PFBC - Earnings call transcript Q1 2022

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Operator

Good afternoon. Welcome to the Preferred Bank 2022 First Quarter Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Instructions]. [Operator event today's being is note, recorded. Please now Larry Clark would like to to over conference the of turn I Financial Inc. Profiles, ahead, go Larry. Please

Larry Clark

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

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

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

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

Li Yu

XX%. shares. payoff moderating to first at performance a quarter. on year. ladies quarter is loan growth momentum of I'm a The This resulted of same highlight very the net with report diluted this previous increased a which has cents origination annualized $X.XX Thank bit you. linked-quarter income to for carried basis and activity and per increase quarter. XX% the X% gentlemen. fully a It the Good on but over fourth our this morning, $XX in million Loan quarter pleased particular in quarter was quarter, first

are the applications for we encouraged received that very so ahead, is Looking loans by new far.

production applications linked these be is underwriting, could quite higher subject will do that increases our was statement light be financial growth quarter within quarter cash loan has Although well second positive lower the think annualized. we activities. deploy of X.X% some engineering. for higher to in The we or This usage, results at standards X.X% allowed deposit expectations us through the proper The positive. versus moderate to is believe excess quarter of of Fed's which better our

XX because the Preferred improved versus under press that lower in basis by Again, components scenario, our assets previous has the environment, asset current higher your our deposit rate margin very quite of a included we're sheet – Bank release. sensitive quarter of deposit and expansion. This has have of positive the information margin looking ahead, changed about balance rising leverage. the the some I partially is from higher a our Our points. loan increase the for

which of the much at average an deposit of is repricing of be a carry they liability we than $X.XX life pace transactional interest-bearing the have side, billion means deposits. certificate deposits slower On months, These portfolio time will account. that X.X

on larger made legacy [indiscernible]. Two improvement basis loans of with in for bank credit two the We have our years. the has non-accrual a been posture over the

before this to repossess we quarter battles, assets these months and just all after finally Finally, court the awarded and months end. of was

in will March higher loans. operating come. inflationary But pretty increase expenses. fully controlling income portfolio to Now, continue XX, and those the will quarter. effect. the the And loans legacy charge-off of be reserve of current that or not industry The quarters expense of are million established statement charging to off has on to our the a the as been previously norm. only to under months certain charge-off that the in we that our is have $X.X is Preferred non-accrual increase almost There related on always no focused is environment was with our pristine, loan Bank XXXX. increases believe our very There It reason any than

our non-interest the like a conference I'd in increase It phone with shares. price higher little our continue guidance share previously January the the the of like apologize of Bank a beginning increased you the And you has fully quarter quarter, with this Preferred better actual counts your first new was number stock norm. we the first expense the be here. to first and to at ready we Also, The in All do our for it for are for we Thank on outstanding quarters to with missed with questions. come. to in And I'm changing. quarter can of along call. I'd and than all, alert value guided quarter stock, change along happy the even the and to will hope diluted will you

Operator

Instructions]. [Operator

from Tenner comes with Davidson. The first Gary D.A. question

Gary Tenner

the on as new expense to the comments norm. your Li, Follow-up, level

Is course through annualized X% that would would first expect? year, expenses general of do think? of full-year perspective X%, quarter, the in on is the XXXX. If of on Or growth kind you're upward around kind you there $XX the you of pressures increase you that go That's top the any the further million.

Li Yu

to us, also, the growing There's premises it the affecting number our would the wage quite it. The inflation. with obviously of renewal category. with the in What future. leases. expense one several the of And us to it's on in forces do all Obviously, unpredictable related especially

we that the expense the other success and are, is are successful Some of has be. variable nowadays. of see you it higher will they effort, come increases But our the to recruiting level due the more subject one

So, we because we the will expense be certainly have hope that higher CECL.

in generally to higher was of inflationary So, quarter. we quarter have second this flexibility environment, But providers the thinking. [indiscernible] first have speaking, slightly than

Gary Tenner

I Just recruiting market there effort quality that on side, particularly guys or to know focused looking add you particular you're a today? a Is people. are the always geography

Li Yu

are all recruiting from our We geography now. right

we'll So, location particular a group we're the couple areas If that information report hiring adding we of so put next eyeing to people branch over. have people on, quarter. probably But we in also to in. a have location. are all of decided new I better then that be and new

Gary Tenner

you on a you're the asset operating good dipped over kind quarter year. last It with generate for increase you expect? for below detail reasonable it leverage, in sensitivity what seem provided XX%. some of expenses, to question Is to of as in is some last leverage, would adjustable terms Just going time positive me, to the terms in still that assets. of the of stay efficiency last would me rate It operating did to that expect but that kind period ratio you that of

Li Yu

You mean efficiency ratio?

