Release Date: April 25, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Preferred Bank (PFBC, Financial) reported a net income of $30 million or $2.23 per share for the first quarter of 2025.
- The bank's deposit base increased by 2.6% on a linked quarter basis, with deposit costs reducing as planned.
- The total classified criticized loan portfolio was reduced by $30 million from the previous quarter, indicating improved credit quality.
- Preferred Bank (PFBC) has a strong collateral position for its nonperforming loans, with no loss content identified at this time.
- The bank has $23 million remaining under its buyback program, indicating potential for future share repurchases.
Negative Points
- Net income was negatively impacted by a reversal of interest income related to elevated levels of nonperforming loans.
- The bank experienced a negative loan growth of $6 million, approximately 0.1% of its total loan portfolio.
- The net interest margin was reported at 3.75%, lower than the previous quarter's 4.06% due to interest reversals.
- Uncertainty from the global tariff situation is affecting loan demand and could impact the bank's customers differently.
- The bank is facing challenges with two significant nonperforming loans totaling $66 million, one of which is in bankruptcy court.
Q & A Highlights
Q: Can you provide an update on the margin outlook and the impact of nonaccrual reversals?
A: Edward Czajka, Chief Financial Officer, stated that the margin for the quarter, excluding nonaccrual reversals, would have been $3.94 million. He noted that the margin is holding up better than anticipated, although he did not have the specific March spot rate at hand.
Q: Regarding the nonperforming loans, can you elaborate on the two credits and their resolution process?
A: Nick Pi, Chief Credit Officer, explained that one credit involves desirable land under contract with nonrefundable deposits, expected to close soon. The other credit is in bankruptcy court, involving an apartment complex with a good value to support the credit. The resolution for both is expected within a quarter or two.
Q: What is the expected expense run rate for the next quarter, assuming no further write-downs?
A: Edward Czajka indicated that the normalized expense run rate for Q1 was just over $21 million. He expects it to be between $21.5 million and $22 million for the next couple of quarters, with potential acceleration thereafter.
Q: Can you discuss the bank's approach to loan growth amid current uncertainties?
A: Li Yu, CEO, expressed hope for continued loan growth but acknowledged uncertainties due to the tariff situation. He noted that many customers are in a "wait and see" mode, which could impact loan demand. The bank is poised to grow but remains cautious.
Q: How is the bank addressing potential risks in the trade finance segment?
A: Li Yu mentioned that the bank is closely monitoring its $200 million trade finance portfolio. While some customers are unaffected, others are more exposed to risks related to supply chain disruptions. The bank is actively engaging with customers to assess their situations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
