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Executives

Lasse Glassen – Investor Relations, Financial Relations Board

Li Yu – Chairman, President & Chief Executive Officer

Edward J. Czajka – Senior Vice President & Chief Financial Officer

Analysts

Aaron Deer – Sandler O'Neill & Partners L.P.

Joe Morford – RBC Capital Markets

Julianna Balicka – Keefe, Bruyette & Woods

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Joe Gladue – B. Riley & Company, Inc.

John Deysher – Pinnacle

Preferred Bank (PFBC) Q4 2008 Earnings Call January 27, 2009 5:00 PM ET

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Preferred Bank fourth quarter 2008 earnings conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions) This conference call is being recorded today, Tuesday, January 27 of 2009. I will now like to turn the conference over to Lasse Glassen, from the Financial Relations Board. Please go ahead sir.

Lasse Glassen

Thank you and good day, everyone, and thanks for joining us to discuss Preferred Bank’s results for the fourth quarter and full year ended December 31, 2008. With us from management today are Mr. Li Yu, Chairman, President and Chief Executive Officer; Bob Kosof, Chief Credit Officer; and Ed Czajka, Chief Financial Officer. Management will provide a brief summary of the quarter, and then we will 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 very much. Thank you ladies and gentlemen for attending the earnings conference. Because of our press release reached a while little late today and I would like to have Ed Czajka to read of the operational results for the fourth quarter and year first and then I will followup with my comments. Ed?

Edward J. Czajka

Thank you Mr. Yu. I’m just going to go ahead and read the first paragraph to kind of give some color on the quarter and also to give everyone a chance to get the press release in and digest here.

Preferred Bank today reported results for the quarter and year ended December 31, 2008, Preferred Bank reported a net loss of $468,000, or $0.05 per diluted share for the quarter and a net loss of $473,000, or $0.05 per diluted share for the year ended December 31, 2008. This compares to net income of $5.8 million, or $0.57 per diluted share for the fourth quarter of 2007 and compares to net income of $26.5 million, or $2.50 per diluted share for the year ended December 31, 2007.

Results for the quarter were negatively impacted by a charge of $4.5 million for an other than temporary impairment charge on investment securities, a provision for loan losses of $6.9 million and a write down of OREO of $1.2 million. Also included in this quarter were life insurance proceeds of $1.6 million received in connection with a former executive as well as a tax benefit of $2.6 million recorded in connection with the OTTI charge that we recorded on Freddie Mac preferred stock in the second and third quarters of 2008.

Li Yu

Okay. Ladies and gentlemen that for the time since December, I thought Preferred Bank will be reporting a profit for the fourth quarter and full year. What I didn’t know is how this OTTI can mushroom on us. Starting from less than a $1 million to over $1 million to then to be about $2 million and finally reached $4.5 million. It seems to me the methodology and the standard as that was applicable in the third quarter is no longer adequate for the fourth quarter. And obviously that well we have to use 18% as discount rate to measuring the cash flow on certain investment securities, that is something that is quite astonishing to me.

But in any event for the full year, we will be reporting $0.05 loss, which I personally is not accustomed to. But having said that, during the full year we have provided $23 million in loan loss provisions, over $12 million and OTTI and approximately $2 million in write down of real estate only. And all this add up to $37 million and we reported a $453,000 of net loss, which making feel that we are still comfortable with the earnings power of Preferred Bank. This is especially true when you consider that we also charged our income statement with the $2 million stock option charge, non-cash stock option charge. To me this is a virtual expense that is neither commonsense, valuable nor with economic reality to-date but in any event that it was expense that was recorded.

During the fourth quarter, we worked very hard in reducing problem loans and we have some good successes here and there. But if it wasn’t for the overwhelming economic events that happened in the fourth quarter and the total meltdown of credit market, we would have report better results in non-performing loans and non-performing assets.

Having said that, we have reduced our exposure in the for-sale housing. We alluded a loan for about 11% another 11% during the quarter and we have reduced a overall exposure in construction loans under the 13% during the quarter.

