Preferred Bank’s third quarter results fell short of Wall Street’s revenue expectations, and the market responded with a negative reaction. Management identified heightened deposit competition and a modest decline in loan balances as key factors behind the softer performance. CEO Li Yu highlighted that “the deposit market is very competitive” and pointed out that many customers are moving funds to U.S. Treasuries, which offer more attractive yields, impacting both deposit growth and costs. The bank also continued to face delays in resolving nonaccrual loans, as court proceedings extended timelines for asset resolution, further pressuring results.
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Preferred Bank (PFBC) Q3 2026 highlights:
- Revenue: $69.7 million vs analyst estimates of $73.09 million (7% year-on-year decline, 4.6% miss)
- Adjusted EPS: $2.73 vs analyst estimates of $2.69 (1.6% beat)
- Market Capitalization: $1.27 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our top 5 analyst questions from Preferred Bank’s Q3 earnings call
- Matthew Clark (Piper Sandler) pressed CFO Edward Czajka on upcoming certificate of deposit (CD) maturities and repricing, with Czajka estimating rates to roll at 3.75%-4% and emphasizing a focus on cost control.
- Matthew Clark (Piper Sandler) also questioned Chief Risk Officer Wellington Chen about the pace of resolving nonaccrual loans, with Chen explaining delays related to bankruptcy court proceedings but expressing optimism about eventual recoveries.
- Andrew Liesch (StoneX Financial) inquired about the causes behind modest loan growth, and Deputy COO Johnny Hsu attributed it to unexpected payoffs and delayed loan fundings, but signaled a stronger pipeline for the next quarter.
- Andrew Liesch (StoneX Financial) asked about expense trends, with Czajka citing lower legal fees and incentive accruals as temporary drivers, and guiding to more normalized expense levels in the next quarter.
- Andrew Terrell (Stephens) questioned the quality and sustainability of deposit growth, with Czajka clarifying that end-of-period deposit balances are a “good launch point” and not transitory, and CEO Li Yu acknowledging the challenges posed by market dynamics and customer preferences.
Catalysts in upcoming quarters
In the upcoming quarters, our analysts will be focused on (1) the pace and quality of loan growth as the pipeline converts to funded loans, (2) stabilization or improvement in deposit costs and retention as market competition persists, and (3) timely resolution of nonaccrual and classified loans through court and bankruptcy proceedings. The trajectory of non-interest income and ongoing cost management will also be important markers of operational effectiveness.
Preferred Bank currently trades at $107.08, down from $108.62 just before the earnings. Is there an opportunity in the stock? The answer lies in our full research report (it’s free).
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