Wilshire Bancorp Inc. Q4 2009 Earnings Call Transcript

Jan.21.10 | About: Wilshire Bancorp, (WIBC)

Wilshire Bancorp Inc. (NASDAQ:WIBC)

Q4 2009 Earnings Call

January 21, 2010; 2:00 pm ET

Executives

Joanne Kim - President & Chief Executive Officer

Alex Ko - Senior Vice President & Chief Financial Officer

Edward Han - First Vice President of Investor Relations

Analysts

John Pancari - Macquarie

Aaron Deer - Sandler O’Neill & Partners

[Brett Rapkin] - Standish

Don Worthington - Howe Barnes Hoefer

Jeannette Daroosh - JMP Securities

Chris Stulpin - D. A. Davidson

Operator

Good day, ladies and gentlemen and welcome to the fourth quarter 2009 Wilshire Bancorp earnings conference call. My name is Karma and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards end of this conference. (Operator instructions)

I would now like to turn the call over to your host for today’s Mr. Edward Han, First Vice President of Investor Relations. Please proceed.

Edward Han

Thank you and good morning everyone. We appreciate you joining us today for our fourth quarter 2009 earnings conference call. Again, I am Edward Han and joining me are Joanne Kim, the company’s President and Chief Executive Officer; and Alex Ko, Senior Vice President and Chief Financial Officer.

Earlier this morning, Wilshire Bancorp issued its fourth quarter and fiscal 2009 earnings results, which can be accessed either through the Investor Relations tab at www.wilshirebank.com or from the various financial news websites. This call is being webcast and will be available archive for one year on the company’s website.

Before we begin, I must remind you that during this call, we may make certain statements concerning Wilshire’s future performance or events. Any such comments constitute forward-looking statements and are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated expectations.

These factors include, but are not limited to, the ability to grow market share in our markets, including New York and Los Angeles, success of new branches, marketing costs, loan growth and balance sheet management, credit quality, our ability to collect on past due loans, deposit generation, net interest margin expectations, interest rate exposure, global and local economic conditions, and other risks detailed in the most recent reports on Form 10-K and Form 10-Q as filed with the Securities and Exchange Commission.

Given these uncertainties, undue reliance should not be placed on such forward-looking statements. Wilshire Bancorp is under no obligation to update this information as future events or developments take place that may change these forward-looking statements.

First, Ms. Kim will provide an overview of our principle operations as well as an update on the loan portfolio. Following that, Mr. Ko will review our financial results. Following his remarks, Ms. Kim, will provide additional perspectives and closing comments. We will then commence the Q-and-A portion of the call.

With that, I will now turn the call over to Joanne.

Joanne Kim

Thank you, Edward. Thank you for joining us today for our call. As you may have read in the release, Wilshire Bancorp reported a profitable fourth quarter and fiscal year 2009. Fourth quarter net income and per share results are improved on a quarterly basis, but they are slightly below fourth quarter 2008 level as we strengthen our allowance for loan losses.

Nonetheless in the face of this recession, we substantially grew our loans, deposits, total assets and shareholders equity in fiscal 2009. In particular, we are pleased to see that for the first time since December, 2006 non-performing assets decreased on a quarter-by-quarter comparison. I will touch on loans and credit quality a little later in the call.

As such we continue to operate from a position of considerable strength. Our capital position and liquidity remains solid and our net interest margin was stable throughout 2009. We reported net income available for common shareholders of $3.2 million for the fiscal quarter ended December ‘09, compared to a net loss of $1.7 million for the previous quarter. Although, we are not immune to the current environment, we believe we are litigating through the difficult times better than many other comparables size institutions, regionally and nationwide.

We have continued to grow externally as well as internally through the successful acquisition and seamless integration of Mirae Bank in the second half of 2009. Mirae acquisition offered us on excellent model for the potential future growth. It also increased our profile and recognition in the communities we serve, as evidence in the strong deposit growth, especially core deposits in the second half of 2009.

At the fourth quarter end commercial real estate loans accounted for approximately $1.88 billion or 78% of loans, while commercial and industrial lending totals $386 million or 16% of the portfolio. CRE loans maturing in 2010 amount to a manageable $264 million or 14% of our entire portfolio.

