PFBC Preferred Bank

Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended June 30, 2024. Preferred Bank (“the Bank”) reported net income of $33.6 million or $2.48 per diluted share for the second quarter of 2024. This represents a slight increase in net income of $126,000 over the prior quarter but down by $4.3 million from the same quarter last year. The decrease in net income from the prior year was due to lower net interest income because of rising deposit costs. Despite the decrease in net income, 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 1.97%
• Return on beginning equity of 19.44%
• Net interest margin (NIM) was 3.96%
• Total loans increased by $103 million or 1.9% for the quarter
• Total deposits increased $77 million or 1.3% for the quarter
• Efficiency ratio was 28.3%

Li Yu, Chairman and CEO, commented, “I am pleased to report Preferred Bank’s second quarter net income of $33.6 million or $2.48 per fully diluted share. For the quarter, total loans grew $103 million or 1.95% on a linked quarter basis. Deposits also grew $77 million or 1.33% linked quarter.

“This quarter, total non-performing loans (NPL’s) increased $22.2 million to $40.6 million as several previously criticized loans have changed from performing status to non-accrual status. This migration is typical in the process of problem loan resolution. We are confident that these NPL’s are either fully-reserved or well-protected by collateral and cash flow. It is not likely that the resolution of these loans will present any significant impact to the Bank’s future earnings. Criticized loans at June 30, 2024, decreased $13.0 million from the previous quarter-end and in-migration into this category seems to have slowed down. There was only one loan newly classified/criticized in the quarter. The loan was supported by adequate collateral value and cash flow with no loss exposure identified.

“During the quarter, we have charged-off $9.0 million of loans that were fully reserved for at the end of the previous quarter. Provision expense for the quarter was $2.5 million. The allowance for credit losses now stands at 1.34% of total loans at June 30, 2024.

“We continue to work on our balance sheet in order to reduce the asset sensitivity in the balance sheet. We are confident that with this work, when interest rates ease the impact on our earnings will be quite modest. Meanwhile, lower interest rates will typically give way to better organic growth which will positively impact earnings.

“The regulatory approval for our $150 million stock buyback plan from 2023 has expired with $72.5 million worth of stock repurchased thus far. We are seeking regulatory approval to extend or renew the plan. We are also pleased to report that with the $72.5 million buyback, the Bank 's tangible common equity (TCE) ratio actually improved from 10.02% as of June 30, 2023 to 10.55% as of June 30, 2024. We attribute this to the Bank’s top echelon earnings capability.

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $66.1 million for the second quarter of 2024. This was a decrease from the $73.3 million recorded in the same quarter last year and down slightly from the $68.5 million posted in the first quarter of 2024. A rising cost of deposits was partially to blame for the decrease in net interest income but so was the addition of new nonaccrual loans whose accrued interest totaled $1.4 million which had to be reversed out of loan interest income. This helped to drive the Bank’s net interest margin down to 3.96% for the quarter. This compares to a margin of 4.19% in the prior quarter and down from 4.58% one year ago. The interest reversals on the nonaccrual loans had the effect of reducing the Bank’s NIM by 8 basis points for the quarter.

Noninterest Income. For the second quarter of 2024, noninterest income was $3.4 million compared with $3.1 million for the same quarter last year and compared to $3.1 million for the first quarter of 2024. The increase over the prior quarter was primarily due to letter of credit (LC) fees which increased by $246,000 and gains on sales of SBA loans which increased by $250,000 partially offset by a decrease in other income of $131,000. In comparing to the same quarter last year; LC fee income was up by $173,000 and gains on SBA loan sales were up by $167,000.

