Good day, and welcome to the Preferred Bank’s Second quarter 2014 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Tony Rossi of Financial Profiles. Please go ahead.

Thank you, Operator. Hello, everyone, and thank you for joining us to discuss Preferred Bank’s financial results for the second quarter ended June 30, 2014. 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, Louie 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 turn the call over to Mr. Li Yu. Mr. Yu, please go ahead.

Thank you. Good morning ladies and gentlemen. I’m pleased to report the operating results for the second quarter of 2014. For the quarter, the Bank earned $5.9 million in net income which is $0.43 per fully diluted share. This quarter is a quarter of growth for our Bank. Our loan grown 4.9% sequentially or nearly 20% annualized. And the gross was proportionally divided between all segments of our loan portfolios. And it’s also a pleasant surprise that our deposits has grown 22% for the quarter, especially when most of the growth coming from non-interest bearing DDAs. While I can offer no specific reason to decide entity composites of this growth, but I can only say that we gladly accept this good fortune. Most of the loan growth was originated in the second half of June. As such it contributes very little to the earnings of our second quarter. However, since we’re forming the base for a higher level for the third quarter it should be having much more effect in the next quarter, especially one, our pipelines deal remained strong and then the -- still continue accumulating additional loans during the beginning part of July. For the quarter, we’re able to maintain or improve slightly our net interest margin, largely because of the employment of excess cash into security investments, also because of the growth in the non-interest bearing DDAs. Of a bigger pleasant surprise to us is, for the first time in a long-long time, the efficiency ratio has dropped below 40%, of course, this quarter we are added by a gain on sale of OREO and without that the efficiency ratio would have been in the low 40s. But we’re fully confident that we can maintain low the 40 efficiency ratio for the remainder of the year. Our bank is currently very well positioned for the interest rate increases. We are nearly substantial I mean heavily asset sensitive balance sheet. So is well positioned for the interest rate changes if it ever comes. However, we’re perfectly happy to operate under the current interest rate environment. Again, we’re pleased to report the $0.43 earnings per share which is a 34% increase from a year ago. Thank you very much. And now we’re ready for your questions.

and:

(Operator Instructions) And we’ll take our first question from Aaron Deer. Please go ahead sir.

Li, the growth this quarter was quite impressive and in particularly you mentioned the DDA inflows, the non-interest bearing deposit inflows. I guess I was -- your commented about not knowing the size and the components of that, I am just wondering are you comfortable with respect to the granularity of what’s coming in, was there anything chunky or unusual in terms of a single deposit or bringing in a lot of money that would be temporary or do you feel like this is sticky deposit that will be around for awhile? Sandler O’Neill & Partners: Li, the growth this quarter was quite impressive and in particularly you mentioned the DDA inflows, the non-interest bearing deposit inflows. I guess I was -- your commented about not knowing the size and the components of that, I am just wondering are you comfortable with respect to the granularity of what’s coming in, was there anything chunky or unusual in terms of a single deposit or bringing in a lot of money that would be temporary or do you feel like this is sticky deposit that will be around for awhile?

No. There’s couple of them coming in, with a little bit of its bigger chunk in the let’s say $10 million level, but this people always come in and out between quarters and not necessary regularly but they always has been a pattern of their business. So other than that we are, we’ve been -- we have been seeing this, goal should be on the how should I say, more comfortable basis, for instance for the first 20 days of July, we see the growth continues.

That’s right. And then on the loan side, you mentioned that you guys are very well positioned for higher rates and I think a big part of that is your preference toward variable rate loans. Can you talk about what the, kind of, what the mix is today variable versus fixed and not just what’s on the balance sheet but in terms of where new production is and how you’re able to maintain that profile just given that I would expect that customer demand would be for more fixed rate product? Sandler O’Neill & Partners: That’s right. And then on the loan side, you mentioned that you guys are very well positioned for higher rates and I think a big part of that is your preference toward variable rate loans. Can you talk about what the, kind of, what the mix is today variable versus fixed and not just what’s on the balance sheet but in terms of where new production is and how you’re able to maintain that profile just given that I would expect that customer demand would be for more fixed rate product?

