Preferred Bank (PFBC) Q1 2026 earnings summary

Executive summary

• Q1 net income was $31.3 million ($2.53 per share), impacted by a large relationship placed on non-accrual status.

• Loans and deposits grew modestly, up 1.1% and 1.2% sequentially, respectively.

• Asset quality was affected by a large nonaccrual relationship, increasing nonperforming assets to $172.1 million at quarter-end, with $48.5 million sold at par in early Q2.

• Net income was down $3.7 million sequentially but up $1.1 million year-over-year, driven by higher net interest income versus last year but impacted by interest reversals and lower noninterest income sequentially.

Financial highlights

• Net interest margin (NIM) was 3.57% for Q1, down from 3.74% in the previous quarter due to non-recurring interest income reversal.

• Net interest income was $65.3 million, down $4.7 million sequentially but up $2.7 million year-over-year.

• Noninterest expense for Q1 was $23.5 million, with over $1 million attributed to payroll tax and stock vesting; expected to decrease to high $22 million to low $23 million range in Q2.

• Efficiency ratio was 33.8%, up from 31.2% last quarter but improved from 35.1% a year ago.

• Return on average assets was 1.67%; return on average equity was 16.00%.

Outlook and guidance

• Expectation for NIM to rebound in coming quarters as the interest income reversal was non-recurring.

• Loan growth guidance has shifted from high single digits to a more cautious outlook due to geopolitical and economic uncertainties.

• Management noted ongoing efforts to resolve nonaccrual loans, with significant progress made through loan sales and charge-offs.

• The impact of Fed rate cuts and nonaccrual loan reversals is expected to continue affecting net interest margin.

• Management remains hopeful for growth in 2026 but acknowledges demand slowdown and heightened competition.