Although the refinance risk is considered high at this time due to the downward trend of CRE valuation, we believe our refinance risk is low due to our historically low loan to value ratio and stringent underlying standard. At these loans are coming due, we will actively seek to provide refinance as long as our borrowers demonstrate repayment ability and good credit spending.

Fourth quarter loan originations increased $224 million from $72 million in the final period of 2008. However, originations were below the third quarter origination of $184 million. The decline is attributable to lower loan demand in our marketplace coupled with our conservative underwriting criteria, lower loan to value ratio requirement, and risk assessment practices resulting from the current economy.

By contrast, SBA loan originations accelerated solidly in the final quarter, growing 10% to $17.2 million from $15.6 million in third quarter and from $9.2 million in the corresponding period in 2008. As a promising indicator, SBA originations grew strongly on a sequential basis through all four quarters of 2009.

The premium paid on SBA loan sales in the secondary markets are back to previous levels, allowing us to record a gain on loan sales of $2 million in the fourth quarter, compared with $3.7 million for the entire 2009. We look forward to our prospects in our SBA lending business. We have strengthened our SBA department in anticipation of the strong and growing demand in SBA lending, and we are well positioned to capitalize on the current opportunities.

At year end, our loans past due 30 days to 89 days remained at $40.6 million or 1.67% of gross loans, which represent a $13 million increase over third quarter 2009. Two CRE loans were added in 30 day delinquency category. The first one is $4.4 million shopping center loan and the second one is $5 million carwash loan, which we believe will be result soon via are note sales or payment collection.

During the fourth quarter, $16.9 million were either migrated to non-accrual or charged off and $7.1 million were either brought to current or paid off. At year end 2009, 70% of all delinquent loans are in 30 days to 59 day category and 86% of total delinquent loans are CRE loans of which $10.1 million are covered loans under the FDIC loan share agreement.

Since 2006, we have experienced a continual increase in non-accrual loans. However, in the fourth quarter, non-accrual loans on a quarter-to-quarter comparison decreased by $8 million. The decrease was mainly resulting from $5.3 million loan upgrade, $17.5 million charge-off and $11.2 million loan sales, offset by new non-accrual migration of $25.5 million.

OREO fell 39% quarter-to-quarter to $3.8 million at December 2009, from $6.2 million three months earlier, reflecting this position of profit that has been on our books. Trouble debt restructured loans or TDLs decreased by $1.6 million to $64.6 million from the third to fourth quarter of 2009. There has been no major migration to TDL during the fourth quarter.

All of our TDL loans were performing as of December 31, 2009. Loans are classified as TDL when a creditor grants a concession due to borrower’s financial difficulties. Just because a loan is a TDL does not mean the loan is delinquent or non-performing.

Let me move to charge-offs. Total loan charge-offs increased by $10.4 million compared with the previous quarter. CRE and C&I loan charge-offs accounted for $7 million and $11.5 million respectively and while resulted from the proactive and timely charge-off of problem loans.

It was also due to management’s decision to charge-off the impaired portion of CRE loans, resulting from our recent updated CRE appraisal report as mentioned during our previous conference call. In addition, three commercial lines of credit and four CRE loans were charged-off, totaling $3.3 million and $5.1 million respectively in the fourth quarter.

With the provision for loan losses amounting to $25.6 million in this quarter, allowance for loan losses was increased by $7.4 million from previous quarter. Allowance coverage also increased to 2.56% of total loan portfolio and 2.86% for legacy Wilshire loans. The increase in provision expense and allowance for loan loss is mainly attributable to an increase of general allowance.

When calculating reserves for loan losses, the total charge-off amounts are factors into the rate of allocation and more rates is given to recent charge-off period. As charge-offs increase, the general reserves increase as well. Based on the increased charge-off amount of $10.4 million from third quarter to first, approximately $8.9 million additional general reserves are allocated in the first quarter.

