East West Bancorp, Inc.

Q4 2020 Earnings Conference Call


spk_0: there and welcome to the east west bank court fourth quarter and four year twenty twenty financial results conference call operative them for be and listen only mode should you need that them please ignore conference specialists by pressing the dark he followed by zero after today published in the opiate opportunity per hour question you have to question you may prefer taller than one on your touch tone them if you would like to withdraw your question please post started to we've met with about it being recorded i would now like to end the conflict there were two juliana baker please go ahead
spk_1: thank you sarah good morning and you everyone for joining up for review the financial result of a fucking corp for the full year and fourth quarter of twenty twenty with me on this conference call today are dominant gang or chairman and chief executive officer and art irene oh or chief financial officer who like to caution you that during the course of the car management may make projections are other forward looking statements regarding events or future financial performance of the company within the meaning of the safe harbor provisions of the private securities litigation reform act of nineteen ninety five the forward looking statements they differ materially from the actual results to to a number of right and uncertain or more detailed description of risk factors that could affect the companies operating result leave referred to are filing for the securities and exchange commission including our annual report on a form tank a for the year ended december thirty first two thousand and nineteen in addition some of the numbers represent it's called pertain to different numbers i'd refer to a full your head for the read conflation of gaps financial measures during the course of the could just call we will be referenced by back and if available for the web captain on the investor relations site as a reminder to they called being recorded and will also be available on replay for map on our investor relations what i will now how over and dominic
spk_2: thank you juliana good morning and thank you everyone for joining us while for you and for quarter two thousand and twenty earnings call
spk_3: i will begin the review of our financial results with like three of our presentation
spk_2: this morning it for your oven twenty net income or five hundred sixty eight million or three dollar ninety seven percent for pusher return what one point one six percent on earth and eleven point two percent on equity quarter year
spk_3: thanks to the unflagging commitment of also did we are a sexually navigating the cold night and pandemic and the resulting economic crisis and also the low interest rate environment the fourth quarter was a strong and to the year and result in net income of one hundred sixty four million or a daughter fifteen cents per share increased by three quarter by three percent quarter over cool
spk_2: fourth quarter return on assets was at one point two four percent and return on equity was twelve point four five percent
spk_4: in queue for we've earned
spk_3: two hundred fifty one million or pre tax preparation income on total revenue of four hundred sixteen million quarter over quarter or revenue grew by ten percent reflecting long road and higher fee income i'll protect the provision income group are twelve percent and are pre tax free provision prop the booty racial expanded by twelve betas point two one point nine percent in the fourth quarter up from one point seven percent in the third quarter importantly we saw across the board improvement in our after quality metrics such as declining to for and delinquency rate lower that charge off and decreasing nonperforming and criticized as it the macro economic outlook for post pandemic recovery has been steadily improving and as we begin to doubt and twenty one we are optimistic about a year ahead
spk_2: and now moving to fly for for summary review of our balance sheet
spk_3: as of december thirty first two thousand and twenty total long's reached a record high of thirty eight point four billion growing by ten percent analyzed from september thirty and by ten percent year over year from december thirty first two thousand and nineteen paycheck protection program ppp long total one point six billion as of december thirty first without twenty a decrease of two hundred and four million from september thirty due to forgiveness of long by the as be a
spk_2: we are participating in the current round of ppp to for our customers and community
spk_5: and as of yesterday
spk_3: we've wandered over two thousand and six hundred new ppp loans totaling over three hundred eighty million
spk_6: excluding ppp
spk_7: total long of grew by
spk_8: one point one six billion in the fourth quarter
spk_3: this reflects growth in all of our major long portfolios fourth quarter long production was brought the he came from across
spk_2: our various lending team and branch network
spk_3: diversify by long product industry geography and property time we think that to leave a strong foundation for the coming year because growth was exceptionally strong in two thousand and twenty five december thirty first total deposits reached a record high of forty four point nine billion growing by thirty percent analyzed from september thirty and by twenty percent year over you
spk_9: in particular
spk_3: non interest bearing deposit reached a record sixteen point three billion as of december thirty first two thousand and twenty throughout tulip two thousand and twenty growth in non interest bearing deposit balances outpaced total deposit growth non interest bearing demand departed made up thirty six percent of total deposit as of december thirty first two thousand and twenty up from thirty percent a year ago but i'm not alone growth departed grove was well diversified across our commercial teams and branch network including cross border klein reflecting the addition of new customers and expanding wanna share of existing relationship we look forward to the straw momentum and core part growth carrying into the coming year
spk_10: turning to fly five
spk_2: you can see that we ended the year where a common equity tier one ratio of twelve point one percent and a total capital ratio
spk_3: have seen point three percent providing us with meaningful capacity for growth to support our customers a book value intangible equity pressure with both have three percent from the prior quarter and are tangible equity to tangible acid ratios remain at nine point three percent as of december thirty first two thousand and twenty compared with september three year to date
spk_2: increased tangible equity pressure the by nine percent
spk_3: given our all capital ratios and positive earnings growth and trajectory i'm pleased to announce that is was board of directors approved a twenty percent increase to the quarterly common stock dividends from twenty seven and a half and pusher to thirty three cents per share
spk_11: equivalent to an annual dividend of a dollar thirty two cents
spk_3: the new dividend would take effect beginning in the fourth quarter and is payable on february twenty third two thousand and twenty one two stockholders a record on february nine two thousand and twenty one moving on to a discussion about loan portfolio beginning would fly sick pm my loans outstanding excluding ppp work twelve point one billion as of december thirty first and total see and i commitments work seventeen point one be quarter over quarter yeah my loans outstanding x p p p grew by eighteen percent annualized fourth quarter see and i grow built on the positive momentum and pipelines and commitment that began in the third quarter
