Preferred Bank (PFBC) Q4 2024 earnings summary

Executive summary

• Net income for 2024 was $131 million ($9.64 per share), with Q4 net income at $30.3 million ($2.25 per share), impacted by an $8.1 million non-recurring rental/occupancy expense adjustment.

• Return on assets was 1.91% and return on equity was 18.8%, both outperforming industry averages.

• Loan growth for the year was 7%, and deposit growth was 3.6%, reflecting moderate expansion in line with industry trends.

• Non-performing loans reduced by over 50% to $10 million, and criticized loans declined by about 33% in Q4.

• The Los Angeles wildfire affected one commercial real estate loan, but the mortgage portfolio and employees' homes were largely unaffected.

Financial highlights

• Q4 net income was $30.3 million ($2.25 per share), including a $0.42 per share after-tax impact from a non-recurring rental/occupancy expense adjustment.

• Annual net income reached $131 million ($9.64 per share).

• Spot margin for December was 3.98%, with a quarterly net interest margin (NIM) of 4.06%.

• Spot rate on deposits at year-end was 3.63%.

• Allowance for loan losses/credit losses stands at 1.27%, above peer group.

Outlook and guidance

• Management expects Q1 2025 margins to remain relatively stable, with minimal further compression anticipated.

• Loan growth and deposit activity are expected to remain moderate, with no significant increase in activity projected.

• Non-interest expense for Q1 2025 is projected at about $23 million, including elevated payroll taxes and a low to mid six-figure charitable donation.

• Criticized loans are expected to decline further in Q1 2025 due to payoffs, settlements, and additional collateral.

• Management expects to continue strong financial performance into 2025, despite a high interest rate and inflation environment.