Preferred Bank(US:PFBC)2025-10-21 19:00Financial Data and Key Metrics Changes - The company reported a record earnings per share of $2.84 for Q3 2025, with net income of $35.9 million, showing significant improvement compared to previous quarters [5][6] - Nonperforming loans decreased from $52 million to $17 million, primarily due to the foreclosure of a $37 million loan, which has since been sold for a gain [6][7] - Loan growth was 2.3% or $133 million, while deposit growth was 2.5% or $151 million, indicating a positive trend in customer optimism despite economic uncertainties [7][8] - The efficiency ratio improved to less than 30% due to increased net interest income, with operating overhead remaining steady [8] Business Line Data and Key Metrics Changes - The company experienced reasonable loan and deposit growth, with a focus on maintaining credit quality metrics stable [7][8] - The loan portfolio composition shifted, with 29% being fixed or long adjustable rates and 71% floating rates, of which 98% have floors [15] Market Data and Key Metrics Changes - The average margin for September was reported at 3.87%, with the cost of deposits at 3.36% [26] - The company has about $1.27 billion of CDs maturing at an average rate of 4.1% in Q4, with new CDs coming in at mid to high 3% [28] Company Strategy and Development Direction - The company aims to increase demand deposits while managing the cost of non-interest-bearing accounts strategically [40][42] - There is a focus on proactive interest rate management, with a significant reduction in floating rate loans from 90% to nearly 70% over the past year and a half [59] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about loan growth in Q4, expecting it to be similar to Q3, influenced by recent interest rate cuts [35][36] - The company anticipates a continued trend of refinancing as borrowers seek to lower their interest burdens, which may lead to increased payoffs [56] Other Important Information - The company repurchased $6.3 million of its own shares during the quarter, with additional repurchases of 128,000 shares in October for $11.2 million [8][19] - An error in calculating diluted earnings per share for the first half of 2025 was acknowledged, resulting in an underreporting of net income by $5 million, which has been corrected in the current report [9] Q&A Session Summary Question: Update on loan portfolio's floating rate component - As of September 30, 71% of the loan portfolio is floating rate, with 98% having floors, but many are not currently in the money [15] Question: Price sensitivity around the buyback - The buyback strategy is measured against income levels and share prices, with no set formula for the amount [17] Question: Average margin and cost of deposits - The margin for September was 3.87%, and the cost of deposits was 3.36% [26] Question: Expectations for near-term expense run rate - Non-interest expense is expected to be around 22% to 22.5% going forward, with increases anticipated in 2026 [38] Question: Insights on deposit composition and flows - There is a strategic focus on increasing non-interest-bearing demand deposits, but competition for these deposits is increasing [40][42] Question: Expected OREO gain in Q4 - The expected OREO gain is projected to be in the range of $3 million to $4 million [43]