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].

Financial Data and Key Metrics Changes - Core pre-tax pre-provision income for Q3 2025 was $54.4 million, up from $49.4 million in Q2 2025 and $29.8 million a year ago, indicating significant growth [6] - Core EPS for Q3 was $0.61 per share, representing a 110% year-over-year increase [14] - The reported NIM increased to 3.1% in Q3, marking a continuous increase for six consecutive quarters [14][7] - Total deposits increased by approximately $320 million from the previous quarter [15] Business Line Data and Key Metrics Changes - Business loans grew by over $160 million in Q3, compared to $110 million in Q2, with year-over-year growth exceeding $400 million [8] - Loan originations, including new lines of credit, increased to $535 million [8] - The weighted average rate on new loan originations was approximately 6.95% [8] Market Data and Key Metrics Changes - The company has a strong loan pipeline currently standing at $1.2 billion, with a weighted average rate between 6.56% and 6.75% [9] - Core deposits increased by $1 billion year-over-year, reflecting strong inflows across the branch network [6] Company Strategy and Development Direction - The company is focused on organic growth, particularly in business loans and core deposits, while maintaining a strong liquidity position [12][49] - A new branch was opened in Manhattan, with plans for additional locations in New Jersey and Long Island [11] - The company aims for continued NIM expansion, with expectations of reaching mid to high 3% in the medium to long term [49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality, with NPAs at 50 basis points of total assets, and a positive outlook for resolving legacy NPAs [29] - The company anticipates more substantial NIM expansion in Q4 2025, driven by reduced deposit costs and maintained loan yields [17] - Management believes the industry is in the later innings of the credit cycle, with expectations of a gradual improvement in the operating environment [63] Other Important Information - The company reported a $1.5 million positive benefit from a fraud recovery related to Legacy Bridge [15][61] - The common equity Tier one ratio grew to over 11.5%, providing a competitive advantage [16] Q&A Session Summary Question: Regarding NPA formations and charge-offs - Management clarified that charge-offs were primarily related to owner-occupied and non-owner-occupied real estate, with no multifamily-related charge-offs [28] Question: Expectations on multifamily payoffs - Management indicated that while there were significant payoffs this quarter, future paydowns would normalize [30] Question: Thoughts on normalized charge-offs - Management expects charge-offs to stabilize around 20 to 30 basis points, with new business lines not contributing to increased charge-offs [36] Question: Market appetite for multifamily products - Management noted no significant differentiation in refinancing between market rate and rent-regulated multifamily loans [40] Question: Expectations on deposit betas with potential rate cuts - Management indicated that gradual rate cuts would help maintain deposit costs, with expectations of similar reductions in future rate cuts [42] Question: Thoughts on stock repurchases - Management is considering stock repurchases, especially as capital ratios are strong and the CRE concentration ratio has improved [55] Question: Industry credit cycle outlook - Management believes the industry is in the later innings of the credit cycle, with expectations of a stable environment moving forward [63]