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Executives

Doug Sherk - EVC Group

Tommy Wu - Chairman, President, and Chief Executive Officer

Dennis Wu - Chief Financial Officer

Jon Downing - Director of Property Environments and InvestorRelations

Analysts

Andrea Jao - Lehman Brothers

Joe Morford - RBC Capital Markets

Aaron Deer - Sandler O'Neill

Brett Rabatin - FTN Midwest

Erika Penala - Merrill Lynch

James Abbott - FBR Capital Markets

Gregg Hillman - First Wilshire Securities Management

Fred Cannon - KBW

Don Worthington - Howe, Barnes, Hoefer, Arnett

Lana Chan - BMO Capital Markets

UCBH Holdings, Inc. (UCBH) Q3 2007 Earning Call October 26, 2007 11:00 AM ET

Operator

Good morning ladies and gentlemen, thank you for standingby. Welcome to the UCBH Holdings Incorporated Q3 2007 Earnings Conference Call.During today’s presentation all parties will be in a listen-only mode.

Following the presentation the conference will be open forquestions (Operator Instructions). And we do ask that you please limit your questiontwo per participants and if you have additional questions, please queue upagain. If you are using speaker equipment, please lift your handset for makingyour selection.

This conference is being recorded today, Friday, October 26,2007.

And now I'd like to turn the conference over to Mr. DougSherk of EVC Group, please go ahead sir.

Doug Sherk

Thank you operator, good morning everyone. Thank you forjoining us today for the UCBH third quarter 2007 conference call. Before webegin the company's earnings release announcing the third quarter 2007 resultswas distributed yesterday afternoon after the market closed. If for some reasonyou haven't seen a copy of the release and would like one, please call ouroffice at 415-896-6820 and we'll get one to you immediately.

There will be a seven-day replay of this call beginning inapproximately one hour after we finish this morning. The replay number is800-405-2236 or for international participants, 303-590-3000. Both numbersrequire the passcode of 11094813 followed by the pound sign.

Additionally, this call is being broadcast over the Internetand can be accessed by the company's website at www.ucbh.com.

I'd like to remind you that this conference call containsforward-looking statements regarding future events or the future financialperformance of the company. Such forward looking statements involve risk anduncertainties and other factors that may cause the actual results ofperformance or achievements of the company to be materially different fromfuture results, performance, or achievements expressed or implied by suchforward looking statements.

Such factors include, among other things, general economicand business conditions in the areas in which the company operates, demographicchanges, competition, fluctuation in market interest rates, changes in businessstrategies, changes in credit quality, and other risk detailed in the documentsthe company files from time to time with the SEC.

We wish to caution that these statements are just predictionsand actual results may differ materially. We refer you specifically to thecompany's latest form 10-Q, which has been filed with the SEC.

Finally, during the question-and-answer session of today'scall, we ask all participants to limit their first set of question to two andthen re-queue if you have additional questions. In advance, we thank you foryour cooperation with this procedure.

And now I'd like to turn the call over to Mr. Tommy Wu,Chairman, President, and Chief Executive Officer of UCBH.

Tommy Wu

Thank you Doug and good morning to everyone. We appreciateyou joining us this morning for a review of our third quarter 2007 results. Onthe call with me today are Dennis Wu, our Chief Financial Officer, and JonDowning, our Director of Property Environments and Investor Relations.

First of all we would like to extend our sympathies to thefire victims in Southern California, who have lost homes in the fires that areraging in the area.

We would like to discuss the operational highlights for thethird quarter and review our strategy going forward. At the conclusion of ourformal remarks, we will be available to answer questions.

I will ask Dennis Wu to discuss our financial position andresults of operations. Following Dennis' comments, I will discuss ourachievements for the quarter and our long-term business trends. Dennis.

Dennis Wu

Thank you Tommy. Good morning everyone. I would like toprovide an overview of the financial results for the third quarter of 2007. Wereported record net income for the quarter, about $30.8 million, an increase of$20.5 % compared with net income of $25.6 million for a corresponding quarterof 2006.

The diluted earnings per common share were $0.29 for thethird quarter of 2007, as compared with $0.26 for the same period in 2006.Interest income was $182.8 million for the third quarter of the year, anincrease of 32.5 %. This compares with interest income of $137.9 million forthe same period as 2006.

Interest expense of $98.8 million for the quarter was anincrease of $37.7%, from the $71.8 million recorded during the same period ofthe previous year. Net interest income before provisions for loan losses was$83.9 million for the third quarter of 2007, an increase of 26.9%, comparedwith net interest income of $66.1 million for the same period of 2006.

Our net interest margins for the third period of 2007 was3.44%, compared with 3.43% for the same period for 2006, and 3.35% for thequarter ended June 30, 2007. The net interest margin increase in the thirdquarter of 2007 reflects the effect of the increase in loan yields, which werepartially offset by increased funding costs.

