Preferred Bank Reports Third Quarter Results

Interest reversals and a higher subordinated-debt coupon weighed on quarterly net interest income despite deposit growth.

Rhea-AI Summary

Preferred Bank (NASDAQ: PFBC) reported third-quarter 2026 net income of $32.9 million, down from both the prior quarter and a year earlier. Diluted earnings were $2.73 per share, versus $2.78 last quarter and $2.84 a year earlier. Net interest income fell to $66.7 million, and net interest margin narrowed to 3.49% from 3.73% last quarter.

New nonaccrual loans triggered $2.1 million in interest reversals. Nonaccrual and 90-day-past-due loans still accruing, excluding loans held for sale, rose to $109.4 million from $98.9 million in June. A separate $56.7 million loan is under contract for sale at par, with closing anticipated in late October. Deposits rose $77.7 million sequentially to $6.55 billion. Noninterest income increased to $5.0 million, while noninterest expense fell sequentially to $22.2 million. Some loan resolutions were delayed pending bankruptcy court decisions.

12 points · 0 major

MixediHow this balance works

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It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

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0 major · 16 points

Hollow bars mark forward-looking points. How the balance works

Positive

• Moderate pointDeposits increased $77.7 million sequentially to $6.55 billion, up $204.4 million from December 2025.
• Moderate pointThird-quarter noninterest income reached $5.0 million, versus $3.5 million sequentially and $3.7 million a year earlier.
• Moderate point. Forward-looking: it has not happened yet and may not happen.The $56.7 million loan is contracted for sale at par, with closing anticipated in late October 2026. 4.4% of market cap
• Moderate pointGross loans reached $6.25 billion, essentially flat sequentially and up $200.6 million from December 2025.
• Minor pointThird-quarter noninterest expense fell to $22.2 million from $23.7 million sequentially, but exceeded $21.5 million a year earlier.

7 minor points

• Minor pointThird-quarter loan recoveries were $8,000, versus $41,000 sequentially and $1.6 million in charge-offs a year earlier.
• Minor pointTotal assets increased $214.9 million from December 2025 to $7.82 billion.
• Minor pointThe leverage ratio rose to 10.78% from 10.54% at December 31, 2025.
• Minor pointNine-month net interest income increased 0.6% year over year to $202.014 million.
• Minor pointNine-month noninterest income increased 11.9% year over year to $12.785 million.
• Minor pointNine-month credit-loss provision declined 2.1% year over year to $4.7 million.
• Minor point. Forward-looking: it has not happened yet and may not happen.The bank expects the recent rate increase to benefit net interest margin because its balance sheet is asset-sensitive.

Negative

• Moderate pointThird-quarter net income fell to $32.9 million, down $3.0 million year over year and $592,000 sequentially.
• Moderate pointThird-quarter net interest income fell to $66.7 million, down $3.3 million sequentially and $4.6 million year over year.
• Moderate pointNet interest margin narrowed to 3.49%, versus 3.73% sequentially and 3.92% a year earlier.
• Moderate pointNew nonaccrual placements included $56.7 million and four other loans totaling $13.5 million, triggering $2.1 million in interest reversals.
• Moderate pointProblem loans excluding loans held for sale rose to $109.4 million, versus $98.9 million in June and $51.3 million in December.
• Moderate pointSubordinated-debt coupon increased from 3.375% to 6.44% after switching to a floating rate on June 16, 2026.

10 minor points

• Minor pointThird-quarter diluted earnings declined to $2.73 from $2.78 sequentially and $2.84 a year earlier.
• Minor point. Forward-looking: it has not happened yet and may not happen.Some loan resolutions moved to fourth-quarter 2026 or first-quarter 2027, pending bankruptcy court decisions.
• Minor pointThird-quarter credit-loss provision was $2.0 million, versus $1.2 million sequentially and $2.5 million a year earlier.
• Minor pointThe efficiency ratio was 30.9%, improved from 32.3% sequentially but above 28.7% a year earlier.
• Minor pointThird-quarter effective tax rate was 30.7%, versus 30.9% sequentially and 29.5% a year earlier.
• Minor pointLoans excluding loans held for sale decreased $41.0 million sequentially after the $56.7 million transfer to held-for-sale status.
• Minor pointTangible common equity ratio fell to 10.13% from 10.38% at December 31, 2025.
• Minor pointTotal capital ratio declined to 13.93% from 14.47% at December 31, 2025.
• Minor pointNine-month noninterest expense increased 3.1% year over year to $69.413 million.
• Minor point. Forward-looking: it has not happened yet and may not happen.The bank expects deposit competition and market conditions to continue into 2027.

News Explained

On June 16, 2026, the Bank’s subordinated debt shifted from fixed 3.375% to floating, with a 6.44% coupon in the third quarter; the company said the higher coupon contributed, to a lesser extent than interest reversals, to the quarter’s lower net interest margin.

