EWBC - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to the East West Bancorp's Third Quarter 2020 Earnings 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 Julianna Balicka. ahead. go Please

Julianna Balicka

events on Good and call, us you or Sarah. West thank management the everyone and With the you for like Securities Dominic today Thank would our of XXXX. Oh, Ng, review the during morning our of the joining Chairman me XXXX. of to We forward-looking third of Executive that statements financial the Act to other future East conference caution regarding make financial performance for company may meaning of call the Safe Officer. are Officer; you, projections Chief of quarter and this Private or Irene results Bancorp the Financial Harbor Reform of course within Chief Litigation the provision

may differ uncertainties. to the risks actual from of number materially results a Forward-looking due and statements

the detailed our for filings company's December refer results, more please description a XX, the and For Commission, Factors Securities of the affect Form XXXX. that XX-K operating Report on the Exchange our could to year-ended Risk with Annual including

the financial referenced some for of quarter reconciliation release to to to our numbers Please addition, on third earnings pertain this the GAAP of adjusted measures. In numbers. non-GAAP call refer

we During of is available a Investor the the will the as webcast this course slide of call, website. Relations part referencing be deck that and on

our website. being call Relations to is in will on over also format and the today's recorded, reminder, a As will Investor Dominic. now call available replay I turn be

Dominic Ng

the $XX on condition a call. up I third morning for X you $XXX million This review for or with net share. per per of us earnings quarter we XX% share presentation. third $X.XX morning our quarter XXXX thank net of and quarter you, begin financial slide XXXX and income second this of $X.XX of reported our income Good from million everyone Julianna. Thank results would joining

XX.X% was was average equity X.XX%, and average was tangible equity return Our XX.X%. on average return assets of return third quarter on

credit demand Our Deposit especially XX% account the this XX% from bearing end was period and of on quarter for declined. losses on the provision but as average based profitability growth based rebound balances. healthy in balances trough which grew annualized strong growth quarter-over-quarter annualized non-interest second quarter very

slow as second half reserve we manageable very of million macro by quarter. pre-provision income As The reached credit for quarter-over-quarter pre-tax, the loan losses we our record the based improved including average of the $XXX annualized a in of XX, basis in compared charge-offs $XX.X third loans of including revenue billion quarter September backdrop the be allowance to quarter In million challenging of generate in provision positive modestly XX to the year deposit increases XXXX $XX.X the loan despite a of losses provision $XX economic September for $XX.X was net in biggest was $XXX demonstrated our million million. million first record third substantially XX, of reduction compared points continues a quarter pandemic. $XX $XXX the an credit Also on economic losses in due decreased in activity net reaching outlook earned growth account. in recorded charge-offs on Overall XX. we the for in a of September driver demand also deposits to level for we a income million net of the total COVID-XX record as billion to which credit in a at We loans. in third $XXX as billion

revenue. year decline impacted interest our in Our has this pre-tax, profitability X.XX%. was steep ratio pre-provision The rates

anticipate that as earning downward reduce funds the will maturing and complete lower. pre-provision largely pre-tax and continue we benchmark assets the to cost our of We at income is forward. of However, reprising stabilize to our CDs profitability rate going reprise

pre-provision Efficiency the and pre-tax our above maintaining industry-leading averages durable efficiency it's in remains key third ratio the quarter to probability. Importantly was XX.X%.

to review slide X our of Moving balance for sheet. summary

is sheet balance strong. Our

liquidity growth $X quarter XXXX rate in assets of billion annual of capital over billion. years. Total billion XX% with increased five as $XX.X levels an annualized. high of the or $XX organic $XX.X translates at X% have $XXX billion than XX, September or of crossover the Quarter-over-quarter billion increased of in XX% past quarters This to and milestone We $XX.X compound annualized. total loans million deposits and length

clients of combination to We September post deposit of of our levels liquidity. deposit June maintaining Due quarter compared new the growth pandemic. deposit Our of ratio can XX.X% boarding of on our XX loan was this growth sustained to to momentum deposit relationships strong XX.X% believe high our as XX. and existing growth expanding as clients, be

turning X. Now slide to

common and and You strong equity. particularly tier are one amount can of East see highest that and capital growing regional banks ratios West are the the for some

were equity quarter equity share the up and both to value tangible assets book per prior X.X%. tangible from on increased Our tangible ratio and to X%

that ratios XXXX stockholders the of fourth payable record directors can increased XXXX of $XX.X on X, for dividends stock. quarter You East on The to November West capital declared from of all November has company's the common XXXX. charge dividend is out cash of quarter-over-quarter. stock XX, see common board

beginning annualized monthly XX% loans portfolios a excluding were million between C&I $XX.X C&I Total loans by decreased were Moving PPP to XX, $XXX annualized. trend in Overall X% of loan commitment PPP excluding positive X. outstanding as of September increase excluding June loans in XX billion quarter-over-quarter of September and a total compared decrease growth about of of XX quarter. growth to $XX.X a turned with of C&I loans. billion as of negative the reversing XX% a PPP decrease second outstanding or a discussion X% of March. XX the since slide to on September annualized Month-over-month September

