Thank you, Drew. Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the third quarter ended September 30th, 2026.

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. Good day, everyone.

Preferred Bank third quarter net income was $32.9 million, or $2.73 per share, okay. This quarter were negatively affected by a $2.1 million recovery of interest income.

Deposits grew $77 million, or 1.2% on a linked quarter basis. As everybody is already well aware of that the deposit market is very, very competitive, okay.

Looking forward, this condition will likely go into the year 2027, okay. The banks are now not only facing more competition from nonbank institutions, but also strangely we see many of our customers invest their extra funds into the Treasuries.

Loans for the quarter decreased $40 million after we place a large credit on a for-sale status. Unlike at the beginning of the third quarter, when we reported in our last conference phone call, but this time, okay, our pipeline seems to be very solid, okay, and we're very hopeful that in the fourth quarter to have a good solid growth.

As we reported earlier, the net interest income was affected by a reversal of interest income, and that has affected our net interest margin, okay. This quarter, net interest margin was reported at 3.49%.

Without this $2.1 million adjustment, it would have been 3.60%. Going forward, we see a stable interest rate market, okay, condition.

If the Fed funds is going to adjust higher, then it would further benefit our net interest margin, as we, Preferred Bank, is a asset-sensitive bank. Resolution of nonaccrual loans is continuing, but slower than what we hope for.

The level of nonaccrual remains stubborn, largely because several credit was scheduled to be resolved in this quarter is all stuck in the court proceedings that has pushed back to third and fourth quarter, no, the fourth fourth quarter next year, okay. The pace of migration seems have slow down or subsided.

There were only $20 million of additional credit that was classified as substandard that remain on accrual status. The rest of them are all has been included in the nonaccrual number.

We are pleased with our consistent cost control of overhead even under very inflationary period, okay. We are constantly looking for opportunities to gradually improve our noninterest income, okay.

With the outlook of a strong 2027 economy and relatively stable interest rate environment, we're looking forward to a good 20 2027 year. Thank you.

Ready for your questions.

Morning, everyone.

Hi.

Hi. Wanted to start on the deposit side.

Maybe Ed, can you update us on how much in the way of CDs you have maturing here in the fourth quarter and weighted average roll-off and roll-on rates that you expect?

We have just under $1.7 million maturing in the fourth quarter, it's a fairly heavy quarter from a maturity standpoint. Weighted average yield is 3.81%.

Those are likely to come on anywhere between 3.75% to 4% as they roll over.

Not that big of a headwind there. Then do you happen to have your deposit cost spot rate at the end of September?

If not, the month of September?

I do. Total deposit cost was 3.06% for the month of September, and the spot margin was 3.58%.

Okay. Then the deposit beta, I think on the way down was about 69%.

Any thoughts on what you might experience on the way up this time, assuming we get maybe another rate hike in December and maybe one in March?

Definitely slower. Matthew, as you can see, we were able to decrease total deposit costs by 3 basis points in a very, very difficult rate environment.

I think part of what you see in terms of the deposit growth versus deposit costs was a function of management's discipline toward keeping the deposit costs down, although that likely cost us some growth in the quarter. Our focus is on keeping the costs under control.

Okay. Then just a couple on credit.

Do you have the criticized loan balance at the end of September, I think it was $170 million at the end of June, and then how much of your NPAs do you think you can get rid of by the end of the first quarter, and any concern around losses there?

Matthew, the total classified loan was $177.6 million, which covers classified plus $11.5 OREO, which is around $17.7 million above what we just disclosed for nonaccrual. That's the classified loans.

For resolution side, I believe during the fourth quarter, as Mr. Yu mentioned, that some of the loans actually is in the BK court, but we do believe all this BK proceedings heading the right direction, and several BK court approved to sell the property in BK court.

If that's continued delayed, then probably we're going to foreclose and we're going to dispose by ourselves. Hopefully by Q4 there will be a couple of large loans will be disposed.

However, it totally depends on the court decision. Sometimes even though the collateral property has a good loan-to-value and we can fully recover, however we have to subject to our BK court's proceedings.

We do have options for handling that as well.

Thank you.

Morning, everyone.

Hi, Andrew.

Hi, a question on the loan growth here in the quarter. Were there outsized paydowns?

Just what was the cause of the more modest pace of growth than what you might have been expecting?

You want to comment about that, Wellington?

Yes, Andrew. The loan growth it's a combination of both, the payoff we have some unexpected payoff, and also production is it wasn't as robust as the second quarter production.

Having said a lot of loans that's in the pipeline, kind of delay in funding and all that, so that's carryover to this quarter. That's why we're looking at the fourth quarter together with a new loan production looking at a stronger pipeline.

Got it. Have you had any customers telling you that they may delay projects that may not pencil in the face of higher rates?

That is the case, too. With the higher rate, people are a little bit more conscientious about the project itself.

Also having said that, with the market itself, higher rate, they actually looking for more option some the opportunity to pick up some better deals.

Got it. Then expenses were very well controlled this quarter, down quite a bit from the second quarter.

Anything unique in that number, and where do you think a good starting point for the fourth quarter would be?

We had a decrease in professional services, primarily legal fees, which are typically associated with the problem loans, and then our incentive compensation accrual was lower this quarter than it was in the prior quarter due to profitability being slightly less. On a go-forward basis, I would say for Q4, look for somewhere between $23 and $24 million, Andrew.

Got it. Makes sense.

That covers my questions. Thanks.

Thank you.

Hey, good morning. Hey,

Andrew.

Maybe just a housekeeping on the deposits. It looks like a lot of the deposit growth maybe happened towards the end of the quarter, just comparing that the end of period versus the average.

Anything that you feel like was more transitory in the deposit base at the end of the period, or is this the end of period number kind of a good launch point for the fourth quarter? It's cert- No,

it's a good launch point for the for the next quarter, Andrew. There's nothing nothing magical there.

A number of the brokered deposits we have specifically maturing and coming on late in the quarter as opposed to early in the quarter, so that's why you see a bit of a discrepancy between the quarterly average and the month-end quarter-end balance.

Great. I appreciate it.

Then, just wanted to get your views on just overall kind of deposit growth in this environment. Appreciate all the color on the loan side, but sounds like a tougher deposit market.

Just your views on ability to kind of core fund growth and what kind of cost.

Andrew, the market is situation with the deposit pricing is all over the place. You are probably familiar with what banks post generally in the 3s for TCDs, okay, because money market and interest-bearing DDAs is all over the place.

Everybody has different deal with every customers, and all. On the TCD, which generally more available information, the banks are in the mid-to-high 3s, but all the security houses is in forced mid-4s, and some of them, the latest we see, E-Trade is offering 4.75%, okay?

Right now, because the Treasury nature is being not taxable in California income tax, which is at 13% top rate, a 5% Treasury become 5.65% effective yield, okay? We see many of the customers take out, after their CD renewed, they're moving to Treasury.

This is the general market is moving. Right now, with all the interest rate environment, it's all over the place.

We just have to do everything we can just hold on to our customers, and meanwhile try to grow a little bit.

All right, great. Appreciate your perspective.

Thanks for taking the questions.

Thank you. It's eventful third quarter for us, okay.

We hope that fourth quarter, we see operation equally as consistent as we had right now, but hopefully many of the item we'll work on will show positive results. Thank you.