LOS ANGELES, Oct. 19, 2022 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ:PFBC), one of the larger independent California banks, today reported results for the quarter ended September 30, 2022. Preferred Bank ("the Bank") reported net income of $35.2 million or $2.40 per diluted share for the third quarter of 2022. This represents an increase of $9.0 million or 34.6% over the same quarter last year and also an impressive $7.1 million or 25.4% increase over the second quarter of 2022. The primary driver of the increase over both comparable periods was net interest income which increased by 39.9% over the same period last year and increased by 18.4% over the second quarter of 2022. Net income for the nine months ended September 30, 2022 was $89.3 million or $6.00 per diluted share compared to $68.8 million or $4.61 per diluted share for the same period last year. This represents an increase in net income of 29.7% and an increase in diluted earnings per share of 30.2%. The extraordinary interest rate hikes undertaken by the Federal Open Market Committee ("FOMC") to fend off inflation has led to a significant increase in interest income as most of the Bank's loans are tied to the Prime rate.

Third quarter 2022 highlights:

Return on average assets ("ROA") of 2.25%
Return on beginning equity ("ROBE") of 23.60%
Pre-provision, pre-tax ("PPPT") ROBE of 34.59% ¹
Efficiency ratio of 25.23%
Linked quarter loan growth (Ex-PPP) of 2.1%

Li Yu, Chairman and CEO, commented, "We have posted another record quarter aided by the Fed's interest rate hikes onto our very asset-sensitive balance sheet. Third quarter 2022 earnings were $35.2 million or $2.40 per diluted share, which is substantially higher than the prior quarter and Q3 of the prior year.

Loan growth for the quarter (Ex-PPP) was $104.5 million or 8.5% (annualized). Our pace of loan growth has slowed under the current interest rate environment.

Deposits grew very moderately at a 3.5% annualized pace. The increase in our cost of deposits was significantly less than that of loan rates, which resulted in margin expansion. Deposit rates have accelerated since September, and are projected to continue to increase during the fourth quarter.

Our credit quality remained stable during the quarter with classified loans continuing to decline. For the quarter we have made a provision for credit losses of $2.7 million. Combined with a loan loss recovery of $2.4 million, our allowance for loan and credit losses has increased $5.1 million from the previous quarter to 1.33% of total loans (Ex-PPP).

Preferred Bank's operating costs (non-interest expense) have increased due to growth and inflation. But, because of the interest margin expansion, our efficiency ratio actually improved to 25.2%.

We recognize the macro economy is very likely heading into a recession. There are many uncertainties ahead so our focus now is credit quality and deposit costs. We have done well so far in this uncharted economic territory and we will continue to stay alert."

Results of Operations

Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $66.8 million for the third quarter of 2022. This was a significant increase from the $47.8 million recorded in the same quarter last year and also up sharply over the $56.4 million posted in the second quarter of 2022. The FOMC rate hikes throughout the second and third quarters drove the Bank's loan portfolio yield higher, as most of the Bank's loans are tied to the Prime rate. Interest expense on deposits also rose significantly in terms of a percentage increase but in actual dollars, the increase was well behind that of interest income, leading to significant margin expansion. The taxable equivalent net interest margin rose 60 basis points on a linked quarter basis to 4.37% from the 3.77% last quarter. Comparing to the same quarter last year, the margin was up by 101 basis points over the 3.36% posted this quarter last year.

Noninterest Income. For the third quarter of 2022, noninterest income was $2.2 million compared with $2.6 million for the same quarter last year and compared to $2.8 million for the second quarter of 2022. The decrease compared to both periods is primarily due to lower LC fees. In comparison to the same quarter last year, service charges on deposits are up by $122,000 partially offsetting the decrease in LC fees.

