Company Participants Conference Call Participants Matthew Clark - Piper Sandler Andrew Terrell - Stephens Gary Tenner - D.A. Davidson David Feaster - Raymond James Tim Coffey - Janney Operator Good day, and welcome to the Preferred Bank Fourth Quarter 2022 Earnings Conference 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 Management will provide a brief summary of the resul ...

Financial Data and Key Metrics Changes - The company reported a record net income of $35.2 million or $2.40 per fully diluted share for Q3 2022, with a return on equity exceeding 23% [9] - Loan growth moderated to 8.5% for the quarter, with year-to-date growth at 14.1% excluding PPP loans [10] - Deposit growth was recorded at 3.5%, with an increase in deposit costs anticipated to accelerate starting from September [10][11] - The net interest margin expanded by 60 basis points due to a greater increase in loan yields compared to deposit costs [11] Business Line Data and Key Metrics Changes - Credit quality remained stable, with classified assets moderately reduced and no charge-offs reported for the quarter [12] - The loan loss reserve increased to 1.33% of total loans, reflecting a $2.4 million recovery and $2.7 million in new provisions [12] Market Data and Key Metrics Changes - The company acknowledged the macroeconomic environment heading into a recession, prioritizing credit quality and management of deposits and deposit costs [13] Company Strategy and Development Direction - The management emphasized a cautious approach to loan growth, particularly in the real estate sector, due to reduced transaction volumes and higher standards for new loans [26] - The company plans to maintain a conservative capital strategy, focusing on preserving capital during potential recessionary periods [74] Management Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding future net interest margin (NIM) expansion, indicating that the pace of deposit cost increases is influenced by market competition [19] - The company is closely monitoring loan portfolios, particularly commercial real estate loans, but has not identified severe issues at this time [44] Other Important Information - Non-interest expenses increased due to inflationary pressures, with expectations for continued expense growth in the future [51] - The weighted average rate on new loans in September was reported at 5.99% [54] Q&A Session Summary Question: Outlook on NIM given recent rate hikes - Management indicated uncertainty but noted that NIM is expected to continue expanding, albeit not at the same level as Q3 [19] Question: Deposit growth trends and mix shifts - Management aims to maintain current deposit levels and is facing increased competition for deposits [33] Question: Concerns regarding loan growth in a slowing economy - Management expressed cautious optimism for loan growth, particularly in commercial and industrial loans, but acknowledged the uncertainty in the market [26] Question: Non-interest expenses and future run rates - Management confirmed that non-interest expenses are expected to remain elevated due to ongoing inflationary pressures [51] Question: Capital management and share repurchase plans - Management emphasized the importance of maintaining capital during uncertain economic times and indicated a cautious approach to future share repurchases [74][81]

Financial Data and Key Metrics Changes - Net income for Q2 2022 was $28 million or $1.87 per share, with a total of $54 million or $3.61 per share for the first half of the year [11] - Loan growth was $329 million or 28.6% annualized for the quarter, and 22.4% annualized for the first half of the year [11] - Deposit growth was $98 million or 7.3% for the quarter [13] Business Line Data and Key Metrics Changes - The loan portfolio consists of 13% fixed rate loans and 87% floating rate loans, with 76% of the total loan portfolio fully floating as of June 30 [16][17] - A provision of $2.9 million was made mainly related to large loan production [16] Market Data and Key Metrics Changes - Competition for deposits has intensified, primarily led by major banks, leading to an expectation of increased deposit costs [13][33] - The average margin in June was about 20 basis points higher than the average for Q2 [21] Company Strategy and Development Direction - The company is focusing on credit quality amid a looming recession and has begun a deep dive into its portfolio [14] - Plans for capital allocation include potential increases in dividends, additional share buybacks, and investments in securities when prices are more attractive [44] Management Comments on Operating Environment and Future Outlook - Management noted that while loan growth may revert to 2021 levels, they aim for low double-digit annualized growth [63] - The company is cautious about committing capital due to economic uncertainties and is monitoring the situation closely [44] Other Important Information - The share repurchase program of $32 million is progressing, with $24 million completed as of the call [18] - Non-performing assets increased mainly due to the payoff of senior loans on a property [15] Q&A Session Summary Question: What is the average margin in June and expectations for Q3? - The June margin was higher than the average for Q2, and margin expansion is expected in Q3, though not to the same extent as in Q2 [21][22] Question: What are the expectations for non-interest expenses in the second half of the year? - The run rate for Q2 was higher than expected, with Q3 expected to be similar, influenced by ongoing salary pressures and inflation [26][27] Question: What is the appetite for broker deposits? - There is currently no appetite for brokered deposits, and the company has allowed brokered money to mature without replacement [64] Question: How is the company approaching reserve levels given economic uncertainties? - The company is applying a cautious posture in reviewing both quantitative and qualitative factors for reserves, maintaining a higher reserve than peer groups [55]

