PFBC - Earnings call transcript Q3 2021

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Operator

Good day, and welcome to the Preferred Bank Third Quarter 2021 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. to Profiles. conference like Haas to now Financial of would turn over the Jeff I ahead. go Please

Jeff Haas

Thanks, Jason. the and from President Preferred September Hello, and everyone, XXXX. management Bank's to joining XX, Officer, CEO, financial discuss are us Chief Chairman results Li me Operating for With third and ended thank quarter today you Yu; for and Management Wellington then questions. of Chief Operating Deputy Nick Pi; Chen; Chief and up summary open Financial will brief Officer, Johnny we Edward will Hsu. the Czajka; the your a results Chief Credit Officer, to provide Officer, call

specific this call, of that forward-looking Act the not may of course the may may meaning Securities management Private made XXXX. include Such During or within of assumptions the correct. conference upon prove statements forward-looking Reform by statements Litigation statements, based are

many are which statements relating factors environment, Preferred Forward-looking unknown and subject difficult Bank. the known are and to which all also risks, and other uncertainties and control of Bank's of business of are Preferred operations beyond to to predict

could to these call of description statements. these incorrect, Corporation ahead. SEC At files results materialize this the I Yu. set risks Preferred materially the time, to turn please as to differ such Li the refer that any these Bank's documents over statements. forward-looking from like any Please prove Bank required in obligation forth the a of If expectations of its update assumes FDIC. Federal no Mr. would go to or Deposit with For or these and Insurance assumptions uncertainties, detailed uncertainties Preferred Bank

Li Yu

income the $XX share. our am of also X.X% Good years’ gentlemen. million third or much. assets on of new and average return the quarter for recent Both on very Preferred records are I equity you a our very Bank. return pleased Thank and ladies are $X.XX to XX% report of Likewise, highs. net morning,

growth annualized an demand are increased quality Quarterly we that on $XXX XX%. in Important thing the is over XX% significant is bearing nearly deposit deposit of million, basis, of have experienced the a non-interest deposits. increases. good. quarter, the deposit deposits area little This the of growth

quarter. X.X% is from annualized. costs is of lower Loan we $XX million And or quarter. of do trend area our found looking quarter previous $XXX demand this fourth And market. moderately than we expect previous the the quarter that improved for XX% our the interest will deposits and to the originated Deposits million increased that moderately when pipelines, I money -- quarters. that Another in improve in continue the bearing loans. new This

However, with $XXX slightly with the better. is quarters, loan million new previous line in on

a compared continue growth. The interest for moderated increased okay? quarter previous in Loan payoff -- $XXX average yield to came in oversized roughly and of of is is likely I to that deposit margin million million, bit to result the mean, quarter, the is moderate, moderately was quarters, which However, to net the in about $XXX little compression compressed the lower the but coming which previous than quarter. X.XX%,

bright quarter, in line for is to increase noninterest largely million $X.X income. the quarter's LC This increased the had the fees. due We

third but to than Looking quarter, less in fourth satisfactory will quarter. fee be probably ahead, it slightly be LC the the likely

the wage in inflation will up show Our I the inflation at operating personal -- guess to expense, wage to And came later quarters. full feel increase in pressure. of started effect We and my XX.X%. surprise, the inflation gradually

loans, steady. Act under X loans them X mortgage time. are product. only at -- the the Our Altogether, nonperforming no them deferred nonperforming PPP to $XX this CARES of had And are credit have is the loans reduced quality of were including payment been stable. million. There X we loans

loan competition in we although controlling how and do intensive the all days. gradually by the called encouraged and are the Preferred will And now amid under slow used it's to facts is year. our I for okay? get third here XXXX I'm virus, you Bank we operating environment, but very We under see Delta this also questions. transitional, progress to know Thank optimistic highly in improve which But are be, the these transition long in don't ready quarter coming going inflationary, about the a results much. quite your we

Operator

[Operator Instructions].

