East West Bancorp, Inc.

Q2 2022 Earnings Conference Call


spk_0: the day and welcome to the east west bank clerk second quarter twenty twenty two earning saw
spk_1: topic is it has to be a massive only mode
spk_0: did you need assistance please signal conference specialist try pressing the starkey followed by zero after today's presentation there will be an opportunity to ask questions to ask a question in may press star than one on your touch tone sounds to drive from the questions you please press star than two please note this event is being recorded i know like to turn the conference over to juliana really stuff sees go ahead
spk_2: thank you sarah good morning and thank you everyone for joining us three the financial results of he think or for the second quarter of twenty two thousand twenty two with me on a conference call today are dominic games or chairman and chief executive officer and i reno or chief financial officer we would like to caution you the during the course of the call management may make projections are other for looking statements regarding events for future financial performance of the company was it a meeting of the safe harbor provisions of the private securities litigation reform act of nineteen ninety five the forward looking statements may differ materially from actual results to to a number of risks and uncertainties for more details description of risk factors that
spk_0: could affect the companies operating results please refer to her filings it with the securities and exchange commission including our annual report on form tank a for the year ended december thirty first twenty twenty one and edition so the numbers reference on this call for change was just the numbers please refer to the banks regulatory filings including our form a case saturday
spk_2: for the reconciliation of gap to non get financial measures during the course of the car we will be referencing aside decks and is available as part of the webcast and on investor relations sites as reminder today's call is being recorded and will also be available and replay formats on or investor relations some sites i will now trying to call over to dominic
spk_3: thank you to get a good morning and thank you everyone for joining us for earnings call i would begin to review of financial results would slide presentation
spk_4: this morning
spk_3: reporters met in into two hundred sixty million and earnings per share of as long as you once and for the second quarter of two thousand and twenty
spk_5: or earnings per share grew thirty eight percent
spk_6: for the first quarter of two thousand twenty two
spk_3: total revenue of five hundred fifty one billion clue forty five percent linkohr centralized included that's an interesting topic of four hundred some a stronger when combined with controlled expense management drove second quarter two thousand and twenty two adjusted to tax free position and tumble of sixty two percent meant quarter analyst a bottom line returns or industry leading will return one point seven percent on average and such eighteen percent on average police and twenty percent on average tangible
spk_7: all our profitability racial and
spk_3: the second quarter results demonstrate the strength of these was business model which is to do for a performance a balanced and is well positioned for rising interest rate and revenue growth discord a reflected not only local but also that interest margin expansion of thirty six days a fourth quarter over quarter loan portfolio is well diversified and second quarter was brought the used across a major long for photos of commercial boosting commercial industrial and residential mortgage
spk_8: i'll deposit days says consumer
spk_3: small business and cooperate commercial accounts portable supporters of non interest bearing demand deposits increased a present men quarter analyzed and totaled forty one forty four percent of average deposits for the second quarter
spk_9: out of a sudden thousand
spk_3: which song capital five
spk_5: the diversification about loans and deposits is important not just because it helps support move across different economic cycles
spk_3: he says supports prudent risk management and a conservative credit cultures economic environment is changing will well positioned to navigate through with confidence and importantly help our customers navigate well too try for present a summary of our balance as of june thirty two thousand twenty two total long's reached a record high of forty six on five second quarter average lungs were forty four and six billion and grew twenty four percent link quarter analyzed
spk_5: based on our your to date results
spk_3: we're updating our long term outlook for the for you to a range of sixteen to eighteen percent of from thirteen to fifteen percent previously or else equal outlook does imply a slower rate of locals in the second have the compare with the pace of the first half
spk_5: current pipelines i hopefully our financial position and liquidity are strong and were very optimistic about a future of this was like however in an environment of rising interest rates will see transaction volume a small impact and commercial and residential mortgage broker
spk_3: awesome
spk_5: the high pace of see an my those in the first half of two thousand and twenty two days moderate due to inflation inflationary
