East West Bancorp, Inc.

Q2 2021 Earnings Conference Call


spk_0: the day and welcome to the east west bank corp second quarter two thousand and twenty one financial results conference call all participants will be an election only mode should you need assistance please ignore conference special it's by prepping the starkey followed by zero after today's presentation the will be an opportunity to ask questions to ask a question you may press or than one or your touch too own phone and to withdraw your question please press door than to we ask that you please limit yourself to two questions please note the event is being recorded i would now like to turn the conference overcome is julianne obelisk a director of investor relations please go ahead ma'am
spk_1: thank you can good morning and thank you everyone for joining us to review the financial results of effect bancorp for the second quarter of two two thousand and twenty one with me and of conference call today aren't dominic in our chairman and chief executive officer and irene oh our chief financial officer and like to caution you that during the course of the car management may make projection of or 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 may differ materially from the actual results due to a number of risks uncertainties permit more detailed descriptions of the risk factors that could affect the companies operating results please refer to her filings that the securities exchange commission including our annual report on for ten k clear ended december thirty first twenty twenty in addition some of the numbers reference on this call pertain to adjust the numbers please refer to our first quarter earnings release for the reconciliation of gap to non get financial measures when the call will be referencing apply deck that if available as part of the web on the investor relations by and kinder to date cause being recorded and will also be available in replay format on investor relations website i will now turn to call over to dominic
spk_2: thankyou juliana good morning
spk_3: and thank you everyone for joining us for earnings call
spk_4: i will begin to review of our financial results with flight
spk_5: intuition
spk_2: this morning we reported second quarter two thousand and twenty one that income of two hundred twenty five million or a dollar fifty seven and pusher this was an increase of ten percent from two hundred and five million in the first quarter
spk_6: highlights of a strong performance include robust long and deposit growth
spk_7: expanding profitability
spk_8: and improving as that quality
spk_9: perhaps are muted
spk_10: hello
spk_8: in the second quarter we earn a two hundred eighty three million in pre tax provision income on total revenue of four hundred forty five million
spk_3: i'll protect people vision income grew by a present link quarter or thirty three percent analyzed and we expected to continue to grow in the second half of the you
spk_4: quarter over quarter or pre tax preparation profitability expanded by six places point two two percent of average as it reflecting east was attractive quarter earnings power
spk_8: as the quality has remained healthy with improvements in every metric because of those
spk_3: and a more constructive macro economic forecast
spk_11: we recorded a negative fifteen million dollars provision for credit losses in the second compared with a zero position in divorce court
spk_3: in some we return and attractive one point five six percent on average effort sixteen point six percent on average equity and eighteen point three percent on average tangible equity for the second quarter of two thousand and twenty one fly for present a summary of our balance sheet as of june thirty two thousand and twenty one total arm's reach a record of forty point one billion including one point four billion of pitcher protection program loans
spk_12: excluding ppp
spk_3: total long grew by twelve percent analyzed from watch for the first two thousand and twenty one
spk_8: second quarter production was distributed across residential mortgage the and i and commercial real estate
spk_4: you to date for the first half of two thousand and twenty one
spk_12: loans excluding ppp
spk_13: can present and
spk_3: based on the current pipeline and expectations we increase out who your outlook for long road to a range of nine to ten percent of from a present student
spk_8: as you can see on the slide our portfolio is somewhat the collaborated between the three major long tight
spk_3: this to friends she's is worse for many other regional banks we also benefit from a geographic footprint with locations in dynamic metropolitan areas
spk_4: we believe that does diversification
spk_3: it's a strength to provide multiple engine of growth and reduces credit concentration roof we are positive about a trajectory of long growth across a business lines are retail branch network is an excellent source of new consumer and commercial banking relationships
spk_6: we continue to see a high origination volume because single family mortgages and home equity line of credit which we primary originate through our branches
spk_8: furthermore through our retail branches we are also growing small business the an island and smaller size multifamily and commercial real estate mortgages a commercial lending teams including our specialty lending verticals serve our middle market and corporate the and i and see our customers the teams are expanding existing customer relationship and gaining new mawkish you're driving solid balance sheet growth
spk_3: and the second quarter deposit growth continue to be very strong as of june thirty two thousand and twenty one total deposits reach a record of fifty two point six billion up to three billion or twenty five percent and arise from watch for the first non interest bearing deposit grew two point nine billion or sixty one percent analyze to a record twenty one point eight the u s of quarter when making up forty one percent of total deposits up from thirty eight percent according to go and up from thirty ports thirty four percent a year ago
