East West Bancorp, Inc. Q1 2010 Earnings Call Transcript

East West Bancorp, Inc. Q1 2010 Earnings Call Transcript
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East West Bancorp, Inc. (EWBC)

Q1 2010 Earnings Conference Call

April 28, 2010 11:30 AM ET

Executives

Kelly Adams – VP, Corporate Communications

Dominic Ng – Chairman, President and CEO

Julia Gouw – President and COO

Irene Oh – EVP and CFO

Analysts

David Rochester – FBR Capital Markets

Lana Chan – BMO Capital Markets

Dave King – RBC

Julianna Balicka – KBW

Joe Gladue – B. Riley

Aaron Deer - Sandler O’Neill Partners

Ken Zerbe – Morgan Stanley

Brett Rabatin – Sterne Agee

Chris Stulpin - D. A. Davidson

Don Worthington – Howe Barnes Hoefer & Arnett

Presentation

Operator

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Good morning and welcome to the East West Bancorp First Quarter 2010 Earnings Conference call. All participants will be in a listen-only mode for this event. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Ms. Kelly Adams first, Vice President. Please go ahead.

Kelly Adams

Good morning, everyone and thank you for joining us to review the financial details of East West Bancorp for the first quarter of 2010. Here to review the results are Dominic Ng, our Chairman and Chief Executive Officer, Julia Gouw, our President and Chief Operating Officer and Irene Oh Chief Financial Officer. We will then open the call to questions.

First we would like to caution participants that during the course of the conference call today management may make projections or other forward-looking statements regarding events or future financial performance of the company within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. We wish to caution you that these forward-looking statements may differ materially from actual results due to a number of risks and uncertainties.

For a more detailed description of factors that affect the company’s operating results we refer you to the filings with the Securities & Exchange Commission including our annual report on Form-10K for the year ended December 31, 2009. Today’s call is also being recorded and will be available in replay format at www.eastwestbank.com and www.streetevents.com.

I will now turn the call over to Dominic.

Dominic Ng

Thank you, Kelly. Good morning and thank you all for joining us in today’s call. Yesterday afternoon we announced the financial results for the first quarter of 2010. We are pleased to announce that announce that East West reported positive earnings for the first quarter of 2010 of $24.9 million or $0.013 per diluted share. Our first quarter results are direct result of our strong core profitability, moderating credit cost and core deposit growth.

Our net interest margin continues to expand and grew to 4.02% for the quarter excluding yield adjustments related to capital loan. As we stated in our last year’s third quarter earnings call, we believe that credit cost peaked in the third quarter of 2009 and would subside in future quarters. We indeed have experienced ongoing improvements for all credit indicators in the last six months. Most significantly the provision for loan losses has declined sizably decreasing by $63.6 million, this quarter of 45% decrease from the fourth quarter of 2009.

The decline in progression is a direction result of the continued improvement in credit quality as evidenced by a sharp decline in net charge offs to $63.9 million or a 51% decline from prior quarter. Further we continue to see less migration in to delinquent and non-accrual status an improvement in non-performing asset levels. The credit improvement of our loan portfolio is a direct result of our aggressive management of assets in 2008 and 2009 resulting in fewer problem credits today and well ahead above peers.

Our commercial real estate portfolio continues to perform well. In March 31, 2009 nonperforming commercial real estate loans were $32.6 million or less than 1% of total CRE loans. Further net charge off for this portfolio were only $8.2 million. Additionally land and constructional balances are now down to only 5.4% of total loan receivable. Given the trend we are seeing in our loan portfolio we expect that the provision for loan losses and net charge offs will continue to decrease throughout 2010.

Now moving onto deposits, growth from our retail and commercial platform has been very strong. Total deposits excluding broker deposits increased $201.7 million during the first quarter. Core deposits increased $656.9 million, increasing to $7.7 billion as of March 31, 2010. Further the retention of legacy UCB deposits has been successful. Once they increase in core deposits the cost of deposit has also decreased down to 93 basis points for the first quarter an improvement from 1.1% in the first quarter of 2009.

We are very pleased with how 2010 has progressed first of all during the month, we successfully completed the full integration of United Commercial Bank as planned and on time. With the integration complete and meaningful improvements in credit quality, we will be 100% focused on growing our business, increasing profitability and taking full advantage of expansion opportunities.

In our earnings release we provided guidance for the second quarter of 2010 and currently estimated fully diluted earnings per share for the second quarter of 2010 will be in the range of $0.13 to $0.17 per diluted share, or net income after tax ranging from $24 to $31 million. This earnings guidance is based on the assumptions that the balance sheet will remain flat. Net interest margin for the second quarter will range from 4% to 4.10% excluding the impact of new adjustments from capital loans or other items.

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