Preferred Bank ( PFBC) Q3 2011 Earnings Conference Call October 20, 2011 5:00 PM ET Executives Li Yu, Chairman – President and CEO Ed Czajka – CFO Analysts Andrew – Sandler O’Neill & Partners Operator
Previous Statements by PFBC
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» Preferred Bank CEO Discusses Q3 2010 Results - Earnings Call Transcript
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 like to turn the call over to Mr. Li Yu. Mr. Li, you can go ahead? Li Yu Thank you, good afternoon. Our bank earned a net income of $6.6 million for the third quarter of 2011. Included in the $6.6 million is a $4.5 million recovery of previously written down Deferred Tax Assets or DTA. We now have a positive outlook of our future, therefore, we decided to make this partial recovery and we do expect future recoveries to continue. Without this DTA recovery, net income is $2.1 million, which is an improvement from prior quarter. The improvement is the result of expanding net interest income and mildly reduced credit costs. The critical [ph] trend right now has been good. We are resolving our non-performing assets at a reasonable pace. The migration into non-performing loans for the past three quarters has been ranging from mild to in – or negligible. Early-stage delinquency of accommodating [ph] loan is 30 to 89 days is very, very low. We have a reason to believe that our future credit costs will be moderating gradually and the way we use the word moderating and gradually is because rather than that we use the word (inaudible) because I believe that current economy is still in a very unstable stage and we rather stay on the conservative side. Our production effort in the third quarter has been satisfactory. Deposit increased $22 million, more importantly – $24 million, more importantly the transactional deposits increased $46 million for the quarter, which has improved our total interest costs and we are seeing trends that this important trend will continue.
On the loan side, during the quarter we have originated a total of $96 million in new loans of which more than half of it is C&I loan or Commercial and Industrial loans.For the quarter, we have net effective increase of $43.5 million of our loan portfolio and with C&I loan as a single quarter 15% unannualized increase. Other improvement in the concentration mix is that we now – we believe we now are one of the few banks that comply in compliance with the regulated guideline of 100/300 in commercial real estate loans. Not that it is very important economically, but it does put us in a better position under current regulatory environment. Going forward, we will continue to work hard to resolve the non-performing assets. We’ll continue to improve and expand our net interest income. We’ll continue to improve our balance sheet quality, which in my personal opinion is already at a very good position at this time. And it gives me great pleasure to report all of the above to you. We are ready for your questions. Question-and-Answer Session Operator Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator instructions) Our first question is from the line of Aaron Deer with Sandler O’Neill & Partners. Please go ahead. Andrew – Sandler O’Neill & Partners Hi, Li, nice quarter. This is actually Andrew on for Aaron right now. Li Yu Hi, Andrew, how are you? Andrew – Sandler O’Neill & Partners Good, thank you. So, given that you’ve been able to recover some of the valuation allowance, I am curious how much of the valuation allowance remains yet to be recovered – could be recovered? Li Yu Well, actually this is kind of a semi-complicated story, but I would like to have Ed to give you better insight about that. Ed, would you take up the question? Read the rest of this transcript for free on seekingalpha.com