Preferred Bank (NASDAQ:PFBC)
Q2 2008 Earnings Call
July 22, 2008 5:00 pm ET
Lasse Glassen - Financial Relations Board
Li Yu - Chairman, President and CEO
Welcome to the Preferred Bank second quarter 2008 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Tuesday, July 22, 2008.
I would now like to turn the conference over to Lasse Glassen with the Financial Relations Board. Please go ahead, sir.
Thank you. Good day, everyone, and thanks for joining us to discuss Preferred Bank's results for the second quarter ended June 30, 2008. With us today from management are Mr. Li Yu, Chairman, President and Chief Executive Officer; Bob Kosof, Chief Credit Officer; and Ed Czajka, Chief Financial Officer. Management will provide a brief summary of the quarter, and then we will open the call up to your questions.
During the course of this conference call, statements made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions that may or may not prove correct.
Forward-looking statements are also subject to known and unknown risks, uncertainties and other factors related to Preferred Bank's operations and business environment, all of which are difficult to predict, and many of which are beyond the control of Preferred Bank.
For a detailed description of these risks and uncertainties, please refer to the documents the company files with the Federal Deposit Insurance Corporation, or FDIC. If any of these uncertainties materialize, or any of these assumptions prove incorrect, Preferred Bank results could differ materially from its expectations as set forth in these statements. Preferred Bank assumes no obligation to update such forward-looking statements.
At this time, I would now like to turn the call over to Mr. Li Yu. Mr. Yu?
Thank you, Lasse. Good afternoon, ladies and gentlemen. With the high earnings record in the past, I am certainly not pleased with the second quarter earnings that we are reporting today. However, I am not totally disappointed.
During this quarter, we have been very aggressive in taking a historically high $7.2 million in loan loss reserve. We also choose to write down the value of a Freddie Mac Preferred Stock by $1.9 million, even though subsequently at this time, the value of these securities seems to have had greater prospects now.
The housing market in Southern California has not improved much in the third quarter. In fact, at this moment, it has not improved much. Although the greatest value deterioration seems to be over or behind us, and the value reduction in the last couple of months seems to be much milder, in some areas, it's not even happening. But today the new challenge of the problem is the mortgage availability.
Today a good qualified borrower will find it very hard to get a mortgage. The mortgage lender had no problem lending $105 on a $100 property in the past. Now, they have great problem on the same property. They are lending $64 on $80 value. As a result, our business customer is under pressure.
Interest carrying certainly becomes a big burden, and sometimes partnership fights have led to legal action that we drag into it. However, above this only one price drop in this area is that the migration of loans from our performing portfolio into the past two categories seems to have slowed down very much in the months of May and June, and, we pray that this is not the temporary situation.
During this very difficult quarter, we also made improvements to our financial conditions. We have improved our capital ratio. We have improved on liquidity, and we frequently improved our balance sheet structure.
Looking forward, although we hope things will change some, I must say it remains, my vision remains, that it is challenging and difficult. However, it is my opinion that is nothing that we cannot manage. And I believe my board and my staff feel the same way. As a result, many board members, together with my staff and many, many of our office’s employees, have been purchasing our stock. Insider ownership now is estimated over 30%, and probably up to 32% now.
Now, with all this information, I am opening for questions. Operator?
Okay, and I am sorry, sir. Okay. And ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). And we currently have no participants in the audio queue, sir.
Okay. Nobody is asking questions.
Okay. Well, in that case, thank you very much. Thank you all for your attention. Good afternoon again.
Ladies and gentlemen, this concludes the Preferred Bank second quarter 2008 conference call. If you would like to listen to our replay of today's conference, please dial 800-405-2236 or 303-590-3000 with the pass code 11117331. AT&T would like to thank you for your participation and you may now disconnect.
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