Taking into account the recent Fed funds rate cuts, we'reprojecting that our interest margin will be the range of 3.45% to 3.5% atyear-end. Non-interest income of $10.8 million for the third quarter of 2007was relatively consistent with a total non-interest income for thecorresponding period in 2006.

Commercial banking fees increased by 40.9% to $5.2 millionin the third quarter of 2007, compared with $3.7 million in the third quarterof 2006, reflecting the bank's growth in our commercial business. Servicecharges and the positive account increase by 80.4% to $1.8 million in the thirdquarter of 2007, compared with $1 million for corresponding quarter of 2006.

The growth in these components of non-interest incomereflects the ongoing expansion in our commercial lending platform bothorganically and through the acquisition of Summit National Bank in September of2006, and the Chinese American Bank in May, 2007.

The increases in commercial banking fees, deposit accountfees, and loan servicing income were offset by a decrease of 3.5 million or59.7% and gain on sale of loans reflecting the planned decrease in volume ofloan sales in 2007 when compared with 2006.

During the third quarter we achieved significant positiveoperating leverage resulting from our earlier investments in ourinfrastructure. We are very pleased with these results. Non-interest expense of$43.6 million in the third quarter of 2007 is a 16.5% increase over the $37.4million of non-interest expense reported in the third quarter of 2006. Thisincrease was a result of increases in personnel costs and occupancy expenses.

Personnel costs increased from $19.9 million in the thirdquarter of 2006, to $24.4 million during the third quarter of 2007, due toadditional staffing required to support growth of our Commercial Bankingbusiness and the expansion of our infrastructure to support a larger and growingorganization as well as the two bank acquisitions previously mentioned.

Occupancy expenses increased from $4.4 million in the thirdquarter of 2006 to $5.5 million during the same period of 2007, primarily as aresult of the two acquisitions.

We anticipate that non-interest expenses will be in a rangeof $44 to $45 million in the fourth quarter of 2007. The effective tax rate forthe third quarter of 2007 was 36%, compared with 34% of the correspondingquarter of 2006.

The reduced tax rate in 2006 reflects the utilization ofenterprise zone tax credits. I would now like to discuss briefly the September30, 2007, balance sheet.

Total loans of $7.89 billion, which includes loans held forsale increased by $316 million, or 16.7% annualized in the third quarter of2007, following the sale of $49.1 million of commercial real estate loans,$28.8 million of multi-family loans, and $15.9 million of SBA loans.

Loan grown was concentrated in commercial business loans andconstruction loans. Our third quarter securitization of CRE loans progressedwell, closing on October 19, 2007. We plan to securitize an additional $200 to$400 million of real estate loans in the fourth quarter of 2007, which isanticipated to close in late December or early January.

We will carry the resulting securities and available forsales securities proposal. Excluding such securitizations, we projectannualized loan growth in the range of 15% to 17% in the fourth quarter of2007.

New loan commitments of $963.7 million for the third quarterof 2007 were comprised of $904.5 million in commercial loans and $59.3 millionof consumer loans. Commercial business loans originations were $257.8 millionfor the quarter, compared with $325.8 million for the third quarter of 2006.

Construction loan commitments were $276.1 million in thethird quarter of 2007, compared with construction loan commitments of $301.4million in the corresponding quarter of 2006.

Our loan pipeline of $2.15 billion at September 30, 2007,provides a base for strong loan origination in the fourth quarter of 2007. Theaverage loan yield improved to 7.93% for the quarter ended September 30, 2007,up from 7.55% from the corresponding quarter, 2006 and up from 7.91% for thesecond quarter of 2007.

We will continue to improve our overall loan yield byreconstructing our loan portfolio and thereby improving our net interestmargins and increasing profitability. Discussions of subprime mortgage exposurehave dominated the media during the past quarter. We have no subprime loans onthe balance sheet and have never engaged in subprime originations.

Total criticized residential one to four-family loans were30 basis points of September 30, 2007, a decrease of 18 basis points from June30, 2007. We have reviewed our loan portfolio and have found that we have onlyone C.R.E. loan on a property located within the areas where fires are ragingin southern California and the property has not been affected by fire.

Total non-performing assets were $36.9 million or 0.33% atthe end of the third quarter compared with $34.3 million, or 0.32% at June 30,2007. Net loan charge off for the third quarter of 2007, were $2.3 million,consistent with the third quarter of 2006.

Total delinquent loans were 1.06% at September 30, 2007,compared with 0.8% at June 30, 2007, and 0.93% at March 31, 2007. Totalcriticized loans were 1.09% at September 30, 2007, compared with 1.27% at June30, 2007, 1.59% at March 31, 2007. The ratio of allowance per loan loss toloans held in portfolio was 0.89% at September 30, 2007, compared with 0.91% atJune 30, 2007 and 0.93% at December 31, 2006.

Total deposits increased on an annualized rate of 5.8% inthe third quarter of 2007 to $7.78 billion, from $7.6 billion at June 30, 2007.We responded to the 50 basis point cut in Fed funds rate by immediately cuttingour deposit rates across the board. The financial impact of the cut in CD rateswould be recognized in the fourth quarter of 2007 and the first quarter of2008.

