PFBC - Earnings call transcript Q4 2024

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Operator

Good day, and welcome to the Preferred Bank Fourth Quarter 2024 Earnings Call. [Operator Instructions]

Please note this event is being recorded.

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

Jeffrey Haas

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

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

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

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

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

Li Yu

most of healthy first every personally you wish use new Thank you opportunity observed to XX most like new day under of a I'd this Lunar one and January a is which a and very year year. alendar, I much. happy to

compares XX.X%. with assets well We income with peer Bank. net or $XXX and on Both was of group the closed Now equity was investment $X.XX. numbers of average. okay. a XX.X%, Return with industry the very million, out year on Return Preferred

to the our in amount was roughly of fourth X $X.XX over impacted slow rental $X.X $XX.X million. industry, correction to years The basis. after-tax growth net equal million number XXXX exceptional. expenses okay? This a the We not the income the negatively $X.XX year on by a for banking the year This nonrecurring share. expense a accumulated was too are quarter, adjustment total For or is

of loan for moderate but growth and deposit growth Our line very the with compared year X.X% the X% average. much previous was industry of in probably year, to

Looking present, at activity significant don't yet. forward, we the see as increases

good loans XX% reduced quarter. million progress For loans in will made reduced credit further criticized has progress the $XX in front. new the during improvement. from And the XX% quarter, see a year this million, area. $XX we Nonperforming hope fourth have the to We

loans to effect unfortunate there wildfire The significant And our may damaged. suffered estate damage. community. home of of Early so Gratefully, significant one employees' indicated property very commercial our be real also, Angeles has seems significantly personally, brought see be none any loan that our mortgage event unaffected. portfolio Los be damage pleased to may survey to I'm

homes. and dedicating Bank our businesses will our be help best to communities, We rebuild at effort our Preferred

in In has year Board $X.XX December, to $X.XX in beginning increase from an payable January our announced dividends in XXXX. this

And from We the end total also million. on book at ratio the value XX.XX% shares I improved the for common $XX The repurchased to tangible stock to XX.XX% of year leverage actually of common stock mean of also consideration $XX.XX has XXX,XXX capital beginning from improved of $XX.XX. our year. in

year performances us in to continue Preferred you the our Bank looking persistent All of is very Thank XXXX. much. forward at

we ready Now questions. for are your

Operator

[Operator Instructions] The first with Terrell question Andrew Stephens. from comes

Andrew Terrell

heavier the loans. off with. margin of the mean I check to of kind want here rate I on mix start considering in floating just to

to thoughts wanted that your influence basis X just first did In maybe bit whether carryforward into your quarter, of there quarter? kind fourth I of reads the negatively or impressive into points really obviously down head a on guys more early as just the or of the marginally thoughts kind we was any get job. maybe or could here XQ margin on a kind You so.

Li Yu

My -- major add my in personal comments. have I quarter. first would not feeling, would have on it My a to effect

also the the the that not We change in quarter. look- would looking Fed just rates first

change X.X the FFO years. the has margin -- the growing about sensitivity So been of

it. So it seems the shown be in in first to results quarter

my quarter affected maybe there relatively Ed, from slightly stable. to personal be First estimate, is will relatively not anything stable much add?

Edward Czajka

get December Andrew, was spot of we're further I'll that the I comment, the spot X.XX seeing question to But the Yu's to compression a the because Mr. of -- see you today, the X.XX%, on quarterly can pattern with you give where sometime know lot at. call the there. Yes. just for not margin from NIM

in very Xs So very, QX. I still high the we're think going into

Andrew Terrell

Got it.

But here. the amount Okay. have then at to in deposits formality was the new of first the up time Yes, kind of the do rate I the rate quarter question spot and what on out and the going offer repricing coming you is they're say is?

