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Here are 1-3 brief analogies for Preferred Bank (PFBC):

• Like a **Wells Fargo** but focused on commercial real estate and business banking in California and New York.
• A specialized **JPMorgan Chase** for entrepreneurs, real estate developers, and high-net-worth individuals.

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Preferred Bank (PFBC) offers the following major products and services:

• Deposit Accounts: A variety of checking, savings, money market, and certificate of deposit accounts for individuals and businesses.
• Real Estate Loans: Financing secured by retail, industrial, office, special purpose, residential properties, and real estate construction projects.
• Commercial Loans: Lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit for businesses.
• SBA Loans: Government-guaranteed loans designed to support small business operations and growth.
• Trade Finance Services: Products such as commercial and export letters of credit, import lines of credit, and international wire transfers to facilitate global commerce.
• High-Wealth Banking Services: Specialized financial services catering to wealthy individuals, particularly those residing in the Pacific Rim.
• Digital Banking Services: Convenient online and mobile banking platforms, including remote deposit capture, for managing accounts.
• Professional & Business Banking Services: Tailored banking, cash management, and other services for professionals and various manufacturing, service, and distribution companies.

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Preferred Bank (PFBC) serves a diverse client base that includes both businesses and individuals. Based on the provided description, its major customer categories are:

1. Small and Mid-sized Businesses, Entrepreneurs, and Real Estate Developers/Investors: This includes businesses seeking commercial banking products, real estate mortgage and construction loans, commercial lines of credit, term loans, SBA loans, and trade finance services.
2. Professionals: Such as physicians, accountants, attorneys, and business managers, who require specialized banking services.
3. High Net Worth Individuals: Including wealthy individuals residing in the United States and the Pacific Rim area, who utilize high-wealth banking services, checking, savings, money market accounts, and individual retirement accounts.

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Li Yu, Chairman and Chief Executive Officer

Mr. Yu is the founder of Preferred Bank, established in 1991. He has served as the bank's Chief Executive Officer since 1993 and as Chairman of the Board of Directors since December 1991. Before founding Preferred Bank, he was involved in several privately held companies as an owner from 1987 to 1991. From 1982 to 1987, he was Chairman of the Board of California Pacific National Bank, which later became part of Bank of America. He also served as President of the National Association of Chinese American Bankers. Mr. Yu holds an MBA from the University of California, Los Angeles.

Edward J. Czajka, Executive Vice President and Chief Financial Officer

Mr. Czajka joined Preferred Bank as Senior Vice President and Chief Financial Officer in 2006 and was promoted to Executive Vice President in 2008. Prior to his tenure at Preferred Bank, he served as Chief Financial Officer for Presidio Bank. He also held the position of Executive Vice President and Chief Financial Officer at North Valley Bancorp (Nasdaq: NOVB), a publicly-traded multi-bank holding company.

Wellington Chen, President and Chief Operating Officer

Mr. Chen has held the roles of President of Preferred Bank since August 2012 and Chief Operating Officer since August 2011.

Nick Pi, Executive Vice President and Chief Risk Officer

Mr. Pi currently serves as the Executive Vice President and Chief Risk Officer. He has been the bank's Chief Credit Officer since 2015 and continues to oversee the credit function, with additional responsibilities for the BSA and Compliance Departments.

Johnny Hsu, Executive Vice President and Deputy Chief Operating Officer

Mr. Hsu has been the Executive Vice President and Deputy Chief Operating Officer of Preferred Bank since 2018. He began his banking career at Preferred Bank in 1992 in branch operations and has since held various production and portfolio management positions. In 2007, he became the head of Commercial Real Estate Lending.

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1. Credit Risk and Asset Quality: Preferred Bank faces significant credit risk, particularly with its substantial exposure to real estate mortgage and construction loans, which constitute a large portion of its assets. Recent reclassifications of a large loan relationship, totaling approximately US$117.6 million (primarily real estate loans), to nonaccrual status due to borrower lawsuits, sluggish cash flow, and poor payment patterns highlight concerns about asset quality. This reclassification has led to an increase in criticized assets and underscores the importance of maintaining exceptional underwriting standards to mitigate potential deterioration in asset quality and elevated credit costs.
2. Net Interest Margin (NIM) Pressure and Interest Rate Risk: The bank's profitability is heavily reliant on net interest income, which accounted for 95% of its Q4 2024 revenues. Preferred Bank is experiencing sustained pressure on its net interest margin due to the normalization of Federal Reserve policy, including interest rate cuts, and persistently high funding costs. Approximately 70% of the bank's loan portfolio is floating rate, which means that federal rate cuts can reduce loan interest income more quickly than deposit costs can adjust, especially in a competitive deposit market where pricing remains elevated.
3. Deposit Retention and Funding Costs: The bank faces challenges in managing deposit costs and navigating intense competition for funding. The ability to attract and retain uninsured deposits can be challenged, and any deterioration in depositor confidence could lead to deposit outflows and liquidity strains. If the bank is required to replace withdrawn deposits with funds borrowed from sources like the Federal Home Loan Bank or Federal Reserve Bank, it could significantly increase marginal interest expense and reduce net interest income.

