East West Bancorp, Inc.

Good day and welcome to the East West Bank Corp fourth quarter and full year 2020 financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. If you would like to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Juliana Balica. Please go ahead.

Thank you, Sarah. Good morning and thank you everyone for joining us to review the financial results of East West Bancorp for the full year and fourth quarter of 2020. With me on this conference call today are Dominic Ng, our Chairman and Chief Executive Officer, and Irene Oh, our Chief Financial Officer. We would like to caution you that during the course of the call, management may make projections or other forward-looking statements regarding events or future financial performance of the company within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may differ materially from the actual results due to a number of risks and uncertainties. For a more detailed description of risk factors that could affect the company's operating results, please refer to our filings with the Securities and Exchange Commission, including our annual report on the Form 10-K for the year ended December 31st, 2019. In addition, some of the numbers referenced on this call pertain to adjusted numbers. Please refer to our full year and fourth quarter aims related to the reconciliation of gaps in non-gap financial measures. During the course of this call, we will be referencing the slide deck that is available as part of the webcast and on the investor relations sites. As a reminder, today's call is being recorded and will also be available in replay format on our investor relations website. I will now turn the call over to Dominic.

Thank you, Juliana. Good morning. And thank you everyone for joining us for our full year and fourth quarter 2020 earnings call. I will begin the review of our financial results with slide three of our presentation. This morning, We reported full-year 2020 net income of $568 million, or $3.97 per share. We returned 1.16% on assets and 11.2% on equity for the year. Thanks to the unslagging commitment of our associates, we are successfully navigating the COVID-19 pandemic and the resulting economic crisis and also the low interest rate environment. The fourth quarter was a strong end to the year and resulted in net income of $164 million, or $1.15 per share, increased by 3 percent quarter over quarter. Fourth quarter return on asset was 1.24 percent, and return on equity was 12.45 percent. In Q4, we earned $251 million of pre-tax preprovision income on total revenue of $416 million. Quarter over quarter, our revenue grew by 10% reflecting loan growth and higher fee income. Our pre-tax preprovision income grew by 12%, and our pre-tax preprovision profitability ratio expanded by 12 basis points to 1.9% in the fourth quarter, up from 1.78% in the third quarter. Importantly, we saw across-the-board improvement in our asset quality metrics, such as declining deferral and delinquency rates, lower net charge-offs, and decreasing non-performing and criticized assets. The macroeconomic outlook for post-pandemic recovery has been steadily improving And as we begin 2021, we are optimistic about the year ahead. And now, moving to slide four for a summary review of our balance sheet. As of December 31st, 2020, total loans reached a record high of $38.4 billion, growing by 10% analyzed from September 30, and by 10% year-over-year from December 31st, 2019. Paycheck Protection Program, PPP, loans total $1.6 billion as of December 31, 2020, a decrease of $204 million from September 30 due to forgiveness of loans by the SBA. We are participating in the current round of PPP to support our customers and communities. And as of yesterday, we funded over 2,600 new PPP loans totaling over $380 million. Excluding PPP, total loans grew by $1.16 billion in the fourth quarter. This reflects growth in all of our major loan portfolios. Fourth quarter loan production was broad-based and came from across our various lending teams and branch network, diversified by loan product, industry, geography, and property type. We think that this lays a strong foundation for the coming year. Deposit growth was exceptionally strong in 2020. As of December 31st, total deposits reached a record high of $44.9 billion, growing by 30% analyzed from September 30, and by 20% year over year. In particular, non-interest-bearing deposit reached a record $16.3 billion as of December 31, 2020. Throughout 2020, growth in non-interest-bearing deposit balances outpaced total deposit growth. Non-interest-bearing demand deposit made up 36 percent of total deposit as of December 31, 2020, up from 30 percent a year ago. Similar to loan growth, deposit growth was well diversified across our commercial teams and branch network, including cross-border clients, reflecting the addition of new customers and expanding wallet share of existing relationships. We look forward to the strong momentum in core deposit growth carrying into the coming year. Turning to slide five. You can see that we ended the year with a common equity tier one ratio of 12.7% and a total capital ratio of 14.3%, providing us with meaningful capacity for growth to support our customers. Our book value and tangible equity per share were both up 3% from the prior quarter, and our tangible equity to tangible asset ratios remain at 9.3% as of December 31st, 2020. compared with September 30. Year-to-date, we increased tangible equity per share by 9%. Given our strong capital ratios and positive earnings growth and trajectory, I'm pleased to announce that East-West Board of Directors approved a 20% increase to the quarterly common stock dividend from 27.5 cents per share to 33 cents per share, equivalent to an annual dividend of $1.32. The new dividend will take effect beginning in the first quarter and is payable on February 23rd, 2021 to stockholders of record on February 9th, 2021. Moving on to a discussion of our loan portfolio beginning with slide six. CNI loans outstanding excluding PPP were $12.1 billion as of December 31st and total CNI commitments were 17.1 billion. Quarter over quarter, CNI Loans Outstanding, XPPP, grew by 18% annualized. Fourth quarter, CNI growth built on the positive momentum in pipelines and commitments that began in the third quarter. In 2021, we expect CNI growth to be stronger in this second half of the year compared with the first half as the anticipated post-pandemic economic recovery takes hold. Fourth quarter CNI growth was well diversified by industry, with notable commitments growth in general manufacturing and wholesale, private equity, entertainment, food-related industries, and clean energy. Further diversifying our CNI growth was growth from our Greater China portfolio, which was $1.5 billion as of December 31st. In the fourth quarter, loans in the greater China grew by $160 million, accelerating from growth of $82 million in the third quarter. The utilization rate of loans outstanding to total commitments was 70.5% as of December 31st, 2020, essentially unchanged from September 30th. Moving to slide 7 and 8, which shows essential details of our commercial real estate portfolio. Total commercial real estate loans were $14.8 billion as of December 31, 2020. Quarter over quarter, this portfolio grew by 4% annualized from September 30. Presently, this is a slow-growing portfolio, reflecting our conservative underwriting in the current environment and a lower level of transactions in the market, both for new deals and for refinancing. We expect to see relatively slower growth from commercial real estate in 2021 until the anticipated post-pandemic economic recovery gains momentum. On Slides 9 and 10, we provide details regarding our single-family residential loans and home equity lines. During the fourth quarter, we originated $1.1 billion of residential mortgage loans, an increase of 38% compared with $768 billion in the third quarter. This was a record quarter of residential mortgage origination for EastWest, and we are seeing the momentum continue in January. As of December 31st, single-family residential loans were $8.2 billion, up by 20% analyzed from September 30th. Home equity lines outstanding were $1.6 billion as of December 31st, up by 23% analyzed from September 30th, including unfunded commitments. Commitment on home equity lines were $3.4 billion as of December 31st, and the utilization rate was unchanged quarter over quarter at 48%. I will now turn the call over to Irene for a more detailed discussion about asset quality and income statement.