Thank you, Jamie. Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the fourth quarter ended December 31st, 2025.

With me today from management are Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward Czajka, Chief Risk Officer Nick Pi, and Deputy Chief Operating Officer Johnny Hsu. Management will provide a brief summary of the results, and then we will open up the call to your questions.

During the course of this conference call, statements made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions that may or may not prove correct.

Forward-looking statements are also subject to known and unknown risks, uncertainties, and other factors relating to Preferred Bank's operations and business environment, all of which are difficult to predict, and many of which are beyond the control of Preferred Bank. For a detailed description of these risks and uncertainties, please refer to the SEC required documents the bank files with the Federal Deposit Insurance Corporation or FDIC.

If any of these uncertainties materialize or any of these assumptions prove incorrect, Preferred Bank's results could differ materially from its expectations as set forth in these statements. Preferred Bank assumes no obligation to update such forward-looking statements.

At this time, I'd like to turn the call over to Mr. Li Yu.

Please go ahead.

Thank you, ladies and gentlemen. Thank you for joining the earnings conference.

I'm very pleased to report that for the fourth quarter of 2025, the bank's net income was $34.8 million or $2.79 a share. For the full year, the bank earned $134 million or $10.41 a share.

Our profitability for the year is believed to be among the top tier of the banking industry. Our net interest margin for the fourth quarter declined from the third quarter.

Principal reason for the decline was federal rate cuts. With a 70% floating-rate loan portfolio, the rate cut did reduce our loan interest income.

However, cost of deposits remains stubbornly high. In fact, many analysts has reported that between quarters, the entire banking industry, cost of deposits may have increased a little.

Looking forward, that we're seeing that our loan demand getting stronger. For the quarter, our total loan growth is $182 million or over 12%.

Deposit growth was $115 million or 7.4%. To round out the year for loan and deposit growth in 7.3% or 7.2% respectively.

During the quarter, we have sold two large pieces of OREO resulted in a net gain of $1.8 million between the two. The income was reported in a section of non-interest income.

The sale that resulted loss was reported in the non-interest expense section. Why?

This is based on the current principle of Generally Accepted Accounting Principles. For the quarter, non-performing assets declined slightly.

However, criticized assets did increase $97 million. Principally, this is due to that we place a large nine loans loan relationship into the classified status.

For the quarter, loan loss provision was $4.3 million. Most economists is forecasting 2026 to be a year of relatively growth and stability.

Our customers' feeling also indicating they have an improved outlook for 2026. Barring any sudden changes in government policy or directions, which we just had one, we're hoping 2026 to be more of a growth year for Preferred Bank.

Thank you very much. I will answer your questions.

Hey, good morning, everyone.

Good morning.

Just want to start on the margin and get some visibility there at least in the near term. Do you have the spot rate on deposit costs at the end of the year or even the month of December, and then also the average margin in the month of December?

Hi, Matthew. This is Ed.

The margin for December was 3.66%, slightly below that of the quarter. That was with the full effect of the December rate cut.

Total cost of deposits was 3.17% for the month of December. That's coming down about 6-7 basis points a month.

Okay. That's where I was headed.

Deposit beta this quarter looks about to be about 40% on interest-bearing. Sounds like things are still pretty competitive.

What are your thoughts on the deposit beta going forward, assuming we get maybe one or two rate cuts this year?

It's going to depend on a number of things. Obviously, the rate cuts will play a big key role.

The other thing that Mr. Yu alluded to is the competition for deposits still remains very, very strong.

I would foresee a similar pattern in terms of about 5 or 6 basis points a month as we have CDs rolling off and then coming on at lower rates. They're just not coming on at rates that we thought we would see at this point given what's happened with the Federal Reserve.

Okay. Got it.

Sounds like loan growth, you expect to maybe step up a little bit this year from the 7.3% pace last year. I would assume you're going to try to grow deposits at a similar pace.

