LOS ANGELES, Oct. 17, 2023 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ:PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2023. Preferred Bank ("the Bank") reported net income of $38.2 million or $2.71 per diluted share for the third quarter of 2023. This represents an increase in net income of $3.0 million or 8.5% over the same quarter last year and up slightly compared to the second quarter of 2023. The primary driver of the increase over the prior year quarter was net interest income which increased by $6.2 million or 9.2% over the same period last year partially offset by higher noninterest expense. When compared to the prior quarter, net interest income was down slightly, as was noninterest income and noninterest expense.

Overall, results were very strong and the Bank also provided for $3.5 million in provision for credit losses which has driven the allowance for credit losses to total loans up to 1.46%.

Highlights for the Quarter:

Return on average assets was 2.25%
Return on beginning equity of 22.66%
Net interest margin was 4.39%
Total deposits increased $94.3 million or 6.7% annually for the quarter
Efficiency ratio was 25.0%
Quarter-end cash and equivalents continues to be strong at $1.02 billion or 18.0% of total deposits

Li Yu, Chairman and CEO, commented, "We are pleased to report another quarter of record profit. Earnings per diluted share for the third quarter was $2.71.

"For the quarter, loans practically stayed even and deposits grew modestly, which is the reflection of the cautiousness of both the Bank and its clients under the current environment. The margin decreased moderately from 4.58% in Q2 to 4.39% for Q3, largely because interest cost increases have slowed down.

"Credit quality remained relatively stable in the quarter. As of September 30, 2023, loans 30-89 days past due were negligible and total criticized loans increased slightly from the previous quarter. For the quarter, we have made a provision for credit losses in the amount of $3.5 million. Allowance for credit losses at September 30, 2023 now increased to 1.46% of total loans. We have been diligently identifying any credit loss exposures and fully reserving any potential exposure so that loan resolutions will not negatively affect the future operating income.

"Our operating expenses remain under control and were within our expectations. The Bank's efficiency ratio for the quarter was 25.0% Since the second quarter of this year, we have been continuously buying back our own stock due to our strong tangible capital position and the market price of the stock. Through September 30, 2023, total shares repurchased were 730,044. Even with the buyback, our tangible capital equity ratio was a strong 10.1%.

"Based upon public information, Preferred Bank is the most profitable independent Bank in California measured by return on equity metrics and we hope this trend will continue. However, the market price of our stock does not reflect our ability to consistently deliver top-of-peer earnings over many years. We will not be discouraged by the market reception and pledge to continue our devotion to operate the Bank efficiently and prudently."

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $73.0 million for the third quarter of 2023. This was a significant increase from the $66.8 million recorded in the same quarter last year but down just slightly from the $73.3 million posted in the second quarter of 2023. The FOMC rate hikes throughout 2022 and into 2023 drove loan portfolio yields higher, as most of the Bank's loans are tied to the Prime rate. Interest expense increased this quarter slightly more than did interest income as deposit rates continued to climb during most of the quarter. Due mainly to increasing deposit rates, the Bank's taxable equivalent net interest margin declined by 19 basis points to 4.39% from 4.58% last quarter. Comparing to the same quarter last year, the margin was up by 2 basis points over the 4.37% posted this quarter last year.

Noninterest Income. For the third quarter of 2023, noninterest income was $3.0 million compared with $2.2 million for the same quarter last year and compared to 3.1 million for the second quarter of 2023. The increase compared to the second quarter of 2022 was due to an increase in both service charges on deposits as well as Letter of Credit ("LC") fee income. The decrease from the second quarter of 2023 was due to lower gain on SBA loan sales as well as lower LC fee income.