commercial Total real total loans multi-family, estate property total of hotel. XX real million a $XXX annualized types XX. The our grew September industrial June well balanced from estate major across was or is XX% the or retail, the Moving billion to and portfolio commercial slide loans. X% portfolio $XX.X office, X, of as

remain exposure Our loans. construction and land loan X.X% low at of to total

on the on XX% that portfolio estate of X see commercial real than loan XX% estate right the real slides residential In equity loans average XX, our lines. provide up Combined LTV X of XX%. XX% home or to our we million. by loans of the property more you from chart details loans of lower. average is total mortgage regarding and value slide range other size residential average an single-family only consumer our can loans. see weighted that to can Nearly On XX% our the and value weighted to of commercial You $X.X loans the have loan XX% and our loan total of type make additional

billion or of XX, residential As year. $XXX the portfolio was half last June $X.X of annualized a pace the residential first quarter consistent up up million by with mortgage and third of single family XX. third quarter from $XXX year-over-year from X% XX% the the originated loans million from In of September we by XXXX

under average increased $XX outstanding to we I lines call loan value portfolio of expect LTV, Equity average plus residential equity equity of will origination XX. size utilization the September average a combined equity is our over quarter. now billion XX% value turn of to is have our commitment last loan residential LTV or our Irene similar more loans of only is XX% asset LTV of and the translating We weighted size detailed total our The commitments $X.X weighted have commitment and XX%. into annualized to XX%. of a in XX% value again outstanding pace less. million a XXX,XXX annualized. only from lines had The slide fourth XX% of to mortgage unchanged rate On quarter. XX and of XX% of an home quality is to billion discussion for home XX% an the undisbursed and loan XXX,XXX for the or in income. home XX% $X.X our mortgage quarter-over-quarter average increased loan

Irene Oh

Dominic. I related will on start you XX. loans by on COVID-XX Thank deferrals discussing slide

commercial decreased on Commercial low. which loans estate rate second deferrals since mortgage payment XX% by suddenly partial loans further The resiliency loans only, customer continued deferral full loans related September and on to deferral comprised longer quarter loans close have COVID-XX date of October flows on interest base. decreased on payment the properties. a X.X%. are on deferral partial partial on X.X% the payments COVID-XX West as for between deferral the payment residential principal in improvement payments. reflecting of largest XX% cash still of interest June C&I on and XX reflecting Quarter-over-quarter and on XX, total XX% were loans including be decreased XX% to was on loans also X.X% Similar X.X% certain XX X.X% to referral to and deferral very of the XX decreased of June deferral making deferral East on the impact month XX to loans As October. modifications down Overall full to October in payment largely were real of total of

for other for XX XX review losses Turning quality a of for to metrics. review our allowance slide and our slide of asset loan

Reflecting losses under oil forecast XXXX third and oil to the of we million improved June up the million coverage XX% commercial was while XX. loan ratio from economic and in allowance loans or quarter in from recorded for Our or current June remain were driven reduction was oil second coverage losses $XXX September accounted of held lifetime loans a the decreased and severe charge-offs This million increased assumptions allowance our basis quarter from as XXX. The and net credit as compared charge-offs gas average and XX, XX gas XX cost. by ratio down of portfolio. by XX. compared has the classes loan of September million X offset for million loan charge-offs and or conditions annualized. of of allowance turn $XXX which the XX allowance primarily XX to in low projecting quarter $XX XX. Charge-offs quarter. our increased drivers forecast Since and charge-off million the for The for the just second estate was of these macroeconomic post-season net January increased as $XXX XX% real the The was reserves qualitative loans at during partially losses to X.X% for Net third of less for provision basis for loans gas loans. other expected as X.XX% were X% modestly June investment million from of portfolio for $XX points $XXX points the of

the Other out loans type largely inflows mentioned an of of increase loans billion. real loans of detail oil amount total Turning real we as either million totals industry XX diversified of of largely September estate property of XX%. X.X total totaling loans criticized from XX assets. loans X.X% $XXX were from components industry loans within by Special loans specialty Criticized The in criticized X.X% of and criticized due remains the concentration of quarter-over-quarter XX; and of type. property the are likewise commercial to in On as gas. largest estate. up was commercial or as increase September loans slide XX. June diversified C&I are by criticized this page were by $X.X the The

quarter-over-quarter was and X.X% to gas by loans XX, loans of The all other as in As of of the of special $XXX loans as of downgrades of mention. June of two XX%. in and all compared XX largely commercial X.X% loans other percent classified real were XX.X% an C&I increase of loans followed September loans, Classified of C&I XX, increase loans oil total X.X% loans. amount graded September driven million estate gas oil by downgrades were of of

non-accrual June other XX assets non-performing basis Non-performing As of of of primarily in XX to gas points the September of XX, status. compared of of C&I real classified. quarter-over-quarter assets classified and XX in as increase as estate million and gas X.X% X% basis $XXX were September XX%. The oil previously assets XX total points of net of to and amount commercial an loans, to XX.X% of increase oil were loans loans all inflows due of was

improvement loans or basis points June Lastly $XXX total XX of of XX million of of loans quarter-over-quarter from $XX XX. XX, were days million due September accruing past XX XX a as loans points basis to as total or of XX%

holding As see metrics can portfolios. quality our you and other oil is loan asset in quality gas across outside credit our of

and our Oil Including outstanding are exposures and down down and and gas gas oil down year-to-date. charge-offs. quarter-over-quarter downs, oil undispersed of down are quarter-over-quarter XX% I'd like pay X% to reduce In to total terms continue X% loans we and commitments note workouts that commitments through XX% and gas year-to-date.

