PFBC Preferred Bank

Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2024. Preferred Bank (“the Bank”) reported net income of $33.4 million or $2.46 per diluted share for the third quarter of 2024. This represents a slight decrease in net income of $209,000 from the prior quarter and down by $4.8 million from the same quarter last year. The decrease in net income from the prior year was due to a decrease in net interest income of $4.1 million due to higher deposit costs as well as an increase in noninterest expense of $3.1 million. These were partially offset by lower provision for credit losses and an increase in noninterest income. The decrease from the prior quarter was due to an increase in noninterest expense of $2.4 million, an increase in the provision for credit losses of $700,000 partially offset by an increase in net interest income of $2.7 million. Preferred Bank continues to deliver top-of-peer group profitability metrics and long term shareholder returns.

Highlights for the Quarter:

• Return on average assets was 1.95%
• Return on beginning equity of 18.37%
• Net interest margin (NIM) expanded to 4.10%
• Total loans increased by $143 million or 2.6% for the quarter
• Efficiency ratio was 30.6%

Li Yu, Chairman and CEO, commented, “I am pleased to report our third quarter 2024 net income was $33.4 million or $2.46 a share. Highlights of the quarter include the successful reduction of $21.2 million in non-performing loans, with no charge-offs. Interest recovery related to this was $800,000. Criticized loans, however, have increased but we believe it may be temporary in nature. Separately, the OREO property is currently in escrow, scheduled to close later this month. The valuation allowance we recorded of $1.7 million is included in the quarter’s non-interest expense.

Loan demand was strong this quarter. We had a net increase of $143 million, or 2.6% on a linked quarter basis. The September’s rate cut seems to have spurred borrower interest in general. Deposits for the quarter had a very small decrease, as we have been careful in monitoring our deposit costs.

At September 30, 2024, Preferred Bank’s loan portfolio was 26% fixed rate loans and 74% floating rate loans with floor rates for most of them. We believe it is well-balanced with the sensitivity of our deposits. However, the time certificates of deposits do have a cost adjustment pattern of slower reduction in the beginning but increasing gradually.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $68.8 million for the third quarter of 2024. This was a decrease from the $73.0 million recorded in the same quarter last year and an increase over the $66.1 million posted in the second quarter of 2024. A higher cost of deposits was to blame for the decrease in net interest income versus the prior year and a curing of a nonaccrual loan in the third quarter of 2024 was the reason for the increase in net interest income over the second quarter of 2024. A loan that was placed into nonaccrual status in the second quarter of 2024 was paid down significantly and the interest was brought current in the third quarter of 2024. This interest recovery of $800,000 helped to increase the Bank’s net interest margin to 4.10% for the quarter from 3.96% in the prior quarter. This compares to a margin of 4.39% one year ago. Also very importantly, the Bank’s total interest expense decreased for the first time since the first quarter of 2022. This was the result of the Bank’s efforts to replace higher cost brokered MMDA accounts with traditional brokered CD’s which carry a lower coupon. This is why, during this quarter, there is a fairly sizeable decrease in money market accounts and a corresponding increase in certificates of deposit.

Noninterest Income. For the third quarter of 2024, noninterest income was $3.5 million compared with $3.0 million for the same quarter last year and compared to $3.4 million for the second quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fees which increased by $210,000 and other income partially offset by a decrease in gains on sales of SBA loans of $263,000. In comparing to the same quarter last year; LC fee income was up by $547,000 partially offset by a decrease in service charges of $192,000.

Noninterest Expense. Total noninterest expense was $22.1 million for the third quarter of 2024 compared to $19.7 million for the second quarter of 2024 and compared to the $19.0 million recorded in the same period last year. The primary reason for the increase from the prior year and over the prior quarter was the $1.7 million valuation allowance recorded this quarter on the Bank’s other real estate owned (OREO) property. In comparing to the prior quarter; personnel expense increased by $581,000 and occupancy expense increased by $167,000. This was partially offset by a decrease in promotion expense of $162,000. In comparing to same quarter last year; personnel expense was up by $517,000, occupancy expense was up by $320,000 and professional services was up by $393,000. The increase in professional services expense was due to increased legal costs which were associated with a number of nonperforming loans. For the quarter ended September 30, 2024, the Bank’s efficiency ratio was 30.6%, higher than the 28.3% posted last quarter and higher than the 25.04% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $13.6 million for the third quarter of 2024. This represents an effective tax rate (“ETR”) of 29.0% which is identical to the ETR for last quarter and up from the 28.5% ETR recorded in the same period last year. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.

