-18.8	%
	Letters of credit fee income					4,578			3,252		40.8	%
	BOLI income					207			210		-1.7	%
	Net gain on sale of other real estate owned					12			-		100.0	%
	Net gain on sale of loans					447			456		-1.9	%
	Other income					1,177			887		32.8	%
		Total noninterest income				7,772			6,469		20.1	%
Noninterest expense:
	Salary and employee benefits					29,086			26,844		8.4	%
	Net occupancy expense					4,565			3,427		33.2	%
	Business development and promotion expense					702			669		4.9	%
	Professional services					3,158			3,289		-4.0	%
	Office supplies and equipment expense					805			950		-15.3	%
	OREO valuation allowance and related expense					3,022			164		1742.7	%
	Other					4,488			4,382		2.4	%
		Total noninterest expense				45,826			39,725		15.4	%
		Income before provision for income taxes				89,178			94,451		-5.6	%
Income tax expense						26,307			27,393		-4.0	%
		Net income			$	62,871		$	67,058		-6.2	%
Income per share available to common shareholders
		Basic			$	4.84		$	4.99		-3.0	%
		Diluted			$	4.77		$	4.93		-3.3	%
Weighted-average common shares outstanding
		Basic				12,989,636			13,435,700		-3.3	%
		Diluted				13,193,850			13,608,783		-3.0	%
Dividends per share					$	1.50		$	1.40		7.1	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
				June 30,				December 31,
					2025				2024
				(Unaudited)				(Audited)
Assets
Cash and due from banks				$	776,257			$	765,515
Fed funds sold					20,000				20,000
	Cash and cash equivalents				796,257				785,515
Securities held-to-maturity, at amortized cost					19,456				20,021
Securities available-for-sale, at fair value					577,040				348,706
Loans held for sale, at lower of cost or fair value					-				2,214
Loans					5,739,610				5,640,615
	Less allowance for credit losses				(73,830	)			(71,477	)
	Less amortized deferred loan fees, net				(11,940	)			(9,234	)
	Loans, net				5,653,840				5,559,904
Other real estate owned and repossessed assets					13,755				14,991
Customers' liability on acceptances					-				-
Bank furniture and fixtures, net					8,021				8,462
Bank-owned life insurance					10,571				10,433
Accrued interest receivable					31,757				33,561
Investment in affordable housing partnerships					74,783				58,346
Federal Home Loan Bank stock, at cost					15,000				15,000
Deferred tax assets					46,012				47,402
Income tax receivable					9,744				2,195
Operating lease right-of-use assets					19,346				13,182
Other assets					3,178				3,497
	Total assets			$	7,278,760			$	6,923,429
Liabilities and Shareholders' Equity
Deposits:
	Noninterest bearing demand deposits			$	675,102			$	704,859
	Interest bearing deposits:				2,004,135				2,026,965
		Savings			34,333				30,150
		Time certificates of $250,000 or more			1,681,026				1,477,931
		Other time certificates			1,683,737				1,676,943
		Total deposits			6,078,333				5,916,848
Advances from Federal Home Loan Bank					200,000				-
Subordinated debt issuance, net					148,588				148,469
Commitments to fund investment in affordable housing partnerships					30,645				21,623
Operating lease liabilities					23,096				16,990
Accrued interest payable					15,549				16,517
Other liabilities					34,889				39,830
	Total liabilities				6,531,100				6,160,277
Shareholders' equity					747,660				763,152
	Total liabilities and shareholders' equity			$	7,278,760			$	6,923,429
Book value per common share				$	60.19			$	57.86
Number of common shares outstanding					12,420,731				13,188,776

