PFBC - Earnings call transcript Q2 2022

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Operator

Good day and welcome to the Preferred Bank Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please do note, that this event is being recorded. I would now like to turn the conference over to Jeffrey Haas of Financial Profiles. ahead. go Please

Jeffrey Haas

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

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

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

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

Li Yu

per income the a income, [Indiscernible] interest loan share. report record call. year for you $X.XX and I'm morning, quarter quarter Net of was a efficiency conference in the very net earnings deposits. much. that Good earnings attending second Thank ratio quarter for $XX net or you stable. gentlemen. Thank was the million and income, and credit very pleased to was our quality share, ladies

$X.XX and $XX months, For the was a share. six million it

We we the [interest] continue [ph] rate grew loan the are And benefited recent by rate which the future Highlight the hikes. or we'll of that growth, be million is $XXX believe increases. beneficiary XX.X% annualized. of to quarter

half For annualized. the One and activities. loan] a that factors. loan in it [outsized pay-down analyzed growth [ph] we XX.X% growth We’ve combination quarter, the of was this have first pay-off, the the is of found year, was reduced two

is a strong we origination during reason Another obviously had quarter. the activities that

strong. In the extraordinary fact, May during April quarter, and was

activities tapered June. However, off beginning

for was the like to go or million of X.X% pipeline level $XX looks will that the back Deposit XXXX. the As quarter. growth today, of

for investors, costs we the and savvy they have mainly continue is year. that we on the basically During remainder our believe And very by seen also major recession will money. the customers with the credit competition are quarter, led fact, because in is deposit accelerate businessmen a in increase, deposits their This the of are our the With to has also focus quality. in good intensified, looming true air, banks.

dive We portfolio. in began have our already deep to

such currently in We're non-performing other seem on past The And this all third accounts – and regulatory credit [indiscernible] increased and hopeful XX% roughly [indiscernible]. senior paid-off year. [above] appraisal quality through close. carry below not we the examination, property have a as improved due [ph] come areas the assets nothing know on on assets will of that to mainly classified before Today, I'm All this we examination. so hope noted of property previous if will have not week important – far, that up any our to value. I due

the production to that mainly provided related have we we have. million For provision $X.X was the of large loan quarter,

And rate net floating rate with there fully changes. loan loans X% bank's Federal portfolio With fixed do the the XX, our rate is with these believe floating be [floors] the anticipated As but we the now On total July have loans of July, will consists income loan Most portfolio floating increase. remainder this, of Reserve [ph] or the XX% XX, is [ph]. of our X% all [loan rate our XX% only portfolios] total end and XX% action, of will not for of interest June June of at we the floating. year believe of loans. June,

increase be noted cost increases. than also will We more to definitely in that We the will enough increase. offset do deposit the costs, believe revenue

share Our repurchase progressing. $XX million is program

to whole questions. $XX aside third As of very million will today, Thank repurchase. ready the we quarter. completed have million was hope now your be you the the much. that program of set for We I'm XX completed in

Operator

first Our Instructions] go with Matthew Piper ahead, Please from question sir. Sandler. Clark will [Operator come

Matthew Clark

Hey, June? you than average off do margin And new of at the gentlemen. greater is morning, Maybe [ph]? be on pipeline the floors? in you're in new the fully that month happen now of in And good the XQ you fair know the starting margin, margin to assume [interest rates] the get the to the expansion benefit loans that XQ higher will it

Edward Czajka

shouldn't is answer, Well, it did second higher June say in significantly, than for the the one easy the one, yes, average not margin came significant the but in Matthew, – come excuse quarter. to so first much, the I me,

XX about higher on the basis than one, quarter. You're that certainly correct points

income still his margin a we interest faster in expansion, than read interest As that pace comments, QX, as Mr. Yu expense. for increasing to through at expect alluded

expanding. margin will likely be expansion we certainly certainly to not some expect the will in had in extent we it So, but QX be QX,

Li Yu

[ph] leverage add in this just looks [QX’s] closed it be on will particular meaning quarter. slightly increase, deposit that versus Matthew, loan increases mathematically

factor the be considered. leverage So [indiscernible] that should maybe for

Matthew Clark

to at Okay, great. of have you the bearing do happen rate June on then, And deposits end spot as well? interest the

Edward Czajka

the I me, other Matthew. of schedule this knew do here information was I realizing have sitting I in apologize. memory. for I That I that getting the ready was not – from was meeting not, front one did

So, I apologize.