Balance Sheet Summary

Total gross loans at September 30, 2024 were $5.57 billion, an increase of $298.1 million from the total of $5.27 billion as of December 31, 2023. Total deposits decreased during the quarter by $11 million but still increased year-to-date to $5.87 billion, up $158.4 million from the $5.71 billion as of December 31, 2023. Total assets were $6.87 billion, an increase of $213.3 million over the total of $6.66 billion as of December 31, 2023.

Asset Quality

Non-accrual loans as of September 30, 2024, was $19.4 million, a decrease of $21.2 million from $40.6 million on June 30, 2024. There were no charge-offs related to the reduction. Interest recoveries were $800,000 for this quarter

The increase in total criticized loans of $161.2 for the quarter was largely due to the downgrade of a relationship with seven real estate related loans. These seven loans totaling $182.1 were secured by retail or multifamily properties that have late payment irregularities. At September 30, 2024, four of the seven loans totaling $86.5 million have been brought current and are expected to be out of criticized status in the fourth quarter. The three loans that have not been brought to current have a combined weighted average LTV of 64% and DCR of 0.98. All these loans have adequate guarantor support. Combined amount outstanding for these three loans is $95.6 million.

Allowance for Credit Losses

The provision for credit losses for the third quarter of 2024 was $3.2 million compared to $2.5 million last quarter and compared to $3.5 million in the same quarter last year. The Bank’s allowance coverage ratio increased to 1.36% of loans as compared to 1.34% in the prior quarter.

Capitalization

As of September 30, 2024, the Bank’s leverage ratio was 11.28%, the common equity tier 1 capital ratio was 11.66% and the total capital ratio stood at 15.06%. As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 ratio was 11.57% and the total capital ratio was 15.18%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s third quarter 2024 financial results will be held this afternoon, October 21, 2024 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing “Preferred Bank.” There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's website at www.preferredbank.com.

Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 4, 2024; the passcode is 7955778.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. In addition, the Bank also operates a loan production office in Sunnyvale, California. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2023 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.

AT THE COMPANY:Edward J. CzajkaExecutive Vice PresidentChief Financial Officer(213) 891-1188	AT FINANCIAL PROFILES:Jeffrey HaasGeneral Information(310) 622-8240PFBC@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
					September 30,			June 30,			September 30,
						2024			2024			2023
Interest income:
	Loans, including fees				$	114,112		$	109,451		$	106,695
	Investment securities					15,032			17,552			18,556
	Fed funds sold					280			291			278
		Total interest income				129,424			127,294			125,529
Interest expense:
	Interest-bearing demand					23,211			24,205			20,257
	Savings					84			79			67
	Time certificates					35,956			35,578			29,369
	FHLB borrowings					-			-			1,557
	Subordinated debt					1,325			1,325			1,325
		Total interest expense				60,576			61,187			52,575
		Net interest income				68,848			66,107			72,954
Provision for credit losses						3,200			2,500			3,500
		Net interest income after provision for
			credit losses			65,648			63,607			69,454
Noninterest income:
	Fees & service charges on deposit accounts					747			819			939
	Letters of credit fee income					1,959			1,749			1,412
	BOLI income					108			105			103
	Net gain on sale of loans					91			353			21
	Other income					554			378			497
		Total noninterest income				3,459			3,404			2,972
Noninterest expense:
	Salary and employee benefits					13,525			12,944			13,008
	Net occupancy expense					1,883			1,716			1,563
	Business development and promotion expense					241			403			193
	Professional services					1,816			1,832			1,423
	Office supplies and equipment expense					435			477			395
	Loss on sale of OREO, valuation allowance and related expense					1,915			29			140
	Other					2,274			2,296			2,287
		Total noninterest expense				22,089			19,697			19,009
		Income before provision for income taxes				47,018			47,314			53,417
Income tax expense						13,635			13,722			15,225
		Net income			$	33,383		$	33,592		$	38,192
Income per share available to common shareholders
		Basic			$	2.50		$	2.51		$	2.74
		Diluted			$	2.46		$	2.48		$	2.71
Weighted-average common shares outstanding
		Basic				13,327,848			13,362,522			13,925,994
		Diluted				13,544,273			13,548,400			14,105,915
Cash dividends per common share					$	0.70		$	0.70		$	0.55

