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Preferred Bank (PFBC)
NASDAQ:PFBC
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Preferred Bank (PFBC) AI Stock Analysis

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PFBC

Preferred Bank

(NASDAQ:PFBC)

Rating:79Outperform
Price Target:
$111.00
â–²(17.92%Upside)
Preferred Bank presents a solid investment opportunity, driven primarily by strong financial performance and reasonable valuation. Positive earnings call insights, including net income and loan growth, bolster its outlook. However, caution is advised due to technical indicators suggesting overbought conditions and economic uncertainties that may affect future performance.

Preferred Bank (PFBC) vs. SPDR S&P 500 ETF (SPY)

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 interest income from its lending activities. The bank extends various types of loans, including commercial real estate loans, commercial and industrial loans, and consumer loans, which contribute significantly to its interest income. Additionally, the bank earns non-interest income from service charges, fees related to treasury management, and other financial services. Preferred Bank also benefits from investment securities, which provide a steady flow of income. Overall, the bank's revenue model relies heavily on managing the spread between interest earned on loans and investments and the interest paid on deposits and borrowed funds.

Preferred Bank Earnings Call Summary

Earnings Call Date:Jul 21, 2025
(Q2-2025)
|
% Change Since: 1.64%|
Next Earnings Date:Oct 15, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted several areas of improvement, including net income growth, loan growth, and asset quality, alongside strategic stock buybacks and branch expansions. However, challenges remain with flat deposit growth, unresolved OREO properties, and ongoing economic uncertainty affecting client confidence.
Q2-2025 Updates
Positive Updates
Improved Net Income
Net income for the second quarter was $32.8 million or $2.52 a share, showing reasonable improvement from the previous quarter.
Loan Growth
Loan growth was approximately 7% on an annualized basis for the quarter, with early indications of increased loan demand in July.
Net Interest Margin Increase
Net interest margin increased to 3.85% from 3.75% in the previous quarter.
Asset Quality Improvement
Nonaccrual loans, criticized loans, and past due loans decreased from the previous quarter, with no additional loss content identified.
Large Stock Buyback
The bank conducted a relatively large stock buyback of $56 million.
New Branch Expansion
The Manhattan branch is performing well, and a new branch in Silicon Valley is planned for the second half of the year.
Negative Updates
Flat Deposit Growth
Deposits remained flat, partly due to efforts to control the cost of deposits.
OREO Write-downs
Higher expenses this quarter were partly due to OREO costs, with no expectation of further write-downs in future quarters.
Unresolved OREO Property
An OREO property remains unresolved due to falling through contracts and continued valuation decreases.
Economic and Market Uncertainty
There remains significant uncertainty in the economy, related to tariffs and inflation, impacting client confidence and planning.
Company Guidance
During the Preferred Bank Second Quarter 2025 Earnings Conference Call, Li Yu, the Chairman and CEO, reported a net income of $32.8 million, or $2.52 per share, marking an improvement from the previous quarter. The bank experienced a 7% annualized loan growth, while deposits remained flat, partly due to efforts in controlling deposit costs. The net interest margin increased to 3.85% from 3.75% in the prior quarter. The bank also repurchased $56 million worth of stock at approximately $80-$81 per share, which affected net interest income and margin. Asset quality improved with reductions in nonaccrual, criticized, and past due loans, indicating a positive trend into the year's second half. The bank's management expressed cautious optimism about loan demand and economic conditions, acknowledging uncertainties due to tariffs, industry dynamics, and inflation.