our In production XXXX place is in hedges of XX% discussion their to and slide page the our now This investments planned statement third items planned $XX tax EMP XX. in terms and second of borrowers summarizes investments the quarter-over-quarter of I compared of hedged in million the income rate and slides. their in Amortization increase for $XX million statement second oil reflects XXXX And is quarter credit will hedged. number of more XX% XX% reflects credit be on quarter of moving income XXXX. The million quarter. tax gas this up approximately production income. quarter. $XX which quarter in in the in rate key for the discuss other detail the on the following fourth The tax in the was line expect the to the of from timing third we quarter-over-quarter XX% effective was pre-tax The tax of change to increase a

of income the XX and now I'll year XX% includes be starting average slides we increase full to XX%. effective margin tax rate year review tax drivers XX% $XXX effective tax fourth the effective rate. from balance effective for higher the interest $XXX the should our The to in on rate full second our trough rate The income for XX rate million tax tax the net full interest before a XX%. effective the estimate of million; key the quarter sheet quarter in taxes net quarter the as year growth. close with Third through to third quarter was increased

and of loans loans in offset $XX.X quarter-over-quarter. was real PPP a C&I estate, Third commercial mortgage decrease average in grew by quarter Growth billion residential loans.

decreased billion driven Average growth offset non-interest deposits. of quarter up made accounts $XX.X quarter. quarter in second and or XX% grew deposit quarter the XX% in and annualized third the a With down XX% to deposits deposit of of XX% in loan third Third linked the in high ratio the quarter in growth quarter the strong quarter in and checking deposit reduction time a deposits average from demand the in XX% from excess loan ago by growth bearing XX% linked in strong by total average quarter. grew accounts year to XX% second annualized cost

opportunities curve with loan level a the we will basis a that are environment net income $XXX third accelerates in to million and net or $XXX managing available to continued this starting points with quarter assets X% average quarter flat was in in largely the to margin of interest from second margin the headwind as rates made see interest third until when higher This compressed balance the Excluding of the ratio decreased PPP loans limited. where average deposit assets yielding interest quarter. we interest In the lower is attractive up self-care. growth and of by low liquidity million match quarter. sheet that was the prior funded X% a in given interest quarter. by We've to XX linked deploy excess it in the this securities the increased On are the growth quarter for PPLF banks current but headwind XXXX you earning net slide sale by billion margin XX up to with average quarter. $XX $X.X the and liquidity can and net cash deposits the and comfortable third interest XX% from XX% Accordingly loan bearing recognize XX%

quarter-over-quarter PPP However, excluding adjusted loans PPLF third million by million X% and exhibiting or the interest impact quarter relative declined the of $XXX stability. of net income $X

point loans million quarter due income million from adjusted quarter-over-quarter in in basis is was to the quarter. cost quarter from cash interest fee as as negative from compressed made bearing as XX yields. asset with cost the to margin partially been XX resulting follows. tailwinds by from reduced income points from of from loan X fluctuation deposits banks other Negative and have lower NIM down lower XX a engine Headwinds well changes from that negative points borrowing. $X.X excessive growth basis basis see yields. change liquidity basis loan improve of PPP forgiveness several our estimate by and quarter-over-quarter offset should we SBA interest expected XXX and second accretion in Third net of basis balances quarter. higher attractive growth third the of Negative loan one Negative in deposit $XX points with redeployment in for a lower by basis XX yields But the deferred fee a for excess PPP net interest impact less from The we points forward. interest lower the deferred of of third lack liquidity. earning a income interest of The XX quarter. the down margin for net points basis excess second PPP deposits going and points breaks

our XXX and interest of net net that GAAP quarter X% we fourth our including follows. grow income and from interest as GAAP to the margin our outlook are X% PPP net anticipate range The will will by interest income. NIM XXX income to drivers For that XXXX for

the CDs. repricing of First, continued maturing reduction from in deposit costs

XXX a have a XXX billion CDs quarter weighted fourth QX average rate X.X interest maturing We average and of XXXX. in weighted in of at at rate interest another X.X the billion of in

that we interest fee loan repaid of the to its thirdly Month downward variable fourth PPP in October loan of PPP forgiveness run to and for we've income rate in million. have of of Also expect general Second the a deferred ahead low $XX our process million begun. yields as has date stability $XXX course. partial already repayment for we PPPLF loans quarter largely and repricing recognize customers;

Now turning to slide XX.