spk_6: not too long i'll deposit grove was also well diversified a quarter of a consumer small business
spk_3: and cross borders customers seconds reflecting our ability to win new account and expand lot of share of existing ones over the last several years we invested in cash management products and risk management solutions
spk_8: that allow us to better serve larger more complex businesses we also invested in consumer and commercial digital banking platforms with cross border capabilities we are pleased with the deposit generation
spk_3: and the related increase in deposit account fees which were up sixty percent year over year to seventeen point three million
spk_8: turning to fly five you can see how strong capital ratio as of june thirty two dogs one with a common equity tier one ratio of twelve percent and a total capital ratio of fourteen point three percent which provides us with mean full capacity for future group he's worth board of directors have declared third quarter two thousand and twenty one dividends for companies common stock come on stop cash dividend of thirty three cents payable on august sixteen
spk_3: two two thousand and twenty one two stockholders of record on august second two thousand and twenty one moving on to a discussion of a loan portfolio beginning was fly six the and i longed outstanding excluding ppp were twelve point four billion as of june thirty two thousand and twenty one and an increase of twenty percent analyzed to march thirty first
spk_8: total see and i commitments was seventeen point seven billion as of june thirty a sequential increase of ten percent annualized on an average bases the an idol excluding ppp grew by six percent analyzed and a second call
spk_14: growth was well diversified by industry
spk_3: and reflected great performance across our footprint and team
spk_8: i would highlight general she and i production in california
spk_3: as well as contribution from or china and new york based t
spk_8: by industry i would highlight and the table
spk_15: clean energy and general manufacturing and wholesale
spk_4: bly seven and eight showed essential details about commercial good of people for you
spk_8: total commercial will say long's with fifteen point four billion as of june thirty two thousand and twenty one up by a present analyzed
spk_3: from march thirty first
spk_8: from the past several quarters origination volume especially from smaller size yeah you climb have been consistent we also benefit from our geographic footprint outside of california in the second quarter taxes poster old raphael you growth
spk_6: and fly nine and ten we provide details
spk_8: regarding our residential mortgage point
spk_16: during the second
spk_3: the originate one point two billion of residential mortgage loans an increase of five percent sequentially
spk_8: this was a record quarter aggressive than your mortgage origination for you sweat
spk_11: and although we expected to float aftermarket changes
spk_8: good momentum is continuing into the second half of the you residential mortgage loans would ten point seven billion as of june thirty two thousand and twenty one growing by a pin present analyzed for march for the first
spk_3: i will now trying to call over to i mean for more detailed discussion
spk_15: f equality
spk_17: and income statement i read
spk_18: thank you dominic of that what alpha calling that tracks on flight eleven overall were very pleased that all of our key alpha called the natural improved corner of a corner total criticized loans were down by fifty percent to one billion as of june thirtieth twenty twenty one or two point six percent of total love with an improvement across all significant loan portfolio nonperforming assets were down by thirty percent to two hundred twenty six million or thirty a be disappointed total assets at the june thirtieth the broad based improvement in alpha quality concluded our oil and gas portfolio a better operate meant for the sector drove double upgrade this along with workout pay off and pay down produce oil and gas criticized load twenty six percent and nonaccrual loan to seventy percent of the portfolio a quarter only we really thirty four million of low last reserve allowance coverage of oil and gas loan was nine point eight percent as of june thirtieth compared with eleven point six percent as of march thirty first on flight while we present the proponents of our lounge below massive are allow a total of five hundred eighty six million as of june thirtieth and one point five two percent of loans excluding ppp compared with six hundred and eight million or one to can kill as of march thirty first and compared with one thirty nine on day one post season now charge of to that thirteen point three million in the second quarter from thirteen point four million in the first quarter the second quarter net charge operation with thirteen basis point of average alone analyzed an improvement on one basis point from fourteen basis point to analyze in the first quarter during the second quarter we recorded a negative fifteen million provision for credit losses compared with zero provision in the first quarter currently we do not expect to record a provision for credit losses and the second half of the care and now moving onto a discussion of our income statement on flight thirteen the slide summarizes the key line items of the income statement which i'll discuss in more detail on the phone flied i'd like a flag a couple of noncash item to non interest income other investment income increased by seven million for quench late reflecting higher value wage sons of feel right at the i see investments during the quarter included an interest rate contract another derivatives are mark to market adjustments which were of five million loss and the second quarter compared with a fourteen million gain in the first corner the primarily will lead to changes in the of credit valuation adjustment