Edward Czajka

X.XX. just We -- million at coming $X.X in due excuse QX me,did me, Billion, a I average rate million? our weighted under have at excuse of say about

side costs. down So CCD that come we'll to for look terms on the in funding continue of to

Andrew Terrell

maybe offer. -- then the And yes, range of

Edward Czajka

are below now that. rates offered Yes,

Andrew Terrell

You of kind rates? range of a offered had

Edward Czajka

wide the in based maturity in and rates on depends term. nationwide but not our deposit it Right amongst now, terms duration. we're local our own on seeing Well, dispersion only of area a very

mid-Xs. Xs we So priced the say, but we're to it suffice to the have accordingly, low from anywhere

Li Yu

And so-called and flexible a Andrew, has Bank Preferred many is depends that our New Chinese Asian brands that to to Actually, the competition. running on them. with stay of locally community Year special compete also in

Andrew Terrell

Yes. Yes. Understood.

and expect get I on of on continued then buyback to dividend then we should of wanted And the Okay. repatriation quarter And buyback some thoughts obviously, capital, XXXX. year? I whether the specifically, you utilization the thought announcement. into in just your the capital saw this

Li Yu

growth kind of continuous also total loan pricing the a of deposits the then the these probably ratio, level kind calculation prospect and this between consideration. depend stock and capital of and the Buyback will on

things would mature So speaking, is basis. friends low local continuous multiple selling we're But being setting our ] at the [ a some earnings all the day. of comparatively these XXx on

staying if a depressed, obviously about thinking chance there's our So stock we're buybacks.

Operator

The next question comes Sandler. Piper Matthew from Clark with

Matthew Clark

think choice, the but let's year-end, I have deposits don't at on I rate a ask if had ideally? spot it you about

Edward Czajka

deposits rate Matthew. spot on The is X.XX,

Matthew Clark

And December year-end? or is that for at

Edward Czajka

December. was That

Matthew Clark

Okay.

how start expense expense as on and in of work here you a guess part of then the a on might kind growth? new year? you to planning And us run the that think Okay. for you're any where give rate I about sense projects

Edward Czajka

first do we to if will the full things. talk of year, a have Well, number I I about want the but talk okay. that's quarter, don't about

So funds. be making going have donation we're excuse to fairly to wildfire healthy relief wildlife far, the probably local me, --

will payroll We're to we have going expense. with compensation elevated do payout. normally that our donation QX, also in So taxes as increase the incentive

that, services, running professional due we're In normal the has legal than to assets of addition higher been working X specifically to through.

$XX at So right looking about now, expense million for QX. I'm noninterest at

Matthew Clark

do how $XX charitable And you be? contribution Okay. the that expect much million, of

Edward Czajka

X have to figures, but absolutely, about a going low going we're today, be to it's Well, figures. to that mid-X mid later -- low meeting

Matthew Clark

Okay.

tend stuff. us exclude to that Some of

want make sure. just So I to

Edward Czajka

$XX million.

Matthew Clark

us the of And a us maybe the they of reserved just previously just makeup a Or quarter. just us that upgrading get the just but then shifting -- us off on expectation and to this service? your some And give function kind the of Okay. and for, then your done give of helped have I just criticized. for Great. in situation kind credit. criticized, were more credits just how -- of charge-offs makeup or sense for on there. Can of is terms remind color what know you rates of outlook that's remind

Li Yu

Nick, answer you the will question?

Nick Pi

charge loans, because Phil, some it's decided the resolutions in charge-off well moment. our at of settlement we recovery whether impaired recognize the resolution the in first that future actually and of any or and of to delay

settled So with we're the criticized, credit in the be couple loans or QX. as QX dropped of a and to substantially. we credits collateral, the the is those I a also off going will that probably for resolved release nonaccrual paid have loans And quite of with the to of in some believe, charge upgrade mentioned the probably also refinanced of are be and scheduled loans through we additional few other and our

criticized should somewhat for loans a dropped be QX, we believe in [indiscernible]. So

Operator

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

Gary Tenner

the about was not curious comment levels. really I activity about any increased seeing

very a be or loan think, most would You the there churn all, not portfolio Is the point versus base? production in growth, at your happy banks had this X.X% at customer building our with. year, for pipelines payoffs which . I within

Wellington Chen

always factor. is the churn the Well,

C&I the and It's bit do line of short-term we the As C&I so you also see know, credit. loans nature you our churning. down, and And on a quite of up can people. the revolving bank, side,

feel expanding bullish a bit And and all and so over little year-end, the increase their that. business people

So -- our nature the that's what team. that's of

Gary Tenner

Okay.

activity more a increase So what's is levels sustainable this missing at in point.

