Does Preferred Bank's (NASDAQ:PFBC) CEO Pay Matter?

Li Yu became the CEO of Preferred Bank (NASDAQ:PFBC) in 1993. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Preferred Bank

How Does Li Yu's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Preferred Bank has a market cap of US$863m, and reported total annual CEO compensation of US$4.5m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$946k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.6m.

Thus we can conclude that Li Yu receives more in total compensation than the median of a group of companies in the same market, and of similar size to Preferred Bank. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see a visual representation of the CEO compensation at Preferred Bank, below.

Is Preferred Bank Growing?

Over the last three years Preferred Bank has grown its earnings per share (EPS) by an average of 26% per year (using a line of best fit). In the last year, its revenue is up 12%.

This demonstrates that the company has been improving recently. A good result. It's a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. It could be important to check this free visual depiction of what analysts expect for the future.

Has Preferred Bank Been A Good Investment?

With a total shareholder return of 24% over three years, Preferred Bank shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

We compared the total CEO remuneration paid by Preferred Bank, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. Looking at the same time period, we think that the shareholder returns are respectable. You might wish to research management further, but on this analysis, considering the EPS growth, we wouldn't call the CEO pay problematic. Shareholders may want to check for free if Preferred Bank insiders are buying or selling shares.

Important note: Preferred Bank may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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