East West Bancorp, Inc.

Q1 2021 Earnings Conference Call


spk_0: good morning and welcome to the east west bank corp first quarter twenty twenty one financial the conference call operative and for been a listen only mode should you need assistance please signal a conflict specialists by pressing star than zero after today's presentation there will be an opportunity to ask questions to ask the question you a press star than one on a touchstone phone to withdraw your question please press star than to please note this event is being recorded i would now like to turn the conference over to juliana belief belief go director of strategy and corporate development prove go ahead
spk_1: thank you better be good morning and thank you everyone for joining us to review the financial results of east to bancorp for the first quarter twenty one with me on this conference call are making our chief executive officer chick with were cute of off with their and irene oh or chief financial officer we would like to caution knew that during the course of the call management may make projections are other patrons regarding events or future financial performance of the company within the meaning of the say harbor provisions of the private securities litigation reform act and nineteen ninety five be forward looking statements may differ materially from the actual results due to a number of with closer to feet or more detailed description a risk factors that could affect the companies operating results or to are filing for to securities and exchange commission including our annual reform or on for pancake for the year and the december thirty first twenty funny in addition some of the numbers references on the crowd and trying to adjust the numbers please refer to first quarter earnings release for the creation of gaffe to get financial measures are in the course of this call we will most part of the web go and on an investor relations right of the that reminder they've called being required and be available and replaced by hundred and after relations i will downturn the call the to or three and and feel dominic game
spk_2: thank you juliana good morning
spk_3: thank you everyone for joining us for earnings call or will begin to review of a financial result was like three of our presentation this morning we reporter fourth quarter two thousand twenty one that income or two hundred and five know all one dollar forty four cents per share of which was up by twenty five percent quarter over quarter
spk_4: your fourth quarter with a strong start to the you
spk_3: highlights include stronghold and deposit go robots revenue growth and decreasing operating expenses
spk_2: or driving pre tax free probation growth of or percent or seventeen percent large
spk_5: if into first quarter were two hundred sixty two million or treat her to probation income on the total revenue of four hundred twenty seven million furthermore due to an improved macro economic outlook and stable f equality we did not report any probation for credit losses in the first call we return one point five percent on average at it fifteen point six percent on average equity and seventeen point two percent on average tangible every fourth quarter
spk_3: all tractor returns reflect a strong financial performance in the first quarter of two thousand and twenty one
spk_6: blog for present a summary of our balance
spk_3: as of march thirty first two thousand and twenty one total loss reached a record of thirty nine point six billion growing by one point two billion or thirteen percent and you're left from december thirty first two thousand and twenty paycheck protection program loans total two point one billion as of march thirty first two thousand twenty one during the first quarter the company funded five thousand and seventy five new tpp loans
spk_7: totaling a hundred twenty eight million
spk_3: since the ppp program launched in two thousand and twenty east west bank ponder a total of twelve thousand five hundred seventeen loans totaling two point six billion through march thirty first two dogs and twenty one excluding ppp total loss grew by a person link quarter analyzed and bush quarter
spk_5: at the top about previous guidance range for the year accordingly based on current pipelines and economic trends we are updating our local look for the full year to a present compared with a range of six to eight percent previously first quarter average low of thirty eight point seven billion grew by eleven percent linked quarter analyzed or nine percent and life excluding ppp
spk_4: roethlisberger base a quota or our major long portfolios with the strongest grow from residential mortgage
spk_3: deposit growth for the quarter was exceptional as much march thirty first two thousand and twenty one total deposits reached a record of forty nine point five billion roland in part four point seven billion or forty two percent annualized from december thirty first damn interest bearing departed cool sixty five percent annualized to a record eighteen point nine days as of march thirty first two thousand twenty one making up thirty eight percent of total deposit
spk_5: as of march thirty first up from thirty six percent a portal ago
spk_3: and up from thirty one percent a year ago
spk_6: we are pleased with a deposit grow and related and deposit
spk_8: account feet
spk_5: which or of one seven percent year over year to fifteen point for mayor
spk_3: we have continually invested in our digital ranking platform and treasury management product capabilities allowing us to win large customers with more complex cash management leach at the same time we have developed deposit product tailored to meet the needs of our small business customers
spk_2: a second has been growing nicely for some time now
spk_3: ability to compete for and when both large and small deposit customers late a good foundation for future go as the economy recovers and business activity increases
spk_4: turning to fly five you can see our strong capital ratio
spk_5: as a lot for the first two thousand twenty one we have a common equity tier one ratio of twelve point seven percent and a total capital ratio of fourteen point three percent which provides us with a meaningful capacity to support our customers in the growth and expansion plans as the economy reopened and bad some called it related restrictions east west board of directors has declared second quarter two thousand and twenty one dividends for companies common stock to common stock cash dividend of thirty three thousand is payable on may seventeen two thousand and twenty one two stockholders of record on may third two thousand and twenty one moving on to a discussion about loan portfolio beginning was fly fix
