Question-and-Answer Session
Operator
Thank you sir. (Operator Instructions) And our first question comes from the line of Aaron Deer with Sandler O'Neill. Please go ahead.
Aaron Deer – Sandler O'Neill & Partners L.P.
Hi, good afternoon Li. Hi Ed.
Li Yu
How are you, Aaron?
Edward Czajka
Hello, Aaron.
Aaron Deer – Sandler O'Neill & Partners L.P.
Good, thanks. Say you just reported the – I was hoping you could talk a little bit about your provision in the quarter. I just would have expected that given the continued rise in non-performers and real estate owned that you might have taken a bigger provision. What holds you back from that?
Li Yu
Well, actually it’s – we can only take provision based on whatever the prevailing GAAP rule, okay and surely the condition is kind of a challenging during the fourth quarter and however that being the most of our construction loan property nowadays are in the prime area of Los Angeles. The value of these properties are generally, well ahead, shouldn’t say well ahead, we comfortably had of the loan amount that is outstanding. Even in cases where you have a disruption of interest payment steered that the loan amount is below and the value of the property. And sometime we’re even converting to a basis for - just for maintenance sake, it’s common – what if these things are turning to a common, what is a common value with a new appraisal, is updated appraisal usually taking November, December, all shows our loan is protected. So, therefore many of the loan that seems to be challenging really does not require provisions.
Aaron Deer – Sandler O'Neill & Partners L.P.
Okay. Then can you talk a little bit about your - I guess maybe what the real estate trends you are seeing in the market in terms of absorption for your builder and borrowers and as well as what kind of talk about the workout process and cases where you are needing to do that?
Li Yu
And fourth quarter is probably the worst time that happened later especially November, December and in some cases carried to the early part of January because of total state of the shock is with everyone, and it was previously people have high hopes I’m talking about a group of borrowers, with high hopes about their projects and properties, their recoverability shows certain degree of reluctance in their part. And many of the reputed customer allows also depend on money partners for continuous interest support, when the interests become due, and the money partners stop evincing interest notably obviously were our Lehman Brothers, but they are people supported by CalPERS, CalSTRS and all kind of financial institution, private and product to these kind of people. Okay. And it seems to me that generally speaking the mood is getting slightly better in the early part of January but there is no proof of the situation yet. Where the property that itself we usually work with the customer, where the property itself can be turning into a income producing property would underwrite to pay for the loans that we will work with them and have them convert to a income producing property that conforms to the current underwriting standards. When there is a shortfall in value in cases, most of our borrow is waiting to come up with additional collaterals to secure the properties. So, the working effort will be continuing because basically these projects are usually in the good areas. Okay. So to most of them they are willing to do that Now I just want to tell you - to give you some example that we had sold three pieces OREOs in the months of December, okay. All three pieces are sold for the combined amount is not over even after bulkheads their expenses are over the loan amount we have. Because they are basically all located in the very action area in the Los Angeles. You’d find they are still buyers out there try to get these items and when it’s well priced.
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