spk_2: in two thousand and twenty one week that the and i grow to be stronger in the second half of the year compared with the first half
spk_3: as the anticipated posts pandemic economic recovery takes whole
spk_12: poor quality and i grew up with well diversified by industry was notable commitments go in general math factoring in a hotel
spk_3: private equity and cayman food related industries and clean energy buddha diversifying out the and i go with quote from our greater china proposal which was one point five billion as of december thirty first in the fourth quarter loans in the go china group by a hundred and sixty million a salaried income growth of eighty two billion in the circle do you live station rate of loans outstanding to total commitment was somebody one five percent as of december thirty first two thousand and twenty essentially unchanged from september thirty moving to fly seven and eight which shows essential details about commercial good of paper for you total commercial going to say long were fourteen point eight billion as of december thirty first two thousand and twenty quarter over quarter just for photo grew by four percent annualized from september three personally this is a slow growing popular
spk_11: reflecting our conservative underwriting in the current environment and a lower level of transactions in the market go for new deals and for refinancing
spk_3: we expect to see reductively to police local non commercial real estate in two thousand and twenty one until the anticipate posts pandemic economic recovery gained momentum on flies nine and ten would provide details regarding our single family residential long and a home equity line
spk_8: during the fourth quarter we originated one point one billion of residential mortgage loan an increase of thirty eight percent compared with seven hundred sixty eight million the third quarter
spk_3: this was a record quarter of residential mortgage origination what you sweat
spk_2: and we're seeing the momentum continue in january
spk_3: as of december thirty first single family residential long were a point two billion up by twenty percent analyzed from september three
spk_13: home equity line outstanding
spk_3: experience as a december thirty first at by twenty three percent analyzed from september to leave including on funded commitment top commitment on home equity line were three point four billion summer thirty first and the utilize asian raid was unchanged quarter or at forty percent i will now turn to call the to i mean for what he chose to discussion about good quality income statement i read
spk_14: think dominant after by discussing little dunkelberg related deferral on flight eleven as a december thirty first twenty twenty london on full payment the pearl one point two percent of porn alone down from two point seven percent of september thirtieth
spk_1: including loaned i'm partial payment for all which generally modifications opinion i can only deferred month or two point six million of along down from four point two percent as of september thirtieth quarter of a quarter note on colvin related deferral decreed by twenty six percent between september thirtieth and december thirty first and largest improvement within our commercial where the loan program which decreased by one hundred fifty one million or twenty nine percent since september thirtieth as of december thirty first the deferral right unfairly went down to under five percent the paroled on residential mortgages decreased by thirty five percent in fourth quarter and that for all right on residential mortgages
spk_14: two point five percent the different way don't see an island continued to be very low printing to fly twelve overview of our as a quality metrics and flight thirteen firmly you are of allowance for loma
spk_1: along with the decline and coven nineteen related to pearl of great way to the across the board improvement in our alpha tommy metrics this quarter quarter of a quarter or criticized the nonperforming out that decline and related out the quality metro radioed improved the outlook for an economic recovery continue to strengthen
spk_14: bars have proven to be resilient and adaptable or comfortable with the credit risk in our portfolio believe that credit card
spk_15: i'm on one lobby mac
spk_1: nonconforming out the top forty five basis points of total lack of other december thirty first and the amount of two hundred thirty five million a quarter important reporter decrease of ten percent a cooling loan thirty two eighty nine days past do your fifty one million or thirteen this point of total known as of december thirty first a coup
spk_16: quarter of a corner decrease of forty percent
spk_1: criticized loan to a one point two billion as of december thirty first at three point two percent of total load a quarter of a quarter decrease of eighteen percent from one point five billion as of september thirtieth or three point nine percent of total loans within that both classified and special my move to quite quarter of a poodle and their respective ratio temperament as of december twenty thirty fourth twenty twenty classified long decrease to one point seven percent of alone and special mention decreased to one point five percent of total though
spk_14: put the i an island with to abide by and street and the crew five commercial on a plate loans were like life diversified buy property the largest concentration with then criticize loan either industrial property type related while ago
spk_1: quarter of a quarter criticize jeremy lin decreed by ninety percent and credit a few nylon excluding oil and gas decreased by eighteen percent
spk_14: qualified oil and gas loan two or three hundred twenty one million as of december thirty first a quarter of a quarter decrease of seventy four percent or ninety percent seventy four million she's week or ninety percent reduction in the loans came from exit pay down and upgrade oil and gas law
spk_1: no charges were under one million in the fourth quarter the backdrop for the oil and gas board help strengthen with higher commodity pricing and demand on flight thirty we didn't do them a component ever allow for low mater or allow for low losses totaled six hundred twenty million as of december thirty first or one point six a person a little help from dutchman excluding ppp load compared what six hundred eighteen million or one seventy three as of september thirtieth and compared with one hundred eighty three million
spk_14: or one thirty nine on day one proceed on your to date twenty twenty posts they want to feel we added one hundred and thirty seven million to the alarm went largely due to the deterioration in the economic forecasts do to correct however the economic forecasts have improved in the second half of twenty twenty resulting in modest the cloth and in the required amount of coverage for all of our major the portfolio quantification if the macro economic conditions continue to improve and credit quality whole to improve we expected he continued reduction in be required lounge
spk_17: michelle
