• It's a regional commercial bank for Southern California, akin to a smaller, more localized version of PNC or U.S. Bank.
• A business-focused regional bank for Southern California companies and professionals, similar to a smaller-scale Comerica Bank.

• Commercial Real Estate Loans: Provides financing for the acquisition, refinancing, or development of various commercial properties.
• Commercial and Industrial (C&I) Loans: Offers credit solutions to businesses for working capital, equipment purchases, and other operational needs.
• Construction Loans: Funds new construction or major renovation projects for commercial and residential properties.
• Deposit Accounts: Offers a range of checking, savings, money market, and certificate of deposit accounts for individuals and businesses.
• Cash Management Services: Provides businesses with tools for efficient daily cash flow management, including ACH, wire transfers, and remote deposit capture.
• International Banking Services: Facilitates global trade through services such as letters of credit and foreign exchange.

• Small and Medium-Sized Businesses (SMBs): These are companies across various industries, often within the Chinese-American and other ethnic communities, that require commercial loans (e.g., commercial and industrial loans, lines of credit), treasury management services, and business deposit accounts.
• Commercial Real Estate Investors and Developers: This category includes individuals and entities involved in the acquisition, development, and management of commercial properties (such as retail, office, multi-family, and industrial properties). They are significant borrowers of the bank's commercial real estate loans and construction loans.
• Affluent Individuals and Professionals: High-net-worth individuals, business owners, and professionals who seek personal banking services, wealth management solutions, and deposit accounts, often complementing their business relationships with the bank.

Li Yu, Chairman and Chief Executive Officer

Mr. Yu founded Preferred Bank in 1991 and has served as its Chairman since December 1991 and Chief Executive Officer since 1993. From 1987 to 1991, he was the owner of several privately held companies. Prior to that, from 1982 to 1987, he served as Chairman of the Board of California Pacific National Bank, which became a part of Bank of America. He received his MBA from the University of California, Los Angeles, and was the past President of the National Association of Chinese American Bankers.

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

Mr. Czajka has been the Bank's Senior Vice President and Chief Financial Officer since 2006, and was promoted to Executive Vice President in 2008. He has 38 years of banking experience. Before joining Preferred Bank, Mr. Czajka was Chief Financial Officer of Presidio Bank, which was then in organization. Previously, he served as Executive Vice President and Chief Financial Officer of North Valley Bancorp (Nasdaq: NOVB), a publicly-traded multi-bank holding company. From 1994 through 2000, Mr. Czajka held the position of Vice President, Corporate Controller for Pacific Capital Bancorp (Nasdaq: PCBC).

Wellington Chen, President and Chief Operating Officer

Mr. Chen has served as the Bank's President since August 2012 and its Chief Operating Officer since August 2011. Before joining Preferred Bank, he was Executive Vice President and Director of Corporate Banking for East West Bank. Prior to that, he was Senior Executive Vice President and a Director of Far East National Bank.

Nick Pi, Executive Vice President and Chief Risk Officer

Mr. Pi was named Executive Vice President and Chief Risk Officer in May 2025, and previously served as the Bank's Chief Credit Officer since 2015. He continues to oversee the credit function and now also supervises the BSA and Compliance Departments. He has 32 years of banking experience, with 21 years at Preferred Bank.

Johnny Hsu, Executive Vice President and Deputy Chief Operating Officer

Mr. Hsu is the Executive Vice President and Deputy Chief Operating Officer. He has 32 years of banking experience, all of which have been with Preferred Bank.

Key Risks to Preferred Bank (PFBC)

1. Concentration Risk in Commercial Real Estate (CRE) Lending: Preferred Bank has a significant portion of its loan portfolio concentrated in real estate, particularly within the California market. As of December 31, 2024, real estate loans comprised approximately 64% of the bank's total loan portfolio, amounting to $3.63 billion. This concentration creates substantial exposure to fluctuations in the commercial real estate market, particularly in sectors like office and retail where valuations are deteriorating in key markets like Los Angeles. A sustained downturn in commercial property values or occupancy rates could lead to a disproportionate increase in non-performing assets and credit losses.
2. Impact of Non-Performing Loans and Asset Quality Volatility: The bank is actively managing non-performing loans, which have adversely affected its net income through reversals of interest income. Preferred Bank's recent earnings calls have reflected challenges with elevated non-performing loans. The asset quality metrics, such as the non-performing asset ratio, tend to be volatile, as issues with a small number of large loans can cause a significant spike in these metrics due to the concentration of its loan portfolio.
3. Funding Profile and Net Interest Margin Pressure: Preferred Bank's funding profile presents a constraint due to a majority of its deposit base being composed of time deposits (Certificates of Deposit or CDs). This structure contributes to a relatively high cost of deposits, which was 3.96% for fiscal year 2024. The elevated cost of funds directly compresses the bank's Net Interest Margin (NIM), impacting profitability, even though the bank has experienced some relief from CD repricing.

