Preferred Bank Q4 Earnings Call Highlights

Core Viewpoint - Preferred Bank reported strong earnings for Q4 and the full year, with net income of $34.8 million for Q4 and $434 million for the full year, indicating robust profitability in the banking sector [3][5]. Financial Performance - The bank's net interest margin in December was 3.66%, slightly below the previous quarter, influenced by the December rate cut [2]. - Total cost of deposits was 3.17% in December, trending down by approximately six to seven basis points per month [2]. - For the full year, the bank earned $10.41 per share, positioning it among the top tier of the banking industry [3]. Loan and Deposit Growth - Preferred Bank experienced quarterly loan growth of $182 million, over 12%, and deposit growth of $115 million, or 7.4% [6]. - Year-to-date loan and deposit growth were reported at 7.3% and 7.2%, respectively [6]. - Management anticipates stronger loan demand in 2026, particularly in commercial real estate and C&I lending [6]. Credit Quality and Provisions - Criticized assets increased by $97 million due to a downgrade of a large relationship, with a provision of $4.3 million booked [4][8]. - Non-performing assets slightly declined, but the bank is prepared to address credit challenges within the next two quarters [11][18]. - The bank believes its reserves are adequate to cover credit situations, with qualitative factors representing 42.5% of total reserves [12]. Non-Interest Income and Expenses - The bank recorded a net gain of $1.8 million from the sale of two large OREO assets, contributing to non-interest income [13]. - Management expects first-quarter non-interest expenses to be between $21.5 million and $22.5 million, with a projected mid- to high-single-digit growth rate for the full year [16]. Capital Actions and M&A Outlook - The bank did not repurchase shares during the quarter, with future repurchases dependent on loan growth and deposit conditions [17]. - Management is reviewing potential M&A opportunities but has found pricing expectations unsatisfactory [18].