Going to the New Year our effort will be continuous and consistent. Now common wisdom today is that we will be starting to see some weaknesses in the CIE portfolio of commercial real-estate portfolio and I would like to report that we have only a limit exposure assuming to higher exposure items, which we think are retail income properties and office properties. In these two areas, our exposure is rather limited and we believe they are underwritten on the reasonable basis at the origination. Looking forward I think 2009 will continue to be tough and challenging for us.

But if I have to make a prediction, which I never did and if I have to make a prediction that’s purely a guess, a personal guess, I would say that for Preferred Bank we’ve seen the worst already.

Thank you very much. We’ll now open for questions.

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions) And our first question comes from the line of Aaron Deer with Sandler O'Neill. Please go ahead.

Aaron Deer – Sandler O'Neill & Partners L.P.

Hi, good afternoon Li. Hi Ed.

Li Yu

How are you, Aaron?

Edward Czajka

Hello, Aaron.

Aaron Deer – Sandler O'Neill & Partners L.P.

Good, thanks. I was hoping you could talk a little bit about your provision in the quarter. I just would have expected that given the continued rise in non-performers and real estate owned that you might have taken a bigger provision. What holds you back from that?

Li Yu

Well, actually we can only take provision based on whatever the prevailing GAAP rule, okay. And surely the condition is kind of a challenge during the fourth quarter and however that being that most of our construction loan property nowadays are in the prime area of Los Angele, the value of these properties are generally comfortably ahead of the loan amount that is outstanding. Even in cases where you have a disruption of interest payment steered that the loan amount is below and the value of the property. And sometime we’re even converting to a basis just for maintenance sake, it’s common – what if these things are turning to a common, what is a common value with a new appraisal, is updated appraisal usually taking November, December, all shows our loan is protected. So, therefore many of the loan that seems to be challenging really does not require provisions.

Aaron Deer – Sandler O'Neill & Partners L.P.

Okay. Then can you talk a little bit about your, I guess maybe what the real estate trends you are seeing in the market in terms of absorption for your builder and borrowers and as well as what kind of talk about the workout process and cases where you are needing to do that?

Li Yu

And fourth quarter is probably the worst time that happened later especially November, December and in some cases carried to the early part of January because of total state of the shock is with everyone, and it was previously people have high hopes. I’m talking about a group of builder borrowers, with high hopes about their projects and properties, their recoverability shows certain degree of reluctance in their part. And many of the builder customer allows also depend on money partners for continuous interest support, when the interests become due, and the money partners stop advancing interest. Notably obviously were Lehman Brothers, but they are people supported by CalPERS, CalSTRS and all kind of financial institution, private and public to these kind of people. Okay. And it seems to me that generally speaking the mood is getting slightly better in the early part of January but there is no proof of the situation yet. Where the property itself we usually work with the customer, where the property itself can be turning into a income producing property would underwrite to pay for the loans that we will work with them and have them convert to a income producing property that conforms to the current underwriting standards. When there is a shortfall in value in cases, most of our borrow is waiting to come up with additional collaterals to secure the properties. So, the working effort will be continuing because basically these projects are usually in the good areas. Okay. So to most of them they are willing to do that. Now I just want to tell you to give you some example, we had sold three pieces OREOs in the months of December, okay. All three pieces are sold for the combined amount is over when the loan expenses are over the loan amount we have. Because they are basically all located in the very action area in the Los Angeles. You’d find they are still buyers out there try to get these items and when it’s well priced.

Aaron Deer – Sandler O'Neill & Partners L.P.

Are you having success in cases like that to just to push your builders to slash prices or do it there whatever they need to do to get it?

Li Yu

They are slashing prices. Whenever they think they can get out with the loan, they are slashing prices. But the question today is the absorption rate being slow, several places have being slow. They basically transactions in November, December. To me it’s non-existing and also with the mortgage restrictions that were placed by the mortgage lenders. Many brokers find that selling out a project is very difficult. Most of them wants to confirm and sale. Only in one or two occasions that you’ll find them that they are really in trouble wants to walk away from the project and the others who have well financed, will love to hold on to the building and just turning to rental property and for sale in a future date.