Noninterest Expense. Total noninterest expense was $19.7 million for the second quarter of 2024 compared to $20.0 million for the first quarter of 2024 and compared to the $20.9 million recorded in the same period last year. The primary reason for the decrease from the prior year is the $2.8 million valuation allowance recorded in the second quarter of last year on the Bank’s other real estate owned (OREO) property. Partially offsetting that is an increase in professional services; mainly legal fees for loan resolutions. In comparing this quarter to the first quarter of 2024; personnel expenses decreased by $956,000 and other professional services increased by $375,000, again due mainly to legal fees. For the quarter ended June 30, 2024, the Bank’s efficiency ratio was 28.3%, a tick higher than the 28.0% recorded last quarter and up off the 27.3% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $13.7 million for the second 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 June 30, 2024 were $5.43 billion, an increase of $155.1 million from the total of $5.27 billion as of December 31, 2023. Total deposits increased to $5.88 billion, up $169.4 million from the $5.71 billion as of December 31, 2023. Total assets were $6.85 billion, an increase of $187.3 million over the total of $6.66 billion as of December 31, 2023.

Asset Quality

As of June 30, 2024, nonaccrual loans increased to $40.6 million, up from the $18.3 million reported as of March 31, 2024 and also up from the $28.7 million as of December 31, 2023. The increase was primarily due to the addition of an $18 million loan secured by a hotel and the addition of two C&I loans totaling $13.5 million as well as a $6.1 million loan also secured by a hotel. These additions were partially offset by the sale of a non-performing note during the quarter which totaled $12.3 million. OREO and repossessed assets totaled $16.7 million as of June 30, 2024, no change from the prior quarter or from December 31, 2023. Criticized loans decreased from $86.6 million as of March 31, 2024 to $73.7 million as of June 30, 2024. Total net charge-offs (recoveries) were $9.0 million for the second quarter of 2024 as compared to $3.4 million last quarter and compared to $0 for the second quarter last year. Below is more detail of our loan quality:

Loan Quality

	June 30, 2024		March 31, 2024
Criticized loans still accruing	$	33,101	$	68,304
Loans on nonaccrual status		40,551		18,314
Total Criticized Loans	$	73,652	$	86,618

Non-performing loans (non-accrual status) includes the following:

1. A hotel loan of $18.0 million, in a very populated area of Los Angeles, with cash flow sufficient to service the debt and loan-to-value ratio (LTV) of 51%.
2. Two commercial and industrial (C&I) loans totaling $13.5 million. The estimated net exposure is fully reserved.
3. A $6.1 million loan in San Francisco collateralized by a motel with LTV of 71%. This note was sold in July at par, so that credit is already resolved.
4. Two real estate loans totaling $1.8 million, which are now paying as agreed. These loans will be reinstated to performing status in the third quarter of 2024.

Allowance for Credit Losses

The provision for credit losses for the second quarter of 2024 was $2.5 million compared to $4.4 million last quarter and compared to $2.5 million in the same quarter last year. The aforementioned charge-offs recorded during the quarter as well as loan growth were the primary drivers of the provision for the quarter. The Bank’s allowance coverage ratio is 1.34% of total loans as compared to 1.49% last quarter.

Capitalization

As of June 30, 2024, the Bank’s leverage ratio was 10.89%, the common equity tier 1 capital ratio was 11.52% and the total capital ratio stood at 14.93%. 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 second quarter 2024 financial results will be held tomorrow, July 26, 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 August 9, 2024; the passcode is 7823115.

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.