Preferred Bank Financial Statement Overview

Summary
Preferred Bank exhibits strong financial health with robust profitability, low leverage, and efficient cash flow management. The company shows steady revenue growth and high margins, although there is a need to enhance cost management. The balance sheet reflects financial stability with increasing equity and low debt levels. While the cash flow statement indicates effective cash generation and management, attention to ongoing capital expenditures is necessary.
Income Statement
85
Very Positive
Preferred Bank demonstrates strong profitability with a gross profit margin of 53.11% and a net profit margin of 24.98% in the TTM. The revenue growth rate is moderate at 5.73% from 2023 to 2024, indicating steady expansion. EBIT and EBITDA margins are robust at 35.24% and 35.65% respectively, showcasing efficient operational management. However, a slight decline in gross profit margin over the years suggests pressure on cost-effectiveness.
Balance Sheet
78
Positive
The balance sheet is healthy with a low debt-to-equity ratio of 0.22, reflecting minimal leverage risk. Return on equity is impressive at 16.34%, indicating strong shareholder returns. The equity ratio stands at 10.97%, which is reasonable, although there is room for improvement in equity financing. The consistent increase in stockholders' equity over time is a positive indicator of financial stability.
Cash Flow
82
Very Positive
The cash flow statement is favorable, with a free cash flow growth rate of 1.21% from 2023 to 2024, signaling stable cash generation. The operating cash flow to net income ratio is healthy at 1.31, indicating efficient cash conversion. Additionally, a free cash flow to net income ratio of 1.30 shows strong cash flow management. However, there is a need to monitor investing cash flows which are consistently negative, reflecting ongoing capital investments.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue520.43M481.76M301.43M218.78M220.32M
Gross Profit271.86M283.14M247.05M193.62M154.21M
EBITDA186.18M211.57M181.09M135.72M98.77M
Net Income130.66M150.04M128.84M95.24M69.47M
Balance Sheet
Total Assets6.92B6.67B6.43B6.05B5.14B
Cash, Cash Equivalents and Short-Term Investments765.51M1.20B1.18B1.48B979.15M
Total Debt165.46M168.00M168.94M170.62M118.02M
Total Liabilities6.16B5.97B5.79B5.46B4.62B
Stockholders Equity763.15M695.11M630.43M586.72M525.45M
Cash Flow
Free Cash Flow163.60M172.98M143.40M119.03M102.27M
Operating Cash Flow164.52M175.39M143.76M119.63M103.77M
Investing Cash Flow-421.62M-98.03M-699.89M-620.01M-318.77M
Financing Cash Flow131.76M65.97M273.05M791.52M438.82M

Preferred Bank Technical Analysis

Technical Analysis Sentiment
Positive
Last Price94.13
Price Trends
50DMA
86.42
Positive
100DMA
83.66
Positive
200DMA
85.04
Positive
Market Momentum
MACD
2.86
Negative
RSI
61.51
Neutral
STOCH
64.72
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PFBC, the sentiment is Positive. The current price of 94.13 is above the 20-day moving average (MA) of 91.52, above the 50-day MA of 86.42, and above the 200-day MA of 85.04, indicating a bullish trend. The MACD of 2.86 indicates Negative momentum. The RSI at 61.51 is Neutral, neither overbought nor oversold. The STOCH value of 64.72 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PFBC.

Preferred Bank Peers Comparison

Overall Rating
UnderperformOutperform
Sector (68)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
81
Outperform
$1.26B19.1311.24%4.10%17.31%-12.46%
79
Outperform
$1.26B10.2317.20%3.13%-2.96%-7.14%
79
Outperform
$1.13B10.2911.08%1.41%7.63%-1.13%
76
Outperform
$1.07B10.289.25%5.54%2.32%-16.87%
76
Outperform
$1.26B11.7712.34%2.36%9.00%27.47%
74
Outperform
$1.17B15.446.08%1.59%-4.22%-14.67%
68
Neutral
$17.10B11.449.70%3.58%11.11%-4.78%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
PFBC
Preferred Bank
94.13
6.08
6.91%
PEBO
Peoples Bancorp
29.05
-3.16
-9.81%
RBCAA
Republic Bancorp
72.64
6.65
10.08%
BY
Byline Bancorp
27.04
-1.67
-5.82%
OBK
Origin Bancorp
37.47
2.99
8.67%
BFC
Bank First National
128.12
36.93
40.50%
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.Date of analysis: Jul 23, 2025