Sandler. question first Clark Our from Matthew comes Piper from

Matthew Clark

the on pipeline. just loan and the Maybe growth outlook

how color the on you the as And obviously little kind mentioned like strong. very think you additional some would other to was still but are of you going that, is disappointing might production a mean by payoffs thoughts I satisfactory, The describe be what it pipeline? helpful? are Sounds payoffs What your quarter, would forward? in respects. any last

Li Yu

the pipeline close But prolonged, At at okay? is about than it's taper third better third elevated, slightly very yield side. and for I this a the to was off previous equally, than maybe many detrimental this point October, X is XX think, in the Fed And margin early will than XX -- think time, the -- to loans think which to people fact less our the I fixed closing there actual not sometimes or doing -- to payoff rate if years, from which environment pipeline and be -- quarters, lift as but better indicated, are interest probably is our okay, somewhere future, I activities. are we quarter low-interest net given quarter,

the we that maintain choose So is because portfolio So okay? to shortsighted. want not reasons, forward to not maybe just our situation, of compete these going we

Matthew Clark

Okay.

production. activity in do that a better you continues, payoff maybe maybe bit little elevated So

this So of your rate low quarter of and digit teens, expectations maybe kind is mid-teens? prior in growth the somewhere between double or

Li Yu

in level our very I probably quarter. continue of we you certainly mean time. hard the reach predict adding As point mean, hiring We'll that have We try But experiences, okay? people, to can staffs. we hard, okay? would I certainly at previous We'll try to -- growth, guess, this cash -- always it's very

to of the activity the -- cooperate transaction -- continue -- forward will market for of certainly and mean the new will loan the has a now. level affecting We too. Delta be looking factor I somehow The opportunities move but control to slowness

Matthew Clark

Great. Okay. then... And

Li Yu

This loan is growth. our priority top to

Matthew Clark

Yes.

was can like then that And other for letters and that Great. one the a forward? something of going on of it Is just little Okay. sustainability you activity. the me you credit Do you fees think the was outsized? feel replicate

Li Yu

quarter little the a is quarter quarter little bit. be than third will probably third think the but but fourth quarter the better outsized, lower a than second I

Operator

from from The next Tenner Gary question comes D.A. Davidson.

Gary Tenner

of of question. seasonal quarter fourth on a fees think letter does kind you the sort the the impact quick a might fee quarter about your A going would comments, diminish Li, follow-up based going on of first credit represent of that credit to that of 'XX? letter kind baseline

Li Yu

slightly pick be time. call looks far, we I and a it in, quarter is it looking third it than will a open so can the So But tell, best fourth be in be a less at is situation, slightly first volatility to The nature baked fee credit okay? of fee, degree okay? we'll will more But third we on the hope obviously, quarter, this hope quarter letter then to like actually, fourth we certain income. of And more we quarter closer few the at the to than deals -- quarter.

Gary Tenner

there hires highlighted as an obviously, room last of more of risks production kind any Okay. offset think, production you quarter, transactionally And Is as ago. of to I payoffs one a think saw the that. a new you of And talked we quarter, some bank. quarters Ed, I think I the being about side? few oriented this

thoughts the the to kind Just some outrun to payoffs? of on ability try of

Li Yu

mean, like put in come it put I our best sometimes to it, at happen. quite one to But And I it we certainly, us always they -- best, point crystal a payoffs is of be can production the the this only a me Payoff as time that demand. bank with is just is we to do time. looking It our doesn't list basis The our update talking payoffs. ball every of mean weekly And do point ahead, and shareholders, lot past our -- in it's okay? a -- you did of kind a surprising priority. receive this was murky event anything of will at the Let top our pipeline, the -- this So okay? say our in is that a we try to notice experiences, that way. at in our top it's thing weekly basis, try trying We I happen. week. to just payoff, update

Gary Tenner

the amount. work portfolio deposit hundred in balances looks finally And you during increased like quarter. it you But the a with for dollars similar then the put million mentioned, Okay. service by the to cash a couple flows of me,

just some shorter-term putting that's might are won't loan about at banks thinking that maybe more yields rate that as but about time work the other for as that lock anything that yields be attractive So -- in of period we're not talking about to of doing?