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,
			2024				2024				2023
Interest income:
Loans, including fees		$	109,451			$	109,980			$	102,220
Investment securities			17,552				16,257				15,919
Fed funds sold			291				283				272
Total interest income			127,294				126,520				118,411
Interest expense:
Interest-bearing demand			24,205				22,290				16,406
Savings			79				75				47
Time certificates			35,578				34,330				25,436
FHLB borrowings			-				-				1,888
Subordinated debt			1,325				1,325				1,325
Total interest expense			61,187				58,020				45,102
Net interest income			66,107				68,500				73,309
Provision for credit losses			2,500				4,400				2,500
Net interest income after provision for
credit losses			63,607				64,100				70,809
Noninterest income:
Fees & service charges on deposit accounts			819				845				844
Letters of credit fee income			1,749				1,503				1,576
BOLI income			105				105				103
Net loss on called and sale of investment securities			-				-				-
Net gain on sale of loans			353				103				186
Other income			378				509				392
Total noninterest income			3,404				3,065				3,101
Noninterest expense:
Salary and employee benefits			12,944				13,900				12,520
Net occupancy expense			1,716				1,711				1,476
Business development and promotion expense			403				266				200
Professional services			1,832				1,457				1,343
Office supplies and equipment expense			477				473				398
Loss on sale of OREO, valuation allowance and related expense			29				135				2,838
Other			2,296				2,086				2,077
Total noninterest expense			19,697				20,028				20,852
Income before provision for income taxes			47,314				47,137				53,058
Income tax expense			13,722				13,671				15,122
Net income		$	33,592			$	33,466			$	37,936
Income per share available to common shareholders
Basic		$	2.51			$	2.48			$	2.63
Diluted		$	2.48			$	2.44			$	2.61
Weighted-average common shares outstanding
Basic			13,362,522				13,508,878				14,419,959
Diluted			13,548,400				13,736,986				14,560,693
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 Six Months Ended
		June 30,				June 30,				Change
			2024				2023			%
Interest income:
Loans, including fees		$	219,431			$	198,101			10.8	%
Investment securities			33,809				28,898			17.0	%
Fed funds sold			574				496			15.8	%
Total interest income			253,814				227,495			11.6	%
Interest expense:
Interest-bearing demand			46,495				33,444			39.0	%
Savings			154				86			78.8	%
Time certificates			69,908				42,029			66.3	%
FHLB borrowings			-				2,262			-100.0	%
Subordinated debt			2,650				2,650			0.0	%
Total interest expense			119,207				80,471			48.1	%
Net interest income			134,607				147,024			-8.4	%
Provision for credit losses			6,900				3,000			130.0	%
Net interest income after provision for credit losses			127,707				144,024			-11.3	%
Noninterest income:
Fees & service charges on deposit accounts			1,664				1,538			8.2	%
Letters of credit fee income			3,252				2,900			12.1	%
BOLI income			210				204			3.0	%
Net loss on called and sale of investment securities			-				(4,117	)		-100.0	%
Net gain on sale of loans			456				526			-13.3	%
Other income			887				984			-9.9	%
Total noninterest income			6,469				2,035			217.8	%
Noninterest expense:
Salary and employee benefits			26,844				26,248			2.3	%
Net occupancy expense			3,427				2,950			16.2	%
Business development and promotion expense			669				305			119.3	%
Professional services			3,289				2,492			32.0	%
Office supplies and equipment expense			950				802			18.5	%
Loss on sale of OREO, valuation allowance and related expense			164				2,910			-94.4	%
Other			4,382				4,045			8.3	%
Total noninterest expense			39,725				39,752			-0.1	%
Income before provision for income taxes			94,451				106,307			-11.2	%
Income tax expense			27,393				30,298			-9.6	%
Net income		$	67,058			$	76,009			-11.8	%
Income per share available to common shareholders
Basic		$	4.99			$	5.27			-5.3	%
Diluted		$	4.93			$	5.21			-5.5	%
Weighted-average common shares outstanding
Basic			13,435,700				14,425,253			-6.9	%
Diluted			13,608,783				14,581,458			-6.7	%
Dividends per share		$	1.40			$	1.10			27.3	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
		June 30,				December 31,
			2024				2023
		(Unaudited)				(Audited)
Assets
Cash and due from banks		$	895,677			$	890,852
Fed funds sold			22,000				20,000
Cash and cash equivalents			917,677				910,852
Securities held-to-maturity, at amortized cost			20,605				21,171
Securities available-for-sale, at fair value			331,909				313,842
Loans held for sale, at lower of cost or fair value			955				360
Loans			5,428,600				5,273,498
Less allowance for credit losses			(72,848	)			(78,355	)
Less amortized deferred loan fees, net			(10,502	)			(11,079	)
Loans, net			5,345,250				5,184,064
Other real estate owned and repossessed assets			16,716				16,716
Customers' liability on acceptances			-				315
Bank furniture and fixtures, net			9,506				9,694
Bank-owned life insurance			10,772				10,632
Accrued interest receivable			36,618				33,892
Investment in affordable housing partnerships			60,432				65,276
Federal Home Loan Bank stock, at cost			15,000				15,000
Deferred tax assets			48,719				48,991
Income tax receivable			6,421				2,391
Operating lease right-of-use assets			22,564				22,050
Other assets			3,436				4,030
Total assets		$	6,846,580			$	6,659,276
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand deposits		$	675,767			$	786,995
Interest bearing deposits:			2,326,214				2,075,156
Savings			28,251				29,167
Time certificates of $250,000 or more			1,406,149				1,317,862
Other time certificates			1,442,381				1,500,162
Total deposits			5,878,762				5,709,342
Acceptances outstanding			-				315
Subordinated debt issuance, net			148,351				148,232
Commitments to fund investment in affordable housing partnerships			27,946				30,824
Operating lease liabilities			19,149				19,766
Accrued interest payable			15,086				16,124
Other liabilities			34,158				39,568
Total liabilities			6,123,452				5,964,171
Shareholders' equity			723,128				695,105
Total liabilities and shareholders' equity		$	6,846,580			$	6,659,276
Book value per common share		$	54.23			$	50.54
Number of common shares outstanding			13,334,752				13,753,246

