Kristen Papke – IR, Financial Profiles Li Yu - Chairman and Chief Executive Officer Wellington Chen - President and Chief Operating Officer Edward Czajka – EVP and Chief Financial Officer.

Matt Schaefer - D.A. Davidson & Co Carlos Velasquez - FIG Partners, LLC.

Good day and welcome to the Preferred Bank Second Quarter 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, Financial Profiles, Investor Relations. Please go ahead..

Hello, everyone and thank you for joining us to discuss Preferred Bank’s financial results for the second quarter ended June 30, 2015. With me today from management are Chairman and CEO, Li Yu; President and Chief Operating Officer, Wellington Chen; and Chief Financial Officer, Edward Czajka.

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 would like to now turn the call over to Mr. Li Yu.

Please go ahead..

Thank you. Good morning ladies and gentlemen. My name is Li Yu. Welcome to the earnings conference call. For the quarter ended June, 30, 2015 our Bank earned a net income of $7.6 million, this is the highest of our corporate history. On the per share basis, we earned $0.55 per fully diluted shares as compared to $0.45 for the same quarter a year ago.

This is a 22% improvement. This quarter’s earnings were enhanced by a special dividend of Federal Home Loan Bank in the amount of $227,000 and a gain on sale of OREO in amount of $325,000. Without these two, we would have earned $0.53 a share which is still well above our own internal expectations.

With the sale of OREO, our total non-performing assets is now little less than $8 million or a little less than 40 basis points or 0.4% of our total loan portfolio. More importantly the classifieds total now stands a little less than $11 million which is equal to about 60 basis points or 0.06%. A bright spot of the quarter is loan growth.

For the quarter our loan grown $78.5 million in spite of a very large pay-off activities, which seems to be the norm of the industry. Deposits however have grown only $25 million or 1.4% on the linked-quarter basis.

With the faster growth in loan and slower growth in deposits the leverage ratio has changed and also aided by the Federal Home Loan Bank dividends, our net interest margin improved in this quarter to 4.01%.

Another bright spot of the quarter is our efficiency ratio now stands at 39%, partially because of the expended net interest income, but more importantly because of the overhead controls intact, net interest income seems to be a recent quarter low of - net interest margin recent quarter low of - efficient ratio of recent quarter low of 39%.

We are also pleased to announce that we have entered into agreement to purchase all the stock of a bank in New York, United International Bank, in Flushing, New York. We are excited about entrance into this all important market.

We are going to continue to do what we have been doing in California, but now we have a one new area for us to expand our activities. The transaction will be, after first two or three months, will be immediately accretive, and the book value dilution is very, very minor, which should be earned back within a one year period.

So with this acquisition, we are really feeling that our future still holds a very positive outlook for our future. Board of Directors and the management wants to send a thank you for your attention to our bank and thank you for attending the conference. Now we are ready for your questions..

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Matt Schaefer of D.A. Davidson. Please, go ahead..

Hi, good morning. This is Mat calling in for Gary..

Hi, Mat..

Hi..

Just on the deal, once the deal is closed, how would you think about investing further in that market? I mean, would you want to rapidly build it out or take your time?.

We don’t have any specific so called pace of investment.

We have confidence the people that we acquired over there can expand the activity to more than what they presently do, but the growth of their activity would be, if it is on the loan side, we have to be on the credit quality first type of basis, but the management in Los Angeles is ready to give them all the support they need and whatever activity lead to we will support them..

Okay.

And then for further M&A opportunities, would you want to wait and focus on this deal? Or would you be immediately looking at other opportunities as they came along?.

We have been presented with number of deals, although on a very, very preliminary basis.

And from now on, we are going to continue to look at opportunities and because these transactions are relatively small and relatively simple we believe the implementation of this transaction is not going to be time - consumption – as time requirement for us as the large deal will be. So we will be looking out on a pretty immediate basis..

Okay, great. Thanks. That’s all my questions..

The next question comes from Carlos Velasquez of FIG Partners. Please go ahead..

This is Carlos on behalf of Tim Coffey here at FIG Partners. Just a couple of questions.

Do you guys anticipate a slowdown in warehouse lending that could potentially weigh on loan growth? And if you do, what are your plans, if you have any plans to store, to offset any potential headwinds?.

Obviously I will ask Wellington to answer little bit later, but we do not have done much warehouse lending to start with and activity has been slowing down in the past one year for what little portfolio we have, okay.

So Wellington anything to add?.

No, I think that’s very accurate..

Okay. And just a further question.

How much more of an increase in the cost of deposits should analysts be considering going forward? How much more expensive do you think deposits will get?.

Well there is all kind of school of thoughts on the marketplace. If you listen to - I mean, a most recent one is the CFO of Chase, Chase Bank, was saying that the he think the deposit cost will increase faster than we think, so how much faster? He has no answer either.

And a regulator has been speculating that there will be large shift from DDA to the TCD area and again we have not been provided any guidance as to what that specific dollar amount is and I can say that we will - it is one of the very high priority in putting our attention to be market effective and to be market reactive all the time.

And Ed do you have anything to add on?.

Yes, Carlos, just so you know, our cost of deposits over the last three quarters has been very, very stable; it’s actually come down few basis points from two quarters ago. So we’re still seeing a very stable cost to deposit, although some of that has to do with the mix of deposits that we’re growing as well. As Mr.

Yu said there is a lot of speculation out there that the interest rate increase that is forthcoming on a liability side will be faster than it has been in previous cycles.

Couple that with possibly cannibalization of DDA deposits into time deposits and you could see banks may not be getting the same pop in their net interest margin that they may think they’re going to get.

We do a lot of modeling in that areas, as a matter of fact we provide for a lot of attrition out of DDA as well, so we’re fully prepared, but again we think it will probably go up faster than in previous cycles..

Okay, great. That's all I have on my end..

[Operator Instructions] This concludes our question and answer session. I would like to turn the conference back over to Mr. Yu for any closing remarks..

Well, we had a very good quarter and certainly we have some new excitement coming our way, so thank you for attending the conference and if you have any questions please call us. Thank you very much..

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