Wilshire Bancorp Inc Q1 2010 Earnings Call Transcript

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 |  About: Wilshire Bancorp, Inc. (WIBC)
by: SA Transcripts

Wilshire Bancorp Inc. (NASDAQ:WIBC)

Q1 2010 Earnings Call

April 23, 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

Aaron Deer – Sandler O’Neill & Partners

Julianna Balicka – Keefe Bruyette & Woods

Don Worthington – Howe Barnes Hoefer & Arnett

Kurt Batinich – D. A. Davidson

Tim Coffey – FIG Partners

Joe Steven [ph] - Steven Capital [ph]

Operator

Good day ladies and gentlemen and welcome to the first quarter of 2010 Wilshire Bancorp, Incorporated Earnings Conference Call. My name is Shanelle and I'll be your coordinator for today. At this time, all lines are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference.

(Operator instructions). As a reminder, this conference is being recorded for replay purposes.

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

Edward Han

Thank you, and good morning, everyone. We appreciate you joining us today for our first quarter 2010 earnings conference call. Again, my name is Edward Han and joining me are Joanne Kim, company's President and Chief Executive Officer, and Alex Ko, Executive Vice President and Chief Financial Officer.

Earlier this morning, Wilshire Bancorp issued its first quarter 2010 earnings results, which can be accessed either through the Investors Relations tab at wilshirebank.com or from the various financial news websites. This call is being webcast and will be available in 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 principal 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 question-and-answer portion of the call.

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

Joanne Kim

Thank you, Edward. Thank you all for joining us today for our call. We are pleased to report another profitable quarter despite the continued weak economic conditions. We recorded a net income of $2.4 million or $0.08 per common share in the first quarter of 2010 compared to a net income with $2.1 million or $0.07 per share in the same period last year.

We continue to see elevated credit cost, but the core earning power of the company is strong enough to absorb these costs and still generate a healthy profit for our shareholders. We continue to benefit from the increased profile we have built in the market and the growing recognition of Wilshire State Bank as a leading bank in the community we serve.

This is seen most notably in our continued growth in core deposits. During the first quarter, we increased core deposits by more than 7% compare to the fourth quarter of 2009. The improving deposit mix has enabled us to decrease our cost of funds and further strengthen our earnings power.

We did see an increase in nonaccrual loans in the first quarter which was largely the result of the migration of loans that had previously been delinquent. Our total nonaccrual loans were $105 million at the end of first quarter 2010 compared to $69.4 million at the end of fourth quarter '09.

These were essentially borrowers that have been on our watch list for some time and have experienced additional deterioration in their financial condition given the continuing weakness in the economy. There were very few additions to nonaccrual loan this quarter that weren’t past due or at least classified at the end of previous quarter.

It is worth noting that the loan portfolio acquires from Mirae Bank continues to generally perform in line with our expectations. The new inflows into nonaccrual loans during the first quarter included 26commercial real estate loans totaling $35.1 million of which eight loans totaling $5.5 million were covered loans. These new nonaccrual loans were primarily concentrated in three retail shopping centers, four hotels and four gas station loans. The average loan to value ratio at originations of these loans were 64.6%, and the average decline in appraisal value has been 36.3% based upon current appraisal report.

The value decline is concentrated in gas stations and hotels properties since the current appraisal report totally excluded embedded business values in their valuation. We have set aside specific allowances to cover the collateral deficiencies in all of our impaired loans and we believe our specific allowance is adequate at this time.

We continue to aggressively work to resolve our problem loans. We have further strengthened our special asset department by adding in house collection specialty and legal counsel and streamlined our legal process.

Our strong capital position and earnings power allow us to continue taking an aggressive posture with respect to disposal of problem loans. We did see a decline in delinquent loans during the first quarter which was attributable to previously delinquent loans migrating to nonaccrual status as well as a decline in the inflow of loans into the early stage of delinquency.