Aaron Deer – Sandler O'Neill & Partners L.P.

Okay I’ll step back. Thank you.

Li Yu

Okay.

Operator

Thank you. Our next question comes from the line of Joe Morford with RBC Capital Markets. Please go ahead.

Joe Morford – RBC Capital Markets

Thanks. Good afternoon everyone and Li congratulations on getting through 2008.

Li Yu

It takes some doing.

Joe Morford – RBC Capital Markets

I wondered if you could talk a bit more about the increase in the 30 to 89 day past dues, it sounds like it was mostly related to the timing issues. Have the bulk of those since been resolved now currently here in late January?

Li Yu

Well 40% of them is the timing issue type of situations result. As some portion of them is the money partners stop to advancing the interest payment and so often there, and the cost and when the loan is due with cost of loan that we’ll be holding on there. And couple of cases the loan to value ratios still below 50%, but the overall reluctance on the marketplace is holding these project and that is setting the stage. So, we are working hard on these things case-by-case, item-by-item and work on these kind of matter is the toughest. And to certain extent when there is a lot of value in there, some of them even also is testing the patience of the bank. And there are many, many borrowers, some of them are our borrowers and some of them are the bank’s borrower that we know of, they are perfectly capable coming up with the continuing fund to support the project and their project is very, very well positioned. But they choose to force the bank and try to see the bank’s patience and to see whether the bank will give them a chance to sure payoff the gain, a further advantage on the bank. Now the threat is that if you do something about foreclosure within going to bankruptcy in later proceeding, and it’s become a case-by-case situation in dealing with these issues. Yours truly is not going anywhere these days and stay in the office and day-to-day dealing at one at a time.

Joe Morford – RBC Capital Markets

Right. Okay. Can you also talk about what looks like maybe two new commercial real estate loans in the NPA category and also new commercial construction credit as well, a little more details about those loans?

Li Yu

Well commercial construction, I mean loans and commercial construction that went to the NPA, it is that particular piece is a office condo, for-sale office condo located in San Diego downtown area in a very beautiful area right across from some very major projects. The location impeccable, again due to our, one of the funds, the mass money that was with the builder decided not to step up, and we are one quarter of the total loan, which lead by another bank. And at this point in time that preliminarily appraisal was made, and we have provided a 25% reduction to the value of that particular property based on the appraisal which was done in October. However, the lead bank had informed us the appraisal that was already done is in floor. And they convinced a new appraisal that ordered, which should be concluded sometime in January. It should show that the value is pretty much equal to the loan amount. So, we will hope for that good news to happen. So, we can reverse the provision in January and another property is, which other property you’re mentioning about?

Joe Morford – RBC Capital Markets

Yeah, it looks like some increase in commercial real estate non-performers there.

Li Yu

No, I really have to go down to the list, would you allow me a couple of minutes?

Joe Morford – RBC Capital Markets

Sure. They went from $8.9 million in September, five properties to seven properties for $14.3 million.

Edward Czajka

Joe, I just want to elaborate on not to take any of your time but on Aaron’s question regarding the allowance for loan loss and coverage. I didn’t want to point out that the coverage ratio, which I’m sure you've all seen has gone from 1.27 at total loans to 1.56 on a linked quarter basis. So, there certainly was a significant rise in coverage.

Li Yu

Majority of that particular amount is $7.4 million loan. In the downtown San Diego area is the condo construction and 14 units condo in the downtown San Diego area. The project is not 100% complete yet. The builder ran out of interest reserve and was 90 days behind you on interest, the latest report that takes $50,000 to finish and get the certificate of occupancy. okay and we are in a process of getting that finished and sending the receiver in, getting that finished and hopefully sell the property beginning sometime later part of this first quarter.