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
						2024			2023			%
Interest income:
	Loans, including fees				$	333,543		$	304,796			9.4
	Investment securities					48,841			47,454			2.9
	Fed funds sold					854			774			10.4
		Total interest income				383,238			353,024			8.6
Interest expense:
	Interest-bearing demand					69,706			53,701			29.8
	Savings					238			153			55.6
	Time certificates					105,864			71,399			48.3
	FHLB borrowings					-			3,819			-100.0	%
	Subordinated debt					3,975			3,975			0.0
		Total interest expense				179,783			133,046			35.1
		Net interest income				203,455			219,978			-7.5	%
Provision for credit losses						10,100			6,500			55.4
		Net interest income after provision for credit losses				193,355			213,478			-9.4	%
Noninterest income:
	Fees & service charges on deposit accounts					2,411			2,477			-2.7	%
	Letters of credit fee income					5,211			4,312			20.8	%
	BOLI income					318			307			3.3	%
	Net loss on called and sale of investment securities					-			(4,117	)		-100.0	%
	Net gain on sale of loans					547			547			-0.1	%
	Other income					1,441			1,481			-2.7	%
		Total noninterest income				9,928			5,007			98.3	%
Noninterest expense:
	Salary and employee benefits					40,369			39,256			2.8	%
	Net occupancy expense					5,310			4,513			17.7	%
	Business development and promotion expense					910			498			82.7	%
	Professional services					5,105			3,915			30.4	%
	Office supplies and equipment expense					1,385			1,197			15.7	%
	Loss on sale of OREO, valuation allowance and related expense					2,079			3,050			-31.8	%
	Other					6,656			6,332			5.1	%
		Total noninterest expense				61,814			58,761			5.2	%
		Income before provision for income taxes				141,469			159,724			-11.4	%
Income tax expense						41,028			45,523			-9.9	%
		Net income			$	100,441		$	114,201			-12.0	%
Income per share available to common shareholders
		Basic			$	7.50		$	8.01			-6.4	%
		Diluted			$	7.39		$	7.92			-6.7	%
Weighted-average common shares outstanding
		Basic				13,399,487			14,257,005			-6.0	%
		Diluted				13,587,820			14,418,939			-5.8	%
Dividends per share					$	2.10		$	1.65			27.3	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
				September 30,				December 31,
					2024				2023
				(Unaudited)				(Audited)
Assets
Cash and due from banks				$	782,394			$	890,852
Fed funds sold					22,600				20,000
	Cash and cash equivalents				804,994				910,852
Securities held-to-maturity, at amortized cost					20,311				21,171
Securities available-for-sale, at fair value					337,363				313,842
Loans held for sale, at lower of cost or fair value					225				360
Loans					5,571,579				5,273,498
	Less allowance for credit losses				(76,051	)			(78,355	)
	Less amortized deferred loan fees, net				(10,414	)			(11,079	)
	Loans, net				5,485,114				5,184,064
Other real estate owned and repossessed assets					15,082				16,716
Customers' liability on acceptances					-				315
Bank furniture and fixtures, net					9,195				9,694
Bank-owned life insurance					10,364				10,632
Accrued interest receivable					35,562				33,892
Investment in affordable housing partnerships					58,009				65,276
Federal Home Loan Bank stock, at cost					15,000				15,000
Deferred tax assets					46,209				48,991
Income tax receivable					1,013				2,391
Operating lease right-of-use assets					30,489				22,050
Other assets					3,414				4,030
	Total assets			$	6,872,344			$	6,659,276
Liabilities and Shareholders' Equity
Deposits:
	Noninterest bearing demand deposits			$	682,859			$	786,995
	Interest bearing deposits:				1,994,288				2,075,156
		Savings			29,793				29,167
		Time certificates of $250,000 or more			1,478,500				1,317,862
		Other time certificates			1,682,324				1,500,162
		Total deposits			5,867,764				5,709,342
Acceptances outstanding					-				315
Subordinated debt issuance, net					148,410				148,232
Commitments to fund investment in affordable housing partnerships					23,617				30,824
Operating lease liabilities					26,730				19,766
Accrued interest payable					16,001				16,124
Other liabilities					39,705				39,568
	Total liabilities				6,122,227				5,964,171
Shareholders' equity					750,117				695,105
	Total liabilities and shareholders' equity			$	6,872,344			$	6,659,276
Book value per common share				$	56.54			$	50.54
Number of common shares outstanding					13,267,852				13,753,246

