PFBC Preferred Bank

Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended March 31, 2023. Preferred Bank (“the Bank”) reported net income of $38.1 million or $2.61 per diluted share for the first quarter of 2023. This represents an increase of $12.0 million or 46.3% over the same quarter last year but a small decrease of $1.5 million from the fourth quarter of 2022. The primary driver of the increase over the prior year quarter was net interest income which increased by $23.7 million or 47.3% over the same period last year. The decrease in net income on a linked quarter basis was due mainly to a $4.2 million loss on sale of a $5.0 million corporate note issued by Signature Bank of New York (SBNY). Also on a linked quarter basis, net interest income was relatively flat as both interest income and interest expense increased by nearly the same amount while noninterest expense was down slightly this quarter compared to last.

The unprecedented turmoil created by the failures of Silicon Valley Bank (SVB) and SBNY created a difficult operating environment and as a result, the Bank’s total deposits declined slightly from year-end 2022. In that regard, we believe it is important to highlight how the Bank’s balance sheet was managed prior to this crisis:

At Year End 2022:

• Total cash on hand of $768 million equaled 13.8% of total deposits
• Tangible common equity was 9.82% - low amount of AOCI adjustment
• Held-to-Maturity portfolio totaled only $22.5 million, market value of $20.5 million
• Our loan to deposit ratio was only 91.3%
• No short term borrowings

Highlights for the Quarter:

• Net income of $38.1 million or $2.61 per diluted share. Net income was affected by the loss on sale of Signature Bank subordinated debt of $4.16 million.
• Net interest income $73.7 in the first quarter of 2023, compared to $74.1 for the fourth quarter 2022. Note that the first quarter of 2023 has two fewer days of operation compared to the previous quarter.
• Return of average assets was 2.41%
• Return on beginning equity of 24.47%
• Net interest margin was 4.77%
• Total loans decreased $17 million from year-end 2022
• Total deposits decreased $149 million from year-end 2022
• Efficiency ratio was 26.0%
• Quarter-end cash on hand was $886 million or 16.4% of total deposits
• Quarter-end held to maturity security portfolio of $22.2 million with market value of $20.6 million
• The allowance for credit losses to total loans increased to 1.36%

Li Yu, Chairman and CEO, commented, “I am truly pleased to report first quarter 2023 net income of $38.1 million or $2.61 per diluted share under a highly strained operating environment.

“We in the banking industry have been truly humbled by the historic events of early March when two good-sized banks failed within days of each other.   We have learned a great deal in the weeks following these failures and the following are my observations:

• The definition for transactional accounts should be revised. True, they are “core deposits” by definition, but we now know that only holds true in good times. Conversely, they are the source of a deposit “run” in more stressful conditions. I now appreciate our TCD (time certificate of deposit) portfolio even more. Aside from knowing the duration of our funding at a known cost, we did not experience even one TCD withdrawal during the second week of March.
• The golden rule of not borrowing short to lend or invest long, still stands. In doing this however, we are going against the grain, so to speak. I cannot count how many times we have seen the disappointment in the faces of our loan officers when their floating rate loan gets paid off by a low fixed rate long-term loan. The events of early March only confirm my belief that it is well worth the agony in order to have a better positioned balance sheet.
• We must respect the fact that government policy change is always one of our biggest risks that we face in the industry. Back in 2021, we were all convinced that inflation was ‘transitory’ by public officials. I highly doubt that anyone was preparing at the time for a nearly 500 basis point rate increase in 2022.
• We managers of publicly traded banks will continue to be confronted by “beat” or “miss” of our quarterly financial results. But it is very clear to me that we must place more weight in longer-term balance sheet management. I hope our shareholders will also do so.

“Going forward, Preferred Bank will continue to maintain its balance sheet flexibility by keeping a relatively short duration balance sheet, maintain high levels of liquidity, control our overhead and operate a simple business model.”

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $73.7 million for the first quarter of 2023. This was a significant increase from the $50.0 million recorded in the same quarter last year but down slightly from the $74.1 million posted in the fourth quarter of 2022. 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. Despite the increasing deposit rates, the Bank’s taxable equivalent net interest margin rose 2 basis points on a linked quarter basis to 4.77% from 4.75% last quarter. Comparing to the same quarter last year, the margin was up by an impressive 135 basis points over the 3.42% posted this quarter last year.