spk_3: supply chain and other macro economic pressures given the current economic uncertainty we want to be conservative in our expectations and food and and uncles
spk_10: holy deposits were fifty four point three billion as of june thirty two thousand twenty two and setting on average deposits
spk_3: fifty four phone number
spk_8: average total deposits me one percent link quarter analyzed in the second quarter
spk_3: turning to sly side oh did and a quarter we we purchased one hundred million of common stock or one thousand four majors as you can see the exhibit on the slides or capital ratios are healthy and strong
spk_6: as of june thirty two thousand twenty two we have a common equity tier one ratio of twelve percent total capital ratios thirteen point two percent
spk_8: tangible common equity racial and forty three percent which provides us with meaningful capacity for future growth twas board of directors has declared
spk_2: two thousand and twenty two dividends for the company's common stock
spk_3: quality common source gelatin of forty cents is payable on august fifteenth two thousand twenty two two stock of records on august was two thousand twenty two moving on to a discussion about on for for you fucking was sliced six
spk_7: he and i loans outstanding work and fifteen point four billion as of june thirty two thousand twenty two and increase of section present analyzed for march thirty first two thousand twenty two
spk_6: pelosi and i commitments with wanted to be billion as of two cities sequence only of fun twenty percent analyzed
spk_3: i'll see had i know utilization rate was stable or the quarter at seventy percent overall similar to recent quarters second quarter see and i quote was well diversified across a juice
spk_6: do offices and specialized sort course including robust growth to private equity and entertainment for for terms of films outstanding and commitments why seven and a show
spk_3: tells about commercial the simple folk
spk_6: as a surprise sigh geography and property types and consists of no loan to value lot
spk_3: total commercials was a two point five billion as of june thirty two thousand and twenty two a size thirty seven percent analyzed for march thirty first
spk_8: oh this was based and well diversified your job recently geographically
spk_3: and all property taxes you in the sense the strongest net wrote in multifamily and industrial commercials
spk_6: in fly nine would provide details regarding our residential watch for photos which consists of single family mortgages and a home equity line of credit
spk_3: i would highlight and eighty four percent
spk_6: lot
spk_3: home equity line of credit for that are in the first mean position residential mortgage loans total
spk_0: five billion as of june thirty two thousand twenty two growing five thirty three percent analyzed bought for the first
spk_11: i will now turn of cold over to i mean for more detailed discussion about as a quality and income students are we
spk_2: since you dominance i'll start with our ask coffee math trucks and components of our lounge for the losses on flights ten and eleven the as quality of our portfolio continues to be strong for of a quarter not performing out and secret by five percent down to ninety million and a non performing alpha trace ratio improve on one basis points down for
spk_12: the point of total assets as a do that
spk_0: other oreo and for assets were down to zero as of june thirtieth
spk_2: total criticized loans
spk_13: treats modestly to two point two percent of loans from one point nine percent as of march thirty first largely from crv and see and i love
spk_5: early stage delinquency loan secrease quarter of a quarter to thirty nine million during the second quarter we bought net recoveries of seven million or six basis points of average was analyzed compared to that charges of a basis points of average loans analyzed for the first quarter the second quarter recoveries were primarily in see
spk_11: and i love or allowance total five hundred sixty three million as of june thirtieth or one point two nine person she's the one point two one percent of loans compared to one point two five percent as of march thirty first report on reporter change in the allowance largely reflects a mix of the loan portfolio as of june thirtieth as well as second quarter logo
spk_14: during the second quarter we recorded a provision for credit losses of thirteen point five million compared to eight million for the first quarter
spk_2: and now moving to discussion of our income statement on page twelve this slide summarizes the key line items of the income and which i'll discuss the more details on the following slice of doubt amortization of tax credit and other investments in the second quarter with fifteen million compared with what you know that in the first quarter
spk_11: this is lower than what we had previously anticipated because of timings we expect the amortization of tax credits and other investment expands to be approximately forty million in the third quarter twenty five million in the fourth quarter now second quarter twenty twenty two income tax expense with eighty
spk_0: three million compared with income tax expense of sixty million for the first quarter twenty twenty year to date effective tax rate for the first six months of twenty twenty two was twenty two percent currently expect that a full year effective tax rates will be approximately twenty one percent including the impact of tax credit