spk_6: he and i loath outstanding excluding ppp were twelve billion as of march good it was to down and twenty one reclining thirty five million or two percent annualized to from december thirty first two thousand and twenty total see and i commitment was seventeen point two billion as a mortuary first two thousand and twenty one a quarter or work on increase
spk_5: of hundred and thirty seven million or three percent and to
spk_3: the decline in outstanding balance reflects pay down in january but on and on average bases he and i loans excluding ppp grew by five percent and allies in the for and the first quarter
spk_6: we're comfortable that are see and i growth who are flow rate through the you based on our year to you you to date growth in commitments
spk_9: current pipeline
spk_5: and the strengthen the economy as you know it takes time for commitments to materialize into travels outstanding bly seven and a show the essential details about commercial good a staple for you
spk_3: total commercial real estate loans were fifteen point one day and as of march thirty first two thousand and twenty one just for photo grew by two hundred and eighty point five million or eight percent annualized from december thirty first two thousand and twenty on an average spaces total see our loews grew by six percent annualized in the first quarter to run rate of growth is stronger than we have originally expected because of higher origination volume
spk_5: about poor traditional yeah you lending customers as well as lowered one just to pay to pay off we expect to see how you pay off to take up in the second quarter before a full year we are comfortable that are total failure you longbow will be supported by continued good demand from our customers
spk_3: at the economy reopens and rebels in flight nine and ten would provide details regarding our single family residence to long's and home equity line
spk_5: during the first quarter religion eight of one point one day in a residential mortgage loans an increase of five percent water over
spk_10: and forty five percent euro
spk_6: this was a record quarter of residential mortgage originations east west and we're seeing the momentum continue into april ah single family residential lungs what eight point five billion and as of march where refers to the other one
spk_11: digital photo by three hundred thirty eight million
spk_5: teen present and light from december thirty first
spk_12: on an average basically
spk_5: single family residential loans grew by sixteen percent annualized in the first quarter home equity line outstanding world one point seven billion as so much the first up one hundred forty seven million or thirty seven percent annualized from december thirty first
spk_3: including unfunded commitment total commitment on the home equity line was three point six paid as of march thirty first
spk_5: up by thirty two percent link quarter annualized do you like station raid remain steady at forty eight percent on an average bases home equity line grew by twenty eight percent and obliged in divorce court
spk_3: i will now trying to call the to i for more detailed discussion
spk_13: con esa quality and income statements i really think your dominant of that with our after calling that tracks on flight eleven or criticized lungs were one point two billion as of march thirty first a three point one percent of total on essentially unchanged from one point two billion as of december thirty first at a point two percent of to
spk_14: alone quarter of a quarter special mention loan decrease to five hundred and four million as of march thirty first down from five hundred sixty five million as of december thirty first classified loans increased to seven hundred thirteen million up from six hundred and fifty three million out the air and nonperforming as of two hundred and
spk_13: that the eight million forty five the point of total assets as of march thirty first compared with two hundred thirty five million forty five bases point of total laughing as of december thirty first you migration into adversely great and loans and the first quarter with limited resulting in stable criticized loans quarter of require oil and gas exposures continue to be the largest single concentration are performing that and the operating backdrop for detectors and improving out that of oil and gas we do not feel systemic issues in our loan portfolio furthermore at six hundred and eight million as of march thirty first two thousand twenty one we believe that are allow for loan losses as the fisher and to absorb losses and on loan portfolio of wallet incremental reserve belt needed for new longer growth we do not expect record any provision for low martyrs for the remainder of the year on flying twelve we present the component of our lounge for loma
spk_14: our allowance for low monsters total totaled six hundred and eight million as of march thirty first or one sixty two of loan help for investment excluding ppp compared with six hundred and twenty million a one sixty eight as of december thirty first and compared with four hundred and eighty three million or one thirty nine on day one posts she's all that a quarter of a quarter reduction and alone largely reflect and improved macro economic okay that charge off in the first quarter were thirteen million compared with nineteen million in the fourth quarter the first quarter net charge off ratio was fourteen basis point of average loan and you're like an improvement and six basis points from the fourth quarter twenty twenty this improvement primarily reflects a decrease in commercial real estate charges during the first quarter we recorded no provision for a loan losses compared to twenty four million and a fourth quarter and now moving to a discussion of our income statement on flight thirteen this flight summarizes the key line item to the income statement which i will discuss the more detail in the following flight first quarter of tactics spent with thirty point five million and effective tax rate with thirteen percent compared with forty nine million and twenty three percent for the fourth quarter