quarter rate of basis average last fee the loans. reduced rates income quarter PPP pricing accredited loans by on as well XX downward of points variable contracted benchmark loan from Third yields XXX reflecting interest to as

of now have quarter basis XX% XX XX to benchmark impact quarter right have repriced. our of loans average contracted contraction loan quarter-over-quarter. yield points we months East of the portfolio. In second these variable rates the rate the West basis by PPP excluding In Nearly PPP, the the and a yield quarter-over-quarter a variable are XXX third of new average chart showing largely the yields out is by of we've quadrant portfolio rate or the impact linked loan was and Excluding loan points. duration loan XX% of with loans three interest laid less. upper by adjusted

portfolio sensitive you As residential by lease mortgage notably rate product to carry a fixed-rate Year-over-year single been our can rate continues reduce family. excluding XX%. yields. attractive and loans asset we PPP sensitivity single loans see To is organically fixed have increased family in growing

to lower maturely of funds. interest asset earning rates yields decreases cost partially of in backdrop in declines Turning offset the the XX. slide Against by been have

was points basis cost and third Our points. rate spot dropped second quarter of points. deposits total September points of XX from XX basis XX XX of basis quarter in average to down of as XX basis deposits improvement an The for the the

quadrant deposit our XX XXXX compared of quarter context quarter; a of of in in December of interest basis of of bearing deck the the the chart XX second basis points. the additional lever last interest deposit points. as policy and within of to improvement in included average spot XX deposits quarter zero We At In the before by down cost cost present it third the dropped September points. XXXX of that XX lower this an which provides of in full The quarter deposits. was quarter points cost deposits of was fed our basis XX XX of under third time category deposits the average bearing to left was XX basis as cost rate interest believe we we average deposits basis basis from bearing rate repricing third deposits points the interest points cost cost the rates was XXXX. Our raised the

repriced that can to down You has book fully historic CD see clearly our levels. Zurich not

our maturing in further. bringing the was total to CDs our XXXX to Quarter-to-date of next CDs on reprice our XX We third renewals The points. or yesterday branch CDs and retention deposits rate of over quarter. and Also excellent paid basis basis deposits the rates in our continue for down been lower, six third an quarter cost it's expect reduce been and is down on CD of have down as rate has XX cost points total lower average XX of of months renewals XX%. spot of of interest the originations the rate CDs the than paid originations deposits cost to points the of basis domestic cost bearing for

of $XX lending million Moving the the Fee quarter and relationships. by valuation third million the for changes in million million quarter. second as loans on largely on was non-interest down $XX million received to sales million or warrants $XX X% fees of was part gains $X $XX third net on XX. quarter-over-quarter. income fee by of income compared income in Total decreased slide $X in Lending quarter reflecting

$X customer of in Included increased included letters quarter-over-quarter. quarter increase an comparison credit the in driven management transactions an of accounts in account and fees in in fees deposit number fees increase lending an warrants parallel increase Reflecting from wealth of driven million quarter-over-quarter with are fees increased activity. in warrants. which customer lending second the the included valuation quarter valuation Third $X in increase customer fees of million from customer

to by in an decreased offset customer revaluations items denominated of Foreign due fees FX sheet trend. quarter-over-quarter driven increase balance downward exchange partially

XX% XX, was million a decrease slide non-interest linked expense third quarter of quarter. to on Moving $XXX

the the year-over-year. third and million of intangible only non-interest deposit of I of increase Excluding million amortization that expense originations would quarter-over-quarter X loan excluding quarter decrease and other third in % a reflects deferred amortization adjusted second of of was deferred. compensation also the X% tax PPP quarter. credits capitalized was investment amortization note origination expense $XXX an core million costs $X impact in loan quarter, investments associated quarter; of expense in increase in of the previously PPP decreased expense spend. quarter-over-quarter second quarter-over-quarter for quarter computer X% The the compensation $XXX $XXX In with software second and million

ratio Our third adjusted quarter efficiency XX.X%. was

Over five efficiency ratio ranged XX.X%. XX.X% from to the has past quarters our

As controlling profitability. for an we to support now the remarks. expenses to strong committed organization remain Ng across turn the board our back I in Dominic that closing call will to order With

Dominic Ng

Irene. Thank margin our you Well net in stabilizing. summary interest is

Our for rebuild helping and activity customer them is manageable. expand the about up picking are and growth forward and credit remains We to remain we disciplined is Business into loan looking efficiency our future. positive.

the to all call during questions. I open thank our like to up will health. and associates now Operator? good the of dedication Here for I continued times would everyone these unprecedented wish

Operator

you. Thank

the Ebrahim begin Instructions] with session. [Operator of question go America. now from will Bank We first Poonawala comes ahead. question-and-answer Our Please

Ebrahim Poonawala

morning. Good

Irene Oh

morning Good Ebrahim.

Ebrahim Poonawala

we just with provisioning credit look we assuming when level macro doesn't that the think from at start I Dominic If could deteriorate here. the

to end to deferrals we of towards the those still around do you that one we're XXXX? the us portfolio have you have expect as the to that expect in about of portfolio the talk terms your what you six and rest learned go percentage to not the going months last comfort comfort credit paying year? us in the of What get go negative into with Just back the surprises of like do are give outstanding versus in what non-accrual to

Dominic Ng

we've been vertical each it all region is always real portfolio in Well industry also CRE gap loan. sector single by have vertical credit been down mortgage C&I in within family office sector and C&I break problem region different with and estate hotel, our looking the actually we and by for commercial many obviously at by loan any by the building, and review hardly then years. our the for multi-family has

our XX kind feel definitely of continued so we, deferral of all From in the good deferral We to the as that done that from do we it as you see classification we and review adequate pretty a about of that classification. rating are show our of feel of this can great we are in at and is two terms we point, and think So we even we've point showed and as current not terms risk today. days of the and where today surprises. September forth June much very way to of and view see concern progress of all lot XX ago the about reserve