Wellington Chen

Yes.

Li Yu

stage, no. that it entire actually, banking feeling Well, think so this us, situation I far at moderate. including earlier, is be The the industry, stated will

Edward Czajka

activity. certainly still payoff the activity has is a little been There to higher. But Wellington's point,

Gary Tenner

increased said if the done I'm hiring relatively But loud is don't in be anything there thinking activity talk lenders activity to anything? on just of remain to the full want expenses. you try levels about through know you drive to -- that. I I terms Ed, appreciate And to out lower, year or or

Edward Czajka

question we of on other relationship terms always a business that? The to expense. budgeted the do March. as have going But certainly, continue annual to lot we which we planning, in forward obviously, we're as development in certainly our as add increase. we in have execute IT new occupancy initiatives to expense going middle officers adding well Well, forward, how we and certainly that's individuals the a personnel branch to right -- of -- well well, will for officers. becomes expect really do Manhattan In establishing And also open of costs

Operator

The next question Tim Coffey comes Janney. with from

Timothy Coffey

as loan If is you on of a any of well a I short about see question Do to maybe growing portfolio. term the securities of kept liquidity. instead right on that now? question it and Liquidity balance keep sheet, that more can stick strategy lot growth change you reason

Edward Czajka

million Tim. made purchases the last over X yield you X because treasury $XX timely the of purchasing in in average XX-year. over for we've at specifically an been treasuries, We or about about the thank question, so, weeks Very last XX-year So X.XX%. weeks

been trying pretty taking a that's been while. -- of longer to the curve, take I done first quite times the some of the have XX-year because exceeding we've X of Fed well we've advantage this is displacement going you on the the think on in So of funds end

Timothy Coffey

and goes then good this to to on? kind of That's Is just kind look how hear. later Okay. try is this Or salvo? of it additional see an

Edward Czajka

Yes. was fashion, continuing it relative Take certainly are on. and some looks a like long-term foresee not Tim, where work what in see right going later historical here but at given Yes, to the I that time to now -- fashion a then us rates. look start money rates in to to to put we're don't

Timothy Coffey

And where feels you think then ratio. been down my I'm the ratio 'XX. of coming there that course And It's the allowance on company was having other level wondering, the comfortable is at? question throughout a

Li Yu

Well, answer that? Nick, do want to you

Nick Pi

Yes. There are factors. several still

stress and have and on the take slowing of the also this the pressure also the economy. local qualitative because watch to, at still a Congress, internal out changes the which our reduction, know And impact business economy of of economy. to calibrating that customers policy and kind reason moment, posturing high a don't have to We administration which the also the LA risk Fed of cost quantitive like course, impact as and new may from some give and may and also, moderate We in well also our fires. we financing the put to down models

So factor have all those to we still in.

be I based low with do really the those believe improvement. should trend, current believe reduced. cause everything that believe on quality reserves bank, However, our should we be points future mentioned any that I gradually all the to and not We trouble

$X.X charge-off, at million So by we're add-on X.XX%. still

mentioned things those want try to as However, we earlier, I first.

also believe in And reduced X.XX% moment. be I so peer the with range, long to X.XX% which our is banks run, I at in should line it to believe this

Li Yu

the okay? philosophy a fourth that, the could to fully the charge-offs the fully bit previously in or aggressive Our all little reserve finally about once reason to is else more that's why in as slightly be So reserved charge quarter So X.XX, peer and X.XX identified year, higher when reserve first been we starting philosophy. our group, than okay? these is That's from always weaknesses that the last ratio credits, why range. has our our in were

okay? X.XX, than our to group, think basis . Now XX higher points peer I at it's still XX

Operator

David [Operator James. Instructions] Feaster comes with next Our Raymond question from

David Feaster

to on the just like folks somewhat competitive payoffs Is you're wanted what seeing could kind curious activity the landscape? competitive payoff being for? loan playing off growth the Just that. now? Is you And alluded on it it of still sales? what if sounded Just kind asset of it to follow just seeing. you side, landscape, touch it I'm up you're Is curious the elevated.