Joe Morford – RBC Capital Markets

Okay, and then I guess lastly just any comment on the status of your TARP application and just get your thoughts in general about taking that capital?

Li Yu

Well we applied way back in November sometime and we had had a question asked to us and information that they want from us, basically the FDIC, and they will have replied in two different times that the information what they want. The last situation is that it’s in the process in being evaluated in San Francisco, perhaps already being sent to Washington D.C. for evaluation. And so we are not told that the TARP is not available to us. Having said that, as each quarter went by actually that our loss situation are less than doomsday situation that many of us internally or externally projected. We really also look at the economic viability, the reality that we should do with this TARP money. And if we get approved, which we would like to hope that we like to think we can get approved, which we get approved we do not know the exact amount we’re going to take in terms of the TARP money. And as you know, today’s interest rate environment has become awfully expensive and what is killing the situation, what’s more threatening to us is because our lower stock prices today the warrants outstanding would constitute more than 10% of our total outstanding shares, which make us awfully unattractive to me, barring all the restrictions on dividends other things was absorbed. We have really have not finalized the amount that we are taking if approved and if anything at all.

Joe Morford – RBC Capital Markets

Okay, and that’s very helpful. Thanks so much Li.

Li Yu

By the way, just on the same line of question, I want to tell you that we think we are going to be – we think we’ve got a clearance for the FDIC Insurance TLGP that senior debt guaranteed money. We think it will enroll on that with one of the firm that and one of the fund that we will be participating in that including roughly $25 million of FDIC in short senior debt.

Joe Morford – RBC Capital Markets

Okay. Great thank you.

Li Yu

Thank you.

Operator

Thank you. Our next question comes from the line of Julianna Balicka with Keefe, Bruyette & Woods. Please go ahead.

Julianna Balicka – Keefe, Bruyette & Woods

Good afternoon.

Li Yu

Hi, Julianna.

Julianna Balicka – Keefe, Bruyette & Woods

Hi, how are you?

Li Yu

I’m fine.

Julianna Balicka – Keefe, Bruyette & Woods

I’ve several questions if you don’t mind. One you had in the beginning of your remarks you talked about limited exposure to the income producing office and retail CRE. Could you give us some numbers behind that?

Li Yu

Yeah, it’s in the back of the text. Retail portfolio is $55 million. Okay, it’s in page number six.

Julianna Balicka – Keefe, Bruyette & Woods

Okay. I’m sorry about that. I’m still going through all the numbers.

Li Yu

Okay.

Julianna Balicka – Keefe, Bruyette & Woods

And then…

Li Yu

It’s a last paragraph page number three was $55 million retail income property with the weighted average LTV at origination of 59%. And average, I think a medium origination date sometime in May ’06 something like that. And on the office property excluding the medical office property is $50 million, again with LTV at origination of 52%.

Julianna Balicka – Keefe, Bruyette & Woods

Okay. OREO write-down that you took in this quarter was not related to a specific property or some overall?

Li Yu

Yes, this is the property in the OREO write down. It’s the second item on the OREO information list. It took $12.2 million partially completed condo/apartment project in the Western Los Angeles. The amount represents the value of an accepted LOI. Now the – that I was told the purchase and sale agreement the points lawyers has cleared that, they are finalizing that purchase and sales agreement now, and the carrying value of the project is $13.3 million, we wrote down $1.2 million, and rounded that to $12.2 million.

Julianna Balicka – Keefe, Bruyette & Woods

Very good and then…

Li Yu

By the way if the event happen I just might as well, add on something. It really is the LOI something in mid January and that we accepted LOI, I shouldn’t say in January 10, 11 and we both sides see things eye-to-eye right on January the 18, or something like that and we decided we want to be provided that write down in the month of December.

Julianna Balicka – Keefe, Bruyette & Woods

Okay, and then you are talking about, excuse me. You are talking about the loan where there is going to be new appraisal in January? What are going to be the changes within this appraisal that will allow for the value to increase by 25%, I mean which one appraisal doing different from the other?

