GlobeNewswire Inc | Oct 20, 2021 04:05PM EDT

October 20, 2021

LOS ANGELES, Oct. 20, 2021 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2021. Preferred Bank (the Bank) reported net income of $26.1 million or $1.76 per diluted share for the third quarter of 2021. This is an increase of $4.7 million or 21.7% over the prior quarter and up significantly from the $17.1 million or $1.15 per share posted in the same quarter of last year. The primary reason for the increase compared to the prior year was a $9.0 million provision for credit losses recorded in the third quarter of last year as compared to a reversal of $1.5 million in allowance for credit losses (ACL) this quarter, a difference of $10.5 million. In comparison to the second quarter of 2021, net interest income increased $4.4 million, the beneficial change in the provision for credit losses was $1.5 million and noninterest income increased by $1.1 million.

Third quarter 2021 highlights:

-- Net income of $26.1 million, or $1.76 per diluted share (company all-time high) -- Linked quarter deposit growth of 8.3% -- Linked quarter loan growth (Ex-PPP) of 1.8% -- Return on average assets (ROA) of 1.80% -- Return on beginning equity (ROBE) of 18.56% -- Pre-provision, pre-tax (PPPT) ROBE of 25.0%

Li Yu, Chairman and CEO, commented, I am pleased to report third quarter 2021 net income of $26.1 million or $1.76 per share. Excluding a release of allowance for credit losses in the amount of $1.5 million, our net interest income and net income set new quarterly records for our Bank.

This quarter we experienced significant asset growth. Total assets are approaching $6 billion, principally due to the $398 million or 8.3% linked-quarter deposit growth.

Loan growth for the quarter was $77 million excluding PPP, or 1.8% on a linked quarter basis. We continue to experience moderate margin compression. Together with the strong deposit growth, our net interest margin for the quarter came in at 3.36%.

Our loan quality was stable. There are no deferred loans granted under the CARES Act as of September 30, 2021. Total PPP balances have been reduced to $64 million as of that date.

Non-interest income increased $1.1 million from the prior quarter principally due to increased letter of credit (LC) fees. Operating expenses continue to be under control for the quarter, as our efficiency ratio clocked in at 30.4%.

We are highly encouraged by this quarters results considering the current low interest rate environment and the slow progress, nationally of controlling the delta variant. We are optimistic that both of these will improve gradually

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $47.8 million for the third quarter of 2021. This was an increase from the $43.4 million recorded in the second quarter of 2021 and was also ahead of the $44.1 million recorded in the third quarter of 2020. The second quarter of 2021 was negatively impacted by a $2.29 million interest reversal on our troubled debt restructured loan as well as a charge of $614,000 to interest expense related to the unamortized issuance costs of the subordinated notes that were called in the second quarter of 2021. These two items drove the Banks taxable equivalent net interest margin down to 3.25%, excluding these items, the Banks margin would have been 3.47%. The taxable equivalent margin was 3.36% for the third quarter of 2021, as compared to 3.47% (adjusted, see table below) in the second quarter of 2021 and versus 3.54% for the same period last year.

Noninterest Income. For the third quarter of 2021, noninterest income was $2,784,000 compared with $1,605,000 for the same quarter last year and compared to $1,646,000 for the second quarter of 2021. The increase compared to last year was due to LC fee income which increased by $886,000 and service charges on deposits which increased by $153,000 over last year. When compared to the second quarter of 2021, LC fees increased by $765,000 and in the prior quarter the Bank recorded a loss on sale of loans of $261,000 which did not recur this quarter.

Noninterest Expense. Total noninterest expense was $15.4 million for the third quarter of 2021. This is up compared to the $13.7 million recorded in the same quarter last year and also up from the $15.0 million posted in the second quarter of 2021. Salaries and benefits expense totaled $10.9 million for the third quarter of 2021, an increase of $1.8 million from the third quarter of 2020 and an increase of $635,000 over the $10.3 million posted in the second quarter of 2021. The increase over the prior year was due mainly to staff expansion and an increase in the Banks incentive compensation expense and the increase over the second quarter of 2021 was mainly due to higher incentive compensation expense. Occupancy expense totaled $1.4 million for the quarter which was flat compared to the prior quarters $1.4 million and down slightly from the $1.5 million recorded in the third quarter of last year. Professional services expense was $1.1 million for the third quarter of 2021, a slight increase of $79,000 over the prior quarter and an increase of $101,000 over the same period last year. Other expenses were $1.4 million for the third quarter of 2021, down from the $1.7 million recorded last quarter and also up from the $1.6 million recorded in the same quarter last year. Lower FDIC premiums were the primary reason for the decrease compared to both periods. For the quarter ended September 30, 2021, the Banks efficiency ratio was 30.4%, down slightly from last quarters 33.2% mark and just slightly over the remarkable 29.9% ratio achieved in the same period last year.