Gary Tenner

Yeah.

Li Yu

expansion, around result which net say have as expenses, have range, be result then, income, and to obviously. a obviously, interest XX% we an there's we And increasing interest combination like you the two certain would situation. the One, the Within hope the a these of growth a but margin a of two as level, of create you will two I higher high right income. hope. net will

months. been back have We the to XX% XX% about bouncing between between

Operator

Our next question comes Sandler. from with Piper Matthew Clark

Matthew Clark

And commitments a quarter you loan to in the any on Can ago? things. that prior year of quantify maybe the then or how three-part start on commentary new as last, to a and Are how compares just well. we question, able the the pipeline compared it's to loan that payoffs side quarter, the just and

Li Yu

we payoff. loan outstanding outstanding new that's had for And a a the $XXX we quarter, Prior end. the $XXX and million commitment then, have quarter million

from to approximately this quarter, the $XXX the $XXX with reduced So, payoff activity million origination in million has same side. the particular

the So, is this mathematics.

Matthew Clark

Any the quarter? out quarter, coming of color pipeline the on this

Li Yu

any is the worse not than second first Pipeline or good, quarter.

light said be value higher the situation the in that, earlier, after and at tests inflation embedded recession. standard mind As always the I and there'll various our nowadays, we and of increases, have back because is also underwriting a rate of inflation, stress of

to always bad ourselves alert at loans time. have good loans a at Preferred tried and are Bank that good made we So,

we'll So, be have to extremely careful now.

Matthew Clark

trails as to On start remix better the outlook, the loan come of it or deposit margin you to growth? deposit growth to should fund kind like do to growth assets and assuming feel the higher, earning growth, thinking loan loans relative to relates continue like march through of kind back you growth feel deposit might do

Edward Czajka

we'll our previous see expectations, about Mr. loan the To lower and something I the on comment think you growth earlier quarters year. think touched I within than coming throughout Yu's in

the the the QE balance With to margin rates, then MX towards utilizing growth level shrinking the and also to fully the loan balance okay and going its the start and seemingly expanding the when with leveraging portfolio. of more the ends lower starts sheet. deposit in supply cash raise Fed Obviously, we're

Matthew Clark

been the we that thought the quarter, economic would part the of reverses Just would increased upcoming of here a of improving kind and opposite comment that basis was provision? reducing assumption. have release I commentary have for itself And to Should on provision, outlook. was that there in the terms that in assume the reserves an in an

Li Yu

to Nick ask will add answer I will on. I that.

Nick Pi

of economy current like at a recession. mentioned power possibility And the a the interruptions, stage, such uncertainties higher Federal the have lot labor supply inflation, as increases Reserve even okay those environment concerns, chain kinds still have seems other rate we of future high Mr. energy and we side, cost. that increase though but also, of all Yu quick things, shortages,

still So, for quarter, reserve side. little on even of a a bet this that the on qualitative situation, kind we more bit under though

we As a this take Mr. cautious at mentioned, try time. Yu posture more to

Edward Czajka

what economic safe within been it's to we CECL model, I more it Yeah, the might release the had had probably than rosier to. out larger say rather predictions think came have

Matthew Clark

should slowdown activity environment credit in about for one just we on that in macro a the rate last How a rising letter the environment? think The of me fees. and

Edward Czajka

probably it think stable. pretty be will I

Li Yu

them You say sometimes a I'd but customer unpredictable we has [indiscernible] come charge stable, to it's because need to fee. a very They like [indiscernible], said in. so open the

pattern is tried is it It's the [indiscernible] customer on economic tried. really any We that. conditions. to We to to depends, specific. relate So, activity hard

We on predicting haven't yet. it been successful

Operator

question next Steve Riley comes Our Securities. with Moss from B.

