PFBC - Earnings call 4 2023

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Operator

Good day, and welcome to the Preferred Bank Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded.

I would now like to turn the conference over to Jeff Haas with Financial Profiles. ahead. go Please

Jeffrey Haas

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

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

statements. prove For assumptions any description of forward-looking of results required any please SEC these If forth the materially could files or detailed the differ materialize its Corporation, and Preferred or risks these expectations these Preferred incorrect, to uncertainties bank Bank such obligation update Insurance Bank's statements. from in to the documents refer set with as of uncertainties, FDIC. Federal assumes no these Deposit a

go At call to this over Mr. Li time, I'd ahead. Yu. Please to like the turn

Li Yu

management earnings million our out quarter call. continuous that control. for conference and share. $XX.X morning, to margin a with $XX.XX share. of Good cost you I'm active the to We a net a our to million was phone year the ladies or you. pleased Thank attribute income this We report coming Bank's $X.XX and $XXX fourth Thank our earnings gentlemen. or closed record

stable. quality During quarter, remained credit the fourth

loans. reduction total a in have We criticized

and -- in of which real we'll loan. nonperforming foreclosure it are now nonperforming loans increase have we classified The be is in one process, occupied whereby support closer the relationship to the fully flow XX%. previously estate this an ultimate ratio However, increase with means insufficient was property of The The estate loan. is is cash collateral resolution. industrial to real relationship the the value loan

currently are this losses will NPL. there We projecting be on no particular

and of During the total for the charge-offs fourth million, quarter the losses loan leads there was on fourth then quarter, to X.XX%. a no were which reserve $X.X Provision loan

below was XXXX, year the loan is in increases level, historical deposit production with our For industry line however, the our and averages. new for

the with closer forward, it Looking projected that deposit believe of the demand. rate our of year, end historical be gradually. to continue will cost loan demand moderate. are hopefully, towards recover to the level the we Likewise, we decreases, will projecting And will

well, has the During put me let way. it the bank quarter, the other --

Our of the flow bank has generated free for cash year a significant amount XXXX.

announced the the to rest XXXX. We $XX also dividends January, buyback of we million another new flow capital capital have capital enhance beginning increase million shares $XX XX% a XXX,XXX the the of our position. of back also In roughly buy stock, and have used stock. own were to of announced our program used And, by cash we

opportunity of to to very we So are mindful for shareholders. looking return our capital

not that, which quarter, to believe begun and carefully the shareholder it normal, $XXX,XXX first ourselves return. in for process we the growth. better forward, also have level we $XX loss, beginning will I banking okay? return securities, sold And position that historical We yields. back certainly buy will our as restructure Bank of to Preferred capital hope the balancing We Also process, going the of we with for mean, to marked, be during does between is And same capital year they million the the securities security securities portfolio. see our growth, back are affect we XXXX, we'll And industry the in okay? already similar enhancement

much. for your very ready I'm you questions. Thank

Operator

today's question Clark Matthew Sandler. comes at from Instructions] [Operator Piper first And

Matthew Clark

a give the at what with renewal margin. on what how -- Starting the is have you rate? interest-bearing? coming coming December, up repricing, or visibility if was and up for total you Can at some on you then in give margin spot sense can us for if rates what's CD average year-end much And also us

Li Yu

Matthew. Yes.

all have that. You

Edward Czajka

in for The margin you as margin for it see, -- the X.XX% December. X.XX% December, spot quarter, was it's the

expect quarter from I the margin in forward the third. that Looking would quarter, we to experienced the a in decrease similar fourth first the

appear it are said, certainly be moderating. cost the moderating, does increases Mr. Yu deposit However, to as

In repricing, billion have we a X.X terms are little QX. that over of reprice about CDs that of ] we'll CDs [ in

Matthew Clark

that off in And people putting you're this the and what rates they're coming at state?

Edward Czajka

average is rate off The coming that's a that X.XX%.

terms quarter, the hold deposit first will CDs of the it's maturing take CDs. we're renewal of that's between belief, in moderation not because So cost in differences my and why seeing kinds this

Matthew Clark

a side. but active thinking might the about you deposit costs? moving larger few assuming book? are this kind that's I assume How the CD be given on how Okay. how year, CD some non-CD rate book on will with of you expectation for cuts then lag there And with is, be the conservative

Edward Czajka

market so the tied actually what funds. the of that into those -- money accounts accounts, we've some corporate done larger of money we've on Fed have, some we market part of Well,

significant our Fed know, we those when portion the a as funds automatically of portfolio. will in so market rate, And money some accounts reduction loan you down to, of come get a as

will be focused drive what when margin, the drive much income, interest the on per net interest the to but earnings seen pickup year Matthew, so so part rates interest what of margin volume Yu And se, what be past, won't a volume Mr. forward. latter going in talked we've it's how help significantly, interest economic not to the income in come going the forward about, in that our down net net loan will seen we've past income. alluding much be do we'll in loan going What decent up picks net environment,

Matthew Clark

your And one X this think, loan Okay. cuts on competitors X% and by NII with assuming, down X% X% year a to rate lot I growth. then guided to also larger X% of

think we the you in have I XX% currently you for low digits your and think, variable. single I have, year. book the of

just about has competitor Your under XX%.

any outlook, decline forecast? I So the year NII depends it but kind the rate mean, for of again, kind on on of based your this rate sense

