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Zacks Investment Research has upgraded Preferred Bank (PFBC - Snapshot Report) to Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Preferred Bank’s first quarter 2013 results bring forth an optimistic scenario of marked profitability and growth prospects for the company. The reported net income of 30 cents per share beat the Zacks Consensus Estimate of 22 cents. Further, expected long-term earnings growth rate for Preferred Bank is 10.0%.

The results were primarily driven by a sequential improvement in loan portfolio by 3.6% to $1.2 billion and an increase in total deposits by 2.0% to $1.4 billion.

Amid tepid market conditions, Preferred Bank managed to maintain a steady net interest margin, aided by strategic deployment of available cash and a marginal reduction in funding costs. Net interest margin for quarter was 4.03%, up 12 basis points from the prior quarter.

Preferred Bank’s healthy balance sheet and consistently improving asset quality, along with the company’s optimistic guidance for the forthcoming quarters, drove the aforementioned rank change.

Notably, Preferred Bank has delivered positive earnings surprise in the preceding 3 out of 4 quarters with an average beat of 26.3%. Moreover, during the last 60 days, the Zacks Consensus Estimate for 2013 increased 6.8% to $1.10 per share. For 2014, the Zacks Consensus Estimate advanced 3.3% to $1.24 per share over the same time period.

Positive earning surprises along with favorable estimate revisions made way for the rank upgrade.

Other Stocks to Consider

Apart from Preferred Bank, other banks worth considering include Central Pacific Financial Corp. (CPF - Snapshot Report), TriCo Bancshares (TCBK - Snapshot Report) and Umpqua Holdings Corporation (UMPQ - Snapshot Report) – all of which carry a Zacks Rank # 1(Strong Buy).

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