Preferred Bank (PFBC) Stock Forecast & Price Target

Preferred Bank has demonstrated solid financial performance with a notable increase in net interest income (NII) due to a 7 basis point expansion in net interest margin (NIM) to 3.92%, coupled with a 10% increase in end-of-period (EOP) deposits. The bank's credit quality indicators also reflect improvement, as non-performing loans (NPL) coverage strengthened significantly to 424%, suggesting a robust risk management strategy. Additionally, the upward revision of earnings per share (EPS) estimates for 2025 and 2026 highlights confidence in the bank's balance sheet growth and operational efficiency moving forward.

Preferred Bank is facing several fundamental challenges that contribute to a negative outlook on its stock. The bank's loan loss provision of $2.5 million fell short of expectations, paired with a decrease in the allowance for credit losses which declined to 1.27%, indicating potential deterioration in asset quality. Furthermore, sluggish loan demand continues to pressure the balance sheet and profitability, while increased competition is expected to negatively impact net interest margins, particularly as approximately 70% of the bank's loan portfolio is floating rate and subject to future rate cuts.