Key Figures

Net income: $32.9 million Diluted EPS: $2.73 Net interest income before provision: $66.7 million +5 more

Net income

$32.9 million

Third quarter 2026; decreased from both the prior quarter and year-earlier quarter

Diluted EPS

$2.73

Third quarter 2026

Net interest income before provision

$66.7 million

Third quarter 2026; down $3.3 million quarter over quarter and $4.6 million year over year

Net interest margin

3.49%

Third quarter 2026, compared with 3.73% in Q2 2026 and 3.92% in Q3 2025

Loans placed on nonaccrual

$56.7 million and four others totaling $13.5 million

During the third quarter of 2026

Interest income reversal

$2.1 million

Third quarter 2026; resulting from loans placed on nonaccrual

Deposits

Increased $77.7 million, or 1.2%

Linked quarter

Nonaccrual and 90-days-past-due loans

$109.4 million

Excluding loans held for sale; compared with $98.9 million at June 30, 2026

Previous Earnings Reports

1 past event · Latest: Jul 22

Same Type 1 event

1. Jul 22

   Q2 2026 earnings

   24h Move

   -1.1%

   Interest recoveries lifted prior-quarter margin; current results disclosed reversals and a sequential margin decline.

24h Move is the share-price change in the day after each event; other market factors may also have contributed.

Key Terms

nonaccrual status, net interest margin, sofr, common equity tier 1 capital ratio

4 terms

nonaccrual status financial

"placed a $56.7 million loan on 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.

net interest margin financial

"The net interest margin for the third quarter was 3.49%"

Net interest margin measures how much a bank earns from lending and investing compared with what it pays for funding, expressed as a percentage of its interest-earning assets. Think of it like a grocery store’s markup: it shows the gap between buying cost and selling price per dollar of goods — here, the cost is interest paid and the sale is interest received. Investors watch it because a higher margin usually means a bank is more profitable and better at managing interest rate and credit conditions.

sofr financial

"floating rate of the 3 month SOFR rate plus 278 basis points"

The Secured Overnight Financing Rate (SOFR) is a market benchmark that measures the cost of borrowing cash overnight using U.S. Treasury securities as collateral. Investors watch SOFR because it acts like a speedometer for short-term interest costs—affecting loan rates, bond yields and the pricing of interest-rate contracts—so movements change borrowing expenses, cash returns and the value of interest-sensitive investments.

common equity tier 1 capital ratio regulatory

"the common equity tier 1 capital ratio was 11.26%"

A bank’s common equity tier 1 (CET1) capital ratio measures the size of its strongest loss-absorbing capital—mainly common shares and retained earnings—relative to the bank’s assets after adjusting those assets for how risky they are (riskier loans count more). Think of it as the safety cushion compared with the weight of risky business; investors use it to judge a bank’s ability to survive losses, meet rules, and sustain dividends or growth.

AI-generated analysis. How Rhea-AI works. Not financial advice.

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LOS ANGELES, Oct. 23, 2026 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2026. Preferred Bank (“the Bank”) reported net income of $32.9 million or $2.73 per diluted share for the third quarter of 2026. This represents a decrease in net income of $3.0 million from the same quarter last year and a decrease of $592,000 from the previous quarter. The decrease compared to the prior year was due to a decrease in net interest income of $4.6 million partially offset by a $1.3 million increase in noninterest income and a small increase in noninterest expense of $661,000. The difference compared to the prior quarter was again due to net interest income which decreased by $3.3 million partially offset by an increase in noninterest income of $1.5 million and a decrease in noninterest expense of $1.6 million. During the quarter, the Bank placed a $56.7 million loan on nonaccrual status and four others totaling $13.5 million and the resulting reversal of interest income was $2.1 million which was the primary driver behind the decrease in net interest income.

Highlights for the Quarter:

• Return on average assets was 1.69%
• Return on average equity was 16.18%
• Total deposits increased by $77.7 million, or 1.2%, linked quarter
• The efficiency ratio for the quarter was 30.9%

Li Yu, Chairman and CEO, commented, “Net income for the third quarter ended September 30, 2026, was $32.9 million or $2.73 per diluted share. Both are lower than the second quarter due primarily to the interest recoveries last quarter and interest reversals this quarter.

“Deposits increased by $77.7 million or 1.2% for the quarter. It is highly likely that the competition for deposits and market conditions will continue into 2027.

“Loans (excluding loans held for sale) decreased $41.0 million after we placed a $56.7 million loan into held for sale status. Presently, we are seeing a stronger pipeline that hopefully will result in solid loan growth in the fourth quarter.

“The net interest margin for the third quarter was 3.49% compared to 3.73% in the second quarter. The variance is largely caused by a $2.1 million interest income reversal in the third quarter and $2.9 million of interest income recoveries in the second quarter. The recent fed rate increase should bring beneficial results to our net interest margin as our balance sheet is asset sensitive.