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,
			2024			2024			2023			2023			2023
Unaudited historical quarterly operations data:
Interest income		$	127,294		$	126,520		$	124,964		$	125,529		$	118,411
Interest expense			61,187			58,020			55,568			52,575			45,102
Interest income before provision for credit losses			66,107			68,500			69,396			72,954			73,309
Provision for credit losses			2,500			4,400			3,500			3,500			2,500
Noninterest income			3,404			3,065			2,106			2,972			3,101
Noninterest expense			19,697			20,028			17,873			19,009			20,852
Income tax expense			13,722			13,671			14,290			15,225			15,122
Net income		$	33,592		$	33,466		$	35,839		$	38,192		$	37,936
Earnings per share
Basic		$	2.51		$	2.48		$	2.63		$	2.74		$	2.63
Diluted		$	2.48		$	2.44		$	2.60		$	2.71		$	2.61
Ratios for the period:
Return on average assets			1.97	%		2.00	%		2.15	%		2.25	%		2.32	%
Return on beginning equity			19.44	%		19.36	%		21.21	%		22.66	%		23.18	%
Net interest margin (Fully-taxable equivalent)			3.96	%		4.19	%		4.24	%		4.39	%		4.58	%
Noninterest expense to average assets			1.15	%		1.20	%		1.07	%		1.12	%		1.28	%
Efficiency ratio			28.34	%		27.99	%		25.00	%		25.04	%		27.29	%
Net charge-offs (recoveries) to average loans (annualized)			0.68	%		0.26	%		-0.00	%		0.01	%		-0.00	%
Ratios as of period end:
Tangible common equity ratio			10.55	%		10.35	%		10.43	%		10.10	%		10.02	%
Tier 1 leverage capital ratio			10.89	%		10.80	%		10.85	%		10.46	%		10.61	%
Common equity tier 1 risk-based capital ratio			11.52	%		11.50	%		11.57	%		11.63	%		11.51	%
Tier 1 risk-based capital ratio			11.52	%		11.50	%		11.57	%		11.63	%		11.51	%
Total risk-based capital ratio			14.93	%		15.08	%		15.18	%		15.32	%		15.14	%
Allowances for credit losses to loans at end of period			1.34	%		1.49	%		1.49	%		1.46	%		1.40	%
Allowance for credit losses to non-performing loans		1.79x			4.33x			2.73x			3.86x			13.86x
Average balances:
Total securities		$	353,357		$	348,961		$	349,863		$	368,968		$	397,905
Total loans			5,320,360			5,263,562			5,126,918			5,086,241			5,044,004
Total earning assets			6,728,498			6,585,853			6,499,469			6,597,557			6,432,950
Total assets			6,863,829			6,718,018			6,627,349			6,719,859			6,558,651
Total time certificate of deposits			2,884,259			2,852,860			2,767,385			2,680,854			2,617,872
Total interest bearing deposits			5,203,034			5,004,834			4,906,947			4,800,227			4,549,519
Total deposits			5,901,976			5,761,488			5,689,713			5,654,350			5,481,457
Total interest bearing liabilities			5,351,347			5,153,089			5,055,143			5,069,014			4,847,596
Total equity			715,190			704,996			683,141			678,020			677,306

