Preferred Bank

Good afternoon and welcome to the Preferred Bank second quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please say no to 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 and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. This time I'd like to turn the floor over to Jeff Haas of Financial Profiles. Please go ahead.

Thank you, Jamie. Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the second quarter ended June 30, 2024. With me today from management are Chairman and CEO Lee Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward Chayka, and Chief Credit Officer Nick Pye. 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 environments, all of which are difficult to predict and many of which are beyond the control of preferred banks. For 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 banks' 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. First of all, I'd like to apologize to all of you for pulling you away from the opening ceremony. And thank you for attending the conference. I'm very pleased to report that Preferred Bank's second quarter net income was $33.6 million, or $42.48 a share. This quarter, we have an annualized 8% loan growth and an annualized 5% deposit growth. For the quarter, we have a $9 million charge-off. The charge-offs are related to the loans that were previously fully reserved as of the previous quarter. and we had an increase in non-performing loans of $22 million. I have included some details in our press release for your information and for your review. We believe these MPAs are either fully reserved or are adequately protected by And the resolution of these non-performing loans will not likely cause any significant impact to our future earnings. It's worthwhile to point out the root of the loan losses came from the pool of criticized loans. This actually has reduced $13 million from the previous quarter. And the migration pattern also seems to be improving. We have always been fairly consistent with the operating non-interest expense and non-interest income. Going forward, I am not seeing any significant changes to these factors. And we have been working to reduce the access sensitivity of our balance sheet. We believe we're not far away from what we see as the optimal level for us. and the much anticipated and hoped for interest rate relief were not likely causing significant effect to our future income statements. A year ago, The bank announced a buyback program of $150 million. For the past 12 months, we have repurchased $72.5 million of our own common stock. The regulatory approval for the program has expired. We are now seeking for reapproval or extension for us to be able to repurchase the remaining $77.5 million. I'm pleased to report with the $72.5 million repurchase, with the $2.80 share dividend, and with the reasonable growth in loan and deposits, the banks TCE ratio actually improved by 53 basis points, just as we have planned. We attribute this to the bank's earning capability. Thank you very much. I'm ready for your questions.