Preferred Bank Announces Continuation of Share Repurchase Plan

Rhea-AI Summary

Preferred Bank (PFBC) announces approval of $50 million stock repurchase plan, following previous approval of up to $150 million. The shares will be bought in the open market, with the first $50 million repurchases completed at an average price of $58.59.

Insights

Financial Analyst

Preferred Bank's announcement of an additional $50 million stock repurchase plan signifies a strong balance sheet and potential excess liquidity, which could be interpreted as a positive signal to the market. Repurchases often suggest management's confidence in the company's fundamentals and a belief that the stock is undervalued. The buyback can be accretive to earnings per share (EPS), as it reduces the number of shares outstanding, potentially increasing the stock's value for existing shareholders.

However, it is crucial to assess the opportunity cost of such a buyback. The funds utilized for repurchasing shares could alternatively be invested in growth opportunities or other value-creating initiatives. Investors should consider the bank's long-term strategy and how these funds align with potential expansion, technological advancements, or other capital expenditures that might offer higher returns.

Market Research Analyst

The repurchase of Preferred Bank's common stock at an average price of $58.59, as part of a larger $150 million authorization, provides insight into market perceptions. The timing and price of the previous repurchase could suggest management's adeptness at capital allocation. The stock's performance relative to this average repurchase price can serve as an indicator of the market's response to the bank's financial health and strategic decisions.

Furthermore, the buyback program's impact on the bank's stock liquidity should be monitored. A reduction in the number of shares available for trading can lead to increased stock price volatility. This could affect investor sentiment and the attractiveness of the stock to both institutional and retail investors. The repurchase plan's influence on market dynamics and shareholder composition is an essential factor for stakeholders to consider.

Economist

Stock repurchase plans can be reflective of broader economic conditions. In a low-interest-rate environment, companies like Preferred Bank may find it more favorable to return capital to shareholders through buybacks rather than seeking low-yield investments. This corporate behavior can also be indicative of the bank's assessment of the macroeconomic landscape, including potential regulatory changes, tax considerations and the cost of capital.

It's important to analyze the bank's capital adequacy ratios and how these buybacks might affect regulatory compliance and the bank's ability to withstand economic downturns. While a stock repurchase might enhance short-term shareholder value, maintaining sufficient capital reserves is vital for the bank's long-term stability and ability to navigate financial stress.

LOS ANGELES, Jan. 09, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), (“the Bank”), an independent commercial bank, today announced that the Board of Directors has approved the repurchase of another $50 million of the Bank’s common stock. The shares will be purchased in the open market.

Recall that at the Annual Shareholder’s Meeting on May 16, 2023, the Bank’s shareholders approved a stock repurchase plan which calls for the repurchase of up to a total of $150 million of the Bank’s common stock. On June 12, 2023, the Bank announced that the Board had approved the first $50 million in repurchases under that blanket shareholder approval and those stock repurchases were completed in October of 2023. The average price of the shares purchased was $58.59.

About Preferred Bank

Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)). The Bank also operates a branch in Flushing, New York and in the Houston suburb of Sugar Land, Texas. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.

AT THE COMPANY:	AT FINANCIAL PROFILES:
Edward J. Czajka	Jeffrey Haas
Executive Vice President	General Information
Chief Financial Officer	(310) 622-8240
(213) 891-1188	PFBC@finprofiles.com

FAQ

What did Preferred Bank announce regarding stock repurchase?

Preferred Bank announced the approval of another $50 million stock repurchase plan, following a previous approval of up to $150 million at the Annual Shareholder’s Meeting on May 16, 2023.

How will the shares be purchased?

The shares will be purchased in the open market.

What was the average price of the shares purchased in the first $50 million repurchases?

The average price of the shares purchased was $58.59.