spk_14: during the fourth quarter were recorded twenty four million and provision for little monsters compared to ten million in the third quarter to quarter a reporter increase in the provision was primarily due to for for logo of over one billion excluding ppp love the other long story but including the improved macro economic for cat lord to throw right on commercial real estate and reduction adversely graded delinquent and nonperforming at a lower oil and gas soldier and in charge of largely off at each other that targets in the fourth quarter were nineteen million a degree of twenty two percent from twenty four million the third quarter the fourth quarter net turned off ratio twenty basis point of average alone and life and improve district basis points from the third quarter a quarter of a quarter increase in commercial real estate charge of the or a quarter was more than offset by the portable cooler decrease in the and i turn josh fourth quarter charges from oil and gasoline total under one million dollars
spk_1: and now moving to a discussion of our income statement on five forty and if like me summarize the key line items of income statement which elvis got the more detail on the ball flight
spk_14: fourth quarter twenty twenty included from non gaap adjustment related to the twenty nine pm right off of dp solar tax on investment which added three million or two cents per share to earnings fourth quarter amortization of tax credit other investments included eleven million recovery with a it to be solar and war quarter in contact with elevated by eight million of tactics and to related to dc solar largely the result of the sea solar related i the effective tax rate for the fourth quarter was twenty three percent compared with that he presented a third that will need effective tax rate for the four year twenty twenty seven two percent compared to twenty percent for twenty nineteen an hour be a b c drive net ordinary income and editors margin and five fifteen through eighteen starting with average balance globe fourth quarter average longer of for quarter average loan of thirty seven point seven billion grew by five hundred sixty five million or six percent link quarter and analyze that by growth in the mental mortgage followed by the and i long for the ppp commercial real estate for quarter average deposit or forty four point four billion to buy three point two billion or twenty one percent linkohr and life driven by very strong growth and noninterest married man deposit which grew at a rate the clincher fifty six percent annualized all other deposit category if we didn't see the auto bro with the strong departure drug we ended the air with an average long to deposit really shield eighty five percent average available for sale debt securities increased by almost one billion from the third quarter of we do poured some of our cash made in the quarter we also added two hundred fifty million to be bothered with did not yet show up an average bounces he continued to deport excess liquidity into a at that
spk_18: security
spk_14: given the low interest rate and the flat yield curve attractive opportunities are limited in october twenty twenty we realized are excess liquidity to pay off in both the ppp l up it was one point one billion as of september thirtieth twenty and the second quarter of twenty twenty one yeah four hundred million of have a job he advances muttering at a rate of to twenty five on flights sixteen you can see that for over twenty twenty net interest income of three hundred forty seven million increased by twenty seven million or seven percent lead quarter and then an interest margin of to thirty seven expanded by five basis points from the prior exploding the impact of people and the ppl up fourth quarter adjusted the interest income of three hundred thirty three million increased by five percent or five million quarter over quarter and fourth quarter or just and then of to thirty six comparable or one basis point from the third quarter ppp low
spk_1: and tripped and divorced being come with fourteen million and what quarter from eight million in the third quarter and the third quarter we adjusted the deferred be income to account for the floor than anticipated forgiveness and pay off of these loans
spk_14: as of december thirty first we have thirteen million of the bird be used on last year's theme flowed love to agree and twenty twenty one plot a course the interest in got a one percent on the tv to you won't outstanding dominant care of the market a family of new ppp lounge earlier on the paul based on that an application process we expect to ponder approximately six hundred fifty million of new ppp load and twenty twenty one generating approximately twenty million of bros ppp some plus interest the five basis points portable quarter increase in the fourth quarter gap in breaks down as follows optic faces point from a lower cost the deposit a fiber of point for more ppp income of one day boy from the payment of the ppp a love partially offset the fuck down the basis points from excess liquidity in the form of more lower yield after and also down one basis point from lower load and other earning out that yields turning to fly seventy fourth quarter average loan yield or three sixty eight expanded by eight basis points from last quarter expand the impact of ppp the fourth quarter job the lonely old of three sixty nine contract by one basis point quarter to quarter exists nobody relative stability the down in price of our variable rate loan portfolio and behind us and the upper right quadrant we laid out our average lonely old by portfolio and you can see or single family residential mortgage product the lead
spk_1: great of a portfolio and continue to carry a trusted
spk_14: turning to light a tea or coffee of the part of continue to decline and of what order as maturing higher reduce the price to current market rate we productive continue to or cough deposit of how deposits maturing the first quarter of twenty twenty repriced lower our average cost of deposit for the fourth quarter back
spk_16: rob to twenty five they have gotten down from thirty three bases point and the third quarter an improvement of a of watch a spot rate of total deposits of of december thirty first appointed to basis for lunch dated january the spot rated down another to the bases point to twenty baseball
spk_14: or bought for average cost of interest bearing deposit drop and forty basis going down from fifty basis points to the third quarter an improvement of hendrix his porch the thought rate of interest bearing deposit and of december thirty first or thirty five basis points month for dated january the spot weighted down and other three baiters point that order to they just point the average cost of cds in the fourth quarter with seventy four bases point we have one point three billion theories mature the first quarter a blood rate of one twenty two the rape paid on originations or new renewal of domestic studied in the fourth quarter of twenty twenty or twenty five basis points compared to forty
spk_16: rebates is point in the third quarter month to dated january detroit kicked down to twenty two days
spk_14: moving on to be and come on flight nineteen putting on and income in the fourth quarter of seventy million compared with fifty four point five noted in the third for the quarter of a quarter increase but driven by number of factors including available change in the credit valuation adjustment of interest rate contract an increase in ca
spk_16: zimmer driven foreign exchange transaction
spk_19: and an increase in that game on sale of of be alone
spk_14: brother perjury management fees continued to go nicely as we grow commercial deposit account and transactions wonder how to fly twenty fourth quarter non expand with a hundred and seventy nine million an increase of four percent luke water
