Preferred Bank Q4 Net Income Falls to $34.8M, Loans Rise $182.3M
Preferred Bank reported net income $34.8M, or $2.79 per share, down $1.1M QoQ and up $4.6M YoY. Loans grew $182.3M and deposits $115.8M, while NIM fell to 3.74% and provision for credit losses was $4.3M.
1. Strong Quarterly Profitability Driven by Core Operations
Preferred Bank reported Q4 2025 net income of $34.8 million, or $2.79 per diluted share, marking a $4.6 million increase over the year-ago quarter and a $1.1 million decrease from Q3. Net interest income before provision declined by $1.3 million from the prior quarter to $70.0 million, as loan yields softened following Federal Reserve rate cuts, while interest expense fell at a faster pace. The bank’s net interest margin contracted to 3.74% from 3.92% in Q3. Noninterest income surged to $8.1 million, up from $3.7 million in Q3, led by a $3.6 million gain on sale of other real estate owned (OREO) properties and increased letter of credit fee and other income. Efficiency ratio widened to 31.2% from 28.7% in Q3, reflecting elevated OREO expenses partially offset by lower incentive compensation.
2. Robust Loan and Deposit Growth Supports Franchise Expansion
During the quarter, total loans rose by $182.3 million (3.1% linked quarter, 12.4% annualized), reaching $6.05 billion. Deposit balances climbed by $115.8 million (1.9% linked quarter, 7.4% annualized) to $6.35 billion. For the full year, loans grew by $413.6 million and deposits by $428.6 million, underpinning asset expansion of $677.7 million to $7.60 billion. Return on average assets was a healthy 1.82%, while return on average equity reached 17.59%, placing the bank among the industry’s profitability leaders. Tangible common equity tier 1 capital ratio stood at 11.26%, with a leverage ratio of 10.54%, reflecting disciplined balance sheet management and continued capital strength above regulatory minima.
3. Asset Quality Metrics Remain Well-Reserved with Stable Credit Coverage
Nonaccrual loans and loans 90+ days past due rose by $33.7 million to $51.3 million, driven by reclassification of a $19.5 million multifamily relationship. Criticized assets increased to $248.5 million from $151.0 million, largely reflecting a $123.1 million downgrade across nine loans, though weighted average LTV of 65.7% and DCR of 1.14x suggest limited expected losses. The provision for credit losses was $4.3 million, up $1.8 million from Q3, boosting the allowance coverage ratio to 1.30% of loans. Net charge-offs were zero for the quarter. Management highlighted sale of two large OREO properties resulting in net gains of $3.6 million and $1.8 million, helping reduce nonperforming assets and strengthen credit reserves heading into 2026.