Updated 3/13/25
Preferred Bank isn’t exactly a household name in the investment world. You won’t see it lighting up the headlines or making waves on financial news networks. But for dividend investors who appreciate strong fundamentals, disciplined management, and a consistent approach to shareholder returns, PFBC deserves a closer look.
Based in Los Angeles, the bank operates in a unique niche—catering primarily to small and mid-sized businesses, with a focus on the Chinese-American community in Southern California. It’s not chasing aggressive growth or expansion, but rather sticking to a high-touch, relationship-driven model that’s helped it quietly deliver impressive returns.
Let’s dig into the details of this under-the-radar dividend play.
Recent Events
Regional banks have had a tough go of it recently. High interest rates, rising deposit costs, and the fallout from several bank failures last year all weighed heavily on investor sentiment. Through it all, PFBC has managed to hold its ground.
In the most recent quarter, the bank posted $274 million in total revenue, up 24% from the year prior. Net income hit $130.6 million, while profitability remained strong, with a net margin of nearly 48%. Return on equity came in at an impressive 17.9%. That’s the kind of number that gets attention from those who know where to look.
However, not everything was perfect. Earnings were down about 16% year-over-year as the impact of margin compression started to show. Still, the stock has been resilient—up around 12% over the past year, outperforming the broader market.
Key Dividend Metrics
📈 Forward Dividend Yield: 3.56%
💸 TTM Dividend: $2.85 per share
📅 Next Dividend Pay Date: April 21, 2025
🪙 Ex-Dividend Date: April 7, 2025
🛡️ Payout Ratio: 21.8%
📉 5-Year Average Yield: 2.83%
📈 Dividend Growth: Consistent annual increases
📆 Last Stock Split: 1-for-5 in 2011
Dividend Overview
There’s a lot to like here from an income perspective. At a current yield of 3.56%, PFBC offers a payout that’s not just respectable—it’s well above its historical average. This isn’t a stretch payout either. The company is only distributing about 22% of its earnings to shareholders, leaving a comfortable buffer for both reinvestment and future dividend hikes.
That conservative approach gives the dividend staying power. It’s not a flashy payout, but it’s stable—and it comes from a bank that has consistently grown its dividend without overextending itself.
Dividend Growth and Safety
PFBC has shown it’s committed to returning capital to shareholders, even during uncertain times. The dividend has steadily grown year after year, and the company didn’t skip a beat during the pandemic, unlike many of its peers.
With such a low payout ratio, there’s plenty of room for this dividend to keep rising. The company is well-capitalized, highly profitable, and focused on long-term stability. That’s exactly the kind of setup dividend investors like to see when evaluating safety and growth potential.
It’s not a stretch to say PFBC’s dividend policy reflects its overall business model—measured, dependable, and quietly effective.
Chart Analysis
Market Cycle Position and Wyckoff Context
Looking at the price action in this PFBC chart, it appears the stock went through a clear markup phase from late spring through summer. The strong upward momentum during July and August, paired with noticeable volume spikes, suggests a phase of institutional buying and broader accumulation coming to fruition. Price rose swiftly, breaking above the 50-day moving average with conviction and staying elevated through early fall.
That initial peak in August, which was followed by a sharp but brief pullback, marked the end of the early markup. The stock then re-entered a secondary rally in late October, posting another high into December. That second leg of strength likely reflects the final stages of the markup, with signs of potential distribution starting to show in the form of choppier price action and weaker upside follow-through.
Volume during these upswings was elevated compared to earlier months, but the highest volume bars were not matched with sustained rallies afterward, especially in the December peak. This shift suggests large holders may have begun distributing shares while keeping prices afloat—a classic hallmark of the distribution phase.
Moving Averages and Trend Structure
The 50-day moving average, which had previously served as solid support during the uptrend, began flattening out in January and has since turned downward. Price has now decisively broken below the 50-day and is sitting just above the 200-day moving average. That breakdown, along with the rollover of the shorter moving average, signals a transition into the markdown phase.
This moving average crossover—where the 50-day threatens to cross below the 200-day—is not a positive technical development. It typically represents a loss of upward momentum and suggests that the dominant trend has shifted to the downside.
Volume Activity and Participation
Volume in recent weeks has remained steady but lacked the heavy spikes seen during earlier rallies. This declining volume on a move lower indicates there’s no panic selling yet, but buyers have also stepped back. The lack of conviction on both sides can create a slow bleed lower, typical of a markdown phase as the market digests prior gains.
Earlier high-volume days during the markup had strong green candles—good sign of institutional activity. But more recent sessions show red candles creeping in, accompanied by lower highs and lower lows.
RSI Behavior and Momentum
The RSI has been on a steady downtrend since late January and is currently sitting near the 30 level, approaching oversold territory. This reflects weakening momentum, aligning with the broader chart structure showing a downtrend taking hold. Momentum peaked with price in December and has not recovered since.
That said, RSI near 30 doesn’t guarantee a bounce—it simply tells us that sellers have been in control for an extended period, and any potential reversal would need to be backed by a pickup in volume and price reclaiming key levels.
Recent Candle Action
Looking at the last five daily candles, the picture isn’t particularly bullish. Each day has seen lower closes, and most of the candles have upper wicks—suggesting selling into strength and a lack of follow-through on intraday rallies. There’s clear pressure on any attempts to move higher, with buyers failing to hold gains by the close.
The March 12 candle especially stands out. It opened at 81.54, tried to push to 84.16 intraday, but ultimately closed back down at 81.14. That long upper wick tells you there was an effort to rally, but sellers pushed it back down decisively by the end of the session.