The average cost of deposits through the third quarter of2007 was 3.8%, compared with 3.59% for the third quarter of 2006 and 3.77% forthe second quarter of 2007. The cost of deposits at September 30, 2007, was3.65%.

I would now like to provide guidance for the balance of2007. We project fully diluted earnings per share in a range of 1.13 to 1.14for 2007. Our assumptions take into account no more Fed funds, rate cuts, arelatively stable yield curve, loan growth in the range of 8% to 10% annualizedin the fourth quarter of 2007.

A commercial real estate loan securitization in a range of$200 million to $400 million to settle in December, 2007, or early January2008, non-interest expenses in a range of $44 million to $45 million, fourthquarter of 2007, and a full year tax rate of 35% to 35.5%.

I would like to point out that an additional 25 basis pointsFed funds cut in October of 2007 would result in a decrease in net interestmargin of approximately five basis points for the fourth quarter of 2007, afterwhich the debt interest margin would continue to expand in the followingquarters.

Further, the Fed funds cut of 50 basis points at September18, 2007, had a minimal adverse impact on the net interest margin for the thirdquarter of the year and will have a more significant impact on the net interestmargin in the fourth quarter of the year. Accordingly, we project that the netinterest margin would be in the range of 3.4% to 3.45% in the fourth quarter ofthe year and then steadily improving in the following quarters.

Also we are projecting our net interest margin to beapproximately in the range of 3.45% to 3.5% at the end of the year. We haveadjusted our net interest margin guidance downward from guidance previouslyprovided, reflecting the recent 50 basis point Fed funds cut in the thirdquarter of 2007, whereas our previous guidance was based upon a 25 basis pointcut in the fourth quarter of 2007.

We will be providing guidance for the earnings per share andnet interest margin for 2008 in our fourth quarter conference call. Thatconcludes my discussions of third quarter results and outlook.

I will now turn the call over to Tommy.

Tommy Wu

Thank you Dennis. We are very pleased to report growth inthe third quarter despite a challenging market environment. Our Hong Kongbranch reached a milestone, achieving 1 billion in total deposits after lessthan four years in operations.

During the fourth quarter, 2007, we will remain focused ondeposit cost management, which will improve our net interest margin. We projectstrong loan growth in the coming quarters. Our $2.15 billion loan pipelinecoupled with the continuing draws on commitments originated in the earlier partof 2007 will continue to fuel loan growth.

The market is very concerned over construction lendingactivities, the decline in housing prices and slowing of absorption rates. UCBestablished very conservative underwriting guidelines for all loan types in1998 and we have been steadfast in adhering to these guidelines since thattime.

We select carefully the builders we do business with and wetend to stay in major metropolitan areas working with developers who buildmoderately priced homes for first time and first time move-up home buyers. Ouraverage loan to value of our construction loan portfolio is under 60% andaverage outstanding commitment is $3 million with all borrowers providing apersonal guarantee.

We structure and underwrite our construction loan businessby adhering to the stringent criteria that have been in place for the past 20years. We have gone through several economic cycles in this twenty-year periodand have had minimal credit losses. Although, we continue to originateconstruction loan commitments, we have moderated our commitment level and havediversified geographically.

Having expanded outside of California to New York andSeattle markets where the construction market is strong and stable. Withrespect to geographic diversification, New York is a strong market forconstruction lending activities, particularly in areas like Flushing andcertain parts of Brooklyn.

The construction loan portfolio remains very high in qualitywith very few criticized and classified loans. Total criticized loans in theconstruction loan portfolio were 1.14% at September 30, 2007, compared with1.19% at June 30, 2007.

New York is a key market for UCBHs future growth. Our NewYork branches continue to grow and our brand recognition is spreadingthroughout the region. We have signed at least to open an additional branch inBrooklyn, which will bring the number of UCBH branches in the greater New Yorkto nine.

Our deposits and loan pipelines there are very strong andtrends are positive and we project continuous increases in deposits and loanoriginations throughout this vibrant market. The integration of the ChineseAmerican bank, which was acquired by UCBH in May, 2007, has been completed, andthe three New York branches acquired in the transaction are now fullyintegrated into UCBH branch network.

The integration went very smoothly and we look forward tothe contributions of these branches to our growing New York franchise. Ourgrowth in southern California continues to accelerate, particularly in the areaof trade finance. During the quarter our commercial business loan originationswere also strong and we anticipate continued strong growth in this line ofbusiness.

Our trade finance business in Hong Kong is expanding rapidlyas well and we are pleased with the momentum there. We anticipate that ourtrade finance business in the domestic U.S. and Hong Kong will grow even fastergoing forward upon completion of our acquisition of Business Environment Bank,which is head quartered in Shanghai, China.

