Preferred Bank Executing On Rate Leverage, But The Street Isn't All That Interested

As far as managing what is within their control, I can’t find much fault with Preferred Bank (NASDAQ:PFBC) since my last update on this smallish ($5B in assets) California bank. Rate leverage has been very strong, operating leverage has been very strong, and credit quality has likewise been quite good. But, banks being out of favor, the shares have done only a little better than the average regional bank since my last update, falling about 5% - beating the market by around 10%, as well as peers like East West (EWBC), Hope Bancorp (HOPE), and Pacific Preferred (PPBI), while underperforming Cathay General (CATY) by a few points.

Macro headwinds remain real, and I don’t expect the Street to stop worrying about this issue for at least another quarter or two. Preferred still has some leverage to further rate hikes, but the bank is already seeing demand destruction for loans and I don’t see much sustainable operating leverage with loan growth. Long term, I still think this is a good bank and I think the valuation is attractive, but this could be stagnant money until the Street is ready to look past the coming slowdown.

 

Read the full article at Seeking Alpha: 

Preferred Bank Executing On Rate Leverage, But The Street Isn't All That Interested