Preferred Bank ( PFBC)

Q2 2011 Earnings Call

July 20, 2011 5:00 PM ET


Lasse Glassen – SVP, Financial Relations Board

Li Yu – Chairman, President and CEO

Edward Czajka – SVP and CFO


Aaron Deer – Sandler O’Neill & Partners

Joe Gladue – B. Riley & Company

Julianna Balicka – KBW

Joe Stieven – Stieven Capital Advisors



Good day ladies and gentlemen, thank you for standing by. Welcome to the Preferred Bank 2011 Second Quarter Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today Wednesday July 20, 2011.

I would now like to turn the conference over to Lasse Glassen, Senior Vice President of Financial Relations Board. Please go ahead sir.

Lasse Glassen

Thank you, good day everyone. And thanks for joining us to discuss Preferred Bank’s preliminary results for the second quarter ended June 30, 2011. With us today from management are Mr. Li Yu, Chairman, President, and Chief Executive Officer; Ed Czajka, Chief Financial Officer; and Louie Couto, Executive Vice President.

Management will provide a brief summary of the quarter, and then we’ll open the call up 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 the company files with the Federal Deposit Insurance Corporation, or FDIC. If any of these uncertainties materializes 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 now like to turn the call over to Mr. Li Yu. Mr. Yu?

Li Yu

Thank you Lasse Glassen. Good afternoon ladies and gentlemen. I’m pleased to report the second quarter 2011 we are reporting a net profit of $1.7 million of $0.13 a share. This is a good improvement on the first quarter. Despite the facts, the credit cost is still at very large at this point in time.

Our credit cost includes $1.8 million of long loss provision. An $900,000 value adjustment or write-down of OREO yields. And also we during the quarter we also have a $700,000 recovery of loan losses on the loans that sold that mostly on the loan that were sold above book value. So, for our practice for personal purposes, the total credit costs is about $3.4 million, and we’re reporting $1.7 million after these costs.

During the quarter, we’ll continue to show improvements in overhead control and also we stabilized our net interest margin. Our core deposits as increased and we also are very encouraged by the activities in loan origination.

Let me give you a little bit color about the loan originations. For the quarter, we originated $92 million of new loans of which a little bit over little over 50% is C&I loans. And roughly 35% are owner occupied commercial real estate loans. Now real estate you’ll aware these loans are very highly competitive to get in the marketplace and we’re very pleased with the year, was our ability to generate that much, I mean in these two categories.

Looking over the pipeline, we see the second quarter to be hopefully to be at least as good as the first quarter say although I mean, second half as good as the first half, okay. Although per quarter, that it may not be evenly distributed in the third or first quarter, okay. But we are highly encouraged by the pipelines currently that we’re seeing. On the deposit side you notice that we have good increases in non-interest bearing deposits. We also have good increases in interest-bearing transaction accounts and small deposits to multi-CDs, all of them are considered core deposits.

Early indication July for the first 19 days these increases trend as to continue. We are hopeful for the second quarter, after the second quarter for the second half of the year we’d continue to have good increases in DDAs and other core deposits.

You all have been reporting the past by us that we’re working hard on NPA disposition or resolution. And we think there is some good activities in the third quarter, second quarter we would also think that the third quarter and fourth quarter of activity should continue. And although some kind of holiday season may delay a little bit in the first quarter, but overall we think the second half of the year we still – we show some good results in this particular area.

With the continued deduction, reduction in our – in the non-performing assets, we are seeing our credit cost begin to subsidizing okay. And subsided, we think the total credit cost frame is very encouraging this point of time. This is especially true that we have just received a shared national credit report that shows no adjustment needed by our bank. So if you remember the last quarter I have reported to you that there is – out there for our third quarter profitability is that snick our shared national credit. Well not where we is in long longer exist. So with all of the above, we collect the fare that at the outlook of the second half of 2011 is positive.

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