Matthew Clark

Okay.

terms non-interest back Okay, we the what's then your expense in run rate, the for year? expectation of the can follow-up. And half of on

Edward Czajka

be Well, would to I expect for higher OREO previously little QX mentioned, QX. run be going expenses. QX rate but wildcard obviously, was similar is to than The our to there had a I

during just costs had pleased pressures are at quarter, you'll does side the not OREO to to etcetera, efficiency still it tell slightly, still we on ongoing. to on that under expense we we're to are have as of saw we a extent repeat, don't even lease things that but were see XX% in but XXX,XXX to go environment. XX see over will the lot continue Salary I down etcetera, people fortunately expense landed But the that in environment. in went You still pressures. though this have we continue Obviously, very up inflationary fixed the operate we ratio. we

Matthew Clark

Yes.

Okay. Thank you.

Operator

next ahead. Our will question from Please Davidson. come Tenner go Gary of D.A.

Gary Tenner

Good morning.

an follow-up bit up some growth, even questions. would margin rate going imagine to, from of income in environment a little pace to the slower pretty side. of significantly loan just go I And the on wanted Just presumably your interest is

little surprising that hike So, full basis me XQ Ed quarter's you presumed the combination about of get a and for would quarter the Li as – doesn't XX of expansion XQ. better expansion you the than NIM it worth a next that is most to in June of and third outlook point hike get week benefit a talk when for

second of your now deposit into maybe or rates deposits for a like quarter you of, in give just could that us the some terms sense what deposit other look kind pretty kind of because to imply beta, elevated of Speakers]? So, a right CDs [Multiple seems significantly

Li Yu

Okay.

rate two because First [ph] operating that time, question June, in that during And in our to answered be QX there's okay. increases of loans is was those period May many than [four] times. the lower that

And loan is than affecting okay. June [with mean, especially, less I every not the increase] was affected. one month, So, [ph]

floating. will having loan now We're you XX% I As that loans in our not second is is total an of showing reported to now, portfolio expecting that quarter. be increase these the earlier fully

good, that the will major nation. you that instance, deposit likely the earlier, the HSBC, quarter is and highest for always also see is all time. it in expansion The banks, be deposits said as So, I pretty probably but is reason their something third I control Citibank will a

[ph] paying Goldman Sachs look people Bank [indiscernible] And is X% was at records, [positive] effectively maybe. offering TCDs amount. Citibank Markets is If X% account] [deposit at having upside and adjustments [ph] the you kicker,

picture, will that speed we in a bank expect every So I the that increases. will Water I in situation And of as [businessman] matter particular level, are the cost reported, in [ph]. each terms its seeks and it's to with lowest the be different getting deposit also see this always level. a institution

banks, many Our is so the investors different and than profile many consumers. of

in pace to little adjustments. So, we're faster us a expecting our cost bit

Edward Czajka

point, that offering back very rolls that right we're on you do on portfolio the bearing closely. side, obviously, on the add on, money said, transaction account [XXX] think their there. interest Mr. and Mr. portfolio they where to CD rolls CD one-year, To money are manage one-year And in we Gary, larger some off as how and asked I clients Yu’s know now And CDs. there it's but market Yu large [ph]

up. So, we keep to have

Li Yu

break rate in put very To place pay cleaning also illustrate the – And we are break making the [indiscernible] was have [indiscernible] April, see the holding customers just their that, CDs, when now paper. in their X%. are penalty, that the Those over account we in money customer changes. beginning we to it OTCD reinvest for waiting because all those They treasure low.

them are have of reinvested, them many not. Some of

to at invasive, stage the be quarter. It actions. these So, are is the that's mean, the of I the try that, fact. early I to don't but quantify tough

