Preferred Bank (PFBC) 2015 Q3 法說會逐字稿

Good day and welcome to the Preferred Bank third-quarter 2015 conference call.

(Operator Instructions)

Please note that this event is being recorded. I would now like to turn the conference over to Julie MacMedan with Financial Profiles. Please go ahead.

Thank you. Hello, everyone, and thank you for joining us to discuss Preferred Bank's financial results for the third quarter ended September 30, 2015. With me today from management are Chairman and CEO, Li Yu; President and Chief Operating Officer, Wellington Chen; Chief Financial Officer, Edward Czajka; and Chief Credit Officer, Nick Pi. 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 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. Li Yu. Please go ahead.

Good morning. Thank you for attending our conference call. I'm very pleased to report the continued growth of our bank. For the third quarter of 2015, our loan and deposits both grew a little bit over 5% on a linked quarter basis. On the year-to-year basis, loan has grown 20.7% and deposit 15.5%.

Although deposit cost is relatively stable, it did tic up a little bit [points] in this quarter because the mix of deposits. Our loan yield continues its downward drift along with the industry trend. Consequently, our net interest margin was compressed. We reported our net interest margin at 4.01%, but that was including a $1 million interest recovery for the quarter. Without that, the net interest margin would have been 3.8%.

But I'm also pleased to say that the growth at the Bank has more than taken care of all of that. The most important number of net interest income has grown 19.7% on the nine-months basis from last year's nine-months basis, and 5% on the linked quarter basis.

Looking ahead, our pipeline remains strong. We also believe the fourth-quarter pay-off activity will continue to be high. Although it is quite difficult to predict fourth-quarter activities because of the holiday season, but we are confident that the Bank will continue to grow in the fourth quarter.

For the quarter, the Bank reported net income per share of $0.57 and this compared to second quarter of $0.55, as compared to last year's third quarter of $0.46. We reported the nine month's net income of $22.2 million, or $1.60 per share as compared to last year's net income of $17.7 million, or $1.29 per share, which is a 25.1% and a 23.8% increase, respectively. Again, we will remain conscientious of maintaining a consistent operation in the future. We are very hopeful that next few quarters our operation will be quite consistent with the present quarter.

Thank you. I'm ready for your questions.

We will now begin the question-and-answer session.

(Operator Instructions)

Our first question comes from Aaron Deer of Sandler O'Neill.

Hi, guys, it's actually Andrew on for Aaron. How are you?

Hi, Andrew.

So a couple questions from us. Just first, to what extent did the participations contribute to the growth in the quarter?

Wellington, do you have any idea?

Less than about $20 million.

Got you.

By the way Andrew, when we participate in, we also participate out.

Right.

So we are [certainly cutting] some of the loans we are sending to our friendly banks for risk, how should I say, risk management.

So similar on those lines then, were there any larger or outsized credits that contributed to the growth?

Not that I know of. Do you know anything?

No.

It's pretty large volume as I?m concerned.

It's a large volume. Yes.

Okay, and then just shifting gears to the margin. It sounds like loan yields were under pressure, deposit costs ticked up a bit, and then there was quite a bit of excess liquidity on that. I'm just curious if you can maybe quantify of the core -- of the drop of the core margin, how much each of those contributed?

Well, I would like to -- I know the answer, but I think Ed is more than happy to answer that. Ed?

So we were at 4% for the quarter, Andrew, 3.81% without the $1 million interest recovery. The tick up in cost of funds contributed about 5 basis points to the core decline from 3.97% to 3.81% on a linked quarter basis and then the rest of that was due to loan yields and liquidity.

Okay, and then if you have the numbers, just do you know the average loan yield in the quarter was relative to the prior quarter?

The average loan yield in the quarter was 4.51%, prior quarter was 4.5% although those are with those extra items in those quarters, Andrew, so I don't have those on a non-adjusted right now. You give me about 30 seconds, I could probably calculate it, but I can do that offline.

Okay, thank you. I appreciate it. Those are all our questions.

(Operator Instructions)

There are no further questions at this time.

Thank you very much. In closing, I'd like to report that we think we're very close, we hope, in gaining regulatory approval for our performance merger of United International Bank in New York. And if, in time, we would like to close it right around the end of November. This is for your information. And thank you very much and we appreciate your attending this conference. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.