Preferred Bank's Q3 net interest income falls due to nonaccrual loans

Overview

• US commercial bank's Q3 net income and EPS declined yr/yr and sequentially

• Lower net interest income, driven by interest reversals on nonaccrual loans, weighed on results

• Company's total deposits rose 1.2% from the previous quarter

Outlook

• Company expects competition for deposits and current market conditions to persist into 2027

• Preferred Bank sees stronger loan pipeline, anticipates solid loan growth in Q4

• Company expects recent Fed rate increase to benefit net interest margin

Result Drivers

• INTEREST REVERSALS - Co said net interest income fell due to $2.1 mln reversal after placing loans on nonaccrual status

• HIGHER DEBT COSTS - Co said net interest margin was also affected by higher coupon rate on subordinated debt

• NONINTEREST INCOME - Co said higher noninterest income was driven by gains on investment securities and increased letters of credit fee income

Company press release:

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "hold" and the breakdown of recommendations is 2 "strong buy" or "buy", 4 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy."

• Wall Street's median 12-month price target for Preferred Bank is $111.00, about 2.2% above its October 22 closing price of $108.62

• The stock recently traded at 10 times the next 12-month earnings vs. a P/E of 10 three months ago

Reuters Recommended Reads

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)