Steve Moss

guys off repricing at deposit In the CDs Maybe just start about pace. slower here. release, pricing with you a talk

guys of kind you broadly? are likelihood? for deposit about point in all hike in more coming thinking betas Also, here here, May curious the you're CD Just just rates how with what thinking basis up XX

Edward Czajka

start I'll off.

thing deposit – deposit going We're much But in rate thing movement going level. of In lower seeing a in seeing forward, least of not with at we're market. interesting changes my at forward, seeing all terms Steve, we're okay the interesting and growth terms an on I in has side And we an still rate lot. think But beyond funding banks I'm opinion, betas – January. weeks of funding go very a basis started we one-year very It every two a in extensively. retail the moving XX is Wholesale moved through on points we get the still to few that CD. move things. retail are seeing surveys XX really

going around, the a what so, this still of and do with you're right? think hear – it time will businesses around, this to cash see lot you on And time, the and economy this hand. have be this time different, time, all the consumer I But

of out some take just happens, of offered I really to present time, as so, we're to you'll And banks the going at time the not slowly start that see system movement. think And seeing to that rates. going their raise it's But I whittle lot forward. a think

like Goldilocks for So, it's bit moment least being. time a now a the little at right

Nick Pi

Ed and this weekly. review I, we

we are holding retail – say. so side, the on well consumer I the And far, on should side very

Edward Czajka

anyway. of lot rates a Also, negotiated those are

So, are low fairly as well. those still

Steve Moss

terms lending here pipeline on the maybe just types Obviously, you had growth of seeing? this strongest, opportunities commercial In real quarter. you estate of are being loan what good

ex-PPP? when here for going obviously, underlying lending Are growth or the the expect you properties And guys to guys just think lend low teens kind year, like, really number about long thinking you we forward? strong types curious, on you are Just a of type pace of here. on

Nick Pi

We're Mr. as mentioned always looking new Yu earlier. for talents,

and the the going expand, and and whether we're Northern where in or we're pandemic, California so a think to So, of it's facility. pipeline – multifamily of of to people of at California, are take market whether looking post opportunity and of lot in I right for terms the type industrial opportunity, we're acquire a now, lot it's are there reposition, And looking will elsewhere. property and talents we're talents, to Southern – looking looking lead

Steve Moss

days? coverage remind the the here, to tighter debt standards what guys underwriting values these kind to are loan of just of you service terms looking us as In or at

Wellington Chen

to of future Loan to year, mentioned Mr. our is this current that data, the underwriting with Yu conservatively as with definitely, consideration very XX%. we're value, rate around XX% increase. loans, And

above. So, and currently, it's X.X around

Steve Moss

One last one took question. that properties terms the of guys over here. Small in OREO you

resolving make curious it you them. as to shortly, kind how you quickly liquidate comments about You of guys can just think

Li Yu

We hope the Thankfully, sought well it's done after. is yesterday. property

broker is that under is the price So, market. that they us telling feel advantageous us the current to very

Operator

question next Andrew Terrell from Stephens. comes with Our

Andrew Terrell

Maybe, Ed.

sheet there's the excess quite on kind start your the of of to off. deposit sheet. of looking still in to expectations guess balance balance at seen appetite Just far, or a overall kind of we've kind take I the leverage rates the comments bit so the of on securities into a growth book just I today. the like, of and seems hear interest some given I'm it bigger swing willingness move here. just any cash,

Edward Czajka

is cash swing and which September in also last cash have going that moves we'll – say, well. We million as with the IOER and utilize I'll into see then lockstep Fed also benefit more actually loan $XXX bought in Funds, remember this is to portfolio took up rate answer of cash the can move probably as point, Ginnie at that well. no. too, of performed rate the monthly a the bit to pretty a we floaters, extent little But a almost the

nice So that's production a of that.

forego the of franchise on that. deposit foundation bank. deposit in we let of are to still We and the that value not be growth, going form So me clear believe the growth, the bank, does

deposit we be but for this growth this pressed year. So, as not we will get will hard year, deposit growth

Andrew Terrell

in the kind core at looking of whether margin Anything loan fees it's this anything. the yields, loan lower just think, I of the on so maybe quarter. were basis core unusual or Maybe XX yields down, points reversal, interest kind or

the this non-core maybe quarter? in anything loan Just yields

Li Yu

No, we don't have it.