At the end of first quarter of 2010, total loan delinquencies were $30.5 million down from $40.6 million at fourth quarter ’09. Approximately $8 million of this amount is covered loan. Roughly 2/3 of all delinquent loans are in the 30 to 59 days past due category and this category declined by approximately $8 million during the fourth quarter compared to fourth quarter ‘09.

Our total troubled debt restructuring or TDR also declined during the first quarter by $10 million to $54.6 million. All our TDRs are performing according to the modified terms at the end of the first quarter 2010. Of the 20 TDR loans, there were only three loans with a balance of $5 million that were delinquent 30 to 89 days. All three of the delinquent TDR loans are covered loans under the load share agreement with FDIC. Our total loan charge-off was $5.8 million in the first quarter down from $18.7 million last quarter. $4.4 million of the loan charge-off in the first quarter came from the CRE portfolio. Portion of the charge-off was attributed by the discount given in the sale of our notes. We sold a total of $16.8 million net problem loans during the first quarter of 2010 of which $5 million were a nonaccrual status.

Of the problem loans sold, carwash and gas station loans accounted for the bulk of the sales. We currently have about $ 21 million in non-performing loans that are either in contract to sell or about to enter into a contract to sell. The resolution of problem assets is our top priority and management continues to proactively evaluate the potential sales of problem assets. Given the increase we saw in nonaccrual loans, we recorded a provision for loan losses of $17 million for the first quarter which strengthened our allowance for loan losses to 3.2 9% of total loan from 2.56% at the end of prior quarter.

Turning to a new loan originations, we had $87.3 million in originations in the first quarter of 2010. This is down from $125 million in fourth quarter and below our historical level of origination. The low level of loan production is attributable to a few factors which include our strategy to limit production of new CRE loans in order to decrease our concentration in CRE portfolio. Secondly, the implementation of more conservative underwriting criteria, loan to value ratio requirements and risk assessment practices and lastly, production has been low simply due to a lack of demand, as a result of the sluggish economy.

Our total loans were essentially unchanged during the first quarter standing at $2.42 billion at March 31, 2010. Commercial real estate loans comprised 78% of the portfolio and C&I loans 15%. We continue to believe that we have minimum refinance risk in our CRE portfolio, 13% of our CRE loans are scheduled to mature in 2010 and the average weighted loan to value ratio in the CRE portfolio was 65% at March 31, 2010.

We believe this limits our exposure to the risk in refinancing. Turning to our SBA lending business, we continue to gain excellent momentum. We originated $23.5 million in SBA loans during the first quarter, an increase of 37% over the prior quarter. Premiums paid on SBA loan sales in the secondary market continue to be in 8 to 9% range making this a very attractive business.

With our strength in the SBA department, we expect SBA sales in the secondary market to be out growing source of non-interest income going forward. Now, let me turn the call over to Alex for further review of our first quarter financials, after which I will provide some commentary and outlook before opening the line for questions.

Alex Ko

Thank you, Joanne, and hello everyone. Now let me begin with a review of our balance sheet at the end of the first quarter. Total asset increased 1% to a $3.46 billion on last quarter. This increase is the attributable to $36.4 million increase in investment securities, offset in part by $9.6 million decrease in gross loans. As Joanne mentioned, we continue to generate very strong deposit growth as more costumers are seeking to move their accounts to stronger financial institutions.

Total deposits rose 3% and reduced our loan to deposit ratio to 83% further improving our liquidity. We saw the strongest growth in our core deposit accounts including 7% increase in non-interest bearing demand deposit and 8% increase in money market accounts. Core deposit now represents 74% of our total deposits compared to 49% at the same time last year.

Our capital position remains largely unchanged from the previous quarter. All of our regulatory remain strong and well above the minimum for well capitalized institutions. Tangible common equity to tangible asset ratio increased from 5.76% at December 31st ’09 to 5.86% at March 31st 2010 and, the tangible common equity pro share increase by $0.13 to $7.14 during the same period.