spk_2: investments expected in the second half of the year our have the key drivers of our net interest in time and editors march and on flights thirteen to sixteen starting what the average balance sheets second quarter average loans of forty four point six million by two point five million or twenty four percent analyze the strong blows across all known category
spk_14: a favorable mid shaft and average grinning outfits quarter of a quarter and the second quarter average alone made of seventy six percent of average earnings as compared with seventy two percent and the prior quarter
spk_11: second quarter average deposits of fifty four point one billion to buy a hundred and four point five million or one percent with quarter and life throws an average non interest bearing demand deposits cds city and interest bearing a checking account was partially offset by a decrease in average money market account
spk_14: was this quarter we observe customers utilizing directs of fun for acquisitions and investments importantly we support of a quarter growth and average demand deposits which made up forty four percent of our average deposits of the second quarter compared with forty three percent of the first quarter and thirty nine percent in a year ago
spk_2: quarter toting to five fourteen second quarter twenty twenty two net interest income a four hundred seventy three million with the highest court me that interesting come in the history of each west growing by sixty five percent link for analyze the net interest march and of three twenty three expanded by thirty six basis points quarter
spk_15: or of a quarter as you can see from the waterfall chart on the slide
spk_2: and that interest margin expansion in the second quarter reflects impact of higher loan and earning assets of which increased again i thirty one basis point possibly have a about earning and of shift which expanded the new by tall basis points this was partially offset by seven basis points of compression
spk_5: erm higher cost of interest bearing us turn into fights a team the average the second quarter average loan deal was three ninety five an increase of thirty two basis points quarter over quarter the average low yield comprised an average coupon yield a three eighty three hundred your judgment which contributed twelve basis points the overall low
spk_11: field and the second quarter as of june thirtieth spot coupon way on our loans was for ninety in the slide we also presents a coupon spot yields for each major loan portfolio in the last three quarter and period
spk_14: you can see the positive impact of rising interest rates on each loan portfolio of loans replies the total sixty three percent of our local boy as devil rays including thirty two percent linked to the prime rate and twenty six percent link to my more ocean
spk_11: most of these loans we priced at least month place
spk_2: to slide sixteen average cost deposits from the second quarter with seventy basis points up seven basis points from the first quarter of spot raid on total deposits with thirty two basis points as of june thirtieth a year to date increase of twenty one basis points to translates to a fifteen percent to
spk_11: to beta relatives one hundred and fifty basis points increase and the target fed funds rate over the same period in comparison the cumulative data on are alone has been fifty percent as or loan coupon spot rate increased by seventy five basis points you today
spk_16: he started the rising interest rate cycle from a position of strength with historically high levels of demand deposits freeze was bank strong liquidity and average monta to deposit racial eighty two percent in the second quarter these bounty characteristics pulsar the acid sensitivity and effects of are variable rate loan portfolio
spk_2: supporting strong revenue growth through the cycle
spk_11: moving on to speak and come on flight seventies
spk_2: total non interest income and the second quarter with seventy eight million down from eighty million in the first quarter customer driven fee income and that games on sale of loans or sixty five million essentially unchanged from the first quarter and up three percent year over year
spk_16: moving on to slide ninety seven for a non interest expense was one hundred and ninety seven million excluding amortization of tax credits and other investments and poor deposit and tangible amortization adjusted not into substance was one hundred and eighty one know these in the second quarter of six know
spk_2: and or four percent sequentially from a season we lower first quarter of the second quarter adjusted efficiency ratio was thirty three percent compared with thirty five percent of the first quarter this reflects strong revenue growth and an ongoing disciplined expense management and with that on out of are updated outlook for the for you
spk_14: you have twenty twenty two on fly nineteen
spk_11: for the for your twenty twenty two compared to our for your twenty twenty one results we currently expect year over year loan road clooney ppp of approximately sixteen to eighteen percent reflecting here today performance or updated outlook is a increase from our previous outlooks of thirteen to fifteen percent slumber