Edward Czajka

But – the No. cash the that rates the also will so mid-March we small Fed hike. a did saw beneficial. we see after after And say on I uptick side, that's

Andrew Terrell

of appetite, whether thinking front, bank of about of me, for M&A anything very the I thoughts updated on bank question interesting any M&A were get from would bank moving Yu. know, seeing kind been last the you've One Mr. it of whether M&A. of in historically, you, active kind forward, your not helpful. Trying you plays there to kind any into running was if just kind on updated be thoughts kind

Li Yu

thing side the one leave situation. our our DNA. it We'll it's maybe is conservative acquisition that of on Number

deals look accretion two, continuously There's number to about tougher introducing be we In the of in the we're geographies, is the of further. requirement the but to reasons, will and any close there's calculation it materialize our to getting or much one didn't So, for or the not industry. us, – success. step intermediaries deals seems probably we talents obviously that either had have pricing various couple

when One as more organic the regenerate profitable choose of the for we is reason can is growth balance average, than to not that and acquisition sheet need that of most way XX% imminent, the growth. therefore increase that the we internal of

think we show statements It letters. make the very say, about profitable hope institution be in to make when in needless not acquisition profitable. we fading this And more I the it, because, how every know out to just up to or started as stop, organic financial doesn't will have growth work well. bold I So, to acquisition

Andrew Terrell

kind you or color you specifics mentioned just of book try – of if can Any know the kind financials accretion kind on back. target. don't earn of what you EPS there meet threshold that I to give or you provide Any IR it's internal need or that can you and on the of kind value color tangible

Li Yu

IR is the I and And value the look at. situation. of the me important Inflation things Obviously, of it EPS. going you dilution is that the look how the payback you at don't much operation, thing pre-paying then can a the whatever also I'm book looking many I just much. on be accretion earnings there's years at and take is for their be make we that cognizant back efficiency through executed. must are to – target, hope you're perfectly not combined and for many, really and to everyone's

So we're just looking the as at very it. book dilution side value of careful

Andrew Terrell

quarter. great a on Congrats

Operator

Our with next Janney. Coffey question comes Timothy from Tim

Timothy Coffey

wondering, West what got the point more the interest be, net banks has color great and press XX off quantify income the sheet sensitivity release really would sensitive are a basis say, on the gain you your I'm Coast. on Ed, asset some can to of balance of one move the higher? asset you of

Edward Czajka

I an I head, basis right tell now. X% Off in XXX the think a basis. you on to that about annualized of top I can't unfortunately, my shock, higher XX% can point we're

Timothy Coffey

a I in pull about in say, March rates January/February? the the any quarter? Can to increase the of business growth ask forward relative loan Did cadence the question towards, month

Li Yu

the think created low XX with people years us the fixed opportunity previously because the – rate we'll more has lose that rate, loans payoffs increased sometimes. I in actually is often to rate to mainly

only, for making we're thinking, God, we that anymore. thank to deals. We're Well, thinking the only. them getting loans not losing rate or fixed these fixed change. of on And started are XX-year, doing about you everybody be low on rate, it's interest keep When then, X-year that, paying loans situation? to loans Some going losing is competition, And competition about pondering we're losing rate into interest reason. should why rates, they

benefiting I competitive customer high delivery start equal touch our and service, relations back of an our competition, advantage think – of to come one-on-one basis us. become we So, where

Timothy Coffey

forward your will going on that pipeline based if expectation decrease fallout Is rates? it

Li Yu

Yeah, to will know that I I will that have caveat the that underwrite we it say decrease. one it carefully. more is

Timothy Coffey

of feel ratio, to doing you information before right more for like it's that prudent to now? wait do Or increasing the that, Speaking ratio of need do you so? reserve the levels start

Li Yu

credit Are about we situation? quality our talking

Edward Czajka

Yeah.

Li Yu

quarter, to to One answer late will continued do of customer in we review in quarter, what going inflation, it. we also in I'm two about our be loan our recession just would as different affected. to project of third again internal situations. I situation board, second a be the inflation starting ways which is or a to light the specific. reported come, that high likely many customers' our customers are to And situation, to of when industry early

we second can late review moves examination scheduled to second So, more be in – active take things. bank-wide do quarter first late to quarter of will relating And We'd like or early these it in take care examine the we in because quarter. starting have a first.