Noninterest Income. For the first quarter of 2023, noninterest income was ($1.1 million) compared with $2.3 million for the same quarter last year and compared to $2.8 million for the fourth quarter of 2022. The decrease compared to both quarters was mainly due to the loss on sale of the SBNY corporate note which was sold in the days following its failure. Letter of credit (“LC”) fees were $1.3 million for the quarter, and increase of $392,000 over the same period last year and a small increase of $79,000 over last quarter. Gains on sales of SBA loans were $340,000 compared to $0 in both comparable periods as the Bank’s SBA department is now originating and selling loans. Finally, service charges on deposits were up slightly over both comparable periods.

Noninterest Expense. Total noninterest expense was $18.9 million for the first quarter of 2023 compared to $20.0 million for the fourth quarter of 2022 and compared to the $16.2 million recorded in the same period last year. Comparing this quarter to the first quarter of last year; personnel expense increased by $2.1 million or 17.9% and other expense increased by $721,000 or 57.9%. The personnel expense increase was mainly due to new hires, merit increases and an increase in incentive compensation. The increase in other expense was mainly due to an increase in FDIC premiums of $510,000 over the same period last year. In comparing to the prior quarter; personnel expense was up by $775,000 or 6.0% and other expense was up by $299,000 or 17.9%. Offsetting this, the Bank incurred a $2.1 million in OREO expenses last quarter (valuation allowance and loss on sale). For the quarter ended March 31, 2023, the Bank’s efficiency ratio was 26.1% slightly higher than the 26.0% posted last quarter but easily surpassing the 30.9% posted this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $15.2 million for the first quarter of 2023. This represents an effective tax rate (“ETR”) of 28.5% and slightly higher than the 28.0% ETR for the fourth quarter of 2022 but even with the 28.5% ETR recorded in the first 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 March 31, 2023 were $5.06 billion, a decrease of $17.1 million from the total of $5.07 billion as of December 31, 2022. Total deposits decreased to $5.41 billion from the 5.56 billion as of December 31, 2022. Total assets were $6.46 billion, an increase of $36.2 million over the total of $6.43 billion as of December 31, 2022.

Uninsured Deposits

As of March 31, 2023, total uninsured deposits represented approximately 49.5 % of total deposits. Since mid-March, we have been diligently working with our larger deposit clients to enroll them in the IntraFi/ICS program to ensure that all of their deposits are FDIC insured. Since mid-March, we have been working with IntraFi/ICS and another firm in order to parse out our larger deposit accounts through their networks in order to increase the insurance coverage on our depositor base. Along these lines, we also hope to bring back some depositors who left in the aftermath of SVN and SBNY.

Balance Sheet Fair Market Values from December 31, 2022

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 2022 Annual Report on Form 10-K.

		December 31, 2022
		Carrying Amount			Estimated Fair Value
Assets:
Cash and cash equivalents		$	767,526		$	767,526
Securities held-to-maturity			22,459			20,517
Securities available-for-sale			428,295			428,295
Loans, net of ACL and net deferred loan fees			4,996,382			5,066,775
Accrued interest receivable			23,593			23,593
Federal Home Loan Bank stock			15,000		N/A
Liabilities:
Demand deposits and savings:
Non-interest bearing		$	1,192,091		$	1,192,091
Interest-bearing			2,334,739			2,334,739
Time deposits			2,030,167			2,055,438
Subordinated debt issuance			147,995			164,477
Accured interest payable			2,608			2,608

Liquidity

As of March 31, 2023, the Bank had $886 million in cash and fed funds on the balance sheet representing 16.4% of total deposits. In addition, the Bank had $304 million in FHLB borrowing availability, $100 million in available funds from the FRB Discount window and $200 million in available for sale securities that were unpledged. All summed, this totals $1.49 billion of total liquidity or 27.6% of total deposits. The Bank still has a considerable number of loans yet to be pledged to the FHLB so the total availability of liquidity will increase over the coming month.

Asset Quality

As of March 31, 2023, nonaccrual loans totaled just $271,000, down from the $5.5 million reported as of December 31, 2022 and down from the $2.2 million reported as of March 31, 2022. In addition, OREO and repossessed assets totaled $18.6 million as of March 31, 2023, down from the $22.0 million as of December 31, 2022 as the Bank was able to sell most of the equipment associated with the other foreclosed assets. In addition to that, the Bank’s total classified assets remained constant at $43.1 million compared to $43.1 million as of December 31, 2022. Total net charge-offs were $43,000 for the first quarter of 2023 as compared to net charge off of $1.2 million in the same quarter last year and compared to $0 in the prior quarter. Management is acutely aware that commercial real estate is falling under some pressure given the change in interest rates over the past year, especially office properties. However in reviewing the portfolio, with delinquencies and nonaccrual loans down and classified assets flat, this weakness has yet to appear. We will be vigilant going forward.