Turning to our income statement, our net interest income before provision for loan losses were 28.6 million in the first quarter of 2010 compared to 19.7 million in the same period of last year. The increase is attributable to increased earning assets and a reduction in total cost of the deposit which had led to 30 basis points increase in our net interest margin.

On a sequential quarter basis, our net interest margin declined eight basis points to 3.65%. The decline was due to reversal of interest income on nonaccrual loans as well as the reversal of loan discount accretion on a loan acquired from Mirae Bank.

Interest income reversed as a result of loans being classified as nonaccrual accounting for 2 million or 25 basis point off of our net margin. Accretion reversed as a result of nonaccrual acquired loans worth $874,000 or 11 basis points off of our net interest margin.

Together, those factors reduced total net interest margin by 36 basis points. Excluding the effect of those two items, our adjusted net interest margin was 4.01% in the first quarter of 2010 compared to 3.73% last quarter.

The increase in adjusted net interest margin was primarily due to the improvement in our deposit mix and higher cost CDs maturing and re-pricing at lower rates. As a result of those factors, our total cost of deposit declined to 1.55% in first quarter of 2010, down from 1.83% last quarter.

As I indicated earlier, we reduced the level of our volume and the interest rate on those volumes also declined by 56 basis points from the previous quarter.

We had 7.3 million in non-interest income in the first quarter of 2010, an increase of 95% from $3.7 million the same period last year. The increase was primarily due to $3.5 million gain on sale of investment securities.

During the quarter, gain on sales of investments securities was booked as we sold portions of the CMO holdings into the market’s historically tight spread level against treasury yields. With the Fed ending in NDS purchase program at the end of March we were able to take advantage of the strong appreciation in price.

Re-investment in securities with the proceed from the sales also serves to shorten the expansion rate within the portfolio, in the face of a potential rising rate environment. Costs complete, the overall duration of the investment portfolio went down from 3.4 at the end of the last quarter to a 3.1 at the end of this quarter.

As Joanne mentioned, we originated $23.5 million in SBA loans in the first quarter of ‘10 and sold approximately $14 million in loans. However due to a change in accounting rules that delays the recognition of the gain on sale of the loans under sales with certain recourse provisions, we did not recognize any gains on the sale of SBA loans in the first quarter. We expect to recognize the gain upon the evaluation after expiration of the re-course provision.

Our total non-interest expense was $14.2 million in the first quarter of 2010, an increase of 19% from $12 million in the same period of the prior year. The increase was primarily due to growth in personnel and occupancy expenses related to acquisition of Mirae Bank and other branches that we opened during the past year. Our efficiencies in the first quarter of 2010 were 40.4% compared to 35% in the fourth quarter of 2009 and 51.2% in the first quarter of 2009.

On a sequential quarter basis, the increase in efficiency ratio is primarily due to lower revenue resulting from decreased non-interest income due to timing issues of the recognition on the gain on SBA loan sale as we mention earlier. Now, I will turn the call back to Joanne. Joanne?

Joanne Kim

Thanks. We are pleased that we have gotten off to a good start into 2010, we expect to continue benefiting from a number of positive trends as we move forward in 2010. We have $248.5 million in CD not including deposit from the State of California time deposits with a weighted average rate of 2.05% that are scheduled to mature in the second quarter.

The amount that we choose to retain should reprice at lower rate and have a positive impact on our net interest margin. We also expect to see an increasing contribution from our SBA lending business given our current pipe line and the premium being paid in the secondary market. Combined with our continuous disciplined expense control these trends should help to further strengthen the core earnings power of the bank. We continue to be cautious with respect to our credit trends.

We expect to keep our reserve at a high level for the foreseeable future and we have the capital strength to allow us to be aggressive in disposing of problem assets. Given the positive trends stated earlier, we are optimistic that the earnings power of the bank will be more than sufficient to absorb our credit cost until we start to see a sustainable improvement in asset quality. Thank you for listening.

Edward Han

That concludes our formal presentation, and at this time would like to open the call for questions.

Question-and-Answer Session

Operator

(Operator instructions).