spk_13: fourth quarter income tax band and effective tax rate or plug the benefit of a higher amount of cathcart enough money and greed item compared with the prior quarter also fourth quarter income tactics been included eight million related to defeat sold or tax credit development on our view the key drivers are more net interest income and editors margin on flight fourteen to seventeen starting with average balance you growth first quarter average loaned of thirty eight point seven billion grew by one billion or eleven percent men quarter and your life the growth rate accelerated from the fourth quarter and was brought back across the major loan kind of wife the strongest growth from other than to mortgage first quarter average deposit the forty seven point eight billion grew by three point four billion for thirty one percent lynn quarter vandalized all the papa category through that by growth and non interest bearing demand deposits at a rate of forty four percent annualized with a strong deposit girl or average loan to deposit ratio and eighty one percent in the first quarter down from eighty five percent in the fourth quarter during the first quarter we deployed some cash and death acuity available for sale and also repo
spk_14: latham on a quarterly average basis security ever increased by one point four billion and repo out that increased by two hundred and four million during the second quarter of twenty twenty one one hundred million of our at they can be funding carrying effect of interest rate of to twenty five
spk_15: i will mature which we expect to pay off
spk_13: turning to flight fifteen first quarter twenty twenty one that interest income of three hundred and four three hundred fifty four million grew by a percent link quarter and your life
spk_16: and the net interest margin with to seventy one a decrease of six basis points from the prior quarter excluding income related to ppp loans are first quarter adjusted net interest income of three hundred thirty nine million grew by seven percent link quarter and your life net interest income related to ppp loan with fifteen million in the first quarter compared with forty million in the fourth quarter as of march thirty first we had thirty four million of ppp loan to bird the to agreed into income
spk_13: the six basis points quarter of a quarter decrease in the first quarter gap name break down as follows
spk_14: plus five basis points from a lower cost of interest bearing deposit plus to basis points for more dd a and the funding next off that by minded seven basis points from lower low neil a monthly basis points from up that liquidity due to the strong autograph
spk_16: turning the flight sixty fourth quarter average lonely of what read that the eight and it could impact of ppp be adjusted low yield was three sixty down by nine basis points quarter of porter from three sixty nine reflecting the impact of low interest rate polio
spk_13: turning to flight seventeen a caught of the part of continue to climb and maturing higher price the beach reprice to current market rate are average cost of the deposits for the first quarter drop to eighteen basis points down from twenty five bases point in the fourth quarter that spot rate of put a deposit as of march thirty first
spk_14: twenty twenty one with sixteen basis plank or first quarter average cost of interest bearing deposit dropped to thirty basis points down from forty basis points in the fourth quarter the spot rate of interest bearing deposit as of march thirty first with twenty six faces point the quarter of a quarter improvement what primarily double by the repression of city as well as by a decrease in the cost of money market account the average cost of cds in the first quarter with the bases want a meaningful drop of twenty four bases point from seventy four bases point in the fourth quarter and the fourth quarter we originated or renewed five point four billion of domestic us cds and a blended rate of twenty days this point and a weighted average term of one month
spk_17: we have
spk_14: nine hundred sixty four million of foodies maturing in the second quarter and a blended rate of sixty two bases one and another eight hundred and seventeen million in the third quarter of a blended rate of sixty one basis point moving on to be and come on flight a pin total non interest income and the first quarter what seventy three million up
spk_13: i'm seventy million in the fourth quarter first quarter fee income and that game on field of loans were fifty five million going by fourteen percent analyzed from the fourth quarter hire foreign exchange income wealth management and deposit account be reflected growth and customer driven transaction for the didn't fly
spk_16: be income growth momentum it's continuing into the second quarter and reproductive business plan to show strength for the full year
spk_14: the quarter over quarter increase in interest rate contracts and other derivative income reflected a favorable page and the quite evaluation adjustment due to the increase in benchmark long term interest rates and an approved macro economic outlook the decline in interest rate contracts revenue reflect the lower customer trans
spk_18: action volume and demand and the current environment
spk_14: moving on to fly nineteen fourth quarter noninterest expand to other one hundred and ninety one million excluding amortization of tax credits and other investment and quarter pocket and tangible amortization adjust the non interest expand would hundred and sixty five million in the first quarter of a decrease of point six million quarter of a quarter or adoptions and overall operating expenses more than offset increase competition and employee benefit expand which is typically higher in the first quarter due to payroll taxes another pillow related expenses the year adjusted non intrusive spam increased by three percent the fourth quarter adjusted efficiency ratio with thirty eight point seven percent compared with thirty nine point eight percent in the fourth quarter over the past five quarters or efficiently ratio has ranged from thirty point four percent to forty point eight percent despite operating had one from the colbert pandemic related economic slowdown and
spk_13: near zero interest rate and what that on our view or updated for your outlook for twenty twenty one on flight twenty
spk_19: for the for your of twenty twenty one compared to our for your twenty twenty result we expect that year over year long road excluding ppp will be approximately eight percent nehring to the upper end of our prior range of sixty percent year over year adjusted that and
