Preferred Bank (NASDAQ:PFBC) Q2 2023 Earnings Call Transcript
Preferred Bank (NASDAQ:PFBC) Q2 2023 Earnings Call Transcript July 20, 2023
Operator: Good morning. And welcome to the Preferred Bank’s Second Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask question. [Operator Instructions] Please note, this event is being recorded. I would like now to turn the conference over to Jeff Haas of Financial Profiles. Please go ahead.
Jeff Haas: Thank you, Allan. Hello, everyone. And thank you for joining us to discuss Preferred Bank’s financial results for the second quarter ended June 30, 2023. With me today from management are Chairman and CEO, Li Yu; President and Chief Operating Officer, Wellington Chen; Chief Financial Officer, Edward Czajka; Chief Credit Officer, Nick Pi; and Deputy Chief Operating Officer, Johnny Hsu. Management will provide a brief summary of the results and then we will open up the call to your questions. During the course of this conference call, statements made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions that may or may not prove correct.
Forward-looking statements are also subject to known and unknown risks, uncertainties and other factors relating to Preferred Bank’s operations and business environment, all of which are difficult to predict and many of which are beyond the control of Preferred Bank. For a detailed description of these risks and uncertainties, please refer to the SEC-required documents that the bank files with the Federal Deposit Insurance Corporation, or FDIC. If any of these uncertainties materialize or any of these assumptions prove incorrect, Preferred Bank’s results could differ materially from their expectations as set forth in these statements. Preferred Bank assumes no obligation to update such forward-looking statements. At this time, I’d like to turn the call over to Mr. Li Yu. Please go ahead.
Photo by Towfiqu barbhuiya on Unsplash
Li Yu: Thank you. Good morning. I am very pleased to report that the second quarter net income of Preferred Bank was $37.9 million or $2.61 a share, okay. For the quarter, our deposit has increased $181 million under a very, very challenging environment. During the quarter, we have seen strong movement of deposits from lower cost deposits to higher cost deposits, and thankfully, as of June 30th, this movement seems to have moderated. Our bank’s uninsured deposits is 39.9% at June 30th, while liquidity coverage was 41.2%. Since early March, we have been working very hard to help the customer to restructure their deposits to be under the schedule FDIC insurance limit by using CEDAR and using ICS, okay. And we will continue to do so, but during the quarter, we have learned a lot of comments that are quite heartwarming.
Loan growth for the quarter was $61 million. The high interest rate environment has obviously depressed loan demand, okay? And the further increase in interest rate will likely to further depress demand. Our credit quality was stable. At June 30th, our total non-performing loans is less than $1 million, where the total non-performing assets is 0.33 basis points, okay. Classified assets is pretty stable compared to previous quarter and there were no charge-offs during the quarter. We made additional provisions to increase our reserve ratio to 1.4%, and during the quarter, we also written down our OREO assets for $1.9 million. Recently, we have received a lot of increase regarding our exposure in the city of San Francisco, okay, which we have a total loan exposure of $114 million in the city.
As you all know, San Francisco is a tale of two cities, where you have trouble downtown commercial area, connected financial district, connected underlying a little bay area is in trouble, while the other part of the city is at least business as usual. Our total exposure in those trouble area is $34 million as of June 30th. Preferred Bank has a very asset sensitive loan portfolio. Therefore, our net interest income has been resilient these quarters. We have always operated with a simple business model. We have always kept our margin reasonable and our operating costs low. With our strong operating cash flow, we will begin to buy back our own stock. At June 30th, total stock repurchase was 281,000 shares. As of yesterday afternoon, the total repurchase a little over 500,000 shares, okay.
Thank you very much. I am ready for your questions.
See also 20 Countries With The Highest Rate Of Diabetes and 6 Most Flirtatious Zodiac Signs.
To continue reading the Q&A session, please click here.