Income Taxes. The Bank recorded a provision for income taxes of $10.5 million for the third quarter of 2021. This represents an effective tax rate (ETR) of 28.7% and just slightly over the ETR of 28.5% in the prior quarter but up from the ETR of 25.7% in the same period last year. The Banks 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, 2021 were $4.32 billion, an increase of $286 million or 7.1% over the total of $4.04 billion as of December 31, 2020. Total deposits increased to $5.2 billion, an increase of $751 million or 16.9% over the $4.44 billion as of December 31, 2020. Total assets ended the quarter at $5.98 billion, an increase of $836 million or 16.3% over the total of $5.14 billion as of December 31, 2020.

Asset Quality

As of September 30, 2021, nonaccrual loans totaled $20.9 million, up slightly from the $20.2 million reported as of June 30, 2021. Total net charge-offs for the third quarter of 2021 were $1.0 million compared to $1.2 million in the prior quarter and compared to net charge-offs of $3.5 million in the third quarter of 2020.

At September 30, 2021, the Bank had no loans remaining on COVID-19 deferral status. Also important to note that as of September 30, 2021, the Bank had recouped 78% of all interest deferred during the deferral period.

Allowance for Credit Losses

The provision for (release of) credit losses for the third quarter of 2021 was ($1.5 million) compared to $0 recorded last quarter and compared to $9.0 million posted in the third quarter of 2020. A consistently improving economic outlook led to a lower allowance requirement. The Banks allowance coverage ratio now stands at 1.44% of total loans (excluding PPP loans).

Capitalization

As of September 30, 2021, the Banks leverage ratio was 9.64%, the common equity tier 1 capital ratio was 11.19% and the total capital ratio stood at 15.47%. As of December 31, 2020, the Banks leverage ratio was 10.08%, the common equity tier 1 ratio was 11.21% and the total risk-based capital ratio was 14.64%. In accordance with the Banks stock repurchase plan, during the third quarter, the Bank repurchased a total of 282,949 common shares at a total cost of $17.47 million.

GAAP ? Non-GAAP Reconciliation-Second Quarter 2021 NIM Net interest margin - GAAP 3.25 %Add: $2.3MM loan interest income 0.17 %Add: $614K unamortized $100M sub-debt issuance cost 0.05 %Net interest margin - non-GAAP 3.47 % GAAP ? Non-GAAP Reconciliation-Third Quarter 2021 PPPT ROBE Net Income $ 26,145 Add: Reversal of credit losses (1,500 )Add: Income tax expense 10,522 Pre-provision and pre-tax income $ 35,167 Total equity - 6/30/21 $ 558,969 Pre-provision and pre-tax ROBE 24.96 %

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Banks third quarter 2021 financial results will be held tomorrow, October 21, 2021 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. Web participants are encouraged to go to the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Preferred Bank's Chairman and Chief Executive Officer 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 be present to discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will remain available in the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through November 4, 2021; the passcode is 10161195.

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 Banks 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 Banks 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. governments 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 Banks 2020 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Banks 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 Banks website at www.preferredbank.com.