We are entering into the final stages of the approvalprocess in this acquisition. We have already received CDFI and FDIC approval inthe United States and CBRT (ph) approval should be finalized very shortly. Weare projecting the completion of the transaction in the fourth quarter of thisyear.

On October 7, 2007, UCBH entered into an agreement withChina, Minsheng Banking Corp, Ltd, that allows Minsheng to acquire an aggregate9.9% ownership interest in UCBH with a mutual option to increase the ownershipto 20%.

In accordance with the terms of the agreement, Minsheng willacquire the 9.9% share in two phases. In the first phase, which is expected toclose in the fourth quarter of 2007, UCBH will issue approximately 5.4 millionshares of its common stock to Minsheng. Following the issuance of these shares,Minsheng will own 4.9% of UCBH.

In the second phase, which is expected to close in 2008,Minsheng will increase its ownership to 9.9%. This transaction is historicallysignificant because this is the first time a Minsheng Chinese bank hassuccessfully made a strategic investment in a U.S. bank. Minsheng currently has112 billion in assets and market capitalization of 30 billion U.S., and 298branches throughout major cities in the wealthy coastal areas of China.

The transaction is a strategic advantageous one for UCBH, asit validates our investment thesis and greater Chinese strategy. Broadens ouraccess to capital to fund future expansion and enhances our ability to buildcross border businesses. It also increases customer convenience and betterpositions UCBH to increase market share in the United States.

In conclusion, we are pleased with the solid results that weachieved in the third quarter despite recent challenges in the marketplace,business momentum continues to be strong and trends are positive andencouraging. We are confident that we will achieve another record year in 2007.

We continue to focus on leveraging our strengths, buildingbrand recognition, increasing market shares, and enhancing share value. Thisconcludes our formal remarks this morning. Thank you again for participating inthis call.

Now, I would like to ask our operator to open up the linesand we will take your questions. Thank you very much.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session(Operator Instructions). Our first question comes from the line of Andrea Jaowith Lehman Brothers. Please go ahead.

Andrea Jao - Lehman Brothers

Good morning gentleman.

Tommy Wu

Good morning, Andrea. How are you?

Andrea Jao - Lehman Brothers

Good. Thank you. I was hoping, we could talk about deposits,if you could start by -- if you could give us an indication of what the organicdeposit growth was during the quarter let's say from June 30, to September 30,and talk a bit more about what exactly you mean by continuing to manage downdeposit pricing?

Tommy Wu

Well, on annualized deposit growth particularly for thethird quarter organically was 5.8% on an annualized basis for the thirdquarter. We also project deposit growth between 5 to 10% in the fourth quarterbut our focus will continue to be cost management on deposits because there area high possibility that there might be another Fed fund cut in the fourthquarter.

So, we are actually very focused to make sure that ourdeposit costs will actually trend down accordingly with the Fed fund rate cutin the fourth quarter, which is kind of anticipation of the market right now.

So instead of aggressively focusing on the CD growth, wewill just focus on the core deposit growth, which is what we have been doing inthe past but what we really want to do is not just focus on deposit growthwithout looking into the cost of the deposits of the whole portfolio. That'swhy we talk about the cost management on deposits for the fourth quarter inlight of the current market conditions.

Andrea Jao - Lehman Brothers

Okay. Perfect, thank you very much.

Tommy Wu

Thank you, Andrea.

Operator

Our next question comes from the line of Joe Morford withRBC Capital Markets. Please go ahead.

Tommy Wu

Hi, Joe. Good morning.

Joe Morford - RBC Capital Markets

Good morning Tommy. Two questions, I guess, first you allhave talked about your plans for securitizing loans for the next couple ofquarters. Are -- Is there still an interest or plan to sell any multi-family orcommercial real estate loans at this point?

Tommy Wu

We might. We actually might sell some CNI loans in thefourth quarter. I think, the multi-family, I'm not sure we are going to sellbecause we might want to consider securitizing those loans as well in thefourth quarter or the first quarter of next year.

So there will be some loan sales for the fourth quarter onfamily loans -- but not in the multi-family loans.

Joe Morford - RBC Capital Markets

And then the other question was just on BDB and I wonderedTommy if you could just share any update on how their trends have been over thepast six months, since you announced the deal.

Tommy Wu

Actually the trends have been very positive. They are -- theearnings are actually up to expectations, during the past six months since weannounced the acquisition. And, also the, up about 25% in the past six monthson the earnings.

And then on the credit quality remember, we talk about theyhave two criticized problem assets, and actually one is paid off. So they areonly down to one non-performing loan as of now. So the trends are verypositive.

They got a lot of business inquiries since we announced thetransaction from our existing customers. So, some of our customers have alreadyopened an account with the BDB, in anticipation of our closing of thetransaction in the fourth quarter of this year. So I would say it's very, verypositive.

Joe Morford - RBC Capital Markets

Okay. Great. Thanks so much, Tommy.

Tommy Wu

Thank you, Joe.

Operator

Our next question comes from the line of Aaron Deer withSandler O'Neill. Please go ahead.

