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Preferred Bank (PFBC)
NASDAQ:PFBC
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Preferred Bank
(NASDAQ:PFBC)
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Rating:67Neutral
Price Target:
$100.00
â–²(14.23% Upside)
The score is primarily driven by solid profitability/returns but meaningfully offset by weakening recent fundamentals (sharp TTM revenue decline, higher leverage, and softer cash-flow momentum). Valuation is a key positive (low P/E and attractive dividend), while technicals are subdued and the latest earnings call reflects continued margin pressure and heightened credit-risk monitoring despite constructive 2026 growth commentary.
Positive Factors
High Profitability and Returns
Sustained high net margins and double‑digit ROE provide durable earnings power relative to peers, enabling the bank to absorb credit volatility, fund dividends and targeted investment, and support capital accumulation over multiple quarters despite cyclical pressures.
Consistent Loan and Deposit Growth
Healthy, recurring loan and deposit expansion reflects strong local client relationships and diversified small‑business/consumer funding, supporting long‑term net interest income growth and funding stability even as market conditions shift.
Strong Cash Conversion
Near‑100% cash conversion of accounting profits into free cash flow underpins reliable internal funding for operations, dividends and selective capital deployment, enhancing financial resilience versus peers that rely more on external financing.
Negative Factors
Material Revenue Contraction
A near‑halving of trailing revenue materially reduces scale economics and raises the bar for sustaining current expense and reserve structures; prolonged top‑line weakness would pressure margins, provisioning capacity, and organic capital generation.
Rising Leverage
A meaningful step‑up in leverage limits balance‑sheet flexibility, increases interest‑rate and refinancing sensitivity, and constrains capital allocation choices (buybacks, dividends, M&A) should asset‑quality or funding costs deteriorate.
Concentrated Credit and Classified Assets
A large downgraded relationship, higher criticized/classified assets and related litigation increase provisioning uncertainty and recovery risk; protracted workout timelines could meaningfully raise credit costs and compress returns over several quarters.
Preferred Bank (PFBC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.15B
Dividend Yield2.99%
Average Volume (3M)81.21K
Price to Earnings (P/E)8.2
Beta (1Y)0.79
Revenue Growth-3.05%
EPS Growth-0.51%
CountryUS
Employees323
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)2.79
Shares Outstanding13,392,737
10 Day Avg. Volume83,173
30 Day Avg. Volume81,213
Financial Highlights & Ratios
PEG Ratio-1.12
Price to Book (P/B)1.51
Price to Sales (P/S)2.22
P/FCF Ratio7.05
Enterprise Value/Market Cap0.58
Enterprise Value/Revenue1.33
Enterprise Value/Gross Profit2.41
Enterprise Value/Ebitda3.60
Forecast
1Y Price Target
$102.67Price Target Upside17.28% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Preferred Bank Business Overview & Revenue Model
Company DescriptionPreferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals in the United States. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; and commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and SBA loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, documentary collections, and bills purchase programs. Further, it provides various high-wealth banking services to wealthy individuals residing in the Pacific Rim area; and remote deposit capture, and online and mobile banking services. Additionally, the company offers various banking services to physicians, accountants, attorneys, business managers, and other professionals; and safe deposit boxes, account reconciliation, courier service, and cash management services to the manufacturing, service, and distribution companies. As of December 31, 2021, it had eleven full-service branch offices in Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana, and San Francisco; and one branch in Flushing, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.
How the Company Makes MoneyPreferred Bank generates revenue primarily through the interest earned on loans and investments. The bank offers various types of loans, including commercial real estate loans, construction loans, and personal loans, which typically have higher interest rates compared to traditional savings accounts. Additionally, PFBC earns fees from services such as treasury management, wire transfers, and foreign exchange transactions. The bank also benefits from a strong deposit base, which provides the necessary funding for its lending activities. Strategic partnerships with local businesses and community organizations further enhance its customer acquisition efforts, contributing to its overall earnings.
Preferred Bank Earnings Call Summary
Earnings Call Date:Jan 22, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 21, 2026
Earnings Call Sentiment Neutral
The call presents a mix of clear strengths—strong full‑year earnings, solid loan and deposit growth, successful one‑time OREO monetizations, and management optimism for 2026—alongside meaningful challenges: margin pressure from rate cuts combined with still‑high deposit costs, a material classified loan relationship that increased criticized assets and includes payment slowdowns and litigation exposure, and modestly higher provisioning/expense variability. Management expects to resolve classified loan issues within a couple of quarters, is budgeting for higher loan growth in 2026, and reports substantial reserve coverage, but the credit issue and margin dynamics temper the near‑term outlook.Q4-2025 Updates
Positive Updates
Strong Full-Year Profitability
Net income for 2025 was $134.0 million ($10.41 per share); Q4 net income was $34.8 million ($2.79 per share). Management states 2025 profitability is among the top tier of the banking industry.
