PFBC - Earnings call transcript Q4 2021

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Operator

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

Jeff Haas

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

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

and unknown also are statements Forward-looking and business Bank's uncertainties, subject relating environment. known and to Preferred operations risks, other to factors

which are difficult control of the beyond of Preferred and predict Bank. are of which many to All

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

Li Yu

very, Bank's earning -provision to net loan are morning, very fourth $XX pleased records. pre fourth PTPP revenue, total full-year million In deposits, assets, of these a $X.XX loans, the million share. very quarter, together was everyone. $XX growth quarter. of sequentially XX.X%. The much. share. loan active and pretax with total annual report was had all fourth Good Thank $X.XX bank or quarter growth of a you total very a together X.X% the And income I'm with Preferred We've

with the $XXX SGM, Unfortunately, For quarters than prior doubled outstanding total doubles which payoff commitment, generated We at production. million $XXX quarter’s also million $XXX of loan more production. prior million.

we SGM. full outstanding billion the For commitments, X.XX year, originated with new $X.X of

payoff again, million. However, $XXX is

have staff's with I Looking decent [Indiscernible] comfortable pipeline but of payoffs very originate personally ahead, a as ability now, our the will remain am loans. to we new in

is with XX% lower our a our of shop. that our that easy, production production face-to-face, about very much us. one-on-one quarter, million. be of litter although from of gradually have could grows getting side deposit lumpy pandemic it is growth but getting has million $XXX and level growth fourth of on Deposit cost. comforting be -- or we easing You the loan on these the economy see, customer It most whole pandemic transactional Much believe about year better going it side, nearly taken should Bank reasonably but that is between in the or forward away with I depends optimistic contact Preferred we the And customer the of is $XX.X quarters.

are Our pretty yield because live mainly the between interest loan quarters. changes remained leverage, that than the net was was our margin But quarter. stable as previous lower greatly assets in

Looking ahead.

Okay.

shortly mentioned payoff press to the One good $XX that the rate news in rising the should XX% us we As in another will release. side, now. to are on well, OIU our in for resolution, loans we And have work assets after. of quantity I that million NPL as that is the and we're to paid environment. from also, of off million $X.X see million aside loading, be $X resolve million a be level We're which from over sold another $X advance the can loans to in right looking can of loan way level our that

the our loan the better first hope quality of than quarter, by would So I even end quarter. be fourth

with XXXX. year But still challenge quiet inflation with as well It's job challenges to us. confident country our way. have in to when predict that is these alert For Omicron. as economy, down. time every we a the taking on And guess be dealing easing effectively. is step prepared also, possible, our get high I will hard But pandemic the will ourselves which along Obviously, then the be we're to up eventually issues and of

I thank So much, questions. your ready I'm for you very

Operator

time, this instructions] with to Piper the Sandler. At the At we momentarily, will this the [Operator Clark roster. session. comes time, begin we'll And question you. Thank up sum question-and-answer from first pause Matthew

Matthew Clark

morning. good Hey,

Li Yu

Good morning, Mr. Clark.

Matthew Clark

cautious Maybe overall just specifically on inflation, more you I would expense wage Ed What's for growth thought starting release on your expense the had in also some commentary year? But there in run rate, just Nice and think. expenses. decline the this comp around the inflation, quarter.

Edward J. Czajka

Yes.

So compensation. QX in was credit we on quarters expense fourth a little because capitalized incentive the them of the side control, due QX. you salary linked to over in as amortize of for and headwind But always the going quarter compensation, of loan know, non-interest as lower And then is to loan. QX. from was that's comparing credit a capitalized And the were expense QX first life know, costs you good would costs loan the expense bit the expect higher forward, incentive a to us payout Matthew. in We quarter terms of expense

run quarter XX/X between guess, XX/X. rates, first be of and anywhere Matthew, terms my would In

Matthew Clark

off? the Okay. And Like it it's balance think trails historically through you do of done the year?

Edward J. Czajka

you big year, recruiting be will you us it That We're already seen. couple recruiting. there, is not first on of touched see of off. the quarters specifically in trail remains to side compensation likely successful on is Matthew, The the wildcard for in the that

a probably you off will trail little However, it bit. if see not,

Fortunately, few to subject pressures terribly the salaries to relates inflationary non-interest items. as with it expense, other we're and exception of not a

Matthew Clark

it. Got

think just about loan the pipeline, year still Mr. you or pipeline, decent. about something get should that I its quick on double-digits then, low you we that? single-digits you ahead, said the is it at And to think enough about Okay. look you or think when the think to you When high Yu, to from

Edward J. Czajka

it, and first on to That base, I'm okay.