Edward Czajka

you difficult this yields. in try environment imagine It's a Yes. as challenge, can to rate to Gary, after this go

But million we'll put going about monthly Ginnie to necessarily we're do that. So we very and yes, floaters. $XXX short to -- work, not it's

in we there. not go risk of we're don't the more we bit point, that. We'll may But this rate portfolio. little to So a bond taking -- long do interest at want

our taken new as option. And year. effect the some question of So add already production, we'd you we regarding within it on of seen to this quarter out to have to previous first have and your think I production like numbers, lend that on the hires hires third

increasing -- our priority. as we forward. we said, Mr. we're it's So best. to it's go certainly doing Yu We're forward top look as But that --

Operator

Moss B. Steve from from comes question Riley. Next

Steve Moss

there's kind And to bit up where fees, account seem yield money for increasing quarter-over-quarter. here, loan pricing in curious these yields the but an as also that are loan -- little new I are to a days? on just know uptick doesn't Maybe yields of quarter-over-quarter. of what ticked

Li Yu

You had the right of front number Ed. you, in

Edward Czajka

Yes.

we Steve, So you about had the almost quarter, interest downward $X.X recall, -- an million. adjustment -- if last

So that was really...

Steve Moss

I remember that yes. now,

Edward Czajka

loan just of -- that, excluding and that the was driver. that fairly earning holding that few the at The have. minutes ago, with well. up we the assets overall, the margin are overall Yes, looking But is loan a cash rest the are yields challenge yields

Steve Moss

on, rate yield just Okay. what's of And you put kind curious guys Mae the the then there? terms the of in Ginnie on

Edward Czajka

think XX going question Didn’t public. to basis in points. you're ask that

Steve Moss

more call over thinking $X the in just in term? sitting Okay. And mean appetite? you -- I it, adding quarter, do are short that you're about cash we terms in the what's on, how upcoming of in the billion how

Li Yu

the to of whole operator, the situation, going on We interest okay? rate, I be but would tightening sort having also the once cognizant be like about forward -- must and away. holding that to bank say every weigh once happens happening, liquidity would as I normalization them trends the in the will some have that, And deploy the be on tapering try or high we wouldn't obviously or is we, going mean, of will

have just be to we about So these careful items.

the items of is Some precautionary.

is I doing And we're of some really situation mean preventive so medicine. -- the

not it's okay? going So nature, last not dollars of be of the going in -- kind chasing be to to this we're risk

Steve Moss

in talked Okay. done past. terms a expenses about have bit fair I consistent understand, obviously just That's of inflationary in maybe I and pressure. you here. And with guess you guys what the little

to the and little expenses how about for a as are you curious of XXXX. kind maybe thinking guys into quarter bit fourth Just

Li Yu

know... is but a bit you maybe guess a Ed different higher, my Well, has flavor,

Edward Czajka

will agree that to continue this given with think, I be clearly, XX.X pretty good we're wage you as pressure environment was higher. will But sir. the They we in. on forward, No. weigh go I time, The this quarter, likely expenses. sub

going incrementally So they increase forward. will likely

Li Yu

people is a every in going are to people somewhere making to the It for And these expense kind rational think things, when face as coming staff, at make we level along pressure level okay? forward, all adjustment only offer of would you the pressure. higher, with and I bank I highs start -- line forward. take wage we adjustment. high obviously Steve, we'll that reflects go then So that the on the away new the -- mean forced your

Operator

question The next Instructions]. Andrew Stephens. Terrell [Operator is from from

Andrew Terrell

was Houston I to on an maybe this business by that, things million update the expansion on on hoping Are track is -- I point? of get your outside middle new of trending think of how at still hit year? we Texas it outstandings kind with over $XXX office. could And maybe of was of then any kind market thoughts next opportunities the in

Li Yu

Wellington, you that add, unless answer to first, want I okay?

