Preferred Bank Q4 Net Income $34.8M; Loans Increase $182.3M, NIM Slides to 3.74%
Preferred Bank reported Q4 net income of $34.8 million ($2.79 per share), down $1.1 million sequentially but up $4.6 million year-over-year, driven by an $8.1 million occupancy charge in Q4 2024. Loans rose by $182.3 million (+3.1%) and deposits by $115.8 million (+1.9%), while net interest margin contracted to 3.74% due to Fed rate cuts.
1. Fourth Quarter Earnings and Profitability
Preferred Bank reported net income of $34.8 million for the quarter ended December 31, 2025, or $2.79 per diluted share, up $4.6 million year-over-year and down $1.1 million sequentially. The year-over-year increase was driven by the absence of an $8.1 million occupancy charge recorded in Q4 2024 related to ASC 842 lease accounting, while the quarter-over-quarter decline reflected a $1.8 million rise in the provision for credit losses and a $1.3 million drop in net interest income, primarily due to lower market interest rates. Noninterest income benefited from a $3.6 million gain on the sale of two OREO properties, helping total noninterest income reach $8.1 million.
2. Net Interest Income, Margin and Balance Sheet Growth
Net interest income before provisions was $70.0 million, down from $71.3 million in Q3 2025 but up $0.8 million versus Q4 2024. The net interest margin contracted to 3.74% from 3.92% the prior quarter and 4.06% a year ago, reflecting full-quarter impact of Federal Reserve rate cuts. Total loans grew by $182.3 million (3.1%) sequentially and by $413.6 million (7.3%) year-over-year to $6.05 billion. Deposits increased by $115.8 million (1.9%) linked quarter and by $428.6 million (7.2%) year-over-year to $6.35 billion, while total assets reached $7.60 billion.
3. Asset Quality and Credit Provisioning
Nonperforming loans and those 90+ days past due rose to $51.3 million from $17.6 million at September 30, driven by the placement of a $19.5 million multi-family loan into nonaccrual status. Criticized assets expanded by $97.5 million to $248.5 million, chiefly due to a $123.1 million downgrade of nine loans. The allowance for credit losses coverage ratio edged up to 1.30% of loans. The provision for credit losses was $4.3 million, compared with $2.5 million in Q3 2025 and $2.0 million in Q4 2024, reflecting cautious positioning against potential asset deterioration.
4. Capitalization, Efficiency and Outlook
The efficiency ratio rose to 31.2% from 28.7% in the prior quarter but improved from 38.8% a year ago, supported by lower personnel costs and one-time gains. Tangible capital, leverage and common equity tier 1 ratios stood at 10.38%, 10.54% and 11.26% respectively, down modestly from year-end 2024 levels. Chairman and CEO Li Yu highlighted full-year 2025 net income of $133.6 million ($10.41 per share) and expressed optimism for continued loan and deposit growth as customer sentiment improves, while noting the potential impact of evolving monetary policy on net interest margins.