Edward Czajka

volumes, tell certainty, to of to on going to Matthew. It's I with largely what the like you level expect be it be. able depend to would we

there's many variables call that income, interest net right to now. of too terms In

your know and have what You models balance their of. the lot sheet have guys of a models our and consists

are if income convinced So a decline certainly, there not be however, X, necessarily in X We're net cuts. rate for. see we're will interest there prepared

Li Yu

uncertainties aware them fact, that a the them facing, okay? You the than there's In affected portfolio many rated have our To so [indiscernible], of that's coming many are sensitive. some okay? it's we're extent, difficulty of less be majority is and them loan will very asset that -- for, others. of something Matthew, down, But yes, when

interest experience production, income we past the loan is net actually new with increased contribute can in that enough. hopefully, So

Matthew Clark

Got it.

sustainable is don't Okay. know And then here. how expenses, necessarily. decline I a that on nice

on just any rate? guidance So run XQ the

Edward Czajka

to in I'm XX.X% QX. Yes. it expecting between anywhere to XX% come in

us a you'll is it higher in for recall, QX every year. quarter As typically

Matthew Clark

on like it the bit then And buyback, Understood. Yes. sounds of lastly, a balance. a

by end a likely pretty the the active just were get it's that million is spread done the in finishing quarters. X of $XX but $XX out, it in you You bit Maybe expectation little year, latest the the million?

Li Yu

capital a on back are between operating big we We we're amount it cash which where at buy ourselves us ratio. that was the certainly do hope keep we actually which to that But means earning, of that. looking balance and what will looks forward like it, whole operation will projecting allow flow, out our

Edward Czajka

purchased The value just as at previous Matthew, we isn't and with the what proposition quite average being $XX of see it Yes. can you a share, the it an today's $XX is, price same over was. million,

there's value there. However, still

Operator

Tim next with question And from today our comes Janney. Coffey

Timothy Coffey

many with comments demand demand. rate your loans? basis more -- and points where do business the spur XX do how about wondering, for need cuts, say, you on follow-up -- cuts rate we a -- do to you Just I'm let's

Edward Czajka

That's Tim. a great question,

Li Yu

also also obviously, seeing a are on customers, our is with Tim, their conversation more they X basically it fourth bit little they'll there we cuts have investments. are, have and you quarter, or And ahead, our if really their production. be new based cuts, by the aggressive okay? And rate with more X being

You can see already it's more say, some progressive in should transactions. type how I of some already customers indicated of engaged our, that

catch feel the rate to, to they peaked some do able that mean, by. are when and opportunities So they the opportunity I has

sports is a Everybody XX is right increase, or the of national there, trend time. But okay? will now, of do sooner generally on XX we you basis, size has often basis hope crystal or a that really recut, have So the the predicting. later, it's is the it we it matter which and ball. to general okay? think the get But with also what We

Operator

next [Operator question D.A. with Davidson. Instructions] Our from comes Gary Tenner

Gary Tenner

you pipeline, of wanted fourth outlook fourth I in before has is just to question, quarter. that in the by that get what on think it you of the a the a transactions How the loan just quarter first folks kind translate commentary follow-up bit much -- levels? activity and little at least quarter of ask for to do activity the kind where trying to addressed year-end? that And

Li Yu

answer Wellington okay? have first, question will the I

Wellington Chen

good a that's question. Gary,

much I is we customer. to think like care looking of customer really -- that because pretty And that continue ourselves year it's we interesting for opportunities. last seems it raised our our take always to good

good it's not -- and there's close they whether sure, they to when a year-end it. it always so capture situation, want So I'm opportunity,

So sure year-end of factors. so the I'm all not

Gary Tenner

as the quarter. pointed in kind [indiscernible] the was next most Okay. then, first terms year And of before here the loan fourth quarter strong growth, into just of out, you heading of pipeline

So does early like what what from part tell? could 'XX the look you of

Li Yu

is This Yu, okay. Okay. Li

very past have quarter. will better pipeline, is is that into the the a than whether kind more third the third level in in XX okay you the than okay? than XX than year, but projected it probably, rush end, for year-end. not first days better stage, be -- days It there's end little be [indiscernible] do active of only because is seems it First, And year, know, we bit far, quarter quarter so seems But into a in like fourth up quarter. third the the quarter, to quarter, to a same it the of early

Gary Tenner

And remind your in floors what variable more. Ed, just rate then if that. Appreciate of start us need guess portfolio you kind amount matter? until you of cuts can I one do to

Edward Czajka

start they gotten before about this point, probably basis points XXX the... of cuts matter it's as XXX to we've At to rate with

Li Yu

an average. As

Edward Czajka

an average, yes. As

will some XXX, will immediate Some that sure. be and farther it's XXX . for around than be yes, But

Li Yu

There's was old the still in sitting a rate was in XXXX, real portfolio. XXXX. portion effective portfolio of our floor It that is

So -- there's loan about production is concerned, XXX some to for the XXX right basis points. of probably newer them is

Operator

question-and-answer to turn I'd concludes any session. final like team management This our you. to for back the conference Thank over the remarks.

Li Yu

thank you standard. much, our by that that think have -- think Well, we we we year very good a

So also that year would forward. much. coming be new keep profitability relative new in that will doing to you we -- the to things Thank year. we things the industry And hopefully, that very compared shareholder-friendly this the certainly like in going

Operator

presentation. conference We all Thank today's attending concludes This today's you. thank call. you for

wonderful now disconnect may your have a You and lines, day.

Preferred Bank (PFBC) 25 Jan 242023 Q4 Earnings call transcript