Okay. We have -- for the second quarter we have maybe done one or two relatively small loans in the fixed rate loans, okay. And usually for a shorter period of time, okay. So we have consciously tried not to do a fixed rate loans as we have hold them off for long, long time. Our strategy has always been having more deal flow coming to us and not necessary coming ourselves to the interest rate risk, we don’t want to come in ourselves in. And I’d like to also report that it seems to me that the customer demands in the latter part of the second quarter for fixed rate loans, seems to me subside a little bit, yes, they are still demanding, but the demand has met by the supplier, is not as strongly met by the supply, in other word there is less banks willing to do, their fix rate loans they also create less of a pressure to us.

Okay. And then on the loan side, it’s of course the growth has been really quite impressive, can you talk about geographically where that’s coming from as well as may be by the type of product and in particular I am curious to know if, what kind of traction you’re getting up here in the Bay Area, I know that you had opened a San Francisco branch and seemed pretty optimistic about the prospects here? Sandler O’Neill & Partners: Okay. And then on the loan side, it’s of course the growth has been really quite impressive, can you talk about geographically where that’s coming from as well as may be by the type of product and in particular I am curious to know if, what kind of traction you’re getting up here in the Bay Area, I know that you had opened a San Francisco branch and seemed pretty optimistic about the prospects here?

Yes Bay Area that we are, we have been in operation since late February of last year, to this state Bay Area total deposit level is a little over $80 million outstanding, those commitment is higher than that, okay. Basically more heavily involved in the CIE area, I mean they are in the CNI area, but however the Bay Area deposits, I mean loans has been very granulized, very few loans at the Bay Area loans over $3 million-$4 million most of them below that, okay. And we actually most of the property we’re financing the Bay Area is really in the city. And we are very thankful that we have a team of people have been banking, I mean bankers over their profit for the past 30 years. So we’ve got a lot of their present we’re following them.

That’s great. And any plans for new hires that you’re looking to do before going down at the end of the year? Sandler O’Neill & Partners: That’s great. And any plans for new hires that you’re looking to do before going down at the end of the year?

We would do the strategic hiring, okay, as we always. We have basically steps ourselves really well, especially the back office and front office, but we are looking to any kind of, see somebody has a record that we think we can be benefited, but we will make no hesitation in hiring.

And we’ll take our next question from Timothy Coffey of FIG Partners. Please go ahead.

Li, do you -- the new loans that came on in the quarter, especially the back half of June, what were yields on those relative to the yields that quarter end? FIG Partners: Li, do you -- the new loans that came on in the quarter, especially the back half of June, what were yields on those relative to the yields that quarter end?

I cannot get you the mixture of the year, because I think it misleading because the proportion of these I mean, CNI and the proportion of CIE sometime is different in our mixture, but I can offer this kind of observation which I have been keeping on tab about constantly. We are booking the loans in the second quarter generally at the level between $0.05 to $0.10 less yield than the first quarter.

And did I read you right that you don’t expect deposit outflow for 3Q, but certainly the growth rates should flow? FIG Partners: And did I read you right that you don’t expect deposit outflow for 3Q, but certainly the growth rates should flow?

We -- well, hopefully we don’t have outflow in the third quarter compare to the second quarter, in fact, we like to grow a little bit in it, because when we have or not had any quarter of net outflow for a long period of time, well, certainly we will not want to break a record. But sometime, deposits are not that easy to control, but our early indication is that we will be able to hold if not increase in reasonable amount.

Okay. Great. And then my last question is, can you provide a little more color on the non-accrual loan held for sell that might pay off in the third quarter? FIG Partners: Okay. Great. And then my last question is, can you provide a little more color on the non-accrual loan held for sell that might pay off in the third quarter?

Okay. Well, we -- I mean our lead back informers that by the way there is -- I was talking they have concluded that by now, but they will only delay so they say they would get into the next Friday that they reported that they had the borrower has come to them and wants to pay down a substantial portion of that the loan that help for sale, okay. The loan originally has a coupon balance of $13 million plus, okay, as since we amortized those slowly below $13 million, okay. And then the proposal is that they will pay down a big dollar amount which will result in not only the widening down the balance to a zero, our current held for sale balance, the book balance was zero, will also result in the non -- I mean in the recovery for recently a month, okay, recently large amount. We don’t know the exact number yet, they’re calculating on that. Now you can add anything Louie?