Noninterest Expense. Total noninterest expense was $17.4 million for the third quarter of 2022. This is up compared to the $15.4 million recorded in the same quarter last year and an increase over the $17.1 million posted in the second quarter of 2022. Comparing this quarter to the third quarter of last year; personnel expense increased by $1.4 million or 12.9%, other real estate owned ("REO") expense was $314,000 this quarter compared to $0 last year and business development and promotion increased by $116,000 this quarter. The personnel expense increase was mainly due to new hires and merit increases. Last year, the Bank did not own any OREO so this years' expenses all were an increase. In comparing to the prior quarter; personnel expense was up by $638,000 or 5.5% from the second quarter of 2022, professional services was down by $299,000 due mainly to lower legal costs, and OREO expense decreased by $71,000 For the quarter ended September 30, 2022, the Bank's efficiency ratio was 25.2%, easily beating the 29.0% posted last quarter and also down from the 30.4% recorded this quarter last year.

Income Taxes. The Bank recorded a provision for income taxes of $13.7 million for the third quarter of 2022. This represents an effective tax rate ("ETR") of 28.0% and slightly below the ETR of 28.7% recorded in the same period last year and equal to the 28.0% ETR posted last quarter. 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, 2022 were $5.01 billion, an increase of $586 million or 13.2% over the total of $4.42 billion as of December 31, 2021. Total deposits increased to $5.46 billion, an increase of $230 million or 4.4% over the $5.23 billion as of December 31, 2021. Total assets ended the quarter at $6.29 billion, an increase of $247 million or 4.1% over the total of $6.05 billion as of December 31, 2021.

Asset Quality

As of September 30, 2022, nonaccrual loans totaled $6.2 million, down from the $10.6 million reported as of June 30, 2022 and down from the $14.8 million as of the end of 2021. In addition, OREO and repossessed assets totaled $26.1 million as of September 30, 2022, compared to $21.4 million as of June 30, 2022 and zero as of the end of 2021. Total net recoveries for the third quarter of 2022 were $2.4 million as compared to zero last quarter and compared to charge-offs of $1.0 million in the same quarter of 2021.

Allowance for Credit Losses

The provision for credit losses for the third quarter of 2022 was $2.7 million as compared to $2.9 million recorded last quarter and compared to a reversal of $1.5 million recorded in the third quarter of last year. Although credit quality remains very good, the prospects for a recession in the next 18 months necessitates a provision of $2.7 million this quarter. The Bank's allowance coverage ratio now stands at 1.33% of total loans (excluding PPP loans).

Capitalization

As of September 30, 2022, the Bank's leverage ratio was 9.95%, the common equity tier 1 capital ratio was 10.46% and the total capital ratio stood at 14.09%. As of December 31, 2021, the Bank's leverage ratio was 9.54%, the common equity tier 1 ratio was 11.26% and the total risk-based capital ratio was 15.37%.

GAAP – Non-GAAP Reconciliation -Third quarter 2022 PPPT ROBE

Net Income	$	35,189
Add: Provision for credit losses		2,700
Add: Income tax expense		13,688
Pre-provision and pre-tax income	$	51,577

Total equity – 6/30/22	$	591,592
Pre-provision and pre-tax ROBE		34.59	%

Conference Call and Webcast

A conference call with simultaneous webcast to discuss Preferred Bank's third quarter 2022 financial results will be held tomorrow, October 20, 2022 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 3, 2022; the passcode is 5793025.

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 2021 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

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,
	2022		2022		2021
Interest income:
Loans, including fees	$	71,192	$	58,541	$	50,866
Investment securities		7,111		3,972		2,725
Fed funds sold		117		46		20
Total interest income		78,420		62,559		53,611

Interest expense:
Interest-bearing demand		6,436		2,448		1,486
Savings		19		20		3
Time certificates		3,850		2,342		3,045
Subordinated debt		1,325		1,325		1,324
Total interest expense		11,630		6,135		5,858
Net interest income		66,790		56,424		47,753
Provision for (reversal of) credit losses		2,700		2,900		(1,500	)
Net interest income after provision for (reversal of)
credit losses		64,090		53,524		49,253

Noninterest income:
Fees & service charges on deposit accounts		703		723		581
Letters of credit fee income		956		1,329		1,576
BOLI income		100		100		98
Net gain on called and sale of investment securities		-		-		41
Other income		428		449		488
Total noninterest income		2,187		2,601		2,784