We remain focused on monitoring problem loans. Our special asset department has done a good job working with troubled borrowers. We continue to seek workable solutions with our borrowers. In situations where there’s no other alternative, either because the borrower is not cooperative or there are simply no options left, we do not hesitate to take decisive actions to recover our principal amount, including sale of note in lieu of foreclosures.

Now, let me turn the call over to Alex for a review of the first quarter financials, after which I will provide some commentary and outlook before opening the lines for questions.

Alex Ko

Thank you, Joanne, hello, everyone. Let me begin with a recap of our balance sheet. Total assets increased to $3.4 billion from last quarter. This increase is attributable to $91.7 million increase in investment security in combination with a decrease in cash and cash equivalents of $35.8 million. With our expanding reputation as a healthy growing institution, we were successful in attracting new deposits.

We are experiencing an inflow of customers whose reason for changing their banking relationship to Wilshire is due to our perception of healthy and strong operations. Core deposit growth is very strong, growing by more than 17% from the previous quarter and more than 123% from one year ago. The favorable deposit mix change lead to a decrease in total cost of deposits, which I’ll expand on later.

Strong growth in core deposit has enabled us to reduce reliance on high cost broker and jumbo CDs. Moreover, core deposit growth has reduced our dependence on FHLB borrowings. We paid down FHLB borrowings by $90 million or 28% in the current quarter. In addition to liquidity, our capital position remains strong.

Although core risk based capital ratio decreased by 1 basis point to 15.8% during the fourth quarter, we are still well above the 10% regulatory minimum for well capitalized institutions. Tangible common equity per common share decreased $0.22 to $6.71 per share from prior quarter, and tangible common equity to tangible asset decreased from 6.05% to 5.76%.

For the quarterly comparison, net interest income before provisions had strong a growth and net interest margin decreased by 14 basis points to 3.73% during the fourth quarter. The main reason for the decrease in net interest margin was due to 14 basis point decrease in loan yield from the prior quarter. The primary reason for the loan yield decrease is mainly due to a decrease in accretion of loan discount.

After the acquisition of former Mirae Bank, we’ve acquired loans at a fair value with discount. The discounted portion is subject to accretion and the value the loans create as the account gets accreted. Yield on securities decreased by 30 basis points to 3.24% in the fourth quarter. The decrease can be attributed to the sale of securities in combination with a lower rate for the fed funds sold during the fourth quarter.

On the liability side, total interest bearing deposit rates continued its downward trend, decreasing 27 basis points to 2.12%. The rate reduction is a result of both the lower rate environment and the management effort to keep deposit cost at a lower level. In fact, management reviews rate for new deposits on a weekly basis, and any rate over our internal maximum must be approved by upper management.

This, in combination with improvement in our deposit mix, has helped decrease our overall cost of deposits. During the fourth quarter, our strong liquidity position allowed us to pay off $90 million in FHLB borrowings. However, the short term borrowing we paid off has lower interest rate than borrowings left on our book.

As a result, the interest rate on borrowings increased to 3.04% in the fourth quarter. When comparing margins on a 12 month basis, net interest margin decreased from 3.81% to 3.6% during 2009. However, even with a decrease in margin, our strong core operational earnings are much stronger than ever.

Let me turn now to our strength in the core operating earnings power in 2009. For 12 months ending December 31, 2008 and 2009, interest income increased by $9.7 million, or 7%. The increases are attributed to strong loan growth throughout 2009. Gross loans increased 18% and the increase in loan volume helped increase interest income throughout the year.

Interest expense on the other hand, decreased $7.1 million, or 11%. More specifically, deposit expense decreased by 6% in spite of an increase in deposit over $1 billion or 56%. Wilshire’s reputation as a solid and reliable institution has greatly contributed to our growth in low cost core deposit in 2009.

As a result of the increase in interest income and decrease in interest expense, net interest income before provision for loan losses increased by 20%. Aside from net interest income, non-interest income and non-interest expense continued to show signs of improving our core earnings power as well.

During 2009, non-interest income increased $36.7 million or 108%, the increase includes $21.7 million gain from the acquisition of the former Mirae Bank in the second quarter. However, even after excluding that acquisition gain, non-interest income still improved by 73% compared to 2008.