There are two clear emerging threats for Preferred Bank (PFBC):

1. Disruption from Fintech Business Banks and Non-Bank Lenders

The rise of digital-first banks (often called neobanks or challenger banks) and specialized non-bank lending platforms specifically targeting small and medium-sized businesses (SMBs) and commercial clients presents a significant threat. Companies like Mercury, Brex (for corporate cards and spend management), Bluevine, and various online lending platforms are leveraging technology to offer more streamlined digital experiences, faster loan approvals, more integrated financial services, and potentially lower operating costs. This allows them to compete aggressively for deposits and loans, eroding the traditional advantages of physical branches and long-standing banking relationships. This shift mirrors the convenience and efficiency offered by Netflix over Blockbuster, potentially drawing away tech-savvy commercial clients who prioritize speed and digital accessibility over traditional branch banking.

2. Structural Shifts in Commercial Real Estate (CRE) Demand

Preferred Bank has a significant concentration of its loan portfolio in commercial real estate. The ongoing and long-term structural changes in demand for various CRE property types, particularly office and retail, pose a clear emerging threat. Factors such as the widespread adoption of remote and hybrid work models are reducing the need for traditional office spaces, while the growth of e-commerce continues to reshape the retail landscape. These shifts can lead to sustained reductions in property values, increased vacancy rates, and potentially higher loan defaults within PFBC's CRE portfolio. This is not a direct competitive threat from another bank but rather a fundamental change in the underlying market for the bank's primary collateral, akin to how shifts in media consumption threatened the physical media rental business.

Preferred Bank (symbol: PFBC) operates as a commercial bank primarily in California, with additional branches in New York and Texas. The bank's main products and services include commercial banking, real estate financing, commercial and industrial loans, Small Business Administration (SBA) loans, trade finance, treasury management, and personalized deposit services.

The addressable markets for Preferred Bank's main products and services within its primary region of operation, California, are as follows:

• Commercial Banking: The market size of the Commercial Banking industry in California is projected to be $125.7 billion in 2025.
• Real Estate Loans: The market size of the Real Estate Loans & Collateralized Debt industry in California is estimated at $62.3 billion in 2025.
• Business Loans (including SBA Loans):
  • Total reported new lending to businesses with revenues of $1 million or less in California was $45.6 billion in 2021.
  • For fiscal year 2024, the total loan volume for SBA loans funded by providers in California was $4.15 billion.

Expected Drivers of Future Revenue Growth for Preferred Bank (PFBC)

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

• Loan Growth: The bank has demonstrated consistent loan growth, with a 2.3% increase in total loans ($133 million) in Q3 2025 and approximately 7% annualized loan growth in Q2 2025. This growth is fueled by increased commercial and industrial (C&I) line usage and funding of existing construction commitments, with management observing early indications of sustained loan demand.
• Net Interest Margin (NIM) Improvement: Preferred Bank has shown sequential improvements in its net interest margin, increasing to 3.85% in Q2 2025 from 3.75% in Q1 2025, and further improving in Q3 2025. This improvement, alongside deliberate management of deposit costs, contributes to increased net interest income, a primary component of revenue.
• Strategic Branch Expansion: The opening of new branches in high-growth markets, such as the successful Manhattan branch for loan origination and a planned Silicon Valley branch in the latter half of 2025, is a key driver for acquiring new customers and increasing loan originations.
• Growth within the Asian-American Commercial Client Segment: Preferred Bank's core focus on the Asian-American commercial community is anticipated to support sustained demand for commercial lending and banking services. Continued demographic growth and rising wealth within this client segment are expected to lead to a larger and more profitable revenue base.
• Deposit Growth and Cost Management: The bank experienced a 2.5% increase in total deposits ($151 million) in Q3 2025. While managing deposit costs, the growth in deposits provides a stable and expanding funding base for loan growth, directly impacting net interest income and overall revenue.

Share Repurchases

• Preferred Bank's shareholders approved a $150 million stock repurchase plan in May 2023.
• Under the $150 million plan, $84.3 million of common stock was repurchased during 2023 and 2024. The final portion of this plan, amounting to $65.7 million for 818,059 shares, was completed in Q1 and Q2 2025, with the total repurchased under the plan reaching 2,146,252 shares at an average price of $70.13 per share.
• A new $125 million stock repurchase plan was approved by shareholders in May 2025.

Share Issuance

• The number of common shares outstanding decreased from 14.89 million at the end of 2020 to 12.569 million as of November 2025, largely influenced by share repurchases.

Inbound Investments

• No significant inbound investments by third-parties, such as strategic partners or private equity firms, have been reported for Preferred Bank within the last 3-5 years.

Outbound Investments

• Preferred Bank has not reported significant outbound strategic investments in other companies within the last 3-5 years. The bank's capital allocation priorities rank strategic investments fourth, after organic growth, dividends, and buybacks.

Capital Expenditures

• Specific dollar values for Preferred Bank's capital expenditures are not consistently reported or highlighted as a significant capital allocation item in publicly available summaries.