spk_1: the second quarter income tax band was forty six million and effective tax rate with seventeen percent the year to date effective tax rate for the first half of twenty twenty one with fifteen percent and wave fact that the full your effective tax rate will also be fifteen percent
spk_19: i'll now would be the key drivers are a net interest income and at interest margin on flight fourteen to seventeen starting with the average balance sheet second quarter average load of thirty nine point six billion grew by nine hundred million or nine percent like porter analyze and by ten percent link quarter may ten percent analyze excluding ppp as dominic discussed growth with broad based across our major loan portfolio and stronger from residential mortgage second quarter average deposit of the fifty point two billion or up by two point three billion or twenty percent link quarter analyzed aside from time deposit all
spk_18: other deposit category increase led by non interest bearing demand deposits at a rate of thirty six percent annualized as a result or average loan to deposit ratio was seventy nine percent the second quarter down from eighty one percent in the first quarter i have a journey after growth and the second quarter reflected the strong the part of grow year to date on average basis security available for sale increased by one point five billion and repo acid increased by seven hundred million this was partially offset by a one billion decline and average interest bearing cash and cash equivalent of we deployed some of our liquidity overall the mix of average earning assets with higher yielding in the second quarter during the second quarter four hundred million at hlb funding which carried an effective interest rate of to twenty five muttered and what paid off
spk_19: put to slide fifteen second quarter twenty twenty one that interest income of three hundred and seventy six not it with the highest quarterly net interest and can and the history of these west growing by twenty six percent link quarter analyzed quarter of a quarter the net interest margin expanded to to seventy five in the second call or an increase of four basis points from the prior quarter and come related to ppp loans with fifteen million the second quarter and included eleven million of differed loan be similar to the amount in the first quarter as of june thirtieth twenty twenty one we are twenty six million of ppp deferred loan fees remaining to agree
spk_20: into income
spk_18: you can see in the waterfall tart on the slide that for bases point quarter of a quarter increase and the net interest margin breaks down as follows part three bases point each from a lower costs of interest bearing deposit and from the deployment of excess liquidity partially offset by minus one basis point each from lower other early as an eel am lower no deal the lower cost of the path of more than offset the draft turn that into margin from lower yield and the deployment of excess liquidity expanded the net interest margin in the quarter and i updated outlook we expect the for your net interest income excluding ppp will grow by ten to eleven percent year over year which is is just the head of are anticipated logo of nine to ten percent this reflects the impact of security is available for sale and wipo asset purchases in addition to net interest income expansion driven by missouri turning to slide sixteen the second quarter average low yield was three thirty seven and excluding the impact of ppp the ajit adjusted lonely and with three fifty eight down slightly by to basis points on free six quarter turning the slide seventeen i have a cough a department for the second quarter dropped a fortune basis point an improvement of what basis points from the first quarter the spot rate of total department of june thirtieth was thirteen basis points down by three basis points from march
spk_21: thirty first
spk_18: our costs of deposit decline of muttering higher rate cds reprice to current market rate and we decrease rate paid on money market and interest bearing checking account with expect to further reduce or costs a deposit maturing cds we price of a second half and twenty twenty one although the impact of this will diminish after that the average cost of cds and the second quarter with forty basis point a drop of ten to points from the first quarter and the second quarter we originated a renewed four point five billion of domestic see the at a blended raid of and nineteen basis points and and weighted average duration of four months we had seven nine hundred twenty seven million of cds maturing and the third quarter and a blended way to fifty five basis points and another one billion in the fourth quarter at a blended rate of thirty five basis points moving want to be income on flight eighteen total non interest income and the second quarter was sixty eight million and it reflects the noncash items noted on slide thirty second quarter be income and that games on sale of loans were sixty three million up by million or fifteen percent from the first quarter higher transaction volume and new customer acquisition good healthy increases in customer and foreign exchange income by nick be what management and deposit account be
spk_1: be income growth and momentum is continuing into the third quarter and we expected business line to show strength for the board year quarter a reporter interest rate contract revenue decline reflecting lower customer transaction volume and demand and the current interest rate environment