Tommy Wu

Hi, Aaron. Good morning.

Aaron Deer - Sandler O'Neill

Good morning.

Tommy Wu

How are you doing?

Aaron Deer - Sandler O'Neill

Doing well thanks. A question on the new commitments in thequarter. I think you put them at about $964 million then had broken out $59 asconsumer and $276 as construction, leaving about $628 million for commercial.And I'm wondering of that, how much of that is commercial real estate versusCNI?

Tommy Wu

I have the information hang on a second. About $211 millionare actually in commercial business, about $310 million in commercial realestate.

Aaron Deer - Sandler O'Neill

Okay. Great. That's helpful. And then, on the untappedcommitments in construction, can we have a sense of where those are locatedgeographically?

Tommy Wu

About 40% from New York and then the rest actually is fromCalifornia, Seattle and the rest of the country where we have branches.

Aaron Deer - Sandler O'Neill

Okay. Great. Thank you.

Tommy Wu

Very well distributed right now.

Aaron Deer - Sandler O'Neill

I’m sorry.

Tommy Wu

Actually very well diversified right now geographically.

Aaron Deer - Sandler O'Neill

Okay. Great. Thank you.

Operator

Thank you. Our next question comes from the line of BrettRabatin with FTN Midwest.

Tommy Wu

Hi, Bret. Good morning.

Brett Rabatin - FTN Midwest

Hi Tommy. Good morning. Wanted to ask you two questions, oneon, wanted to delve in a little more into the deposits and I know you had about$1.5 billion of deposits, or of CDs for pricing in the third quarter and thecost of CDs increased about 9 basis points or a little above 5%.

I know you don't want to give too much competitiveinformation on the call but just can you talk about how much you anticipate youmight be able to lower those that particular $4.5 billion funding source in thenext quarter to get in your, you're going to be less competitive on higher costfunding?

Tommy Wu

Well. As, the Fed fund cut rate actually happened in thelast 12 days of the quarter, so the majority of the thing was we priced in theearly part of the quarter for Q3.

Brett Rabatin - FTN Midwest

All right.

Tommy Wu

And then, we have actually quite a bit of CD will bere-priced in the fourth quarter. That would actually be helpful from a marginstandpoint. But at the same time, we want to be very careful in terms of makingsure that those deposits will stay.

We are not going to be going out aggressively to dopromotions on CDs as I talked about earlier but I think we just want to be verycareful in managing the deposit portfolio to that, our deposit will continue togrow nicely and steadily but not aggressively in the fourth quarter. Becauseunder the current environment you don't want to book CD with longer termsbecause that's going to hurt the margins if the interest rates trend down.

So that's the strategy, we are actually having for thedeposits but we do have some good amount of deposits that actually will bematured in the fourth quarter. And will be I think the cost will be loweredbecause of the current interest rate environment.

Brett Rabatin - FTN Midwest

Okay. Maybe we can follow up on that after the call. Theother thing, I was curious about was just inflows, outflows, out of thenon-accrual list during the quarter, if you can give some color around that.?

Tommy Wu

Jon, do you have that number?

Jon Downing

Very specifically, what type of color without accruals?

Brett Rabatin - FTN Midwest

Well, just inflows and outflows in terms of dollar amountson the non-accrual list.

Tommy Wu

Actually, it’s not much in and out to be honest with you,Brett it's very slow. But if Jon doesn't have the number he can call youseparately off-line to give that you information.

Brett Rabatin - FTN Midwest

Okay, great. Thank you.

Tommy Wu

Thank you, Brett.

Operator

Thank you. Our next question comes from the line of ErikaPenala with Merrill Lynch. Please go ahead.

Tommy Wu

Hi Penala. Good morning.

Erika Penala - Merrill Lynch

Good morning, Tommy.

Tommy Wu

How are you?

Erika Penala - Merrill Lynch

I’m doing well. I want to do follow up on your commentaryabout business development mix. Given that they are growing rapidly is it tooearly to ask how much you expect they will add in loans and deposits when youclose in fourth quarter?

Tommy Wu

Yeah, I think that's, I would actually agree with what youjust said we are going to close pretty late in the fourth quarter. We don'tknow exactly the time. As soon as we receive the approval we have theobligation to close the transaction.

And also, we have already lined up the capital funding forthe closing of this transaction. So we are ready to close. But exactly when wedon't know. It really depends when exactly we get all the approvals.

So, I think it's too early to comment for this year in termsof what we have accomplished and how much they will be contributing to the UCBHincome line for 2007. But once we close then we will have a much clearerpicture.

Erika Penala - Merrill Lynch

Okay. And my second question is how should we think aboutreserve levels going forward? Do you expect to keep your reserves to loansratio in the U.S. flat or build it? And also are you planning to reserve moreagainst the loans originated by Business Development Bank?

