Stephens on Monday lowered its 12-month price objective for Preferred Bank (NASDAQ:PFBC) to $93.00 from $105.00, while retaining an Equal Weight recommendation on the shares.
The research firm made the adjustment even after Preferred Bank reported operational earnings per share of $2.78, outpacing Stephens’ internal estimate of $2.56 and consensus Street expectations of $2.73. The bank’s pre-provision net revenue for the period came in at $53.7 million.
Following the quarter, Stephens modestly raised its 2027 operational EPS projection for Preferred Bank by 2.5% to $11.01. Despite that upward revision and the earnings beat, Preferred Bank shares have fallen 12% since the results were released. By comparison, the KRE regional banking index registered a larger decline of 15.6% over the same interval.
Stephens attributed the reduction in its price target primarily to a sizable increase in the bank’s criticized loan balance, which rose from $151.0 million to $248.5 million during the period. The increase included the addition of one $123 million relationship made up of nine loans that Stephens flagged as potentially tied to Cantor Group exposure.
The firm noted that Preferred Bank is in the first lien position on these loans and that loan-to-value and debt service coverage measures appear acceptable. However, the bank’s public commentary on how it expects to handle the portfolio - including the workout process and timing - was described by Stephens as "relatively unclear." That lack of clarity led Stephens to say it "struggled to see a material valuation catalyst path" while the criticized-loan issue remains an overhang.
Separately, Preferred Bank reported fourth-quarter 2025 results that also exceeded analyst forecasts. The bank posted GAAP earnings per share of $2.79 versus an anticipated $2.73, and generated revenue of $78.07 million compared with a projected $74.54 million. Stephens noted the EPS surprise was about 2.2% and highlighted the revenue beat as a positive element of the quarter.
While the quarterly performance showed upside against expectations, Stephens emphasized that the enlarged balance of criticized loans and the lack of a detailed public plan for mitigation create uncertainty around near-term valuation drivers. Investors may weigh the improved operating results against the asset-quality questions as they assess the stock.
Industry relevance: The developments bear on regional banking and commercial lending segments, where concentration and workout timelines can influence investor sentiment and valuation dynamics.