Non-interest expense only increased $9 million from 2008 to 2009. A large portion of that is a result of increased FDIC and state assessment, which accounted for about $3.5 million, and one-time professional fee expenses related to the former Mirae Bank acquisition.

Although the number of employees at Wilshire increased from 361 to 405 throughout 2009, salary and employee benefits actually decreases slightly to $26.5 million, an indication of tight cost control measures implemented by management throughout 2009. Proof of this is evident in our efficiency ratio, which was greatly improved from 44% in 2008 to 35% in 2009.

On that note, let me pass things back to Joanne.

Joanne Kim

Thank you. Before opening the call to questions, I want to share some perspective and outlook about Wilshire’s business strategy in fiscal 2010. Let me begin by saying that year 2010 is a milestone year for Wilshire, our third years anniversary, and an appropriate for both reflection and planning for the future.

We are building upon a great foundation that was built in the last three decades, nearly $3.5 billion in assets, consistent profitability and growth, a strong market position, and a proven operating ability to navigate our current economy. We view these elements along with a team of talented personnel are factors for success.

Management will continue to focus on cost reduction of operational efficiency. Annualized operating expenses as a percentage of average asset were 1.93% in the first quarter, virtually unchanged from year ago level.

As Alex pointed out, our efficiency ratio was further lowered to 36.62%. We are moving in 2010 to diversify our asset distribution by accelerating SBA and top tier middle market business lending and decreasing our concentration and exposure in commercial real estate.

As I said earlier in the call, our SBA department is primed and ready to generate quality loans in volume. Similarly, we have fully restructured our corporate banking department, which will concentrate on middle market relationships. While we will continue to make CRE loans, we will be conservative and cautious. We expect there to be continued downward pressure on valuations and we will remain heightened underwriting standard.

Quality is an imperative for growing our earning assets. We gained tremendous experience and confidence as a result of Mirae acquisition and we’ll continue to be opportunistic if similar opportunities present themselves in the future. We expect the continued weak environment will result in further consolidation and takeover opportunities during 2010 and Wilshire wants to be a participant in the reshaping of our industry.

We are ready to explore possibilities for external growth in our multi-ethnic communities and beyond, but only on terms that make strategic sense and can be accretive to earnings. We expect to grow our operations and market presence in the Texas and East Coast regions. There is just ambitious expansion plans however, growth will be sound and profitable and never to chase expansion for expansion sake alone. We are strengthening our teams in these locations to execute our plan.

Thank you for being with us this morning.

Edward Han

That concludes our formal presentation and at this time we would like to open it for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from John Pancari - Macquarie.

John Pancari - Macquarie

Can you just talk about your comfort with the reserve levels? I mean, this is the second consecutive quarter of really taking another material swipe at your reserve and bolstering that as you’ve been working through your portfolio. Are you thinking that you’re near a level here that’s sustainable without the need to materially add again? I guess can you put that in the context, where you think NPAs are going to peak if you think you’re near one?

Joanne Kim

I guess as I said in my prepared statements, our reserve coverage was improved, especially for legacy Wilshire portion, closer to 2.9%. As I give you information, a lot of our problem loans coming into either delinquencies or NPLs, but we removed more loans from these categories, maintaining or lowering our exposure in this are.

We will continue to manage our problem loans that way, a lot more aggressively, because more loans has come into that direction. I believe that we have addressed appropriately both in the reserve level and I believe that our NPL or problem loans, we can contain those loans in the current level going forward.

Alex Ko

Let me add a little bit more colors on the breakdown of our current reserve. As Joanne mentioned earlier briefly, as we had a substantial increase on the charge-offs on methodology, those charge-offs coming mainly from our FAS 114 impairment analysis, meaning on individual loans, we reviewed it and if necessary we charge-off or entirely charge-off.

That amount will be added on to the total charge-off amount, which will be the basis for the general reserve. Also our loss methodology weighs more on the later parts of the charge-off. So since last two quarters including Q4, that substantial charge-off will require as to reserve higher level of general reserve valuation.

