Preferred Bank (PFBC) investor relations material

Executive summary

• Net income for Q2 2026 was $33.5 million ($2.78 per share), up $2.4 million sequentially and $693,000 year-over-year, exceeding prior results and internal budget.

• Significant progress made in resolving troubled assets, with non-performing loans reduced by $70.2 million (41.5%) and criticized loans by 33.9%.

• Loan balances increased by $125 million (2% sequentially), with strong origination despite loan sales and payoffs.

• Deposit growth was $52 million (0.8% sequentially), amid industry-wide stiff competition for deposits.

• Noninterest income declined due to a $950,000 loss on a loan sale; noninterest expense increased slightly, mainly from higher legal fees.

Financial highlights

• Net interest margin (NIM) was 3.73%, positively impacted by interest recoveries; adjusted NIM was 3.60% for Q2.

• Efficiency ratio improved to 32.3% from 33.8% in the prior quarter, holding steady despite inflationary pressures.

• Provision expense for the quarter was $1.2 million, reflecting reduced reserve requirements due to asset quality improvements.

• Cost of total deposits was 3.06% in June; cost of interest-bearing deposits was 3.44%.

• Return on average assets was 1.75%; return on average equity was 17.05%.

Outlook and guidance

• Three non-performing loans totaling $60 million remain, with resolution timing dependent on bankruptcy proceedings.

• NIM expected to reset to mid-3.50% range in Q3 due to competitive pressures and deposit repricing.

• Loan growth outlook for Q3 is more challenging due to increased competition and customer hesitation; Q4 recovery is uncertain.

• Deposit growth targeted above low single digits, with focus on DDA growth.

• Expense run rate expected to remain flat or slightly improve in Q3.