spk_18: moving on to fly nineteen second quarter non interest expense was one hundred eighty nine point five million excluding amortization of tax credits and other investments and core deposit intangible amortization adjust the not interests expense was one hundred and sixty one point five million in the second quarter a decrease of three million or to pursue a the consciously this reflects careful and then management and a quarter over quarter decrease in compensation and employed benefit from a seasonally hi first quarter year over year adjusted non interest expand increased by five percent that and quarter adjusted efficiency ratio was thirty six point three percent compared with thirty eight point seven percent in the first quarter importantly we achieve our efficiency ratio not just through expand management but through increase revenue reinforcing our revenue growth is our continue with investment the people on technology to band are bacon capabilities and product offerings and would that are now or you are updated for your outlook for twenty twenty one on flying twenty we've updated our full year outlook for twenty twenty one relative to a porter ago for the full year of twenty twenty one compared with are full of your twenty twenty result we expect your were your logo including ppp in the range of nine to ten percent up from our prior outlook of approximately eight
spk_19: percent year over year adjusted net interest income growth exploding ppp in the range of panda loving percent we've adjusted our outlook incorporate the impact of year to date security them repo purchases which we expect will left net interest income growth ahead of lung broke
spk_18: adjusted not interest expense growth excluding pack credit investment amortization of five percent year over year unchanged from our prior outlook based on our macro economic forecasts and logo thought look at this point we do not expect to book a provision for credit losses in the second half of the year four year twenty twenty one effective tax rate of approximately fifteen percent including the impact of tax credit investment unchanged from a prior outlook with that are now turn to call back over to dominic proposing remarks
spk_22: thank you i agree
spk_11: and closing we had a very strong african quarter and expected to continue
spk_2: for the rest of the while a hot work an excellent execution or or of our associates drive our results
spk_3: and it's so true testament of the kotor eastward i would now open up to call to question operator
spk_0: thank you we will now begin the question and answer session to ask a question you may press store than one on your touch tone phone if you're using a speakerphone please pick up your handset before pressing the key and to withdraw your question for you to restore been to please limit yourself to two questions and at this time will pause momentarily to assemble roster or
spk_23: and the first question will come from abraham pull a walla with bank of america please go ahead good morning good morning biggest oh just first question maybe four or going for you own cash management are you been no buying into the first portfolio and will have the report
spk_19: do have a sense of how you thinking about holding on to excess liquidity
spk_18: what the duration of the that assets that you're adding and just overall affixes sensitivity of the bank and we think about eventually shortage going higher
spk_24: yeah great question abraham
spk_18: certainly i think our view from what we the options that we took in the first quarter have shifted a little bit where the long term rate coming down so although do we do it back to redeploy some of our act of pass know where a little bit shy as far as going out to long and i think will be a little bit more
spk_24: casa then you know it the options that you so we took in the first quarter when the ten your higher and we really the point about two billion into a longer duration security than repost the republican or variable rate i think that more attractive broth and the current environment
spk_23: and the security that were buying right now probably about a largely and the as the most you know about one five kind of right but it and are your separate question no dominic for human loan group seems to be very strong deposited good today strong
spk_25: give us defense now that you had like sixty nine month into the biden administration
spk_3: the headlines around us shyness to suggest a lot of tension how that impacting your growth out will call you're going about growing the bank of because that's something that consistently keeps coming up from an investor's standpoint when the to think about east with
spk_14: good question
spk_8: well first of all other into second quarter quarter we're going nicely out in china and i'll cross border business and i think that that have a lot to do with while
spk_14: wow
spk_3: the political rhetoric cloud there you know salt is always gonna be there because that seems to be something that donna have been lot of traction among our politicians and so forth but if you look at the business there were still obviously a lot of business going on between us and china and now the headline news about some of the large investment may not be coming or but you have to
spk_26: on the sand from east west bank perspective we are mainly focusing on the middle of the size business
spk_27: and they're not up to high profile business and then they're not a highly sensitive kind of business like taking like of artificial intelligence or very much hi tech stuff so from our perspective we have plenty of a client continue to do cross border business and they're doing fine
spk_4: and now we also have to reflect back on for the last four years
spk_28: another trauma ministration you know do a lot of does not only just rebels but also
spk_8: was of terrorists
spk_14: all our clients navigate through it wasn't easy and if east was bang navigator through and in fact every single year we had growth for the last four years and in terms of overall risk management were doing great