spk_16: excluding amortization of tax credits and other and and and poor pocket and intangible amortization are just they're not interested spend with one hundred and fifty six million in the fourth quarter an increase of seven percent put our reporter and especially my flat year over year the quarter a quarter change and operating expenses but primarily due
spk_14: run by increase bonus compensation approval and increased our owed them which was included in other news for quarter of just a deficiency ratio with thirty nine point eight percent an improvement from forty point eight percent in the third quarter of over the fact of path quarters or and jewish your his range from thirty point three percent to forty point eight percent despite operating had one run the colbert pandemic related economic slowdown and near zero interest rates and with that are now or deal our outlook for twenty twenty one
spk_16: on fly twenty one
spk_14: for the full your twenty twenty one we currently expect year over year low growth exploding ppp of six to eight percent for contact longer excluding ppp with six percent and twenty twenty and seven and a half and analyzed for the second half and twenty twenty the expel well diversified group
spk_20: the twenty twenty one coming from all of our major loan portfolio the diversification of our loan portfolio in terms of known type and industry real estate property and young free allows us to outperform our peers in terms of local in europe
spk_14: year over year adjusted that interest income growth excluding ppp journal and line with low road on a for your beta underpinning or interest rate interest income assumption is the current for interest rate per
spk_16: adjusted not interest expense growth exploding tax credit investment amortization of three to five percent year over year in the current environment we are focused on net interest income and pretax pre provision income growth provision for credit losses with to a
spk_14: link between seventy and eighty them with the logo that we expect much further improvement in the economic forecast this provision outlook anticipate that the allow coverage alone will continue to modestly reduce from current level lawyer twenty twenty one effective tax rate of approximately
spk_1: fifteen percent including the impact of tax credit investment there will be quarterly variability and the catch rate do to timing of tax credit investments place in the german
spk_14: what that i will now to the call back over to dominic because the normal
spk_21: thank you i read in summary
spk_3: we had of finish to most unprecedented year
spk_2: they have been a challenging year for many and i wish to thank all of our voted for the commitment and dedication
spk_22: to meeting our customers frankly me
spk_3: of i said at the beginning of my remark we are optimistic about a year ahead including are expected additional governments don't want us to read go cooking the food and community
spk_2: and the have to support for public health
spk_3: and abroad broader distribution of covert nineteen vaccine
spk_23: in addition
spk_4: we're looking for to an improvement in the discourse between us and china
spk_3: which will be constructor for cross border capital flow and accordingly plotlines business opportunities we have strong capital and liquidity to put down should grow as the economy recovers and we're confident that we will be able to deliver another year of strong financial performance for shareholders in two thousand and twenty one i will now open up the cold questions operator
spk_0: thank you we will now begin the question and answer session to ask a question you may prefer darn than one on your touch tone phone if you're using a speakerphone to pick up your handset before prepping the key the withdraw your question please pick far than que please limit yourself to one question and one follow up at the time we will cause momentarily to double our roster our first question and some abraham put a walla with bank of america to go ahead
spk_24: good good morning
spk_25: monique against the the first question on credit go if the to can you can advance i guess i mean one not worth about the remaining before the move was all the bush under full difference when of the sun fit for the he went to the come to an end and separately if you could address your outlook on the charger of a think about what you talked about rebuilding potential for the rebuild leave oh and would i be a policeman guidance as you could i just wish me
spk_1: now are on the for all you know other to talk about the for our earlier and twenty twenty know to the deparle piano or just ah the principal or for three month period i would say that the one that we had that were off again to get your ass
spk_16: and some of them on giving the nature and the process of them a month on our little bit longer term but on average i would say still do to six month is all want those deferral term are on the charge off ratio and are pay asian or twenty twenty one i wanna just start by saying if you look at the full year or the fourth quarter
spk_14: for twenty twenty the heart operations were very low and your life for the fourth quarter twenty bases point four year of southern feeling so at that point in time i think it's realistic have been a big increase the little bit from the level by of as we look at quantico validate as it stands today there's nothing that were really concerned that the turned off ratio to increase dramatically
spk_0: got it and just ownership or ignored though maybe don't make when you think about the sea and i don't go to jail for the you do see there's more all potential put up trade surprise or don't take this ought to your outlook though and district watch about any new opportunity that you feel the female and big jump on that could there be
spk_25: i mean it's a great driver for the bank think it
spk_8: while we always walking on an upside for price are people that big fat i think that we we've pretty much look at
spk_3: the year now the fourth quarter this exceptional eighteen person and allies grows is rudy accumulation of efforts from the third and fourth quarter and we kind of like somewhat highlight in the third quarter that we were developing is much stronger pipeline and know sold out of luck getting
spk_26: get a book in the fourth quarter so that was exceptional got a we look at a second half of two thousand and twenty i'll sort of like how analyze grow was about seven percent for the enough for will kind of using that as our current run rate
spk_3: an hour we feel pretty good about where we are today because we're able to grow in a very diversified direction from industry tight product make an hour to grab a geographic region including even the greater china region as i mentioned earlier my remark that up our greatest heightened obvious other chinese economy is we recover
spk_11: the head of the united states and so we saw a positive he a nylon grow a non
spk_27: hong kong and china
spk_8: in the third quarter in all six and a hapless and analyze go was the and night long growth in greater china include quarter and then a tolerate it for four to twelve percent analyzed
spk_3: so we see that oil so good sign and then if we looked at softball domestically know from private equity our general hotel our manufacturing and attainment clean energy
spk_28: all of these different areas
spk_3: we're growing so from that standpoint i overall right now we we expect them to continue to do well and so hopefully would do better than what we
spk_26: forecast