Noninterest Expense. Total noninterest expense was $19.0 million for the third quarter of 2023 compared to $20.9 million for the second quarter of 2023 and compared to the $17.4 million recorded in the same period last year. Comparing this quarter to the third quarter of last year, the major variances were; personnel expense increased by $682,000 or 5.5%, other professional services increased by $262,000 due mainly to legal fees and consulting fees and other expense increased by $810,000 due mainly to higher FDIC premiums as well as a one time $150,000 penalty for payroll tax which we believe will be at least partially recovered. In comparing the third quarter of 2023 to the prior quarter; personnel expense increased by $488,000 or 3.9% and there was no OREO valuation adjustment in the current quarter which means that OREO costs decreased by $2.7 million. For the quarter ended September 30, 2023, the Bank's efficiency ratio was 25.0%, besting the 27.3% posted last quarter and slightly better than the 25.2% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $15.2 million for the third quarter of 2023. This represents an effective tax rate ("ETR") of 28.5% and the same as the 28.5% ETR for the second quarter of 2023 but up from the 28.0% ETR recorded in the third quarter of 2022. 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, 2023 were $5.13 billion, an increase of $53.4 million from the total of $5.07 billion as of December 31, 2022. Total deposits increased to $5.68 billion from the $5.56 billion as of December 31, 2022, an increase of $126.3 million. Total assets were $6.63 billion, an increase of $207.2 million over the total of $6.43 billion as of December 31, 2022.

Uninsured Deposits

As of September 30, 2023, total uninsured deposits represented approximately 41.8 % of total deposits. Since mid-March, we have been diligently working with our larger deposit clients to enroll them in various reciprocal deposit programs to ensure that all of their deposits are FDIC insured. It should be noted that included in the uninsured deposits figure is $187 million of deposits that are collateralized so these would not otherwise necessitate FDIC insurance. Finally, there are also a number of accounts totalling $166 million that are enrolled in one of our reciprocal deposit programs but have yet to participate in the program; these are also included in uninsured deposits.

Balance Sheet Fair Market Values from June 30, 2023

With so much focus recently on ASC Topic 825, Financial Instruments, formerly known as FASB 107, we felt it would be beneficial for shareholders to view the Bank's disclosure in its recently filed Quarterly Report on Form 10-Q for June 30, 2023. As can be clearly seen, the rise in interest rates has not hurt the fair market value of our loan portfolio, unlike mst other banks.


	June 30, 2023
	Fair Value Measurement Using	Carrying Amount		Estimated Fair Value


	(Dollars in thousands)
Assets:
Cash and cash equivalents	Level 1	$	1,049,745	$	1,049,745
Securities held-to-maturity	Level 2		21,818		19,865
Securities available-for-sale	Level 2/3		352,548		352,548
Loans receivable, net	Level 3		5,036,618		5,102,339
Customers' liability on acceptances	Level 2		448		448
Accrued interest receivable	Level 2/3		28,184		28,184
Federal Home Loan Bank stock	Level 2		15,000	N/A

Liabilities:
Demand deposits and savings:
Noninterest-bearing	Level 2	$	870,282	$	870,282
Interest-bearing	Level 2		2,037,387		2,037,387
Time deposits	Level 2		2,681,322		2,665,195
Subordinated debt issuance	Level 2		148,114		169,134
Acceptances Outstanding	Level 2		448		448
Accrued interest payable	Level 2		6,998		6,998

Liquidity

As of September 30, 2023, the Bank had $1.02 billion in cash and fed funds on the balance sheet representing 18.0% of total deposits. In addition, the Bank had $1.11 billion in FHLB borrowing availability, $85.42 million in available funds from the FRB Discount window and $156.2 million in available for sale securities that were unpledged. All summed, this totals $2.39 billion of total liquidity or 42.1% of total deposits.

Asset Quality

As of September 30, 2023, nonaccrual loans increased to $19.4 million, from $423,000 reported as of June 30, 2023 and up from the $6.2 million reported as of September 30, 2022. Although a marked increase, we are confident in the expedient and low cost resolution of these loans. In addition, OREO and repossessed assets totaled $16.7 million as of September 30, 2023. In addition to that, the Bank's total criticized and classified assets assets remained fairly constant at $115.3 million compared to $105.1 million as of June 30, 2023. Total net charge-offs were $80,000 for the third quarter of 2023 as compared to net charge offs of $0 last quarter and compared to net recoveries of ($2.4 million) in the same quarter last year. Management is acutely aware that commercial real estate is under some pressure given the change in interest rates over the past year, especially office properties. However in reviewing the portfolio, this weakness has yet to appear. We will be vigilant going forward.

