Preferred Bank (PFBC) AI Stock Analysis

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Preferred Bank

(NASDAQ:PFBC)

Rating:79Outperform

Price Target:

$111.00

▲(15.91% 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)

Market Cap

$1.26B

Dividend Yield3.13%

Average Volume (3M)80.85K

Price to Earnings (P/E)9.9

Beta (1Y)0.85

Revenue Growth-2.96%

EPS Growth-6.62%

CountryUS

Employees323

SectorFinancial

Sector Strength75

IndustryBanks - Regional

Share Statistics

EPS (TTM)2.52

Shares Outstanding13,392,737

10 Day Avg. Volume57,933

30 Day Avg. Volume80,852

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)0.00

Price to Sales (P/S)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap0.56

Enterprise Value/Revenue1.38

Enterprise Value/Gross Profit2.59

Enterprise Value/Ebitda3.86

Forecast

1Y Price Target

$110.00

Price Target Upside14.87% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Preferred Bank Business Overview & Revenue Model

Company DescriptionPreferred Bank (PFBC) is a community bank based in California that focuses on serving the banking needs of small to medium-sized businesses and individuals. With a strong emphasis on personalized customer service, PFBC offers a range of financial products, including commercial loans, real estate financing, and deposit services. The bank primarily targets the Asian-American community and leverages its understanding of the unique needs of this demographic to provide tailored banking solutions.

How the Company Makes MoneyPreferred Bank generates revenue primarily through interest income from loans, which is the largest component of its earnings. The bank offers various types of loans, including commercial real estate loans, construction loans, and lines of credit, each carrying interest that contributes to its revenue stream. Additionally, PFBC earns fee income from services such as account maintenance, transaction fees, and service charges. The bank also benefits from its deposit accounts, where it attracts deposits from customers, which are then utilized to fund loans. Strategic partnerships with local businesses and community organizations further enhance its customer base and drive additional deposits and loan opportunities, contributing to its overall profitability.

Preferred Bank Earnings Call Summary

Earnings Call Date:Jul 21, 2025

(Q2-2025)

% Change Since: |

Next Earnings Date:Oct 15, 2025

Earnings Call Sentiment Positive

The earnings call highlighted several positive outcomes such as increased net income, loan growth, and improved asset quality. However, challenges persist with flat deposit growth, unresolved OREO property issues, and broader economic uncertainties. Despite these challenges, the overall sentiment leans towards being cautiously optimistic.

Q2-2025 Updates

Positive Updates

Net Income Increase

Preferred Bank's second quarter net income was $32.8 million, or $2.52 per share, showing a reasonable improvement from the previous quarter.

Loan Growth

Loan growth of roughly 7% on an annualized basis was achieved in the second quarter.

Asset Quality Improvement

There was a decrease in nonaccrual loans, criticized loans, and past due loans compared to the previous quarter, indicating improved asset quality.

Net Interest Margin Improvement

Net interest margin increased from 3.75% in the previous quarter to 3.85%.

Stock Buyback

The bank executed a substantial stock buyback worth $56 million, at an average price of $80-$81 per share.

Manhattan Branch Success

The newly opened Manhattan branch has shown promising loan generation performance.

Negative Updates

Flat Deposit Growth

Deposits remained flat, attributed to the bank's efforts to control deposit costs.

OREO Costs

Higher expenses this quarter were partly due to OREO costs, with expectations that such write-downs won't repeat in future quarters.

Unresolved OREO Property

A remaining OREO property continues to face valuation and sale challenges, with no updated timeline for resolution.

Economic Uncertainty

Ongoing economic uncertainties, including tariffs and inflation, continue to impact the bank's operating environment.

Company Guidance

During the Preferred Bank Second Quarter 2025 Earnings Conference Call, management reported a net income of $32.8 million, translating to $2.52 per share, reflecting an improvement from the previous quarter. The bank experienced a 7% annualized loan growth, although deposits remained flat. The net interest margin improved to 3.85% from 3.75% in the prior quarter. A significant stock buyback of $56 million was executed at around $80 per share, with an additional $125 million authorization approved but not yet utilized due to current share pricing. The bank's asset quality showed improvement, with declines in nonaccrual, criticized, and past-due loans. The cost of deposits in June was 3.41%, with $1.4 billion in CDs set to roll off in Q3 at a rate of 4.21%. Operating expenses were slightly elevated this quarter due to OREO costs, with expectations to stabilize between $21.8 million and $22.6 million in subsequent quarters. The bank also highlighted the opening of a new branch in Manhattan, with plans to open another in Silicon Valley later in the year. Despite the favorable financial metrics, management expressed caution due to ongoing economic uncertainties such as tariffs 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

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

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

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.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	520.43M	481.76M	301.43M	218.78M	220.32M
Gross Profit	271.86M	283.14M	247.05M	193.62M	154.21M
EBITDA	186.18M	211.57M	181.09M	135.72M	98.77M
Net Income	130.66M	150.04M	128.84M	95.24M	69.47M
Balance Sheet
Total Assets	6.92B	6.67B	6.43B	6.05B	5.14B
Cash, Cash Equivalents and Short-Term Investments	765.51M	1.20B	1.18B	1.48B	979.15M
Total Debt	165.46M	168.00M	168.94M	170.62M	118.02M
Total Liabilities	6.16B	5.97B	5.79B	5.46B	4.62B
Stockholders Equity	763.15M	695.11M	630.43M	586.72M	525.45M
Cash Flow
Free Cash Flow	163.60M	172.98M	143.40M	119.03M	102.27M
Operating Cash Flow	164.52M	175.39M	143.76M	119.63M	103.77M
Investing Cash Flow	-421.62M	-98.03M	-699.89M	-620.01M	-318.77M
Financing Cash Flow	131.76M	65.97M	273.05M	791.52M	438.82M

Preferred Bank Technical Analysis

Technical Analysis Sentiment

Positive

Last Price95.76

Price Trends

50DMA

91.78

Positive

100DMA

86.81

Positive

200DMA

86.40

Positive

Market Momentum

MACD

0.90

Negative

RSI

56.57

Neutral

STOCH

66.77

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 95.76 is above the 20-day moving average (MA) of 92.77, above the 50-day MA of 91.78, and above the 200-day MA of 86.40, indicating a bullish trend. The MACD of 0.90 indicates Negative momentum. The RSI at 56.57 is Neutral, neither overbought nor oversold. The STOCH value of 66.77 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
BFC	81 Outperform	$1.27B	18.62	11.22%	4.10%	17.15%	-12.46%
PFBC	79 Outperform	$1.26B	9.86	17.20%	3.13%	-2.96%	-6.62%
RBCAA	74 Outperform	$1.33B	12.08	12.34%	2.24%	8.97%	27.79%
OBK	74 Outperform	$1.20B	17.25	6.08%	1.55%	-4.48%	-14.67%
PEBO	71 Outperform	$1.10B	10.53	9.25%	5.28%	2.33%	-16.87%
Sector *	68 Neutral	$18.05B	11.73	10.24%	3.73%	9.66%	1.70%
BY	66 Neutral	$1.32B	10.78	10.69%	1.35%	2.23%	-1.13%

* Financial Sector Average

Performance Comparison

PFBC

Preferred Bank

95.76

20.05

26.48%

PEBO

Peoples Bancorp

31.17

2.58

9.02%

RBCAA

Republic Bancorp

77.77

18.44

31.08%

Byline Bancorp

29.18

3.38

13.10%

OBK

Origin Bancorp

39.09

7.86

25.17%

BFC

Bank First National

127.97

44.75

53.77%

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