Is that fair, just given your loan-to-deposit ratio?

That's a most fair statement. Yeah.

Okay. Then just last one for me on expenses, the run rate, a little noise this quarter, but stripping that out, a little better than expected on comp.

How should we think about the run rate here in the first quarter with some seasonality?

I'm going to forecast probably somewhere in the neighborhood of $22 million, maybe slightly below that, but $21.5 to $22 million should be about right.

Why don't you use a $21.5 to $22.5 million?

Okay. Bigger margin.

I like it. Thank you.

Targeting, huh? Yeah.

thanks. Good morning.

Just a quick follow-up on the deposit side of things. If you could kind of update us on the CD maturities in the first quarter and kind of the out and in rate that you expect?

Sure. We have about $1.3 billion maturing in Q1 at a weighted average rate of 3.96%.

They're currently coming on right now at about round 3.70% to 3.80% right now on average, Gary.

Appreciate that. Just out of curiosity, last quarter, when you talked about the CDs maturing in fourth quarter, they were maturing at 4.1% and you had sort of posited kind of new CDs in the mid to high-3s.

It sounds like that number was towards the upper end of that repricing range in the fourth quarter. Is that kind of what played out?

Yes. As we said, we would have expected market rates to come down a little more than they did given the Federal Reserve's actions.

Okay. That 70% floating-rate portfolio now, with the fourth-quarter cuts, did you clear through any significant floors that changed the number?

It probably only affected about $150 to $200 million of the loan book. Right now, we have about 45% of the floors are in the 0 to 100 basis point bucket in terms of their protection effectiveness.

Great. Thank you.

Hey, good morning.

Andrew.

Hey, I was hoping to just follow up on the time deposit commentary. I was hoping you could just maybe expand upon that a bit more and just sounds like high-3s for you guys right now.

Is that generally in line with your competition? Are you trying to price ahead, price below to pick up more deposits?

Just curious where you're at versus the market, kind of your strategy or expectations there.

I think the challenge is kind of walking the tightrope, right? We want to bring deposit costs in.

That's really a big goal of ours, but at the same time we want to grow the deposits. That's been kind of a challenge.

What we've seen in the marketplace is not only local competition still being fairly stiff, but we're seeing some large money center banks still out there promoting CDs right in our marketplace. When you have those guys doing that type of thing, it makes it more challenging for us because of their size.

Yep. No, makes total sense.

On the downgraded loan this quarter, the $123 million relationship, I appreciate all the color you guys put in the release around the LTVs and debt service there that both look pretty good. I was just hoping you could talk a little bit more about the pathway to curing this, what the timeline and outcome looks like as you see the picture today.

Then also just it's a pretty large relationship, 2% of the loan book. Is this the largest relationship at the bank, or are there other similarly large relationships that you guys have?

Who wants to answer that, you or Wellington? I believe this is one of the large relationships, correct, for the bank at this point.

In terms of the workout, it's a little bit early to be able to tell what the future's going to hold for this particular relationship. There are several options that we've utilized in the past.

We've sold notes, we've foreclosed and taken back property, etc., but

Andrew, our first choice, obviously, we know these customers they are late in payments and they are having problem with other banks, but their principle is that because these properties still have value, very positive value in their eyes, and the information we have is they're working very hard try to finance it out from other alternative. The bank is going to be waiting for them to get these procedures done, okay?

In case if they are not able to continue the loan and then we have to go through the foreclosure procedure, we are not going to be shy away from that. We'll do immediately.

Then that current marketplace is pretty reasonable as regard to pay for these properties at this point of time. In other words, we're not seeing the market situation 2008, '09, 2011, '12 that you have the bottom fall off.

It's not happening. Market has been very stable.

It's a matter of time to resolving these things as these loans are basically fundamentally reasonably underwritten.

Great. Okay.

I appreciate all the color there, and thanks for the questions.

Great. Thank you.