Ebrahim Poonawala

of it. I CETX mentioned on levels. capital think And capital you the you terms in one just on of Got Dominic stronger even equity tangible have

back coming conservative were into buying You the cycle not stocks.

and into if us I is? it where it capital to the a desire back on half next of the Just buy think of not talk in look about terms stock of how stays year allocation you to guess we maybe in next couple months first as but

Dominic Ng

have a we months, so. Well and board two half two every months meetings or

would a say always that standing So I is this like agender.

members financial deliver with and take and we information, we economic then any information also of have whether it those discussion board condition So we update balance the the the kind outlook then mainly of with action. the we and and sheet

right I So at say we're this stage pandemic now that still and would environment. that in

We back stock. to going be looking into are not buying

of in can then circumstances that terms XXXX right outlook do and the economic at hand dramatically On based whatever other the change point. on in the is will accordingly comes things we

Operator

Zerbe go Morgan Stanley. ahead. Please Ken comes question next from Our with

Ken Zerbe

and little maybe is have I guess the by NPA looking have is just does the the worries reserves still Thanks. Thanks. you obviously it detail it continue a driven slash you Great. was mean would I the deteriorates? I gas do for portfolio increase I concern for know on as have right right. continue All that guess more I oil you running it we off is sizable it to build but doesn't and a additional portfolio said

Irene Oh

that that's reserves that and and Ken lot also say last the increased Yes X% has the come and charge-offs in look a great a of course portfolio When over also non-accrual the the at gas we really have we beyond of really let's year and oil from XX%. increase quarter-over-quarter question. loans a to

seeing the loss think still say content I positive are ongoing oil of downward I from in I into and deterioration when that we're identified it's kind loans one that thing at assets. look So is were do classified of though is previously these they where and would when is it perspective not the gas. portfolio classified our in an

Dominic Ng

of condition back crude properly even level March also earlier actually of confident many of let macroeconomic there percentage of potential twinkling charge are shared we you that I bucket per barrel on price that looked that we have add add quite would continue gas $XX of but shared difference probability. losses and portfolio loans feel as unheard classify all mean more we Irene gas is today prices have is from at The what are it's stabilized there had actually in the at one up we and just There own because XXXX. portfolio it's the know months to And mind the and dropped and loans than pretty say, into many maybe Yes. oil hedged few these Ken to that and going is substantial in more and nicely. much then every the that recall keep them in gone be a our me Definitely. there likelihood just portfolio. in the Irene then just oil I early as of positive very We have ago. and loans only and late a so them been that our so right to down is is in would April just

not it's like trouble. daily one that by going going are a So basis one loans they these into are on the

we what the experience think gas of I off business. link relative everyone that in somewhat in get to terms the oil charge peers and and the from industry

of it that So return and to for decent portfolio is we have asset. from against that reserve our confident income that this still equity these substantial of we is smaller and and it to perspective offset with a plenty and and profits we getting come have we can a losses return of smaller that addition provide is and up manage and feel in

Ken Zerbe

off a just for to years plan how talking like and spike. every this this adjust generates returns I'm long-term guess risk positive it's losses there's problem adjusted segment risk it almost positive because and like a to Yes see few running hard over just to I feels multi-year period. keep is given it us a returns

Dominic Ng

United If are managing keep managing States downs happen it is the to feel knows environment the who that the advancement managing changed started we or last from the continue to dynamic we no changing a and have even down world and ability we a down, the what's then then We can project. going we not the a but I that demand that technological or segment. we management. around risk going risk year there this manage it reason of as we to financing effectively industry an with we're this facilitate forward that bank is focus why mean very-very basically into be very going no

prudent to watch I think future very going do accordingly. we and will be down back the always on it's get right thing all in the what's to

Operator

Please Shaw Fargo. from comes Jared question next Wells ahead. go with Our

Jared Shaw

Hi good morning.

Irene Oh

Good morning Jared.

Jared Shaw

to is at can efficiency you you anything on Looking do or the do low side back can in there the side get help broader some will depend we given accelerate improvement side broader really efficiency ratio XX% that expense that? the or on seeing rate environment to the a expense sub think rate

Irene Oh

that Jared question. call, Yes I take will a

that think be variable side. I largest revenue for would the the on

feel our in will NIM we earlier prepared revenue increase. and fourth that about remarks beyond do that strongly talked margin interest we As that quarter

I the history this that type in so. we'll able expenses of to be we have and ability to proven long that's do control confident to feel continue of that environment something think a we

investments that still making appropriate While need our growing we the to support business.