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The clear emerging threat to Preferred Bank is the continued expansion and technological advancements of digital-first financial institutions and fintech companies. These entities challenge traditional banks by offering:

• More streamlined, often mobile-centric, banking experiences for deposits (checking, savings), payments, and wealth management, potentially attracting tech-savvy customers and those prioritizing digital convenience over physical branch interactions.
• Faster, more accessible, and sometimes AI-driven loan origination and approval processes for small and mid-sized businesses, directly competing with Preferred Bank's commercial, real estate, and SBA loan offerings.
• Specialized and often lower-cost financial services, such as international payment transfers and trade finance alternatives, which could impact Preferred Bank's niche offerings, including its services for Pacific Rim high-net-worth individuals and trade finance programs.

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Preferred Bank (PFBC) operates within several addressable markets for its diverse range of commercial banking products and services. These markets are primarily concentrated in the United States, with high-wealth banking services also extending to the Pacific Rim area.

Commercial Banking for Small and Mid-Sized Businesses

The U.S. commercial banking market, which serves small and medium-sized enterprises (SMEs), represents a significant addressable market for Preferred Bank. In 2025, the overall U.S. commercial banking market size was estimated at USD 732.5 billion and is projected to grow to USD 915.45 billion by 2030, demonstrating a compound annual growth rate (CAGR) of 4.56%. Within this market, the small and medium enterprise segment is specifically forecasted to expand at a 7.02% CAGR through 2031. As of 2023, SMEs constituted approximately 99.9% of all U.S. businesses and accounted for 47.3% of the private workforce, heavily relying on commercial banks for financing.

Real Estate Loans

Preferred Bank is active in the U.S. real estate loan market, encompassing various property types. The overall U.S. Real Estate Loan Market was valued at USD 3.5 trillion in 2024, with a projected CAGR of 10.6%. More specifically, the U.S. commercial real estate (CRE) mortgage market for income-producing properties is approximately $4.5 trillion, alongside an additional $470 billion in construction loans. For residential properties, the U.S. home loan market reached USD 2.42 trillion in 2026 and is expected to grow to USD 3.17 trillion by 2031.

SBA Loans

As a provider of SBA loans, Preferred Bank operates within the broader U.S. small business loan market. This market was valued at $245.39 billion in 2023 and is projected to reach $349.64 billion by 2033, growing at a CAGR of 3.4% from 2024 to 2033. In fiscal year 2024, the U.S. Small Business Administration (SBA) provided $37.8 billion in 7(a) and 504 funding.

Trade Finance Services

Preferred Bank's trade finance services address a market primarily driven by cross-border trade activities. The U.S. trade finance market generated a revenue of approximately USD 10.31 billion in 2024 and is expected to grow to USD 12.40 billion by 2030. The North American trade finance industry, which includes the U.S., dominated globally in 2024 with a revenue share of over 26.8%.

High-Wealth Banking (Pacific Rim)

For its high-wealth banking services targeting individuals in the Pacific Rim area, Preferred Bank serves a rapidly expanding market. Asia's private banking assets reached a record $2 trillion. The Asia-Pacific private banking market, measured by revenue, is estimated at USD 48.47 billion in 2026 and is projected to reach USD 76.05 billion by 2031, growing at a CAGR of 9.43%.

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Preferred Bank (PFBC) is expected to drive future revenue growth over the next 2-3 years through several key strategies and market dynamics:

1. Sustained Loan Growth: Management anticipates a recovery in loan demand, with projections for it to gradually return to historical levels, particularly as interest rates are expected to decrease. The bank has demonstrated consistent annualized loan growth in recent quarters, including over 10% in Q3 2024 and 7% in Q2 2025, with Q4 2025 seeing quarterly loan growth exceeding 12%. A significant portion of the loan portfolio (74%) is floating-rate, positioning the bank to benefit from a favorable interest rate environment.
2. Net Interest Margin (NIM) Improvement through Deposit Cost Management: Despite some past NIM compression, the bank is actively managing its deposit costs. Management expects deposit costs to moderate with projected rate declines, with a CFO projecting a slow decline of about 5-6 basis points per month as Certificates of Deposit (CDs) reprice. Strategic efforts, such as replacing higher-cost brokered money market accounts with lower-coupon brokered CDs, have already led to a decrease in total interest expense. This focus on optimizing funding costs is crucial for stabilizing and potentially expanding the net interest margin, a key driver of the bank's net interest income.
3. Strategic Branch Expansion: Preferred Bank is expanding its geographical footprint into promising markets. The new Manhattan branch has shown strong performance in loan origination, and a Silicon Valley branch is planned for the second half of 2025. These expansions into economically active regions are expected to drive revenue growth by increasing the customer base and enhancing loan origination opportunities.

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Share Repurchases

• Preferred Bank's shareholders approved a new $125 million stock repurchase program on May 22, 2025, which requires regulatory approval.
• The bank completed a previous $150 million stock repurchase plan on May 8, 2025, under which it repurchased 2,146,252 shares at an average price of $70.13 per share.
• Under the previous $150 million plan, $84.3 million of common stock was repurchased during 2023 and 2024, including $50.7 million in 2023 and $34.3 million in 2024. The final portion of this program saw 818,059 shares repurchased for $65.7 million during the first and second quarters of 2025.