Allowance for Credit Losses

The provision for credit losses for the first quarter of 2023 was $500,000 compared to $2.0 million last quarter and compared to the reversal of $250,000 in the same quarter last year.   The economic indicators and most likely scenarios did not require a total ACL in excess of what was recorded. The Bank’s allowance coverage ratio now stands at 1.36% of total loans.

Capitalization

As of March 31, 2023, the Bank’s leverage ratio was 10.63%, the common equity tier 1 capital ratio was 11.30% and the total capital ratio stood at 14.91%. 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%.

GAAP – Non-GAAP Reconciliation -First quarter 2023 PPPT ROBE
Net Income	$	38,074
Add: Provision for credit losses		500
Add: Income tax expense		15,176
Pre-provision and pre-tax income	$	53,750
Total equity – 12/31/22	$	631,071
Pre-provision and pre-tax ROBE		34.54	%

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank’s first quarter 2023 financial results will be held tomorrow, April 19, 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 April 26, 2023; the passcode is 5434053.

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)) and one branch in Flushing, New York. In addition, the Bank operates a Loan Production 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.

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

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
					March 31,				December 31,			March 31,
						2023				2022			2022
Interest income:
	Loans, including fees				$	95,881			$	87,159		$	52,119
	Investment securities					12,979				11,028			2,886
	Fed funds sold					224				192			19
		Total interest income				109,084				98,379			55,024
Interest expense:
	Interest-bearing demand					17,038				13,906			1,431
	Savings					39				32			19
	Time certificates					16,593				9,004			2,217
	FHLB borrowings					374				-			-
	Subordinated debt					1,325				1,325			1,325
		Total interest expense				35,369				24,267			4,992
		Net interest income				73,715				74,112			50,032
Provision for (reversal of) credit losses						500				2,000			(250	)
		Net interest income after provision for (reversal of)
			credit losses			73,215				72,112			50,282
Noninterest income:
	Fees & service charges on deposit accounts					694				631			671
	Letters of credit fee income					1,324				1,245			933
	BOLI income					101				102			99
	Net (loss) gain on called and sale of investment securities					(4,117	)			297			-
	Net gain on sale of loans					340				-			-
	Other income					592				533			563
		Total noninterest income				(1,066	)			2,808			2,266
Noninterest expense:
	Salary and employee benefits					13,728				12,953			11,640
	Net occupancy expense					1,474				1,444			1,422
	Business development and promotion expense					105				320			101
	Professional services					1,149				1,028			1,243
	Office supplies and equipment expense					404				460			489
	Loss on sale of OREO, valuation allowance and related expense					72				2,103			16
	Other					1,967				1,668			1,246
		Total noninterest expense				18,899				19,976			16,157
		Income before provision for income taxes				53,250				54,944			36,391
Income tax expense						15,176				15,384			10,364
		Net income			$	38,074			$	39,560		$	26,027
Dividend and earnings allocated to participating securities						-				-			(1	)
Net income available to common shareholders					$	38,074			$	39,560		$	26,026
Income per share available to common shareholders
		Basic			$	2.64			$	2.76		$	1.76
		Diluted			$	2.61			$	2.71		$	1.74
Weighted-average common shares outstanding
		Basic				14,430,606				14,357,326			14,765,337
		Diluted				14,602,149				14,617,377			14,978,667
Cash dividends per common share					$	0.55			$	0.55		$	0.43

