Preferred Bank (PFBC) Q4 2025 Earnings Transcript

Core Insights - Preferred Bank reported a net income of $34.8 million for Q4 2025, translating to $2.79 per share, and a total annual income of $134 million or $10.41 per share, positioning it among the top tier of the banking industry [1][3] - The bank experienced a decline in interest margin due to federal rate cuts, impacting its floating rate loan portfolio, which constitutes 70% of its loans [1][4] - Despite challenges, loan demand is strengthening, with total loan growth of $182 million (over 12%) and deposit growth of $115 million (7.4%) for the quarter [4] Financial Performance - The bank's profitability metrics indicate a strong performance, with a full-year net income of $134 million [1] - Nonperforming assets saw a slight decline, while criticized assets increased by $97 million due to a large loan being classified [5] - The loan loss provision for the quarter was $4.3 million, reflecting a cautious approach to credit risk management [5] Market Conditions - The cost of deposits remains high, with a total cost of deposits at 3.17% for December, slightly down from previous months [7] - The bank anticipates a stable growth environment for 2026, with customers expressing improved outlooks [5] - The competitive landscape for deposits remains strong, with large money center banks actively promoting CDs [16] Loan and Deposit Growth - Loan growth for the year was reported at 7.3%, while deposit growth was at 7.2% [4] - The bank is budgeting for higher loan growth in 2026, focusing on commercial real estate and C&I loans [20] - Approximately $1.3 billion in CDs are maturing in Q1 at a weighted average rate of 3.96%, with new CDs expected to come in at around 3.70% to 3.80% [12] Credit Quality and Risk Management - The bank is closely monitoring classified loans, with a significant relationship under scrutiny due to litigation with other banks [24][33] - The bank's reserve for credit losses is deemed adequate, with a Q factor reserve around 42.5% [36] - Management is optimistic about resolving credit issues within the next two quarters [38]