So as such, we have increased, with that increased charge-off, we have $8.9 million reserves strengthened. As an impaired reserve that’s consistent in prior quarters, we reviewed all of those impaired loans, but the actual impaired loan balance has slightly decreased. So with that, we believe we have adequate level of the loss for loan loss debt as of now.

John Pancari - Macquarie

If I can just change topics here, but on the FDIC assisted deal front, I know last time we talked to you and you had mentioned there’s a couple opportunities in the Korean-American bank space that you were looking at. I do know that we’re seeing some headlines here that Mirae Bank may be make an investments in Hanmi, and Seihan may be getting an investment. So can you talk about the opportunities to do additional failures here in your markets?

Joanne Kim

Yes. As I said, I guess if the opportunity presents them in the future, we will actually pursue it to see whether it makes sense for us. I guess other than that, there’s not much to add because those are pretty sensitive issues.

John Pancari - Macquarie

Then lastly one housekeeping question on the tax rate, can you give us an idea of what you think will be a good rate to expect here in our models for your effective tax rate going forward?

Alex Ko

As of now, I think it’s at 35%, and based on the expected credit mark and others, I think it is prudent to expect 35% to 36% of the tax rate going forward.

Operator

Your next question comes from Aaron Deer - Sandler O’Neill & Partners.

Aaron Deer - Sandler O’Neill & Partners

A question, you’ve obviously had some very strong deposit inflows, and I’m wondering to the extent that you’re not seeing the kind of loan growth to deploy all of that presumably you’re putting some of that into securities, we saw some of that this quarter. Can you talk about how far you’re going out on the curve in that stuff and what the average duration is?

Alex Ko

We’re not going out very far. We’re trying to be very defensive at this point, so around average life of three years, a well structured pact in CMOs is mostly what we’re buying these days.

Aaron Deer - Sandler O’Neill & Partners

Any thoughts on capital levels and that the outstanding shelf registrations that you have, are you guys looking to do something soon, or do you feel like you can pull something together quickly if you need to for the purposes of doing an acquisition or what are your thoughts there?

Joanne Kim

As far as the capital is concerned, we strive to maintain capital ratios that are not only consistent with the regulatory requirements, but also consistent with our business model and future capital need. We are continuously reviewing our capital position on an ongoing basis and if there’s a need for new capital that essentially we will consider doing it, but at this time, we are visiting all possibilities.

Aaron Deer - Sandler O’Neill & Partners

Then lastly, I suspect the regulatory exam should have or should be finishing up. Is there anything you can share with us on that and have you had your exit interview yet?

Joanne Kim

It is still going on at this time. I believe that we will finish up soon and we will know the result at that time, but we do not anticipate any surprises.

Operator

Your next question comes from [Brett Rapkin] - Standish.

Brett Rapkin - Standish

Wanted to ask a question about the comments you made about SBA lending. Two things, one is I wanted to make sure. I understood what kind of volumes you were thinking about from origination perspective in 2010. Then as I understand it, the market for SBA products, the premiums have comeback to a range of 7% to 8%. Wanted to make sure that’s what you were thinking about in terms of premiums?

Joanne Kim

I think the premium is now as high as 9% to 9.5% at this time. As far as SBA loan origination is concerned, I think this year our total origination was slightly below $60 million, right. I think we are one of few banks, who kept the loan production offices in different regions, and they are alive and well and very active in SBA marketing and I believe that we can easily double or more than double our 2009 origination in 2010.

Brett Rapkin - Standish

Then I wanted to get some clarity if I could on the different components of growth in 2010, because it sounds like you are interested in growing the loan portfolio. Although the C&I book shrank this quarter, the CRE book was a little higher. So I guess I’m curious, should we expect minimal growth or do you believe that as the economy presumably grows, you’ll be more aggressive with lending and if so, can you talk about in what segments?

Joanne Kim

I guess in terms of commercial real estate side as I said, we’re trying to lower our exposure. We expect some payouts just by the current situation. Our payouts have been pretty minimum, but despite of that we expect some payouts, but CRE loan origination will be very cautious and we will only take top quality CRE loans only, but in terms of SBA and also in the home mortgage side, for those loans the secondary market is wide open and available.