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,
					2024			2024			2024			2023			2023
Unaudited historical quarterly operations data:
	Interest income			$	129,424		$	127,294		$	126,520		$	124,964		$	125,529
	Interest expense				60,576			61,187			58,020			55,568			52,575
		Interest income before provision for credit losses			68,848			66,107			68,500			69,396			72,954
	Provision for credit losses				3,200			2,500			4,400			3,500			3,500
	Noninterest income				3,459			3,404			3,065			2,106			2,972
	Noninterest expense				22,089			19,697			20,028			17,873			19,009
	Income tax expense				13,635			13,722			13,671			14,290			15,225
		Net income		$	33,383		$	33,592		$	33,466		$	35,839		$	38,192
	Earnings per share
		Basic		$	2.50		$	2.51		$	2.48		$	2.63		$	2.74
		Diluted		$	2.46		$	2.48		$	2.44		$	2.60		$	2.71
Ratios for the period:
	Return on average assets				1.95	%		1.97	%		2.00	%		2.15	%		2.25	%
	Return on beginning equity				18.37	%		19.44	%		19.36	%		21.21	%		22.66	%
	Net interest margin (Fully-taxable equivalent)				4.10	%		3.96	%		4.19	%		4.24	%		4.39	%
	Noninterest expense to average assets				1.29	%		1.15	%		1.20	%		1.07	%		1.12	%
	Efficiency ratio				30.55	%		28.34	%		27.99	%		25.00	%		25.04	%
	Net charge-offs (recoveries) to average loans (annualized)				-0.00	%		0.68	%		0.26	%		-0.00	%		0.01	%
Ratios as of period end:
	Tangible common equity ratio				10.92	%		10.55	%		10.35	%		10.43	%		10.10	%
	Tier 1 leverage capital ratio				11.28	%		10.89	%		10.80	%		10.85	%		10.46	%
	Common equity tier 1 risk-based capital ratio				11.66	%		11.52	%		11.50	%		11.57	%		11.63	%
	Tier 1 risk-based capital ratio				11.66	%		11.52	%		11.50	%		11.57	%		11.63	%
	Total risk-based capital ratio				15.06	%		14.93	%		15.08	%		15.18	%		15.32	%
	Allowances for credit losses to loans at end of period				1.36	%		1.34	%		1.49	%		1.49	%		1.46	%
	Allowance for credit losses to non-performing loans			3.92x			1.79x			4.33x			2.73x			3.86x
Average balances:
	Total securities			$	356,590		$	353,357		$	348,961		$	349,863		$	368,968
	Total loans				5,458,613			5,320,360			5,263,562			5,126,918			5,086,241
	Total earning assets				6,684,766			6,728,498			6,585,853			6,499,469			6,597,557
	Total assets				6,817,979			6,863,829			6,718,018			6,627,349			6,719,859
	Total time certificate of deposits				2,874,985			2,884,259			2,852,860			2,767,385			2,680,854
	Total interest bearing deposits				5,124,245			5,203,034			5,004,834			4,906,947			4,800,227
	Total deposits				5,828,227			5,901,976			5,761,488			5,689,713			5,654,350
	Total interest bearing liabilities				5,272,617			5,351,347			5,153,089			5,055,143			5,069,014
	Total equity				747,222			715,190			704,996			683,141			678,020