PREFERRED BANK
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
				March 31,				December 31,
					2023				2022
				(Unaudited)				(Audited)
Assets
Cash and due from banks				$	865,691			$	747,526
Fed funds sold					20,000				20,000
	Cash and cash equivalents				885,691				767,526
Securities held to maturity, at amortized cost					22,155				22,459
Securities available-for-sale, at fair value					367,492				428,295
Loans					5,057,728				5,074,793
	Less allowance for credit losses				(68,929	)			(68,472	)
	Less amortized deferred loan fees, net				(10,286	)			(9,939	)
	Loans, net				4,978,513				4,996,382
Other real estate owned and repossessed assets					18,628				21,990
Customers' liability on acceptances					107				1,731
Bank furniture and fixtures, net					8,784				8,999
Bank-owned life insurance					10,425				10,357
Accrued interest receivable					26,532				23,593
Investment in affordable housing partnerships					59,009				61,173
Federal Home Loan Bank stock, at cost					15,000				15,000
Deferred tax assets					43,713				43,218
Operating lease right-of-use assets					22,188				21,718
Other assets					3,300				2,917
	Total assets			$	6,461,537			$	6,425,358
Liabilities and Shareholders' Equity
Deposits:
	Non-interest bearing demand deposits			$	1,050,992			$	1,192,091
	Interest-bearing deposits:				1,751,439				2,295,212
		Savings			33,861				39,527
		Time certificates of $250,000 or more			1,329,720				1,138,727
		Other time certificates			1,241,754				891,440
		Total deposits			5,407,766				5,556,997
Acceptances outstanding					107				1,731
Advances from Federal Home Loan Bank					150,000				-
Subordinated debt issuance, net					148,055				147,995
Commitments to fund investment in affordable housing partnerships					26,709				27,490
Operating lease liabilities					21,076				20,949
Accrued interest payable					4,529				2,608
Other liabilities					46,754				37,162
	Total liabilities				5,804,996				5,794,932
Shareholders' equity					656,541				630,426
	Total liabilities and shareholders' equity			$	6,461,537			$	6,425,358
Book value per common share				$	45.49			$	43.91
Number of common shares outstanding					14,432,122				14,358,145

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				For the Quarter Ended
				March 31,			December 31,			September 30,			June 30,			March 31,
					2023			2022			2022			2022			2022
Unaudited historical quarterly operations data:
	Interest income			$	109,084		$	98,379		$	78,420		$	62,559		$	55,024
	Interest expense				35,369			24,267			11,630			6,135			4,992
		Interest income before provision for credit losses			73,715			74,112			66,790			56,424			50,032
	Provision (reversal of) for credit losses				500			2,000			2,700			2,900			(250	)
	Noninterest income				(1,066	)		2,808			2,187			2,601			2,266
	Noninterest expense				18,899			19,976			17,400			17,140			16,157
	Income tax expense				15,176			15,384			13,688			10,916			10,364
		Net income		$	38,074		$	39,560		$	35,189		$	28,069		$	26,027
	Earnings per share
		Basic		$	2.64		$	2.76		$	2.44		$	1.90		$	1.76
		Diluted		$	2.61		$	2.71		$	2.40		$	1.87		$	1.74
Ratios for the period:
	Return on average assets				2.41	%		2.48	%		2.25	%		1.84	%		1.75	%
	Return on beginning equity				24.47	%		26.58	%		23.60	%		18.91	%		17.99	%
	Net interest margin (Fully-taxable equivalent)				4.77	%		4.75	%		4.37	%		3.77	%		3.42	%
	Noninterest expense to average assets				1.20	%		1.25	%		1.11	%		1.12	%		1.08	%
	Efficiency ratio				26.01	%		25.97	%		25.23	%		29.04	%		30.89	%
	Net charge-offs (recoveries) to average loans (annualized)				0.00	%		0.00	%		-0.19	%		0.00	%		0.11	%
Ratios as of period end:
	Tier 1 leverage capital ratio				10.63	%		10.30	%		9.95	%		9.92	%		9.92	%
	Common equity tier 1 risk-based capital ratio				11.30	%		10.81	%		10.46	%		10.61	%		11.20	%
	Tier 1 risk-based capital ratio				11.30	%		10.81	%		10.46	%		10.61	%		11.20	%
	Total risk-based capital ratio				14.91	%		14.39	%		14.09	%		14.31	%		15.12	%
	Allowances for credit losses to loans at end of period				1.36	%		1.35	%		1.33	%		1.25	%		1.27	%
	Allowance for credit losses to non-performing loans			254.56x			12.49x			10.75x			5.27x			27.15x
Average balances:
	Total securities			$	442,852		$	434,830		$	410,649		$	430,203		$	455,899
	Total loans				5,012,862			4,981,561			4,908,870			4,777,353			4,367,095
	Total earning assets				6,276,630			6,193,330			6,076,616			6,008,024			5,938,720
	Total assets				6,400,849			6,328,017			6,215,184			6,133,703			6,044,155
	Total time certificate of deposits				2,209,370			1,872,239			1,749,257			1,810,886			1,869,654
	Total interest bearing deposits				4,451,299			4,287,287			3,973,105			3,982,888			3,947,616
	Total deposits				5,479,945			5,468,562			5,373,252			5,301,370			5,215,810
	Total interest bearing liabilities				4,630,982			4,435,245			4,121,005			4,130,729			4,095,399
	Total equity				650,963			613,729			598,188			606,260			597,214