Quarter and Annual Loan Growth
Total loan growth in the quarter was $182 million (over 12% for the quarter). For the full year, loan growth was 7.3%.
Quarter and Annual Deposit Growth
Deposit growth in the quarter was $115 million (7.4% for the quarter). For the full year, deposit growth was 7.2%.
OREO Sales and One-Time Gain
Sold two large OREO properties in Q4 resulting in a net gain reported in noninterest income of $1.8 million (with related GAAP reclassifications reported in noninterest expense).
Improving Loan Demand and 2026 Outlook
Management reports loan demand is getting stronger, is budgeting higher loan growth for 2026 than 2025, and customers indicate an improved outlook for 2026.
Reserve Coverage and Provisioning Actions
Quarterly provision for loan losses was $4.3 million. Management increased certain qualitative (Q) factors (approximately a five basis point adjustment) and reports Q-factor based reserve coverage around 42.5%, which management cites as providing comfort for adequacy of reserves.
Fee Income Baseline
Management indicated Q4 fee income (excluding the one-time OREO gain) would be a reasonable baseline for 2026, though possibly slightly below Q4 excluding the gain; LC fee income was particularly strong in 2025.
Improving Deposit Cost Trend
Cost of deposits showed improvement in December with a month-end cost of 3.17% and deposit costs trending down roughly 6–7 basis points per month; December net interest margin was 3.66% (reflecting full effect of the December rate cut).
Negative Updates
Margin Pressure from Fed Rate Cuts and High Deposit Costs
Net interest margin declined in Q4 versus Q3 due to federal rate cuts combined with a 70% floating rate loan portfolio which reduced loan interest income; deposit costs remain stubbornly high and competitive pressures persist.
Significant Classified/Criticized Asset Increase
Criticized assets increased by $97 million in the quarter, principally due to placing a large loan relationship (about $121–$123 million across several loans) into classified status.
Nonaccrual Multifamily Loan Downgrade
A well-secured multifamily loan of $19.4 million was downgraded to nonaccrual; while collateral appraisal showed value (~$49 million), the loan is nonaccrual which contributes to asset-quality pressure.
Borrower Payment Delinquencies and Litigation Exposure
The large downgraded relationship is reported as being behind in interest service (payments slowed) and is involved in litigation with other banks, complicating workout timelines and increasing classification risk.
Provision and Expense Volatility
Q4 provision was $4.3 million driven by loan growth and specific reserves; noninterest expense had 'noise' related to OREO and other items, and management expects expense growth of mid- to high-single digits for the year.
Large Q1 CD Rollover at Elevated Rates
Approximately $1.3 billion of CDs mature in Q1 at a weighted average rate of 3.96%; management expects re-pricing coming in around 3.70%–3.80%, and competitive market pressures from large banks remain a challenge for deposit retention and cost control.
Share Repurchases Reduced / Uncertain Capital Deployment
No material share repurchases in Q4 (only a nominal October repurchase); management indicated the environment is less conducive to buybacks versus last year and repurchases may be deprioritized if balance sheet funds are needed for loan/deposit growth.
Company Guidance
Management’s guidance emphasized continued margin pressure from Fed rate cuts (December margin 3.66%; December total deposit cost 3.17%, down ~6–7 bps/month) with a ~40% beta on interest‑bearing deposits and expected ongoing CD repricing of roughly 5–6 bps/month; about $1.3B of CDs roll in Q1 at a weighted average 3.96% and are repricing to ~3.70–3.80%. They see loan demand strengthening in 2026 (70% of loans floating), are budgeting higher loan growth than 2025 (2025: quarterly loan growth $182M or >12%; full‑year loan/deposit growth 7.3%/7.2%; Q4 deposit growth $115M or 7.4%), and noted a Q4 provision of $4.3M, slight decline in NPAs but a ~$97M increase in criticized/classified assets. Expense guidance is a Q1 run‑rate of about $21.5–22M with full‑year noninterest expense growth expected in the mid‑ to high‑single digits; Q4 OREO sales produced a $1.8M gain (roughly $0.20 EPS benefit), and share buybacks/M&A will be opportunistic depending on funding needs.Preferred Bank Financial Statement Overview