Office Building Loans

As a result of the pandemic and working from home, office occupancy has suffered and there has been a corresponding decline in the value of office properties, especially in city centers. As of September 30, 2023, the Bank has the following office loans; (in 000's)

Medical Office	$	14,184
Mixed Use (Office & Retail)		170,590
Pure Office		177,322
Reposition for Multi-Family		105,731
Total	$	467,827

Substantially all of the office building loans are secured by properties located in more suburban areas. There are only $9.0 million of office building loans in downtown areas.

Allowance for Credit Losses

The provision for credit losses for the third quarter of 2023 was $3.5 million compared to $2.5 million last quarter and compared to $2.7 million in the same quarter last year. Macro economic conditions as well as more stress in the commercial real estate sector lead to the increase in the provision from last quarter. The Bank's allowance coverage ratio now stands at 1.46% of total loans.

Capitalization

As of September 30, 2023, the Bank's leverage ratio was 10.46%, the common equity tier 1 capital ratio was 11.63% and the total capital ratio stood at 15.32%. As of December 31, 2022, the Bank's leverage ratio was 10.30%, the common equity tier 1 ratio was 10.81% and the total risk-based capital ratio was 14.39%.

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank's second quarter 2023 financial results will be held tomorrow, October 18, 2023 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 1, 2023; the passcode is 6410410.

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 eleven full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, 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. 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 2022 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,
				2023		2023		2022
Interest income:
	Loans, including fees			$	106,695	$	102,220	$	71,192
	Investment securities				18,556		15,919		7,111
	Fed funds sold				278		272		117
		Total interest income			125,529		118,411		78,420

Interest expense:
	Interest-bearing demand				20,257		16,406		6,436
	Savings				67		47		19
	Time certificates				29,369		25,436		3,850
	FHLB borrowings				1,557		1,888		-
	Subordinated debt				1,325		1,325		1,325
		Total interest expense			52,575		45,102		11,630
		Net interest income			72,954		73,309		66,790
Provision for credit losses					3,500		2,500		2,700
		Net interest income after provision for
			credit losses		69,454		70,809		64,090

Noninterest income:
	Fees & service charges on deposit accounts				939		844		703
	Letters of credit fee income				1,412		1,576		956
	BOLI income				103		103		100
	Net gain on sale of loans				21		186		-
	Other income				497		392		428
		Total noninterest income			2,972		3,101		2,187

Noninterest expense:
	Salary and employee benefits				13,008		12,520		12,326
	Net occupancy expense				1,563		1,476		1,452
	Business development and promotion expense				193		200		214
	Professional services				1,423		1,343		1,161
	Office supplies and equipment expense				395		398		456
	Loss on sale of OREO, valuation allowance and related expense				140		2,838		314
	Other				2,287		2,077		1,477
		Total noninterest expense			19,009		20,852		17,400
		Income before provision for income taxes			53,417		53,058		48,877
Income tax expense					15,225		15,122		13,688
		Net income		$	38,192	$	37,936	$	35,189

Income per share available to common shareholders
		Basic		$	2.74	$	2.63	$	2.44
		Diluted		$	2.71	$	2.61	$	2.40

Weighted-average common shares outstanding
		Basic			13,925,994		14,419,959		14,792,298
		Diluted			14,105,915		14,560,693		15,006,801

Cash dividends per common share				$	0.55	$	0.55	$	0.43

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
				2023			2022		%
Interest income:
	Loans, including fees		$	304,796		$	181,852		67.6	%
	Investment securities			47,454			13,969		239.7	%
	Fed funds sold			774			182		325.5	%
		Total interest income		353,024			196,003		80.1	%

