Preferred Bank reported a net income of $32.9 million, or $2.73 per share, for the third quarter of 2026. The results were impacted by a $2.1 million adjustment in interest-income recovery, which lowered the reported net interest margin to 3.49%, down from an estimated 3.60% without the adjustment. Despite facing stiff competition from various financial institutions and Treasury securities, deposits increased by $77 million, or 1.2%.
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Nearly $1.7 billion in certificates of deposit are set to mature in the fourth quarter, with management anticipating rollover rates between 3.75% and 4%. While loan balances saw a slight decline, the loan pipeline showed improvement as the bank entered the fourth quarter. The resolution of classified and nonaccrual loans has been delayed due to ongoing court proceedings, though management is hopeful for property sales and loan dispositions in the fourth quarter.
Chairman and CEO Li Yu stated that the bank experienced challenges due to the interest-income recovery adjustment, significantly affecting the net interest margin. Yu expressed a cautious outlook on the interest-rate environment, suggesting that any increases in the federal funds rate could positively impact the bank’s margin due to its asset-sensitive position.
In response to competitive funding conditions, which are expected to persist into 2027, deposits experienced growth. Yu noted that some customers have shifted available funds into Treasury securities, taking advantage of favorable tax treatment in California. Chief Financial Officer Edward Czajka highlighted that approximately $1.7 billion in certificates of deposit are due to mature in the upcoming quarter, with a weighted-average yield of 3.81%.