Preferred Bank Reports Fourth Quarter Results
LOS ANGELES, Jan. 22, 2026 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ:PFBC), one of the larger independent California banks, today reported results for the quarter ended December 31, 2025. Preferred Bank ("the Bank") reported net income of $34.8 million or $2.79 per diluted share for the fourth quarter of 2025. This represents a decrease in net income of $1.1 million from the prior quarter and an increase of $4.6 million over the same quarter last year. The increase compared to last year was primarily due to an occupancy charge of $8.1 million recorded in the fourth quarter of 2024 related to a correction in the adoption of ASC 842, Lease Accounting. The decrease in net income from the prior quarter was due to an increase in the provision for credit losses of $1.8 million and a decrease in net interest income of $1.3 million. The primary reason for the decrease in net interest income was due to the decline in market interest rates. The Bank sold two large OREO properties during the quarter resulting in a gain of $3.6 million, recorded in noninterest income and total OREO expense was $3.5 million for the fourth quarter of 2025.
Highlights for the Quarter:
Return on average assets was 1.82%
Return on average equity was 17.59%
Total loans increased by $182.3 million or 3.1%, linked quarter
Total deposits increased by $115.8 million, or 1.9%, linked quarter
The efficiency ratio for the quarter was 31.2%
Li Yu, Chairman and CEO, commented, "I am pleased to report fourth quarter net income of $34.8 million or $2.79 per share and for the full year 2025, net income of $133.6 million or $10.41 per share, which makes our profitability among the top echelon of the banking industry.
"The Bank's net interest margin for the fourth quarter was 3.74%, a decrease from third quarter, due mainly to the interest rate cuts implemented by the Federal Reserve in September and December. However, market rates on deposits have not kept pace with the rate cuts as competition for deposits remains elevated.
"Our loan growth for the quarter was $182.3 million or 12.4% on an annualized basis as we have seen an increase in loan demand. Deposit growth for the quarter was $115.8 million or 7.4% on an annualized basis. For the full year, loan and deposit growth was $413.6 million and $428.6 million, respectively.
"During the quarter, we sold two large OREO properties for a gain between the two. Therefore, total nonperforming assets decreased from the prior quarter. However, total criticized assets increased by $97.5 million due to the placing of a large relationship into classified status during the quarter. The provision for credit loss was $4.3 million for the quarter.
"It seems that most economists in the country have a positive economic outlook for 2026. We are also seeing our customers have an improved outlook. Barring any sudden and significant changes in government policy, we are hopeful to increase our growth rate in the new year."
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $70.0 million for the fourth quarter of 2025. This represents a $1.3 million decrease from the $71.3 million recorded in the prior quarter and a $802,000 increase over the same quarter last year. The decrease compared to the prior quarter was due to a decrease in the loan and overnight fed funds rate from the Federal Reserve interest rate ease that occurred in September as this quarter saw the full effect of that rate ease. Since a majority of the Bank's loans are tied to the Prime rate, interest on loans was down from the prior quarter which was partially offset by a decrease in deposit rates. The increase in net interest income over the same quarter last year was due to a larger decrease in interest expense than the decrease in interest income. The Bank has made significant efforts to decrease rates on deposits and the results this quarter are indicative of that effort. The Bank's net interest margin contracted in the quarter to 3.74% from 3.92% last quarter and down from the 4.06% net interest margin recorded in the fourth quarter of 2024.
Noninterest Income. For the fourth quarter of 2025, noninterest income was $8.1 million compared with $3.6 million for the same quarter last year and compared to $3.7 million for the third quarter of 2025. The increase over the same quarter last year was mainly due to a $3.6 million gain on sale of OREOs and increase in letter of credit (LC) fee income of $431,000, an increase in other income of $517,000 partially offset by a decrease in service charges of $216,000. In comparison to the prior quarter, the gain on sale of OREOs drove the increase as did an increase in other income of $744,000.