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
	For the Six Months Ended
	June 30,				June 30,
		2024				2023
Interest income	$	253,814			$	227,495
Interest expense		119,207				80,471
Interest income before provision for credit losses		134,607				147,024
Provision for credit losses		6,900				3,000
Noninterest income		6,469				2,035
Noninterest expense		39,725				39,752
Income tax expense		27,393				30,298
Net income	$	67,058			$	76,009
Earnings per share
Basic	$	4.99			$	5.27
Diluted	$	4.93			$	5.21
Ratios for the period:
Return on average assets		1.99	%			2.37	%
Return on beginning equity		19.40	%			24.31	%
Net interest margin (Fully-taxable equivalent)		4.07	%			4.67	%
Noninterest expense to average assets		1.18	%			1.24	%
Efficiency ratio		28.16	%			26.67	%
Net charge-off (recoveries) to average loans		0.47	%			0.00	%
Average balances:
Total securities	$	351,159			$	420,254
Total loans		5,291,961				5,028,520
Total earning assets		6,657,176				6,355,222
Total assets		6,790,924				6,480,186
Total time certificate of deposits		2,868,560				2,414,750
Total interest bearing deposits		5,103,935				4,501,301
Total deposits		5,831,732				5,480,705
Total interest bearing liabilities		5,252,219				4,740,508
Total equity		710,093				664,207

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				As of
				June 30,				March 31,				December 31,				September 30,				June 30,
					2024				2024				2023				2023				2023
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	917,677			$	936,600			$	910,852			$	1,021,108			$	1,049,745
	Securities held-to-maturity, at amortized cost				20,605				20,904				21,171				21,474				21,818
	Securities available-for-sale, at fair value				331,909				333,411				313,842				335,608				352,548
	Loans:
		Real estate – Mortgage:
			Real estate—Residential	$	732,251			$	724,101			$	688,058			$	663,021			$	631,795
			Real estate—Commercial		2,833,430				2,777,608				2,760,761				2,688,148				2,744,074
			Total Real Estate – Mortgage		3,565,681				3,501,709				3,448,819				3,351,169				3,375,869
		Real estate – Construction:
			R/E Construction — Residential		238,062				236,596				246,201				226,482				186,239
			R/E Construction — Commercial		247,582				213,727				179,775				164,666				153,418
			Total real estate construction loans		485,644				450,323				425,976				391,148				339,657
		Commercial and industrial			1,371,694				1,369,529				1,394,871				1,383,216				1,398,213
		SBA			5,463				3,914				3,469				2,424				4,427
		Consumer and others			118				379				363				285				345
			Gross loans		5,428,600				5,325,854				5,273,498				5,128,242				5,118,511
	Allowance for credit losses on loans				(72,848	)			(79,311	)			(78,355	)			(74,849	)			(71,429	)
	Net deferred loan fees				(10,502	)			(10,460	)			(11,079	)			(10,240	)			(10,464	)
		Net loans, excluding loans held for sale		$	5,345,250			$	5,236,083			$	5,184,064			$	5,043,153			$	5,036,618
	Loans held for sale			$	955			$	605			$	360			$	-			$	176
		Net loans		$	5,346,205			$	5,236,688			$	5,184,424			$	5,043,153			$	5,036,794
	Other real estate owned and repossessed assets			$	16,716			$	16,716			$	16,716			$	16,716			$	16,728
	Investment in affordable housing partnerships				60,432				62,854				65,276				54,679				56,844
	Federal Home Loan Bank stock, at cost				15,000				15,000				15,000				15,000				15,000
	Other assets				138,036				134,040				131,995				124,793				118,465
		Total assets		$	6,846,580			$	6,756,213			$	6,659,276			$	6,632,530			$	6,667,942
Liabilities:
	Deposits:
		Demand		$	675,767			$	709,767			$	786,995			$	838,300			$	870,282
		Interest bearing demand			2,326,214				2,159,948				2,075,156				2,091,384				2,005,298
		Savings			28,251				29,261				29,167				30,427				32,089
		Time certificates of $250,000 or more			1,406,149				1,349,927				1,317,862				1,283,461				1,244,128
		Other time certificates			1,442,381				1,552,805				1,500,162				1,439,699				1,437,194
		Total deposits		$	5,878,762			$	5,801,708			$	5,709,342			$	5,683,271			$	5,588,991
	Acceptances outstanding			$	-			$	-			$	315			$	103			$	448
	Advance from Federal Home Loan Bank				-				-				-				-				150,000
	Subordinated debt issuance, net				148,351				148,292				148,232				148,173				148,114
	Commitments to fund investment in affordable housing partnerships				27,946				29,647				30,824				20,824				20,930
	Other liabilities				68,393				77,008				75,458				109,651				90,692
		Total liabilities		$	6,123,452			$	6,056,655			$	5,964,171			$	5,962,022			$	5,999,175
Equity:
	Net common stock, no par value			$	113,510			$	115,915			$	134,534			$	143,584			$	167,404
	Retained earnings				640,675				616,417				592,325				566,027				535,373
	Accumulated other comprehensive income				(31,057	)			(32,774	)			(31,754	)			(39,103	)			(34,010	)
		Total shareholders' equity		$	723,128			$	699,558			$	695,105			$	670,508			$	668,767
		Total liabilities and shareholders' equity		$	6,846,580			$	6,756,213			$	6,659,276			$	6,632,530			$	6,667,942

