Preferred Bank

Good day, and welcome to the Preferred Bank first quarter 2023 earnings conference call. All participants will be in a listen-only mode for the duration of the call. And should you need any assistance at this time, 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. And to withdraw a 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 Larry Clark of Financial Profiles. Please go ahead, sir.

Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the first quarter ended March 31, 2023. 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 a preferred bank. For a detailed description of these risks and uncertainties, please refer to the SEC-required documents the bank files with the 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. Good morning. I'm very pleased to report the first quarter net income of $38.1 million. or $2.61 a share. We are satisfied with the results that was achieved during this very stressful quarter. The events of March truly humbled all of us in the banking industry. Personally, I'm very sad to see two good-sized banks went away in just a matter of hours, especially when both these parents had certain expertise in certain sizable industries, and they had been servicing or serving these industries faithfully, diligently in the past 20 to 30 years, only to see those customers are the first ones to run. In any event, the whole matter taught us a lot. And personally, I have the following observations. The textbook definition of transactional accounts being accord deposits need to be revisited. True. They are called deposits, but only during the good time. But in a stressed environment, they seem to be the first to run. I'm so very pleased with our TCD portfolio, not because we know exactly how much it costs us and how long we can have them. During this difficult period, we have not seen one TCD that ran on us, that run on us. The golden rule of not borrowing short and lend long or investing long, I guess you still But I want to tell you to do this, it is really a difficult process. Throughout the years, I don't know how many times we have to face the disappointment of our officers knowing their loans will be taken out or lost to the low fixed rate mortgages. But now, as we look back, it seems to worth all the agony in order to have a better balance sheet. We now must respect the regulator or government risk even more as a banker. If you recall in 2021, when we are all convinced the country's inflation was transitory. To be practical, how many of us, you and us, how many of us is preparing for a near 500 basis point interest rate increase in 2022? And now as manager of a public traded bank, we'll face each quarter like now with the earnings beat or miss. I can't help but think sometimes the things that may be good for a short-term fix may or may not, probably may not be necessarily good. for the long-term health of the bank's operation and the balance sheet. I wish all of our investing public would put more weight into the bank's balance sheet consistency and the long-term operation. Having expressed my personal opinion, I now must report to you our deposit situation. During the three days in March, March 9, March 11, and March 12, and March 13, okay, the three working days, Preferred Bank also experienced deposits outflow. The good news is we have a total of less than 10 accounts that pulled the money out. The bad news is that three of them is very good sized. For the quarter, our deposit reduced or decreased by 2.7%. As of yesterday evening, which is April 18th, we have our deposits increased 1%, back increased 1%. We're working very hard to gain back the deposits we lost because most of them have a borrowing relationship with us. But I do want to tell you that during the process, we have received many, many heartwarming phone calls from our depositors, from our customers, telling us they have faith in banking industry, telling us they have faith in us, telling us that we have a good balance sheet and we have good capital and especially we have good earnings. With their confidence, with their blessing, and I also believe it's our shareholders' wish We will continue to maintain a flexible balance sheet. We'll continue to maintain good liquidity. We'll continue to control our overhead like we always do. And we will continue to operate Preferred Bank with a simple business model. Thank you very much. I'm ready for your questions.