Preferred Bank’s Strategic Risk Overhaul Under New Chief Risk Officer

Preferred Bank, one of California’s largest independent commercial banks, has made a significant leadership move to bolster its risk management capabilities. On May 9, 2025, the bank announced the appointment of Nick Pi as its new Executive Vice President and Chief Risk Officer (CRO), effective immediately. The decision underscores the institution’s commitment to strengthening oversight of its $5.63 billion loan portfolio and navigating complex risks tied to trade, compliance, and market volatility.

The Appointment of Nick Pi: A Strategic Play for Risk Integration

Pi, who has served as the bank’s Chief Credit Officer since 2015, will now oversee not only credit risk but also the Bank Secrecy Act (BSA) and compliance departments. This expanded role reflects a strategic shift to unify credit and regulatory risk management under a single leader with deep institutional knowledge.

Li Yu, Preferred Bank’s Chairman and CEO, emphasized Pi’s proven leadership in Credit Administration, stating the appointment aims to “enhance our enterprise risk governance at a critical juncture.” The move comes amid heightened scrutiny of banks’ compliance practices and growing economic uncertainties, including trade-related headwinds highlighted in the bank’s first-quarter 2025 earnings report.

Why This Matters for Investors

For investors, the appointment signals a proactive stance toward risk mitigation—a key concern given Preferred Bank’s exposure to sectors like real estate and trade finance, which account for a significant portion of its loan portfolio. The bank’s focus on integrating credit and compliance functions could reduce operational silos, improve decision-making, and better align risk management with regulatory requirements.

Note: While Preferred Bank’s stock is not publicly traded, its loan portfolio growth (from $3.8B in 2020 to $5.6B in 2025) reflects its aggressive expansion. However, managing this growth requires robust risk controls to avoid overexposure to volatile sectors.

Navigating Challenges: Trade Tariffs and Market Volatility

The bank’s first-quarter report cited “trade-related uncertainties” as a key risk, particularly in its trade finance and commercial lending divisions. Pi’s dual role as CRO and Chief Credit Officer positions him to address these challenges by:
1. Strengthening BSA/AML Compliance: With heightened regulatory focus on anti-money laundering, consolidating compliance under Pi ensures alignment with credit risk strategies.
2. Balancing Growth and Prudence: Preferred Bank’s loan portfolio has grown by 48% since 2020, but rapid expansion demands rigorous credit underwriting.
3. Adapting to Trade Dynamics: As tariffs and geopolitical tensions affect trade flows, Pi’s cross-functional oversight could improve the bank’s ability to assess and mitigate risks in international lending.

A Steady Hand in a Volatile Landscape

Pi’s tenure as Chief Credit Officer has seen Preferred Bank maintain a low non-performing loan (NPL) ratio, averaging 0.8% over the past five years—a stark contrast to the industry average of 1.2% in 2024. This record suggests his risk management philosophy has been effective, and investors can expect this discipline to extend to broader compliance functions.

Conclusion: A Prudent Move with Long-Term Benefits

Preferred Bank’s appointment of Nick Pi as CRO is a strategic response to the evolving risk landscape. By unifying credit and compliance under a seasoned leader, the bank is positioning itself to better navigate trade-related challenges, regulatory demands, and market volatility.

Key data points reinforce this conclusion:
- Loan Portfolio Quality: An NPL ratio of 0.8% (vs. 1.2% industry average) demonstrates Pi’s existing success in credit risk management.
- Geographic Diversification: A presence in Texas and major California markets reduces regional risk exposure.
- Regulatory Focus: BSA/AML compliance consolidation aligns with FDIC expectations, potentially minimizing penalties and reputational damage.

While the bank’s loan portfolio growth (48% since 2020) underscores its ambition, the Pi-led risk overhaul should help ensure this expansion remains sustainable. For investors, this move signals a prioritization of long-term stability over short-term gains—a prudent strategy in an uncertain economic environment.

In sum, Nick Pi’s appointment is a critical step toward fortifying Preferred Bank’s risk governance, which could prove decisive in maintaining its leadership position in California’s competitive banking sector.