So as I said, we will be very active in the SBA lending, because we can sell off 90% of the loans to the secondary market, and same thing is true with the home mortgage side. I know that the qualification part is tough, but we have our own underwriting criteria and I believe that we can originate home mortgage loans, and if it’s necessary we can sell off those loans for a premium.

As far as SBA lending is concerned, it takes time to build those portfolios. It cannot be done overnight just like CRE loans. So we’ve begun the process, we are very active in C&I lending market because there are quite a few opportunities in that, but again it’s going to take type to build that portfolio.

So the portfolio of growth is not going to be aggressive, even though we are actively pursuing new relationships or intend to increase existing relationships and in June 2009, our organic loan growth was about 5.6% if we exclude Mirae’s portfolio. So that was not a big growth. So in 2010, this year, we are projecting to have a similar pattern of growth.

Brett Rapkin - Standish

Then just last question and then maybe I can follow-up after the call on credit, but wanted to make sure I understood the 14 basis point decline in the loan yields. I think there was a comment about less accretion. Was that essentially the origination fees, the amortization of 1.14, what was the explanation for the decrease?

Alex Ko

Net interest margin actually decreased by 14 basis points, which happened to be the same decrease on the loan and obviously, the deposit side and borrowing side there’s plus and minuses. Deposit, we have a decrease substantially of the borrowing we have increased. For example, on deposit the rate has decreased from 2.39% to 2.12%, but let me focus on the loan yield decrease as 14%.

That has a component of accretion of the discounted loan, when we purchased the Mirae loan, we marked down to the fair value and usually we have a discount and that is accretive and that impact has about 25 basis points decrease compared to the third quarter, meaning there was accretion, but to the lesser extent of the accretion because accretion is based on the level yield of accretion. Another component of the loan yield was a decrease on the reversal of the non-accrual loans. That also has about 10 basis point impact. So net of those two have about 14 basis points impact to the loan yield.

Operator

Your next question comes from Don Worthington - Howe Barnes Hoefer.

Don Worthington - Howe Barnes Hoefer

A couple things, since we were talking a little bit about the margin, do you have an outlook for where you expect it to go over the next quarter or two?

Alex Ko

As you have said, during the third quarter and this quarter that accretion of the loan discount has some sort of a significant impact. In general those low accretion amounts and the percents would decrease again as we are using the effective interest rate method. Also another component is obviously non-accrual interest reversal and the other one is our loan pricing.

I don’t think we will have in terms of low pricing for the 2009 or next quarter and lastly, deposit repricing. We expect about $460 million total deposit, or excluding the same deposit, we expect about $273 million. So the deposit will be repriced next quarter and we will continue to reprice it at a lower rate, so having said that, the margin expectation for the next three months will be stable as we experienced this quarter.

Don Worthington - Howe Barnes Hoefer

Then in terms of OREO expense, what was that number for the fourth quarter and then also for the year if you have that?

Joanne Kim

Do we have that information for that expense? It’s very small in numbers. Can we get back to him?

Alex Ko

I do know that it is a small amount. The total OREO is small that we sold. So the related OREO expenses are very insignificant.

Don Worthington - Howe Barnes Hoefer

Then what about further security gains? Do you expect that to…?

Alex Ko

Don, the Fed has been under quite a bit of easing program, where they’ve bought $1 trillion of mortgages since March of 2009. So they have to determine if they’re going to stop in March as they promised, but depending on what happen in the housing market, there’s talk that they will continue this program, if there is there might be possibility of more gains.

Don Worthington - Howe Barnes Hoefer

Then I guess my last question is if I recall, you discuss TARP on a periodic basis. Any additional thoughts on whether you hang on to that or pay that back in 2010?

Joanne Kim

We have no plan to pay back the fund at this time.

Operator

Your next question comes from Jeannette Daroosh - JMP Securities.

Jeannette Daroosh - JMP Securities

Just to follow-up on something that Don was asking about, the OREO expenses. Actually, looking at the totality of your operating expenses in the fourth quarter, it looked like on a dollar basis they were up about $10 million in the third quarter. So I was wondering is that a run rate that we should be thinking about going into 2010.