spk_3: but in terms of down downside ah i guess the downside will be you know in case i don't know if there were say that the vaccine distribution not walking while and and somehow you know the execution from the government and to was the
spk_11: humanists plan was not working and so forth on and that can potentially solo like do well somebody up customers confidence to lab
spk_3: invest or to grow the business that can potentially happen but i look at the current administration looks like we have all very seasoned veterans that i'm managing ah the best he can i have i've been a higher of confidence at this point that doors high likelihood that they will be able to get a call enemy turn around in the second half of the you
spk_0: our next question will come from can there be that morgan stanley please go ahead
spk_29: great thanks my first question just in terms your and i guidance that is going to generally be alive when loan growth of your longer of comments the said i've seen in bed longer of picks up in the back half of the year
spk_30: should we expect the and i to follow that same rent like that it stays relatively quiet first half of then accelerates a backup for an average should cost fifty percent or the block any commentary thanks
spk_14: can so our guidance it and and longer than sixty eight percent so with the and i'm on a plane falling that average longer for the year i think in general probably ah well you look at that money on the lower end of that you could a person and probably what makes that for that calculation
spk_30: gotta understand okay i think it actually and of period that that totally makes sense and they just a separate question in terms of your see so day one reserve i think it was about a hundred and thirty five basis points i could be wrong is there's still a good target post pandemic of or you might want to be given your current load max
spk_14: that's certainly my as you know it's very complex calculations and ah
spk_31: so i can't comment on necessarily where i think it's gonna end up but i wouldn't confidently say as a comedy economy recovers as a kind of quality continue to improve that i believe there's certainly room to lower not allow and from the levels we are today
spk_32: i thank you
spk_33: thanks can
spk_0: or next question comes from michael young with to the charity gala head
spk_34: hey thanks for taking the question and preemptive congratulations on the or of the ox i hope it's better than the or of the rat that line with you i wanted to ask you did early on on the charge off nice corner and knew what you he coming to the pipe yeah i know i know generally you guys lender very low value on on course real estate to pay just curious what called the natural charge off in a bucket
spk_1: after the time off for here are we in the order in know we obviously especially with the pandemic and the environment and there are some loan that we're working
spk_35: so they have been kind of problem nonperforming loans for a while and depending on panda looking at where the cash flow door and valuation
spk_16: and a year and kind of making sure that the books are in order to protect us
spk_34: okay for they're burning through kind of thirty than fifty percent equity question that revolution
spk_36: ah well yeah i can for birth specific
spk_14: loans and are problematic certainly the circumstances are unique which is why you well as which is what you're referring to i generally our mars and a loan to value being so low there's a lot of equity but are specific situations related to really cash flow which is why we took the charge off
spk_8: i do want to accept that overall from a commercial real estate portfolio
spk_3: of multifamily office building hotels retail shopping center than and or industrial buildings you name it all of that on the earth today we have a pretty strong for folio based on not only just our ltd many of our customers despite the condemning i'll kill you know get him by quite well you know so in fact that's what you see the
spk_11: classified and criticize asset show coming down and deferral coming down and
spk_3: not surprisingly you know we always expected you know these customers should do well to do better you know it as an average compare with our industry as a whole because of the he knows though long to value and now so many of them have personal guarantee and they have a lot of liquidity but i think a pen then with a very good trust test to see how overall both of these customer have done well with always they will always have a few isolated incident here and there and that's what happened
spk_34: okay and maybe get a the power on the residential when they are things like by be a larger portion of the group if your what a raid and provision do you put on that and and should we expect that kind of a lower growth rate of fee and come as a result that higher it of bread the one
spk_37: yeah on e r
spk_38: forty lot and be
spk_1: residential mandate for followed that we have an odd product some variation of and that that originating for forty years
spk_14: the credit quality generally has been outstanding in general the reserve that we have or are single family and also the he love which are my add are largely personally and a quite low relative that the allow infinitely book for the rest of the portfolio and in fact with them crude none in about four past ah during the fourth quarter we will do the kind of
spk_16: required reserve from about thirty basis points downtown twenty overall as i mentioned with the data that we have on the historic losses over the course of ten twenty years it's been incredibly low for this portfolio
spk_34: protect think you happy new year
spk_39: happy new year thank you
spk_0: oh next question comes from dave rochester what contact point please go ahead
spk_40: hey morning as
spk_41: the morning of
spk_34: are under in a god was just wondering what your thoughts were on adjusted game that you're expecting and that and given no strong security growth in the quarter it you get it to your assumption to that growth and deposit growth which all will ultimately impact on the out growth and and as well
spk_19: at i think her crushed than is really maybe be most unknown paying for us banks right now as far as and the liquidity and then deposit girl them those names are
spk_20: are are continuing to experience i can for our
spk_38: when we look at the crowd
spk_14: men and i were very comfortable that will be able to expand from the fourth quarter level it's not year over year but certainly from the fourth quarter levels and that are will be able to maybe just kind of continue to expand around twenty twenty one i'll also add you know maybe one or the key drivers a more comfortable out on the acid side you know there's some challenges largely out of five thing that we
spk_16: price down security now or share like to gamble the security that were buying in january or probably yielding about one point seven percent or so we had extended out the duration a little but the not extensively
spk_14: and then what we had there were were more comfortable is we do have a lot of deposits yet and of funding that we expect to reprise are over the course of the coming months
spk_34: okay great and this one follow up on capital got a play that the capital to buy back and still outstanding and anything with it's an early last year was just wondering what you guys are waiting for this point it looks like you've had some good improve on the credit side regulators a the be warming to at a little bit
spk_40: with that detach bags