Financial Tables to Follow

PREFERRED BANKCondensed 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, 2021 2021 2020 Interest income: Loans, including $ 50,866 $ 47,906 $ 50,417 fees Investment 2,725 2,548 2,335 securities Fed funds sold 20 19 30 Total interest 53,611 50,473 52,782 income Interest expense: Interest-bearing 1,486 1,530 1,432 demand Savings 3 18 20 Time 3,045 3,419 5,681 certificates Subordinated 1,324 2,145 1,530 debt Total interest 5,857 7,112 8,663 expense Net interest 47,754 43,361 44,119 income(Reversal of)provision for (1,500 ) - 9,000 credit losses Net interest income after (reversal of) provision for credit 49,254 43,361 35,119 losses Noninterest income: Fees & service charges on 581 525 428 deposit accounts Letters of credit fee 1,576 811 690 income BOLI income 98 98 96 Net gain on called and sale 41 - 15 of investment securities Net loss on sale - (261 ) - of loans Other income 488 473 376 Total noninterest 2,784 1,646 1,605 income Noninterest expense: Salary and employee 10,920 10,285 9,126 benefits Net occupancy 1,430 1,429 1,455 expense Business development and 98 117 95 promotion expense Professional 1,075 996 974 services Office supplies and equipment 467 476 443 expense Other 1,380 1,661 1,570 Total noninterest 15,370 14,964 13,663 expense Income before provision for 36,668 30,043 23,061 income taxesIncome tax expense 10,522 8,563 5,936 Net income $ 26,146 $ 21,480 $ 17,125 Dividend andearnings allocated (3 ) (3 ) (53 )to participatingsecuritiesNet incomeavailable to common $ 26,143 $ 21,477 $ 17,072 shareholders Income per shareavailable to common shareholders Basic $ 1.76 $ 1.44 $ 1.15 Diluted $ 1.76 $ 1.44 $ 1.15 Weighted-averagecommon shares outstanding Basic 14,884,570 14,954,688 14,893,774 Diluted 14,884,570 14,954,688 14,893,774 Cash dividends per $ 0.38 $ 0.38 $ 0.30 common share

PREFERRED BANKCondensed 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 2021 2020 %Interest income: Loans, including fees $ 148,631 $ 151,794 -2.1 % Investment securities 7,550 8,634 -12.6 % Fed funds sold 63 185 -66.2 % Total interest 156,244 160,613 -2.7 % income Interest expense: Interest-bearing demand 4,453 6,262 -28.9 % Savings 40 51 -22.3 % Time certificates 10,291 21,617 -52.4 % Subordinated debt 5,000 4,592 8.9 % Total interest 19,783 32,522 -39.2 % expense Net interest income 136,461 128,091 6.5 %(Reversal of) provision (100 ) 21,800 -100.5 %for credit losses Net interest income after (reversal of) provision for credit losses 136,561 106,291 28.5 % Noninterest income: Fees & service charges 1,532 1,172 30.7 % on deposit accounts Letters of credit fee 3,195 2,280 40.1 % income BOLI income 292 285 2.5 % Net (loss) gain on called and sale of 41 (98 ) -141.9 % investment securities Net (loss) gain on sale (640 ) 15 -4363.5 % of loans Other income 1,357 1,053 28.9 % Total noninterest 5,777 4,707 22.7 % income Noninterest expense: Salary and employee 32,328 30,123 7.3 % benefits Net occupancy expense 4,260 4,147 2.7 % Business development 288 360 -20.0 % and promotion expense Professional services 3,052 2,994 1.9 % Office supplies and 1,381 1,391 -0.7 % equipment expense Other 4,677 4,166 12.3 % Total noninterest 45,986 43,181 6.5 % expense Income before provision for income 96,352 67,817 42.1 % taxesIncome tax expense 27,532 19,229 43.2 % Net income $ 68,820 $ 48,588 41.6 % Dividend and earningsallocated to participating $ (8 ) $ (153 ) -94.6 %securitiesNet income available to $ 68,812 $ 48,435 42.1 %common shareholders Income per share available to common shareholders Basic $ 4.61 $ 3.25 41.6 % Diluted $ 4.61 $ 3.25 41.6 % Weighted-average common shares outstanding Basic 14,929,519 14,881,381 0.3 % Diluted 14,929,519 14,881,381 0.3 % Dividends per share $ 1.14 $ 0.90 26.7 %