Your first question comes from line of Chris Stulpin from D.A. Davidson.

Chris, your line is open.

Again Chris, if your line is on mute, please unmute it. But your line is open.

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

Aaron Deer – Sandler O’Neill & Partners

Hey, good morning. Joanne, good morning, Alex.

Alex Ko

Good morning, Aaron.

Aaron Deer – Sandler O’Neill & Partners

First a question on the credit, I guess I was surprised that given a lot of the positive trends that you saw in the quarter, why maybe you didn’t get aggressive on charge offs and try to hold the NPA level down?

Joanne Kim

Well, actually when we -- again as I said is, we did set aside sufficient specific reserves to cover the deficiencies in the collateral side. However, we look at the individual loans and if there are good businesses and then when there is a strong enough and realistic chance for these businesses or the borrowers to continue to do business and repay our loans, we don't necessarily charge off those potions. Because many of those – we do have some hotels and car wash, gas station operate.

When the business value went down to a certain level, literally the appraisal company wiped out the entire business value and they literally put land value only which is not necessarily a true reflection of the collateral value and those businesses still are going concerns, healthy business. The reason why we put these loans in that category is because their loans -- that converge ratio was below because of the sales decline or their income decline, but that does not necessarily mean that their entire business value is wiped out.

So we actually look at chase by chase basis. If there's no way for us to recover from the decrease or lost value, collateral value, we charge it off; we do a partial charge off. If there is a realistic you know, and practical reason, then we just set aside reserves and do not charge off, but again it is our intention that we’ll continue to look at it and if it make sense we will charge off.

Alex Ko

And also let me add a little bit more color on our charge off versus reserving allowance. First of all our total provision for loan losses for the current quarter was 17 million while we charged off 500 million. So there’s a well access of the provisioning versus Q4 we had 18 million of charge off and we a have 24 million for provision, so the gap between the charge off has a more aggressively provisioning we took positions more aggressively provide a provision instead of charge off.

The reason you know why we have less charge off again is based on our appraisal. We updated all those non-performing and impaired loans and there was a, actually a value decline that requires us to charge off. However we cannot just charge off everything based on the collateral. And based on the collateral intimation, we set aside reserves and one of the indications; out of total 105 million of the non-accrued loan or non-performing loans, most of those loans, about 86% was placed during the last two quarters as are non-performing. So if we see a more certain credit deposit deterioration, we take always the position to charge off aggressively.

Aaron Deer – Sandler O’Neill & Partners

That’s very good color on what you are thinking. Can you give specifically what the – what the specific reserve is and what the general reserve is?

Alex Ko

All right. We have a total as of Q1 79 million, 79.5 million is the total reserve and we have 28 .5 million of specific reserve which compares to last quarter, it was 12.8 million. So, it was a more than double in terms of the specific reserve reflecting those collateral value decreases. And the remaining is the general reserve including collateral reserve.

Aaron Deer – Sandler O’Neill & Partners

OK. And then Alex you mentioned the duration on the securities book came down which was encouraging I guess. But the – it looks like given the excess liquidity that you have seen you have been adding to the securities book overall. Can you talk a little bit about what types of securities you are adding, what kind of yield you are getting and then on the aggregate portfolio what's the mix of fixed versus variable?

Alex Ko

Mostly, what we’ve been adding is shorter duration CMO packs and sequential very -- it is the safest type of mortgage backed security. We’ve been adding about three —the yield, the book yield will be – by these -- about 3.2 with a duration of about 3. And the overall portfolio is 3.1 duration.

Aaron Deer – Sandler O’Neill & Partners

OK. And the mix of overall fixed versus variable?

Alex Ko

I would say 95% fixed.

Aaron Deer – Sandler O’Neill & Partners

OK. OK. Thanks, I'll step back.

Operator

Your next question comes from the line of Julianna Balicka of KBW.

Julianna Balicka – Keefe Bruyette & Woods

Good morning. How are you?