Noninterest Expense. Total noninterest expense was $24.4 million for the fourth quarter of 2025 compared to $21.5 million for the third quarter of 2025 and compared to $28.2 million recorded in the same period last year. The primary reason for the increase over the prior quarter was mainly due to a $1.8 million write-down of the Bank's OREO property which was subsequently sold as well as other OREO expenses of $1.6 million. This was partially offset by a decrease in personnel expense of $1.1 million which was due to a decrease in incentive compensation. The decrease from the same quarter last year was due again to the $8.1 million charge to occupancy expense in the fourth quarter of last year which was previously mentioned. This was partially offset by an increase in OREO expense of $3.5 million. The Bank's efficiency ratio came in at 31.2% for the quarter which compares to 28.7% last quarter and to 38.8% in the same quarter last year.
Income Taxes. The Bank recorded a provision for income taxes of $14.5 million for the fourth quarter of 2025. This represents an effective tax rate ("ETR") of 29.5% which is up from the 29.0% ETR for the same quarter last year and the same as the 29.5% ETR recorded in the third quarter of 2025. 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.
Year-to-Date Results
Net income for the year ended December 31, 2025 was $133.6 million or $10.41 per diluted share compared to $130.7 million or $9.64 per diluted share last year. Net interest income declined from 2024 to 2025 however the provision for credit losses declined from $12.1 million in 2024 to $9.1 million in 2025. Additionally, noninterest income increased by $6.0 million over 2024 levels partially offset by noninterest expense which increased by $1.6 million in 2025. On a percentage basis, the increase in diluted earnings per share ("EPS") was higher than the increase in net income due to common stock repurchases which occurred in late 2024 and throughout 2025.
Balance Sheet Summary
Total gross loans at December 31, 2025 were $6.05 billion, an increase of $413.6 million from the total of $5.64 billion as of December 31, 2024. Total deposits were $6.35 billion, an increase of $428.6 million from the $5.92 billion as of December 31, 2024. Total assets were $7.60 billion, an increase of $677.7 million over the total of $6.92 billion as of December 31, 2024.
Asset Quality
Non-accrual loans and loans 90 days or more past due and still accruing totaled $51.3 million, up from the $17.6 million as of September 30, 2025. This represents an increase from the prior quarter of $33.7 million. The main reason for the increase was due to placing a $19.5 million well-secured multi-family loan into nonaccrual status during the quarter. As previously mentioned, total criticized assets increased during the quarter from $151.0 million as of September 30, 2025 to $248.5 million at year-end. The increase is mainly due to a $123.1 million relationship consisting of nine loans; seven commercial real estate loans totaling $121.0 million and two unsecured credits totaling $2.0 million which were downgraded during the quarter. This was partially offset by the sale of $49.1 million of OREO during the quarter. Four of the loans which were downgraded are the subject of lawsuit which was previously disclosed by another financial institution. The weighted average LTV and DCR of the real estate loans that were downgraded was 65.7% and 1.14x respectively, so it is not expected that there will be any significant loss content in these loans. During the fourth quarter, the Bank disposed of one OREO property with a book value of $37.1 million at a price which yielded a net gain on sale of $3.6 million. (This sale was reported in the third quarter press release however it was recorded in the fourth quarter of 2025). In addition, the Bank also disposed of its long held OREO in Santa Barbara, however, it was sold at a small gain after a valuation charge of $1.8 million. Total net charge-offs (recoveries) on loans for the quarter were $0 compared to net charge-offs of $1.6 million in the prior quarter and compared to $6.6 million in the fourth quarter of 2024.
Allowance for Credit Losses
The provision for credit losses for the fourth quarter of 2025 was $4.3 million compared to $2.5 million last quarter and compared to $2.0 million in the same quarter last year. The Bank's allowance coverage ratio increased to 1.30% of loans as compared to 1.27% in the prior quarter and 1.27% at the end of 2024.