PREFERRED BANKCondensed Consolidated Statements of Financial Condition(unaudited)(in thousands) September 30, December 31, 2021 2020 (Unaudited) (Audited)Assets Cash and due from banks $ 1,060,634 $ 739,465 Fed funds sold 22,000 20,000 Cash and cash equivalents 1,082,634 759,465 Securities held to maturity, at amortized 15,294 6,568 costSecurities available-for-sale, at fair 461,356 239,682 valueLoans 4,321,529 4,035,394 Less allowance for credit losses (61,135 ) (63,426 ) Less amortized deferred loan fees, net (5,498 ) (4,574 ) Loans, net 4,254,896 3,967,394 Customers' liability on acceptances 7,697 3,596 Bank furniture and fixtures, net 10,955 11,825 Bank-owned life insurance 10,022 9,828 Accrued interest receivable 16,551 23,692 Investment in affordable housing 53,399 62,521 partnershipsFederal Home Loan Bank stock, at cost 15,000 15,000 Deferred tax assets 25,128 24,466 Income tax receivable 1,192 - Operating lease right-of-use assets 20,598 16,106 Other assets 5,118 3,498 Total assets $ 5,979,840 $ 5,143,641 Liabilities and Shareholders' Equity Deposits: Non-interest bearing demand deposits $ 1,349,114 $ 938,911 Interest-bearing deposits: 1,861,334 1,700,818 Savings 33,417 34,702 Time certificates of $250,000 or 959,826 912,546 more Other time certificates 990,228 855,503 Total deposits 5,193,919 4,442,480 Acceptances outstanding 7,697 3,596 Subordinated debt issuance, net 147,699 99,334 Commitments to fund investment in 17,900 30,715 affordable housing partnershipsOperating lease liabilities 21,933 18,682 Accrued interest payable 2,081 1,245 Other liabilities 26,590 22,142 Total liabilities 5,417,819 4,618,194 Shareholders' equity 562,021 525,447 Total liabilities and shareholders' $ 5,979,840 $ 5,143,641 equity Book value per common share $ 38.29 $ 31.47 Number of common shares outstanding 14,679,215 14,931,861

PREFERRED BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Unauditedhistorical quarterlyoperations data: Interest $ 53,611 $ 50,473 $ 52,160 $ 53,649 $ 52,782 income Interest 5,857 7,112 6,814 7,586 8,663 expense Interest income before 47,754 43,361 45,346 46,063 44,119 provision for credit losses (Reversal of) provision for (1,500 ) - 1,400 4,200 9,000 credit losses Noninterest 2,784 1,646 1,347 1,356 1,605 income Noninterest 15,370 14,964 15,652 14,177 13,663 expense Income tax 10,522 8,563 8,447 8,162 5,936 expense Net income $ 26,146 $ 21,480 $ 21,194 $ 20,880 $ 17,125 Earnings per share Basic $ 1.76 $ 1.44 $ 1.42 $ 1.40 $ 1.15 Diluted $ 1.76 $ 1.44 $ 1.42 $ 1.40 $ 1.15 Ratios for the period: Return on 1.80 % 1.58 % 1.65 % 1.63 % 1.34 % average assets Return on beginning 18.56 % 15.98 % 16.36 % 16.49 % 13.94 % equity Net interest margin 3.36 % 3.25 % 3.61 % 3.66 % 3.54 % (Fully-taxable equivalent) Noninterest expense to 1.06 % 1.10 % 1.22 % 1.10 % 1.07 % average assets Efficiency 30.41 % 33.25 % 33.52 % 29.90 % 29.88 % ratio Net charge-offs (recoveries) 0.10 % 0.12 % -0.01 % 0.20 % 0.35 % to average loans (annualized) Ratios as of period end: Tier 1 leverage 9.64 % 10.07 % 10.26 % 10.08 % 9.75 % capital ratio Common equity tier 1 11.19 % 11.28 % 11.34 % 11.21 % 11.02 % risk-based capital ratio Tier 1 risk-based 11.19 % 11.28 % 11.34 % 11.21 % 11.02 % capital ratio Total risk-based 15.47 % 15.61 % 14.73 % 14.64 % 14.51 % capital ratio Allowances for credit losses 1.41 % 1.49 % 1.56 % 1.57 % 1.55 % to loans at end of period Allowance for credit losses to 292.84 % 290.58 % 294.74 % 308.96 % 243.56 % non-performing loans Average balances: Total $ 401,641 $ 269,000 $ 242,200 $ 251,284 $ 237,801 securities Total loans 4,156,289 4,130,190 4,044,800 3,971,537 3,956,145 Total earning 5,659,678 5,364,598 5,102,291 5,018,031 4,975,005 assets Total assets 5,760,056 5,467,678 5,200,079 5,110,065 5,073,548 Total time certificate of 1,959,514 1,893,247 1,820,461 1,764,528 1,841,901 deposits Total interest bearing 3,783,704 3,704,771 3,531,358 3,508,276 3,501,275 deposits Total deposits 4,971,607 4,724,104 4,486,399 4,426,326 4,408,882 Total interest bearing 3,931,375 3,815,964 3,630,705 3,607,592 3,600,560 liabilities Total equity 569,624 553,561 538,282 518,567 503,421