spk_34: announcing buyback for this course i just want to get your ideal but there
spk_3: oh we are you right we do i currently have a buyback organization outstanding all three hundred fifty four million remains a two point you know we're not we do not anticipate doing any by back in the near future cause frankly we look at where we all right now are we excited about the growth opportunities ahead about and frankly we prefer to have you know capita available to take advantage of any emerging the opportunities that may come and as as of today when we look at where we are gonna return perspective
spk_11: you know currently we're generating attractive
spk_3: you know return on equity and we actually can we can hopefully do even better going forward from that point of view is not something that we lack of returned that we we need by back to arm push on and pressures and stuff like that opposition is that the but my experience you know for many years and he's worth buying how we always done that whenever there are any kind of economic inflection point and so one of the reasons why we are done that it's not just ability to execute an the other know what our our associate who had done a great job but more importantly are we have a lot of capital always at that time and allow us to be in position to take advantage or turn crisis in do opportunities in socal so i generally inclined to stay with a look at more capital and and but google will continue to watch the
spk_2: our ability to generate know above average return of equity to our shareholders as long as we feel that we can do that and then we will continue to stay this position for now until a great opportunity to come along you know that that we may deployed to the capital differently
spk_3: our board of directors are all very engaged though
spk_42: that the the beauty of where we all right now if i looked at them
spk_43: tomorrow
spk_3: capital perspective
spk_11: we really looking at
spk_3: the situation that we can just they consume call were what numbers any time
spk_44: and have a discussion executed a by that those not like there any kind of repertory of constrain or any of the other issues is very different than you know i'm with building up you know a a separate see at night
spk_3: a platform or when we start building something monumental so this is something that is very easy to do and we're always shareholders friendly and we know exactly once the right time to our a now to by that which we did
spk_0: i'm back in you know earlier last year
spk_45: so i mean that's the part that that we have will philosophically we are in line with our shareholders and we will do the right thing it just a matter of like up level of competence that we have right now for potential future opportunities and and that's what we sat at this point
spk_46: my next question comes from technocrat a old kbw please go ahead right my
spk_47: barnum am going to put the follow up on on that prior question
spk_34: europe is there's a shift in maybe in a willingness to do a deal
spk_3: if you're not gonna buy the stock i mean i i understand the yeah digg the competition the growth outlook but i'm i'm honored if you know deal might be more on a table and twenty one minute was in prior years oh i mean we always interest i in you know as you have you looked at our capital ratio we always have the capital that allow us to look into gareth opportunities the it's just a matter of life when the when the right you'll come along or we have the capacity ah some people perspective from cap or detective perino to actually to enter into any a a have a positive transaction
spk_48: but yeah but you also have to take a look at where we are you know if we reflect that from up the last a very tiny acquisition the we made was in two thousand and fourteen for metro bank in texas
spk_3: a very small institution for about two billion dollars in size
spk_49: and at that time
spk_50: didn't then we've been growing organically
spk_3: ah
spk_49: and with double our five
spk_3: in left and six years ah so we've done pretty well organic growth through organic growth so that that our challenge really is more internal internal issue is that how do we justified any acquisition while we have to a dullard you to double our five in left and fixtures and so look like go
spk_51: and forward feel have that
spk_46: a bloody to continue to grow organically and so from that perspective
spk_34: any kind of potential acquisition that we looked at it needs to be here attractive so i mean i thought we were looking at right now but when they're attracted you come from all were absolutely will be interesting to look at so again as repeat the same philosophical view that i share earlier is that we all shareholders friendly way we always do what good for the bank at what's good for the shareholders
spk_50: i thought a take i think i'm just follow up on the deposit growth
spk_11: that determines the polygraph you've seen the sheer
spk_8: i'm i'm interested in in kind of any i need to that are driving a disproportionate amount of that growth in the interest bearing on the ratio they gave me on the high thirty percent of told the police to the great race is one a what as pathetic didn't he might be driving that like
spk_3: it coming from all over the place that in fact the by look at yeah he and i have industry vertical so we talked about so each each and every one of them to introduce even in commercial real estate are we have newcomers over to stay customers that they contributed i would say and then of course
spk_52: retail banking were actually doing quite well
spk_11: so i would say that not only each and every one of them contributed i think this i share earlier my remarked is that we brought in our quite a few new customers would generate new deposit and then we also got increase in departed from existing customers
spk_53: because
spk_8: through the years of investment in the up capability a product and hansman in our cash management area
spk_11: our payment of
spk_54: solar our and kid capability is getting better and better that in the past we have customers that while we were having a lending relationship we only get a smaller share of up bta because we did not have the technical
spk_3: capability to serve a more complex cash management the some of our klein have these are somewhat sophisticated mod your customers
spk_11: the last few years through interesting
spk_3: we continue to improve our cash management and treasury management pick capability and now and also ethics
spk_10: except for so that get us to and the position that we're getting a larger wallet share all these relationship with existing customers so it's really a combination of both new and existing customers and i do want to emphasize is that we bring a lot of small retail customers want estimated time
spk_11: on at retail branches despite a pandemic how branches were open in office every every single business day and they're there to attract new customers the ppp
spk_0: oh
spk_34: ppp first round was very helpful you know in april from april to june we actually brought in quite a few new customers
spk_55: so it's all the combination to get out into where we are today
spk_14: so i can't think of any particular one that actually the catholic of a difference you know because they just caught the
spk_16: thank you
spk_14: my next question comes from judge child with well for the security of please go ahead
spk_19: i thank you so regular i the the margins discussion i was surprised that he the securities book or so much and you're able to maintain the the old are you are you changing the get the the dynamic of what you're purchasing there in terms of you taking structure or credit read in the portfolio