Preferred Bank (NASDAQ:PFBC) Q1 2022 Results Earnings Conference Call April 20, 2022 2:00 PM ET Company Participants Larry Clark - Investor Relations, Financial Profiles, Inc. Li Yu - Chairman and Chief Executive Officer Edward Czajka - Executive Vice President and Chief Financial Officer Nick Pi - Executive Vice President and Chief Credit Officer Wellington Chen - President and Chief Operating Officer Conference Call Participants Gary Tenner - D.A. Davidson Matthew Clark - Piper Sandler Steve Moss - B. Ril ...

Preferred Bank (NASDAQ:PFBC) Q4 2021 Earnings Conference Call January 20, 2022 2:00 PM ET Company Participants 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 Conference Call Participants Matthew Clark – Piper Sandler Gary Tenner – D.A. Davidson Steve Moss – B. Riley Andrew Terrell – Stephens Inc. David Feaster ...

Preferred Bank (NASDAQ:PFBC) Q3 2021 Earnings Conference Call October 21, 2021 2:00 PM ET Company Participants Jeff Haas - Financial Profiles Li Yu - Chairman and Chief Executive Officer Edward Czajka - Chief Financial Officer Wellington Chen - President and Chief Operating Officer Nick Pi - Chief Credit Officer Johnny Hsu - Deputy Chief Operating Officer Conference Call Participants Matthew Clark - Piper Sandler Gary Tenner - D.A. Davidson Steve Moss - B. Riley Andrew Terrell - Stephens Inc. Operator Good ...

Preferred Bank (NASDAQ:PFBC) Q2 2021 Earnings Conference Call July 21, 2021 2:00 PM ET Company Participants Jeff Haas - Investor Relations Li Yu - Chairman and Chief Executive Officer Wellington Chen - President and Chief Operating Officer Ed Czajka - Chief Financial Officer Nick Pi - Chief Credit Officer Johnny Hsu - Deputy Chief Operating Officer Conference Call Participants Matthew Clark - Piper Jaffray Andrew Terrell - Stephens Steve Moss - B. Riley Securities Tim Coffey - Janney Gary Tenner - D.A. Davi ...

Financial Data and Key Metrics Changes - Preferred Bank reported a record income of $21.2 million or $1.42 per share for Q1 2021, compared to the previous quarter, which had 92 days instead of 90 days in the current quarter [8] - The bank experienced strong deposit growth of over 25% on an annualized basis [9] - Loan growth for the first quarter was $104 million, representing a 10.4% annualized increase [11] Business Line Data and Key Metrics Changes - The bank added a team of four relationship officers in Houston and five in California to meet increased loan demand [12] - The total deferred COVID-19 related loans decreased to $25.8 million, indicating stability in the credit matrix [13] Market Data and Key Metrics Changes - The bank's operating expenses were slightly higher due to quarterly specific payroll taxes, but overall expenses remained consistent with previous quarters [13] - The bank's loan portfolio is 82% floating rate, with over 99% of floating rate loans having floors [33] Company Strategy and Development Direction - The management is focused on becoming more asset sensitive and is actively preparing the balance sheet for potential interest rate increases [13][33] - The bank aims to maintain reasonable organic growth and is dedicated to expanding its client base through new hires and market penetration [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic recovery and noted that clients are increasingly optimistic about business expansion [11] - The bank anticipates continued loan growth in the coming quarters, although quantifying this growth remains challenging due to economic variables [34] Other Important Information - The bank's loan loss provision for 2020 was $26 million, with a charge-off of $5.4 million, indicating a stable loan portfolio [68] - The bank is managing liquidity carefully, balancing the need for deposits with the potential for reduced costs [70][71] Q&A Session Summary Question: Margin contribution from PPP - The contribution from PPP was negligible against a $4 billion portfolio, with a rate including fees around 2% [22] Question: Outlook for margin and loan growth - The margin prediction is closely monitored, with a payoff rate 90 basis points higher than new loan rates, indicating potential margin compression [23][24] Question: Update on Houston LPO and loan growth expectations - The Houston LPO has not yet contributed to loan origination, but there are several deals ready to close [44] Question: Loan loss reserve outlook - The bank expects a more stable loan loss reserve this year compared to last year, with potential releases in the future [69] Question: Deposit growth and client activity - Most deposit growth came from existing clients, indicating improved financial conditions among the customer base [54] Question: Time deposits maturing and pricing differential - Approximately $500 million in time deposits will mature at an average rate of 95 basis points, expected to be replaced at around 50 basis points [60]