Joanne Kim

I’m fine, thank you.

Julianna Balicka – Keefe Bruyette & Woods

I wanted to follow up a little bit more also on Aaron’s line of questioning if I may on the specific reserve of the 28.5 million and the 12.8 million. Can you just quantify the dollar amount of loan that that’s against?

Joanne Kim

Well, I guess the total impaired credit amount, that’s what you're asking, right?

Julianna Balicka – Keefe Bruyette & Woods

Sure, yes

Joanne Kim

What is the total?

Alex Ko

You know, let me give you a little bit more specific information. You know a quarter over quarter comparison might give you more color you know how we have reserved. In total we have impaired loans which includes the already announced loans under TDR.

Julianna Balicka – Keefe Bruyette & Woods

Yes.

Alex Ko

We have a 184 million.

Julianna Balicka – Keefe Bruyette & Woods

184?

Alex Ko

184 million.

Julianna Balicka – Keefe Bruyette & Woods

Yes.

Alex Ko

That’s the 28.5 million out of 184 million that represents 37% of the coverage as a specific reserve. Compare this with the fourth quarter of last year , we had a total impaired loan of $124 million. And our reserve was 12.8 million which was approximately 10%. So, the specific reserve coverage as of percentage of impaired loan has increased from 10% to 37%.

Julianna Balicka – Keefe Bruyette & Woods

OK, very good. And then, on the, and then when you talked about the collateral deficiencies for which you provisioned that’s the deficiency between what you perceive to be the true value of the loan versus the appraisal at land value or is that deficiency relative to some kind of internal appraisal?

Joanne Kim

No, that's the -- we performed the full appraisal during the first quarter and then that's a reflection, that's the deficiency between the loan amount and the actual collateral, updated collateral value of the…

Julianna Balicka – Keefe Bruyette & Woods

The land value that you’re talking about basically?

Joanne Kim

For example, if it is gas station properties, they literarily give us land value only. So you know there's a substantial deficiency balances in the collateral. Again, as I said, those substantial cushions team from the gas station properties and car wash properties. Those typically carry a good portion of intangible business value.

Julianna Balicka – Keefe Bruyette & Woods

OK. OK, I understand. All right, and then I have a, the question is, do you have the dollar amount of the new delinquencies this quarter not -- because you mentioned migration. So, I was wondering what the new delinquencies were this quarter, the inflows?

Alex Ko

You know, there is a substantial upgrade to the past loans [ph]. It’s about like a, you know, about 45 million.

Julianna Balicka – Keefe Bruyette & Woods

OK.

Alex Ko

And we don't have -- 45 million was the actually upgrade from delinquent to know no delinquency category. And but, you don’t have a specific data how much we added on. But, as a quarter over quarter comparison about 10 million decrease and majority of that decrease is due to the upgrade of about 45 million of non delinquent loan.

Julianna Balicka – Keefe Bruyette & Woods

And do you have data then instead on the migration to non-accrual from delinquent?

Joanne Kim

I think we do.

Alex Ko

Yes, we do. We do have about $33 million migrated to non-accrual.

Julianna Balicka – Keefe Bruyette & Woods

OK, very good. All right, I’ll step back now. Thank you very much.

Never mind.

Operator

Your next question comes from the line of Don Worthington, of Howe Barnes Hoefer & Arnett.

Don Worthington – Howe Barnes Hoefer & Arnett

All right, good morning.

Alex Ko

Good morning, Don

Don Worthington, of Howe Barnes Hoefer & Arnett

Couples of things, one on the SBA gain on sale are we looking at kind of the second quarter being what you would have recorded this quarter plus what you get next quarter or is it kind of a rolling delay in terms of when you book the gain on sale?

Joanne Kim

A rolling delay.

Don Worthington, of Howe Barnes Hoefer & Arnett

OK. OK.

Alex Ko

I just want to make it clear, it’s not just, you know, we just take specific policy or procedures. There is a new accounting guidance that’s issued and we are just following that gap. We expect the unrecognized gain portion, which is about like 1.3 million, I think it will be recognized in the next quarter, so it’s like a three month deferral.