Summary
Strong underlying profitability and returns (TTM net margin ~25.8%, ROE ~17.4%) support the score, but it is held back by a sharp TTM revenue decline (-47.1%), weaker TTM net income vs. 2023, higher leverage (debt-to-equity ~0.49 vs. ~0.22 in 2024), and deteriorating recent free-cash-flow trend (TTM FCF down ~27% YoY).Income Statement
Profitability remains strong, with TTM (Trailing-Twelve-Months) net margin at ~25.8% and solid operating profitability (~36–37% EBIT/EBITDA margin). However, the growth profile has weakened: TTM (Trailing-Twelve-Months) revenue declined sharply (-47.1%) versus positive growth in prior years, and net income is down versus 2023 (TTM ~$129.0M vs. 2023 ~$150.0M). Overall, strong margins offset by a material recent slowdown/decline in the top line.74
Positive
Balance Sheet
Returns on equity are consistently healthy (TTM (Trailing-Twelve-Months) ~17.4%; 2023 ~21.6%), supported by a growing equity base over time. The key watch-out is leverage trending higher in the most recent period: debt-to-equity increased to ~0.49 in TTM (Trailing-Twelve-Months) from ~0.22 in 2024, reflecting a meaningful step-up in debt. Assets have also grown versus 2023–2024, but the recent leverage increase reduces balance-sheet flexibility.69
Positive
Cash Flow
Cash generation remains closely aligned with earnings, with free cash flow essentially matching net income in TTM (Trailing-Twelve-Months) (~1.00x), indicating strong cash conversion. That said, free cash flow has deteriorated recently (TTM (Trailing-Twelve-Months) free cash flow down ~27% year over year; operating cash flow also lower vs. 2024), signaling weaker momentum. Overall, good cash conversion, but recent cash flow pressure pulls the score down.62
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 500.51M | 520.43M | 481.76M | 301.43M | 218.78M | 220.32M |
| Gross Profit | 276.04M | 271.86M | 283.14M | 247.05M | 194.62M | 154.21M |
| EBITDA | 184.59M | 186.18M | 211.57M | 181.09M | 135.72M | 98.77M |
| Net Income | 129.03M | 130.66M | 150.04M | 128.84M | 95.24M | 69.47M |
Balance Sheet | ||||||
| Total Assets | 7.47B | 6.92B | 6.66B | 6.43B | 6.05B | 5.14B |
| Cash, Cash Equivalents and Short-Term Investments | 795.50M | 765.51M | 1.20B | 1.18B | 1.48B | 979.15M |
| Total Debt | 379.72M | 165.46M | 168.00M | 168.94M | 170.62M | 118.02M |
| Total Liabilities | 6.69B | 6.16B | 5.96B | 5.79B | 5.46B | 4.62B |
| Stockholders Equity | 775.64M | 763.15M | 695.11M | 630.43M | 586.72M | 525.45M |
Cash Flow | ||||||
| Free Cash Flow | 120.38M | 163.60M | 172.98M | 143.40M | 119.03M | 102.27M |
| Operating Cash Flow | 120.83M | 164.52M | 175.39M | 143.76M | 119.63M | 103.77M |
| Investing Cash Flow | -550.62M | -421.62M | -98.03M | -699.89M | -620.01M | -318.77M |
| Financing Cash Flow | 440.26M | 131.76M | 65.97M | 273.05M | 791.52M | 438.82M |
Preferred Bank Technical Analysis
Negative
87.54
Price Trends
94.34
Negative
92.16
Negative
89.14
Negative
Market Momentum
-2.98
Positive
41.24
Neutral
23.02
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PFBC, the sentiment is Negative. The current price of 87.54 is below the 20-day moving average (MA) of 92.11, below the 50-day MA of 94.34, and below the 200-day MA of 89.14, indicating a bearish trend. The MACD of -2.98 indicates Positive momentum. The RSI at 41.24 is Neutral, neither overbought nor oversold. The STOCH value of 23.02 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PFBC.
Preferred Bank Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $1.46B | 11.05 | 10.78% | 1.34% | 1.31% | 2.02% | |
80 Outperform | $1.26B | 11.18 | 13.05% | 3.70% | -13.17% | -16.37% | |
75 Outperform | $1.26B | 10.92 | 12.35% | 2.57% | 5.21% | 24.51% | |
72 Outperform | $1.34B | 16.33 | 5.71% | 2.68% | 15.55% | -28.10% | |
72 Outperform | $1.57B | 19.31 | 11.18% | 3.99% | 14.13% | -12.75% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
67 Neutral | $1.15B | 8.24 | 16.91% | 2.99% | -3.05% | -0.51% |
* Financial Sector Average
PFBC
Preferred Bank
87.26
-1.28
-1.45%
RBCAA
Republic Bancorp
73.27
8.52
13.16%
WABC
Westamerica Bancorporation
51.13
1.66
3.36%
CNOB
ConnectOne Bancorp
27.53
2.01
7.88%
BY
Byline Bancorp
32.76
3.78
13.06%
BFC
Bank First National
146.38
49.43
50.99%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.