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				For the Quarter Ended
				June 30,			March 31,			December 31,			September 30,			June 30,
					2025			2025			2024			2024			2024
Unaudited historical quarterly operations data:
	Interest income			$	120,443		$	114,529		$	125,858		$	129,424		$	127,294
	Interest expense				53,569			51,871			56,685			60,576			61,187
		Interest income before provision for credit losses			66,874			62,658			69,173			68,848			66,107
	Provision for credit losses				1,600			700			2,000			3,200			2,500
	Noninterest income				3,774			3,998			3,637			3,459			3,404
	Noninterest expense				22,457			23,369			28,246			22,089			19,697
	Income tax expense				13,744			12,563			12,343			13,635			13,722
		Net income		$	32,847		$	30,024		$	30,221		$	33,383		$	33,592
	Earnings per share
		Basic		$	2.56		$	2.27		$	2.29		$	2.50		$	2.51
		Diluted		$	2.52		$	2.23		$	2.25		$	2.46		$	2.48
Ratios for the period:
	Return on average assets				1.85	%		1.76	%		1.74	%		1.95	%		1.97	%
	Return on average equity				17.55	%		15.62	%		15.81	%		17.77	%		18.89	%
	Net interest margin (Fully-taxable equivalent)				3.85	%		3.75	%		4.06	%		4.10	%		3.96	%
	Noninterest expense to average assets				1.26	%		1.37	%		1.62	%		1.29	%		1.15	%
	Efficiency ratio				31.79	%		35.06	%		38.79	%		30.55	%		28.34	%
	Net (recoveries) charge-offs to average loans (annualized)				0.00	%		-0.01	%		0.47	%		-0.00	%		0.68	%
Ratios as of period end:
	Tangible common equity ratio				10.26	%		10.96	%		11.02	%		10.92	%		10.55	%
	Tier 1 leverage capital ratio				10.73	%		11.52	%		11.33	%		11.28	%		10.89	%
	Common equity tier 1 risk-based capital ratio				11.18	%		11.86	%		11.80	%		11.66	%		11.52	%
	Tier 1 risk-based capital ratio				11.18	%		11.86	%		11.80	%		11.66	%		11.52	%
	Total risk-based capital ratio				14.43	%		15.15	%		15.11	%		15.06	%		14.93	%
	Allowances for credit losses to loans at end of period				1.29	%		1.28	%		1.27	%		1.36	%		1.34	%
	Allowance for credit losses to non-performing loans			1.41x			0.91x			1.89x			3.92x			1.79x
Average balances:
	Total securities			$	503,861		$	402,754		$	350,732		$	356,590		$	353,357
	Total loans				5,623,010			5,555,010			5,542,558			5,458,613			5,320,360
	Total earning assets				6,984,272			6,780,438			6,788,487			6,684,766			6,728,498
	Total assets				7,121,047			6,905,249			6,920,325			6,817,979			6,863,829
	Total time certificate of deposits				3,321,327			3,164,766			3,144,523			2,874,985			2,884,259
	Total interest bearing deposits				5,345,308			5,244,243			5,220,655			5,124,245			5,203,034
	Total deposits				6,005,486			5,886,163			5,905,127			5,828,227			5,901,976
	Total interest bearing liabilities				5,614,737			5,392,735			5,369,092			5,272,617			5,351,347
	Total equity				750,535			779,339			760,345			747,222			715,190

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				For the Six Months Ended
				June 30,				June 30,
					2025				2024
	Interest income			$	234,972			$	253,814
	Interest expense				105,440				119,207
		Interest income before provision for credit losses			129,532				134,607
	Provision for credit losses				2,300				6,900
	Noninterest income				7,772				6,469
	Noninterest expense				45,826				39,725
	Income tax expense				26,307				27,393
		Net income		$	62,871			$	67,058
	Earnings per share
		Basic		$	4.84			$	4.99
		Diluted		$	4.77			$	4.93
Ratios for the period:
	Return on average assets				1.81	%			1.99	%
	Return on average equity				16.58	%			18.99	%
	Net interest margin (Fully-taxable equivalent)				3.80	%			4.07	%
	Noninterest expense to average assets				1.32	%			1.18	%
	Efficiency ratio				33.38	%			28.16	%
	Net charge-off to average loans				-0.00	%			0.47	%
Average balances:
	Total securities			$	453,588			$	351,159
	Total loans				5,589,198				5,291,961
	Total earning assets				6,882,920				6,657,176
	Total assets				7,013,744				6,790,924
	Total time certificate of deposits				3,243,479				2,868,560
	Total interest bearing deposits				5,295,055				5,103,935
	Total deposits				5,946,154				5,831,732
	Total interest bearing liabilities				5,504,349				5,252,219
	Total equity				764,857				710,093