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,
				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)		$	5,324,410		$	109,451	8.27	%		$	5,265,940		$	109,980	8.40	%		$	5,044,517		$	102,220	8.13	%
	Investment securities (3)			353,357			3,652	4.16	%			348,961			3,430	3.95	%			397,905			3,709	3.74	%
	Federal funds sold			20,866			291	5.61	%			20,390			283	5.58	%			20,000			272	5.45	%
	Other earning assets			1,029,865			13,999	5.47	%			950,562			12,928	5.47	%			970,528			12,311	5.09	%
		Total interest earning assets		6,728,498			127,393	7.61	%			6,585,853			126,621	7.73	%			6,432,950			118,512	7.39	%
	Deferred loan fees, net			(10,459	)							(10,694	)							(10,417	)
	Allowance for credit losses on loans			(79,119	)							(78,349	)							(68,956	)
Noninterest earning assets:
	Cash and due from banks			10,626								11,244								12,712
	Bank furniture and fixtures			9,787								10,084								9,005
	Right of use assets			22,886								22,003								21,988
	Other assets			181,610								177,877								161,369
		Total assets	$	6,863,829							$	6,718,018							$	6,558,651
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand and savings	$	2,318,775		$	24,284	4.21	%		$	2,151,974		$	22,365	4.18	%		$	1,931,647		$	16,453	3.42	%
		TCD $250K or more		1,379,116			17,295	5.04	%			1,341,298			16,501	4.95	%			1,259,305			12,772	4.07	%
		Other time certificates		1,505,143			18,283	4.89	%			1,511,562			17,829	4.74	%			1,358,567			12,664	3.74	%
		Total interest bearing deposits		5,203,034			59,862	4.63	%			5,004,834			56,695	4.56	%			4,549,519			41,889	3.69	%
Advance from Federal Home Loan Bank				-			-	0.00	%			-			-	0.00	%			150,000			1,888	5.05	%
Subordinated debt, net				148,313			1,325	3.59	%			148,255			1,325	3.59	%			148,077			1,325	3.59	%
		Total interest bearing liabilities		5,351,347			61,187	4.60	%			5,153,089			58,020	4.53	%			4,847,596			45,102	3.73	%
Noninterest bearing liabilities:
	Demand deposits			698,942								756,654								931,938
	Lease liability			19,828								19,500								20,708
	Other liabilities			78,522								83,779								81,103
		Total liabilities		6,148,639								6,013,022								5,881,345
Shareholders’ equity				715,190								704,996								677,306
		Total liabilities and shareholders’ equity	$	6,863,829							$	6,718,018							$	6,558,651
Net interest income						$	66,206							$	68,601							$	73,410
Net interest spread								3.02	%							3.20	%							3.66	%
Net interest margin								3.96	%							4.19	%							4.58	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	698,942							$	756,654							$	931,938
	Interest bearing deposits			5,203,034			59,862	4.63	%			5,004,834			56,695	4.56	%			4,549,519			41,889	3.69	%
		Total Deposits	$	5,901,976		$	59,862	4.08	%		$	5,761,488		$	56,695	3.96	%		$	5,481,457		$	41,889	3.07	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $1.3 million, $1.1 million and $902,000 for the quarter ended June 30, 2024, March 31, 20243 and June 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)