spk_2: year over year that interest income growth excluding ppp and the range of thirty two thirty five percent increase from our previous outlook of net interest in some broad ranging from twenty two to twenty four percent are updated outlook reflects lumber as well as impact of anticipated as funds rate increases on our ass and sensitive bounties underpinning our interest income assumptions is the for interest rate current as of june thirtieth with that funds expected to reach three fifty by year end johnson non interest expense both excluding tax credit investment amortization of approximately nine to ten percent year over year increase from our previous outlook for standstill approximately eight percent for two thousand and twenty two we currently expect that provision for credit losses will be the way and of succeeded seventy million for the following year
spk_14: is up from our previous outlook for provision for credit losses and or age of fifty to sixty million finally we now expect that the full your twenty twenty two effective tax rate will be twenty one percent
spk_3: compared with our previous is is for an effective tax rate of eighty to ninety percent to change in our outlook a flat tire since i'm at a lower amount of tax cut investments as compared with our previous forecast that will be orderly variability and the tax rates to the timing of tax credit investments place into service
spk_17: we currently expect that the third quarter tax credit investment amortisation expands will be approximately forty million with that are now trying to call that saddam that for closing remarks
spk_3: thank you i read in closing we have had a slave first half of this is the for two deliveries for financial results
spk_8: while shareholders in the second half of two thousand twenty two
spk_3: what well positioned to navigate a current environment of thousand as a sensitive we have employed quoted qualities and santiago
spk_7: credit for quality is like was strong
spk_0: also sees of focused on providing superior banking services to our customers wish to thank them for their asses and excellent results are not open up to call to questions operator yeah we will now begin the question and answer session to ask a question you may press star than one on your touchstone for us if you're using a speaker said please pick up your handset before pressing the cheese
spk_18: to withdraw your question please press start and to
spk_19: please limit yourself to one question and one final lap at this time we will pause momentarily to assemble i roster
spk_20: first question comes from abraham to in a wallet listening to the america merrill lynch to go ahead good morning
spk_2: the morning
spk_21: okay so first questions surrounding zone good outlook i don't like you mentioned about
spk_3: maybe some guidance of this see susan student suit on in the back half is that just out of been wanting to be conservative given all the things you laid out or for the last two to four weeks have you actually seen customer appetite to bordeaux and activity begin to slow down of i think mainly about from our perspective is sad part no one would he know what the us economies going be like let's say six to twelve months of an hour while there's a lot of predictions you their opposition is that would interest rate rising naturally you know you're not gonna be as many refinancing single family mortgages
spk_8: how's yeahs etc and even on the sea and i saw we that you know
spk_22: we don't know what the christmas is going to be a tissue would consumers to gonna be as active in terms of purchasing skills for families and friends or would they not no one knows that to stage and so the from the east west bank perspective is as lot of customers are doing
spk_3: well we think that i'm a two stage is only prudent for us to expect that there will be a slow down because it appears to me that logically when rates are rising higher cc refinancing activities with slow down and and from the sea and i thought maybe it was stationed on major investment would also may not be happening maybe deferring to future so we we just look at it as from our perspective is as a while customers are doing just fine
spk_20: are we want to choose guide our projections lower to make sure that just in case that economy it's to go into a direction that in the that if voice got it
spk_14: biggest one of question for you waiting
spk_0: to answer your assumption on the deposit bit as you think about
spk_23: a result of your to your in iowa guidance and distribute to find point on your an eye out looks at the assuming thirty five percent beautiful your growth implies exit fourth quarter and i closer to five seventy five to six hundred million to sort of makes you were thinking about that correctly
spk_0: and i think i am a hundred number is pretty close to where i think will end up on on the deposit bad as well i think for each class and relay the entire industry will be able to land a deposit cause so realistic place ah i think we're
spk_24: i'm very proud of what we've done here today i want to be shot at all of our team members front line is variable pricing is very challenging realistically we do expect that deposit a to increase for the rest of the year with that sad you know with these