Capitalization
As of December 31, 2025, the Bank's tangible capital ratio was 10.38%, the leverage ratio was 10.54%, the common equity tier 1 capital ratio was 11.26% and the total capital ratio stood at 14.47%. As of December 31, 2024, the Bank's tangible capital ratio was 11.02%, the Bank's leverage ratio was 11.33%, the common equity tier 1 ratio was 11.80% and the total capital ratio was 15.11%.
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank's fourth quarter 2025 financial results will be held this afternoon, January 22, 2026 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing "Preferred Bank." There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's website at www.preferredbank.com.
Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief 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 855-669-9658 (domestic) or 412-317-0088 (international) through February 5, 2026; the passcode is 4064016.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), two branches in New York (Manhattan and Flushing, Queens) and a branch office in the Houston, Texas suburb of Sugar Land. In addition, the Bank also operates a loan production office in Sunnyvale, California. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank's future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government's monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank's 2024 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank's website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank's website at www.preferredbank.com.
AT THE COMPANY:Edward J. CzajkaExecutive Vice PresidentChief Financial Officer(213) 891-1188
AT FINANCIAL PROFILES:Jeffrey HaasGeneral Information(310)
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
December 31,
September 30,
December 31,
2025
2025
2024
Interest income:
Loans, including fees
$
109,747
$
110,645
$
111,596
Investment securities
14,677
15,977
14,013
Fed funds sold
209
228
249
Total interest income
124,633
126,850
125,858
Interest expense:
Interest-bearing demand
16,952
17,562
18,245
Savings
55
67
85
Time certificates
34,543
34,792
37,030
FHLB borrowings
1,783
1,794
0
Subordinated debt
1,325
1,325
1,325
Total interest expense
54,658
55,540
56,685
Net interest income
69,975
71,310
69,173
Provision for credit losses
4,300
2,500
2,000
Net interest income after provision for credit losses
65,675
68,810
67,173
Noninterest income:
Fees & service charges on deposit accounts
545
625
761
Letters of credit fee income
2,408
2,421
1,977
BOLI income
105
105
102
Net gain on sale of other real estate owned
3,609
-
-
Net gain on called and sale of investment securities
132
-
-
Net gain on sale of loans
93
56
112
Other income
1,202
458
685
Total noninterest income
8,094
3,665
3,637
Noninterest expense:
Salary and employee benefits
13,101
14,240
13,279
Net occupancy expense
2,430
2,297
10,110
Business development and promotion expense
163
238
340
Professional services
2,091
1,494
1,606
Office supplies and equipment expense
375
361
396
OREO valuation allowance and related expense
3,465
463
155
Other
2,752
2,405
2,360
Total noninterest expense
24,377
21,498
28,246
Income before provision for income taxes
49,392
50,977
42,564
Income tax expense
14,570
15,038
12,343
Net income
$
34,822
$
35,939
$
30,221
Income per share available to common shareholders
Basic
$
2.85
$
2.90
$
2.29
Diluted
$
2.79
$
2.84
$
2.25
Weighted-average common shares outstanding
Basic
12,210,077
12,384,924
13,190,696
Diluted
12,479,124
12,634,174
13,442,294
Cash dividends per common share
$
0.80
$
0.75
$
0.75
PREFERRED BANK
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for net income per share and shares)
For the Twelve Months Ended
December 31,
December 31,
Change
2025
2024
%
Interest income:
Loans, including fees
$
427,767
445,139
-3.9
%
Investment securities
57,790
62,854
-8.1
%
Fed funds sold
898
