Preferred Bank gets green light for $150 million stock buyback

LOS ANGELES - Preferred Bank (NASDAQ: NASDAQ:PFBC), an independent commercial bank, has received regulatory approval to proceed with the remaining $77.5 million of its $150 million stock repurchase plan. This follows an earlier phase where the bank repurchased $72.5 million of its common stock at an average price of $62.02.

The bank, which operates across various locations in California and has branches in New York and Texas, had its previous regulatory approval for stock buybacks expire in July 2024. As a state-chartered, non-member bank, Preferred Bank must obtain regulatory consent for transactions altering its capital structure.

The repurchase plan is set to continue until February 2025, with the bank making purchases on the open market. This move is part of a shareholder-approved initiative to buy back stock, a common practice among companies aiming to reduce the number of shares on the market and potentially increase the value of remaining shares.

Preferred Bank, one of the larger independent commercial banks headquartered in California, provides a variety of banking services. Its offerings include deposit and loan products for both commercial and consumer clients, real estate finance, commercial loans, and trade finance.

The bank's customer base has diversified significantly, although it continues to benefit from the migration of ethnic Chinese to California from China and other East Asian regions. Preferred Bank conducts its operations from its main office in Los Angeles and through a network of full-service branch banking offices in California, as well as in Flushing, New York, and Sugar Land, Texas, with a loan production office in Sunnyvale, California.

This news is based on a press release statement from Preferred Bank.

In other recent news, Preferred Bank has been the subject of several significant developments. The bank reported a strong second quarter with a net income of $33.6 million, or $2.48 per share, exceeding both analyst and consensus estimates. Despite a rise in non-performing loans and some charge-offs, the bank remains optimistic about its risk protection measures and future earnings.

Financial services firms Stephens and Piper Sandler have both adjusted their outlooks on Preferred Bank. Stephens raised its price target to $95, citing the bank's robust second-quarter performance. Piper Sandler, on the other hand, increased its stock price target to $105, reflecting an optimistic outlook for the bank's future earnings and performance relative to its peers.

In addition to these financial projections, Preferred Bank has been actively repositioning its balance sheet, reducing its exposure to floating rate loans from 90% to approximately 75%. The bank is also implementing more loan floors to mitigate asset sensitivity in case of declining interest rates. These are among the recent developments that investors should consider.

InvestingPro Insights

As Preferred Bank (NASDAQ: PFBC) moves forward with its $150 million stock repurchase plan, real-time data and insights from InvestingPro can offer a deeper understanding of the bank's financial health and market position. With a market capitalization of $1.1 billion and a P/E ratio that has slightly decreased to 7.72 in the last twelve months as of Q2 2024, Preferred Bank presents an intriguing picture for investors.

InvestingPro Tips highlight that the management's aggressive share buybacks are a sign of confidence in the company's valuation, which is further supported by a high shareholder yield. Additionally, the bank has a consistent record of dividend payments, having maintained them for 11 consecutive years and raised them for the last three. This illustrates a commitment to returning value to shareholders, which aligns with the stock repurchase strategy.

The company has also demonstrated financial resilience, with analysts predicting profitability for the current year and a history of profitability over the last twelve months. This is despite a downward revision of earnings by three analysts for the upcoming period, which is a factor investors may want to consider.

In terms of stock performance, Preferred Bank has seen a significant one-year price total return of 37.91% as of the date provided, reflecting a strong market sentiment. However, the bank's gross profit margins have been described as weak, which could be an area for potential improvement.

For those interested in further insights, there are a total of 10 InvestingPro Tips available, which can be accessed for Preferred Bank at https://www.investing.com/pro/PFBC. These tips provide additional context and could help investors make more informed decisions regarding their investment in Preferred Bank.

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