“Resolution of non-accrual loans is progressing although slower than we had hoped for. Several loans that were scheduled to be resolved in the quarter are now delayed to the fourth quarter or the first quarter 2027 because these assets are subject to bankruptcy courts’ decisions.

This quarter we have outperformed our own expectations in non-interest income and non-interest expense. Our cost control remains effective under this inflationary environment.

We believe the country’s economy will remain strong in 2027, and inflationary pressure will gradually subside. We are optimistic that Preferred Bank will continue to grow.”

Results of Operations

Net Interest Income Compared to Prior Quarter. Net interest income before provision for credit losses was $66.7 million for the third quarter of 2026. This represents a $3.3 million decrease from the previous quarter. The decrease in net interest income from the prior quarter was due primarily to an interest recovery of $2.9 million recorded in the second quarter of 2026. Secondarily, the Bank reversed $2.1 million in the third quarter as a result of placing loans on nonaccrual status. Finally, interest expense also increased this quarter over the prior quarter driven by an increase in the interest rate on the Bank’s subordinated debt. On June 16, 2026, the Bank’s subordinated debt went from fixed rate to a floating rate of the 3 month SOFR rate plus 278 basis points resulting in an increase in the coupon rate from 3.375% to 6.44% for the third quarter of 2026. The Bank’s net interest margin (“NIM”) contracted in the quarter to 3.49% due to the interest reversals previously mentioned and to a lesser extent, the increase in the sub debt coupon. This compares to a NIM of 3.73% in the prior quarter which was aided by interest recoveries and to a NIM of 3.92% for the same quarter last year.

Net Interest Income Compared to Prior Year Quarter. Net interest income before provision for credit losses was $66.7 million for the third quarter of 2026. This represents a $4.6 million decrease from the $71.3 million recorded in the same quarter last year. The decrease compared to the same quarter last year was due mainly to the $2.1 million in interest reversals previously mentioned as well as lower interest on overnight funds due to lower balances partially offset by a decrease in interest expense.

Noninterest Income. For the third quarter of 2026, noninterest income was $5.0 million compared with $3.7 million for the same quarter last year and compared to $3.5 million for the second quarter of 2026. The increase from the same quarter last year was mainly due to a gain on the call of one of the Bank’s investment securities of $431,000 as well as an increase in letters of credit fee income of $748,000. The increase over the prior quarter was due to a loss on the sale of a loan of $874,000 which occurred last quarter as well as an increase in letters of credit income and the gain on the call of an investment security this quarter.

Noninterest Expense. Total noninterest expense was $22.2 million for the third quarter of 2026 compared to $21.5 million for the same period last year and compared to $23.7 million recorded in the prior quarter. The primary reason for the increase from the prior year was mainly due to an increase in FDIC assessments of $560,000 and an increase in other professional services of $289,000 due mainly to legal fees on problem loans. This was partially offset by a decrease in OREO expense of $388,000. The decrease from the prior quarter was due primarily to a decrease in personnel expense of $1.1 million, $366,000 in other professional expense and a $109,000 in OREO expense. The Bank’s efficiency ratio came in at 30.9% for the quarter, which compares to 32.3% last quarter and to 28.7% in the same quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $14.6 million for the third quarter of 2026. This represents an effective tax rate (“ETR”) of 30.7% which is up from the 29.5% ETR for the same quarter last year and down slightly from 30.9% ETR recorded in the second quarter of 2026. 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 September 30, 2026 were $6.25 billion, essentially flat from the $6.25 billion reported as of June 30, 2026. And an increase of $200.6 million from the total of $6.05 billion as of December 31, 2025. Total deposits were $6.55 billion as of September 30, 2026, an increase of $77.7 million from the $6.47 billion as of June 30, 2026 and an increase of $204.4 million from December 31, 2025. Total assets were $7.82 billion, an increase of $214.9 million over the total of $7.60 billion as of December 31, 2025.

Asset Quality

Non-accrual loans and loans 90 days or more past due and still accruing totaled $109.4 million excluding loans held for sale compared to $98.9 million at June 30, 2026 as compared to $51.3 million as of December 31, 2025. During the quarter, the Bank placed a $56.7 million mixed use property onto nonaccrual status due to late payments. This loan is currently under contract to be sold at par with closing anticipated in late October 2026. The Bank is continuously reviewing all nonaccrual loans to ensure timely resolution. At present, there is no significant loss content identified and the average LTV for this commercial real estate cohort stands at 60.8%. Total net charge-offs (recoveries) on loans for the quarter were $(8,000) compared to $(41,000) in the second quarter of 2026 and compared to net charge-offs of $1.6 million in the third quarter of 2025.

Allowance for Credit Losses

The provision for credit losses for the third quarter of 2026 was 2.1 million compared to the $1.2 million recorded in the second quarter of 2026 and compared to $2.5 million in the same quarter last year.   The Bank’s allowance coverage ratio was 1.26% of total loans held for investment compared to 1.22% last quarter and compared to 1.30% as of December 31, 2025.