Interest expense:
	Interest-bearing demand			53,701			10,315		420.6	%
	Savings			153			58		163.9	%
	Time certificates			71,399			8,409		749.1	%
	FHLB borrowings			3,819			-		100.0	%
	Subordinated debt			3,975			3,975		0.0	%
		Total interest expense		133,046			22,757		484.6	%
		Net interest income		219,978			173,246		27.0	%
Provision for credit losses				6,500			5,350		21.5	%
		Net interest income after provision for credit losses		213,478			167,896		27.1	%

Noninterest income:
	Fees & service charges on deposit accounts			2,477			2,097		18.1	%
	Letters of credit fee income			4,312			3,218		34.0	%
	BOLI income			307			299		2.7	%
	Net loss on called and sale of investment securities			(4,117	)		-		-100.0	%
	Net gain on sale of loans			547			-		100.0	%
	Other income			1,481			1,440		2.9	%
		Total noninterest income		5,007			7,054		-29.0	%

Noninterest expense:
	Salary and employee benefits			39,256			35,654		10.1	%
	Net occupancy expense			4,513			4,315		4.6	%
	Business development and promotion expense			498			491		1.4	%
	Professional services			3,915			3,864		1.3	%
	Office supplies and equipment expense			1,197			1,404		-14.7	%
	Loss on sale of OREO, valuation allowance and related expense			3,050			715		326.6	%
	Other			6,332			4,254		48.9	%
		Total noninterest expense		58,761			50,697		15.9	%
		Income before provision for income taxes		159,724			124,253		28.5	%
Income tax expense				45,523			34,968		30.2	%
		Net income	$	114,201		$	89,285		27.9	%

Dividend and earnings allocated to participating securities			$	-		$	(2	)	100.0	%
Net income available to common shareholders			$	114,201		$	89,283		27.9	%

Income per share available to common shareholders
		Basic	$	8.01		$	6.09		31.5	%
		Diluted	$	7.92		$	6.00		31.9	%

Weighted-average common shares outstanding
		Basic		14,257,005			14,653,982		-2.7	%
		Diluted		14,418,939			14,873,933		-3.1	%

Dividends per share			$	1.65		$	1.29		27.9	%

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)


			September 30,			December 31,
				2023			2022
			(Unaudited)			(Audited)
Assets
Cash and due from banks			$	998,508		$	747,526
Fed funds sold				22,600			20,000
	Cash and cash equivalents			1,021,108			767,526

Securities held-to-maturity, at amortized cost				21,474			22,459
Securities available-for-sale, at fair value				335,608			428,295
Loans				5,128,242			5,074,793
	Less allowance for credit losses			(74,849	)		(68,472	)
	Less amortized deferred loan fees, net			(10,240	)		(9,939	)
	Loans, net			5,043,153			4,996,382

Other real estate owned and repossessed assets				16,716			21,990
Customers' liability on acceptances				103			1,731
Bank furniture and fixtures, net				8,748			8,999
Bank-owned life insurance				10,563			10,357
Accrued interest receivable				33,627			23,593
Investment in affordable housing partnerships				54,679			61,173
Federal Home Loan Bank stock, at cost				15,000			15,000
Deferred tax assets				47,311			43,218
Operating lease right-of-use assets				20,440			21,718
Other assets				4,000			2,917
	Total assets		$	6,632,530		$	6,425,358

Liabilities and Shareholders' Equity
Deposits:
	Noninterest bearing demand deposits		$	838,300		$	1,192,091
	Interest bearing deposits:			2,091,384			2,295,212
		Savings		30,427			39,527
		Time certificates of $250,000 or more		1,283,461			1,138,727
		Other time certificates		1,439,699			891,440
		Total deposits		5,683,271			5,556,997

Acceptances outstanding				103			1,731
Subordinated debt issuance, net				148,173			147,995
Commitments to fund investment in affordable housing partnerships				20,824			27,490
Operating lease liabilities				18,438			20,949
Accrued interest payable				12,506			2,608
Other liabilities				78,707			37,162
	Total liabilities			5,962,022			5,794,932

Shareholders' equity				670,508			630,426
	Total liabilities and shareholders' equity		$	6,632,530		$	6,425,358

Book value per common share			$	48.75		$	43.91
Number of common shares outstanding				13,753,246			14,358,145

