Good day and welcome to Preferred Bank Q1 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kristen Papke, Investor Relations for Preferred Bank. Please go ahead.

Hello, everyone and thank you for joining us to discuss Preferred Bank’s financial results for the first quarter ended March 31, 2015. With me today from management are Chairman and CEO, Li Yu; President and COO, Wellington Chen; Chief Financial Officer, Edward Czajka; and Chief Credit Officer of Lu Couto. Management will provide a brief summary of the results, and then we will open up the call to your questions. During the course of this conference call, statements made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions that may or may not prove correct. Forward-looking statements are also subject to known and unknown risks, uncertainties and other factors relating to Preferred Bank’s operations and business environment, all of which are difficult to predict and many of which are beyond the control of Preferred Bank. For a detailed description of these risks and uncertainties, please refer to the SEC required documents the Bank files with the Federal Deposit Insurance Corporation or FDIC. If any of these uncertainties materialize or any of these assumptions prove incorrect, Preferred Bank’s results could differ materially from its expectations as set forth in these statements. Preferred Bank assumes no obligation to update such forward-looking statements. At this time, I’d like to now turn the call over to Mr. Li Yu. Please go ahead.

Thank you. I just finished talking about - am I clear to anyone? Okay I just finished talking about that there has been lot of [indiscernible] in the first quarter because many of loans jumping to the CMBS market for obvious long-term fixed rate loans. However, our first quarter production was strong and we resulted in the good growth in the first quarter. Looking ahead, our second quarter pipeline looked good. However, likely most of the new loans will be originated in the second half of the quarter, which will result in approximately the same pattern as first quarter with the lower average loan growth for the quarter. On a deposit side first quarter was $80 million growth of 4.5% on a linked quarter basis. All the growth from DDAs was three quarters of them in the non-interest bearing category. We are very pleased with this result, we are also realized that this may not be a norm for the long-term. In fact we’re also contemplating whether to add on some TCDs in the eve of interest rate movement, so seeking somewhat interest rate stability for one or two years period. During the quarter asset quality of the non-performing long category, our non-performing assets category did not change much, remained at approximately $16 million. However there was a continued improvement in the classified assets category. Total classified assets which including the non-performing assets is now stands less than $20 million less than 8% of the capital reserve of the Bank. With that, we are seeing a gradually reducing legal expenses. We hope the moderation will be more evident in the coming quarters. First quarter expense also included some seasonal expenses such as payroll taxes on bonus and reflecting the full quarter of the expenses on new branch of San Fernando valley which they have started operation in February. And with that the efficiency ratios stays 42%. We're pleased about that. Well, I must say there may be some [unintended] consequences about rewarding our employees with RSAs, and with now the income allocated are related to the RSA seems to be bigger than we anticipated now takes away penny of the EPS, otherwise our operating income would have been $0.49 on the fully diluted basis rather than $0.48. Probably to me the most ... important thing is that the Bank now maintains a - still maintains a 89% rate sensitive, asset sensitive loan portfolio, in another words 89% of the loans are on the floating rate basis. We are ready to take full advantage of the rate, the increases, if it ever happens. Thank you very much. Now, we are ready for your questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from George Connaughton with DLV Capital.

Good morning, guys.

Good morning.

My question first is about the high levels of capital at the Bank. There was some mention in the 10-K regarding uses of that capital. You guys have reinstated the dividend, and you opened a new branch. But you mentioned that you were looking for some other uses to deploy that capital as well. Does that include - is it just de novo openings, or might that also include acquisitions as part of the strategy?

It would be our mission that continues to look for the possibility of that.

For acquisitions?

Yes.

Okay. And just to help me get a picture of I guess your strategy, the long-term strategy for growth and fit with the Bank, can you give an example? I'm not looking for names of course, but just characteristics that you could find attractive, like what characteristics of a Bank would be a good fit for Preferred or maybe what characteristics would you see as not a good fit, when looking for acquisitions?

Actually there is a two type of banks that we would be interested, okay. First type is that it represents significant cost saving immediately which means that basically in the same area we operate in and especially a little bit weaker in the area okay. So that would give us enhancement into our current operation also in a mean time would show some combination expense savings and this is the category that would be interesting. Another is representing the new market and for instance that we opened up San Francisco office, before that we are looking to the possibility acquisition, but we decided to open office first and has been very successful operation there. Obviously by saying that we can continue to look for the opportunity there to enhance to make it larger even more efficient.