Li Yu

I mean and then basically speaking that was originally,frankly speaking that was a one that was told by our lead bank. They said they think that on a different set of assumption and that is on the property that was some kind of based on the for-sale condo. But if you use as a rental units, the value seems to be higher, it was the value based on the basis that is not necessarily strong, and not necessarily the cause of action. But we’ve – I’m not fully aware of that. I just heard their President told me that that they are still informations, I mean, indication that is the case.

Julianna Balicka – Keefe, Bruyette & Woods

Okay, well lot here I guess.

Li Yu

I have crossed my fingers because I would need a $1.1 million at least part of it.

Julianna Balicka – Keefe, Bruyette & Woods

And then yeah, we can always use that and what’s the NIM without the impact of the non-accrual interest reversal?

Edward Czajka

Julianna, probably it would have been a right around 336 as suppose to the 331 that we posted for the quarter. Certainly not a lot of contractions given was gone on with interest rates. Our asset yields have come down a little bit but so have our deposit costs we've talked about in the past as CD start to reprise to this lower rate environment.

Julianna Balicka – Keefe, Bruyette & Woods

And then my final question, I'll step back. On your FDIC baseline assessment rate, what is that going to be going forward please?

Li Yu

I didn’t quite get your question.

Julianna Balicka – Keefe, Bruyette & Woods

Sorry my final question. The FDIC insurance baseline assessment rates, initial assessment rate, what's that going to be going forward?

Li Yu

We have not, frankly speaking, I cannot answer that question to you. But at this point in time because we have not really – how should I say, really dive into the question on that particular part but we will study and provide the information to you.

Julianna Balicka – Keefe, Bruyette & Woods

Okay. I think that’s all the questions I have. Thank you.

Li Yu

Thank you.

Operator

Thank you. Our next question comes from the line of Don Worthington with Howe Barnes Hoefer & Arnett. Please go ahead.

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Hi, good afternoon Li and Ed.

Li Yu

Hi Don.

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Couple of minor things. On that BOLI gain. Is that included in the other non-interest line item?

Li Yu

Yes.

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Okay. And then in terms of the OTTI write-downs, what are the remaining balances of the various securities, for example, the CDO, TRAP and then the bonds and then everything left on the Freddie Mac?

Li Yu

Okay. I’ll let Ed read that to you. We have four pieces of trust pool trust preffered. The two pieces that seems to be not impaired, am I right?

Edward Czajka

We’ve four pools that just you discussed. The two that have we’ve not recorded the impairment charges. As you recall we reported our impairment charge in Q3 for about $1.1 million. We recorded an impairment charges this quarter for about $3.1 million. Those were on two separate pools. The other two pools we’ve not reported any impairment charges and in looking and analyzing all of the underlying issuing banks there does not seem to be any point into the future where we can determine that there is going to be any principle default on either of those pools. I’ve done an extensive analysis on the underlying banks utilizing Texas ratio, capital ratios, non-performing assets et cetera as well as earnings and those look to be okay. Going forward they are obviously in terms of their market value, they’re quite illiquid assets and so they are getting from an OCI standpoints, we’re getting fairly low marks, but the other two that we own now, the one we took the charge on this quarter, Don we now own that at $0.22 from the dollar and when we took a charge on in Q3, we own it about $0.43 from the dollar. Total book value of all four of those combined is about $3.7 million. On the corporate notes, we took two charges this quarter on two different corporate notes. The one know now we own at the book value is $312,000, we own that at $0.24 from the dollar and the other one we own at $864,000 and that is at $0.43 from the dollar and those were the current marks as of 12/31/08. All the other securities in the corporate bond portfolio, none of those are other than temporally impaired and they’re all investment grade.

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Terrific that’s I need to know. Thank you.

Li Yu

Well thank you, I know even I asked the question because looking forward also and well how much more we’ve to write down ahead of us, since we’ve is no man’s land, no rules governing that, it’s judgment decide everything.

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Yes.

Li Yu

And thank heaven we don’t have much left you know.