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,
				2023			2023			2023			2022			2022
Unaudited historical quarterly operations data:
	Interest income		$	125,529		$	118,411		$	109,084		$	98,379		$	78,420
	Interest expense			52,575			45,102			35,369			24,267			11,630
		Interest income before provision for credit losses		72,954			73,309			73,715			74,112			66,790
	Provision for credit losses			3,500			2,500			500			2,000			2,700
	Noninterest income			2,972			3,101			(1,066	)		2,808			2,187
	Noninterest expense			19,009			20,852			18,899			19,976			17,400
	Income tax expense			15,225			15,122			15,176			15,384			13,688
		Net income	$	38,192		$	37,936		$	38,074		$	39,560		$	35,189

	Earnings per share
		Basic	$	2.74		$	2.63		$	2.64		$	2.76		$	2.44
		Diluted	$	2.71		$	2.61		$	2.61		$	2.71		$	2.40

Ratios for the period:
	Return on average assets			2.25	%		2.32	%		2.41	%		2.48	%		2.25	%
	Return on beginning equity			22.66	%		23.18	%		24.49	%		26.58	%		23.60	%
	Net interest margin (Fully-taxable equivalent)			4.39	%		4.58	%		4.77	%		4.75	%		4.37	%
	Noninterest expense to average assets			1.12	%		1.28	%		1.20	%		1.25	%		1.11	%
	Efficiency ratio			25.04	%		27.29	%		26.01	%		25.97	%		25.23	%
	Net charge-offs (recoveries) to average loans (annualized)			0.01	%		-0.00	%		0.00	%		0.00	%		-0.19	%

Ratios as of period end:
	Tier 1 leverage capital ratio			10.46	%		10.61	%		10.63	%		10.30	%		9.95	%
	Common equity tier 1 risk-based capital ratio			11.63	%		11.51	%		11.30	%		10.81	%		10.46	%
	Tier 1 risk-based capital ratio			11.63	%		11.51	%		11.30	%		10.81	%		10.46	%
	Total risk-based capital ratio			15.32	%		15.14	%		14.91	%		14.39	%		14.09	%
	Allowances for credit losses to loans at end of period			1.46	%		1.40	%		1.36	%		1.35	%		1.33	%
	Allowance for credit losses to non-performing loans		3.86x			13.86x			254.56x			12.49x			10.75x

Average balances:
	Total securities		$	368,968		$	397,905		$	442,852		$	434,830		$	410,649
	Total loans			5,086,241			5,044,004			5,012,862			4,981,561			4,908,870
	Total earning assets			6,597,557			6,432,950			6,276,630			6,193,330			6,076,616
	Total assets			6,719,859			6,558,651			6,400,849			6,328,017			6,215,184
	Total time certificate of deposits			2,680,854			2,617,872			2,209,370			1,872,239			1,749,257
	Total interest bearing deposits			4,800,227			4,549,519			4,451,299			4,287,287			3,973,105
	Total deposits			5,654,350			5,481,457			5,479,945			5,468,562			5,373,252
	Total interest bearing liabilities			5,069,014			4,847,596			4,630,982			4,435,245			4,121,005
	Total equity			678,020			677,306			650,963			613,729			598,188

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)



			For the Nine Months Ended
			September 30,			September 30,
				2023			2022

	Interest income		$	353,024		$	196,003
	Interest expense			133,046			22,757
		Interest income before provision for credit losses		219,978			173,246
	Provision for credit losses			6,500			5,350
	Noninterest income			5,007			7,054
	Noninterest expense			58,761			50,697
	Income tax expense			45,523			34,968
		Net income	$	114,201		$	89,285

	Earnings per share
		Basic	$	8.01		$	6.09
		Diluted	$	7.92		$	6.00

Ratios for the period:
	Return on average assets			2.33	%		1.95	%
	Return on beginning equity			24.22	%		20.35	%
	Net interest margin (Fully-taxable equivalent)			4.58	%		3.86	%
	Noninterest expense to average assets			1.20	%		1.11	%
	Efficiency ratio			26.12	%		28.12	%
	Net charge-off (recoveries) to average loans			0.00	%		-0.03	%