Preferred Bank (NASDAQ:PFBC) Q4 2020 Earnings Conference Call January 26, 2021 2:00 PM ET Company Participants Jeff Haas - IR, Financial Profiles Li Yu - Chairman & Chief Executive Officer Edward Czajka - Chief Financial Officer Wellington Chen - President & Chief Operating Officer Johnny Hsu - Deputy Chief Operating Officer Conference Call Participants Nick Cucharale - Piper Sandler Timothy Coffey - Janney David Feaster - Raymond James Steve Moss - B. Riley Operator Good day and welcome to the Preferred Ba ...

Financial Data and Key Metrics Changes - Preferred Bank reported a net income of $17.1 million or $1.15 per share for Q3 2020, showing improvement compared to the previous two quarters [7] - The net interest margin for the quarter was 3.54%, a slight decrease of 3 basis points from the previous quarter, but improved to 3.61% when excluding PPP loans [9] - Return on equity was reported at 13.7%, reflecting the bank's efforts to restructure and reposition its loan portfolio [12] Business Line Data and Key Metrics Changes - Total deposits grew by 1.5% or $64 million, while loans declined by $14 million due to reduced deal flow in key markets [10] - The bank's loan-loss provision for the quarter was $9 million, with total reserves to loans standing at 1.58% [10] Market Data and Key Metrics Changes - The bank experienced a 53% reduction in loans receiving modifications under the CARES Act, indicating a positive trend in borrower repayment plans [11] - Nonperforming loans were reported at less than 50 basis points as of June 30, with proactive measures taken to charge-off and reserve for potential losses [10] Company Strategy and Development Direction - The management emphasized a shift from being an asset-sensitive bank to a liability-sensitive bank, focusing on reducing deposit costs and controlling overhead [8] - The bank is cautious about new loan opportunities, particularly in sectors like hotels and retail, due to current market uncertainties and pricing challenges [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the bank's ability to maintain profitability despite uncertainties, with a focus on credit management [12][48] - The bank's strategy includes preparing for potential economic challenges while aiming for growth through careful loan management [19][49] Other Important Information - The bank's total capital ratio increased by nearly 80 basis points from the end of the previous year, indicating strong internal capital generation [19] - The bank has submitted applications for PPP loan forgiveness, with expectations of recognizing fees throughout Q4 [73] Q&A Session Summary Question: Impact of capitalized origination costs on operating expenses - Management noted that loan originations were flat quarter-over-quarter, with PPP loan fees contributing to capitalized credit costs [17] Question: Outlook on commercial paydowns and loan balances - Management indicated that commercial paydowns have reduced balances, but net production showed some activity [18] Question: Capital priorities and potential buyback plans - Management stated that current focus is on uncertainties ahead, with no immediate plans for stock buybacks [19] Question: Tax rate expectations for future quarters - The tax rate decreased in Q3 due to a true-up of 2019 tax returns, with expectations for a similar rate in Q4 [20] Question: Details on charge-offs during the quarter - Management provided insights on charge-offs related to larger loans and the ongoing collection process [22][23] Question: Loan demand and borrower hesitance - Management acknowledged that while there is capital on the sidelines, borrowers are cautious about new investments [46] Question: Trends in loan deferrals and future projections - Management confirmed that deferrals have decreased significantly, with expectations of minimal amounts by year-end [40] Question: Update on classified and criticized loans - Classified loans were reported at $59 million, with criticized loans totaling approximately $139 million [70] Question: Applications for PPP forgiveness and fee recognition - Management confirmed that applications for PPP forgiveness have been submitted, with fees being amortized over the life of the loans [74][75]