plan the line is But CRE term from best it acquire situation. holding term to at many investment. looking estate really drills. for in same to and many, assets in through they what protection it's the do because on to quarter stage long inflationary is our over in long safe trying think power common favored – they the there's is think we the real to continue many, So, customers, will what experience, astute We sales, product over as – – say, the situation, went of line market just the have past the they early the my obviously, side, for probably the and inflation, drill customer be the many third product speaking

do are have review the that, on to thing. also we assets So, about while but still we cognizant

Edward Czajka

forward spoke the going how Tim, ACL. Mr. on depends question Yu the that of results review to your answer whether relative the of, look we To

Operator

[Operator Instructions].

from comes with David Feaster Our next Raymond James. question

David Feaster

point push – billion I on of it competitive follow up I been. just loans you to push it's have competitive just do more wanted your would that Mr. more through lower? the price think But we rate how kind meetings, to and how the these? with rate $X.X commentary has kind higher next immediately. increase that you as next do And guess, ability back than about reprice think on do about XX through the get It competitors Yu, your fully as landscape. of talking think payoffs effective like, I ability to paydowns about hikes, point your the XX like adjustable expect see two able you just rate guess, to how basis push a you through rates bit the of to couple Or been landscape, a your basis loans, hike on sounds if about of rational you at

Li Yu

is But, the In if offer. margin, is in can cycle, the is meaning is staff. competitive what cycle competitors what this is people or and or different. words, I Each loan staff, worth our index see with they the other number, however, other everybody offering people

always lower now, sensible other are loan, people over be would are. majority the see many doing don't offer right is our that. I there, that. they So, for few equally I think see as competitors of doing as a number don't been to we people And index to I just There's much but

So, I of the do lose a to business their rate that, due we push More think that wants so, will economics because because lot loan. [indiscernible]. the of to do if higher the of to things anybody many it's will not actually

David Feaster

yields improve? an portfolio? in loan inflection new new like see to starting the Have seen you yields you Are across loan

Li Yu

that being the loans off made. loans told last higher as quarters, generally than paid basis our you to XX anywhere points few points have basis is from old In the rate I XX

the rate. number second have the a better $X.XX. the new quarter, quarter, down And narrowed feeling to the $X.XX will on loans or a This is I situation, carry

David Feaster

quarter, the in growth see. the C&I was that great On to

I clients think hearing or proportion are increased talked your all borrowers and as at C&I that build Or you seeing XX/XX, starting Just Has that function existing for demand new are how inventories? you pipeline? And curious to increased an just it about… lines? C&I we that was of you whether drawings then was on a what still are the of lines of it's from think kind

Wellington Chen

relationship. had really, line on new Not a necessary. under existing And it's mainly growth. not coming It's the good of We where couple the C&I from, that's drawdown. wins much

Operator

comes Our with Hymowitz Philadelphia Jordan next from question Financial.

Jordan Hymowitz

Before question, say, want IPO. Li I guys to you and just covered ask something years since I for team, my XX I've the

to is not integrity really and the but only your done and better say a things You've refreshing. when great thoughtfulness are worse job, or willingness

deserve great kudos. guys a You

job. good So,

Li Yu

you. my Made day. Thank

Jordan Hymowitz

a because I for improprieties, would may follow on you the RBB's And resigning gentleman's market. have or you It's question a Who interested with thing. do other now at the saying that there's to But or different should not that of I'm that rumors shouldn't might But a may Chairman M&A. question. certain not in? go up price knows? a you on property be the be that M&A

Li Yu

chairman, And least number today, has at we situation. two on this except and aware them here former too. that the the among members, firms board group longtime as I president former a the them that me my a or mine, of Well, was I friend And knows none well particular friend. was CEO are do. lease have of as obviously, thing, of one, of of the Many three represented contacted

how a a I And still their like sort their vibrant, growth matter the have situation. to the situation, they And whether much business, ongoing business expectation. a So, stabilized after business. know of it's represents the it's – matter slow of level,

why I should price. the shareholder, deliver that? on you guys, do you're by depends It year, Unless a the you deliver to can on depends. better future I the it year So,

Operator

any the remarks. for over our back Yu session. closing Li like to conference to Mr. I concludes question-and-answer This would turn

Li Yu

you so for Thank our much very joining conference.

questions, or that. Mostly any call than please love Thank we'd Anyways, me. You I. have Ed much. answer you to Ed so but

Operator

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

now may disconnect. You

Preferred Bank (PFBC) 21 Apr 222022 Q1 Earnings call transcript