1,103
-18.6
%
Total interest income
486,455
509,096
-4.4
%
Interest expense:
Interest-bearing demand
67,275
87,951
-23.5
%
Savings
262
323
-18.9
%
Time certificates
138,154
142,894
-3.3
%
FHLB borrowings
4,647
0
100.0
%
Subordinated debt
5,300
5,300
0.0
%
Total interest expense
215,638
236,468
-8.8
%
Net interest income
270,817
272,628
-0.7
%
Provision for credit losses
9,100
12,100
-24.8
%
Net interest income after provision for credit losses
261,717
260,528
0.5
%
Noninterest income:
Fees & service charges on deposit accounts
2,521
3,172
-20.5
%
Letters of credit fee income
9,406
7,188
30.9
%
BOLI income
417
420
-0.8
%
Net gain on sale of other real estate owned
3,609
-
100.0
%
Net gain on called and sale of investment securities
132
-
100.0
%
Net gain on sale of loans
596
659
-9.5
%
Other income
2,838
2,126
33.5
%
Total noninterest income
19,519
13,565
43.9
%
Noninterest expense:
Salary and employee benefits
56,427
53,648
5.2
%
Net occupancy expense
9,292
15,420
-39.7
%
Business development and promotion expense
1,103
1,250
-11.8
%
Professional services
6,743
6,711
0.5
%
Office supplies and equipment expense
1,541
1,781
-13.5
%
OREO valuation allowance and related expense
6,938
2,234
210.6
%
Other
9,645
9,016
7.0
%
Total noninterest expense
91,689
90,060
1.8
%
Income before provision for income taxes
189,547
184,033
3.0
%
Income tax expense
55,915
53,371
4.8
%
Net income
$
133,632
$
130,662
2.3
%
Income per share available to common shareholders
Basic
$
10.61
$
9.79
8.4
%
Diluted
$
10.41
$
9.64
8.0
%
Weighted-average common shares outstanding
Basic
12,594,305
13,347,004
-5.6
%
Diluted
12,837,442
13,554,266
-5.3
%
Dividends per share
$
3.05
$
2.85
7.0
%
PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
December 31,
December 31,
2025
2024
(Unaudited)
(Audited)
Assets
Cash and due from banks
$
807,098
$
765,515
Fed funds sold
20,000
20,000
Cash and cash equivalents
827,098
785,515
Securities held-to-maturity, at amortized cost
18,749
20,021
Securities available-for-sale, at fair value
566,186
348,706
Loans held for sale, at lower of cost or fair value
-
2,214
Loans
6,054,264
5,640,615
Less allowance for credit losses
(78,992
)
(71,477
)
Less amortized deferred loan fees, net
(9,030
)
(9,234
)
Loans, net
5,966,242
5,559,904
Other real estate owned and repossessed assets
3,510
14,991
Bank furniture and fixtures, net
8,064
8,462
Bank-owned life insurance
10,712
10,433
Accrued interest receivable
34,154
33,561
Investment in affordable housing partnerships
69,978
58,346
Federal Home Loan Bank stock, at cost
15,000
15,000
Deferred tax assets
42,464
47,402
Income tax receivable
3,396
2,195
Operating lease right-of-use assets
30,531
13,182
Other assets
5,081
3,497
Total assets
$
7,601,165
$
6,923,429
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand deposits
$
699,160
$
704,859
Interest bearing deposits:
2,205,914
2,026,965
Savings
30,376
30,150
Time certificates of $250,000 or more
1,754,273
1,477,931
Other time certificates
1,655,723
1,676,943
Total deposits
6,345,446
5,916,848
Advances from Federal Home Loan Bank
200,000
-
Subordinated debt issuance, net
148,706
148,469
Commitments to fund investment in affordable housing partnerships
23,327
21,623
Operating lease liabilities
35,107
16,990
Accrued interest payable
16,513
16,517
Other liabilities
42,589
39,830
Total liabilities
6,811,688
6,160,277
Shareholders' equity
789,477
763,152
Total liabilities and shareholders' equity
$
7,601,165
$
6,923,429
Book value per common share
$
64.83
$
57.86
Number of common shares outstanding
12,177,588
13,188,776
PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
For the Quarter Ended
December 31,
September 30,
June 30,
March 31,
December 31,
2025
2025
2025
2025
2024
Unaudited historical quarterly operations data:
Interest income
$
124,633
$
126,850
$
120,443
$
114,529
$
125,858
Interest expense
54,658