Operator

come ahead. Our will with next Please Terrell question go from Stephens. Andrew

Andrew Terrell

good afternoon morning. or good Hey,

Li Yu

Andrew. Hi,

Andrew Terrell

ask just in question, little a different maybe just And the fashion. margin

than south June. about average, net you of for X% still the that XXXX see from quarter put little interest would margin X% the us expansion full XX gave Do points think which of in You higher June you in level? just average, of shy a XQ us bit month basis guess I on just was XQ the

Edward Czajka

want question. Oh, expansion, I absolutely. good. see earlier know. will XX to we there's will I don't didn't expansion? necessarily misunderstood basis be margin we points of the but just see but the no it comment. margin be wanted fact temper that that on No, Yes. much, will I expecting to Not

Andrew Terrell

Yes.

and you're Yu, for become you'll kind Mr. even bigger of hikes I a profitable, in already picture really I putting solid coming solid rate is guess kind spot. through a even think guess capital would with up more, more question. already profitability, of I Okay.

reinvestment my question on the guess just have longer side. is And may given comfortable today? that that spending you're profitability there of then been profile? I on improved of investments Where the focusing any the on So, kind you and backdrop kind improved more focused term are more now and investments are on making rate

Li Yu

okay. forward, We actually stepping I think is consciously

know faster is. or we the that all, accumulating recession, we're to of about the severe how long recession is it the to worry economy, how capital make In the have in already but the meantime, First I game, coming when I this afford can in pace, here whether mistakes. or

When So, of it. in capital it to likely, And we're before we will holding much we we attractive. will the cautious I obviously probably to be additional are some commit dividend And prices increase. ready to is buyback. put more securities. we seek hope our the money going obviously also is would do

the are okay? do, that these So, would areas we

Andrew Terrell

progress we tempering asset then Okay. cycle? sensitivity, would kind about cycle, on of just some talk of sensitivity. much appreciate institutions their higher as other rate of you we a sensitive asset guess rate given kind approach, one about, another the that kind doing kind of tempering are how as that rate And consider you That's me, especially heard I through helpful. institutions, it. something We've is I talking sensitive for

Edward Czajka

just Andrew, ask – what tempering, elaborate talked how you can means? that rate can I you on about

Andrew Terrell

of that are trying I of swaps, mainly it just to assume would tempering sensitivity rate – with variety but Yes. I kind I lever? mean, doing in, just think just but the a things fashions,

Li Yu

be certainly to level Well, And want – we make adjust think fixed consider competitive. manners, pricing would our really just and loans rate later the every so market to obviously, seriously about of that more would this have to every stage okay? every that forward. may week, time, month when we that our get end portfolio. more but to We we in this of will this month, [indiscernible] about increase need it product we by know different our year to we by hold up all the reposition take to how is we going And careful in it I

Andrew Terrell

Thank you I great. taking Okay, for questions. appreciate my it.

Operator

Riley Securities. Moss question will B. of from Please Our next go come ahead. Steve

Steve Moss

liabilities on in question just here. you're one Maybe behavior. morning. Good changes obviously repricing seeing It last sounds like customer

these like how of days, it's wondering CD shortened? kind of sounds the book Just probably the of securities duration what's –

Edward Czajka

between it's X I right months believe and X now, Steve. months

Steve Moss

of you a – Okay. taping kind And of here get growth. on into that's quarter near just then guys Do levels? third more carryover you'd loan feel And loan term the maybe some in a had see terms we the helpful. for of trends? then great some pipeline typical off of here, quarter Just before that

Li Yu

you that don’t answer [indiscernible]. Why first

Nick Pi

level. quarter We look at think probably was to say, quarter. as XXXX Yu will to down will second pipeline be that mentioned it tapper and earlier healthy, the Mr. would not but and continues It second extraordinary quite our I the be [indiscernible] it in I

Steve Moss

on of [indiscernible]? new then Great. kind just pricing, guys And curious are where loan following loan on Okay. you

