Preferred Bank (PFBC) Stock Forecast & Price Target

Preferred Bank has demonstrated a resilient financial performance, with net interest income (NII) rising by 0.5% quarter-over-quarter and a strong net interest margin (NIM) of 4.06%, reflecting effective management of interest income relative to interest expenses. The bank's efficiency ratio has significantly improved to 27.6%, showcasing its operational effectiveness and ability to manage costs while generating revenue. Additionally, Preferred Bank is projected to achieve total loan growth of 4.9% in 2025 and 5.7% in 2026, supported by a healthy increase in deposit balances, signaling robust demand for its lending products and a stable growth trajectory.

Preferred Bank's stock outlook is negatively affected by a notable decline in its Allowance for Loan Losses (LLP), which fell to $2.0 million, contributing to a decrease in the Allowance for Credit Losses (ACL) to 1.27% and a rise in Non-Performing Assets (NCOs) to 0.47%. Additionally, the bank experienced a significant drop in Core Non-Interest Expense (NIE), declining 8.8% quarter-over-quarter to $20.1 million, and while they anticipate a seasonal uptick to $23 million in the following quarter, there's an expectation of further decline thereafter. Furthermore, despite stable Net Interest Margin (NIM) performance in the fourth quarter, there are concerns about potential pressure on NIM amid uncertain interest rate environments, which could further exacerbate the bank's valuation challenges.