Okay. All right. Well, thank you. As far as leverage rate, basically as far as looking for banks that are loaned up versus not loaned up, or other characteristics that way inherent to the Bank, anything there, other than market area, in other words?

Could you repeat a question again I didn’t quite get it.

Sure, I'm sorry. As far as just other characteristics, looking at banks, not just market area but basically their leverage for example, the amount of loans per assets, certain types of deposit characteristics, anything like that that you find attractive or unattractive?

Actually right now that obviously deposits always attractive, rightly priced deposits is really the most attractive since for the long-term, but we kind of believing that wherever we go we have a capability of recruiting adequate loan staff to add onto the loan to the operation. So we are not really looking for something loaned up or not loaned up. Also, the opportunity that will present to us.

All right. Just one follow-up question, I guess. With respect to related loans as well, and I guess new loan teams. You mentioned I think before that you've started an entertainment loan division, and can you just comment on that as far as how - well that industry first of all, what exposure that currently represents in the loan portfolio? And also any other industries that represent a sizable exposure to the loan portfolio?

Okay, entertainment loan portfolio I would let one of answer that was regarding to the nature of that. We have more level look at as really a diversification and if I diversify one of the C&I loan product realizing entertainment company is one of the promising on the mark in our base. Not by coincidence after we get into the field. All you season use all the Chinese big companies come in, partnering with Hollywood studios. But we also believe the contents going to the future will be big business. But having said that was to recognize our limitation that we are basically still sort of participating was the larger very, very, very, very, very I mean experienced the major, major, major banks to get part of their loan portfolio and on the companies that we're familiar with on basically that Company that represents a steady operation. What's the portfolio number right now?

The portfolio right now is about 30 million and these loans are more or less corporate loan there asset based and against the library. So you mentioned we join with a big bank to take a piece of action here and there.

Okay. And so other than entertainment, any other industries represent a sizable portion of loan origination, or just in the portfolio in general?

We do not have major concentration. We do have a plate of concentration, limitation the Board approves every year based on economic movement of various categories, okay. So I mean in fact, one of the major things that are regulated with concern is the concentration.

Okay. Thank you.

[Operator Instructions] Our next question comes from Aaron Deer with Sandler O'Neill.

Hey, guys, it's actually Andrew Liesch on for him. How are you?

Hi, Andrew.

Question on the loan production. Just curious if you could break out the yields that were added by type? What are new CREs loans being added and what are new C&I loans being added at?

Right to my fingertips, okay. The CRE loans we are newly underwritten or newly booked, put it this way C&I on the new loans when we see the 3373.

Got you. Thank you. And then you mentioned that you may be looking to do a CD promotion just to lock in some longer term funding. Just kind of curious what sort of rates you're looking at? What are you currently offering, and what's the…

We don’t intend to do promotion immediately.

Okay.

We have seen those CDs going out, it will probably defend a little bit and currently the market places - CDs are priced at 115 and higher for CDs, we just believe that cost is too high for us.

Got you.

So we will be strategically adding on certain things in different categories and hopefully that will be less than 1% level.

Got you. Okay. And then just with the loan growth again coming on here in the second quarter, maybe towards the end, just seems like with the liquidity that you do have that maybe the margin might hold in this level or maybe be down a little bit in the second quarter. Am I looking at that correctly?

Aaron, this is probably that science that can never so that okay. Because the so many factors affecting when to move what the loan pay off the rate average pay off was is compile to which is something that we really don’t have them pro and the new loan what event sometimes in our dollar amount the rate is slightly have nothing putting negotiated is on the time and may resulting $0.25 change based is away so I would generally venture to say that we will not see too much difference compare to the first quarter into net interest margin but you must give me the flexibility to say that I am not about that.

Right. Of course. All right. Thank you. I'll step back.

[Operator Instructions] And we have a follow up again from Aaron Deer with Sandler O'Neill

Hey, guys, Andrew again. Sorry, if it's just me, one last question. What are you projecting for the tax rate going forward?

Tax rate going forward Andrew, probably be slight were was after the first quarter or probably slightly higher as we move forward as earnings grow are component of tax exempt earnings become smaller and overall percentage so we will see that ETR tick up a little bit toward 40%.

Gotcha. Thanks very much.

At this time, I am showing no further question. So I would like to turn the conference back over to management for any closing remarks.

Well, thank you very much and represent the least question we have in all the conference we have we must represents that up our income - our financial statements and transparent okay. So but in any event if you think about anything you can always give us phone call. Okay thank you very much.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.