PREFERRED BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) For the Nine Months Ended September 30, September 30, 2021 2020 Interest income $ 156,244 $ 160,613 Interest expense 19,783 32,522 Interest income before provision for 136,461 128,091 credit losses (Reversal of) provision for credit losses (100 ) 21,800 Noninterest income 5,777 4,707 Noninterest expense 45,986 43,181 Income tax expense 27,532 19,229 Net income $ 68,820 $ 48,588 Earnings per share Basic $ 4.61 $ 3.25 Diluted $ 4.61 $ 3.25 Ratios for the period: Return on average assets 1.68 % 1.33 % Return on beginning equity 17.51 % 13.81 % Net interest margin (Fully-taxable 3.40 % 3.60 % equivalent) Noninterest expense to average assets 1.12 % 1.19 % Efficiency ratio 32.33 % 32.52 % Net charge-offs to average loans 0.07 % 0.12 % Average balances: Total securities $ 304,865 $ 245,181 Total loans 4,110,835 3,864,667 Total earning assets 5,377,565 4,764,789 Total assets 5,477,989 4,865,382 Total time certificate of deposits 1,891,583 1,788,612 Total interest bearing deposits 3,674,201 3,382,405 Total deposits 4,729,147 4,213,950 Total interest bearing liabilities 3,793,782 3,481,659 Total equity 553,937 488,641

PREFERRED BANKSelected Consolidated Financial Information(unaudited)(in thousands, except for ratios) As of September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Unaudited quarterlystatement of financial position data:Assets: Cash and cash $ 1,082,634 $ 896,474 $ 943,126 $ 759,465 $ 807,791 equivalents Securities held-to-maturity, at 15,294 15,749 6,039 6,568 6,727 amortized cost Securities available-for-sale, at 461,356 278,460 228,635 239,682 219,778 fair value Loans: Real estate ? Mortgage: Real $ 540,725 $ 558,147 $ 541,313 $ 523,789 $ 528,371 estate?Residential Real 2,093,692 2,019,995 1,925,554 1,911,485 1,808,200 estate?Commercial Total Real 2,634,417 2,578,142 2,466,867 2,435,274 2,336,571 Estate ? Mortgage Real estate ? Construction: R/E Construction ? 122,382 120,363 123,302 148,825 170,773 Residential R/E Construction ? 213,833 224,323 229,933 215,032 223,706 Commercial Total real estate 336,215 344,686 353,235 363,857 394,480 construction loans Commercial and 1,286,995 1,259,668 1,248,550 1,165,990 1,144,051 industrial PPP 63,897 95,765 95,434 70,234 74,551 Consumer and others 6 143 155 39 68 Gross loans 4,321,529 4,278,403 4,164,241 4,035,394 3,949,721 Allowance for credit (61,135 ) (63,635 ) (64,883 ) (63,426 ) (61,262 ) losses on loans Net deferred loan fees (5,498 ) (5,329 ) (4,872 ) (4,574 ) (4,411 ) Net loans, excluding $ 4,254,896 $ 4,209,439 $ 4,094,486 $ 3,967,394 $ 3,884,048 loans held for sale Loans held for sale $ - $ - $ - $ - $ - Net loans $ 4,254,896 $ 4,209,439 $ 4,094,486 $ 3,967,394 $ 3,884,048 Investment in affordable 53,399 55,452 59,824 62,521 47,917 housing partnerships Federal Home Loan Bank 15,000 15,000 15,000 15,000 15,000 stock, at cost Other assets 97,261 105,334 100,894 93,011 104,313 Total assets $ 5,979,840 $ 5,575,908 $ 5,448,004 $ 5,143,641 $ 5,085,574 Liabilities: Deposits: Demand $ 1,349,114 $ 1,063,472 $ 1,026,260 $ 938,911 $ 926,166 Interest-bearing 1,861,334 1,774,668 1,751,951 1,700,818 1,620,495 demand Savings 33,417 32,560 37,551 34,702 32,830 Time certificates of 959,826 930,976 927,043 912,546 977,821 $250,000 or more Other time 990,228 994,630 979,694 855,503 857,113 certificates Total deposits $ 5,193,919 $ 4,796,306 $ 4,722,499 $ 4,442,480 $ 4,414,425 Acceptances outstanding $ 7,697 $ 7,797 $ 9,670 $ 3,596 $ 7,463 Subordinated debt 147,699 147,787 99,365 99,334 99,304 issuance, net Commitments to fund investment in affordable 17,900 19,197 27,918 30,715 16,689 housing partnerships Other liabilities 50,604 45,852 49,283 42,069 43,826 Total liabilities $ 5,417,819 $ 5,016,939 $ 4,908,735 $ 4,618,194 $ 4,581,707 Equity: Net common stock, no par $ 203,844 $ 219,958 $ 218,593 $ 217,444 $ 213,519 value Retained earnings 352,843 332,276 316,481 300,969 284,568 Accumulated other 5,334 6,735 4,195 7,034 5,780 comprehensive income Total shareholders' $ 562,021 $ 558,969 $ 539,269 $ 525,447 $ 503,867 equity Total liabilities and shareholders' $ 5,979,840 $ 5,575,908 $ 5,448,004 $ 5,143,641 $ 5,085,574 equity