Wellington Chen

is This Hi, Matt. Wellington.

-- is pipeline from the region a that hat well. as believe, robust, the new in, pattern especially think a continue have big relationship new looking think Hope I target year. we to at with mentioned, the our out wildcard, very and worked strategic to have brought last runoff. new to that Mr. manager and the decent I The Yu hire as we I hire is

So to runoff, the run have we'll faster we then -- that's and just the than wildcard.

Li Yu

be of Matt, saying relying total of which staff's I feel size. should should $X.X much as did billion getting in None I'm considering ball a loan we our that, we -- And be. is a the XXXX, have one just We will how is upon capability. very be new hopefully I better. us originate crystal said, our is doing better economy and total [Indiscernible] thing number high

Matthew Clark

quarter, that's the loan able behind and remix some can source commercial you growth, guys just was of the quarter. toward the then be real the and on pretty loan well of upcoming weighted give then the end color And the us up assume being benefiting the growth it margin outlook, the fair Great. remix, more properties finance in the of that pricing late? of to the you here the Would margin held estate knowing types are to

Li Yu

will the I loan pricing situation. -- give margin giving Ed the movement information and is the our of that hello? you actually No, you Ted

Wellington Chen

got We background. some

Li Yu

Hello?

Wellington Chen

ahead. Go

Li Yu

trend the to the higher year roughly to payoff, basis XXX points that off. it and I will less basis anywhere made national reason quarter there's are new rate And in more is the a the paid the competition to than this trend if it's this trend And down of loan the narrowed and for first by in loans at banking. differences all beginning further. from [Indiscernible] the XX be And environment, of year, believe whole this this narrowed interest about is being have year, basis close points. to loan points, the The XX

a do go nothing continuously you because would it, loan, takes. you down portfolio you about it If payoff have is whatever

is, new enough try generate loans. what So to do we

hopefully -- fee income with up net To interest -- is total shareholders. Okay. bring our that to level the to is for reasonable the

going to So you're add.

Edward J. Czajka

going part quarter quarter, to the of on the in we last terms the the the deleveraging that balance is the and margin, and growth as a of with loan quarter sheet. lot due effect deposit talked the we at the the during latter ended in the XXX, preponderance occurring quarter the Yeah, throughout of the year growth of deleveraged about,

decline So in the that another led to margin. the --

certainly, that interest So we -- focus with would expect grow going we base really forward, said expect what on. asset higher we that's net income and a to earning

In a expanding in I flat little output, bit or to terms slightly mathematical probably of would it's just say margin, to the going QX. be

Matthew Clark

you. Thank Great.

Edward J. Czajka

Thank you.

Operator

from question Thank you. comes Andrew Terrell And the Stephens. next with

Andrew Terrell

morning. good Hey,

Edward J. Czajka

Hi, Andrew.

Andrew Terrell

holistically appreciate Maybe normalize higher the helpful. throughout it year. stay maybe a if And to the I bit on guide just start there expenses and really thinking the year about expenses. more It's

also improving rate sensitive. clearly asset and they're very We backdrop have an

of we quarter? shouldn't, you shouldn't together. the can any this saw we of kind ratio reason kind that we pieces manage that kind level, add or XX% below of taking Just efficiency those Is there I think guess like

Edward J. Czajka

low even Andrew, but why we a that see surpassed be at any yeah. XXs. can't problem own all. our -- our a keep That shouldn't Well, reason expectations, don't XX/X I

Li Yu

I this. -- on just to I And have add

ma the if that is less or You that of -- that's a movement a interest environment, see, when expenses efficiency less ratio. when to net rates With function increase. than And incomes income the maintain the interest likely interest rewriting actually, a the is efficiency it -- of ratio can we likely income. net is --

Andrew Terrell

us And impressive you XX provide thanks. is at, [Indiscernible]. yeah, LPO? Could Texas maybe Houston, an the clearly going guys on update how for progress Okay,

Edward J. Czajka

Okay.

update to Houston? want You

Unidentified Analyst

Houston update.