spk_3: reason being is said
spk_29: ah this is our strength we have the expertise in the cross border us china space and this is something that we're really good and if i look at just the last two quarters you know we have
spk_3: very diverse of ago
spk_30: in china operation and with very diverse like grown in us from a cross border business and spread from ah
spk_8: clean energy
spk_3: general manufacturing hotel consumer goods
spk_8: to private equity etc so we have a pulley
spk_31: broad base of growth opportunity i think one of the things i really want to highlight is dead
spk_3: the reason the up to grove is not that unlike the multinational companies all the money senate bangs who actually for the last six months is also has been stepping up in investing in china you heard the news about jp morgan morgan stanley goldman sachs
spk_8: are there are stepping up and investing more in china the
spk_32: the standard chartered at the
spk_14: hsbc they're talking about hi thousands of people in hong kong
spk_3: we're not doing any of that would be very very consistent to focusing on our
spk_14: of strategy have been the bridge between east and west and the southern cross border business and but what we've done is with the last few years we talk about it in the quarterly earnings release often that is that we continue to make investment
spk_33: in technology
spk_3: in
spk_26: cash management product capability ethics capability dexedrine the whole idea is that we build a platform would build productive ability to fit the customer neat during the cross border business whether there are you a companies exporting to china importing from
spk_3: china or maybe having investment in china or vice versa we providing to product capabilities to support them for five years ago
spk_8: it will have aspiration
spk_3: ah have capability today you know we have a lot more capability from a technical standpoint so when you see the growth of fee income and treasury management when you see the fee income of foreign exchange and we have this record the income than because court
spk_8: and a deposit i deposit grow da da and so forth and with together when loans is no surprise because we have built up the capability to allow us to expand our not only would new customer relationships
spk_3: but also you know getting a larger wanna share
spk_0: for many of our existing customers who may be four years ago when able to do so and type of
spk_34: like foreign exchange or maybe soon type of cash management relationship with us because the little bit lack of capability in the past that we were able to correct that so our a digital offering and are online offering a much stronger and will continue to build that and in the next few years would continue to focus on building decade ability
spk_14: because the market opportunities is enormous for east west bank
spk_8: i have to strong expertise to continue to expand his direction the next question will come from kinzer be with morgan stanley please go ahead
spk_3: thank you morning
spk_35: i guess what you think about low growth on a go for bases are getting ready mortgage has just been such an amazing driver of that growth but will rethink when you look out to the second half of the year maybe under tight wait who is does raise he can take you to be the main driver or do you think the sea and i could actually start picking up a therapy
spk_11: from here
spk_3: i've been predicting the demise of single family mortgages for the last forty years and i was wrong every single year so somehow you know every to quarter i start talking internally with our team and saying that i'm not sure that don't know it sent single family mortgages origination
spk_36: it can sustain this level and so my mortgage department continue to
spk_37: pleasantly surprised me because i thought for sure was death all time high there's no way that we can ever be dead and then fourth quarter of just be dad and and then i thought it will be over and then second quarter come in and then become record performance again now at some point
spk_15: being prudent i would expect at some point it was fun but then i would say that looking at the pipeline today and looking at the the origination a few seems to be going at one would it would why would we flowed out i don't know yet but in the meantime we're very confident with our
spk_4: with the and i grow
spk_3: and our you growth of our approach has always been are we gonna try to do it in a very balanced approach you know this whole pie chart that we share that you know we have a somewhat equally distributed both
spk_11: alan she said
spk_34: somewhat equal weight of
spk_38: the and i see are you and single family and so if one particular area is slowing little bit hopefully the other two will pick up and so far that's been working just like that and i would expect it you know maybe economy stop picking up even more and use was continue to so far we've been able to for the last
spk_18: twelve twenty four months would be continuing getting new see and i customers and it just you know as as a matter of math because we get so many new see and i customers at some point the balance will grow and so i expect that that see and i will continue to grow and hope
spk_39: fully at the time that single families thought you know slowing down a little bit
spk_18: to see and i will step up a bit more so that's what we see at this point but so far things look pretty good
spk_40: okay great and then my second question really quick me one for irene
spk_24: i guess when you guys originally said you do not expect a provision expensive this year
spk_0: by originally thought you meant zero that obviously is is it came and low blow that is it fair to assume the eighth air is it fair to expect a negative provision expense of the back half of the year