Capitalization

As of September 30, 2026, the Bank’s tangible common equity ratio was 10.13%, the leverage ratio was 10.78%, the common equity tier 1 capital ratio was 11.26% and the total capital ratio stood at 13.93%. As of December 31, 2025, the Bank’s tangible common equity ratio was 10.38%, the Bank’s leverage ratio was 10.54%, the common equity tier 1 ratio was 11.26% and the total capital ratio was 14.47%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2026 financial results will be held this afternoon, October 23, 2026 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 Risk 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 855-669-9658 (domestic) or 412-317-0088 (international) through November 6, 2026; the passcode is 9134266.

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 thirteen full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana, Cupertino 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. 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 2025 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

Financial Tables to Follow

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
					For the Quarter Ended
					September 30,				June 30,				September 30,
						2026				2026				2025
Interest income:
	Loans, including fees				$	106,517			$	108,358			$	110,645
	Investment securities					13,966				13,883				15,977
	Fed funds sold					199				205				228
		Total interest income				120,682				122,446				126,850
Interest expense:
	Interest-bearing demand					16,003				15,624				17,562
	Savings					79				75				67
	Time certificates					33,441				33,497				34,792
	FHLB borrowings					1,877				1,743				1,794
	Subordinated debt					2,571				1,517				1,325
		Total interest expense				53,971				52,456				55,540
		Net interest income				66,711				69,990				71,310
Provision for credit losses						2,000				1,200				2,500
		Net interest income after provision for credit losses				64,711				68,790				68,810
Noninterest income:
	Fees & service charges on deposit accounts					556				570				625
	Letters of credit fee income					3,169				2,890				2,421
	BOLI income					108				107				105
	Net gain on called and sale of investment securities					431				35				-
	Net gain (loss) on sale of loans					112				(874	)			56
	Other income					616				755				458
		Total noninterest income				4,992				3,483				3,665
Noninterest expense:
	Salary and employee benefits					14,205				15,281				14,240
	Net occupancy expense					2,360				2,395				2,297
	Business development and promotion expense					240				322				238
	Professional services					1,783				2,149				1,494
	Office supplies and equipment expense					385				340				361
	OREO valuation allowance and related expense					75				184				463
	Other					3,111				3,044				2,405
		Total noninterest expense				22,159				23,715				21,498
		Income before provision for income taxes				47,544				48,558				50,977
Income tax expense						14,596				15,018				15,038
		Net income			$	32,948			$	33,540			$	35,939
Income per share available to common shareholders
		Basic			$	2.78			$	2.83			$	2.90
		Diluted			$	2.73			$	2.78			$	2.84
Weighted-average common shares outstanding
		Basic				11,853,279				11,843,821				12,384,924
		Diluted				12,078,448				12,049,162				12,634,174
Cash dividends per common share					$	0.80			$	0.80			$	0.75

PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
					For the Nine Months Ended
					September 30,				September 30,					Change
						2026				2025				%
Interest income:
	Loans, including fees				$	318,257			$	318,020				0.1	%
	Investment securities					41,150				43,113				-4.6	%
	Fed funds sold					596				689				-13.5	%
		Total interest income				360,003				361,822				-0.5	%
Interest expense:
	Interest-bearing demand					46,747				50,323				-7.1	%
	Savings					208				207				0.3	%
	Time certificates					100,311				103,611				-3.2	%
	FHLB borrowings					5,310				2,864				85.4	%
	Subordinated debt					5,413				3,975				36.2	%
		Total interest expense				157,989				160,980				-1.9	%
		Net interest income				202,014				200,842				0.6	%
Provision for credit losses						4,700				4,800				-2.1	%
		Net interest income after provision for credit losses				197,314				196,042				0.6	%
Noninterest income:
	Fees & service charges on deposit accounts					1,642				1,976				-16.9	%
	Letters of credit fee income					8,796				6,998				25.7	%
	BOLI income					320				312				2.5	%
	Net gain on called and sale of investment securities					525				-				100.0	%
	Net (loss) gain on sale of loans					(738	)			503				-246.5	%
	Other income					2,240				1,636				36.9	%
		Total noninterest income				12,785				11,425				11.9	%
Noninterest expense:
	Salary and employee benefits					44,946				43,326				3.7	%
	Net occupancy expense					7,181				6,862				4.6	%
	Business development and promotion expense					765				940				-18.6	%
	Professional services					5,579				4,652				19.9	%
	Office supplies and equipment expense					1,083				1,166				-7.1	%
	OREO valuation allowance and related expense					622				3,473				-82.1	%
	Other					9,237				6,893				34.0	%
		Total noninterest expense				69,413				67,312				3.1	%
		Income before provision for income taxes				140,686				140,155				0.4	%
Income tax expense						43,054				41,345				4.1	%
		Net income			$	97,632			$	98,810				-1.2	%
Income per share available to common shareholders
		Basic			$	8.18			$	7.77				5.4	%
		Diluted			$	8.03			$	7.63				5.3	%
Weighted-average common shares outstanding
		Basic				11,933,229				12,723,788				-6.2	%
		Diluted				12,153,212				12,949,445				-6.1	%
Dividends per share					$	2.40			$	2.25				6.7	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
				September 30,				December 31,
					2026				2025
				(Unaudited)				(Audited)
Assets
Cash and due from banks				$	681,029			$	807,098
Fed funds sold					20,000				20,000
	Cash and cash equivalents				701,029				827,098
Securities held-to-maturity, at amortized cost					17,834				18,749
Securities available-for-sale, at fair value					672,082				566,186
Loans held for sale, at lower of cost or fair value					56,557				-
Loans					6,198,293				6,054,264
	Less allowance for credit losses				(78,284	)			(78,992	)
	Less amortized deferred loan fees, net				(7,611	)			(9,030	)
	Loans, net				6,112,398				5,966,242
Other real estate owned and repossessed assets					11,534				3,510
Bank furniture and fixtures, net					10,888				8,064
Bank-owned life insurance					10,924				10,712
Accrued interest receivable					38,349				34,233
Investment in affordable housing partnerships					79,047				69,978
Federal Home Loan Bank stock, at cost					15,000				15,000
Deferred tax assets					55,015				41,976
Income tax receivable					3,513				3,884
Operating lease right-of-use assets					27,679				30,531
Other assets					4,172				5,002
	Total assets			$	7,816,021			$	7,601,165
Liabilities and shareholders' Equity
Deposits:
	Noninterest bearing demand deposits			$	745,763			$	699,160
	Interest bearing deposits:				2,321,924				2,205,914
		Savings			29,840				30,376
		Time certificates of $250,000 or more			1,830,163				1,754,273
		Other time certificates			1,622,184				1,655,723
		Total deposits			6,549,874				6,345,446
Advances from Federal Home Loan Bank					200,000				200,000
Subordinated debt issuance, net					148,884				148,706
Commitments to fund investment in affordable housing partnerships					32,040				23,327
Operating lease liabilities					32,184				35,107
Accrued interest payable					16,779				16,513
Other liabilities					43,827				42,589
	Total liabilities				7,023,588				6,811,688
Shareholders' equity					792,433				789,477
	Total liabilities and shareholders' equity			$	7,816,021			$	7,601,165
Book value per common share				$	66.85			$	64.83
Number of common shares outstanding					11,853,571				12,177,588

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				For the Quarter Ended
				September 30,				June 30,				March 31,				December 31,				September 30,
					2026				2026				2026				2025				2025
Unaudited historical quarterly operations data:
	Interest income			$	120,682			$	122,446			$	116,875			$	124,633			$	126,850
	Interest expense				53,971				52,456				51,562				54,658				55,540
		Interest income before provision for credit losses			66,711				69,990				65,313				69,975				71,310
	Provision for credit losses				2,000				1,200				1,500				4,300				2,500
	Noninterest income				4,992				3,483				4,310				8,094				3,665
	Noninterest expense				22,159				23,715				23,539				24,377				21,498
	Income tax expense				14,596				15,018				13,440				14,570				15,038
		Net income		$	32,948			$	33,540			$	31,144			$	34,822			$	35,939
	Earnings per share
		Basic		$	2.78			$	2.83			$	2.57			$	2.85			$	2.90
		Diluted		$	2.73			$	2.78			$	2.53			$	2.79			$	2.84
Ratios for the period:
	Return on average assets				1.69	%			1.75	%			1.67	%			1.82	%			1.93	%
	Return on average equity				16.18	%			17.05	%			15.89	%			17.59	%			18.64	%
	Net interest margin (fully-taxable equivalent)				3.49	%			3.73	%			3.57	%			3.74	%			3.92	%
	Noninterest expense to average assets				1.14	%			1.24	%			1.26	%			1.27	%			1.16	%
	Efficiency ratio				30.90	%			32.28	%			33.81	%			31.22	%			28.67	%
	Net charge-offs (recoveries) to average loans (annualized)				-0.00	%			-0.00	%			0.37	%			0.00	%			0.11	%
Ratios as of period end:
	Tangible common equity ratio				10.13	%			10.26	%			10.05	%			10.38	%			10.38	%
	Tier 1 leverage capital ratio				10.78	%			10.55	%			10.37	%			10.54	%			10.66	%
	Common equity tier 1 risk-based capital ratio				11.26	%			11.06	%			10.87	%			11.26	%			11.34	%
	Tier 1 risk-based capital ratio				11.26	%			11.06	%			10.87	%			11.26	%			11.34	%
	Total risk-based capital ratio				13.93	%			13.74	%			13.98	%			14.47	%			14.56	%
	Allowances for credit losses to loans at end of period				1.26	%			1.22	%			1.24	%			1.30	%			1.27	%
	Allowance for credit losses to non-performing loans				0.75	x			0.84	x			0.8	x			1.54	x			4.24	x
Average balances:
	Total securities			$	610,837			$	558,696			$	580,248			$	586,950			$	583,302
	Total loans held for investment				6,191,538				6,021,420				6,037,241				5,947,814				5,753,801
	Total loans held for investment and held for sale				6,200,211				6,038,330				6,051,465				5,947,986				5,754,073
	Total earning assets				7,587,420				7,532,781				7,437,232				7,439,767				7,234,568
	Total assets				7,733,141				7,668,719				7,563,705				7,585,940				7,382,265
	Total time certificate of deposits				3,468,041				3,500,857				3,451,924				3,402,304				3,330,241
	Total interest bearing deposits				5,714,126				5,712,097				5,644,722				5,651,369				5,501,767
	Total deposits				6,456,558				6,420,198				6,311,446				6,336,242				6,169,728
	Total interest bearing liabilities				6,062,973				6,060,886				5,993,452				6,000,042				5,850,376
	Total equity				807,742				789,114				794,931				785,581				764,766