Don Worthington, of Howe Barnes Hoefer & Arnett

OK. And then in terms of the liquidity position, I mean obviously that's been built up pretty substantially as core deposit growth has substantially outpaced the loan growth. Do you have any feel for when you might be able to re-deploy some of that into higher yielding assets? I know obviously it’s key as loan demand, but any thoughts there?

Joanne Kim

Well, actually loan demand as I said is pretty low. I know that we do have a higher concentration in CRE side. So, unless the loan itself is top quality low risk loans, we currently would not put those loans on our book. And we are now concentrating more on the SBA loans and home mortgage loans and mid market business loans. Some of those mid market business loans, it takes time to develop underwrite and properly structure these loans and put them on our book, you know I think if you go back into the CRE loans. I know that I can deploy that, these money rather quickly.

However, that’s not the direction that we want to go at this time. So, that’s the reason why you don’t see the rapid that loan growth that we used to do in the past. So, what we are doing now is as you could see our core deposits continue to grow despite the fact that we continue decreasing our interest rate.

And as I said, the fact that we have a pretty good name in the community wherein really help us that we can improve our deposit mix quality. So, again as we move along, I don’t think we – you're going to see a substantial increase in loan origination, especially in the CRE site but you will see a gradual increase in the C&I and other type of loan products.

Don Worthington, of Howe Barnes Hoefer & Arnett

OK, great thank you.

Operator

Your next question comes from the line of Kurt Batinich of D. A. Davidson.

Kurt Batinich – D. A. Davidson

Hi, I’m standing in for Chris Stulpin today and I have two quick questions for you. One, can you explain why you took the reversal on the loan discount accretion on the loans acquired from Mirae?

Alex Ko

Sure. You know one of the accounting rules is SOP 03-3 and also FAS 91 meaning when we acquire a loan from the FDIC, we are required to segregate those two loans in two pockets, one performing loan and two non-performing loans. And performing loan is based on FAS 91, non-performing is SOP 03-3 loan.

So main differences between those two is performing loan, we accrete the initial discount. Obviously when you apply a loan based on the fair value we mark down to fair value and that discount will be accretive over the period unless this performing loan is downgraded to a non-performing loan.

Once it’s downgraded to non-performing loan, it is subject to SOP 03-3 and SOP 03-3 does not allow to accrete those discounts unless it is fully paid off. So, we have to reverse those accretions because of those Mirae loans there was initially performing loan but it was downgraded to non-performing loan subject to SOP 03-3 loan.

Kurt Batinich– D. A. Davidson

Ok, then my second question, how do you guys breakout the CRE loan composition in the press release, are those both covered and non-covered loans?

Joanne Kim

Yes. We also have a breakdown of covered and non-covered in our press release.

Kurt Batinich– D. A. Davidson

Yes. But for the CRE, can you break out for us the loan composition of the CRE of just non-covered loans?

Alex Ko

Yes, you know we can give it to you.

Joanne Kim

(inaudible)

Alex Ko

Let me put it this way, it is not much different you know between legacy reserve [ph] and combined basis. You know, I can get back to you with a very detailed -- but I can tell you it was not much different Mirae portfolio versus the legacy reserve portfolio in terms of CRE breakdown. Mirae, they also had a CRE concentration, I think it was around like 70%.

Kurt Batinich– D. A. Davidson

Ok, thank you.

Operator

Your next question comes from the line of Tim Coffey of FIG Partners.

Joanne Kim

Good morning Tim.

Tim Coffey– FIG Partners

Good morning. Good morning, how are you?

Joanne Kim

I was doing OK.

Tim Coffey– FIG Partners

Great. You know as we look at the kind of yields you are bringing on the securities and the lower loan growth that we are seeing, what are your thoughts about portfolio-ing SBA loans?

Joanne Kim

Can you repeat your question one more time?

