NasdaqGS:PFBC

Stock Analysis Report

Executive Summary

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals in the United States.

Rewards

Trading at 47.7% below its fair value

Earnings are forecast to grow 3.01% per year

Earnings grew by 29.6% over the past year

Risk Analysis

Unstable dividend track record



Snowflake Analysis

Flawless balance sheet with solid track record.


Similar Companies

Share Price & News

How has Preferred Bank's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: PFBC has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

3.4%

PFBC

-0.3%

US Banks

1.7%

US Market


1 Year Return

33.5%

PFBC

15.3%

US Banks

23.2%

US Market

Return vs Industry: PFBC exceeded the US Banks industry which returned 21.7% over the past year.

Return vs Market: PFBC exceeded the US Market which returned 24.7% over the past year.


Shareholder returns

PFBCIndustryMarket
7 Day3.4%-0.3%1.7%
30 Day2.8%-2.0%4.2%
90 Day15.4%9.1%11.9%
1 Year36.6%33.5%18.6%15.3%25.8%23.2%
3 Year19.1%12.6%34.3%24.8%52.8%42.9%
5 Year142.1%121.3%85.7%64.8%75.2%55.8%

Price Volatility Vs. Market

How volatile is Preferred Bank's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Preferred Bank undervalued compared to its fair value and its price relative to the market?

45.7%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: PFBC ($59.38) is trading below our estimate of fair value ($113.62)

Significantly Below Fair Value: PFBC is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: PFBC is good value based on its PE Ratio (11.7x) compared to the Banks industry average (12.8x).

PE vs Market: PFBC is good value based on its PE Ratio (11.7x) compared to the US market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: PFBC is poor value based on its PEG Ratio (3.9x)


Price to Book Ratio

PB vs Industry: PFBC is overvalued based on its PB Ratio (1.9x) compared to the US Banks industry average (1.2x).


Next Steps

Future Growth

How is Preferred Bank forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

3.0%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: PFBC's forecast earnings growth (3% per year) is above the savings rate (1.7%).

Earnings vs Market: PFBC's earnings (3% per year) are forecast to grow slower than the US market (14.3% per year).

High Growth Earnings: PFBC's earnings are forecast to grow, but not significantly.

Revenue vs Market: PFBC's revenue (5.7% per year) is forecast to grow slower than the US market (7.5% per year).

High Growth Revenue: PFBC's revenue (5.7% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: PFBC's Return on Equity is forecast to be low in 3 years time (15.2%).


Next Steps

Past Performance

How has Preferred Bank performed over the past 5 years?

25.2%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: PFBC has high quality earnings.

Growing Profit Margin: PFBC's current net profit margins (47.5%) are higher than last year (41.2%).


Past Earnings Growth Analysis

Earnings Trend: PFBC's earnings have grown significantly by 25.2% per year over the past 5 years.

Accelerating Growth: PFBC's earnings growth over the past year (29.6%) exceeds its 5-year average (25.2% per year).

Earnings vs Industry: PFBC earnings growth over the past year (29.6%) exceeded the Banks industry 27.1%.


Return on Equity

High ROE: PFBC's Return on Equity (16.9%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Preferred Bank's financial position? (This company is analysed differently as a bank or financial institution)


Financial Position Analysis


Debt to Equity History and Analysis


Balance Sheet

Inventory Level: PFBC has a low level of unsold assets or inventory.

Debt Coverage by Assets: PFBC's debt is covered by short term assets (assets are 5x debt).


Financial Institutions Analysis

Asset Level: PFBC's level of assets compared to its equity is low.

Allowance for Bad Loans: PFBC has a sufficient allowance for bad loans.

Low Risk Liabilities: PFBC's liabilities are made up of primarily low risk sources of funding.

Loan Level: PFBC has an acceptable proportion of non-loan assets held.

Low Risk Deposits: PFBC's loans are broadly funded by customer deposits.

Level of Bad Loans: PFBC has an appropriate level of bad loans (0.1%)


Next Steps

Dividend

What is Preferred Bank's current dividend yield, its reliability and sustainability?

1.97%

Current Dividend Yield


Dividend Yield vs Market

company2.0%marketbottom25%1.4%markettop25%3.6%industryaverage2.8%forecastin3Years2.1%

Current dividend yield vs market & industry

Notable Dividend: PFBC's dividend (2.02%) is higher than the bottom 25% of dividend payers in the US market (1.4%).

High Dividend: PFBC's dividend (2.02%) is low compared to the top 25% of dividend payers in the US market (3.66%).


Stability and Growth of Payments

Stable Dividend: PFBC's dividend payments have been volatile in the past 10 years.

Growing Dividend: PFBC's dividend payments have fallen over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its low payout ratio (23.7%), PFBC's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: PFBC's dividends in 3 years are forecast to be well covered by earnings (23.8% payout ratio).


Next Steps

Management

What is the CEO of Preferred Bank's salary, the management and board of directors tenure and is there insider trading?

10.5yrs

Average management tenure


CEO

Li Yu (78yo)

27yrs

Tenure

US$4,549,073

Compensation

Mr. Li Yu founded Preferred Bank and has been its Chairman since December 1991 and Chief Executive Officer since 1993 and served as its President from 1993 to August 22, 2012. He serves as Corporate Secret ...


CEO Compensation Analysis

Compensation vs Market: Li's total compensation ($USD4.55M) is above average for companies of similar size in the US market ($USD2.53M).

Compensation vs Earnings: Li's compensation has been consistent with company performance over the past year.


Management Age and Tenure

10.5yrs

Average Tenure

58.5yo

Average Age

Experienced Management: PFBC's management team is seasoned and experienced (10.5 years average tenure).