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				For the Nine Months Ended
				September 30				September 30
					2026				2025
	Interest income			$	360,003			$	361,822
	Interest expense				157,989				160,980
		Interest income before provision for credit losses			202,014				200,842
	Provision for credit losses				4,700				4,800
	Noninterest income				12,785				11,425
	Noninterest expense				69,413				67,312
	Income tax expense				43,054				41,345
		Net income		$	97,632			$	98,810
	Earnings per share
		Basic		$	8.18			$	7.77
		Diluted		$	8.03			$	7.63
Ratios for the period:
	Return on average assets				1.71	%			1.85	%
	Return on average equity				16.37	%			17.27	%
	Net interest margin (fully-taxable equivalent)				3.60	%			3.84	%
	Noninterest expense to average assets				1.21	%			1.26	%
	Efficiency ratio				32.32	%			31.71	%
	Net charge-off to average loans				0.12	%			0.04	%
Average balances:
	Total securities			$	583,373			$	497,301
	Total loans held for investment				6,083,964				5,644,668
	Total loans held for investment and held for sale				6,097,213				5,648,323
	Total earning assets				7,519,694				7,001,424
	Total assets				7,655,809				7,137,935
	Total time certificate of deposits				3,473,667				3,272,717
	Total interest bearing deposits				5,690,570				5,364,715
	Total deposits				6,396,600				6,021,497
	Total interest bearing liabilities				6,039,359				5,620,958
	Total equity				797,309				764,826

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				As of
				September 30,				June 30,				March 31,				December 31,				September 30,
					2026				2026				2026				2025				2025
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	701,029			$	789,820			$	825,161			$	827,098			$	815,459
	Securities held-to-maturity, at amortized cost				17,834				18,154				18,458				18,749				19,034
	Securities available-for-sale, at fair value				672,082				525,956				553,184				566,186				569,115
	Loans:
		Real estate – mortgage:
			Real estate—residential	$	745,775			$	737,321			$	738,508			$	783,136			$	793,217
			Real estate—commercial		3,127,696				3,169,037				3,105,331				3,028,762				2,890,990
			Total Real estate – mortgage		3,873,471				3,906,358				3,843,839				3,811,898				3,684,207
		Real estate – construction:
			R/E construction — residential		282,750				284,219				265,748				282,808				285,623
			R/E construction — commercial		356,582				364,807				343,598				387,759				323,897
			Total real estate construction loans		639,332				649,026				609,346				670,567				609,520
		Commercial and industrial			1,676,780				1,675,300				1,584,984				1,563,504				1,570,423
		SBA			8,598				8,444				8,087				8,053				7,630
		Consumer and others			112				153				288				242				231
			Gross loans		6,198,293				6,239,281				6,046,544				6,054,264				5,872,011
	Allowance for credit losses on loans				(78,284	)			(76,276	)			(75,036	)			(78,992	)			(74,692	)
	Net deferred loan fees				(7,611	)			(8,288	)			(7,923	)			(9,030	)			(9,956	)
		Net loans, excluding loans held for sale		$	6,112,398			$	6,154,717			$	5,963,585			$	5,966,242			$	5,787,363
	Loans held for sale			$	56,557			$	8,348			$	76,324			$	-			$	-
		Net loans		$	6,168,955			$	6,163,065			$	6,039,909			$	5,966,242			$	5,787,363
	Other real estate owned and repossessed assets			$	11,534			$	3,010			$	3,010			$	3,510			$	52,609
	Investment in affordable housing partnerships				79,047				77,729				66,394				69,978				73,874
	Federal Home Loan Bank stock, at cost				15,000				15,000				15,000				15,000				15,000
	Other assets				150,540				137,887				133,521				134,402				135,340
		Total assets		$	7,816,021			$	7,730,621			$	7,654,637			$	7,601,165			$	7,467,794
Liabilities:
	Deposits:
		Demand		$	745,763			$	754,670			$	716,777			$	699,160			$	654,302
		Interest bearing demand			2,321,924				2,209,390				2,200,374				2,205,914				2,205,865
		Savings			29,840				31,617				26,822				30,376				31,087
		Time certificates of $250,000 or more			1,830,163				1,822,765				1,795,883				1,754,273				1,699,757
		Other time certificates			1,622,184				1,653,766				1,680,291				1,655,723				1,638,662
		Total deposits		$	6,549,874			$	6,472,208			$	6,420,147			$	6,345,446			$	6,229,673
	Advance from Federal Home Loan Bank				200,000				200,000				200,000				200,000				200,000
	Subordinated debt issuance, net				148,884				148,825				148,766				148,706				148,647
	Commitments to fund investment in affordable housing partnerships				32,040				29,949				18,873				23,327				24,874
	Other liabilities				92,790				86,112				96,652				94,209				88,958
		Total liabilities		$	7,023,588			$	6,937,094			$	6,884,438			$	6,811,688			$	6,692,152
Equity:
	Common stock, no par value			$	210,882			$	210,882			$	210,882			$	210,882			$	210,882
	Additional paid-in capital				113,018				110,913				108,853				105,105				103,235
	Treasury stock				(334,626	)			(334,591	)			(334,490	)			(293,406	)			(277,351	)
	Retained earnings				849,830				826,365				802,308				780,637				755,587
	Accumulated other comprehensive income				(46,671	)			(20,042	)			(17,354	)			(13,741	)			(16,711	)
		Total shareholders' equity		$	792,433			$	793,527			$	770,199			$	789,477			$	775,642
		Total liabilities and shareholders' equity		$	7,816,021			$	7,730,621			$	7,654,637			$	7,601,165			$	7,467,794

PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(Unaudited)
			Three months ended September 30,											Three months ended June 30,											Three months ended September 30,
				2026											2026											2025
							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)		$	6,200,211			$	106,517			6.82	%		$	6,038,330			$	108,358			7.20	%		$	5,754,073			$	110,645			7.63	%
	Investment securities(3)			610,837				6,499			4.22	%			558,696				5,611			4.03	%			583,302				6,257			4.26	%
	Federal funds sold			20,648				199			3.82	%			21,538				205			3.82	%			20,000				228			4.52	%
	Other earning assets			755,724				7,561			3.97	%			914,217				8,364			3.67	%			877,193				9,811			4.44	%
		Total interest earning assets		7,587,420				120,776			6.32	%			7,532,781				122,538			6.52	%			7,234,568				126,941			6.96	%
	Deferred loan fees, net			(8,072	)										(8,139	)										(10,686	)
	Allowance for credit losses on loans			(76,309	)										(75,675	)										(72,784	)
Noninterest earning assets:
	Cash and due from banks			11,412											11,141											10,071
	Bank furniture and fixtures			10,803											9,694											7,945
	Right of use assets			28,288											29,211											19,153
	Other assets			179,599											169,706											193,998
		Total assets	$	7,733,141										$	7,668,719										$	7,382,265
Liabilities and shareholders' equity
Interest bearing liabilities:
	Deposits:
		Interest bearing demand and savings	$	2,246,085			$	16,082			2.84	%		$	2,211,240			$	15,699			2.85	%		$	2,171,526			$	17,629			3.22	%
		TCD $250K or more		1,817,686				17,296			3.78	%			1,812,356				17,065			3.78	%			1,686,710				17,406			4.09	%
		Other time certificates		1,650,355				16,145			3.88	%			1,688,501				16,432			3.90	%			1,643,531				17,386			4.20	%
		Total interest bearing deposits		5,714,126				49,523			3.44	%			5,712,097				49,196			3.45	%			5,501,767				52,421			3.78	%
Advance from Federal Home Loan Bank				200,000				1,877			3.72	%			200,000				1,743			3.50	%			200,000				1,794			3.56	%
Subordinated debt, net				148,847				2,571			6.85	%			148,789				1,517			4.09	%			148,609				1,325			3.54	%
		Total interest bearing liabilities		6,062,973				53,971			3.53	%			6,060,886				52,456			3.47	%			5,850,376				55,540			3.77	%
Noninterest bearing liabilities:
	Demand deposits			742,432											708,101											667,961
	Lease liability			32,888											33,946											22,908
	Other liabilities			87,106											76,672											76,254
		Total liabilities		6,925,399											6,879,605											6,617,499
Shareholders’ equity				807,742											789,114											764,766
		Total liabilities and shareholders’ equity	$	7,733,141										$	7,668,719										$	7,382,265
Net interest income							$	66,805										$	70,082										$	71,401
Net interest spread											2.78	%										3.05	%										3.19	%
Net interest margin											3.49	%										3.73	%										3.92	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	742,432										$	708,101										$	667,961
	Interest bearing deposits			5,714,126				49,523			3.44	%			5,712,097				49,196			3.45	%			5,501,767				52,421			3.78	%
		Total Deposits	$	6,456,558			$	49,523			3.04	%		$	6,420,198			$	49,196			3.07	%		$	6,169,728			$	52,421			3.37	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $0.8 million, $1.2 million and $1.7 million for the quarter ended September 30, 2026, June 30, 2026 and September 30, 2025, 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)
			Nine Months ended September 30,
			2026										2025
							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)		$	6,097,213			$	318,257		6.98	%		$	5,648,323			$	318,020		7.53	%
	Investment securities(3)			583,373				17,822		4.08	%			497,301				15,546		4.18	%
	Federal funds sold			20,898				596		3.81	%			20,244				689		4.55	%
	Other earning assets			818,210				23,606		3.86	%			835,556				27,857		4.46	%
		Total interest earning assets		7,519,694				360,281		6.41	%			7,001,424				362,112		6.91	%
	Deferred loan fees, net			(8,181	)									(9,965	)
	Allowance for credit losses on loans			(76,980	)									(72,225	)
