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Preferred Bank (PFBC)
NASDAQ:PFBC
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Preferred Bank
(NASDAQ:PFBC)
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Rating:72Outperform
Price Target:
$100.00
▲(14.56% Upside)
Action:UpgradedDate:03/06/26
The score is driven primarily by strong underlying financial performance and an attractive valuation (low P/E with a solid dividend). These positives are tempered by weaker technical momentum and earnings-call risks tied to net interest margin pressure and elevated credit/classified-asset concerns.
Positive Factors
Profitability & Cash Generation
Sustained high margins and near‑par free cash flow conversion indicate durable earnings quality. Strong FCF growth supports internal funding for loan growth, reserves, and shareholder returns, providing a structural buffer through economic cycles and limiting reliance on external financing.
Consistent Loan & Deposit Growth
Repeatable quarter and annual loan/deposit expansions show durable franchise traction with businesses and consumers. Steady funding growth supports scale in interest income and liquidity, reducing reliance on wholesale funding and enhancing long‑term net interest income potential.
Improving Loan Demand & Reserve Coverage
Management forecasts rising loan demand and budgets higher loan growth, which aligns with a predominantly floating loan book. Elevated reserve coverage provides a structural cushion for credit volatility, supporting prudent credit economics as lending expands over the medium term.
Negative Factors
Margin Pressure & Deposit Costs
Persistent deposit pricing and Fed rate cut impacts create durable NIM headwinds. Large CD rollovers and a high deposit beta mean funding repricing will erode spread income over multiple quarters, pressuring core profitability unless loan yields or funding mix materially improve.
Asset Quality & Concentration Risk
A material classified relationship and recent nonaccrual increase signal concentrated credit risk. Protracted workouts, litigation, or further downgrades could require higher provisions, reducing earnings and capital flexibility and creating multi‑quarter uncertainty around asset quality.
Rising Leverage
A meaningful jump in leverage diminishes financial flexibility and increases sensitivity to funding stress. Higher debt levels constrain capital deployment decisions, may limit buybacks or opportunistic M&A, and raise the importance of maintaining strong earnings and reserves to preserve capital ratios.
Preferred Bank (PFBC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.19B
Dividend Yield2.99%
Average Volume (3M)81.21K
Price to Earnings (P/E)8.9
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 Ratio1.08
Price to Book (P/B)1.51
Price to Sales (P/S)2.38
P/FCF Ratio7.13
Enterprise Value/Market Cap0.55
Enterprise Value/Revenue1.31
Enterprise Value/Gross Profit2.37
Enterprise Value/Ebitda3.45
Forecast
1Y Price Target
$102.00Price Target Upside16.85% Upside
Rating ConsensusHold
Number of Analyst Covering4
EPS Forecast (FY)10.37
Revenue Forecast (FY)$294.29M
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 profitability and cash generation: TTM net margin (~26%) and EBIT margin (~38%) are healthy, with strong free-cash-flow conversion (~0.99x net income) and strong FCF growth (~36%). Offsetting this is a meaningful rise in leverage (debt-to-equity ~0.53 vs ~0.22 in 2024) and profitability below 2022–2023 peak levels.Income Statement
PFBC shows strong profitability with healthy margins in TTM (Trailing-Twelve-Months) (net margin ~26% and EBIT margin ~38%). Revenue growth in TTM accelerated sharply (~40%), although revenue is slightly lower than 2024, and profitability is below the 2022–2023 peak (net income down from 2023). Overall, earnings power remains solid, but results look less “peak-cycle” than a couple of years ago.78
Positive
Balance Sheet
The balance sheet is generally sound with strong returns on equity (~17% in TTM (Trailing-Twelve-Months)). However, leverage increased meaningfully: debt-to-equity rose to ~0.53 in TTM (Trailing-Twelve-Months) versus ~0.22 in 2024, reflecting a sizable jump in total debt. Assets and equity have grown steadily, but the higher leverage is the key watch item.71
Positive
Cash Flow
Cash generation is a strength: free cash flow is essentially matching net income in TTM (Trailing-Twelve-Months) (~0.99x), supporting earnings quality. Free cash flow growth is very strong in TTM (Trailing-Twelve-Months) (up ~36%), and operating cash flow is stable year-over-year. A notable weakness is that operating cash flow is small relative to the asset base (coverage ratio ~0.028), which is common in banking but still implies limited cash-flow buffer versus balance-sheet size.82
Very Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 499.04M | 520.43M | 481.76M | 301.43M | 218.78M |
| Gross Profit | 274.30M | 271.86M | 283.14M | 247.05M | 194.62M |
| EBITDA | 189.55M | 186.18M | 211.57M | 181.09M | 135.72M |
| Net Income | 133.63M | 130.66M | 150.04M | 128.84M | 95.24M |
Balance Sheet | |||||
| Total Assets | 7.60B | 6.92B | 6.66B | 6.43B | 6.05B |
| Cash, Cash Equivalents and Short-Term Investments | 827.10M | 765.51M | 1.20B | 1.18B | 1.48B |
| Total Debt | 383.81M | 165.46M | 168.00M | 168.94M | 170.62M |
| Total Liabilities | 6.81B | 6.16B | 5.96B | 5.79B | 5.46B |
| Stockholders Equity | 789.48M | 763.15M | 695.11M | 630.43M | 586.72M |
Cash Flow | |||||
| Free Cash Flow | 166.79M | 163.60M | 172.98M | 143.40M | 119.03M |
| Operating Cash Flow | 168.14M | 164.52M | 175.39M | 143.76M | 119.63M |
| Investing Cash Flow | -623.80M | -421.62M | -98.03M | -699.89M | -620.01M |
| Financing Cash Flow | 497.24M | 131.76M | 65.97M | 273.05M | 791.52M |
Preferred Bank Technical Analysis
Negative
87.29
Price Trends
90.60
Negative
92.23
Negative
90.51
Negative
Market Momentum
-0.59
Positive
40.10
Neutral
57.30
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 87.29 is below the 20-day moving average (MA) of 89.54, below the 50-day MA of 90.60, and below the 200-day MA of 90.51, indicating a bearish trend. The MACD of -0.59 indicates Positive momentum. The RSI at 40.10 is Neutral, neither overbought nor oversold. The STOCH value of 57.30 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 |
|---|---|---|---|---|---|---|---|
72 Outperform | $1.19B | 8.90 | 16.91% | 2.99% | -3.05% | -0.51% | |
71 Outperform | $1.23B | 10.23 | 12.53% | 3.70% | -13.17% | -16.37% | |
69 Neutral | $1.19B | 10.37 | 12.27% | 2.57% | 5.21% | 24.51% | |
69 Neutral | $1.39B | 9.46 | 10.78% | 1.34% | 1.31% | 2.02% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
65 Neutral | $1.50B | 16.76 | 11.18% | 3.99% | 14.13% | -12.75% | |
64 Neutral | $1.32B | 8.36 | 5.49% | 2.68% | 15.55% | -28.10% |
* Financial Sector Average
PFBC
Preferred Bank
88.82
7.74
9.55%
RBCAA
Republic Bancorp
68.35
5.08
8.03%
WABC
Westamerica Bancorporation
50.38
0.90
1.83%
CNOB
ConnectOne Bancorp
26.21
3.29
14.35%
BY
Byline Bancorp
30.39
4.09
15.56%
BFC
Bank First National
134.23
35.61
36.11%
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.