spk_41: kanye original expectation was that it would be girl and long lived your expectation and interpretation
spk_42: a hard guy and and yeah i think at this point get in i portfolio given the trajectory were comfortable with say at year old provision and ah for the second half of the year know depending on the economic outlook largely for the different model that we run driven by the unemployment rate and a to ten treasury's bad
spk_24: gdp growth i think it's within the realm of possibility it could go negative but you know certainly i think from our perspective want to be cautious
spk_18: with the that provision and a negative provision so uncomfortable with the zero provision for the second half of the air
spk_43: the next question will come from dared shaw with wells fargo securities please go ahead
spk_42: i good morning the morning yeah i guess my perception boron on liquidity and you know when you look at the commercial customers that are stepping back up and borrowing today are they doing so well so keeping high levels of liquidity on their own balance sheet and how should we think about future longer have to about potentially be offset by potential
spk_8: deposit outflows with a loan to deposit ratio normalizing yeah what a lot of the new growth that we've had and balance increases that you're seeing on the fee and i sign in particular is really do customer acquisition i think if you look at it and we look just in general for argue night customers overall utilization or
spk_44: rates are pretty flattish ah an overall and we look at the financial them are a few night customers we agree right people have a lot of cash they have a lot and liquidity that's one of the reasons the utilization rate for an angry thing but the balance increases are really from new customer acquisition
spk_26: hope that helps clarify your question
spk_3: yeah yeah but i get some okay yeah that that's good and then on the on the fee income side you great growth on on fee income and in good guidance there is they are you seeing a sir pent up demand coming out now that that things are starting to release or is is just more of a know
spk_11: a good return to normal and and we should see a steady march higher from here is as by and capacity continue to increase well i i i'm pretty sure that some of them to sell out a bit of a rebound from are two thousand and twenty
spk_15: in terms of then there more vaccination and and economy opening up a little bit there's a to a certain degree jurors that but i think for again going back on the east was going perspective
spk_11: are we have
spk_8: brought in a lot more new customers and also as i share earlier hide from the cross border banking perspective
spk_11: we have actually not just cross border banking actually many of our more sophisticated largest size clients are are signing up with our cash management services that maybe two three years ago
spk_8: soon type of deposit was still reside in some of the money center bank and many of them were willing to move more more of that deposit to earth and giving us the larger wanna share and that twice you know these additional fee income
spk_6: in the treasury management services and then of course on the foreign exchange you know because that there's so much more cross border both from the consumer and commercial side
spk_0: in addition to that in terms of wealth management again that's the sheer bringing more customers ah
spk_45: because that booty isn't related to be no more sophisticated proc platform and social features bringing more customers and so we expected that will continue to
spk_38: execute and just strategic direction
spk_3: in our focus has continued to be diverse diversified portfolio of client base to allow us to not have to over relied on any concentrated growth risk and after death the game plan the next question will come from rock band of really with you bs please go ahead hi go to be like abraham in for brock i'm just maybe starting out on the the and i grow again so obviously very good
spk_46: sounds like better acquisition the driver which is great
spk_3: in your pricing also pretty stable quarter over quarter and have you had to make any trade offs on pricing or structure to keep them at the moment and going to check thin
spk_45: we have you know that again going back to a very diverse diversified
spk_8: a group or ended from industry perspective from to grab and perspective there are always some type of a business that
spk_3: like all the community bangs or maybe a regional banks are or heavily engaged and and for those business know there are some competitive pressure the others like some of our cross border businesses that will hardly have any competition that we do not have as much pressure so but all in all i think having a diversified portfolio
spk_0: of see a night out loans and was many different sectors allow us to somewhat blended into where we are today so i looked at it is that there's always gonna be pressures you in there but then will we have very unique value propositions in some of the sectors
spk_47: don't allow us to get the kind of like our pricing
spk_48: data make it worked out so that's why you see that there is stable type of know you
spk_6: okay
spk_49: and i'm mythic equipped and can you talk a little bit more about east west theory business in texas that you alluded to in your remarks how should we think about the strength of that economy and immigration into that it added relate to your guys portfolio
spk_15: but our taxes team is is doing well doing very well in fact
spk_14: obviously you know we would take their oil and gas aside because that's where we are trying to you or make sure that we hold it below a day in and that so far going good well obviously no dia the audi after quality metrics and prove much better but would put that on a thigh