Noninterest expense:
Salary and employee benefits		12,326		11,688		10,920
Net occupancy expense		1,452		1,441		1,430
Business development and promotion expense		214		176		98
Professional services		1,161		1,460		1,075
Office supplies and equipment expense		456		459		467
Other real estate owned expense		314		385		-
Other		1,477		1,531		1,380
Total noninterest expense		17,400		17,140		15,370
Income before provision for income taxes		48,877		38,985		36,667
Income tax expense		13,688		10,916		10,522
Net income	$	35,189	$	28,069	$	26,145

Dividend and earnings allocated to participating securities		-		-		(3	)
Net income available to common shareholders	$	35,189	$	28,069	$	26,142

Income per share available to common shareholders
Basic	$	2.44	$	1.90	$	1.76
Diluted	$	2.40	$	1.87	$	1.76

Weighted-average common shares outstanding
Basic		14,408,235		14,792,298		14,884,570
Diluted		14,644,452		15,006,801		14,884,570

Cash dividends per common share	$	0.43	$	0.43	$	0.38

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
	2022			2021			%
Interest income:
Loans, including fees	$	181,852		$	148,631		22.4	%
Investment securities		13,969			7,550		85.0	%
Fed funds sold		182			63		190.6	%
Total interest income		196,003			156,244		25.4	%

Interest expense:
Interest-bearing demand		10,315			4,453		131.7	%
Savings		58			40		46.4	%
Time certificates		8,409			10,290		-18.3	%
Subordinated debt		3,975			5,000		-20.5	%
Total interest expense		22,757			19,784		15.0	%
Net interest income		173,246			136,460		27.0	%
Provision for credit losses		5,350			(100	)	-5450.0	%
Net interest income after provision for credit losses		167,896			136,560		22.9	%

Noninterest income:
Fees & service charges on deposit accounts		2,097			1,532		36.9	%
Letters of credit fee income		3,218			3,195		0.7	%
BOLI income		299			292		2.6	%
Net gain on called and sale of investment securities		-			41		-100.0	%
Net loss on sale of loans		-			(640	)	-100.0	%
Other income		1,440			1,357		6.1	%
Total noninterest income		7,054			5,777		22.1	%

Noninterest expense:
Salary and employee benefits		35,654			32,328		10.3	%
Net occupancy expense		4,315			4,260		1.3	%
Business development and promotion expense		491			288		70.5	%
Professional services		3,864			3,052		26.6	%
Office supplies and equipment expense		1,404			1,381		1.7	%
Other real estate owned expense		715			-		100.0	%
Other		4,254			4,677		-9.0	%
Total noninterest expense		50,697			45,986		10.2	%
Income before provision for income taxes		124,253			96,351		29.0	%
Income tax expense		34,968			27,532		27.0	%
Net income	$	89,285		$	68,819		29.7	%

Dividend and earnings allocated to participating securities	$	(2	)	$	(8	)	-78.6	%
Net income available to common shareholders	$	89,283		$	68,811		29.8	%

Income per share available to common shareholders
Basic	$	6.09		$	4.61		32.2	%
Diluted	$	6.00		$	4.61		30.2	%

Weighted-average common shares outstanding
Basic		14,653,982			14,929,519		-1.8	%
Diluted		14,873,933			14,929,519		-0.4	%

Dividends per share	$	1.29		$	1.14		13.2	%

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


	September 30,			December 31,
	2022			2021
	(Unaudited)			(Audited)
Assets
Cash and due from banks	$	729,484		$	1,030,610
Fed funds sold		20,000			20,000
Cash and cash equivalents		749,484			1,050,610

Securities held to maturity, at amortized cost		12,442			13,962
Securities available-for-sale, at fair value		377,534			451,911
Loans		5,010,546			4,424,992
Less allowance for credit losses		(66,472	)		(59,969	)
Less amortized deferred loan fees, net		(9,695	)		(6,316	)
Loans, net		4,934,379			4,358,707

Other real estate owned and repossessed assets		26,075			-
Customers' liability on acceptances		10,058			10,188
Bank furniture and fixtures, net		9,377			10,533
Bank-owned life insurance		10,289			10,088
Accrued interest receivable		19,008			14,646
Investment in affordable housing partnerships		62,745			59,018
Federal Home Loan Bank stock, at cost		15,000			15,000
Deferred tax assets		41,530			26,674
Operating lease right-of-use assets		21,994			21,969
Other assets		2,928			2,997
Total assets	$	6,292,843		$	6,046,303

Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing demand deposits	$	1,341,199		$	1,305,692
Interest-bearing deposits:		2,263,775			2,032,819
Savings		38,151			37,839
Time certificates of $250,000 or more		971,378			934,444
Other time certificates		841,173			914,717
Total deposits		5,455,676			5,225,511

Acceptances outstanding		10,058			10,188
Subordinated debt issuance, net		147,936			147,758
Commitments to fund investment in affordable housing partnerships		28,611			22,606
Operating lease liabilities		21,692			22,861
Accrued interest payable		2,170			715
Other liabilities		36,147			29,946
Total liabilities		5,702,290			5,459,585

Shareholders' equity		590,553			586,718
Total liabilities and shareholders' equity	$	6,292,843		$	6,046,303

Book value per common share	$	41.13		$	39.97
Number of common shares outstanding		14,356,708			14,679,769

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,
	2022			2022			2022			2021			2021
Unaudited historical quarterly operations data:
Interest income	$	78,420		$	62,559		$	55,024		$	54,791		$	53,611
Interest expense		11,630			6,135			4,992			5,374			5,858
Interest income before provision for credit losses		66,790			56,424			50,032			49,417			47,753
Provision (reversal of) for credit losses		2,700			2,900			(250	)		(900	)		(1,500	)
Noninterest income		2,187			2,601			2,266			1,966			2,784
Noninterest expense		17,400			17,140			16,157			14,806			15,370
Income tax expense		13,688			10,916			10,364			11,056			10,522
Net income	$	35,189		$	28,069		$	26,027		$	26,421		$	26,145

Earnings per share
Basic	$	2.44		$	1.90		$	1.76		$	1.80		$	1.76
Diluted	$	2.40		$	1.87		$	1.74		$	1.80		$	1.76

Ratios for the period:
Return on average assets		2.25	%		1.84	%		1.75	%		1.72	%		1.80	%
Return on beginning equity		23.60	%		18.91	%		17.99	%		18.65	%		18.56	%
Net interest margin (Fully-taxable equivalent)		4.37	%		3.77	%		3.42	%		3.28	%		3.36	%
Noninterest expense to average assets		1.11	%		1.12	%		1.08	%		0.97	%		1.06	%
Efficiency ratio		25.23	%		29.04	%		30.89	%		28.82	%		30.41	%
Net charge-offs (recoveries) to average loans (annualized)		-0.19	%		0.00	%		0.11	%		0.03	%		0.10	%

Ratios as of period end:
Tier 1 leverage capital ratio		9.95	%		9.92	%		9.92	%		9.54	%		9.64	%
Common equity tier 1 risk-based capital ratio		10.46	%		10.61	%		11.20	%		11.26	%		11.19	%
Tier 1 risk-based capital ratio		10.46	%		10.61	%		11.20	%		11.26	%		11.19	%
Total risk-based capital ratio		14.09	%		14.31	%		15.12	%		15.37	%		15.47	%
Allowances for credit losses to loans at end of period		1.33	%		1.25	%		1.27	%		1.36	%		1.41	%
Allowance for credit losses to non-performing loans		10.75	x		5.27	x		27.15	x		4.05	x		2.93	x

Average balances:
Total securities	$	410,649		$	430,203		$	455,899		$	470,811		$	401,641
Total loans		4,908,870			4,777,353			4,367,095			4,218,699			4,156,289
Total earning assets		6,076,616			6,008,024			5,938,519			5,984,055			5,659,678
Total assets		6,215,184			6,133,703			6,044,155			6,079,934			5,760,056
Total time certificate of deposits		1,749,257			1,810,886			1,869,654			1,915,116			1,959,514
Total interest bearing deposits		3,973,105			3,982,888			3,947,616			3,945,275			3,783,704
Total deposits		5,373,252			5,301,370			5,215,810			5,277,507			4,971,607
Total interest bearing liabilities		4,121,005			4,130,729			4,095,399			4,093,002			3,931,375
Total equity		598,188			606,260			597,214			576,495			569,624

