Preferred Bank

Good day and welcome to the Preferred Bank First Quarter 2025 Earnings Conference Call. All participants will be in lesson-only mode. Should you need 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 note that this event has been recorded. I would now like to turn the conference over to Jeff Haas of Financial Profiles. Please go ahead.

Thank you, Jacob. Hello, everyone. Thank you for joining us to discuss Preferred Bank's financial results for the first quarter ended March 31, 2025. With me today for 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 risk 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 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. Good morning. Preferred Bank's first quarter net income was $30 million, or $2.23 a share. This quarter's net income was negatively impacted by an outsized reversal of interest income related to the elevated level of non-performing loans. It is also negatively impacted by a charge of our real estate over our yield in the amount of $1.3 million. The non-performing loans totaled is $71 million at quarter end, of which $66 million of the $71 million related to one relationship or two credits. This event is previously disclosed to you in early March end. The two credits, or two loans, have a collateral value which will protect the loan amount, and there are no loss compounds identified at this time. Total credit trend seems to be okay. The total classified, I mean, criticized loan portfolio is reduced $30 million from previous quarter and are roughly 20 percent, and there are very few migrations into this category during the quarter. The reversal of interest has also impacted our net interest margin, which is reported at 3.75 percent for this quarter. Without this effect, We internally estimate the net interest margin would have been much closer to 4.06% reported last quarter. This quarter, we have a negative loan growth of $6 million, equal to approximately 0.1% of our total loan portfolio. But our deposit increase 2.6% on the mean quarter basis. And the deposit cost is reducing as planned. Looking ahead, loan demand does not seem to improve much, mainly because we're currently under the uncertainty of a tariff wall with the whole world. This current situation is truly very much unpredictable, bringing many, many of the uncertainties, ranging from supply chain changes, you know, cost increases, inflation, or empty shelves, empty product warehouse. All these things can affect each and every one of our customers differently. So we have already started to monitoring our loan portfolio, we started by a thorough review of our trade finance segment of our business, which equal to approximately $200 million, a little bit over $200 million of our loan portfolio. And as time goes on, within the next ensuing months, realizing that the many uncertainties and their implications and their side effects that happened with this tariff war, we will continue our review process diligently. Thank you. I'm ready for your question now.