PREFERRED BANK
Selected Consolidated Financial Information
(unaudited)
(in thousands, except for ratios)
				As of
				March 31,				December 31,				September 30,				June 30,				March 31,
					2023				2022				2022				2022				2022
Unaudited quarterly statement of financial position data:
Assets:
	Cash and cash equivalents			$	885,691			$	767,526			$	749,484			$	768,658			$	985,162
	Securities held-to-maturity, at amortized cost				22,155				22,459				12,442				12,784				13,496
	Securities available-for-sale, at fair value				367,492				428,295				377,534				400,597				430,280
	Loans:
		Real estate – Mortgage:
			Real estate—Residential	$	612,908			$	609,292			$	587,812			$	581,412			$	539,614
			Real estate—Commercial		2,813,680				2,730,726				2,693,852				2,583,484				2,367,862
			Total Real Estate – Mortgage		3,426,588				3,340,018				3,281,664				3,164,896				2,907,476
		Real estate – Construction:
			R/E Construction — Residential		175,286				193,027				179,955				168,420				141,218
			R/E Construction — Commercial		142,319				204,478				188,083				203,217				209,726
			Total real estate construction loans		317,605				397,505				368,038				371,637				350,944
		Commercial and industrial			1,299,325				1,320,830				1,330,028				1,336,631				1,281,559
		SBA			7,306				11,339				8,067				22,186				32,554
		Trade finance			6,885				4,521				22,634				24,663				18,919
		Consumer and others			19				580				115				128				115
			Gross loans		5,057,728				5,074,793				5,010,546				4,920,141				4,591,567
	Allowance for credit losses on loans				(68,929	)			(68,472	)			(66,472	)			(61,396	)			(58,496	)
	Net deferred loan fees				(10,286	)			(9,939	)			(9,695	)			(9,525	)			(8,573	)
		Net loans		$	4,978,513			$	4,996,382			$	4,934,379			$	4,849,220			$	4,524,498
	Other real estate owned and repossessed assets			$	18,628			$	21,990			$	26,075			$	21,449			$	15,547
	Investment in affordable housing partnerships				59,009				61,173				62,745				54,874				56,946
	Federal Home Loan Bank stock, at cost				15,000				15,000				15,000				15,000				15,000
	Other assets				115,049				112,533				115,184				110,459				101,427
		Total assets		$	6,461,537			$	6,425,358			$	6,292,843			$	6,233,041			$	6,142,356
Liabilities:
	Deposits:
		Demand		$	1,050,992			$	1,192,091			$	1,341,199			$	1,385,934			$	1,251,613
		Interest-bearing demand			1,751,439				2,295,212				2,263,775				2,239,501				2,159,178
		Savings			33,861				39,527				38,151				39,784				39,946
		Time certificates of $250,000 or more			1,329,720				1,138,727				971,378				870,376				924,317
		Other time certificates			1,241,754				891,440				841,173				872,357				934,615
		Total deposits		$	5,407,766			$	5,556,997			$	5,455,676			$	5,407,952			$	5,309,669
	Acceptances outstanding			$	107			$	1,731			$	10,058			$	11,053			$	8,222
	Advance from Federal Home Loan Bank				150,000				-				-				-				-
	Subordinated debt issuance, net				148,055				147,995				147,936				147,877				147,818
	Commitments to fund investment in affordable housing partnerships				26,709				27,490				28,611				20,036				22,606
	Other liabilities				72,359				60,074				60,009				54,531				58,756
		Total liabilities		$	5,804,996			$	5,794,287			$	5,702,290			$	5,641,449			$	5,547,071
Equity:
	Net common stock, no par value			$	181,208			$	184,604			$	180,324			$	197,997			$	209,065
	Retained earnings				505,207				475,072				443,409				414,393				392,610
	Accumulated other comprehensive income				(29,874	)			(28,605	)			(33,180	)			(20,798	)			(6,390	)
		Total shareholders' equity		$	656,541			$	631,071			$	590,553			$	591,592			$	595,285
		Total liabilities and shareholders' equity		$	6,461,537			$	6,425,358			$	6,292,843			$	6,233,041			$	6,142,356

