Commercial banking company Preferred Bank (NASDAQ: PFBC) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 1.6% year on year to $70.65 million. Its GAAP profit of $2.52 per share was 3.7% above analysts’ consensus estimates.
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Preferred Bank (PFBC) Q2 CY2025 Highlights:
- Net Interest Income: $66.87 million vs analyst estimates of $66.67 million (1.2% year-on-year growth, in line)
- Net Interest Margin: 3.9% vs analyst estimates of 3.8% (11 basis point year-on-year decrease, in line)
- Revenue: $70.65 million vs analyst estimates of $70.82 million (1.6% year-on-year growth, in line)
- Efficiency Ratio: 31.8% vs analyst estimates of 31.1% (0.7 percentage point miss)
- EPS (GAAP): $2.52 vs analyst estimates of $2.43 (3.7% beat)
- Market Capitalization: $1.15 billion
Li Yu, Chairman and CEO, commented, “We are pleased to report our results for the second quarter of 2025. We recorded net income of $32.8 million or $2.52 per fully diluted share. This quarter we had an increase in our loan portfolio of 1.8% (linked quarter), however, deposits only increased slightly. The Bank’s net interest margin improved to 3.85%. Last quarter we reported a net interest margin of 3.75% which was negatively impacted by an outsized interest reversal.
Company Overview
Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ: PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.
Sales Growth
From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.
Thankfully, Preferred Bank’s 10.3% annualized revenue growth over the last five years was impressive. Its growth beat the average bank company and shows its offerings resonate with customers, a helpful starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Preferred Bank’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.1% over the last two years. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, Preferred Bank grew its revenue by 1.6% year on year, and its $70.65 million of revenue was in line with Wall Street’s estimates.
Net interest income made up 96.1% of the company’s total revenue during the last five years, meaning Preferred Bank lives and dies by its lending activities because non-interest income barely moves the needle.
Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.
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Tangible Book Value Per Share (TBVPS)
The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.
This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.
Preferred Bank’s TBVPS grew at an incredible 12.9% annual clip over the last five years. The last two years show a similar trajectory as TBVPS grew by 13.1% annually from $47.04 to $60.19 per share.
Over the next 12 months, Consensus estimates call for Preferred Bank’s TBVPS to grow by 10.1% to $66.30, solid growth rate.
Key Takeaways from Preferred Bank’s Q2 Results
Preferred Bank's net interest income and EPS were in line. Additionally, the company narrowly topped analysts’ tangible book value per share expectations this quarter. Overall, this quarter was fine with no big surprises. The stock remained flat at $93.32 immediately following the results.
Is Preferred Bank an attractive investment opportunity right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