PREFERRED BANKQuarter-to-Date Average Balances, Yield and Rates(unaudited) Three months ended September Three months ended June 30, Three months ended September 30, 30, 2021 2021 2020 Interest Average Interest Average Interest Average Average Income Yield/ Average Income Yield/ Average Income Yield/ or or or Balance Expense Rate Balance Expense Rate Balance Expense RateASSETS (Dollars in thousands)Interest-earning assets: Loans ^(1,2) $ 4,156,289 50,866 4.86 % $ 4,132,451 $ 47,906 4.65 % $ 3,956,145 $ 50,417 5.07 % Investment 401,641 2,163 2.14 % 269,000 2,058 3.07 % 237,801 1,967 3.29 % securities ^(3) Federal funds sold 21,837 20 0.36 % 20,437 19 0.36 % 23,828 30 0.50 % Other earning 1,079,911 679 0.25 % 942,710 597 0.25 % 757,231 474 0.25 % assets Total interest-earning 5,659,678 53,728 3.77 % 5,364,598 50,580 3.78 % 4,975,005 52,888 4.23 % assets Deferred loan (5,176 ) (4,924 ) (4,713 ) fees, net Allowance for credit losses on (63,608 ) (64,842 ) (55,822 ) loansNoninterest earning assets: Cash and due from 14,457 10,620 7,355 banks Bank furniture and 11,123 11,468 11,856 fixtures Right of use 21,136 19,735 16,550 assets Other assets 122,446 131,023 123,317 Total assets $ 5,760,056 $ 5,467,678 $ 5,073,548 LIABILITIES AND SHAREHOLDERS' EQUITYInterest-bearing liabilities: Deposits: Interest-bearing demand and 1,824,190 $ 1,489 0.32 % 1,811,524 $ 1,548 0.34 % $ 1,659,374 $ 1,452 0.35 % savings TCD $250K or 964,656 1,542 0.63 % 926,161 1,688 0.73 % 987,631 2,993 1.21 % more Other time 994,858 1,503 0.60 % 967,086 1,731 0.72 % 854,270 2,688 1.25 % certificates Total interest-bearing 3,783,704 4,534 0.48 % 3,704,771 4,967 0.54 % 3,501,275 7,133 0.81 % depositsSubordinated debt, net 147,671 1,324 3.56 % 111,193 2,145 7.74 % 99,285 1,530 6.13 % Total interest-bearing 3,931,375 5,858 0.59 % 3,815,964 7,112 0.75 % 3,600,560 8,663 0.96 % liabilitiesNon-interest bearing liabilities: Demand deposits 1,187,903 1,019,333 907,607 Lease Liability 22,747 21,765 19,400 Other liabilities 48,407 57,055 42,560 Total 5,190,432 4,914,117 4,570,127 liabilitiesShareholders? equity 569,624 553,561 503,421 Total liabilities and $ 5,760,056 $ 5,467,678 $ 5,073,548 shareholders? equityNet interest income $ 47,870 $ 43,468 $ 44,225 Net interest spread 3.18 % 3.03 % 3.27 %Net interest margin 3.36 % 3.25 % 3.54 % Cost of Deposits: Noninterest bearing demand $ 1,187,903 $ 1,019,333 $ 907,607 deposits Interest bearing 3,783,704 4,534 0.48 % 3,704,771 4,967 0.54 % 3,501,275 7,133 0.81 % deposits Total Deposits $ 4,971,607 $ 4,534 0.36 % $ 4,724,104 $ 4,967 0.42 % $ 4,408,882 $ 7,133 0.64 % ^ Includes non-accrual loans and loans held for sale(1)^ Net loan fee income of $823,000, $669,000 and $683,000 for the quarter ended(2) September 30, 2021, June 30, 2021, September 30, 2020, respectively, are included in the yield computations^ Yields on securities have been adjusted to a tax-equivalent basis(3)

