Preferred Bank (PFBC) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was $33.6 million ($2.48 per share), down from $37.9 million in Q2 2023, with annualized loan growth of 8% and deposit growth of 5%.

• Diluted EPS was $2.48 for Q2 2024, compared to $2.61 in Q2 2023; six-month diluted EPS was $4.93, down from $5.21.

• Total assets reached $6.85 billion, up 2.8% from December 31, 2023; loan portfolio grew by $155.1 million to $5.43 billion.

• Non-performing loans rose to $40.6 million, mainly from a few large credits, but are considered well-collateralized or fully reserved.

• Management believes non-performing assets are adequately reserved or collateralized, minimizing future earnings impact.

Financial highlights

• Net interest income for Q2 2024 was $66.1 million, down from $73.3 million in Q2 2023, with net interest margin declining to 3.96% from 4.58% year-over-year.

• Net charge-offs totaled $9 million, with $7.5 million tied to a single C&I loan and $2.5 million to a resolved real estate loan; all were previously reserved.

• Noninterest income rose to $3.4 million for Q2 2024, up $303,000 year-over-year, mainly due to higher letter of credit fees and SBA loan sales.

• Noninterest expense was $19.7 million, down from $22.5 million in Q2 2023, with efficiency ratio at 28.3%.

• Provision for credit losses was $2.5 million for Q2 2024, down from $4.4 million in Q1 2024.

Outlook and guidance

• Loan growth is expected to slow in Q3 due to reduced borrower demand but may improve in Q4 if rate cuts materialize.

• Management expects modest earnings impact if interest rates decline, with potential for improved organic growth.

• Non-interest expense guidance remains between $20 and $20.5 million per quarter.

• Management anticipates limited impact from future interest rate changes due to reduced asset sensitivity.

• The bank is seeking to extend or renew its $150 million stock buyback plan, with $72.5 million repurchased to date.