Average balances:
	Total securities		$	402,971		$	432,085
	Total loans			5,047,971			4,686,424
	Total earning assets			6,436,889			6,008,091
	Total assets			6,560,955			6,131,640
	Total time certificate of deposits			2,504,426			1,809,492
	Total interest bearing deposits			4,602,039			3,967,963
	Total deposits			5,539,223			5,297,387
	Total interest bearing liabilities			4,851,214			4,115,805
	Total equity			668,862			600,558

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)



				As of

				September 30,			June 30,			March 31,			December 31,			September 30,
					2023			2023			2023			2022			2022
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	1,021,108		$	1,049,745		$	885,691		$	767,526		$	749,484
	Securities held-to-maturity, at amortized cost				21,474			21,818			22,155			22,459			12,442
	Securities available-for-sale, at fair value				335,608			352,548			367,492			428,295			377,534
	Loans:
		Real estate – Mortgage:
			Real estate—Residential	$	663,021		$	631,795		$	612,907		$	609,292		$	587,812
			Real estate—Commercial		2,688,148			2,744,074			2,813,681			2,730,726			2,693,852
			Total Real Estate – Mortgage		3,351,169			3,375,879			3,426,588			3,340,018			3,281,664
		Real estate – Construction:
			R/E Construction — Residential		226,482			186,239			175,286			193,027			179,955
			R/E Construction — Commercial		164,666			153,418			142,319			204,478			188,083
			Total real estate construction loans		391,148			339,657			317,605			397,505			368,038
		Commercial and industrial			1,377,675			1,388,865			1,299,325			1,320,830			1,330,028
		SBA			2,424			4,427			7,306			11,339			8,067
		Trade finance			5,541			9,348			6,885			4,521			22,634
		Consumer and others			285			345			19			580			115
			Gross loans		5,128,242			5,118,511			5,057,728			5,074,793			5,010,546
	Allowance for credit losses on loans				(74,849	)		(71,429	)		(68,929	)		(68,472	)		(66,472	)
	Net deferred loan fees				(10,240	)		(10,464	)		(10,286	)		(9,939	)		(9,695	)
		Net loans, excluding loans held for sale		$	5,043,153		$	5,036,618		$	4,978,513		$	4,996,382		$	4,934,379
	Loans held for sale			$	-		$	176		$	-		$	-		$	-
		Net loans		$	5,043,153		$	5,036,794		$	4,978,513		$	4,996,382		$	4,934,379

	Other real estate owned and repossessed assets			$	16,716		$	16,728		$	18,628		$	21,990		$	26,075
	Investment in affordable housing partnerships				54,679			56,844			59,009			61,173			62,745
	Federal Home Loan Bank stock, at cost				15,000			15,000			15,000			15,000			15,000
	Other assets				124,793			118,465			115,049			112,533			115,184
		Total assets		$	6,632,530		$	6,667,942		$	6,461,537		$	6,425,358		$	6,292,843

Liabilities:
	Deposits:
		Demand		$	838,300		$	870,282		$	1,050,992		$	1,192,091		$	1,341,199
		Interest bearing demand			2,091,384			2,005,298			1,751,439			2,295,212			2,263,775
		Savings			30,427			32,089			33,861			39,527			38,151
		Time certificates of $250,000 or more			1,283,461			1,244,128			1,329,720			1,138,727			971,378
		Other time certificates			1,439,699			1,437,194			1,241,754			891,440			841,173
		Total deposits		$	5,683,271		$	5,588,991		$	5,407,766		$	5,556,997		$	5,455,676

	Acceptances outstanding			$	103		$	448		$	107		$	1,731		$	10,058
	Advance from Federal Home Loan Bank				-			150,000			150,000			-			-
	Subordinated debt issuance, net				148,173			148,114			148,055			147,995			147,936
	Commitments to fund investment in affordable housing partnerships				20,824			20,930			26,709			27,490			28,611
	Other liabilities				109,651			90,692			72,359			60,074			60,009
		Total liabilities		$	5,962,022		$	5,999,175		$	5,804,996		$	5,794,287		$	5,702,290