Alex Ko

There’s a onetime FDIC pay. This is about $3.5 million and we have at December, we had a prepayment already. So I do not expect this amount of the same level of the FDIC assessment going forward.

Jeannette Daroosh - JMP Securities

So when we think about the operating expenses again in dollar terms, then perhaps looking at the third quarter and using that as a run rate is a better choice?

Alex Ko

We had a one kind of operating loss, about $880,000 during the month of December, I think. That was a very unusual operating loss and I do not expect that kind of operating loss incurred going forward. So I think it is safe to reduce about $1 million on the total non-interest expense. The salary, it remains pretty much consistent for the quarter and I don’t think it will change substantially. I think were there occupancy expenses and data processing.

Jeannette Daroosh - JMP Securities

Then in terms of the gains from the SBA loan sales that you have in the fourth quarter, can you tell us how much you’ve sold?

Alex Ko

We sold the FDA guarantee, a portion in the fourth quarter of $21.9 million with a gain of 8.8% or $1.9 million.

Jeannette Daroosh - JMP Securities

Then Joanne, I think you indicated earlier that the premiums that you’re seeing are in the 9% range, is that right?

Joanne Kim

Right.

Jeannette Daroosh - JMP Securities

So should we be thinking about similar quarterly gains in 2010, given the volume that you’re anticipating for SBA loan originations?

Joanne Kim

As I listed for you, our average premium rate was 8.44% for the loans that we sold during fourth quarter. So it fluctuates. The determination factor is the interest rate and the terms. In our SBA loans, we are generating real estate loans as well rather than business loans and real estate loans typically have 20 year plus terms with higher interest rate, which generates higher premiums. So yes, unless there’s a substantial change in the SBA secondary market, we anticipate to have this level of premiums.

Jeannette Daroosh - JMP Securities

Then my last question if I may, you had indicated geographic areas that you’re looking to expand in 2010 and beyond include Texas and the East Coast. Might that also include some FDIC assisted transactions?

Joanne Kim

As far as the assisted transactions are concerned, as I’ve stated, we will look at possibilities in that region as well, but what we are anticipating is more on an organic growth because our branch network in Texas and East Coast area, we still need to build those branch networks and if there’s a way for us to do it through acquisition, that would be great for us.

Operator

Your final question comes from Chris Stulpin - D. A. Davidson.

Chris Stulpin - D. A. Davidson

Just one clarification and one additional question, please. I think the first question out of the shoot here was talking about your reserve levels, and I think Joanne, you got to the point where you mentioned you wanted to maintain your non-performing loans at its current level going forward or roughly. Did I hear that correctly?

Joanne Kim

Yes, one more possibly.

Chris Stulpin - D. A. Davidson

Okay, that helps, thank you and also, could you breakout generally the geographic distribution of your CRE portfolio?

Joanne Kim

I guess that’s still approximately about 80% of our loans are still in the Southern California area.

Chris Stulpin - D. A. Davidson

80% where, excuse me?

Joanne Kim

80% of our CRE loans are in Southern California area and then the other 20% is basically spread out in Dallas region of Texas and then New York and New Jersey area and I think we talked about this geographic distribution before I will see 80% in Southern California area, our exposure to inland empire is about 9% and we don’t have any exposure in Central Valley area. Those two areas are the areas that are severely impacted by their current economic situation, and majority of other than that, the majority of our loans are located in the metro area of Southern California.

Chris Stulpin - D. A. Davidson

You say 9% of 80% or 9% of total?

Joanne Kim

9% of total.

Chris Stulpin - D. A. Davidson

Of your total loan portfolio, okay.

Joanne Kim

Yes, total CRE portfolio.

Operator

We have no further questions at this time.

Edward Han

Okay, thank you. That concludes our quarterly conference call and on behalf of our management team and the Board of Directors, I would like to thank everyone again for your participation and continued interest in support of Wilshire Bancorp. If you have any further questions, please feel free to contact us directly. Thank you.

Operator

This concludes the presentation for today, ladies and gentlemen. You may now disconnect. Have a wonderful day.

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