Morning, everybody. Mr.

Yu, as we start looking at loan growth for this next year, what do you think are the best opportunities for growth? Like what loan products?

Basically, we're still a we're still a sort of like commercial market that we that basically commercial real estate and and the C&I loans. We see both side demand is is reviving a bit right now.

In fact, internally, we're budgeting a higher number than previous year right now. It's still very early to tell.

As you know that as you know that not only we have we we have normal economy, but we do have a very active government that changes, practices from time to time. It it will be if we venture into sort of everything was smooth, no change, or go this way, I think that's always over overly optimistic situation, too.

I'd like to say that we're budgeting a higher number than last year for our upcoming years, this year.

Okay. Great.

Thanks. Then, Ed, looking at non-interest expenses for the full year in terms of the growth rate, is kind of a mid to high single-digits number reasonable?

Yes. That's about what we're looking at is, yeah, right in that neighborhood, Tim.

You're spot-on.

Okay. Then just kind of general thoughts on share repurchases for this year?

We just have to see what the total picture is. That obviously we have to see what our loan growth is during the year, and all possibility, all funds will have to be reserved for loan growth, and certainly that deposit situation will also be very important.

When we have the balance sheet all fixed, then we probably will turn around to see whether it is additional availability for repurchases. I will say that the situation is not quite as, how should I say, conducive to repurchases as last year.

Right. Oh, sure.

Absolutely. Then I guess I want to kind of make sure I dot the i and cross the t's on the classified loans.

Given the uniqueness of this situation, what does the timeline for disposition look like, or how does this play out?

That the amount of the relationship is there's several different loans. Some of them have an earlier maturity date than the other one.

Obviously, we will be given our customer of that particular relationship the opportunity of resolving these matters to our satisfaction. Now then the legal procedure will start if they failed to do that.

Now, I would say that internally we would say that probably we will have a good portion of all resolved sometime within two quarters. Nick, do you think I'm too optimistic or what's your department say?

That's the goal where we're heading, Mr. Yu, yes.

Two quarters we will try to resolve the issues.

I think we give ourselves so much time to get a lot of the work done.

Okay. Great.

That was very helpful. Those were my questions.

Thank you.

Thank you.

Hi. Good morning, everyone.

This is Liam on for David Feaster. There's been a good amount of discussion surrounding the classified downgrade, but I did just want to touch on the well-secured multifamily loan that was downgraded to nonaccrual.

Did you have the credit metrics for that loan? Is there anything in particular we should take into account?

You mean that the 19 $19.5 million?

Yeah, $19.5 million.

Okay. Nick, you have the numbers.

Nick? Okay.

Fill out the credit metrics. Right.

Based on the most updated appraisal we conducted after we classified this loan, and the value come out even higher than the previous one. With that everything in mind—

No, how much the value? $48 million?

It's $49 million.

$49 million.

$49 million, and our loan is 19.5.

That's very helpful.

Thank you. Again, that is one loan that we like to think that the borrower will want to find a way to resolve that, okay, because there's too much difference between the assumed market value is the appraisal value.

It's too much difference.

No, thank you very much. Then just one more for me.

For fee income in 2026, would the 4Q number excluding the one-time OREO impact be a good baseline?

I think that's probably a good baseline, maybe slightly below that. LC fee income was very, very strong this year.

Not sure we can exactly reproduce that number, but I'm sure we'll get close to that. I would take that non-interest income without the gain on sale of other real estate.

Thank you very much. I'll step back.

Hey, thanks. Just want to clarify your expense guidance for this year.

Does that exclude OREO costs because the midpoint of your guide for the first quarter of $22 million annualizes obviously to $88 million. It would be below this past year and would imply some significant growth after the first quarter.

Just want to make sure we're on the same page.

Yes, it will grow through the year. There's no question about it.

We still have a couple of small OREO properties, there will be some expense related to those as well.

