Preferred Bank

Good day, everyone, and welcome to the Preferred Bank second 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 remarks, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Jeff Haas of Financial Profiles. Please go ahead, sir. Thank you, Cole.

Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the second quarter ended June 30th, 2026. With me today from management are Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward Czajka, Chief Risk Officer Nick Pi, 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 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 risks 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. Thank you all for joining our conference phone call. Good morning. We are pleased to report that our net income for the second quarter of 2026 was $33.5 million of $2.78 a share. This number compares favorably with previous quarter and same quarter previous year. It also exceeded our internal budget. For this quarter, we have been quite focused on the resolution of troubled assets. Non-performing loans during the quarter has been reduced $70 million or 41.5%. and likewise, the criticized loans have been reduced by $90 million, or 34%. With the large reduction in classified assets, or criticized loans, the reserve requirement on these items has been reduced. Therefore, our provision expense for the quarter is $1.2 million. Looking ahead, at June 30th, we still have three more loans totaling $60 million, non-performing loans totaling $60 million scheduled to be resolved in the second half of 2026. However, as each one of them is not in its own bankruptcy case proceeding. The exact timing of the resolution will be at the mercy of our legal system. This quarter we have satisfactory or good loan production activities, loan increased $125 million or two quick descending order basis. But if you count in the, we also made up the $70 million alone we sold, the actual origination effort was quite good. On the deposit side, it only increased $52 million are reporting 8% in quarter basis. We are aware nationwide all banks or the entire banking industry is reporting stiff competition in deposits.