more right individuals the terms this month. hire end have we now, our we're of of on-board have X towards We and to looking in headcounts X coming

that with in that a I mind, is again, business. variable So always in cost always looking manager for mentality we bring can -- our relationship we where consider think productive

right the of under going a veteran. the is So Houston leadership direction,

So we optimistic. feel quite

Li Yu

staff strategic of been bit point very to want to our to little explosive always Houston I It is the small production view. Board growth. in total a some we market, more view Andrew, And small also of we a also, portfolio. of going want diversification. is percentage a on Directors, loan careful don't express in we're new when have From of a a add

it to the you that growth new reason Officer, one Chief Credit want whatever our reasons in don't for explosive is, For market. of the have

that's because our office, office we actively be Houston So capability good visiting too of would pulled market. that this And office. is the changed a pandemic the growing bad the support

plan. much keep there's So our our plan, according just still along pretty growing to with

Edward J. Czajka

ahead Andrew, our well. real add finished that, of estate and they that's of just onto inexpensive the piece to a year operate as very to expectations

about we it. So feel good

Andrew Terrell

Right.

I for you questions good it, it taking quarter. Thank on appreciate congrats me. a for my Okay. that's and

Edward J. Czajka

Thank you.

Operator

Thank the from And with Gary Davidson. comes question A. next you. D. Tenner

Gary Tenner

and a quarter on I morning. as of XX-X. of quarter that first or about would line, I'm of where was hearing having potentially if think you like. this why inflation had the year-over-year, it look that's general benefit look am Good be something production wondering we everything. just the of just Thanks. I wage the XX-X expense the in it what below 'XX If first wondering, capitalized it for not the first-quarter follow-up to the kind and of at XXXX We're guide, in Ed, and cost on economy commentary case is increased else? versus here, the related quarter, in

Edward J. Czajka

Gary. That's part it, of

when The accrued February is the due compensation. to annual other pay of are thing incentive taxes coming out some that we the be going did we we payroll in

tax payroll expense the so does year did Our of in we some XXXX. go accrue up, that

So that's why you high. quite won't as see that

asset. non-performing down in risk addition come for improved bank premiums to has that, addition FDIC that to as actually In -- our relative the profile a to

Li Yu

Also raises a the It's March to beginning beginning be are big the bank where on -- would only our First Crowd immediately that impact. staffs, not Xst. creating

Gary Tenner

fee the significant Okay. That's you credit just third a stronger had then, really helpful. the on question quarter, fees. labor on And second I had with quarter side,

fourth quarter you but the it was the of talked so. where was even think lower, half about year first being I below it

it there's line line that looking of, that terms versus XXXX be item, volatility probably we're In when today are some maybe as October? out knowing about to in going talked of thinking are you thinking business we how how about in you to that

Edward J. Czajka

Wellington that? answer to you want wants to Anybody answer that?

Wellington Chen

Yes, Gary.

I similar did On greater of what probably XXXX. credit than we be view will letter think fee in we the side, should or

connected we officer In source. all who the have fact, I ready their think with

servers, So that's and that's we XXXX. be, that service something forecast at we on other do and it'll surpass that of in the would that deposit types well, believe our something it'll

Edward J. Czajka

In addition, Gary. Thanks, Wellington.

In notice because that that's deposits and continually service get in but base item, programs it's big we the of of advantage line to not XX lot take that doesn't number a a DDA and addition, increases to on service order charges internally of that increased a have. we charges year-over-year began larger due

Gary Tenner

All right. Thank you.

Operator

comes Steve Securities. Riley B. from question with next The Moss you. Thank

Steve Moss

Good morning.

Li Yu

morning. Good

Steve Moss

quarter-over-quarter. down. I you Maybe relatively just There's starting back about to with, Mr. Yu, stable loan circling yields coming pricing here. heard talk

quarter? unusual whether just extra or any this curious fees Just the yield in fees loan

Edward J. Czajka

No.

interest of we I a $XX,XXX actually fact, about small loans. of income of couple reversal of matter a As had a on think

been matter of the against at as loan over basis income to that backdrop quarters this past unusual is Steve, average loan nothing X quarters, points step interest in loans a take past yield further there's only So X our XX yields the down -- fact, a and on looking over the

Li Yu

the okay. interest Okay. the I But changes as and the of -- that --we of I growth more margin amount The mean, twice quarter-by-quarter. passive net again, previous net will loan also mean, the I've growth in growth it's strong interest much that loan passive said, and out, loan spend okay. -- time income, absolutely and obvious pattern

Steve Moss

Right.

of to all, curious, any Okay. for a in at cash? And purchases, is a had additional the kind just with appetite sticking if the up you're here. inputs What we've move maybe margin, rates in your just securities billion-plus given

Li Yu

buy to Let me mentioned of me we add a that the should more start the securities. couple to

Gary Tenner

I not. did

Wellington Chen

You did.