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


	For the Nine Months Ended
	September 30,			September 30,
	2022			2021

Interest income	$	196,003		$	156,244
Interest expense		22,757			19,784
Interest income before provision for credit losses		173,246			136,460
Provision (reversal of) for credit losses		5,350			(100	)
Non-interest income		7,054			5,777
Non-interest expense		50,697			45,986
Income tax expense		34,968			27,532
Net income	$	89,285		$	68,819

Earnings per share
Basic	$	6.09		$	4.61
Diluted	$	6.00		$	4.61

Ratios for the period:
Return on average assets		1.95	%		1.68	%
Return on beginning equity		20.35	%		17.51	%
Net interest margin (Fully-taxable equivalent)		3.86	%		2.54	%
Non-interest expense to average assets		1.11	%		1.12	%
Efficiency ratio		28.12	%		32.33	%
Net charge-offs (recoveries) to average loans		-0.03	%		0.07	%

Average balances:
Total securities	$	432,085		$	304,865
Total loans		4,686,424			4,110,835
Total earning assets		6,023,091			5,377,565
Total assets		6,131,640			5,477,989
Total time certificate of deposits		1,809,492			1,891,583
Total interest-bearing deposits		3,967,963			3,674,201
Total deposits		5,297,387			4,729,147
Total interest-bearing liabilities		4,115,805			3,793,782
Total equity		600,558			553,937

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


	As of

	September 30,			June 30,			March 31,			December 31,			September 30,
	2022			2022			2022			2021			2021
Unaudited quarterly statement of financial position data:
Assets:
Cash and cash equivalents	$	749,484		$	768,658		$	985,162		$	1,050,610		$	1,082,634
Securities held-to-maturity, at amortized cost		12,442			12,784			13,496			13,962			15,294
Securities available-for-sale, at fair value		377,534			400,597			430,280			451,911			461,356
Loans:
Real estate – Mortgage:
Real estate—Residential	$	587,812		$	581,412		$	539,614		$	536,286		$	540,725
Real estate—Commercial		2,693,852			2,583,484			2,367,862			2,267,063			2,093,692
Total Real Estate – Mortgage		3,281,664			3,164,896			2,907,476			2,803,349			2,634,417
Real estate – Construction:
R/E Construction — Residential		179,955			168,420			141,218			130,842			122,382
R/E Construction — Commercial		188,083			203,217			209,726			202,482			213,833
Total real estate construction loans		368,038			371,637			350,944			333,324			336,215
Commercial and industrial		1,330,028			1,336,631			1,281,559			1,245,734			1,274,847
PPP		8,067			22,186			32,554			42,467			63,897
Trade finance		22,634			24,663			18,919			11,309			12,148
Consumer and others		115			128			115			118			6
Gross loans		5,010,546			4,920,141			4,591,567			4,424,992			4,321,529
Allowance for credit losses on loans		(66,472	)		(61,396	)		(58,496	)		(59,969	)		(61,135	)
Net deferred loan fees		(9,695	)		(9,525	)		(8,573	)		(6,316	)		(5,498	)
Net loans	$	4,934,379		$	4,849,220		$	4,524,498		$	4,358,707		$	4,254,896

Other real estate owned and repossessed assets	$	26,075		$	21,449		$	15,547		$	-		$	-
Investment in affordable housing partnerships		62,745			54,874			56,946			59,018			53,399
Federal Home Loan Bank stock, at cost		15,000			15,000			15,000			15,000			15,000
Other assets		115,184			110,459			101,427			97,095			97,261
Total assets	$	6,292,843		$	6,233,041		$	6,142,356		$	6,046,303		$	5,979,840

Liabilities:
Deposits:
Demand	$	1,341,199		$	1,385,934		$	1,251,613		$	1,305,692		$	1,349,114
Interest-bearing demand		2,263,775			2,239,501			2,159,178			2,032,819			1,861,334
Savings		38,151			39,784			39,946			37,839			33,417
Time certificates of $250,000 or more		971,378			870,376			924,317			934,444			959,826
Other time certificates		841,173			872,357			934,615			914,717			990,228
Total deposits	$	5,455,676		$	5,407,952		$	5,309,669		$	5,225,511		$	5,193,919