spk_14: tourist income growth excluding ppp would be genuinely in line with low growth on a full year basis in the current interest rate environment we are focused on net interest income growth which will be primarily driven by logo for a bank underpinning or interest income assumption is the current ford interest rate per
spk_16: adjusted not interest expense growth exploding tap court and buff and amortization of five percent year over year their own to the upper end of up higher range of three to five percent
spk_14: this change parallel to the update of our logo about luck and largely reflects wrote and compensation from and hire a computer software embolization expense of we amortize previously capitalized technology and buff month compensation expand over flubbed low production and rubble
spk_20: new growth for the year
spk_14: updated outlook for revenue expand translate to hire protect pre provision income growth for twenty twenty one compared to up higher expectations
spk_16: i would add that we also expect to see able to modestly improving operating leverage for the year compared to twenty twenty
spk_13: based on our macro economic forecasts and logo about love we do not expect a book provision for little credit losses for the full year finally for your twenty twenty one effective tax rate of approximately fifteen percent including the impact of tax credit investment on change from my pyro luck
spk_14: there will be quarterly variability in the tax rate do the timing of tax credit enough month and service
spk_13: what's that on that from the call back to dominic proposing remarks
spk_21: thank you i agree
spk_3: in closing we had a very good start to the year with a tractor broken profitability and look forward to delivering strong financial results for shareholders in two thousand and twenty one i would now open up to call to questions operator
spk_0: we will now begin with question answer session to ask a question you impress star than one on your touch tone phone if you're using a speaker phone please pick up your handset before pressing the keith if at any time your question have been addressed and you would like to withdraw your question please press star than two in the interest of pie i'm limit yourself to one question and one follow up at this time we'll pogba i'm apparently to assemble our after first question comes from abraham punto wallet from bank of america
spk_22: please go ahead
spk_23: good morning
spk_24: the morning i guess my first question is you should own dough and i'm trying to figure out the potential for upside to your loan growth outlook don't make if you could help of just across the three major buckets one on the residential mortgage side is there any reason to believe that momentum floors on c and i what what are the industries that you think will drive loan growth and they don't feel read a song
spk_25: lot more constructive than you did in the last few to six months so if they're the reopening what to what you're hearing from clients makes you feel better about feel reactivity for the year
spk_3: okay
spk_26: three yeah the three bucket assault residential mortgages
spk_3: the homework with are in fact our reno i've been predicting it to slow down for the last for five years and i hadn't for feet are we've been having a very small momentum in the residential mortgages and home equity line business up for our tree
spk_26: quite a few years now acted as it almost we getting tired of record every quarter after quarter of i think that obviously you know these low interest rate help but for what we've seen so far i'm in our momentum
spk_3: because computer goes wrong and i
spk_2: you'll get even have so far in april you old is keep going and a dictator right now i don't be
spk_27: the of residential mortgage to combat much simply because we are getting good momentum both from refinance from law in purchases and our home equity line picking up really wrong so a two stage right now i think that should be looking put it good to continue on foot
spk_26: on the a nice i know i think the
spk_5: good to great news video that we're getting new customers are we continue to getting rudi hi paula deen new customers at the end of the ppp
spk_3: back in april of two thousand and twenty we were successfully getting some very high quality customers because of a bit more chaotic situation and mouse some of the other banks and eleven hours to able to demonstrate that also this level
spk_10: in a better so from that them porn what we also look at how and to himself out see a nice guy
spk_2: it's to grow from many different articles many different geographical boundaries so pretty
spk_6: this evenly distribute and the commitments computer to grope so of course in the first quarter you know we haven't got that pick up much from the and and balanced and point of view simply because we always have a first quarter of that's the nature about the and i dismiss so we do expect
spk_26: that up in the particular as we highlighted you know as i read guidance in the in a third and fourth quarter would be most like be seeing more pick up ah
spk_3: bomb not only just because of economy would open up more is because the nature of the business either tend to up
spk_6: have more drawdown in the third and fourth quarter so that's been going on a c r u side you know i pray or highlighted it can become my up
spk_28: sort like presentation or to you is that them he anticipated pay off for fourth quarter
spk_2: it didn't happen
spk_6: as high as we expected we do expect maybe it will be happening in the second quarter but already know i would say that we are seeing good momentum from our tradition know court customers in this yeah you'd have sector
spk_26: well many of our customers now are getting more positive and in fact our date the opportunity
spk_6: and in fact a store even in the late third and fourth quarter of last year and they continue to look for investment opportunity and does allow was
spk_29: the
spk_6: opportunity to actually be some decent role in our theory sofa
spk_30: so we
spk_31: watching for progress and it as of today i will say that we're comfortable
spk_24: you're comfortable with that guidance that we lay low so far
spk_26: but it had full color and just
spk_24: as a quick follow up and don't have to deposit growth was raised on this quarter a directive a breakdown of what homage of the good came from the us was in hong kong and greater china
spk_6: and the i always got it may i make us as you know our hong kong and china is just a very small part of our our deposit total sold most of the deposit coming from united states