spk_1: and yeah i guess he keep talking about where you are high deploy that billion dollars in the know what you're buying know
spk_14: i'm guarantee yeah so in general i would say we haven't really taken on line of credit route we have extended duration durations gonna quarter over quarter mile honestly couldn't even do to curb but also the security that were purchasing so as the comparison
spk_34: nowhere about three to four as of nine thirty and that instructor for twenty five generally look up the lips of the security portfolio
spk_55: financially are different from that we handle for as far as what we're buying ah
spk_34: no are all you know certainly given in the of know for a long var taking a long hard look at kind of what are comfortable love from interest rate with perspective
spk_11: and that an increase in a certain way and up after a function really of of the comfort level as far as nepal that the department growl we anticipate and then horse especially with our commercial customers some pie the bouncers whatnot
spk_56: it can be and go up and down depending on their pass me by our we realize that the excess liquidity throughout twenty twenty was going to continue that's why the to the options are paying off the ppp i laugh and then some of the security a little more to securities vs keeping in cash
spk_8: it's a hundred people and to then gonna jam yeah i do you talk about the the increase increase piece of a landing
spk_11: i'm from greater china yeah how are you think that can translate into the pace of cross border trade expectations and you know whether that's just pure landing a lawyer or near the opportunity for be growth from from that apple devices well
spk_8: in terms of cloud and a greater china region i think that again will expect you know gradual increase in terms of the activity and i'll cross border team in you acts actually have done well both in fact that they've grown both and long deposit and feeling a
spk_3: and so what movie all
spk_11: looking at in two thousand and twenty one is also a continuation of the gradual increase know just because you know what the last four years under trauma ministration
spk_3: that create a lot of hostility between us and china the way that i looked at it use was is that we know
spk_11: the day we we have strong knowledge of a business environment and a political environment between us and china and we are very top it with our size is much easier to be symbol to navigate accordingly so despite the fact that you know that from the media perspective the perception that us china
spk_57: business are not doing much at all but the fact as we somehow find a way to get the business but as we go forward in looking at two thousand and twenty one and beyond under the biden administration
spk_3: and i just expect that there will be more predictable approach
spk_10: the and it would i think the by demonstration will bring stability to the relationship
spk_8: the so from that standpoint of we will most likely be able to gain additional business just because that
spk_11: because of the more predictable and more stable environment that customers from both sides will be more comfortable to continue to invest in soho they're all gonna be certain area some very what i call
spk_3: ah senses sensitive industry that fact national security dad obviously we no longer be able to conduct a lot of business between two shores
spk_0: but there are
spk_58: plan your business that are non national security sensitive that i expected to continue know
spk_25: things such as even tourism
spk_59: ah you didn't you know attending college and you as and some of the other general manufacturing
spk_60: gen pop or industries even in health care that do not have use what i call very essential purpose in united states looks back at they'll be more trade and commerce that take place between the two countries so we we all what they are and will continue to target those business opportunity that's why i actor in the next few years there will be more opportunity to come
spk_11: our next question comes from matthew clark like piper sandler please go ahead
spk_60: now your mind
spk_57: i'm
spk_61: morning first question was just pay for christmas just around the multi family portfolio was down slightly this quarter in the growth i think in twenty twenty was about a quarter of what it was the prior year
spk_3: can you speak to your appetite and net asset class and you know whether not you're you're backing away from certain markets and were out what your what the prospects are for growth there we're not backing away from multifamily you know we'll are all approach has always been you know will work with our the customers that we know well and
spk_26: that have strong credit history and whenever these customers we quiet
spk_11: financing from us will jump in that opportunity now of for multifamily terrorists are one factor is the
spk_62: there are a lot of
spk_59: you know like gum you know fannie mae type of up the pricing that that is hard to beat know sometimes we have customers that that even they've been thank him with are so many years and always look at us as of
spk_14: first why refusal but there are these very attractive pricing out there data it just makes sense for them to reply for a very low rate and we we respect that and and so from that standpoint you know we have i would say that more like up pay off due to revive for lower rate hopeless situation because our growth
spk_35: got it
spk_63: okay elon
spk_14: just maybe for irene the effects and derivative fee income pretty outsized this quarters or something
spk_35: that would make that remain
spk_64: elevated here in the near term or should we start to normalize that run rate
spk_0: now you know i've been from our customers are income perspective with a good or for both of us
spk_65: and then i are see i are seen anything the details of death
spk_3: matthew we have them flight nineteen of our dad know you'll see earlier in the year for irish a customer revenue was much higher but i'll just point now where the fourth quarter
spk_66: cdm a march or a and a weird that the pot an uptick in the ten year and then also kind of reddit or lower kind of credit costs associated with interest rate contract so for the border if you look at irish the total gap revenue was thirteen million
spk_67: in approximately
spk_2: six point you have that was customer facing income and then behavior just man with a of the dead six point eight million of that you know what are we had many more kind of transaction in the fourth quarter particularly kind of quarter to quarter and from the earlier part and we're optimistic that will continue to be able to grow up back you will be here
spk_3: okay great thank you
spk_68: or next question comes from band or leave with you be a could go ahead
spk_3: oh great thanks to the question you cover them greater china performance already i was just to ask in terms of you know in that an area now with the change of administration and or incremental investment will you really feel like you you've already got the pieces on more the you need a well in terms of and from than to of depends on the opportunity what we we have plenty of capital
spk_11: to allow the al quaeda china because team to grow if need to be but he was have never really work on a business model to relied on greater china to