Acceptances outstanding	$	10,058		$	11,053		$	8,222		$	10,188		$	7,697
Subordinated debt issuance, net		147,936			147,877			147,818			147,758			147,699
Commitments to fund investment in affordable housing partnerships		28,611			20,036			22,606			22,606			17,900
Other liabilities		60,009			54,531			58,756			53,522			50,604
Total liabilities	$	5,702,290		$	5,641,449		$	5,547,071		$	5,459,585		$	5,417,819

Equity:
Net common stock, no par value	$	180,324		$	197,997		$	209,065		$	208,840		$	203,844
Retained earnings		443,409			414,393			392,610			372,952			352,843
Accumulated other comprehensive income		(33,180	)		(20,798	)		(6,390	)		4,926			5,334
Total shareholders' equity	$	590,553		$	591,592		$	595,285		$	586,718		$	562,021
Total liabilities and shareholders' equity	$	6,292,843		$	6,233,041		$	6,142,356		$	6,046,303		$	5,979,840

PREFERRED BANK
Quarter-to-Date Average Balances, Yield and Rates
(Unaudited)


	Three months ended Sept 30,							Three months ended June 30,							Three months ended Sept 30,
	2022							2022							2021
				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)	$	4,908,870			71,192	5.75	%	$	4,777,353		$	58,541	4.92	%		4,156,289		$	50,866	4.86	%
Investment securities ⁽³⁾		410,649			2,995	2.89	%		430,203			2,370	2.21	%		401,641			2,163	2.14	%
Federal funds sold		20,071			117	2.30	%		20,088			46	0.92	%		21,837			20	0.36	%
Other earning assets		737,026			4,221	2.27	%		780,380			1,708	0.88	%		1,079,911			679	0.25	%
Total interest-earning assets		6,076,616			78,525	5.13	%		6,008,024			62,665	4.18	%		5,659,678			53,728	3.77	%
Deferred loan fees, net		(9,333	)						(9,084	)						(5,176	)
Allowance for credit losses on loans		(61,477	)						(58,568	)						(63,608	)
Non-interest earning assets:
Cash and due from banks		10,562							11,363							14,457
Bank furniture and fixtures		9,615							10,028							11,123
Right of use assets		21,404							21,287							21,136
Other assets		167,797							150,653							122,446
Total assets	$	6,215,184						$	6,133,703						$	5,760,056

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Interest-bearing demand and savings		2,223,848		$	6,455	1.15	%		2,172,002		$	2,468	0.46	%	$	1,824,190		$	1,489	0.32	%
TCD $250K or more		914,373			2,517	1.09	%		892,410			1,211	0.54	%		964,656			1,542	0.63	%
Other time certificates		834,884			1,333	0.63	%		918,476			1,131	0.49	%		994,858			1,503	0.60	%
Total interest-bearing deposits		3,973,105			10,305	1.03	%		3,982,888			4,810	0.48	%		3,783,704			4,534	0.48	%
Subordinated debt, net		147,900			1,325	3.56	%		147,841			1,325	3.59	%		147,671			1,324	3.56	%
Total interest-bearing liabilities		4,121,005			11,630	1.12	%		4,130,729			6,135	0.60	%		3,931,375			5,858	0.59	%
Non-interest bearing liabilities:
Demand deposits		1,400,147							1,318,482							1,187,903
Lease Liability		21,332							21,602							22,747
Other liabilities		74,512							56,630							48,407
Total liabilities		5,616,996							5,527,443							5,190,432
Shareholders' equity		598,188							606,260							569,624
Total liabilities and shareholders' equity	$	6,215,184						$	6,133,703						$	5,760,056
Net interest income				$	66,895						$	56,530						$	47,870
Net interest spread						4.01	%						3.59	%						3.18	%
Net interest margin						4.37	%						3.77	%						3.36	%