spk_26: do see that as continue
spk_6: yeah well i looked at it well when you look at these forty so my posts and analyze growth rate or or sixty five percent you know like annualized growth or de da you know those are kind of things that we within a half a lot to do with the current economic environment
spk_3: i put what what i would want to share his dad i don't necessarily get paid too much attention to to do so subtle like big deposit grow up quoted by quarter which has been happening for the last couple of quarters but i would say that i'm much more interested to look at our
spk_5: do we have high quality customers
spk_10: the coming into the bank to we have these new route to we have high growth in the new customers
spk_32: that originated fire branches by our commercial lending officer and that commercial bankers throughout us and china and so far that's been happening
spk_26: fact our treasury management
spk_33: cash management products team
spk_26: how working day and night overtime
spk_6: opening an account setting up you know
spk_26: all these are online banking and and digital banking
spk_6: requirement for our customers because we are getting more than a new customers and that to me is
spk_3: very encouraging and we're hoping that up that
spk_26: continued growth will sustain and that will allow us to rudy have a much more meaningful cool customer base going forward and this is above and beyond just the our current environment because many banks also have ah
spk_3: hi deposited balance growth for the last quarter that but i guess what i'm really focusing on
spk_6: how many new customer we have and what kind of customers all day or these customer cool to have a sustainability go in and those the one i'm paying attention and i feel pretty good right now
spk_34: that we will continue to seek road from the set of new customers and together would existing customers who are expanding their relationship with us because our core capability from product and technology wise are getting better
spk_0: which allows to be able to take on more complex
spk_35: deposit setup
spk_36: our next question comes from can therapy with mountain family please go ahead
spk_35: i agree thanks to morning the money can i can first prototype pretty easy one
spk_37: in terms of the provision expense guy in a swamp make sure i understand it correctly so you're not going to book a provision expense for the full year
spk_14: are you saying that it is generally going to be zero breach of the next quarter shirt or could potentially be yeah bb fleet negative if you do end up releasing a significant amount of research
spk_38: and that's a great crushed and i don't have a crystal ball on a flame bought and i owe with our guide and of the zero it's as we kind of project out a we model out right now the likelihood of having to add net provision you know is very low at this point in time and that's really why
spk_35: drove the change that we made to our guide and the men map that what might happen each quarter certainly that could bury and the oh certainly it is possible that will have a negative provision but nonetheless i i'm very comfortable at this point in time with the zero president vision for the for for year
spk_13: gotta okay perfect and they just a quick follow up the terms of the ppp amortization with thirty four million remaining pleaded fifty million this quarter's seems that it could potentially fall pretty noticeably on a go for basis he should remind us what your amortization schedule is
spk_14: of that thirty four is a story line over five years or is it more heavily weighted towards the front end
spk_39: yeah it's more heavily weighted toward that pot and and i'll also add you know we've had a fair amount of up a down as well if we look at that in the
spk_14: in the first quarter there was a period of time or we stopped
spk_0: doing
spk_40: the ppp loan forgiveness the lower back up on that in fact actually last week we started opening our portal or ppp forgiveness for ppp around to and twelve
spk_41: our next question comes from michael young with true security please go ahead
spk_40: hey thanks for the question
spk_42: the mourning mourning
spk_40: i'm just wanted to start with the in guide and made sure i understand for the increase in the loan grow to eight percent would have a commensurate increase in the in a i go to a percent growth of a beef number from last year you know i don't know certainly if that's gonna exactly correlate but it will definitely be on line michael
spk_43: okay and then my follow up is just sort of on the additional liquidity bill that that keep coming with a strong deposit growth
spk_13: you know the you have any updated thought without the pulling not given kind of were rates of move to today and or any additional analysis of you know sort of the stick enough of those deposits going forward
spk_14: yeah great question certainly in the first quarter with kind of the right movement and our comfort level as far as the deposit the growth that we've had to growth that we expect in the pipeline know that was some under decision and factors that we considered as we we deployed some of that cash that we have been building into securities and repost and keep in mind obviously also the part of that consideration was the as the sensitivity of our balance sheet and also keeping in mind with the security that we did purchase and that we both know we did extend to ration but being cognizant of the fact that we didn't want to spend too much so that we both live or plus one thirty kind of prey
spk_20: i think and then the security as well largely what we've been buying or treasury's know people gfp kind of that bad things like that well we're comfortable our own owning a little bit more money cash to date on the cash today but not extended duration too much and this kind of environment on a go for a says you know about
spk_0: are you waiting kind of our liquidity the departed girl that's certainly something that will continue to look at and evaluate
spk_44: over the course of the or
spk_45: our next question comes from brock van what from new bf please go ahead
spk_46: morning actually question
spk_45: it if you could just kind of review and of that puts it takes on the
spk_46: interesting interesting come to the fx derivatives service charges a we've been expecting those kind of come in