Jared Shaw

Okay. seeing into you is and Thanks then quarter a that getting was somebody what and portfolio and or on refining side? I how what guess this on of guess terms CRE loan the product bit translating pricing how comfort growth you maybe much shifting better that the and CRE are CRE and your I to conditions now little else's guess and around thoughts putting new you, doing gives you're saw I and the

Dominic Ng

was for almost business of we most getting them I CRE them banks of than I are taking and with a loans last are mean terms so that are pricing the, would that been would time nine originated we've of doing say it and no ago In customers months better a from competitive so all have also six that customers very with as we I long will these It's competitive other them feel say are then go negatively than balance we not impacted just along that originated. pricing refi with that forth. forward. and and slightly be, of slightly sheet we CRE better some was by These some of is comfortable shares that's obviously pricing CRE and year. are these financial properties loans; better and the originating obviously what extremely a pandemic strong less the The new longer

volume XXXX. we CRE not origination XXXX nice of would in as I did may in and have think growth that of of of In terms we like robust CRE loans probably a

that around us East difficult is not So XXXX then institution somewhat enough that bushes giant you would tempered we the hide to keep because I growth that continue it be up of of show lack financed, looked it's then just rate. is a quality a finding asset and look expect will be growth but not and to to to will great the at looking the rate West positive make for and gems,

Operator

ahead. next Our McGratty go from with comes KBW. Chris Please question

Chris McGratty

have increase a ask everyone's next Great. given Thanks topic and favorite walk bit the guys amortization been the expectations a I want taxes potential that tax over also in could sensitivity years? that little rate the about on given through line tax us proactive managing the there question. more year could you for the line market's you be to the your taxes and

Irene Oh

we the that we this about time the that moving on DTAs of happen a there XX% so at be we a X% about Chris you lot the rest parts that from changes know the are on corporate of tax look impact will a to that point test happens in although might rate at Yes. of happens XX% with when think if details to $XX little more would this with if will point in you million add well. quarter this January in talk that I fourth amortization bit as it can that reverse call have give along we once have time of about we at that

Chris McGratty

think then around is quo year bring Got of I on XX assuming $XX this XX it equal status the right year or the else just million all for modeling fourth next rate to math tax the would it amortization? for quarter amortization for that you XX% so said that and purposes for and the

Irene Oh

in So we'll talk January. about that

Chris McGratty

Thanks. Got it.

Operator

with question next Compass Rochester ahead. go comes from Our Please Dave Point.

Dave Rochester

good morning Hey guys.

Irene Oh

morning. Good

Dave Rochester

you was reserve Hey bit reserve level if more still on that the little just how I and going to on are the that give your just detail at a about remaining reducing book wondering pan you deferrals maybe there's a release where credit talked in point bit. comfort your economy book could this uncertainty CRE in on the out.

bucket. that that building in quarter saw reserve banks particular This other we

that point could were baked would for your much be this this just wondering if about thoughts So at have talk then stimulus that you your how into outlook great? what you and quarter

Irene Oh

Okay.

reserve of aside kind $XXX just set the at have for look we of million. the our breakdowns estate is our allowance of if amount over we loans that So real

estate So and producing on income multi-family. also real

that portfolio as see very what I say forecast level happens comfortable and seeing a appropriate. the ultimately as we'll allowance look right far So we're our level customers is would we're the in now depending with with on deferrals what

we calculation share scenario Moody's adverse quantitative aside tailor and on a overall severe more our than approach the allowance is of forecast because we our portfolio. the the there reserve use is of the multi-scenario set baseline that that SX higher baseline. and economic We do will to SX For to reserve rely kind a SX I

Dave Rochester

how into for Okay. this at your overall outlook stimulus? assume guys do And point? much government you What then additional baked stimulus is government,

Irene Oh

and Yes scenario assumed down in just so it think none. X.X baseline assume -- break the with I I did so trillion will

overall that So is as than the reserve higher I we mentioned have the baseline. quantitative

Operator

with Please ahead. D.A. next from go Gary Our Davidson. question comes Tenner

Gary Tenner

terms PPP Thanks. pre-paying comments on have you liquidity do by that the but said been I month How year the Good million in curious you of morning. A date your facility. questions to expect much of lot think on exit of end? I answered $XXX was to

Irene Oh

we paid million. off So $XXX the

me far off we'll and if will as we'll million We pay as, $XXX more. evaluate evaluate excuse see see and

for that of the as I that of think loans liquidity as depending and started expected than much the pace we the and see which we'll the also us. how more $XXX look is forgiveness of then have on timing the far PPP has the and

Gary Tenner

some Do Okay system anticipation kind about over in our have amount also the you of and overall in terms in have improving. expectations continuing then holding liquidity you of liquidity just talked excess of any of you of balance that and funding flows sheet now. longer given right

Irene Oh

that was that at book, as gone continued into I bit reinvesting book. with flow done some know great securities have securities this a we've a especially it think the comfortable I especially of and our What deposit we've more quarter. question in securities little and also

bit. We little a extended duration have the out

you is the a not in close to the look yields and X%. quarter-to-date, average September I month up it if the think at little So, bit of portfolio

and duration, as X.X at we're X.X look about you of about you XXX, If XX at XX.XX. have are we

Operator

next with from Matthew Sandler. Please The question Clark comes go Piper ahead.