Yes. And what Mr. Yu was talking about the $30 million that was our pro rata share of that.

(Operator Instructions) We will take our next question comes from Gary Tenner of D.A. Davidson. Please go ahead.

Thanks. Just had a question regarding your commercial real estate growth, it’s almost 30% over the last 12 months and I wonder if you could comment on any areas within that line of business that you’re specifically steering away from at this point? D.A. Davidson: Thanks. Just had a question regarding your commercial real estate growth, it’s almost 30% over the last 12 months and I wonder if you could comment on any areas within that line of business that you’re specifically steering away from at this point?

Sure, Gary, first of fall, to share a way, clearly from land loan we don’t do land loan and also the other of our lending areas in the empire is the region that we want to stay away from. We focused on inflow and more like a LA, San Francisco as Mr. Yu mentioned earlier in the city and stick to what we know best, foreign county as well.

Well, I am sorry, I guess I didn’t mean geographically areas you’re staying with and not any kind of businesses or product type they will stay away from? D.A. Davidson: Well, I am sorry, I guess I didn’t mean geographically areas you’re staying with and not any kind of businesses or product type they will stay away from?

No, we basically, as we early indicated those are loans, land development in the less desirable area we still awaits from that, the larger land development and we just don’t do it, okay. And generally we’ve been trying to granulize our loan portfolio quite a bit, okay. These days we are generating a number of loans that we are participating out, so in order to granulize it. And we are very fortunate that we have a production staff that was generating more than sufficient loan pipeline for us and not only we can have our growth we also participating out quite a bit.

And we’ll take our next question from John Deysher of Pinnacle. Please go ahead.

Two question, one on the regulatory front, I think you were having an exam around this time and I was just curious if that’s still on track, are the examiners still on site and when do you anticipate? Pinnacle Value Fund: Two question, one on the regulatory front, I think you were having an exam around this time and I was just curious if that’s still on track, are the examiners still on site and when do you anticipate?

We have a large group of examiner on site and they are riding the middle of their examination and should conclude their work in few weeks, okay. So other than that we cannot report anymore there.

When do you anticipate getting the report by? Pinnacle Value Fund: When do you anticipate getting the report by?

Well, usually after they have -- I am just speaking from past experiences, usually after their -- I mean their field work, the lead examiner will write up a report and when the another lead examiner from the state agency will also review the report and jointly they have to send their posted and we’re not only the lead and have to send to Washington DC, okay. So the whole process sometime is one month, sometime two months so we don’t know. Okay.

Okay. And do you anticipate opening any new branches between now and year-end? Pinnacle Value Fund: Okay. And do you anticipate opening any new branches between now and year-end?

Yes. We are targeting have the branch opening late this year in San Fernando Valley is our location of our greater Los Angeles area.

Okay. So that will open in November or December? Pinnacle Value Fund: Okay. So that will open in November or December?

We like to open in November but looks like it could be December.

Okay. Good. And how are you staffing that? You’re hiring new people or you’re transferring from existing branches? Pinnacle Value Fund: Okay. Good. And how are you staffing that? You’re hiring new people or you’re transferring from existing branches?

We have a policy that whenever we open our new branch we will recruit. The bankers -- it has been in the area having support from the local community and in this particular case we have inventory that had demand since that, since last year. And we had been gradually building up new tenants now.

So to say you’ve hired the key person already? Pinnacle Value Fund: So to say you’ve hired the key person already?

Yes. One year ago.

And it appears that we have no further questions at this time. I’d like to turn it back over to management for any closing remarks.

Well, thank you very much. We are very pleased with our quarter and as I said, indicated that we look forward to continued performance in the same line in future quarters. And with that, for any additional question you can certainly call us. Thank you.

And this does conclude your teleconference for today. Thank you for your participation. And you may disconnect it anytime.