spk_14: we have fairly mature currently offer very strong to for and they actually headed higher know what what should we be looking for and isn't the balance of the year the next whore yeah so if you know i think if you look at the accompanying get that we haven't paid a fee i think we do a nice job at breaking out that he and come from a customer transaction perspective and reckoned coming back to the gap though if you look at each line aid and comfort born fx income we have seen a lot more kind of transaction volume and number of choir so
spk_47: in the prepared remarks we talked about at how that we expect that that to continue you know them man can particular on a year over year basis so far and second quarter know we're we're doing pretty well as well
spk_13: on the wealth management side same thing new have buried point in twenty twenty with the pandemic you know there wasn't a lot of customer activity we saw more interest we've also kind of expanded and have some great kind of product offerings for our customers that they like and that it certainly helped as well i would say of
spk_14: so on with the
spk_19: strong departed grilled know that dominic's spoke about and we talked about in the prepared remarks in the gts
spk_48: related deposit account be continued to grow we expect that to continue to grow over the course of the year most wow so really you know at the i or see contract the customer revenue related revenue given that kind of the right environment that probably the category where don't see that kind of level of world for the four year but other areas
spk_2: you know we're very positive of year over year
spk_26: yeah so i just want to add again it's like it broody ill when you were you look at non interest income foreign exchange and now
spk_33: robo treasury services you know cash management and the consumer branch the
spk_26: these are the type of and wealth management
spk_10: these are all you know
spk_26: customer related type of fee income and that's what i'm talking about odious that we are getting new customers
spk_49: and we're getting new customers
spk_26: well obviously because of the you know group dedicated service from our you know associate know throughout
spk_6: the us and china
spk_50: more importantly we because of the investment aid from our digital banking to ethics to
spk_26: a cash management etc these investment the we made allow us to now have the capability to take on some of those in addition know how total like product capability to the we have now to allow us to earn teeth additional fee on and have we not have some of these technology to a technological advancement built we wouldn't be able to
spk_15: generate he sees even though we might have these customers before that some of these customer and not able to transact everything with these was before because we did not have the technical capability
spk_45: that the last few years slowly gradually with building up that capability and putting them down now in our non interest income and i would expect that will continue to grow and that's why it's important was to also continue to invest
spk_51: though add you to last year including largely and lending phase we had worn income of about eleven million which we don't expect a car so aside from that you know we do expect good growth of the income
spk_0: go back to the car quarter
spk_52: thank you welcome thank you
spk_53: for next question comes from dave rochester from compass point
spk_52: please go ahead a good morning guys most growth is quarter
spk_42: they think day
spk_37: was i was wondering if you could talk about where new low yields are today across your major long buckets well as new security shields discriminate steeper curve and then would be good to hear where the the overall average yield was on the securities purchases and once you that home one minute let me get that for you my computer are locked up the like gotta give give me one minute
spk_42: prob
spk_16: adi and you know and excitement of my computer locking up i didn't hear the last part of your question third would you mind repeating that
spk_52: oh sure just got where the security purchases were this quarter in terms of used to be our done that i don't need to look up the security that we purchased i generally are about one fifty one sixty so lower than kind of the yield that we had before but as i said earlier we wanted to just make sure from a duration perspective know we were comfortable
spk_37: and then give me one minute here if you look at kind of the lonely yelled
spk_52: current my a new quarter alone yelled general a party and i am alone about kind of four percent public including fee for commercial real estate where are probably prime flat and and consumer loans and total were about to somebody bought right and then for read the that that gone with the for
spk_54: the three seventy five was combined on let me clarify for he lock and up and go family
spk_37: gotcha okay so so the as the reggie pieces now i guess maybe a little to blow for
spk_52: that the right
spk_55: that all combines okay great
spk_3: the perspective and were paid
spk_56: yeah the blooded perspective when they arm up or followed as well
spk_26: okay great and then you guys have plenty of capital the day you still have that buyback outstanding was just wondering what a prompt you to take a closer look at that buyback it's we go to the year if you have any specific capital targets you're looking at cynical or they would be great thanks
spk_2: we
spk_5: having put he didn't go so far and so i mean that's whole idea about having yeah the a little bit more capital of their now appears is did well during the pandemic you know particular the beginning the pandemic you know when everybody panic we didn't have to panic it's much because were kind of capital so now i think when the economy start rebound know we have very nice clothes as you can be our you
spk_30: no huge the know deposit and even longbow is pretty strong and so we really looked at is that it's nice to have that kind of capital of that in case out okay even stronger
spk_32: we got planet cap capital to support that so at this stage right now i think that we we can stay put and and see how goes it it could be mine don't know even with well capita today
spk_5: i should share that we have a
spk_57: the return of equity and out to take tangible equity of seventeen point two percent
spk_0: which is not bad
spk_58: and that's the way i we we see that when we can pool in this kind of like a return
spk_59: we we we we don't need to spend too much time in terms of the
spk_60: managing the capital too tight
spk_58: our next question comes from ilan thing for chat with jeffries please go ahead