Tommy Wu

Okay. That's a good question. The U.S. domestic market, Ithink, we project that we said it would be flat or maybe around 90 basispoints. That would be our plan for U.S. domestic operations. For BDB, there areactually China regulatory guidelines in terms of the reserve.

So it would be 1% flat. So that will be the regulatoryguidelines from the China. But, the 1% that's not taking out from the P&L,in net it becomes a problem loan that will have specific provision for thatparticular loan.

So in general, the guideline from C.B.R.C., China is that 1%threat for that loan provision but it's taking out from equity, not fromP&L.

Erika Penala - Merrill Lynch

I see, okay. Thank you for taking my call, Tommy.

Tommy Wu

Thank you very much Erik.

Erika Penala - Merrill Lynch

Well, thank you.

Operator

Our next question comes from the line of James Abbott withFBR Capital Markets.

Tommy Wu

Hi, James, good morning.

James Abbott - FBR Capital Markets

Hi Tommy and everyone else. My question is on the portfoliocomposition geographically. I had some questions recently, because youdiversified so much over the last couple of years through acquisitions and soforth.

Do you happen to have a breakdown of, I know you've talked alittle bit about loan growth is coming, I think you said 40% from New York andI think that was on construction loans, if I'm not mistaken? But do you havethe overall portfolio broken down?

Tommy Wu

Okay. I don't have the specific details, but I'm sure we canget it for you. But I think overall, the New York, in terms of the loanportfolio is largely on construction side, I imagine about our constructionlending in New York is doing very well and the projects are really goodprojects.

We also have a decent commercial business loan growth in NewYork during 2007, the first three quarters. And then because of Summit, becauseof the bank we acquired from, in Seattle and in Houston also have a very goodgrowth in (inaudible) loans for the last two quarters and that we closed theSummit at the end of last year.

Overall, I think we still have a lot of loans in Californiabecause of our franchise in California has been there for almost 40 some years.But the loan portfolio has started to diversify very nicely geographically in2007. And we continue to expect the trend to be that way. But, as of now, Ijust don't have the specifics at this point.

James Abbott - FBR Capital Markets

Maybe another way to approach this is if I look at thedeposit market share you have in each of those markets as a percentage of yourtotal franchise, would that be a good proxy or has there been a lot of loangrowth in one area that's been disproportionate to what the deposit growth hasdone?

Tommy Wu

I've seen it different I would say. Some branches arestronger in deposits. Some branches are stronger in loan growth, but I thinkhaving a deposit concentration in different markets may be a good indication ofthe loan concentration but would not be exactly the same.

James Abbott - FBR Capital Markets

I think my second question, if I can, is on, give me ascenario if you would where you would issue primary shares to Minsheng in 2008,as opposed to allowing them to by the shares in the open market.

My concern is how should I model for share count in 2008? Atthis point I've assumed that Minsheng, you don't issue any additional shares toMinsheng in 2008, because it doesn't seem to me that you need additionalcapital but maybe there are different drivers, can you go into some detail onthat?

Tommy Wu

Sure, as of now our current trend is to issue 5.4 millionshares for Minsheng for the 4.9% ownership to close the BDB transaction. That'sour current plan. And we as of now we do not have any plan to issue additionalshare to Minsheng for the remaining 4.9% for the aggregate 9.9% ownership.

So most, if nothing had happened then they will have to buyfrom the open market for the remaining percentage for 4.9%, unless we have amajor acquisition, actually we will be contemplating.

Otherwise I think for share count purposes I think we shouldas of now, as of this moment will be no new shares to be issued to Minsheng.

James Abbott - FBR Capital Markets

So, unless there's an acquisition you don't see a need to.And in terms of loan growth from BDB, in 2008, have you given any guidance onthat and has that changed at all or?

Tommy Wu

We actually, we have, remember when we actually announcedthe acquisition of BDB, we want to build a loan portfolio from 2 to 3 billionin, actually in 2010. So that has, remains unchanged.

James Abbott - FBR Capital Markets

That part I remember, it's just the dollar amount in 2008,would we expect it to be 100 million or 500 million or 1 billion, I don't knowbut how fast it would ramp up?

Tommy Wu

I think the numbers would be around 200 to 300 million in2008, if we close the deal in fourth quarter 2007.

James Abbott - FBR Capital Markets

Okay. Thank you again.

Tommy Wu

Thank you very much James.

Operator

Thank you, our next question comes from the line of GreggHillman with First Wilshire Securities Management. Please go ahead.

Gregg Hillman - First Wilshire SecuritiesManagement

Good morning, gentlemen. I was wondering, if you could talkabout cash flow base lending in China?

Basically, whether there is any ursory laws [ph] that wouldlimit your interest rates or whether you could have a division of BBC thatcould actually charge rates similar to what private equity funds charge in theUnited States for loans to smaller businesses like 12% and up and just overallmarket size for capital based lending.

Tommy Wu

Well, our strategy in China is very simple. We will continueto focus on small and medium-size enterprise lending and also will help tofacilitate trade between the United States and they quit China. So many of ourcustomers actually from the U.S. actually have the established their operationsin China. So for our BDB operations it's very obvious that we will help tofinance those transactions or growth for our customers in the mainland. That'snumber one.