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				For the Nine Months Ended
				September 30,				September 30,
					2024				2023
	Interest income			$	383,238			$	353,024
	Interest expense				179,783				133,046
		Interest income before provision for credit losses			203,455				219,978
	Provision for credit losses				10,100				6,500
	Noninterest income				9,928				5,007
	Noninterest expense				61,814				58,761
	Income tax expense				41,028				45,523
		Net income		$	100,441			$	114,201
	Earnings per share
		Basic		$	7.50			$	8.01
		Diluted		$	7.39			$	7.92
Ratios for the period:
	Return on average assets				1.97	%			2.33	%
	Return on beginning equity				19.30	%			24.22	%
	Net interest margin (Fully-taxable equivalent)				4.08	%			4.58	%
	Noninterest expense to average assets				1.21	%			1.20	%
	Efficiency ratio				28.97	%			26.12	%
	Net charge-off (recoveries) to average loans				0.31	%			0.00	%
Average balances:
	Total securities			$	352,982			$	402,971
	Total loans				5,347,918				5,048,452
	Total earning assets				6,666,439				5,047,971
	Total assets				6,800,008				6,436,889
	Total time certificate of deposits				2,870,717				6,560,955
	Total interest bearing deposits				5,110,755				2,504,426
	Total deposits				5,830,555				4,602,039
	Total interest bearing liabilities				5,259,068				5,539,223
	Total equity				722,560				4,851,214

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				As of
				September 30,				June 30,				March 31,				December 31,				September 30,
					2024				2024				2024				2023				2023
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	804,994			$	917,677			$	936,600			$	910,852			$	1,021,108
	Securities held-to-maturity, at amortized cost				20,311				20,605				20,904				21,171				21,474
	Securities available-for-sale, at fair value				337,363				331,909				333,411				313,842				335,608
	Loans:
		Real estate – Mortgage:
			Real estate—Residential	$	753,453			$	732,251			$	724,101			$	688,058			$	663,021
			Real estate—Commercial		2,882,506				2,833,430				2,777,608				2,760,761				2,688,148
			Total Real Estate – Mortgage		3,635,959				3,565,681				3,501,709				3,448,819				3,351,169
		Real estate – Construction:
			R/E Construction — Residential		274,214				238,062				236,596				246,201				226,482
			R/E Construction — Commercial		290,308				247,582				213,727				179,775				164,666
			Total real estate construction loans		564,522				485,644				450,323				425,976				391,148
		Commercial and industrial			1,365,550				1,369,617				1,369,529				1,394,871				1,377,675
		SBA			5,649				5,463				3,914				3,469				2,424
		Consumer and others			124				118				379				363				285
			Gross loans		5,571,804				5,428,600				5,325,854				5,273,498				5,128,242
	Allowance for credit losses on loans				(76,051	)			(72,848	)			(79,311	)			(78,355	)			(74,849	)
	Net deferred loan fees				(10,414	)			(10,502	)			(10,460	)			(11,079	)			(10,240	)
		Net loans, excluding loans held for sale		$	5,485,339			$	5,345,250			$	5,236,083			$	5,184,064			$	5,043,153
	Loans held for sale			$	225			$	955			$	605			$	360			$	-
		Net loans		$	5,485,564			$	5,346,205			$	5,236,688			$	5,184,424			$	5,043,153
	Other real estate owned and repossessed assets			$	15,082			$	16,716			$	16,716			$	16,716			$	16,716
	Investment in affordable housing partnerships				58,009				60,432				62,854				65,276				54,679
	Federal Home Loan Bank stock, at cost				15,000				15,000				15,000				15,000				15,000
	Other assets				136,021				138,036				134,040				131,995				124,793
		Total assets		$	6,872,344			$	6,846,580			$	6,756,213			$	6,659,276			$	6,632,530
Liabilities:
	Deposits:
		Demand		$	682,859			$	675,767			$	709,767			$	786,995			$	838,300
		Interest bearing demand			1,994,288				2,326,214				2,159,948				2,075,156				2,091,384
		Savings			29,793				28,251				29,261				29,167				30,427
		Time certificates of $250,000 or more			1,478,500				1,406,149				1,349,927				1,317,862				1,283,461
		Other time certificates			1,682,324				1,442,381				1,552,805				1,500,162				1,439,699
		Total deposits		$	5,867,764			$	5,878,762			$	5,801,708			$	5,709,342			$	5,683,271
	Acceptances outstanding			$	-			$	-			$	-			$	315			$	103
	Subordinated debt issuance, net				148,410				148,351				148,292				148,232				148,173
	Commitments to fund investment in affordable housing partnerships				23,617				27,946				29,647				30,824				20,824
	Other liabilities				82,436				68,394				77,008				75,458				109,651
		Total liabilities		$	6,122,227			$	6,123,453			$	6,056,655			$	5,964,171			$	5,962,022
Equity:
	Net common stock, no par value			$	109,928			$	113,509			$	115,915			$	134,534			$	143,584
	Retained earnings				664,808				640,675				616,417				592,325				566,027
	Accumulated other comprehensive income				(24,619	)			(31,057	)			(32,774	)			(31,754	)			(39,103	)
		Total shareholders' equity		$	750,117			$	723,127			$	699,558			$	695,105			$	670,508
		Total liabilities and shareholders' equity		$	6,872,344			$	6,846,580			$	6,756,213			$	6,659,276			$	6,632,530