spk_59: thanks to the morning
spk_37: it just want to add a touch on credit was a little bit surprised to see
spk_61: the oil and gas
spk_47: if you actually go up despite a better backdrop for a little bit of migration
spk_61: maybe talk to the outlook in that book in the reserve for that kind of going forward for this year
spk_14: that great question though the reserve calculation good increase in the law that part of it is correlated to you know a little that that adverse migration into
spk_61: substandard and then altered specific reserve that we had for some of the non accrual alone
spk_14: so if you look at three thirty one
spk_60: total reserve that we had for the oil and gas portfolio whether one hundred and thirteen
spk_59: million out the for the outstanding loan compared to one hundred and eleven million as of december thirty first overall you know i would say that we're continuing to work through the portfolio
spk_26: general laid out look at more positive but certainly if we wanna be prudent and kind of conservative with our preserving their okay
spk_10: and i
spk_26: i think you touched on on on the kind of fame earlier but just are carried maybe get a poll fun on the outlook for cross border activity
spk_11: maybe you know for the second half of this year
spk_26: yes close quarter activities going pretty well in fact up again is getting back to it's a combination of people and technology again
spk_2: what we've noticed is that despite the fact that we have that i share earlier that most of deposit groves coming from us and and a long road mainly from us interesting enough of up quite a few of those deposit have that cross border elements into it
spk_3: and quite a bit of even that long have a bit of cross border elements into it is because of we actually have many of our customers that are doing business in us but that have you know to eat a ownership prob china or hong kong and
spk_62: so we are doing a lot more business
spk_26: in terms of a customer that we quiet may be us providing a loans and commercial deposit set up and us in addition to that they have business
spk_10: in china and hong kong that also set up additional
spk_26: commercial banking relationship was and also a have either guarantee support of letter of credit to show up dirt though critics writing for us added these kind of like up
spk_3: passport or type of
spk_5: transaction that east west
spk_48: it's very proud to have the ability to be able to handle it you know and twenty four seven and different time zones
spk_2: and we also have the compliance repertory expertise can understand
spk_26: that the rules and regulations in different regions and so we are going to continue to be able to get these type of business
spk_63: that in general from an east west point of view that we do not have that kind of competition
spk_64: the against appear banks and us and more importantly we would end up
spk_65: under writing credit to have substantially less
spk_66: actual risk was perceived risk from other banks who don't know anything about this cross border kind of business so enough employed will continue to expect that we will do well going forward
spk_26: in our sort of like bridge between east and west type of value proposition and we we we we would looking at it and then the next two years though we more opportunity to come for us next question comes from jared shot with wells fargo please go ahead
spk_5: i could morning
spk_26: and morning herald
spk_5: looking at at credit and losses with the fifteen be sources quarter think that we've turned a corner on
spk_2: on last content and she would be looking at this it's or of the the high watermark for expectations given the the broader economic backdrop or could we see more episodic losses as we get through the year
spk_5: i think that from our perspective what we're most comfortable with is really looking at the
spk_0: we are entitled to overall bad though you know what we see that of you know our criticize loans spin stable
spk_67: and we also continue to review our loan portfolio one factor at a time you know we've recently just have another theology law review and then we look at these different industry go to call them see and i and so forth and based on our review would you put a half
spk_68: done that out long before the overall have up
spk_69: have you know in terms of credit quality as been very good and and in terms of any kind of major concern that would get even worse at the state right now i would say it is not very likely there's always gonna be okay no one or two loans that that we enter the charging all but in terms of overall do we have enough reserve for our own sort of like don't to folio i would say that with delegate confident that we are plenty of up
spk_14: reserve and allowances to cover any potential bosses in the future
spk_54: thanks
spk_47: our next question comes from chris mcgrady with kbw
spk_69: please ahead
spk_70: there are a great white
spk_71: ernie crap
spk_0: eg morning a to an armed for quick how keeping the i'm on a tax tax rate in the i'm in the amex and
spk_72: any color on that occasion for the rest the or hundred million with kind of the thought on the expand per person yeah you know and it certainly and and we've talked about this before depending on the timing of the enough know that can be a little bounce around but at that point in time
spk_73: and with the
spk_42: tax rate the effective tax rate that we're assuming it also includes one hundred and thirty million for the full year of credit and one hundred and fifteen million come amortization push back to perform year
spk_16: so one one fifties will it up from here
spk_42: good better
spk_72: you're welcome the next question comes from matthew clerk with piper family please go ahead hague money for question just on the core and i guy that look like in order to get to that eight percent you need assets to grow faster than loans are not just wondering if a phenomenon could put some additional pressure on their core name or do you think going from cash into securities can help mitigate or just too get a sense for wouldn't that we trust in the corn him
spk_37: i think that the great question on we we do think that the and i grow will correlate where the known go out and then as you pointed out where the kind of redeployment of some of that excess cash into securities that will help from and
spk_14: and i i perspective and also and yeah
spk_73: also point out that you know our continued kind of repricing on a funding side the pov that the flab also helps as well