Matthew Clark

on in bit. mention, fact Hi, Can give this little touched migrated that quarter? good us of some on you like increase commercial special real-estate specific migrated the examples more morning. first you what Maybe the a

Irene Oh

making is of deferral, downgrading that regardless Yes. necessarily a to grading extent And Matthew, kind the look really certain we're the that sure a special quarter, the portfolio when throughout mentioned we we share, these is whether loans. at the into if during on customer of was it appropriate migration are of

of I classes, but multifamily So, asset board the some across and of the in on loans would deferral also that loans downgraded retail. kind were we office, were different say

Matthew Clark

that Okay. the been sort in energy Whether has what sense x are And C&I this might date. of muted then, or give deferrals, us the for increase future? the sand I point. doing not customers that at your just Can the a why you on

Irene Oh

quarter last and as us have about our as Certainly at a it front. C&I think this kind think our point-in-time, month, accommodation shared I them conversations look like It helped called those We customers, pay. we well. a for did I an one reach this with that on helped that of with out skip of initially we customers doesn't the

had, conversations deferrals, and we has request relatively with our that have the the and kind think I generally request been flows we've positive. cash that the conversations around our of for customers

Operator

Wedbush Chiaverini with And next go from Securities. David ahead. question Please comes

David Chiaverini

A couple thanks. Hi, of questions.

one loan on first growth. The

CRE single-family already if loan residential, categories growth of You hit expecting about we you about of the on type loan what trend expecting versus exclude But couple similar forward. mentioned are that category? C&I, you going a in this PPP, on year in growths year next

Dominic Ng

deferral. took thank thing time I quarter actually great payment in on not We we can April, COVID-XX. share we but today employee to the is what next at do XXXX, in to to we much have have, for in I mystery as with spent us mean this that employees of the of gross be just lot upcoming that better to goodness at will the all the this I of provide sort things feel early do that health on happening vaccine of time about one our when plan May of who the for the be a us a second of a you will will available, PPP, Well, be the too June, to point presidential of in now. is guidance And are and right today lot that to have in midst for keeping or as time, it release, skip to January. guidance focus number one and provide election in for right mean earnings went at hospital focusing

customers. We're kept focusing we're that's number into deferral of one And going everyone very we're health. of and thing can to to mean, potential keep PPP very so, then we're so all looking they vigilant doing good health to take continue also forth. And good care I are stay now so And us PPP, that in us busy. on. in will

they to get really didn’t Some they they customers they confused, thought deferral, just need get need, don’t have just a deferral. a

So, going conversation back on there's lot then. of a

branch settled, our as of all some that latter in relationship and sometime highlighted until managers quarter, when in I not we loans. frontline is the part news our start kind good C&I business. then reaching looking for nice of talked So, managers the that new Then out have in these and we really booking a earlier And mean PPP third September even start these in issues loans related growth their customers C&I. we of other are many start actually and some our caused in customers active our type of matters I by seeing some non-customers banking decided of new originated, brand to or good these think that too being nearly and we're move prospects we banking that degree very to fortunate relationship. helping that

West. banks our of at some East And

new picking we're business. some So, up

banks we to other of trend And continue. and has some it. of hope business for will in been us. we So, October, bring that very of that's Other continue new weeks this helpful three part also

who aggressively, to fact could we in happened are business be other in capital the there of out that the that given be are one that helped lot pandemic investment that Now, of a than and midst the pandemic. the growth and the commercial still putting And them. that business

For those who were traditional pandemic business, them. not in may other some the help

credit line lower. utilization rate for their contingent to of I bit probably would little think their say a

we to a strong substantial to growth. there. customers existing higher going growth don’t customers cause expect down line But draw push that of getting So, the we are that new many to a dramatically supplement the the have

that finance are industry digital grown than project West of our know, clean we just back, even from side. the grown business one have a are you industry quarter from particular energy pretty stronger our it's our business fourth all-in-all, positive much all before. bank. entertainment think point verticals not it's so type across C&I geographic and back region, for this by more looking coming or strong coming the And business those I Several nicely So, media back coming way East feel one board particular at this

both or continue on and XXXX, fourth trend put some the So, January for also it detail will quarter the we to providing are sort the side of well for this forecast XXXX. hope in in XXXX a lending but

David Chiaverini

for shifting that. gears And thanks helpful, that's fee to Well income. then,

customer increased how the customer transaction the outlook we in about transaction is fourth or either mentioned into what quarter activity. You or That activity quarter for fourth to quarter, rebound. should stabilization that continued as of the third the momentum curious expect

Just to your curious as thoughts there.

Dominic Ng

Yes.

of had the banking fee up. customer income transaction can related income it for all you As see fee side, picked type

many has can because talked with you larger new account in now the cash fees, enhancement income. So, the all from do cash relationship infrastructure a existing of of customers look I technology but earlier us two a the in of actually Or with results. needs. COVID comfortably about the to about that Bank services those offer great of capability are internal that us. we handle example and combination to that improvement, the relationship this the tangible will we at manage result have if just some sophisticated generating relationship cost banking the like move banking generating deposit for we cash lot East mind and that to large rebuilt expanding fee years of accommodate in That the put management about investing to talked in more management system can even us business. We sized West banks few stronger Keep last management for

the we pandemic. at trend to in a account income positive well are do very deposits. result still lot see of larger as fee working home that are of and that us more under And but us that So, able for all we DDA the that

to with on also banking expanding for keep the looking working is to the and customers deepening to or what relationship So, existing customers, we're continue forward pushing and and outside. the new

at finance. management, even wealth management, So, looked cash the and trade from I

of have X% business. We in a pickup terms

income referral then the bank from in then I a XXXX. so just get this forth. good and at through or care meaningful And more of business fee step new our making and getting took focusing to and it clients at clients coming one sure time So, we we now that is all then our on that more looked continue good we'll to hopefully

