Preferred Bank

Good day, and welcome to the Preferred Bank second quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please do note that this event is being recorded today. I would now like to turn the conference over to Jeffrey Haas of Financial Profiles. Please go ahead.

Thank you, Joe. Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the second quarter ended June 30, 2022. With me today from management are Chairman and CEO Lee Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward Chayka, Chief Credit Officer Nick Pye, 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 banks' operations and business environment, all of which are difficult to predict and many of which are beyond the control of preferred banks. For a detailed description of these risks and uncertainties, please refer to the SEC-required documents 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 its 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. Lee Yu. Please go ahead.

Thank you very much. Good morning, ladies and gentlemen. Thank you for attending our earnings conference on call. I'm very pleased to report that the second quarter of the year was a record quarter in net interest income, net income, earnings per share, loans, and deposits. They all set a corporate record. Meanwhile, credit quality and efficiency ratio was stable. Net income for the quarter was $28 million or $1.87 a share. For the six months, it was $54 million and $3.61 a share. We are the beneficiary of recent Fed rate hikes, and we believe that we'll continue to be benefited by the future rate increases. Highlight of the quarter is the loan growth, which grew $329 million all, 28.6% annualized. For the first half of the year, the loan growth was 22.4% annualized. When they analyzed the outside loan growth in this quarter, And we have found that it was a combination of two factors. One is reduced pay off, pay down activities. Another reason is obviously that we had a strong origination activities during the quarter. In fact, during the quarter, April and May was extraordinarily strong. However, activities tapered off beginning June. As of today, the pipeline looks like that we're back to the level of 2021. Deposit growth was $98 million or 7.3% for the quarter. During the quarter, we have seen that competition for deposits has intensified. mainly led by the major banks. And we believe the deposit cost will continue to increase, in fact, accelerate in the remainder of the year. This is also true because our customers are basically businessmen and savvy investors. They are very good with their money. With recession looming in the air, our focus is also on credit quality. We have already begun to deep dive in our portfolio and so far we have noted not, did not note any deterioration, okay. We're currently in the third week of our regulator examination and I'm hopeful, I hope that there's nothing important will come out through this examination. The non-performing assets increase mainly due to that we paid off senior links on the property before close. Today this property was carried on a bulk roughly 50% below Appraisal values, okay. All other areas of the quarter credit quality such as classified assets and past due counts all seem to have improved from previous year. For the quarter, we have provided $2.9 million of provision that was mainly related to the large loan productions we have. As of June 30th, the bank's total loan portfolio consists of 13% fixed rate loans and 87% floating rate loans. Most of these floating rate loans do have floors. On June 30th, 76% of our total loan portfolio is now fully floating with the next rate changes. And with the anticipated July Federal Reserve action, we believe at the end of June, July, there will be only over 2 or 3 percent of our total loan portfolios is not floating. With this, we believe our interest income for the remainder of the year will increase. We also noted that deposit costs will definitely increase. We do believe the increase in revenue will be more than enough to offset the cost increases. Our $32 million share repurchase program is progressing. As of today, we have completed 24 million of the $32 million that was set aside to repurchase. We hope the whole program will be completed in the third quarter. Thank you very much. I'm out. I'm ready for your questions.