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,
				2024								2024								2023
						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)		$	5,459,842		$	114,112	8.31	%		$	5,324,410		$	109,451	8.27	%		$	5,086,302		$	106,695	8.32	%
	Investment securities (3)			356,590			3,610	4.03	%			353,357			3,652	4.16	%			368,968			3,422	3.68	%
	Federal funds sold			20,164			280	5.52	%			20,866			291	5.61	%			20,111			278	5.48	%
	Other earning assets			848,170			11,521	5.40	%			1,029,865			13,999	5.47	%			1,122,176			15,235	5.39	%
		Total interest earning assets		6,684,766			129,523	7.71	%			6,728,498			127,393	7.61	%			6,597,557			125,630	7.55	%
	Deferred loan fees, net			(10,248	)							(10,459	)							(10,071	)
	Allowance for credit losses on loans			(72,899	)							(79,119	)							(71,503	)
Noninterest earning assets:
	Cash and due from banks			10,826								10,626								12,101
	Bank furniture and fixtures			9,419								9,787								8,814
	Right of use assets			22,496								22,886								21,491
	Other assets			173,619								181,610								161,470
		Total assets	$	6,817,979							$	6,863,829							$	6,719,859
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand and savings	$	2,249,260		$	23,295	4.12	%		$	2,318,775		$	24,284	4.21	%		$	2,119,373		$	20,324	3.80	%
		TCD $250K or more		1,412,073			17,866	5.03	%			1,379,116			17,295	5.04	%			1,251,397			14,085	4.47	%
		Other time certificates		1,462,912			18,090	4.92	%			1,505,143			18,283	4.89	%			1,429,457			15,284	4.24	%
		Total interest bearing deposits		5,124,245			59,251	4.60	%			5,203,034			59,862	4.63	%			4,800,227			49,693	4.11	%
Advance from Federal Home Loan Bank				-			-	0.00	%			-			-	0.00	%			120,652			1,557	5.12	%
Subordinated debt, net				148,372			1,325	3.55	%			148,313			1,325	3.59	%			148,135			1,325	3.55	%
		Total interest bearing liabilities		5,272,617			60,576	4.57	%			5,351,347			61,187	4.60	%			5,069,014			52,575	4.11	%
Noninterest bearing liabilities:
	Demand deposits			703,982								698,942								854,123
	Lease liability			18,882								19,828								19,759
	Other liabilities			75,276								78,522								98,943
		Total liabilities		6,070,757								6,148,639								6,041,839
Shareholders’ equity				747,222								715,190								678,020
		Total liabilities and shareholders’ equity	$	6,817,979							$	6,863,829							$	6,719,859
Net interest income						$	68,947							$	66,206							$	73,055
Net interest spread								3.14	%							3.02	%							3.44	%
Net interest margin								4.10	%							3.96	%							4.39	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	703,982							$	698,942							$	854,123
	Interest bearing deposits			5,124,245			59,251	4.60	%			5,203,034			59,862	4.63	%			4,800,227			49,693	4.11	%
		Total Deposits	$	5,828,227		$	59,251	4.04	%		$	5,901,976		$	59,862	4.08	%		$	5,654,350		$	49,693	3.49	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $991,000, $1.1 million and $1.3 million for the quarter ended September 30, 2024, June 30, 2024 and September 30, 2023, 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,
				2024								2023
