Preferred Bank(US:PFBC)2025-04-25 19:00Financial Data and Key Metrics Changes - Preferred Bank reported a net income of $30 million or $2.23 per share for the first quarter of 2025, negatively impacted by a significant reversal of interest income due to elevated non-performing loans [6][8] - The net interest margin for the quarter was reported at 3.75%, down from an estimated 4.06% in the previous quarter, primarily due to the interest reversal [8][13] - Total classified loans decreased by $30 million or approximately 20% from the previous quarter [7] Business Line Data and Key Metrics Changes - The bank experienced a negative loan growth of $6 million, approximately 0.1% of the total loan portfolio, while deposits increased by 2.6% on a linked quarter basis [8] - Non-performing loans totaled $71 million at quarter end, with $66 million related to two specific credits [6][7] Market Data and Key Metrics Changes - The bank is closely monitoring its trade finance segment, which constitutes over $200 million of its loan portfolio, due to uncertainties arising from the ongoing tariff situation [8][9] - Management indicated that loan demand is not expected to improve significantly in the near term due to the unpredictability of the tariff war and its impact on supply chains and inflation [8][30] Company Strategy and Development Direction - The bank is taking a cautious approach to underwriting loans, particularly in the industrial property sector, which has seen increased pressure on cap rates [51][52] - Management is actively engaging with trade finance customers to assess their responses to the tariff situation and to mitigate potential risks [48][50] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the potential impact of tariffs on property values and overall loan demand, indicating a "wait and see" approach from many customers [30][46] - The bank is prepared to adapt its strategies based on customer feedback and market conditions, emphasizing the importance of understanding each customer's situation [50] Other Important Information - The bank has a buyback program with $65 million available, having repurchased 532,000 shares in early April [24] - The normalized expense run rate for the next couple of quarters is estimated to be between $21.5 million and $22 million [23] Q&A Session Summary Question: Margin outlook excluding reversals - Management indicated that the margin for the quarter, excluding nonaccrual reversals, would have been 3.94%, which is better than anticipated [13][14] Question: Details on non-performing loans - One of the non-performing loans is expected to be sold at par, with a collateral value supporting the loan amount [20][21] Question: Loan interest revenue decline - The decline in loan interest revenue was attributed to interest reversals and the impact of rate cuts from the previous year [40][42] Question: Trade finance portfolio risks - Management noted that the trade finance segment is being monitored closely due to varying impacts on customers based on their supply chains [37][38] Question: Positioning in the current economic cycle - Management is taking a cautious approach, focusing on understanding customer reactions to the tariff situation and adjusting lending practices accordingly [50][51]