Cost of Deposits:
Non-interest bearing demand deposits	$	1,400,147						$	1,318,482						$	1,187,903
Interest-bearing deposits		3,973,105			10,305	1.03	%		3,982,888			4,810	0.48	%		3,783,704			4,534	0.48	%
Total Deposits	$	5,373,252		$	10,305	0.76	%	$	5,301,370		$	4,810	0.36	%	$	4,971,607		$	4,534	0.36	%

________________________________________
⁽¹⁾	Includes non-accrual loans and loans held for sale
⁽²⁾	Net loan fee income of $1.2 million, $887,000 and $823,000 for the quarter ended September 30, 2022, June 30, 2022, and September 30, 2021, 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,
	2022							2021
				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)	$	4,686,424		$	181,852	5.19	%	$	4,111,596		$	148,631	4.83	%
Investment securities ⁽³⁾		432,085			11,706	3.62	%		304,865			6,104	2.68	%
Federal funds sold		20,093			182	1.21	%		21,251			63	0.39	%
Other earning assets		869,489			2,478	0.38	%		939,853			1,769	0.25	%
Total interest-earning assets		6,008,091			196,218	4.37	%		5,377,565			156,567	3.89	%
Deferred loan fees, net		(8,257	)						(4,818	)
Allowance for credit losses on loans		(60,004	)						(63,967	)
Non-interest earning assets:
Cash and due from banks		11,167							11,683
Bank furniture and fixtures		10,024							11,452
Right of use assets		21,480							19,255
Other assets		149,139							126,819
Total assets	$	6,131,640						$	5,477,989

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits:
Interest-bearing demand/ savings		2,158,471		$	10,373	0.64	%		1,782,618		$	4,493	0.34	%
TCD $250K or more		911,931			4,755	0.70	%		936,825			5,148	0.73	%
Other time certificates		897,561			3,654	0.54	%		954,758			5,143	0.72	%
Total interest-bearing deposits		3,967,963			18,782	0.63	%		3,674,201			14,784	0.54	%
Subordinated debt, net		147,842			3,975	3.59	%		119,581			5,000	5.59	%
Total interest-bearing liabilities		4,115,805			22,757	0.74	%		3,793,782			19,784	0.70	%
Non-interest bearing liabilities:
Demand deposits		1,329,424							1,054,946
Lease Liability		21,795							21,280
Other liabilities		64,058							54,044
Total liabilities		5,531,082							4,924,052
Shareholders' equity		600,558							553,937
Total liabilities and shareholders' equity	$	6,131,640						$	5,477,989
Net interest income				$	173,461						$	136,783
Net interest spread						3.63	%						3.20	%
Net interest margin						3.86	%						3.40	%

Cost of Deposits:
Non-interest bearing demand deposits	$	1,329,424						$	1,054,946
Interest-bearing deposits		3,967,963			18,782	0.63	%		3,674,201			14,784	0.54	%
Total Deposits	$	5,297,387		$	18,782	0.47	%	$	4,729,147		$	14,784	0.42	%

________________________________________
⁽¹⁾	Includes non-accrual loans and loans held for sale
⁽²⁾	Net loan fee income of $2.9 million and $2.0 million for the nine months ended September 30, 2022 and 2021, 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, 2022			December 31, 2021
	(Dollars in 000's)
Allowance For Credit Losses
Balance at Beginning of Period	$	59,969		$	63,426
Charge-Offs
Commercial & Industrial		1,222			1,697
Mini-perm Real Estate		1			817
Total Charge-Offs		1,223			2,514

Recoveries
Commercial & Industrial		-			57
Mini-perm Real Estate		2,376			-
Total Recoveries		2,376			57

Net Charge-Offs (recoveries)		(1,153	)		2,457
Provision for (reversal of) Credit Losses:		5,350			(1,000	)
Balance at End of Period	$	66,472		$	59,969

Average Loans Held for Investment	$	4,686,424		$	4,138,023
Loans Held for Investment at End of Period	$	5,010,546		$	4,424,992
Net Charge-Offs (recoveries) to Average Loans		-0.03	%		0.06	%
Allowances for Credit Losses to Loans at End of Period		1.33	%		1.36	%

¹ This is a non-GAAP measure and links to the reconciliation on page 4.

Preferred Bank Reports Record Quarterly Earnings