Preferred Bank ((PFBC)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Preferred Bank’s recent earnings call presented a balanced sentiment, with the company showcasing robust financial metrics amidst certain challenges. The performance was underscored by notable improvements in credit quality and shareholder returns, though it faced moderate growth in loans and deposits and a significant non-recurring expense.
Net Income Achievement
Preferred Bank reported a notable net income of $131 million for the year, boasting a return on assets of 19.1% and a return on equity of 18.8%, figures that outperform industry averages. This achievement highlights the bank’s strong financial standing and operational efficiency.
Successful Share Repurchase
In a strategic move, Preferred Bank repurchased 464,000 shares of its common stock for a total of $34 million. This decision underscores the bank’s sound financial management and commitment to enhancing shareholder value.
Improved Credit Quality
The bank demonstrated significant improvements in its credit portfolio, with non-performing loans reduced by 50% from $20 million to $10 million. Additionally, criticized loans decreased by 33% in the fourth quarter, reflecting enhanced credit quality.
Dividend Increase
Preferred Bank’s board announced an increase in dividends from $0.70 to $0.75 per share, payable in January. This decision indicates confidence in the bank’s ongoing financial health and its ability to deliver increased returns to shareholders.
Tangible Book Value Growth
The tangible book value on common stock saw an impressive increase from $50.54 to $57.86, further demonstrating the bank’s growth in shareholder equity and financial stability.
Non-Recurring Expense Impact
The bank faced a notable $8.1 million adjustment to rental expenses over five years, which negatively impacted net income by $0.42 per share. This non-recurring expense posed a challenge to the overall earnings.
Moderate Loan and Deposit Growth
Loan growth of 7% and deposit growth of 3.6% were observed, considered moderate compared to previous years. This indicates a steady yet cautious approach to expanding the bank’s financial operations.
Los Angeles Wildfire Impact
The recent Los Angeles wildfire posed a potential risk to the bank’s commercial real estate loans, as significant damage was reported within the community. This incident could have implications for future financial performance.
Higher Operating Expenses Anticipated
Preferred Bank anticipates higher non-interest expenses in the first quarter of 2025, projected to be around $23 million. This increase is attributed to raised payroll taxes and donations to wildfire relief funds.
Forward-Looking Guidance
The bank closed the year with a net income of $131 million, translating to $9.64 per share, and an improved leverage capital ratio, which rose from 10.85% to 11.33%. Looking forward, Preferred Bank anticipates stable net interest margins in the first quarter of 2025, maintaining its financial performance momentum while managing anticipated expenses.
In summary, Preferred Bank’s earnings call revealed a robust financial performance with a balanced sentiment. The call highlighted strong shareholder returns and improved credit quality, despite moderate growth in loans and deposits and the impact of non-recurring expenses. The bank’s strategic decisions, including share repurchase and dividend increase, reflect its commitment to maintaining financial stability and enhancing shareholder value.
