Preferred Bank(PFBC) - 2022 Q2 - Earnings Call Transcript

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]