Operator

with The go Brock ahead. next question UBS. from Please Vandervliet comes

Brock Vandervliet

pretty lot between obviously a Dominic, about Hi been It's the China. Hi, released in and about you've talked a political thanks. in the the U.S. it. past environment bit past fraught the

this you your change win. As How we it business? and at do buy could look potentially at potentially think

Dominic Ng

an the terms recall, any is that presidential We lot bring political we and adjusting day are very looked much always business have about with trade there. in their ago with the And exposure, is of place the that couple changed nimble as to of out government investments the and last the organization of ladder the a even China for of hardly greater in and we big also and of dramatically. sort turned also policy election the been so years or had due at hostile whatever has years had years trade few war dynamic at have does, forth. in heads U.S. like import in the and from terror, have you of then environment four seen to political China China we far To end portfolio, such very the so And with finance last investing comfortably losses. for export that with

down temporary slowed business pandemic, shutdown because course of actually the the be cautious force months. Now, also bit a then because we'd more China and few a of

the then well growth and risk aspect, aspect. have we no in effect the And losses. had terms of But manage so, very that almost

seat et allies United looking against work American the world and seat. the front when engaging am policy, world step delighted with the back to all or is Then into made stick and together. third and would going had the more collaborate with into and back allies very that leadership in instead WHO, forward, a loan United that China to and work around and Joe take be sure and American to get back the and is four So, to clear is U.S. do about and all for States to now with will the get U.S. change I activities to say of or XXX% which than seat, other need foreign Biden mind the I the it then gold wanted with nations WTO, that Nation, going back into climate to back his front cetera get second

U.S. China U.S. Republican to to think expect Democrat, right happens, question would whether Party or at thing have be There's that if do a to But it's the the the wrong end and I the other also to more I that day exchange nothing commit think that going I'd economically. compete lot So, strong there's that with to hand will between there's And compete. compete. no China. to business I on of confidence is

more a Just giving giving company a get even said China. Joe business into and new them U.S. reflect Starbuck stopped taking last ever in Lieberman months, in insurance whole government licenses, others in that new front the opening business of are but opening never joint for stopped. Everyday expanding business allies coverage more fact stake in been in and the license; back have lot stopped have life Never majority stores; giving all And in few license. pulling American Parker news our are the venture management Morgan opportunities JPMorgan also Chinese Stanley never increase had doesn’t them the before. bank stores; and the giving Express more Bedrock, ownership. China new few given their

about in direct a talking protection Senior fact, week foreign for intellectual right are China in investments Minister In just last additional China.

people of happening China just media watching and that actually constantly So, day-to-day and a for basis what's at look like news. U.S. between regulation mainstream on do us instead

changing transfer investors to that take laws China company or different aggressive and multiple force before penalizing and in continue of the so and seeing majority planned foreign effort that forth. sort up making never technology letting at floor ownership are of Renting in market to intellectual to open and the property license then they on protection also ownership We industries. the

hearing been making we've it. that U.S. were all we've things of those trade from to Lighthizer, these that things many hearing a the changes of times representative All been

from the over changes they that broadcasting not from world are whether or this they but benefitting Now and the all Europe are then from directly it. are could making U.S.

investments West to degree East are we're get some business. most to not is certain certain in a those capital new get certain invest and there well of to because for type position of license that, irrelevant then us going big So,

go Shenzhen the their having Shanghai friends theaters the even and position China strong movie has is colleagues my that to dinner or usual. and have in emerged cross to still Our business Many to border business out wear of will to from pandemic back with as masks.

happy them. So, for I'm

So, wealth be business. the but exchange in or listing. Kong them going a for Stock lot Stock up Hong stock still Kong. we U.S. buying And Exchange. overpass Unicorn Hong investments We management. in are Exchange, new all is U.S. other Through this there personal around they Shenzhen of of to Unicorn, at are up need after IPO, places are risk billionaires doing also. either billionaires all doing more investments. Because investments. Kong, absolutely there's And the one to to and lining Hong properties have look world, in going are to there all They Shanghai IPO make prefer terms they lining business companies need to they their or going

business we to feel going do be there. is So, comfortable that

find So, the we to adapt how Xrd One and know circumstances. can thing to whatever thrive on predict East under for adjust other. coming outcome ability way and not everyone, the or November have one West what is election their way I on to guarantee

Brock Vandervliet

Thanks, Dominic.

better backdrop Thank a to forward there. you. Looking

Dominic Ng

Thank you.

Operator

remarks. our closing question turn back to would like and over Dominic conference session. the Ng answer concludes This I and to

Dominic Ng

all are January. Thank with in in call. looking forward speaking thank Bye. you, to this of we for And joining And us you again. you,

Operator

presentation. you Thank attending concluded. now today's for is conference The

disconnect. now may You

East West Bancorp (EWBC) 22 Oct 202020 Q3 Earnings call transcript