In the context of Wyckoff, this area looks like a markdown is underway after the completion of a distribution zone. Price has fallen back toward the longer-term 200-day moving average, and without strong support or buyer conviction showing up in volume, the trend remains under pressure.
Analyst Ratings
📈 Recent analyst activity for Preferred Bank (PFBC) reflects a mixed sentiment, with both upgrades and downgrades shaping the current outlook on the stock.
🔼 In late January 2025, one firm maintained its buy rating on PFBC and raised its price target from $101 to $111. The upgrade was based on the bank’s strong financial footing, consistent profitability, and the positive tailwinds it could experience from sustained higher interest rates.
⚖️ Another analyst held a neutral stance, reiterating a hold rating with a price target of $100. Their perspective was more cautious, citing concerns around credit exposure and the pace of loan growth. While acknowledging the bank’s operating efficiency, they flagged the potential for headwinds in a slowing economic environment.
📊 A separate rating group echoed the neutral tone, also reaffirming a hold while nudging its price target slightly higher from $98 to $101. The view here was that while PFBC remains a well-run bank, its valuation already reflects much of the near-term upside.
🎯 As it stands, the consensus across analysts sits at a hold rating, with an average price target around $104. That implies modest upside from current levels, suggesting the stock is fairly valued by the market but could have room to run if the bank continues to deliver steady results in a tough macro backdrop.
Earning Report Summary
Preferred Bank’s latest earnings came in with a few bumps, but overall, the core story remains solid. For the fourth quarter of 2024, the bank reported net income of $30.2 million, which worked out to $2.25 per diluted share. That was down a bit from the previous quarter, mainly due to a one-time accounting adjustment tied to lease expenses. Without that hit, earnings would’ve looked a lot more stable.
Profitability metrics stayed impressive even with the adjustment. Return on assets was 1.74%, and return on equity landed just over 16%. The net interest margin held steady at 4.06%, which continues to be a strong number in the current rate environment. On the lending side, the bank added $71 million in new loans during the quarter—a modest but steady 1.3% growth.
Zooming out to the full year, Preferred Bank pulled in $130.7 million in net income, or $9.64 per share. That’s a strong performance, and it came with a return on assets just under 2% and a return on equity close to 19%. Loan growth for the year came in at 7%, and the efficiency ratio—a key measure of how well the bank controls costs—was a very healthy 31.5%. They’ve clearly kept expenses in check while still growing the business.
One of the bright spots was asset quality. Non-performing loans dropped significantly, falling by 52% in the quarter. Criticized loans were also down by nearly a third. That kind of cleanup on the balance sheet is encouraging, especially in a market where credit quality has been a concern across the sector.
On the shareholder return side, PFBC bumped up its quarterly dividend from $0.70 to $0.75, with the new payout kicking off in January 2025. They also bought back just over 464,000 shares during the year, returning another $34 million to shareholders. Capital levels are solid too—the tier 1 leverage ratio improved to 11.33%, and tangible book value per share grew nicely, up over 13% from the year before.
All told, despite the noise from the lease accounting adjustment, the bank is still delivering strong numbers. The foundation remains intact, and there are clear signs they’re positioning for long-term strength.
Financial Health and Stability
A quick glance at the balance sheet tells a clear story. PFBC is sitting on $785 million in cash while holding just $165 million in debt. That’s a healthy cushion in any environment, let alone one where liquidity and asset quality are under scrutiny across the sector.
Book value per share stands at $57.86, and with the stock trading around $85, that’s a modest premium of 1.46x. In the world of regional banks, that’s not excessive. In fact, it reflects confidence in the underlying business without crossing into overvaluation territory.
Return on equity at nearly 18% and return on assets just under 2% paint a picture of strong internal efficiency. PFBC is generating real value from its asset base and doing so without relying on financial engineering or aggressive risk-taking.
Valuation and Stock Performance
On the valuation front, PFBC trades at about 8.75 times trailing earnings and 8.3 times forward estimates. Those aren’t bargain-basement multiples, but they’re well within reason for a bank delivering this kind of profitability.
The price-to-book multiple of 1.46 and price-to-sales around 4.0 also suggest a valuation that’s fair but not stretched. Investors are paying a reasonable premium for a consistent performer in a sector still recovering from credibility concerns.
In terms of stock movement, PFBC has quietly outperformed. A 12% gain over the past 12 months might not turn heads, but paired with a 3.5% dividend yield, it stacks up well. Especially considering the broader headwinds facing regional banks over the same period.
Risks and Considerations
Every investment carries risk, and PFBC is no exception. The bank’s focus on a specific geographic and demographic market introduces some concentration risk. While that has historically been a strength, it could become a weakness in a localized downturn.
Interest rate risk is also something to watch. While PFBC has navigated the recent rate hikes fairly well, a prolonged period of inverted yield curves or funding pressure could weigh on future earnings.
The stock doesn’t trade with a lot of volume, averaging under 90,000 shares per day. That could create some challenges for larger investors or during volatile market conditions. Additionally, short interest sits at just over 7% of shares outstanding—worth monitoring, though not necessarily a red flag on its own.
Final Thoughts
Preferred Bank isn’t going to be the next big tech play or a household name in the dividend aristocrat club. But for investors who care more about consistency than excitement, this one brings a lot to the table.
Strong financials, a conservative dividend policy, and a management team that clearly understands risk and reward all point to a bank that knows how to operate in both good times and bad. PFBC won’t shout for your attention—but for those who are listening, it’s quietly delivering.