Li Yu

Fourth able we sales buyers I quarter, speaking, make the finance transaction rates do a when previous transactional prices are to see I'd say to the new some mean compared easy is heavy correctly. quarter, payoff. the comparatively at down, of X to the

payoff the is elevated mostly activity. So

the loan on about stays the origination consistent So third on Our quarter, is book it. okay? this with

David Feaster

down see you the changed the you a -- much. from perspective in change have the any opportunities. pulse doesn't seen and it That clients? of coming curious, makes bit, Just kind your any sound with sense. seeing where like rates to landscape demand from you're Have Okay. of started And pipelines your

Li Yu

at of relationship views officer. really for come these customers our about willing of to safe on survey It's I a active enough to feedback generally, this I has market or invest, feel money kind we thing. of them be our do try They by, a the an to not have The you. abstract things very constant point lot think There's from lot it's a okay, down that to Yes. the them for because There's time. mean, the haven't of that getting just rate enough sideline. to on people

So is can feedback best get customers. the this we that from our

David Feaster

the Is in off What XX do the Just Is -- got we've view. of basis slower in it them another points rear election you gets the sidelines? kind it think inflation? cuts?

you off think get some sidelines? what the guys those Just do of

Li Yu

think question probably for some understand than how I much, that okay? to further now, takes Well, I is respect cut forecasting to about more I are think costs But year. Right Chairman[indiscernible] a in that probably it you X. the

David Feaster

just had but lot you pledging through credit And credit rates on kind could hoping additional rate are the encouraging. healthier are like in, system. if working seems squeeze you're was the impacted borrowers. success just higher I of floating to it going then could seeing Obviously, trends way X borrowers, Okay. side, clients has back I you've Things the touch more the the of a with collateral. their

you're Just of the could you the seeing just touch on on health broadly? your borrowers and what credit

Li Yu

the else Nick first, you Well, answer can on. what to okay, and add we I. want see and

Wellington Chen

The first healthy. clients are health of very the -- our

our think we -- plan relationship oriented. I are

sponsored -- are So fully all they we our loans and and multiple flexibility. have

the put our get benefit it some we remargin it certain from where or that is will loan vessel. we issue, into any strength that's if we and time work out borrow, So of a lending. the additional project Yes, collateral up

Li Yu

add want you to anything? Nick, do

Nick Pi

customer our about our sponsors very mention strong Wellington especially have behind it. like just Yes, loans, we

step sponsors to bank the believe work weather the is each whenever issues, those out I So to up with work will and there with we'll crisis. other concern

these you So what well. during see can the past high environment, rate quarters, few are pretty

Li Yu

is the us the of starting philosophy factor mitigate is terms to real fairly underwriting the the is, of And is that during okay? X situation fact the is more like customer the strength. they of have happening. guarantee to underwriting, the of It's loan, customers good And of whatever the assets. okay, we find to the group [indiscernible]. you our from loan of serious a cash top out the in [indiscernible], most the in time, obviously, different But value case question that dominant So flow, on And tend estate if that property okay? be to going in can

David Feaster

service Have That's Okay. rates net start improve helpful. you as see started down? have to come to

Li Yu

be come service seems it that side we the rates income improvement Obviously, of see But level rate to the down. also gradually stable.

Operator

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

Li Yu

you. for We're Thank positive We XXXX. Thank happy year are very just XXXX. you also so much. our with

Operator

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

may now You disconnect.

Preferred Bank (PFBC) 28 Jan 252024 Q4 Earnings call transcript