Number two, and there are a lot of SMEs in China. SME inChina is not really cash flow lending. It's really based on the business, basedon the business model, based on securities. It's, in China, even SME you havesecurities, actually to be the collateral for the lending activities for theSME market.

So it's a little bit very secured type of lending if youwill in China for the type of lending we will be entering into in China. So,it's very different from what you just mentioned and in terms of yield it'sactually a little bit better that's why BDB currently even though their fundingcost is so high their margin is about 3.5% or even 5.4% as of now.

Once UCB actually closes the transaction with thisacquisition we will be using UCB credit rating to secure funding so that itwill lower the funding cost immediately that will help us to have a marginexpansion for the BCB portfolio.

So we are anticipating between 3.8% to 4% margin down therow for the BDB operation in China. So it's a total different type of lendingactivities compared to what you just mentioned.

Operator

Thank you, our next question, Fred Cannon with KBW. Pleasego ahead.

Fred Cannon - KBW

Thanks and good morning.

Tommy Wu

Hi, Fred. Good morning.

Fred Cannon - KBW

In terms of a new loan commitments Tommy, I notice that thenew business commitments were below the construction and CRE commitments in thequarter. I know part of the plan you guys have been doing an awful lot of workin terms of focusing a lot of the attention on the business side of yourlending.

I was wondering if you could give us some kind of thought ifwe should start to see the business commitment start to exceed those on theconstruction and other real estate stuff sometime.

Tommy Wu

Yes for sure, I think starting the fourth quarter and goingforward the commercial business loans actually the commitment will continue toincrease. But one thing I didn't mention earlier is that we also have a verydecent government guarantee loan, which is also part of the commercial businesslending. About 60 million in the first quarter was not included in the numbersthat I mentioned earlier.

So those would also be considered as part of businesslending activities, CNI lending activities. Those are government guaranteeprograms including XM, FBA loans as well as, those are actually the momentum isgetting very strong.

Fred Cannon - KBW

And then on the A. Triple L., I think you said earlier thatyou are going to stabilize at around 90 basis points, I think it came down to acouple of basis points from 91 to 89 in the previous linked quarter basis. Doesthe guidance that Dennis discussed anticipate a 90 basis point reserve at theend of the year?

Tommy Wu

That will be our plan.

Fred Cannon - KBW

Okay. Great, thank you.

Tommy Wu

Thank you.

Operator

Our next question comes from Don Worthington from HoweBarnes, Hoefer, Arnett.

Please go ahead.

Tommy Wu

Hi, Don. Good morning.

Don Worthington - Howe, Barnes, Hoefer,Arnett

Hi John. Good morning Tommy. On the SBA loans, just curiousin terms of whether you are seeing any reductions in volumes or narrowing ofgain on sale premiums and whether we might be looking at continuation ofsomewhere between $500,000 to $1 million in gain on sale profits on a quarterlybasis going forward?

Tommy Wu

The SBA lending activity is pretty consistent and steady forthe year. I think we anticipate it will continue to be steady. The reason whyit's a little competitive to what we did last year is because of differenttypes of loans in terms of 504 loans and versus 7A loans. The premium is alittle bit different. So I think we should anticipate between $0.5 million to$1million SBA loans going forward.

Don Worthington - Howe, Barnes, Hoefer,Arnett

Okay. And then secondly, in terms of the Hong Kong deposits,you said that's grown to about $1 billion. What types of accounts are thosetypically, or at least the bulk of them, are they business or retail or…

Tommy Wu

We don't have a operation in Hong Kong as you know. It's justa branch, actually sitting in an office building, we step in really well. Thedeposit actually from a corporate customer, high net worth customer, areactually the two types of customers actually contribute the most in terms ofdeposits for our Hong Kong operations.

Don Worthington - Howe, Barnes, Hoefer,Arnett

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of AndreaJao, with Lehman Brothers.

Tommy Wu

Hi Andrea.

Andrea Jao - Lehman Brothers

Hello again.

Tommy Wu

Hi.

Andrea Jao - Lehman Brothers

Hi. I was hoping to ask about provisioning and that chargeoff, at least in the coming quarters. Do you think the modestly higher levelsof provisioning and mostly higher level of charge off as seen in the thirdquarter, is that a good run rate to assume?

Tommy Wu

Well as you know every quarter we do our home -- loananalysis based on current market conditions and the portfolio, the shift of themix. We are projecting about $2 million worth of allowance for the quarter andalso the charges should be very, I would say similar to what we experienced inthe past, maybe, it depends but I think it should be very consistent.

Andrea Jao - Lehman Brothers

Okay. It’s great.

Tommy Wu

And also the, the synchronization also because it would besomething that we also need to consider as a factor.

Andrea Jao - Lehman Brothers

Okay. So the securitizations keep your provisions andrequirements lower.