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				As of
				June 30,				March 31,				December 31,				September 30,				June 30,
					2025				2025				2024				2024				2024
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	796,257			$	925,183			$	785,515			$	804,994			$	917,677
	Securities held-to-maturity, at amortized cost				19,456				19,745				20,021				20,311				20,605
	Securities available-for-sale, at fair value				577,040				390,096				348,706				337,363				331,909
	Loans:
	Real estate – Mortgage:
	Real estate—Residential			$	767,621			$	779,462			$	790,069			$	753,453			$	732,251
	Real estate—Commercial				2,868,307				2,897,956				2,840,771				2,882,506				2,833,430
		Total Real Estate – Mortgage			3,635,928				3,677,418				3,630,840				3,635,959				3,565,681
	Real estate – Construction:
	R/E Construction — Residential				291,343				306,283				296,580				274,214				238,062
	R/E Construction — Commercial				303,354				269,065				287,185				290,308				247,582
		Total real estate construction loans			594,697				575,348				583,765				564,522				485,644
	Commercial and industrial				1,501,188				1,374,379				1,418,930				1,365,550				1,371,694
	SBA				7,741				7,104				6,833				5,424				5,463
	Consumer and others				56				164				247				124				118
		Gross loans			5,739,610				5,634,413				5,640,615				5,571,579				5,428,600
	Allowance for credit losses on loans				(73,830	)			(72,274	)			(71,477	)			(76,051	)			(72,848	)
	Net deferred loan fees				(11,940	)			(9,652	)			(9,234	)			(10,414	)			(10,502	)
	Net loans, excluding loans held for sale			$	5,653,840			$	5,552,487			$	5,559,904			$	5,485,114			$	5,345,250
	Loans held for sale			$	-			$	-			$	2,214			$	225			$	955
	Net loans			$	5,653,840			$	5,552,487			$	5,562,118			$	5,485,339			$	5,346,205
	Other real estate owned and repossessed assets			$	13,755			$	13,650			$	14,991			$	15,082			$	16,716
	Investment in affordable housing partnerships				74,783				63,612				58,346				58,009				60,432
	Federal Home Loan Bank stock, at cost				15,000				15,000				15,000				15,000				15,000
	Other assets				128,629				120,319				118,732				136,246				138,036
	Total assets			$	7,278,760			$	7,100,092			$	6,923,429			$	6,872,344			$	6,846,580
Liabilities:
	Deposits:
	Demand			$	675,102			$	730,270			$	704,859			$	682,859			$	675,767
	Interest bearing demand				2,004,135				2,099,987				2,026,965				1,994,288				2,326,214
	Savings				34,333				32,631				30,150				29,793				28,251
	Time certificates of $250,000 or more				1,681,026				1,531,715				1,477,931				1,478,500				1,406,149
	Other time certificates				1,683,737				1,678,132				1,676,943				1,682,324				1,442,381
		Total deposits		$	6,078,333			$	6,072,735			$	5,916,848			$	5,867,764			$	5,878,762
	Subordinated debt issuance, net				148,588				148,529				148,469				148,410				148,351
	Commitments to fund investment in affordable housing partnerships				30,645				20,956				21,623				23,617				27,946
	Other liabilities				73,534				79,268				73,337				82,436				68,394
	Total liabilities			$	6,531,100			$	6,321,488			$	6,160,277			$	6,122,227			$	6,123,453
Equity:
	Net common stock, no par value			$	40,965			$	96,079			$	105,501			$	109,928			$	113,509
	Retained earnings				728,891				705,360				685,108				664,808				640,675
	Accumulated other comprehensive income				(22,196	)			(22,835	)			(27,457	)			(24,619	)			(31,057	)
	Total shareholders' equity			$	747,660			$	778,604			$	763,152			$	750,117			$	723,127
	Total liabilities and shareholders' equity			$	7,278,760			$	7,100,092			$	6,923,429			$	6,872,344			$	6,846,580

PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(Unaudited)
			Three months ended June 30,								Three months ended March 31,								Three months ended June 30,
			2025								2025								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)		$	5,632,204		$	105,884	7.54	%		$	5,556,521		$	101,491	7.41	%		$	5,324,410		$	109,451	8.27	%
	Investment securities (3)			503,861			5,195	4.14	%			402,754			4,093	4.12	%			353,357			3,652	4.16	%
	Federal funds sold			20,511			233	4.56	%			20,222			228	4.57	%			20,866			291	5.61	%
	Other earning assets			827,696			9,230	4.47	%			800,941			8,816	4.46	%			1,029,865			13,999	5.47	%
		Total interest earning assets		6,984,272			120,542	6.92	%			6,780,438			114,628	6.86	%			6,728,498			127,393	7.61	%
	Deferred loan fees, net			(10,005	)							(9,189	)							(10,459	)
	Allowance for credit losses on loans			(72,328	)							(71,550	)							(79,119	)
Noninterest earning assets:
	Cash and due from banks			12,590								11,513								10,626
	Bank furniture and fixtures			8,215								8,439								9,787
	Right of use assets			19,917								15,201								22,886
	Other assets			178,386								170,397								181,610
		Total assets	$	7,121,047							$	6,905,249							$	6,863,829
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand and savings	$	2,023,981		$	16,242	3.22	%		$	2,079,477		$	16,659	3.25	%		$	2,318,775		$	24,284	4.21	%
		TCD $250K or more		1,644,322			17,092	4.17	%			1,482,324			15,640	4.28	%			1,379,116			17,295	5.04	%
		Other time certificates		1,677,005			17,840	4.27	%			1,682,442			18,247	4.40	%			1,505,143			18,283	4.89	%
		Total interest bearing deposits		5,345,308			51,174	3.84	%			5,244,243			50,546	3.91	%			5,203,034			59,862	4.63	%
Advance from Federal Home Loan Bank				120,879			1,070	3.55	%			-			-	0.00	%			-			-	0.00	%
Subordinated debt, net				148,550			1,325	3.58	%			148,492			1,325	3.62	%			148,313			1,325	3.59	%
		Total interest bearing liabilities		5,614,737			53,569	3.83	%			5,392,735			51,871	3.90	%			5,351,347			61,187	4.60	%
Noninterest bearing liabilities:
	Demand deposits			660,178								641,920								698,942
	Lease liability			23,657								18,963								19,828
	Other liabilities			71,940								72,292								78,522
		Total liabilities		6,370,512								6,125,910								6,148,639
Shareholders’ equity				750,535								779,339								715,190
		Total liabilities and shareholders’ equity	$	7,121,047							$	6,905,249							$	6,863,829
Net interest income						$	66,973							$	62,757							$	66,206
Net interest spread								3.10	%							2.96	%							3.02	%
Net interest margin								3.85	%							3.75	%							3.96	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	660,178							$	641,920							$	698,942
	Interest bearing deposits			5,345,308			51,174	3.84	%			5,244,243			50,546	3.91	%			5,203,034			59,862	4.63	%
		Total Deposits	$	6,005,486		$	51,174	3.42	%		$	5,886,163		$	50,546	3.48	%		$	5,901,976		$	59,862	4.08	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $1.1 million, $0.9 million and $1.3 million for the quarter ended June 30, 2025, March 31, 2025 and June 30, 2024, 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)
			Six Months ended June 30,
				2025								2024
						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)		$	5,594,572		$	207,375	7.47	%		$	5,295,175		$	219,431	8.33	%
	Investment securities (3)			453,588			9,289	4.13	%			351,159			7,082	4.06	%
	Federal funds sold			20,367			461	4.56	%			20,628			574	5.60	%
	Other earning assets			814,393			18,045	4.47	%			990,214			26,927	5.47	%