spk_11: the see and i n p r ye in taxes a growing it's a quick walk and we have very strong talent in in that region and we we expect continue strong go in texas
spk_4: the next question will come from matthew clark what piper sandler please go ahead
spk_3: big money
spk_14: the morning
spk_11: first question just sit around loan price scene and and given what the curve is done of laid have you seen any any change in terms of the competition and
spk_48: on a new business here i'm more recently
spk_18: are there are always competition
spk_50: apple and particular see how he that sort of like of keep going down in terms of pricing and so frankly we could have done a lot more if we're willing to just
spk_0: going down the same path by thing opposition is that
spk_51: by and large of our focus on a few years of work with our long time existing customers and also continue to develop new relationship
spk_52: that to a certain degree
spk_42: we have value add services that allow us to hold uprising maybe slightly better
spk_45: than the dot downward spiral that are taking a oh i've got that going on amount some of these other smaller community banks and that's something that we we just don't think that is necessary for us to go down that path and i thank god damn
spk_38: because many of those are the a bang some
spk_18: so so like base on the your curve and i walked upright down and and i think eventually when they did the interest rate environment change it can it can hurt them in the long run so we we we are looking at both short term and long term so of and just do thing prudently in into useless way
spk_53: okay
spk_24: and then in multifamily you had an and they step up after remaining fairly stable over the last twelve months have you change your appetite there and and where is that growth coming from you know within your markets
spk_18: yeah that bothers really coming largely from southern california and then also to dominate point earlier also are texas teams as well the no change in our our our strategy or direction
spk_38: the next question will come from dave rochester what compass point please go ahead
spk_54: oh my god
spk_45: good morning this but my my first question would be on that pogba group that has been fantastic here
spk_51: i remember the first quarter you said that was gonna slow and into q and i guess technically dead but it's not six percent certain brad there was just wondering how you see that momentum continuing into the back half the year if you're expecting that to continue to slow but still remain strong and then if i heard you correctly it sounds like you're assuming slower
spk_40: security's growth in your and i guys that just want to confirm that
spk_55: in then also to talk about what kind of curvier your factoring into the and i got as well the be great
spk_0: yeah i'm great question gave you know our deposit grog there's no question were kind of the documents that we made the product operate the debate that were and cross border our customers know where acquiring new customers with that sad and we see that you know more strongly were the transaction volume
spk_56: the product you to lose the chan and just you know that the income from that but would that that there's no question you know the the kind of mapped or environment and the other drivers are contributing to access kind of liquidity that some of our client tab yeah i think what we're really pleased with as far as the deposit world rom consumer and small business and are we tell branches cooperate deposit commercial deposit to there all girl a nice lay and that be income and the poor cooperating counter growing so we're pleased about that but also kind of wheel with deck as far as there is some excess liquidity here and some fluctuations with some of our
spk_57: customer balances and i think that's why we're taking maybe more a me at this point in time especially when the yield curve is
spk_56: i have a cautious approach as far as redeploying some of that longer and securities will still continue to do that as i mentioned that maybe not at that same pace that we did in the first quarter
spk_11: yeah good and then on the right side you're assuming the current curve persists or her and her brother
spk_3: or got current car and then appreciate that and then but maybe just my second question is qualified to growth you guys saw and loans and deposits in hong kong and china in and to do that be great thanks
spk_56: if grow up in loans in hong kong which put and china was pretty good disc this quarter about one hundred and fifty million or so on the deposit side a little bit of an increase but not as much so we have ended prob doubly about one point of views made two point eight billion in hong kong and china combined the next question will come from a long thinker with jeffries please go ahead
spk_18: thanks right morning everyone
spk_24: i'm just back on on along growth i just wanted to check in on the theory pay down debt and you
spk_18: you are expecting some elevated pay down paddling second quarter
spk_4: did those happen
spk_0: did you see that and and i guess what the outlook going forward for that
spk_58: tom do some don't and so are we expect a those would
spk_3: it didn't pay down in the second quarter may pay down in the third quarter and so are
spk_58: it's something that will see because often times know klein
spk_3: our intention may not necessary always worked out okay and we get to the five percent expense guide
spk_58: it assumes you know teaching are picking cotton the second half
spk_59: i guess what's driving those caught higher and have ended his kind of began some sort of pick up a notch travel related costs