Li Yu

between on the our okay? I be floor, And be the [Indiscernible] will with floor most would that's of anywhere mean, the rate [month] pricing happening the [indiscernible] find in order. usually starting entry okay? [ph]. the an Loan range,

Steve Moss

Okay, terms – just great. kind And of hear then Mr. I of in

You concerned on economic about the more the about terms more or of reserve outlook. and a – concerned

So, about reserve? go kind thinking tracks are guys forward the we factors add do we you do be reserve expect are the of as you qualitative at – provision to – – to the going probably more to expense just or you maybe loan growth? how how think What's

Li Yu

qualitative want answer probably but I qualitative is already that, will industry, to conferred tell let you, is our number Nick high. I to our factor

Nick Pi

time. our are Currently, this Yes. than groups peer at higher we

that reserve both mix and answer Steve, reviewing little lying supporting side. economy was also your qualitative the imagine a as kind factors to trying our question, cautious to side and kind a a as still posture so on to indication conservative quantitative bank uncertainty kind of kind also applying, of it's it ahead, when far of be of exposure broadcast side. bit for lot continuously a So, there's the few Because and of

back, So, GDP there's and things, improvement expected. I supply coming hiring, and up do This negative know. have we client chain than and disruptions, some negative of the we initial maybe freeze morning, higher rate

sales side, time. still good at On we this [indiscernible] have the we other have and retail

dropped a been bit. it's decided we While little

bit to satisfy [pass economy bit checked So, we QX, our time external still pick definitely Mr. up a at this look [ph] like a reserve reserve. cautious, kind the are when of we and rate] like more we we little little on just Yu? factors a

Li Yu

have I Well, nothing add. thank to more you.

Steve Moss

Okay. One for one me. last

desirable kind Just to something order books the being, I mentioned on here? the recall wondering property here, off disposition, could the near future just in of on is that the status guys be on property, you your

Li Yu

that. Nick, you like I answer to

Nick Pi

Yes.

a I title property. reputable And QX house We officially ready hopefully rid the or the this on we'll by the OREO work are for of believe is [indiscernible] with QX This the [indiscernible] local get sale. and and for aggressively coming Friday, now well get marketing. market put broker we

Li Yu

[ph] house] with the the on is [indiscernible]. property [luxurious XX,XXX By this a the above foot way, square

labor that's so-called in nice general, So quite partner. a

Steve Moss

right. there. appreciate Well, I you thank you very All hear it. much. I

Operator

Our Coffey go ahead. next Tim with question come from Janney. Please will

Tim Coffey

to loan is Thank ask a letting Great. say low that for annualized XXXX rate? to say, Thanks some you. If revert me double level, growth digit questions. growth of does kind that imply going

Li Yu

XXXX, in certainly [now] hopefully of we to can So, the high-single low-double, we [ph]. maintain guiding which growth same level Yeah, low-double-digit okay? a that was to XXXX is

Tim Coffey

Okay.

different narrow the hike, – if now? say great. line this last but all appetite way – then, the back bringing a a the And bit for the been broker that seems right deposits? balance what's range, of more in situation it's Okay, take maybe you been Ed, kind So, rate has going on to

Edward Czajka

one-year pay mentioned me money think now. that up manage Tim? We the when runoff. deposits, you did X% of right We appetite deposit you and Did not the have retail didn't you QX broker that. And prepared that's is it. no to why all hear caught for let at certainly I to wholesale QX market replace in chuckle to when we get. look brokered growth money market. matured Obviously, We the not any from the We're

very but those appetite could below we we to So, money it's been right brokered certainly want for in as a the we to have obviously stay that watch, of now, no future, and limitations limitations have but interesting change dynamic well anyway.

Tim Coffey

my were very Thank Those much. you understood. questions. Okay,

Li Yu

Thank you.

Operator

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

Li Yu

Thank very much. you

please phone further on back. you the usual will any Thank As questions, have us you for bye. attention. stay we if your Bye, call and

Operator

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

now may lines. disconnect You your

Preferred Bank (PFBC) 21 Jul 222022 Q2 Earnings call transcript