						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)		$	5,350,465		$	333,543	8.33	%		$	5,048,452		$	304,796	8.07	%
	Investment securities (3)			352,982			10,691	4.05	%			402,971			11,125	3.69	%
	Federal funds sold			20,472			854	5.57	%			20,111			774	5.14	%
	Other earning assets			942,520			38,448	5.45	%			965,355			36,633	5.07	%
		Total interest earning assets		6,666,439			383,536	7.68	%			6,436,889			353,328	7.34	%
	Deferred loan fees, net			(10,466	)							(10,142	)
	Allowance for credit losses on loans			(76,775	)							(69,653	)
Noninterest earning assets:
	Cash and due from banks			10,693								11,912
	Bank furniture and fixtures			9,762								8,931
	Right of use assets			22,462								21,780
	Other assets			177,893								161,238
		Total assets	$	6,800,008							$	6,560,955
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand/ savings	$	2,240,038		$	69,944	4.17	%		$	2,097,613		$	53,854	3.43	%
		TCD $250K or more		1,377,621			51,662	5.01	%			1,258,870			37,600	3.99	%
		Other time certificates		1,493,096			54,202	4.85	%			1,245,556			33,798	3.63	%
		Total interest bearing deposits		5,110,755			175,808	4.59	%			4,602,039			125,252	3.64	%
Advance from Federal Home Loan Bank				-			-	0.00	%			101,099			3,819	5.05	%
Subordinated debt, net				148,313			3,975	3.58	%			148,076			3,975	3.59	%
		Total interest bearing liabilities		5,259,068			179,783	4.57	%			4,851,214			133,046	3.67	%
Noninterest bearing liabilities:
	Demand deposits			719,800								937,184
	Lease liability			19,401								20,482
	Other liabilities			79,179								83,213
		Total liabilities		6,077,448								5,892,093
Shareholders’ equity				722,560								668,862
		Total liabilities and shareholders’ equity	$	6,800,008							$	6,560,955
Net interest income						$	203,753							$	220,282
Net interest spread								3.12	%							3.67	%
Net interest margin								4.08	%							4.58	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	719,800							$	937,184
	Interest bearing deposits			5,110,755			175,808	4.59	%			4,602,039			125,252	3.64	%
		Total Deposits	$	5,830,555		$	175,808	4.03	%		$	5,539,223		$	125,252	3.02	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $3.4 million and $3.2 million for the year ended September 30, 2024 and 2023, 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, 2024				December 31, 2023
					(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period					$	78,355			$	68,472
	Charge-Offs
		Commercial & Industrial				12,409				124
		Mini-perm Real Estate				-				-
		Total Charge-Offs				12,409				124
	Recoveries
		Commercial & Industrial				5				7
		Mini-perm Real Estate				-				-
		Total Recoveries				5				7
	Net Charge-Offs					12,404				117
	Provision for Credit Losses:					10,100				10,000
Balance at End of Period					$	76,051			$	78,355
Average Loans Held for Investment					$	5,347,918			$	5,067,870
Loans Held for Investment at End of Period					$	5,571,579			$	5,273,498
Net Charge-Offs to Average Loans						0.31	%			0.00	%
Allowances for Credit Losses to Loans at End of Period						1.36	%			1.49	%