PREFERRED BANKYear-to-Date Average Balances, Yield and Rates(unaudited) Nine Months ended September 30, 2021 2020 Interest Average Interest Average Average Income or Yield/ Average Income or Yield/ Balance Expense Rate Balance Expense RateASSETS (Dollars in thousands)Interest-earning assets: Loans ^(1,2) $ 4,111,596 $ 148,631 4.83 % $ 3,865,350 $ 151,794 5.25 % Investment 304,865 6,104 2.68 % 245,181 6,193 3.37 % securities ^(3) Federal funds sold 21,251 63 0.39 % 26,093 185 0.95 % Other earning 939,853 1,769 0.25 % 628,165 2,736 0.58 % assets Total interest-earning 5,377,565 156,567 3.89 % 4,764,789 160,908 4.51 % assets Deferred loan (4,818 ) (3,662 ) fees, net Allowance for credit losses on (63,967 ) (48,981 ) loansNoninterest earning assets: Cash and due from 11,683 7,321 banks Bank furniture and 11,452 12,039 fixtures Right of use 19,255 16,774 assets Other assets 126,819 117,102 Total assets $ 5,477,989 $ 4,865,382 LIABILITIES AND SHAREHOLDERS' EQUITYInterest-bearing liabilities: Deposits: Interest-bearing 1,782,618 $ 4,492 0.34 % 1,593,793 $ 6,313 0.53 % demand/ savings TCD $250K or 936,825 5,148 0.73 % 967,413 11,469 1.58 % more Other time 954,758 5,143 0.72 % 821,199 10,148 1.65 % certificates Total interest-bearing 3,674,201 14,783 0.54 % 3,382,405 27,930 1.10 % depositsSubordinated debt, net 119,581 5,000 5.59 % 99,254 4,592 6.18 % Total interest-bearing 3,793,782 19,783 0.70 % 3,481,659 32,522 1.25 % liabilitiesNon-interest bearing liabilities: Demand deposits 1,054,946 831,545 Lease Liability 21,280 19,850 Other liabilities 54,044 43,687 Total 4,924,052 4,376,741 liabilitiesShareholders? equity 553,937 488,641 Total liabilities and $ 5,477,989 $ 4,865,382 shareholders? equityNet interest income $ 136,784 $ 128,386 Net interest spread 3.20 % 3.26 %Net interest margin 3.40 % 3.60 % Cost of Deposits: Noninterest bearing demand $ 1,054,946 $ 831,545 deposits Interest bearing 3,674,201 14,783 0.54 % 3,382,405 27,930 1.10 % deposits Total Deposits $ 4,729,147 $ 14,783 0.42 % $ 4,213,950 $ 27,930 0.89 % ^ Includes non-accrual loans and loans held for sale(1)^ Net loan fee income of $2.0 million and $1.9 million for the nine months ended(2) September 30, 2021 and 2020, respectively, are included in the yield computations^ Yields on securities have been adjusted to a tax-equivalent basis(3)

Preferred BankLoan and Credit Quality Information Allowance For Credit Losses History Nine Months Nine Months Ended Ended September 30, September 30, 2021 2020 (Dollars in 000's)Allowance For Credit Losses Balance at Beginning of Period $ 63,426 $ 34,830 Charge-Offs Commercial & Industrial 1,431 1,661 Mini-perm Real Estate 817 1,900 Total Charge-Offs 2,248 3,561 Recoveries Commercial & Industrial 57 - Construction - Commercial - 193 Total Recoveries 57 193 Net Charge-Offs 2,191 3,368 (Reversal of) Provision for Credit Losses: CECL Cumulative Effect Adjustment - 8,000 Current (Reversal) Provision (100 ) 21,800 Balance at End of Period $ 61,135 $ 61,262 Average Loans Held for Investment $ 4,110,835 $ 3,864,667 Loans Held for Investment at End of $ 4,321,529 $ 3,949,721 PeriodNet Charge-Offs (Recoveries) to Average 0.07 % 0.12 %LoansAllowances for Credit Losses to Loans at 1.41 % 1.55 %End of Period



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