Equity:
	Net common stock, no par value			$	143,584		$	167,404		$	181,208		$	184,604		$	180,324
	Retained earnings				566,027			535,373			505,207			475,072			443,409
	Accumulated other comprehensive income				(39,103	)		(34,010	)		(29,874	)		(28,605	)		(33,180	)
		Total shareholders' equity		$	670,508		$	668,767		$	656,541		$	631,071		$	590,553
		Total liabilities and shareholders' equity		$	6,632,530		$	6,667,942		$	6,461,537		$	6,425,358		$	6,292,843

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,
				2023							2023							2022
						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)		$	5,086,302		$	106,695	8.32	%	$	5,044,517		$	102,220	8.13	%	$	4,908,870		$	71,192	5.75	%
	Investment securities ⁽³⁾			368,968			3,422	3.68	%		397,905			3,709	3.74	%		410,649			2,995	2.89	%
	Federal funds sold			20,111			278	5.48	%		20,000			272	5.45	%		20,071			117	2.30	%
	Other earning assets			1,122,176			15,235	5.39	%		970,528			12,311	5.09	%		737,026			4,221	2.27	%
		Total interest earning assets		6,597,557			125,630	7.55	%		6,432,950			118,512	7.39	%		6,076,616			78,525	5.13	%
	Deferred loan fees, net			(10,071	)						(10,417	)						(9,333	)
	Allowance for credit losses on loans			(71,503	)						(68,956	)						(61,477	)
Noninterest earning assets:
	Cash and due from banks			12,101							12,712							10,562
	Bank furniture and fixtures			8,814							9,005							9,615
	Right of use assets			21,491							21,988							21,404
	Other assets			161,470							161,369							167,797
		Total assets	$	6,719,859						$	6,558,651						$	6,215,184

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand and savings	$	2,119,373		$	20,324	3.80	%	$	1,931,647		$	16,453	3.42	%	$	2,223,848		$	6,455	1.15	%
		TCD $250K or more		1,251,397			14,085	4.47	%		1,259,305			12,772	4.07	%		914,373			2,517	1.09	%
		Other time certificates		1,429,457			15,284	4.24	%		1,358,567			12,664	3.74	%		834,884			1,333	0.63	%
		Total interest bearing deposits		4,800,227			49,693	4.11	%		4,549,519			41,889	3.69	%		3,973,105			10,305	1.03	%
Advance from Fedferal home loan bank				120,652			1,557	5.12	%		150,000			1,888	5.05	%		-			-	0.00	%
Subordinated debt, net				148,135			1,325	3.55	%		148,077			1,325	3.59	%		147,900			1,325	3.55	%
		Total interest bearing liabilities		5,069,014			52,575	4.11	%		4,847,596			45,102	3.73	%		4,121,005			11,630	1.12	%
Noninterest bearing liabilities:
	Demand deposits			854,123							931,938							1,400,147
	Lease Liability			19,759							20,708							21,332
	Other liabilities			98,943							81,103							74,512
		Total liabilities		6,041,839							5,881,345							5,616,996
Shareholders' equity				678,020							677,306							598,188
		Total liabilities and shareholders' equity	$	6,719,859						$	6,558,651						$	6,215,184
Net interest income						$	73,055						$	73,410						$	66,895
Net interest spread								3.44	%						3.66	%						4.01	%
Net interest margin								4.39	%						4.58	%						4.37	%

Cost of Deposits:
	Noninterest bearing demand deposits		$	854,123						$	931,938						$	1,400,147
	Interest bearing deposits			4,800,227			49,693	4.11	%		4,549,519			41,889	3.69	%		3,973,105			10,305	1.03	%
		Total Deposits	$	5,654,350		$	49,693	3.49	%	$	5,481,457		$	41,889	3.07	%	$	5,373,252		$	10,305	0.76	%