PREFERRED BANK
Quarter-to-Date Average Balances, Yields and Rates
(Unaudited)
			Three months ended March 31,								Three months ended December 31,								Three months ended March 31,
				2023								2022								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)		$	5,013,740		$	95,881	7.76	%		$	4,981,561		$	87,159	6.94	%		$	4,367,095		$	52,119	4.84	%
	Investment securities (3)			442,852			3,994	3.66	%			434,830			3,993	3.64	%			455,899			2,224	1.98	%
	Federal funds sold			20,222			224	4.50	%			20,000			192	3.81	%			20,122			19	0.38	%
	Other earning assets			799,816			9,087	4.61	%			756,939			7,139	3.74	%			1,095,604			770	0.29	%
		Total interest-earning assets		6,276,630			109,186	7.05	%			6,193,330			98,483	6.31	%			5,938,720			55,132	3.76	%
	Deferred loan fees, net			(9,937	)							(10,003	)							(6,322	)
	Allowance for credit losses on loans			(68,466	)							(66,515	)							(59,951	)
Non-interest earning assets:
	Cash and due from banks			11,527								11,569								11,589
	Bank furniture and fixtures			8,977								9,237								10,440
	Right of use assets			21,867								22,002								21,754
	Other assets			160,251								168,397								127,925
		Total assets	$	6,400,849							$	6,328,017							$	6,044,155
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
	Deposits:
		Interest-bearing demand and savings	$	2,241,929		$	17,077	3.09	%		$	2,415,048		$	13,938	2.29	%		$	2,077,962		$	1,450	0.28	%
		TCD $250K or more		1,266,072			10,743	3.44	%			1,017,302			6,014	2.35	%			929,170			1,027	0.45	%
		Other time certificates		943,298			5,850	2.52	%			854,937			2,990	1.39	%			940,484			1,190	0.51	%
		Total interest-bearing deposits		4,451,299			33,670	3.07	%			4,287,287			22,942	2.12	%			3,947,616			3,667	0.38	%
Advance from Fedferal home loan bank				31,667			374	4.78	%			-			-	0.00	%			-			-	0.00	%
Subordinated debt, net				148,016			1,325	3.63	%			147,958			1,325	3.55	%			147,783			1,325	3.64	%
		Total interest-bearing liabilities		4,630,982			35,369	3.10	%			4,435,245			24,267	2.17	%			4,095,399			4,992	0.49	%
Non-interest bearing liabilities:
	Demand deposits			1,028,646								1,181,275								1,268,194
	Lease Liability			20,993								21,542								22,463
	Other liabilities			69,265								76,226								60,885
		Total liabilities		5,749,886								5,714,288								5,446,941
Shareholders’ equity				650,963								613,729								597,214
		Total liabilities and shareholders’ equity	$	6,400,849							$	6,328,017							$	6,044,155
Net interest income						$	73,817							$	74,216							$	50,140
Net interest spread								3.96	%							4.14	%							3.27	%
Net interest margin								4.77	%							4.75	%							3.42	%
Cost of Deposits:
	Non-interest bearing demand deposits		$	1,028,646							$	1,181,275							$	1,268,194
	Interest-bearing deposits			4,451,299			33,670	3.07	%			4,287,287			22,942	2.12	%			3,947,616			3,667	0.38	%
		Total Deposits	$	5,479,945		$	33,670	2.49	%		$	5,468,562		$	22,942	1.66	%		$	5,215,810		$	3,667	0.29	%
(1)	Includes non-accrual loans and loans held for sale
(2)	Net loan fee income of $1.2 million, $972,000 and $765,000 for the quarter ended March 31, 2023, December 31, 2022, and March 31, 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
					Quarter Ended				Year ended
					March 31, 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				44				1,222
		Mini-perm Real Estate				-				1
		Total Charge-Offs				44				1,223
	Recoveries
		Commercial & Industrial				1				-
		Mini-perm Real Estate				-				2,376
		Total Recoveries				1				2,376
	Net Charge-Offs (recoveries)					43				(1,153	)
	Provision forCredit Losses:					500				7,350
Balance at End of Period					$	68,929			$	68,472
Average Loans Held for Investment					$	5,012,862			$	4,760,815
Loans Held for Investment at End of Period					$	5,057,728			$	5,074,793
Net Charge-Offs (recoveries) to Average Loans						0.00	%			-0.02	%
Allowances for Credit Losses to Loans at End of Period						1.36	%			1.35	%