Executive Summary

Q1 2014 net income was $1.09M, down 30% YoY as guarantee defaults and lower permissible lending rates compressed earnings; EPS was $0.105 vs $0.174 YoY .
Net revenue fell 23% YoY to $2.05M as net commission on guarantee services swung to a loss, driven by an under-provision reversal to address guarantee losses (under/(over) provision of $(0.31)M vs +$0.04M YoY) .
Credit quality deteriorated: nonaccrual loans rose to $4.88M (5.46% of loans) from $2.82M; allowance increased to $1.95M (2.18% of loans) and accrual for guarantees to $0.89M, reflecting repayment obligations on defaulted guarantees .
Management cited regulatory rate caps and tighter PBOC liquidity as headwinds, and became more cautious on new loan originations; guarantee defaults required $5.45M of repayments to banks .
No formal guidance or earnings call transcript was provided; S&P Global Wall Street consensus estimates were unavailable for BYU, so estimate comparisons cannot be made (consensus unavailable via SPGI tools).

What Went Well and What Went Wrong

“Interest expense on short-term bank loans decreased by $60,965, or 20%,” driven by lower bank borrowing balances ($16.2M vs $20.7M YoY) .
Management tightened underwriting and became more cautious amid shadow banking risks: “management decided to grant new loans in a more cautious manner” .
Operating discipline contained core opex lines; salaries and business taxes modestly declined YoY .

Rate cap pressure: “maximum interest rate… permitted… shall be fifteen percent compared to eighteen percent previously,” reducing net interest income despite a slightly larger loan portfolio .
Guarantee stress: “a number of our financial guarantee customers defaulted on their loans… outstanding repayment balance amounted to $5.4 million,” driving a $(0.31)M under-provision in guarantee services .
Credit deterioration: more loans migrated from “special mention” to “substandard” and “doubtful,” increasing the allowance and nonaccruals to $4.88M (vs $2.82M) .

Metric	Q1 2013	Q1 2014
Total interest and fees income ($)	$3,009,245	$2,898,922
Net interest income ($)	$2,703,090	$2,653,732
Provision for loan losses ($)	$488,216	$588,180
Net interest income after provision ($)	$2,214,874	$2,065,552
Commissions & fees on guarantee services (gross) ($)	$411,209	$298,310
Under/(over) provision on guarantee services ($)	$44,170	$(309,853)
Net commission on guarantee services ($)	$455,379	$(11,543)
Net revenue ($)	$2,670,253	$2,054,009
Non-interest income ($)	$25,775	$120,960
Total non-interest expense ($)	$827,292	$896,611
Income before taxes ($)	$1,868,736	$1,278,358
Income tax expense ($)	$298,868	$184,725
Net income ($)	$1,569,868	$1,093,633
EPS (basic & diluted) ($)	$0.174	$0.105

Component	Q1 2013	Q1 2014
Interests and fees on loans ($)	$2,912,078	$2,856,474
Interest on deposits with banks ($)	$97,167	$42,448
Commissions & fees on guarantee services (gross) ($)	$411,209	$298,310
Net commission on guarantee services ($)	$455,379	$(11,543)
Non-interest income ($)	$25,775	$120,960

KPI	Dec 31, 2013	Mar 31, 2014
Loans receivable, net ($)	$88,827,465	$87,350,379
Nonaccrual loans ($)	$2,815,358	$4,879,645
Allowance for loan losses ($)	$1,375,948	$1,948,400
Guarantee portfolio outstanding ($)	$59,692,091	$42,340,018
Accrual for financial guarantee services ($)	$588,740	$891,434
Restricted cash ($)	$10,784,960	$7,202,559
Cash & equivalents ($)	$9,405,865	$5,197,772
Short-term bank loans ($)	$16,360,721	$16,225,337
Deposits payable ($)	$9,659,362	$6,893,294
Unearned guarantee income ($)	$482,029	$208,400
Total assets ($)	$113,003,448	$110,110,115
Operating cash flow (quarter) ($)	$1,801,919	$700,142

Note: Company operates a single reportable segment (financial services in PRC), per ASC 280 disclosure .

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q2–FY14	Not provided	Not provided	Maintained (no guidance)
Margins	Q2–FY14	Not provided	Not provided	Maintained (no guidance)
OpEx	Q2–FY14	Not provided	Not provided	Maintained (no guidance)
Tax rate	Q2–FY14	Not provided	Not provided	Maintained (no guidance)

Management did not issue formal quantitative guidance in the 8‑K or 10‑Q .

No Q1 2014 earnings call transcript was identified for BYU in the period; therefore, themes and Q&A comparisons are unavailable .

Topic	Previous Mentions (Q-2, Q-1)	Current Period (Q1 2014)	Trend
Lending rate policy	N/A	Jiangsu cap reduced max rates to ~15%, pressuring yields	Negative for NIM
Liquidity & SMEs	N/A	PBOC liquidity withdrawal; more cautious loan granting	Defensive posture
Guarantee performance	N/A	Multiple defaults; $5.45M repayments, higher provisions	Deteriorating
Credit quality	N/A	More loans moved to substandard/doubtful; nonaccruals up	Deteriorating

“The decrease is the net effect of decrease in effective weighted average loan interest rate… due to… maximum interest rate… permitted… fifteen percent compared to eighteen percent previously” .
“People’s Bank of China withdrew a significant amount of liquidity… management decided to grant new loans in a more cautious manner” .
“During the three months ended March 31, 2014, a number of our financial guarantee customers defaulted… As of March 31, 2014, the outstanding repayment balance amounted to $5.4 million” .
“Non-interest expenses… increased… primarily due to… audit-related fees… and an increase in D&O insurance premium of $70,875” .

No earnings call or Q&A transcript was available for Q1 2014 .

Wall Street consensus estimates via S&P Global were unavailable for BYU Q1 2014 due to missing coverage mapping in the SPGI dataset, so comparisons to consensus EPS and revenue cannot be made (consensus unavailable).

Regulatory rate caps in Jiangsu compressed loan yields and net interest income despite stable loan balances; expect continued NIM pressure unless policy eases .
Guarantee business stress is material: defaults required $5.45M of bank repayments and drove a swing to net commission loss; watch guarantee exposure reductions and recoveries from counter‑guarantors/collateral .
Credit quality deteriorated with nonaccruals and allowances rising; litigation and collections are in process—near‑term earnings carry elevated provisioning risk .
Liquidity tightened (cash fell to $5.20M; restricted cash down), and operating cash flow declined; financing flexibility remains via short‑term bank lines, but growth capital may be constrained .
Management is prudently slowing originations amid shadow banking risks; expect lower volume but potentially improved credit selection over coming quarters .
No formal guidance was issued; with estimates unavailable, trader focus should be on subsequent guarantee recoveries, nonaccrual trends, and any regulatory changes affecting rates .
Structural note: BYU operated a single PRC microcredit/guarantee segment in 2014; subsequent strategic shifts (e.g., P2P platform launch) were nascent and not revenue‑generating in Q1—limited diversification benefit in near term .