spk_25: strong amount of our brain accounts that we have to strong amount of the dd a that we have a percent of our total deposits the overall at this point i'm very comfortable that are kind of lifetime or cycle through deposit data will be much better than we cat in the last cycle
spk_0: next question comes from brandon king with surest please go ahead
spk_25: sporting brandon
spk_3: which brings his personal reasons
spk_26: mr scooters of wondered when you seen any brand new jersey seasons into the second year and it there's also
spk_3: changing jesus's of
spk_8: and then i would i have some difficulties out sharing your question is at the back foot snow drifts second half
spk_3: although china oh sure sure which i our our yeah of our branch are well out of china operations and also hong kong operation that done extraordinary well and the first half of year because we all saw the headline news you know from the media about are locked down in shanghai and then all these quarantine requirement in hong kong
spk_7: and so our associates in that region
spk_27: one through some very very tremendous difficulties personally you know like he the most of them being locked up at home
spk_3: lol walking and a few of them actually locked up in the office for over two two months and the fact is they came through throughout this time
spk_28: they not only were able to get the business going and took good care of our clients in fact that even grew loans and deposits so they were doing very well ah but overall and obviously china is only five percent of alcohol when she's so an average that obvious he's not going to have a material
spk_3: oh you know impact to our overall financial performance but i'm very very pleased
spk_8: with what they have done and they continue to grow are very thought of very diverse see and i dismissed and that covers from not general manufacturing consumer goods and team and private equity
spk_3: technology clean energy and digital media healthcare etc so they really have done a good job as odds continue to diversify their focus and have very high quality customers that they brought him and in addition to that in our customers that doing very well as you can see for the last out
spk_5: several years now since i see you as you know started putting terrorists in place know power
spk_3: long for photo in china
spk_29: as a qualities pristine we did not have any kind of like
spk_3: credit issues and they continue to perform well this is because of we really believe that our bridge banking strategy our understanding of
spk_8: china
spk_30: and i expertise and cross border business
spk_31: make a big difference when and as our plays that with he's worst would have to accept his expertise and cross border business between us and china
spk_2: still allow us to be able to offer you need value proposition
spk_3: and services a really important and relevant to the business what does that us business and doing business in china or chinese business doing business us we to offer a unique and he says is for them that ninety nine point five percent of the banks and state don't have
spk_25: so in that respect we have substantially less competition
spk_32: and we'll put it shoes
spk_0: exactly the high quality customers he wanted to bank so we'll very very pleased with how everything's going right now sold as of today you know obviously our
spk_33: associates in hong kong and china all back to the office and doing business as know so we expect them to continue to be able to do good work for the second half of the
spk_25: featured image or did you can you can only species she gave you
spk_0: rachel registered third for senior citizens days we will be kind of two years with you
spk_2: right ratios i'm it to raise teachings theories it's a syrian refugees to the next year beside know whether it's very similar
spk_3: the icing on the efficiency ratio of brand and we don't have a ratio that we're trying app pens tales normally this is a time when dominant goes through the calculation of the numerator and denominator obviously breeze last year we were made disciplined on sunday rights with that said we have continued to make them vastness we the necessary to support our business a cash management part as you see that with the outstanding growth we have cross border as it's dominant talked about also particular on the consumer side on the digital side arm as wow are on sale here in this kind of environment where acid sensitive banks are with that revenue increases honestly that all efficiency ratio is a johnson related to that but just are you know we can we don't just try to guide to have teaches you the a shall we make developments we need to support the business efficiency ratio it's just a report card kind of like number return of back when you return of as a recession sea ray showed you
spk_0: reports are so we we looked at it it's about proud to be in that position however we lose our much more focus and measuring like our input such as deposit grove on both interest margins expansion
spk_34: as a quality and also you know making sure the expenses growing according to us
spk_35: what do the balance sheets powerful that's what we're trying to what does this sad that navy the report card numbers of our away and are really matter for four hundred because if you'd like to ask a question please post dollars said one at this time or next question comes from chris mcgrady with katie previously so ahead
spk_36: the the mornings