			Six Months ended June 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)		$	5,295,175		$	219,431	8.33	%		$	5,029,214		$	198,101	7.94	%
	Investment securities (3)			351,159			7,082	4.06	%			420,254			7,703	3.70	%
	Federal funds sold			20,628			574	5.60	%			20,110			496	4.97	%
	Other earning assets			990,214			26,927	5.47	%			885,644			21,398	4.87	%
		Total interest earning assets		6,657,176			254,014	7.67	%			6,355,222			227,698	7.23	%
	Deferred loan fees, net			(10,576	)							(10,178	)
	Allowance for credit losses on loans			(78,734	)							(68,713	)
Noninterest earning assets:
	Cash and due from banks			10,729								11,920
	Bank furniture and fixtures			9,936								8,991
	Right of use assets			22,444								21,928
	Other assets			179,949								161,016
		Total assets	$	6,790,924							$	6,480,186
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand/ savings	$	2,235,375		$	46,649	4.20	%		$	2,086,551		$	33,530	3.24	%
		TCD $250K or more		1,360,207			33,796	5.00	%			1,262,670			23,515	3.76	%
		Other time certificates		1,508,353			36,112	4.81	%			1,152,080			18,514	3.24	%
		Total interest bearing deposits		5,103,935			116,557	4.59	%			4,501,301			75,559	3.39	%
Short-term borrowings				-			-	0.00	%			-			-	0.00	%
Advance from Federal Home Loan Bank				-			-	0.00	%			91,160			2,262	5.00	%
Subordinated debt, net				148,284			2,650	3.59	%			148,047			2,650	3.61	%
		Total interest bearing liabilities		5,252,219			119,207	4.56	%			4,740,508			80,471	3.42	%
Noninterest bearing liabilities:
	Demand deposits			727,797								979,404
	Lease liability			19,664								20,850
	Other liabilities			81,151								75,217
		Total liabilities		6,080,831								5,815,979
Shareholders’ equity				710,093								664,207
		Total liabilities and shareholders’ equity	$	6,790,924							$	6,480,186
Net interest income						$	134,807							$	147,227
Net interest spread								3.11	%							3.80	%
Net interest margin								4.07	%							4.67	%
Cost of Deposits:
	Noninterest bearing demand deposits		$	727,797							$	979,404
	Interest bearing deposits			5,103,935			116,557	4.59	%			4,501,301			75,559	3.39	%
		Total Deposits	$	5,831,732		$	116,557	4.02	%		$	5,480,705		$	75,559	2.78	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $2.4 million and $2.1 million for the year ended June 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
					Six Months Ended				Year ended
					June 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				2				7
		Mini-perm Real Estate				-				-
		Total Recoveries				2				7
	Net Charge-Offs					12,407				117
	Provision for Credit Losses:					6,900				10,000
Balance at End of Period					$	72,848			$	78,355
Average Loans Held for Investment					$	5,295,175			$	5,067,870
Loans Held for Investment at End of Period					$	5,428,600			$	5,273,498
Net Charge-Offs to Average Loans						0.47	%			0.00	%
Allowances for Credit Losses to Loans at End of Period						1.34	%			1.49	%

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