Edward J. Czajka

Ginnie the $XXX you We see to a did million. monthly in portfolio add about actually did that's floaters QX, add, Gary, we Mae stuff. we did can as bond And

average it's March, So was the I looking terms in in since the last just very here in months. on, duration. million balance the $XXX at added on we've of X short But cash from sheet balance sheet

point any Fed part And rate to look put up. IOER for so rates then be of We that's going probably help. go that to I pretty really to as at be And decent this work. think the fund reluctant we'd certainly to increased

Steve Moss

Right. And maybe that. just on

Li Yu

Go Okay. ahead.

Steve Moss

about think have I'm points The points. on the just correctly, if on just for curious recall point percent XX XX here, percentage it's that just basis Okay. money. -- in what in rates And I I basis us. maybe floors what the are rewriting, loans of money

Edward J. Czajka

for this through Gary. go me Let you,

we're rate of As floor. now, XX, And XX% of to about we're moving -- the to XX, it a rate have at XX% the about about and -- go looking greater. at rate $XXX little increase, portfolio million million loan a gets up $XXX over we're of in increase. as the first right of looking at the book, rate, we floating When going look first floating represents the then

Li Yu

one cash move one I has add And million the part together. that and with $XX and the changes. on are about is want is along the securities also XX,XXX pull-forward of on running rate will move -- because our building to $XXX of go Well, hand, thing million is

also our So changes. up $X.XX liability we DDA. TCD million immediate in schedule. about And with sensitive go billion is of the is maturity we if and assets will I raise the remaining rates would Phase And calculated million XX money Where $X.XX months every which the first-fit assets $X.X have have loans. Actually, of rate $X.XX together month. sensitive is market X/XX interest-bearing thing $X.XX

whole increasing gradually situation. on basically the you're So

first way with personally Actually, little management. bit move, some some should a the we increases. when along rate doing further I So And better. am was be the luck and hoping

Steve Moss

Okay.

Li Yu

-- in then And [Indiscernible]

Steve Moss

I'm sorry.

Li Yu

Did that answer your question?

Steve Moss

Yes. maybe very one for That's just helpful. me. question And last then

what Going business is back up. pipeline mix are you in to the loan curious, the seeing pipeline, just of coming the guys

Li Yu

Okay. want Either to you one answer that? of

Wellington Chen

XX%, and anything? XX%. I related say CNI will Johnny Well, XX% right right. CRE side. That's on about now I the business above the think XX%,

Edward J. Czajka

Yeah.

Li Yu

includes mortgage. CIE After

Wellington Chen

Mortgage.

Li Yu

a small was increase. Mortgage percentage

in XX% been to around in last always So that line. C&I loans. somewhere few keep XX% We has along between the always business our years

Steve Moss

much. and All you Well, very right. good Right. quarter thank

Li Yu

Thank you.

Operator

question the you. Feaster Thank from James. David And next comes with Raymond

David Feaster

David Specter great of on Eric Congrats behalf on is this really -- quarter. a It's Feaster. Hey, great

Edward J. Czajka

you. Thank

David Feaster

see improvement further To the early improvement in quality -- the and XXXX.

you X Just the CECL which reserves expect think forward, back provision for and the to curious, about what going how would that you day to X.XX decrease post And is and level. it level.

on just be quick can a great? that, give update that'd you if So

Li Yu

of First going on level reserve give CPAs situation. the so to the the we're Nick, from that he all, be is you which and to official to has answering of reserve answer

Wellington Chen

Sure.

