Chairman’s Message from the 2013 Annual Report


April 9, 2015


Dear Shareholders:


I am pleased to say that 2014 was perhaps the most successful year in the history of Preferred Bank.

First and foremost, our stock price increased significantly over the year. Total shareholder return for 2014 was 39.6%, the best in the U.S. for any bank with Preferred Bank’s market capitalization or larger.

During the year, the Bank’s total assets grew to $1.77 billion at December 31, 2013 from a total of $1.55 billion as of December 31, 2012. This growth is the result of 17.5% growth in total loans and 12.7% growth in total deposits during 2013. While achieving this growth, we also made significant investments in administrative personnel and processes to support the Bank’s future growth.

Since 2011, we have dedicated ourselves to improving asset quality, growing loans and deposits, diversifying the loan portfolio, optimizing our deposit mix, increasing operating profit, controlling overhead, building up management talent for future growth and perhaps most importantly, positioning ourselves to take advantage of any upward movement in interest rates. As of the end of 2014, we have substantially accomplished all of these important goals.

Preferred Bank now has reached an all-time high in total assets of $2.05 billion. During the year, we grew loans by $275 million or 20.7% and we grew deposits by $247 million or 16.2% while improving the deposit mix at the same time. Fully diluted net income per share grew from $1.42 to $1.78 for the year, a 25.4% improvement.

We have also been able to effectively control overhead costs. Despite the asset and earnings growth, noninterest expense in 2014 increased only 5.3% from 2013 levels. Our efficiency ratio for the entire year was 40.8%.

While growing the Bank, we are always mindful of potential interest rate changes. Although elusive to predict, we believe that the FOMC will raise short term rates sometime this year and we are well-positioned to take advantage of this probable event. At December 31, 2014, our loan portfolio is highly rate sensitive; 89% of the portfolio is in floating rate product, and nearly all of that is tied to the Prime rate.

Preferred Bank has come a long way from the 2008 financial crisis and subsequent recession. The Board of Directors and management are now very confident of our future and appreciate the confidence you have placed in us..


Very truly yours,


Li Yu

Chairman of the Board

Chief Executive Officer