Donald Worthington – Howe Barnes Hoefer & Arnett Inc.

Okay, thank you.

Operator

Thank you. Our next question comes from the line of Joe Gladue with B. Riley. Please go ahead.

Joe Gladue – B. Riley & Company, Inc.

Yeah, hi Li, hi Ed.

Edward Czajka

Hi, Joe.

Li Yu

Hi, Joe.

Joe Gladue – B. Riley & Company, Inc.

Just wanted to get a little bit better idea on the net interest margin. I guess though I don’t think it will have much effects going forward. But you mentioned putting floor on loans you’re going forward. How many of your loans or what percentage have floors on them now?

Li Yu

Right now it’s over 40% of the loans have a floor. We previously had fixed rate loans and other near fixed rate loans in the neighborhood about 13%. So, that’s makes about 53% of our total loan hitting the floor. Every renewal will require a floor going forward. And every new loan, which instead doing a limited amount of new loans. They are always by when hope that will require floor. And all this fourty something percent of the loans that have a floor that currently are being in operation at the floor, because the lowest floor we have other than one 4.5% to rest of them are over 5%.

Joe Gladue – B. Riley & Company, Inc.

And on the funding side, what type of, how much in the way of CDs and borrowings might come to, I mean in the next – in first or second quarter that you might be able to reduce rates on?

Li Yu

We - I mean do you have the – that …

Edward Czajka

Well I would say on the CD side its probably about 30% of the CDs within the next quarter or two would be maturing probably actually if we’re talking about two quarters, we’re talking about probably more than half the CD portfolio will be reprising. On the borrowing side, the $58 million we have outstanding and FHLB advances, most of those were a little bit longer-term, I think we only have one coming due in the first six months of '09.

Joe Gladue – B. Riley & Company, Inc.

Okay, all right thank you. That’s all.

Operator

(Operator instructions). And our next question comes from the line of John Deysher with Pinnacle, please go ahead.

John Deysher – Pinnacle

Good afternoon.

Li Yu

Hi.

John Deysher – Pinnacle

What are you seeing on the C&I portfolio? I mean the small businessmen and what’s the sense of account going forward?

Li Yu

Well, that’s probably the hardest question to-date and I’ve attempted to ask many people , some of the banks bigger than we are and people much, much smarter than we are, and of course I try to ask our credit people and seems to be that nobody can come with conclusion thus far how to have the methodology for evaluating C&I. And because it’s so micro in the whole situation each loan has its own characteristic, belong to a different industry, belong to a different situation. Let me just give you a funny example, so that I should let you know, you would have thought that tody with the economy of today that the shoe importers from China will be in trouble. Well, we have one customer like that, and they are one of the largest shoe importers from China, even though with cost increases and everything else. They reported business increase 30% and for the increased earning because it’s very simple, what you say, all their competitor were not at business. She is one of the few people that’s been spending there. So, it is almost a case-by-case situation and frankly speaking the monitoring of a C&I items is one of constant and never ending job in a bank.

John Deysher – Pinnacle

Okay, I mean your non-accruals are basically flat in that category quarter-to-quarter?

Li Yu

We are basing it on a historical number and we also have a – our non-accrual is fairly flat, okay. Not that is spiking up so much. We will have – once heard that one went up to a spiking up here and there but it’s either resolved, or written losses so on

John Deysher – Pinnacle

Fair enough. And just it wasn’t quite clear on that chart of non-accruals, the commercial real estate, the number of delinquent loans increased by two and it went from $8.9 to $14.3 million?

Li Yu

Yeah, that’s the one that is a $4 million as I had indicated, now it’s commercial real estate, let me see.

John Deysher – Pinnacle

Yeah okay.

Li Yu

And I have to go back to the list.

John Deysher – Pinnacle

So, if you could just clarify specifically what those two loans are and what the amounts are, that would be helpful?