As Mr. our aside, substantially. heading that the mentioned to from classify out earlier, asset -- quality also loans and both our this is of end will quarter, really by our believe starting and mentioned dropped I special Yu positive XXXX, be

However, is this there's the year at as bubble years or this there's property. the the still watching and we're asset probably past rate to a high mentioned, during inflation times fab try lot everybody supply Li rate, Mr. cap disruptions, that and of also since also chain of chasing increase time, because low that probably the and some several most

actually a key based bubble, I'd our the on though maybe instead this asset our is value, even good this give those for cushion year of on existing loans. However, things underwriting

closely are too. these all will watching things to apparently, Omicron, pandemic pressure of we us some issues, growth. give loans, new For kind shortage, that And labor economy

back and X.XX% believe around is once now and getting I I I so X.XX% Then range it's minus. Obviously and me level. they of are factors or necessarily not operators’ Steve, is see asking go now, point then portfolio from our of is What X.X%, the we X.XX%. we're these not view, away that there guess a the plus to releasing better you're better economy whole have get out what, what But we woods qualitative we to can think the issues we right of matter lot no the at and normal hope right do that So our are differences? about is think yet.

go every every evaluate that? may maintain way. quarter clean along we I but can I'm And we I will to we hope if credit way. have X.XX%, So we go I very, even the very might quality, the step say someday, just that when right below

Edward J. Czajka

Yes. Yes. Very true.

Li Yu

CEO? our be getting Would with trouble I

Edward J. Czajka

You're good.

Li Yu

All right.

David Feaster

to and seeing just Great. Thank potential And hear and did you're as your And demand interested. where want well. footprint expansion opportunities just the on you. for across then loan follow-up a do most quick where novo you're opportunities

Li Yu

Either one to Okay. you discuss want of opportunities? the

Wellington Chen

While I we novo, the think for of the location, mean, opportunity territory at terms a go, I we never that in de have. we look we expand is, of sake the into always geographic talents

For we're able today experienced that went example, and because market Houston, we to group we recruit into going of banker area.

Johnny of then and future in and are that's chime that. our strategy in all fuel the is, hires recruiting where So of new opportunity terms

Edward J. Czajka

Yeah.

In philosophy. demand, what's team of But always look right That's geographic the terms our expansions the of like your right for our California. consistent think people. question, we demand And York, have Eric, footprint. been Houston, what but we all find is Southern always and Northern I on New the pretty to opportunities for and

David Feaster

Thank Great. you. more. One

opportunities. dividend just growth? capital buybacks or curious but paramount, thoughts don't I'm you just growth remains deployment curious, mind, appetite Obviously, I'm for your organic about If on your

Li Yu

did something, is share our buyback buyback. [Indiscernible] we all you values. I'm the become rewarding back, to price, And analysts. our ask buy shareholders? rewarding market change that the you Well, many something after talk the PE-based of told guess question. the to shareholders. PE-based, the buying when your the we based to will book I valuing keeping Well, really -- buyback back, less. asking buyback. and bit. our I then it remaining were code always about networks should have In is our fully stock We we I to And on

to have to required in for, when -- shareholder. shareholder excess we we not we capital return will and today, So growth when yes, is where anticipate use once this that continue we we will the see capital do it

can our you see, dividends we are increasing continuously. As

David Feaster

a on Great. Thank great you. Congrats quarter. again

Li Yu

Thank you.

Operator

you. call Chairman this I and to And session. Thank would concludes question-and-answer the And to the comments. turn Li Yu, closing over CEO, like for

Li Yu

-- has Well, middle the consider you that last very still country that the in the considered the gone through we're much. that's thank And pandemic. at what two And of years.

to operating Diamond today. now discussed wind the you fortunate as base have or a the if bank, But future. environment Mr. way have just rate are that results which Fed of every rising much. in whatever a the We Thank is Jamie able careful to be be to And will on near saying, are. saying, in of more that step we we the the like sensitive rate we is you so beneficial is

Operator

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

You may lines. now disconnect your

Li Yu	Chairman and Chief Executive Officer
Jeff Haas	Financial Profiles
Edward Czajka	Chief Financial Officer
Wellington Chen	President and Chief Operating Officer
Nick Pi	Chief Credit Officer
Johnny Hsu	Deputy Chief Operating Officer
Matthew Clark	Piper Sandler
Gary Tenner	D.A. Davidson
Steve Moss	B. Riley
Andrew Terrell	Stephens Inc.
David Feaster	Raymond James

Preferred Bank (PFBC) 20 Jan 222021 Q4 Earnings call transcript