spk_4: a cheap fast pace of growth and noted for us to generate a kind of meaningful pro financial performance for our shareholders so credit china has always been more strategically important than quantity to have been so from that perspective will continue to look into how
spk_8: we can use hong kong and our china team to look in opportunity are frankly in the united states many of our domestic see and i dismiss
spk_3: chose his worst
spk_69: as the banker because of our knowledge of the
spk_65: china and autumn many of them either the importer exporter or they may be buying components from china and so called have that in a connectivity between us and china after all these are the two largest us and china the two largest gdp in the world so that interconnectivity so are are there for many of the business around us
spk_70: and our team in china were able to i hope to provide you know advice and services
spk_3: in china or in us for our klein like a big difference and differentiate use was dramatically from other regional banks of we're competing with so that part has been going well whether we would need to make additional investment or not i think that will or depends on
spk_71: any kind of the potential ah
spk_11: changes in record tory direction from us and china and i will on what kind of like potential opportunities may come
spk_3: if there's a great opportunity again you know and previous question about any kind of opportunity of would be interesting look at i'd always look at it that we look at a broadly and any kind of opportunities that are have a high certainty to provide better return to our shareholders we look at it so i just age right now i don't really have anything specific tool to mention i would you say that we always on the lookout to identify opportunities that to deploy all capital wisely
spk_2: got it and
spk_11: more broadly do you anticipate any
spk_3: the changes in the bit in your business model know coming out of of covered
spk_2: the
spk_3: or or not
spk_11: i'm not anything dramatically know i would say that we have always been
spk_3: very much running organization with a very sort of like out diversify approach in terms of making sure that we touch on many different industries in us and we have a a good percentage of
spk_2: long's and fee and i and and while balance between fee and i feel ye and single family mortgages
spk_11: from the consumer side
spk_72: we are generating the stronger fee income every year from wealth management you foreign exchange and then
spk_0: cash management fee income and interest way swap eccentric cetera so that if you're going to be in place of we always going to make sure we have a good balance between commercial banking and retail banking go i'm not many banks out there they're competing with us right now without size that actual have
spk_47: the thrall retail banking business like we do and so that's a big advantage for us and will continue grow our with our consumer retail banking business going forward
spk_34: and the as edelman upgrade to china is dad dad as i said earlier with
spk_73: that's too big gdp you know the whoa lodges and the second largest and there are plenty of business for us to identified particularly for an organization like east west that don't really have much competition against us because most of the us things would he do not have this
spk_2: part of the up growth element so we we look at all of that is why you know for years we set our nation addition in terms of now business model
spk_74: to focusing on and destruction
spk_2: and i would say that this is more or less the same direction that will be focusing on the the next ten years or so
spk_3: so at this point where very comfortable with our business strategy going forward
spk_2: right i still call or next question comes from david she ever he knew flatbush maturity please go ahead
spk_75: i thanks and wanted to follow up on loan growth thing and i growth you mention in account positive in september and momentum continued and in the year end you also mention that pipelines have positive momentum as you can look out from here
spk_26: here but you also mentioned to expect slower growth and he nine the first have a twenty one versus the second half of twenty one so should we expect kind of similar see and a growth in the first happened twenty one versus the annualized growth in the fourth quarter of course on an x ppp basis and then a further pick up
spk_76: in in the second half from there
spk_8: i know as i mentioned i think that maybe in one of the q and a rodeo our
spk_4: keep in mind our fourth quarter
spk_77: annualized growth rate was eighteen percent
spk_2: but if you look at the second half of the year
spk_3: oh analyze growth rate was seven percent for see and i buy seven percent so we're using the seven percent run rate as what we expected for the year
spk_2: and at this stage you know we we figure out in the current environment just looking at the current environment with up
spk_11: you know what you're trying to figure out do we have enough vaccine for everybody or that how many more very ends of the lack of the corona virus that may popped up ah we just look at it is that maybe the first
spk_3: quarter and to wish wouldn't be expecting business to be coming back as business as usual as a strong but i would expect a after this by the summer or after the summer you know this is just going to come back with a stronger because meant most of the economy's going to get back into know so there will be a pickup then so keep in mind that
spk_11: while we booking commitment of you look at that utilize station rate know we are somewhat of are all time low because normally in the path will always have about eighty percent utilize asian should were dropped down to seventy percent of that business or not to on are many of them are not to wind down the line so
spk_3: we we're very pleased to we can book new business bringing new customers but many of them as to hunker down and not joined the lines and until the economy rudy see some sort of like normalcy i would expect that business will continue to be hated and to
spk_11: actively draw down the line and actively engaged in no food wrong business
spk_78: so from that standpoint that's why we think that chances are it's going to be a little bit slower in the first two quarters and then picked it up a look stronger and a third and fourth quarter one other factors that there's always since seasonality for some of alfie and i business
spk_3: that in general
spk_11: the things tend to slow down particular said to slow down the first and second call quarter of because particular the business
spk_79: are you know a keto to consumer retail and
spk_47: ah there's always like
spk_34: stacking up the inventory right around good near the end of summer and then start sucking it up all the way too
spk_14: near christmas you know and that type of of corbett and that the we have four years
spk_16: and still you know i'd meaningful size of business in our see an ipo for legal and we expect that isn't those business would continue to behave accordingly which is a little slow in the first and second quarter a loaded
spk_35: stronger than a third and fourth quarter because of the
spk_16: utilize station behavior
spk_80: so from that standpoint i thank you for combination of different factors that
spk_0: cautious to conclude with this sub
spk_3: donald like forecast
spk_0: thanks for that very helpful and then shifting to a question on credit the oil and gas portfolio classified loans were two hundred and forty million down thirteen percent

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