spk_74: at this point in time although it hard to predict exactly where that im gonna fall out based on largely at this point you know the deposit the nexus liquidity and i will comfortable that you know our margin will stabilize you know and could kind of the than modestly increase
spk_0: okay and and laughlin for me just on the on floods sixteen of the deck
spk_75: your see i average loan yielded three thirty six this quarter x p p p just
spk_52: given your your growth prospects like is how can you
spk_76: because help you get how do you feel comfortable i guess pricing at a level how do you ensure that you get paid for the risk you're taking the guess it's because
spk_52: yeah you know i think what a rate being so loud that bap bap a question that we have every day every day we talk about it when our our our and our team leaders and the credit team and the treasurer i think that not just the ini local theory as well for out as you know single family and he logged kind of holiday
spk_77: so extraordinary and i'm not concerned there and them from a product offering perspective
spk_26: also we have a unique product so for see and i in theory in all honestly i think that also were being very careful to make sure problem overall were turn perspective from kind of a kind of quality perspective you know we are careful what that and with that reflected in kind of the growth numbers as well that
spk_78: we're expecting
spk_10: the next question comes from gary penner with the a davidson go ahead
spk_26: good morning
spk_79: in had have more questions and orange first in terms of machinery growth
spk_80: and just kind of the general taken temperature of of their customer base
spk_77: you can come in on kind of what degree growth is come from the shitty verticals and give any those specially burgos the are getting particularly more active
spk_81: well
spk_3: we've been fortunate i mean i think fun
spk_2: i would say the allowed model third quarter of last year
spk_26: we're really seeing a you know positive momentum from just pretty much every single go to call every so every month there's another there's another team data come out stronger than the other one you know as a nice little internal competition which is good a healthy are buried by look at in the fourth quarter from unknown outstanding point of view
spk_59: the i would say that the a few that stand out for the first quarter awful a see a nylon outstanding long growth will be and mainly and the and healthcare
spk_76: technology
spk_82: and a little bit of the cross border business so now but in terms of commitment
spk_76: so some up some some of them done well in terms of book and commitment they just couldn't get anything funded for example up
spk_83: private equity
spk_14: capital call on you know they get some nice come in and they just haven't been able to get along pundit you know but in time
spk_73: you would think that you know some of these private equity fund they raise money to invest so in time you would think that they would start investing so i would expect that you know different quarter will be a different makes you know at this stage know i'm pretty comfortable that are you from
spk_16: sectors all going to be doing quite well
spk_63: in other than in the i guess that we are you know decided to really just in those slowed down and and our country and you you know how to balance to come down to left in the day and and that's what we've been working on has been working so hard
spk_0: got it thank you and then it can be of the provision they can follow question their if you assumed a percent growth gets ppp and canada and europe or asia and of course they redid the teams getting pretty close to the day when she's or allowance
spk_84: you know potter manish know when thirty eight one forty the that
spk_3: had the been a changes that could you maybe joke longer term drive that alone below the she should day one or in that trying to glide path to more the base level
spk_85: yeah you know my mouth works out the same as yours
spk_73: certainly i think they're depending on kind of what happened largely to the forecast i think it could drive lower you know if we look at it as a three thirty one vs day one cease all
spk_14: near term there are driver such as unemployment that are certainly higher today but when we look at the forecast over multi years it's about our gdp gdp growth of you know it's also something over the next couple years look to be better so there are other drivers i think
spk_85: that is especially if they improve our could drive out lower but certainly that something more looking at very carefully as a reminder if you have a question please press star than one to be joined into the que
spk_26: our next question comes from david cheer verney with wedbush securities please go ahead
spk_5: i think my first question is kind of a combo question between expenses and and loan so expenses were down in the quarter but the guide was raised the upper end of the range to five percent from three to five percent and you mention that it's driven by crew in compensation related to loan production and computer software exp
spk_86: when i get the question is are are you hiring on the loan team side of things or is the growth that you're expecting more a function of increased commitment and pipelines from the existing teams
spk_84: really we do our we have higher you know additional people i wouldn't say that we have made significant the hiring you know i think that i would say the vast majority of oak growth coming from i accept the existing t
spk_37: not bad you know and part of that commentary is really the point that you know if we look at add payroll it up also when we look at kind of that revenue from and expectations for girls under lending side of the income side we are also increasing our bonus pool
spk_13: or
spk_2: that we've set aside given that our expectations their revenue and an income will be up and considerably a year over year and if you look at it i mean the year over year increase from the first quarter this corner to last year about three percent so hopefully that gives you some perspective around that
spk_0: and the other thing until last year not as years not at what i call normal you had lashes been relatively normal why would think that the incremental increase would not be
spk_5: as much at all
spk_87: simply because last year that we have you know
spk_0: you know reduce expenses

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