Board Age and Tenure

8.7yrs

Average Tenure

70yo

Average Age

Experienced Board: PFBC's board of directors are considered experienced (8.7 years average tenure).


Insider Trading

Insider Buying: PFBC insiders have only sold shares in the past 3 months.


Recent Insider Transactions

SellUS$146,86418 Dec 19
Clark Hsu
EntityIndividual
Role
Vice Chairman
Vice Chairman of the Board
Shares2,500
Max PriceUS$59.24
SellUS$196,98713 Dec 19
Clark Hsu
EntityIndividual
Role
Vice Chairman
Vice Chairman of the Board
Shares3,500
Max PriceUS$56.90
SellUS$139,71410 Dec 19
Clark Hsu
EntityIndividual
Role
Vice Chairman
Vice Chairman of the Board
Shares2,500
Max PriceUS$56.03
SellUS$218,65618 Nov 19
Li Yu
EntityIndividual
Role
Chief Executive Officer
Chairman
Shares4,000
Max PriceUS$54.66
SellUS$127,14413 Nov 19
Nick Pi
EntityIndividual
Role
Senior Key Executive
Executive VP & Chief Credit Officer
Shares2,300
Max PriceUS$55.28
SellUS$107,48212 Sep 19
Wellington Chen
EntityIndividual
Role
President
President & COO
Shares2,000
Max PriceUS$53.74
SellUS$156,00011 Sep 19
Wellington Chen
EntityIndividual
Role
President
President & COO
Shares3,000
Max PriceUS$52.00
SellUS$475,30010 Apr 19
Wayne Wu
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares10,000
Max PriceUS$47.53

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Ed Czajka (55yo)

    Executive VP & CFO

    • Tenure: 13.7yrs
    • Compensation: US$805.46k
  • Li Yu (78yo)

    Chairman

    • Tenure: 27yrs
    • Compensation: US$4.55m
  • Wellington Chen (59yo)

    President & COO

    • Tenure: 7.4yrs
    • Compensation: US$1.29m
  • Nick Pi (58yo)

    Executive VP & Chief Credit Officer

    • Tenure: 4.6yrs
    • Compensation: US$693.99k
  • Johnny Hsu

    Executive Vice President

    • Sandy Ho

      Executive VP & Regional Manager

      • Compensation: US$169.42k
    • Stella Chen

      Senior Vice President

      • Compensation: US$172.26k
    • Erika Chi

      Executive Vice President

      • Ted Hsu

        Executive Vice President

        • Gary Hu

          Executive Vice President


          Board Members

          • Li Yu (78yo)

            Chairman

            • Tenure: 27yrs
            • Compensation: US$4.55m
          • J. Belliston (74yo)

            Independent Director

            • Tenure: 17yrs
            • Compensation: US$145.58k
          • Wayne Wu (56yo)

            Independent Director

            • Tenure: 6.6yrs
            • Compensation: US$123.58k
          • Gary Nunnelly (70yo)

            Independent Director

            • Tenure: 29yrs
            • Compensation: US$142.08k
          • Chih-Wei Wu (59yo)

            Independent Director

            • Tenure: 7.2yrs
            • Compensation: US$131.08k
          • William C. Cheng (71yo)

            Independent Director

            • Tenure: 25yrs
            • Compensation: US$139.08k
          • Clark Hsu (48yo)

            Vice Chairman of the Board

            • Tenure: 8.7yrs
            • Compensation: US$143.08k
          • Shirley Wang

            Independent Director

            • Tenure: 1.3yrs
            • Compensation: US$60.58k
          • Kathleen Shane

            Independent Director

            • Tenure: 0.8yrs

          Company Information

          Preferred Bank's company bio, employee growth, exchange listings and data sources


          Key Information

          • Name: Preferred Bank
          • Ticker: PFBC
          • Exchange: NasdaqGS
          • Founded: 1991
          • Industry: Regional Banks
          • Sector: Banks
          • Market Cap: US$909.152m
          • Shares outstanding: 15.06m
          • Website: https://www.preferredbank.com

          Number of Employees


          Location

          • Preferred Bank
          • 601 South Figueroa Street
          • 29th Floor
          • Los Angeles
          • California
          • 90017
          • United States

          Listings

          TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
          PFBCNasdaqGS (Nasdaq Global Select)YesCommon StockUSUSDJun 2001
          1IUDB (Deutsche Boerse AG)YesCommon StockDEEURJun 2001

          Biography

          Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals in the United States. The company's deposit products include checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital and term loans for capital expenditures; and commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, export financing products, bills purchase programs, and acceptances/trust receipt financing products, as well as standby letters of credit and foreign exchange services for importers and exporters. In addition, it offers various high-wealth banking services to wealthy individuals residing in the Pacific Rim area with residences, real estate investments, or businesses in Southern California. Further, it provides various banking services to physicians, accountants, attorneys, business managers, and other professionals; and safe deposit boxes, account reconciliation, courier service, and cash management services to the manufacturing, service, and distribution companies. Additionally, it offers remote deposit capture, and Internet and mobile banking services. As of December 31, 2018, it had 13 full-service branch offices in Alhambra, Arcadia, Century City, City of Industry, Diamond Bar, Los Angeles, Pico Rivera, San Francisco, Tarzana, Torrance, and Irvine, California; and Flushing, New York. The company was founded in 1991 and is headquartered in Los Angeles, California. 


          Company Analysis and Financial Data Status

          All financial data provided by Standard & Poor's Capital IQ.
          DataLast Updated (UTC time)
          Company Analysis2020/01/17 23:41
          End of Day Share Price2020/01/17 00:00
          Earnings2019/09/30
          Annual Earnings2018/12/31


          Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.