spk_37: dominic
spk_3: i'm positive just surprised to see the by that
spk_26: in the quarter how do we think about
spk_3: prospective uses of the on the rest of the by that given the markets the stock valuation but also concerns in the macro
spk_38: okay the by bad
spk_7: well we i said it before that of
spk_39: the bank it's always shareholders friendly of we are relatively as i say food and and conservative than other banks and but we are opportunistic what we do see that since my time in the right place
spk_2: we do swipe and so er that's what we did
spk_3: i use what i looked at stays on the economic landscape today and looking forward and seeing that
spk_40: so sad
spk_8: i will continue to increase interest rates with many economists not predicting you know
spk_41: to the economy going forward we just feel like that sounds time that we probably will have to pause and of weight and this is what does is a kind of like
spk_3: very consistent is was thankful a city that will we do feel that has the right time to do something that we have plenty of capital plenty of earnings and and etc lol obviously when the opportunity you our allies lose step in and do the right thing for shoulders that the meantime we feel that two seven capital it's a better way to go down reflecting back several years ago obviously most banks will actively doing by that and he's was was on the isolated few get is not but if you looked at probably done in the last for five years we have actually almost double down organically not acquisition organically so obviously we do we have the engines second growth of we did not wanna to
spk_34: then the capital into by that when we do that we have plenty of twelve opportunity
spk_35: and it didn't hurt when were plenty of capital light and the beginning of cold
spk_42: and so our decision is that will always be very considerate of shareholders return however
spk_43: we always wanted to look at it
spk_3: summer long term basis and so that's how we come to this conclusion about by that and bad
spk_44: take us that perspective seconds the ask one more common thread throughout the the quarter for a for all the banks is been deposits and levels
spk_3: and i think you can sort of the market is a deal with the said he actually getting que te the study elemental in partner deposits yeah i'm sure you've looked over your portfolio and in kind of separated what may be at risk but could you share with mixture of us and the observations about what pieces about might be a more risk and how much do they could actually well out of if the said that's what the so soon the thank you things out the cheese far at east west bank deposit franchise his olive retail banking deposit you know we unlike many regional banks are we actually have a very very small retail banking see potter franchise very stable sandy of customers out there bank with ease was time for many years and they are the one that normally not expect a lot of us volatility obviously one way to rise in a substantial way of we do need to make sure we take care of them and pay them blow up higher rate that i don't expect out there will be a lot of a movement or volatility from the retail banking side in fact i do expect that we have opportunities grossed more or one good example is that us are we we started a
spk_45: this is checking deposit products about a year ago less than a year ago actually
spk_8: it's just the last six months and we brought him about close to five hundred million dollars of a dj deposit of we will continue to be able to find opportunity to you know
spk_3: yea balances in this very small business
spk_46: customers and i looked at it is at in addition to that we'd country to see his activities of overseas investors still putting money in the united states and most of them to look at ease was of the first choice so from that sample with a pretty good obviously we have to
spk_0: merciless a towns that some of them have more volatility to to the operating beeps and so forth so those are the one that we will keep a close eye on it but we also feel that
spk_47: because of our he pauses of great today we got plenty of room to what was our customers if we do need to pay live at a high rate to retain more deposit is something that we obviously have much more flexibility they be other banks next question comes from jared shall be close point out please go ahead
spk_23: a glaring thanks
spk_14: maybe just growing up a little bit on on the deposit side when you look at sea
spk_2: your your guidance for and i what's the what's the expectation for
spk_47: overall deposit growth and i guess every cell phone to deposit ratio
spk_48: in this environment and it sounds like they get some if you think that says in that scenario you can still see a balance growth from some of these new initiative that the right way to look at it
spk_14: and we do expect that deposits was wrong for the entire year yeah i think quarter over quarter especially on average basis point to point you will see barry ability for example this corner as well
spk_49: historically we've had clients one point in particular are related to task crack up property tax payments made in the second quarter the boundaries are down and that we saw that this corner is class with that sad you know i went also just comment on just the granularity and the deposits that we
