Preferred Bank (
Q4 2011 Earnings Call
January 26, 2012 5:00 pm ET
Kristen McNally - IR
Li Yu - Chairman, President and CEO
Wellington Chen - COO
Ed Czajka - CFO
Louie Couto - CCO
Joe Gladue - B. Riley & Company
Joe Stieven - Stieven Capital
Gary Tenner - D.A. Davidson
Previous Statements by PFBC
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Welcome to the Preferred Bank's fourth quarter 2011 conference call. (Operator instructions) This conference is being recorded today Thursday, January 26, 2012.
I would now like to turn the conference over to Kristen McNally, Investor Relations for Preferred Bank.
Thank you. Good day, everyone, and thanks for joining us to discuss Preferred Bank's preliminary results for the fourth quarter and full year ended December 31, 2011. With us today from management are Mr. Li Yu, Chairman, President and Chief Executive Officer; Wellington Chen, Chief Operating Officer; Ed Czajka, Chief Financial Officer; and Louie Couto, Chief Credit Officer. Management will provide a summary of the quarter and then we'll open 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 documents that the company 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.
Thank you very much. It gives me great pleasure to report to you that after a very difficult 2009 and 2010, we are reporting $3.8 million profit for the fourth quarter and $12.2 million net income for the year of 2011. More importantly, we have four quarters of continuous increase in profitability. Largely, this is the result of continuous moderation in credit cost and most importantly improvements in our operation.
Now, during the fourth quarter or more precisely the later half of 2011, we have made some progresses in our deposits and in our loan portfolios. For the fourth quarter, loan increased about $48 million. Almost entirely that amount is related to C&I loans. These loans yield less, but gives more deposits balances and therefore does not affect the net interest margin as much. And on the deposit side, we increased about $43.8 million or $44 million with about two-thirds of the increase in the core deposits.
Looking back, compared to where we are one year ago, I really want to point out that for the year, other loan only increased $37 million. But considering the reduction of non-performing loans, our total interest-earning loans are now over $900 million.
Deposits although show only a 3.5% increase, a $2.36 million increase, but it is composed of $117 million increase, a 30% increase in core deposits and was offset by the reduction in time deposit, basically the paying of the broker deposits. And during this year, we improved our net interest margin 96 basis points.
As of December 31, we are fully in compliance with regulated guideline of less than 100% construction and land development loan or less than 300% in total of CRE loans, which makes us one of the very few banks able to achieve that in the Greater Los Angeles area.
All this time, our capital ratio increased 136 basis points. Now, this is all accomplished during the year that we're busy in resolving our non-performing credits. But we are pretty mindful about going out business and improve our balance sheet.
Looking ahead, even though we realized fourth quarter resolution of non-performing assets, it has been slowed down by the holiday season and by the economy. Looking ahead, we're fully confident that we will make further reductions in non-performing assets until probably a relatively insignificant level toward the end of the year.
Meanwhile, we will continue to make improvement and advancement in our loans, in our deposits, in our efficiencies and most importantly in our profitability.
(Operator Instructions) Our first question comes from the line of Joe Gladue with B. Riley & Company.
Joe Gladue - B. Riley & Company
Wanted to ask a little bit more on the loan growth, very nice loan growth. But what does the pipeline look like going forward?
Well, I would defer the particular question to Wellington Chen. Wellington, would you answer that?
Sure, we're off to a good start for January. Our pipeline looks very strong. As you know, we have frontline lenders who are then involved working on the asset resolution and at the same time to make sure that we're bringing the productive C&I lenders and to build on our future as well as the core commercial deposit.
So because we are off to a very good start last year already. And this year as our problem asset continue to wind down, that will leave more of our frontline producer who are very capable and reputable producers in the past to add to our production team. So this year looks very favorable. And I think that so far in January, we are off to a very good start.