Wellington Chen

Please.

Li Yu

Okay.

has producer, producers, loan We turnover mean bank, some is visionary -- have not Houston, okay? expectation X Right that. X have chosen but with we the less next another total point months X The level expenses, be in okay? of time or person following a now, him down a which in of much the producing, and this of moderated I They to with the take So have to Houston. the okay? staff continued team, line more in position has the very still the okay? or will at leader another X in payroll related in

currently and are hiring for operation, anything when will to add? Wellington, the We beef staff looking the So along, be new So to new Houston coming okay? reaccelerated staff up okay? it

Wellington Chen

No.

holding still the pretty you to mention holding covered is good basically, think I still over going. pipeline and people Houston pretty that just loan inventory And for the -- production. fort a and have are the looks there robust,

Andrew Terrell

thoughts on kind any kind potential market of of new expansion? Okay. And

Li Yu

on team people. cannot we're working are but say letting it, of we anything until We some successful

Andrew Terrell

Okay.

the to kind has of quarter. kind still improved repurchasing relative were should during forward? Or change share expect buybacks where bit the of Any appetite valuation we think for moving third repurchases? of you at a shares I in

Li Yu

report want to that? Ed, on do Well, you

Edward Czajka

we have hard ceiling the repurchase a a plan in is Sure. of share. $XX Andrew, cap, hard a with place

mid And that we to September. so around ran into late

And in active but -- not the been have that we market so time. since we not terminated,

Li Yu

that share our for continues whole improve, to their beef should and capital But ability up and earnings go additional account limit capital the the returned and our if to the on level the to seeking to fund increase -- the situation. that we approval use. generate Obviously, -- will to be Board -- given

Andrew Terrell

Understood.

further this at about down? to Do how comfortable it's Okay. feeling you are of Mr. room with X.X% you today? are Or around at Yu, the reserve where there's work you today? think kind

Li Yu

I little can have a in bit -- answer that and only thing, then answer I this Nick later.

[XXX], okay, a that whole our year, remember of is the last is banking the our if think been I First pre-pandemic prudent you okay? CECL conversion, putting all very level day of kind at of CECL level, -- in the on lot after has situation. reserve industry So

improved model -- the each viewpoint they to on condition. of factors bank's economic CECL on depend that model recognize economic everybody different, as started everybody's okay? many depend but is So -- -- conditions, has So

hold I the deteriorate, quite it's we the not day when it So one day, would -- get I steady. level, return know. level. If after economy not to mean we to But back pre-CECL do think CECL Nick, does a add? quality that anything to

Nick Pi

echo totally Mr. comment. Yu's I

CECL quarters. on With related tentatively the reserve our as side, the there well stress qualitative future improvement of that conditions less be somewhat as on the requirement to will the economic we in forecast believe

also Mr. loan all -- However, credit Yu et cetera. of as cetera, will definitely, of such factors unemployment depending as et moving also rates, on quality definitely mentioned, migration growth, GDP, and lots you those,

Li Yu

pandemic. of Uncertainty

Nick Pi

Right.

definitely, So our is this guesstimate. best

on level, all to depends plus/minus, For long should moving our X.X% those be the reduced gradually run, reserves around factors.

see quarters. we're be eventually this that few range. It going to to hard -- will during the we're handle next So in how

Operator

There no Yu to the to This in queue. question-and-answer questions for session. closing back turn like remarks. are the I'd our more over any conference Li concludes

Li Yu

very overall, every thank our in continue okay? -- I your put bank, category, we direction. effort back we mean, running for appreciate in much segment looking Well, we -- our a the for Thank high-performing us look of our for we'll in you looking your that but operations, do above you. toward are and home average So now not support. we interest are And

Operator

Thank The you attending today's conference concluded. for has now presentation.

disconnect. now may You

Preferred Bank (PFBC) 21 Oct 212021 Q3 Earnings call transcript