Preferred Bank’s second quarter results drew a positive market response, as management pointed to modest loan growth and improved asset quality as key drivers. CEO Li Yu highlighted a 7% annualized loan growth rate, stable deposit levels, and a slight increase in net interest margin. The executive team attributed improved asset quality to a reduction in nonaccrual and criticized loans, noting that loan loss reserves remain sufficient. Management was cautious about deposit gathering, emphasizing a focus on controlling funding costs, while a sizable share buyback also played a role in the quarter’s financial dynamics.

Is now the time to buy PFBC? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions Preferred Bank’s Q2 Earnings Call

• Matthew Timothy Clark (Piper Sandler) asked about June’s net interest margin and deposit costs; CFO Edward Czajka replied that both remained steady throughout the quarter with “not much change on either side.”
• Gary Peter Tenner (D.A. Davidson) inquired about the drivers of loan growth and the pipeline into the next quarter; executives explained that the quarter’s growth reflected both increased credit line usage and funding of existing construction commitments, though future demand is uncertain.
• David Pipkin Feaster (Raymond James) asked for an update on the remaining OREO (Other Real Estate Owned) property; CEO Li Yu said the bank intends to sell it when a reasonable offer emerges but will avoid a “fire sale.”
• Robert Andrew Terrell (Stephens) questioned the competitive landscape for new loans; management indicated that while competition remains, Preferred Bank’s relationship-driven approach helps retain and grow business despite competitors offering low fixed rates.
• David Pipkin Feaster (Raymond James) also sought updates on new branch expansion, with CEO Li Yu noting strong loan generation at the Manhattan branch and plans to open a Silicon Valley branch in the second half of the year.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace and sustainability of loan growth in light of ongoing economic uncertainty, (2) the bank’s success in maintaining deposit cost discipline while supporting balance sheet expansion, and (3) the performance and customer acquisition at new and recently opened branches such as Manhattan and Silicon Valley. The evolution of tariff policy and supply chain disruptions will remain important variables.

Preferred Bank currently trades at $93.91, up from $92.49 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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