spk_3: has as dominic mention not only do we have kind a broad based on the retail side small business on the retail side over on the commercial side as well skill the deposits are very granular a new chart so that's something that we think will continue the how bad as the gone to the cycle
spk_7: with that that backdrop as as is assuming the i guess we should we could assume he's become forgetting that loan to deposit ratio back north of of ninety percent
spk_22: the longer officer
spk_3: yeah superman gone sour you know with commented on the spot for high and low nineties it's something we're very comfortable less again particularly with the granularity deposit that we have we don't have a problem
spk_22: all thought
spk_3: going on loan balances due to like a pressure from deposit because at this eighty eighty plus percent long to deposit racial we have plenty of
spk_47: so are we just have to reason that we do not have a very high expectations of high long growth for the second half despite the fact that we have good pipelines and good momentum is because is an economic outlook overall does not look very good that if if it turns out that we can tune defiance high quality loans
spk_50: we consult
spk_48: and we will simply because we got plenty of deposits to support
spk_3: excellent as fall as my second question here looking at the expense guide and did increase or is are primarily just performance a son that are better revenue drives better performances and a comp or there some initiatives
spk_8: in there for the for the branches
spk_0: we always make incremental investment i'm in every single year that money's was philosophy is never good it to a major major big projects and loaded in one year
spk_51: and that cause you know so volatility of our earnings so will continue to invest and of course hill out there are you know sony inflationary factors in here are some for because of
spk_52: waitress and out other type of miscellaneous expenses all have gone up because we saw it on and nine point one percent consumer price index know
spk_51: number that came out recently saw position is sad that we feel that wow we're managing our expenses are very prudently are we expected to flu up slightly so that's why we guiding it up from a percent increase to us nine to ten percent increase next question concern clegg gray davis and sell it as
spk_53: the marine clerk right on for gary tenor this morning
spk_8: the morning i
spk_3: are there but of course you produced alone loan growth and the guide so i guess just assuming your lower peace process second half i mean it wouldn't be surprising given the first half growth but you can be states the pipeline going into the third quarter him whether the whether or not your projections assume a drop off in sports quarter or of the drop off it's balance between a third and fourth
spk_54: oh we have
spk_3: at this point again pass the projection is south more or less how i put it out
spk_55: we are just being prudent because ah just because we're pipelines
spk_3: no sometime finalized pipeline does not result in funding our our projection right now said yes the maybe a lot of you saw in the banking but i'll start out there will be some prudence investor of it all which are helping customers who looked at it may be two months from now three months and now and have the right continued to go up like what the fat expected to do they come to conclusions and
spk_56: maybe i should move forward
spk_3: and i just kind of looking at it on the downside scenario that may be a lot of deals that people are thinking about doing and and i'm not and as those are kind of things of we are we were anticipating i mean as a very simple answer would be like and the residential mortgages area you know we would expect add the people that may expected to revise their mortgage decided
spk_57: not too because to raise so i didn't make sense of the film expect to buy a home by a second home or third phone
spk_58: decided not to again because raise high price haven't come down yes enough to make it a good do seas or what i call a transitional time transitional time in a way that
spk_3: when the pies still
spk_2: they put he was very much up there but then the interest rate suddenly make the economic less attractive
spk_51: so that would discourage people making investments are in will say or maybe make investments in soon have a doesn't stay in love with saw this is a kind of logic to we're going through in our mind that despite the fact that
spk_59: hello
spk_0: relationship managers out there and our branch managers out there having bringing in more new clients and more opportunities to do more deals are we just looked at it is at naturally
spk_3: people would just take a break one they are not sure
spk_60: having some certainty about what you horizon movie or which is no different at once you get into a recession or maybe once you get the the and recession people was jumping and left and right taking advantage of these distress prices and so forth so in this the point at what what we see right now that we too
spk_0: as something that ah maybe in the third and fourth quarter we're transitioning slowly into that kind of uncertain pass however if for some reason things changed and for the positive obviously you know our we will expected strawman strong along with

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