spk_18: yeah we have in our kind of for kept assume the little bit more travel related cos it's already happening certainly not too kind of a normalized level but i just kind of maybe remind you like for the first half year over year compared to last year were out that pipers that so it's really kind of daddy from or where we're at right now most of the cost increases that we have our related to compensation employees new employees that we've hired you know we're making more money so bonus or curled our higher their investments that we made and technology and my amortizing that but as you know you know we are very kind of careful in our expense management we expect them will continue to do so we also give him more
spk_0: money to charity to and we were doing doing well we need to give back to the community
spk_60: the next question will come from branding king with truest please go ahead
spk_61: good morning
spk_42: the moment to with the one yeah so with the imply and improve our wedding levers and be guided
spk_18: could there be any played coupon board any plan investment
spk_24: what what do you mean by plant plant investment can you help help much defined in years or me to the ongoing tibetans in the business but with operating leveraging through being
spk_18: could you could choose we pooh poohed in a better to they say in makes you or using a bad that you play on
spk_24: on go
spk_18: are we just so you know we can teach you execute according to our our struck a strategic business plan and know what family that's a technology investments and point or people investments and point we continue to just trying to do it in an orderly fashion
spk_24: and not necessarily that you know trying to a summary based on out and any particular specifics top situation
spk_62: but of course if there are some our mean great opportunity out there that data is available we we ike's all always you know open flexible and then somewhat entrepreneur or to take advantage of it but are are outside of any of that like and we you just follow our our strategy plan and execute accordingly
spk_63: well go
spk_18: and i saw that former jammu dollar the fhlb bases you paid off in a quarter not figures record you could you need our remaining when they're mature and are you planning to period all
spk_64: eventually
spk_0: get the rep the wrap them a flamethrower at various points next year
spk_65: we expect to pay that off at that point in time
spk_3: hundred seventy five million in february of next year and another seventy five in november the next question will come from chris mcgrady with kbw please go ahead brick morning
spk_66: i'm the morning meeting with you more in one video a longer term question on toilet body on the other he the result of and fantastic in part because the the news but we think about the way your visitors today
spk_49: and we kind of password in a wanted to yours are you thinking about the overall was you normalized losses for it's worth today than maybe the are prepared them
spk_3: that that's a great posture you know i think if you look at our portfolio on and that category of load that we have the main category theory the and i and sfr certainly historical experience that we've had from the rather than
spk_14: follow has been excellent right lot of had been really negligible
spk_3: on the see we saw it as well historically you know at you know if you think about a construction under a credit crisis nor income producing theory has also the credit quality has been a good particularly relative to appears i've been gone to see a nice side you know what we're trying to do is make sure we don't have too many concentrations in one area or one sucked are to ensure that our credit quality is something that continues or perhaps you know kind of the good to reactor we have right now so when we look at that you know i were very careful and i think there were some questions earlier during the call as far as
spk_67: you know rate versus structure but particularly i think for the commercial loan theory the and i were careful from the perspective of not giving up structural
spk_11: can operate
spk_8: great executive that
spk_3: kind of a modeling question you energy that fifteen percent on the factory that you have what the remaining i associate and would be that went to the you
spk_15: yeah at this point in time we think it's going to be about seventy million for the rest of twenty twenty one maybe a little bit more in the third quarter chris
spk_68: kevin email i got it thank you
spk_3: the next question will come from david shivering with wedbush securities please go ahead
spk_69: i think i had a follow up on the and i loaned growth could you talk about the pipeline in the opportunity within some of the higher growth areas such as private equity and i think you called our entertainment and cleaner energy could you talk about that in any new team hires that helping that growth
spk_11: we continue to sort of like strategically ad
spk_8: a new talent into various teams so
spk_15: for example like it but and you know and and and payment you know actually we only add up
spk_3: one
spk_70: for time individual however
spk_71: i think too that ah the team for the last
spk_8: ah six to nine months has been going very strong
spk_3: and what will find is that you know that the the beauty of this
spk_72: of diversification strategies that we have so many different industry protocols
spk_73: and we have so many well i'm not with i would say so many well quite a few a very attractive
spk_3: geographic footprint and there's a lot areas such as from new york to taxes to of
spk_65: from washington state to massachusetts and then of course know we're gonna lie in show business in the state of california
spk_18: now let's not forget that we do have you know hong kong and also it's offices in china
spk_0: so they are at various time
spk_15: would have stronger performance one quarter over the next so if you recall i think last year we mentioned private equity quite a bit
spk_74: ah the last six months
spk_0: they have not yet have to kind of strong performance like entertainment or clean energy

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