Preferred Bank

Good day, and welcome to the Preferred Bank First Quarter 2026 Earnings Conference Call. All participants will be in a listen-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 touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Evan New.

Please go ahead. Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the first quarter ended March 31, 2026. With me today from management are Chairman and CEO Lee Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward Chayka, and Deputy Chief Operating Officer Johnny Suh. 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 on 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 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. Li Yu. Please go ahead. Thank you very much.

I'm very pleased to report the first quarter net income of $31.3 million, or $2.53 a year. This quarter's net income was negatively impacted by the placement of a large relationship to the non-performing status. If you recall, probably February and March, we have issued a press release informing all of you that we have placed a nine-loan relationship on a non-accrual basis. This relationship consists of two C&I loans of a small $2 million, and the rest are all in commercial real estate loans. in a total amount of only $77 million on the non-accrued basis. Shortly after the announcement, we're able to sell one loan at par of $9.4 million. And on April the 1st, we have sold another two loans at par for $48.5 million. So as of today, we have effectively reduced the relationship by roughly 50%. And we'll continue our progress in the second quarter and in the third quarter, hopefully by the time that we should have substantial resolution on this situation. Loan growths is moderate 1.1% sequentially, and deposit growth was moderate 1.2% sequentially. Market competition, especially in the pricing end of it, has been very severe. It seems to me that The war in the Middle East is trending toward more stabilized basis. I hope our country will soon concentrate on our economic affairs in the ensuing months. Our net interest margin was 3.47%. 3.57% for this quarter, which is down from 3.74% in the previous quarter. Again, the reversal of interest income is the main reason. Since this reversal of interest income is non-recurring, we're very hopeful, especially when there seems to be no imminent rate movements. We're very hopeful that our net interest margin will rebound in the ensuing quarters. Our operating overhead on interest expense has been stable and will continue to keep it on a stable basis in the future. And for your information, that the bank has repurchased roughly 400,000 shares of our own common stock for the total consideration of roughly $89, $90 a share. Thank you very much. I'm ready for your questions.