Preferred Bank(US:PFBC)2022-10-20 19:29Financial 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]