		Total interest earning assets		6,882,920			235,170	6.89	%			6,657,176			254,014	7.67	%
	Deferred loan fees, net			(9,599	)							(10,576	)
	Allowance for credit losses on loans			(71,941	)							(78,734	)
Noninterest earning assets:
	Cash and due from banks			11,846								10,729
	Bank furniture and fixtures			8,326								9,936
	Right of use assets			17,572								22,444
	Other assets			174,620								179,949
		Total assets	$	7,013,744							$	6,790,924
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand/ savings	$	2,051,576		$	32,901	3.23	%		$	2,235,375		$	46,649	4.20	%
		TCD $250K or more		1,563,771			32,732	4.22	%			1,360,207			33,796	5.00	%
		Other time certificates		1,679,708			36,087	4.33	%			1,508,353			36,112	4.81	%
		Total interest bearing deposits		5,295,055			101,720	3.87	%			5,103,935			116,557	4.59	%
Short-term borrowings				-			-	0.00	%			-			-	0.00	%
Advance from Federal Home Loan Bank				60,773			1,070	3.55	%			-			-	0.00	%
Subordinated debt, net				148,521			2,650	3.60	%			148,284			2,650	3.59	%
		Total interest bearing liabilities		5,504,349			105,440	3.86	%			5,252,219			119,207	4.56	%
Noninterest bearing liabilities:
	Demand deposits			651,099								727,797
	Lease liability			21,323								19,664
	Other liabilities			72,116								81,151
		Total liabilities		6,248,887								6,080,831
Shareholders’ equity				764,857								710,093
		Total liabilities and shareholders’ equity	$	7,013,744							$	6,790,924
Net interest income						$	129,730							$	134,807
Net interest spread								3.03	%							3.11	%
Net interest margin								3.80	%							4.07	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	651,099							$	727,797
	Interest bearing deposits			5,295,055			101,720	3.87	%			5,103,935			116,557	4.59	%
		Total Deposits	$	5,946,154		$	101,720	3.45	%		$	5,831,732		$	116,557	4.02	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $1.9 million and $2.4 million for the six months ended June 30, 2025 and 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
					Six Months Ended				Year Ended
					June 30, 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				8				19,028
		Mini-perm Real Estate				132				-
		Total Charge-Offs				140				19,028
	Recoveries
		Commercial & Industrial				193				50
		Total Recoveries				193				50
	Net (Recoveries) Charge-Offs					(53	)			18,978
	Provision for Credit Losses:					2,300				12,100
Balance at End of Period					$	73,830			$	71,477
Average Loans Held for Investment					$	5,589,198			$	5,396,844
Loans Held for Investment at End of Period					$	5,739,610			$	5,640,615
Net (Recoveries) Charge-Offs to Average Loans						0.00	%			0.35	%
Allowances for Credit Losses to Loans at End of Period						1.29	%			1.27	%

FAQ

What was Preferred Bank's (PFBC) earnings per share in Q2 2025?

Preferred Bank reported earnings of $2.52 per diluted share in Q2 2025.

How much did Preferred Bank's net income increase in Q2 2025 compared to Q1?

Net income increased by $2.8 million from Q1 2025, reaching $32.8 million in Q2 2025.

What was PFBC's net interest margin in Q2 2025?

Preferred Bank's net interest margin was 3.85%, up from 3.75% in Q1 2025 but down from 3.96% year-over-year.

How did Preferred Bank's loan portfolio perform in Q2 2025?

Total loans increased by $105.2 million or 1.9% quarter-over-quarter, reaching $5.74 billion.

What was PFBC's credit quality status in Q2 2025?

Credit quality improved with non-accrual loans decreasing to $51.2 million from $78.9 million in Q1, and total criticized loans decreased to $104.5 million.