Li Yu

Okay, let me see. I’ve to really go back and to see which item is specifically related to because they’re not being classified item-by-item during the quarters. There is a one $3 million item is two single family used as a collateral for commercial projects and that was willing to non-interest payments date over 90 days past due okay. Then another…

John Deysher – Pinnacle

Wait a second. What is that known as a single family?

Li Yu

Two single family that was used as a collateral for commercial type of projects.

John Deysher – Pinnacle

Okay, those are considered non-accrual loans?

Li Yu

Yes.

John Deysher – Pinnacle

And they are embedded in the commercial real estate category?

Li Yu

That’s right.

John Deysher – Pinnacle

Doesn’t quite make sense but okay go ahead.

Li Yu

It makes sense because it’s for the commercial real property to start with.

John Deysher – Pinnacle

It was commercial real property to start with?

Li Yu

Yes.

John Deysher – Pinnacle

What does that mean?

Li Yu

Well it was for the purpose of the commercial real estate to start with.

John Deysher – Pinnacle

Okay. I’ll followup with that after that later but what’s the other loan?

Li Yu

Can’t get the detail about it. It maybe one other loan. Can’t get the detail at this point of time.

John Deysher – Pinnacle

All right, thank you.

Operator

Thanks. Our next question comes from the line of (inaudible) with Private Investor. Please go ahead.

Unidentified Analyst

Yes, hi good afternoon.

Li Yu

Hello, how are you?

Unidentified Analyst

Good. How are you? I have three questions, two kind of big picture and then something a little more detailed. My first question is regarding the dividend on the common stock. Any thoughts, intentions, what are you feelings about that going forward?

Li Yu

We will be having the meeting this afternoon after this conference to discuss the dividends issue. So, unfortunately that was at the Board discussion that I would not be able discuss the issue at this point of time.

John Deysher – Pinnacle

Okay. The second question I have is, are there currently any plans or efforts other than the TARP capital? Are there currently any plans or efforts other than the TARP capital, are there any plans or efforts as far as securing additional private capital?

Li Yu

Well the consensus opinion by many of our professional analysts that covers us is that the Preferred Bank has sufficient capital, and at this current low rate of our discount value of our capital stock to get additional stock at current today’s market price will be, how should I say it, it will be in disadvantageous to our current shareholders in our opinion. We’re certain we’ll keep that in mind from time-to-time when the need, further need arises, if they arise.

John Deysher – Pinnacle

Okay. And then my final question and I’ll step back is regarding the past two loans 30 to 89 days, would it possible to put a number that would be more specific as far as the reading from the statement the portion that was related to temporary interest payment disruption and how they related to delayed loan extension? How much of that was because of those?

Li Yu

We don’t have the exact information right now. We will maybe able to get that information. And frankly speaking, when we get that I wouldn’t know what the value of discussing the matter because every case is so different. The one delayed interest payment may or may not come over the additional interest. If they don’t, it goes through 90 days and they would become past due or the one delayed funding we found our new guys having a funding situation, I mean they may or may not. Or we’ll force them to liquidate or we’ll sell the note if we can. All these situations that has been built on an individual basis to get that has a little value to us internally.

John Deysher – Pinnacle

Okay and thank you very much.

Li Yu

Okay.

Operator

And management, there are no further questions. I’ll turn it back to you for closing comments.

Li Yu

Okay, well thank very much for attending the conference and let me apologize again for the press release hit a lot late. So, many of you does not have a chance to read that - read it more carefully on the situation, which we’ll try to correct this situation in the future and certainly it’s not a promise and – who would deal to do that but, I’m crossing my finger and hopefully next quarter I can have a better and more cheerful voice. Thank you very much.

Operator

Thank you, sir. Ladies and gentlemen that will conclude today's teleconference. We do thank you again for your participation. If you would like to listen to replay of today’s presentation, you may dial-in 303-590-3000 or 1800-405-2236 and enter the access code of 11125508 followed by the pound sign. We thank you again and at this time you may disconnect.

Li Yu

Okay, thank you.

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Source: Preferred Bank. Q4 2008 Earnings Call Transcript
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