Noninterest earning assets:
	Cash and due from banks			10,872										11,178
	Bank furniture and fixtures			9,677										8,198
	Right of use assets			29,224										18,105
	Other assets			171,503										181,220
		Total assets	$	7,655,809									$	7,137,935
Liabilities and shareholders' equity
Interest bearing liabilities:
	Deposits:
		Interest bearing demand/ savings	$	2,216,903			$	46,955		2.83	%		$	2,091,998			$	50,530		3.23	%
		TCD $250K or more		1,801,206				51,247		3.80	%			1,605,201				50,138		4.18	%
		Other time certificates		1,672,461				49,064		3.92	%			1,667,516				53,473		4.29	%
		Total interest \bearing deposits		5,690,570				147,266		3.46	%			5,364,715				154,141		3.84	%
Short-term borrowings				1				0		2.77	%			-				-		0.00	%
Advance from Federal Home Loan Bank				200,000				5,310		3.55	%			107,692				2,864		3.56	%
Subordinated debt, net				148,788				5,413		4.86	%			148,551				3,975		3.58	%
		Total interest bearing liabilities		6,039,359				157,989		3.50	%			5,620,958				160,980		3.83	%
Noninterest bearing liabilities:
	Demand deposits			706,030										656,782
	Lease liability			33,899										21,857
	Other liabilities			79,212										73,512
		Total liabilities		6,858,500										6,373,109
Shareholders’ equity				797,309										764,826
		Total liabilities and shareholders’ equity	$	7,655,809									$	7,137,935
Net interest income							$	202,292									$	201,132
Net interest spread										2.91	%									3.09	%
Net interest margin										3.60	%									3.84	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	706,030									$	656,782
	Interest bearing deposits			5,690,570				147,266		3.46	%			5,364,715				154,141		3.84	%
		Total Deposits	$	6,396,600			$	147,266		3.08	%		$	6,021,497			$	154,141		3.42	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $3.2 million and $3.6 million for the nine months ended September 30, 2026 and 2025, 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
					Nine Months Ended				Year Ended
					September 30, 2026				December 31, 2025
					(Dollars in 000's)
Allowance for credit losses
Balance at beginning of period					$	78,992			$	71,477
	Charge-Offs
		Commercial & Industrial				2,555				8
		Mini-perm real estate				3,833				1,749
		Total charge-offs				6,388				1,757
	Recoveries
		Commercial & Industrial				112				172
		Mini-perm real estate				868				-
		Total recoveries				980				172
	Net charge-offs					5,408				1,585
	Provision for dredit losses					4,700				9,100
Balance at dnd of period					$	78,284			$	78,992
Average loans held for investment					$	6,083,964			$	5,721,077
Loans held for investment at end of period					$	6,198,293			$	6,054,264
Net charge-offs to average loans						0.12	%			0.03	%
Allowances for credit losses to loans at end of period						1.26	%			1.30	%

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

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What were Preferred Bank's third-quarter 2026 earnings?

Preferred Bank earned $32.9 million, or $2.73 per diluted share, in the third quarter of 2026. Net income decreased $3.0 million from the same quarter last year and $592,000 from the previous quarter.

Why did Preferred Bank's net interest margin decline in third-quarter 2026?

Preferred Bank's margin narrowed to 3.49% as interest reversals and a higher subordinated-debt coupon weighed on results. The third quarter included $2.1 million in interest reversals, while the previous quarter benefited from $2.9 million in interest recoveries.

What credit-loss coverage did Preferred Bank report for September 2026?

Preferred Bank's allowance coverage ratio was 1.26% of total loans held for investment, compared with 1.22% last quarter and 1.30% at December 31, 2025.

What did Preferred Bank say about potential losses on its nonaccrual commercial real estate loans?

Preferred Bank identified no significant loss content at present and reported an average loan-to-value ratio of 60.8% for its nonaccrual commercial real estate cohort. Loan-to-value measures the loan balance against the property's value.