Okay. Then did you repurchase any shares this quarter?

No, not this quarter. Did

you?

We did in October, but it was a nominal amount, Matthew, so.

Okay. Then just last one for me on M&A, just wanted to get an update on your appetite for M&A to the extent you see some opportunities with M&A expected to accelerate this year.

There are few deals that have been brought to us that we end up taking a look at it. As you know that that has mean nothing on our main effort in M&As.

They are couple of deals we did take a look at it, and probably the pricing structure require of that still not to our satisfaction. We'll continue to look at it.

We know that there may be another one or two coming up, but we'll take a look at it.

Okay. Great.

Thanks again.

Yes, hello. Thanks for taking my questions.

My first question is really more just to clarify the diluted EPS of $2.79. If I'm reading it correctly, it looks like your gain on sale of the OREO properties is included in that EPS, which after tax was about 20 cents.

Just want to confirm, am I reading that correctly that ex of that gain, the EPS was $2.59?

That sounds about right, yes.

$1.8 million after equal to maybe 10 cents. $3.6

million, 3

point $3.2 million. That's about right.

Thank you. Then my next question is on those OREO properties you sold in the fourth quarter, did you provide any financing to the buyers, or have you completely absolved yourself of any exposure to those properties going forward?

We provide financing, okay. The other one's outright cash sale.

Correct. Got it.

You still have a loan through one of those properties going forward.

It's a much smaller loan.

Got it. Okay.

Then the last question I had was with respect to the increase in the classified loans. Can you please confirm the $121 million of loans that are with the relationship where there's litigation going on with other banks, I'm assuming you're referring to Western Alliance and Zions, are those loans paying current?

Are they performing, or no?

As far as I know, we don't know exactly the status of the other two banks' loan, and we don't have any idea about their structures. How I know is that we are in a first position deed of trust lender, we're fully secured by property.

Are you receiving current interest and debt service on those loans currently?

Yes, we have been receiving the payments, but no. It's been slow down.

It's been slow down.

Yes,

correct.

Yeah.

Sorry. They're behind in interest service or they're current in interest service?

I'm not following.

Generally they are behind in interest services,

okay?

That's the weakness of the loan that we classified. Okay.

Thanks for clarifying. I'm just really more trying to understand the context of a 1.14 times debt coverage ratio if the loan's not paying.

Because of the guarantor's got involved with the litigation with other banks, probably they're not 100% using all the cash flow from this property to make the payment to our bank. That is our guess.

Got it. Okay.

That's helpful. Then, just finalize the question on this topic, given where the allowance for credit losses stood at the end of the quarter or end of the year and your increase in the provision for credit loss, what gives you comfort that you're adequately reserved and we don't get surprised as we did this quarter with significant increase in non-performing and criticized loans?

How recent of a scrub have you done of your portfolio to kind of give you that comfort that you're adequately reserved?

All this loans under this relationship, because it's standard impaired, we go with the ASC 310-14 analysis. As the release mentioned about the loan-to-value is at around 55%.

There's no specific reserve on this one. However, the $4.3 million provision for this quarter was mainly the result of a combination of many, many factors including the loan growth, including other specific reserve for some of the loans, just give you an example, we fully reserve this relationship under unsecured credit, and also based on Q-factors.

Due to the movement of all this relationship and increase of the criticized loans, we have adjusted our Q-factors side, especially on the credit trend area. We increase 5 basis points of the entire real estate segment.

Based on the component of our reserve at this moment, our Q-factors side actually account around 42.5% of the entire reserve. We do believe the reserve should be more than enough to cover our credit situation.

Got it. Okay.

Thank you very much.

Thank you very much that being for now that Preferred Bank, we have a little challenges as we within the next six six months period of time try to resolve this issues on the credit side. Overall, everything remained the same.

We still the same company. We're still instructed with a normal operation, normal matrix and so on, and we're sort of still look forward to 2026, and thank you very much.