Tim Coffey– FIG Partners

Sure, sure. As we look at the process of lower loan growth going forward, why not keep SBA loans you originated as supposed to selling them?

Joanne Kim

Oh, I see. Yes, I guess I can either keep those loans because the interest rate on those loans are pretty healthy usually between 2-2.75% over prime rate. I can go either way. However at this time I guess we realized that the recognition of premium income is pretty healthy and substantial but going forward that's one thing that we would consider doing it because as you know, we know the deployment of the deposit is so much slower in the lending part. So that's the option that we are currently considering as well.

Tim Coffey– FIG Partners

OK.

Joanne Kim

But either way, you know, we could go either way.

Tim Coffey– FIG Partners

And then on the loan deposit ratio, obviously with loan demand being as slack as it is the ratio has been coming down. Do you have any target level you'd like to see that at or is it more dependent on the economic environment?

Alex Ko

Sure, I believe it currently is at 83% which compares to more than 110% like 18 month ago so we have a substantial improvement in terms of loan to deposit ratio and I think currently you know we are kind of comfort level and we are more focusing on the competition of those you know deposit accounts, increasing CDA versus you know interest bearing deposit. So, we are more focusing and we are not kind of intending to decrease or increase substantially, meaning I think – I think we are initially at 85%, you know 85%, we are comfortable with similar ranges.

Tim Coffey– FIG Partners

Ok, great. Thank you very much.

Joanne Kim

You’re welcome.

Operator

Your next question comes from the line of Joe Steven [ph] with Steven Capital [ph].

Joe Steven - Steven Capital

Good morning.

Joanne Kim

Good morning, Joe.

Joe Steven - Steven Capital

Most of my questions have been answered, but can you talk about a big feature concept. Can you give us a little view on what you think are the opportunities on the acquisition side either on FDIC transactions or just the smaller companies that might just need capital? Thank you.

Joanne Kim

OK. On the acquisition side, we are constantly looking at an opportunity within the community that we serve and outside the community that we are in. So, again, if there are good fits, the important is good fit, if there's a good fit with Wilshire’s State Bank culture and customer base, credit cards and everything, we will go after those opportunities. And your second question is about the capital?

Joe Steven - Steven Capital

No, no. I guess, it was just on acquisition either on the FDIC basis or on a, you know, smaller banks that just might need capital instead so.

Joanne Kim

Currently, we are only looking at FDIC acquisitions or acquisition through FDIC, not the regular M&A at this time.

Joe Steven - Steven Capital

OK, thank you.

Joanne Kim

OK.

Operator

(Operator instructions) You have a follow up on from the line of Aaron Deer of Sandler O'Neill.

Aaron Deer – Sandler O’Neill & Partners

Hi Joanne, as long as you mentioned capital, what are the current thoughts on that with respect to where you stand and what are you think in terms of paying of TARP?

Joanne Kim

I believe that we have enough capital to put up our current business needs at this time. Going forward, if there's an acquisition opportunities definitely we'll consider raising additional capital to meet that capital requirement. As far as TARP re-payment is concerned we are actually reviewing on a periodic basis what would be the good time for us to repay that money, because we will repay that money. There is no question about it but as far as the timing is concerned, we are looking for the best timing and then when we raise capital to do so, I guess we intend to do it in a shareholder friendly way. So, we are looking for the timing.

Aaron Deer – Sandler O'Neill & Partners

OK. So, in any capital raise would be contingent or either specifically for the purpose paying back capital or to doing an FDIC acquisition.

Joanne Kim

That’s correct.

Aaron Deer – Sandler O'Neill & Partners

OK, great. Thank you.

Operator

There are no further questions, I’ll now like to turn the call back over to Mr. Edward Han.

Edward Han

OK, that's concludes our quarterly conference call. On behalf of our management team and the board of directors, I would like to thank everyone again for your participation and continued interest and support of Wilshire Bancorp. If you have any further questions, please feel free to contact us directly. Thank you.

Operator

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.

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