⁽¹⁾	Includes non-accrual loans and loans held for sale
⁽²⁾	Net loan fee income of 1.1 million, $$912,000 and $1.2 million for the quarter ended September 30, 2023, June 30, 2023, and September 30, 2022, 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,
			2023							2022
						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)		$	5,048,452		$	304,796	8.07	%	$	4,686,424		$	181,852	5.19	%
	Investment securities ⁽³⁾			402,971			11,125	3.69	%		432,085			7,590	2.35	%
	Federal funds sold			20,111			774	5.14	%		20,093			182	1.21	%
	Other earning assets			965,355			36,633	5.07	%		869,489			6,698	0.25	%
		Total interest earning assets		6,436,889			353,328	7.34	%		6,008,091			196,323	4.37	%
	Deferred loan fees, net			(10,142	)						(8,257	)
	Allowance for credit losses on loans			(69,653	)						(60,004	)
Noninterest earning assets:
	Cash and due from banks			11,912							11,167
	Bank furniture and fixtures			8,931							10,024
	Right of use assets			21,780							21,480
	Other assets			161,238							149,139
		Total assets	$	6,560,955						$	6,131,640

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
	Deposits:
		Interest bearing demand/ savings	$	2,097,613		$	53,854	3.43	%	$	2,158,471		$	10,373	0.64	%
		TCD $250K or more		1,258,870			37,600	3.99	%		911,931			4,755	0.70	%
		Other time certificates		1,245,556			33,798	3.63	%		897,561			3,654	0.54	%
		Total interest bearing deposits		4,602,039			125,252	3.64	%		3,967,963			18,782	0.63	%
Advance from Fedferal home loan bank				101,099			3,819	5.05	%		-			-	0.00	%
Subordinated debt, net				148,076			3,975	3.59	%		147,842			3,975	3.59	%
		Total interest bearing liabilities		4,851,214			133,046	3.67	%		4,115,805			22,757	0.74	%
Noninterest bearing liabilities:
	Demand deposits			937,184							1,329,424
	Lease Liability			20,482							21,795
	Other liabilities			83,213							64,058
		Total liabilities		5,892,093							5,531,082
Shareholders' equity				668,862							600,558
		Total liabilities and shareholders' equity	$	6,560,955						$	6,131,640
Net interest income						$	220,282						$	173,566
Net interest spread								3.67	%						3.63	%
Net interest margin								4.58	%						3.86	%

Cost of Deposits:
	Noninterest bearing demand deposits		$	937,184						$	1,329,424
	Interest bearing deposits			4,602,039			125,252	3.64	%		3,967,963			18,782	0.63	%
		Total Deposits	$	5,539,223		$	125,252	3.02	%	$	5,297,387		$	18,782	0.47	%

⁽¹⁾	Includes non-accrual loans and loans held for sale
⁽²⁾	Net loan fee income of $3.2 million and $2.9 million for the six months ended September 30 2023 and 2022, 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, 2023			December 31, 2022
			(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period			$	68,472		$	59,969
	Charge-Offs
		Commercial & Industrial		124			1,222
		Mini-perm Real Estate		-			1
		Total Charge-Offs		124			1,223

	Recoveries
		Commercial & Industrial		1			-
		Mini-perm Real Estate		-			2,376
		Total Recoveries		1			2,376

	Net Charge-Offs (recoveries)			123			(1,153	)
	Provision for Credit Losses:			6,500			7,350
Balance at End of Period			$	74,849		$	68,472

Average Loans Held for Investment			$	5,047,971		$	4,760,815
Loans Held for Investment at End of Period			$	5,128,242		$	5,074,793
Net Charge-Offs (recoveries) to Average Loans				0.00	%		-0.02	%
Allowances for Credit Losses to Loans at End of Period				1.46	%		1.35	%


AT THE COMPANY: Edward J. Czajka Executive Vice President Chief Financial Officer (213) 891-1188		AT FINANCIAL PROFILES: Jeffrey Haas General Information (310) 622-8240 PFBC@finprofiles.com

Preferred Bank Reports Quarterly Earnings