Tommy Wu

Yes, but we also anticipate good loan growth in the fourthquarter. So I think $2 million would be a good number for fourth quarter.

Andrea Jao - Lehman Brothers

And then my follow-up question is, I was hoping to hear abit more about the market for first time and first time move up home buyers,and kind of learn a bit more what the developers for those kind of developmentsare facing at the moment.

Tommy Wu

Well, we actually have been very, have very close contactwith our customers in terms of concerns in any activities. Those from thoseareas we are focusing on actually our first time and first time move up, acouple of $100,000 to $1 million homes.

That's what we've been focusing on. In those areas where webelieve the absorption rate will be very consistent and also for those projectswe want to make sure that the pick out will not have to be dependent upon thesub-prime mortgages.

So, those are the lending activity we're in is totallydifferent from some builder to build thousands of homes who actually can letthe prime mortgages take out, is totally different business we are actuallyentering into or we've been entered into. So that's the types of lendingactivities that we are actually have been focusing on in the past and will bein the future.

Andrea Jao - Lehman Brothers

How is that segment faired in recent months?

Tommy Wu

Actually it's, well the California overall slowed down alittle bit. That's the fact. But in certain areas like San Francisco we have somecouple of projects financed for some of the condos. The average condo pricebetween $800,000 to $1.2 million.

Those projects within two weeks, gone. So certain areas aredoing very well but as you know some pockets in California like Indian Empire,Stockton area and also Sacramento area, those actually have slowed down. But wehave very limited exposure in those areas.

Operator

Thank you. Our next question comes from the line of LanaChan with BMO Capital Markets. Please go ahead.

Tommy Wu

Hi Lana Good morning.

Lana Chan - BMO Capital Markets

Hi Tommy. I just wanted to see if I can get more details onthe internal loan securitization and just to make sure I understand thedynamics of what's going to happen to the balance sheet going forward.

So could you talk about what you think is going to happen tothe overall average earning asset growth as those loans are internallysecuritized how much of the existing securities are going to run off,particularly in the fourth quarter and what kind of rates we are seeing, withthe differential on the internal loan securitization versus what's running off?I ask this to Jon.

Tommy Wu

Okay sure. Sure, Jon, can you answer the question.

Jon Downing

Sure, good morning, Lana. We have a BS that will continue togrow at about 15% to 17% per annum moving forward perhaps. And so with that wewill need a security space that provides ample borrowing horsepower to meet ourborrowing needs.

So, I necessarily wouldn't look for a reduction of thedollar amount of the existing securities portfolio, which by coincidence hasgone from 23% at 12/31/06, to about 16% at 9/30/07, rather I would look forsome stability in that portfolio as we move forward.

So kind of maintaining it where it is. Having said that, wewill also going to have a movement, a geographical movement on the balancesheet of current C.R.E. loans up to a mezzanine classification of securities.When I say that, we intend to classify them on the balance sheet as securities availablefor sale that have resulted from internal securitizations and we would look forthat segment of the balance sheet line item to grow.

Is that helpful?

Lana Chan - BMO Capital Markets

Okay. And as far as any rate differential or impact for, onthe interest yields from these actions. How should I be thinking about that?

Jon Downing

Well of course when there's a securitization you have yourinsurance and your amortization of fees and things of that nature. So we arelooking on something like that would be about 50 to 60 basis points.

Lana Chan - BMO Capital Markets

Okay. Thanks, John.

Operator

Thank you. Our next question comes from the line of ErikaPenala with Merrill Lynch. Please go ahead.

Erika Penala - Merrill Lynch

Hi. I just had a quick follow up question. I wanted to makesure I understood the margin guidance correctly. So the margin guidance for thefourth quarter is a range of 3.45 to 3.5% and the 3.4 to 3.45% is if the Fedcut another 25 basis points?

Tommy Wu

No, let me clarify. If the current environment will be 3.4to, let me see my notes. Hang on a second. Okay, the current guidance based onthe current environment is 3.4% to 3.45% for the fourth quarter. And then atthe end of the year, December will be 3.45% to 3.5%.

If there will be another Fed fund cut in late October, thatwill have, for 25 basis points there will be about five basis point impact forthe fourth quarter. But after that then the margin would expand afterwards.

Erika Penala - Merrill Lynch

Thanks for the clarification, Tommy.

Tommy Wu

Thank you, Erika.

Operator

(Operator Instructions)

Tommy Wu

If there are no other questions, let me conclude by sayingthank you very much for everybody participating on this call. If you have anyfurther questions please feel free to call any one out there. Have a niceweekend. Thank you very much.

Operator

Thank you ladies and gentlemen. That does conclude ourconference for today. If you would like to listen to a replay of today'sconference please dial (303)590-3000, or 1(800)405-2236. Passcode number, wouldbe 11094813. ACT would like to thank you for your participation. You may nowdisconnect.

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Source: UCBH Holdings Q3 2007 Earnings Call Transcript

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