East West Bancorp's CEO Discusses Q1 2012 Results - Earnings Call Transcript

East West Bancorp (EWBC)

Q1 2012 Earnings Call

April 18, 2012 11:30 am ET

Executives

Kelly Adams -

Dominic Ng - Chairman of the Board, Chief Executive Officer, Member of Executive Committee, Chairman of East West Bank and Chief Executive Officer of East West Bank

Julia Gouw - Vice Chairman, President, Chief Operating Officer, Member of Executive Committee, Vice Chairman of East West Bank, President of East West Bank and Chief Operating Officer of East West Bank

Irene H. Oh - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Chief Financial Officer of the Bank and Executive Vice President of the Bank

Analysts

Ken A. Zerbe - Morgan Stanley, Research Division

David Rochester - Deutsche Bank AG, Research Division

Aaron James Deer - Sandler O'Neill + Partners, L.P., Research Division

Brett D. Rabatin - Sterne Agee & Leach Inc., Research Division

Herman Chan - Wells Fargo Securities, LLC, Research Division

Jonathan Elmi - Macquarie Research

Joseph Gladue - B. Riley & Co., LLC, Research Division

Joe Morford - RBC Capital Markets, LLC, Research Division

Jennifer H. Demba - SunTrust Robinson Humphrey, Inc., Research Division

Gary P. Tenner - D.A. Davidson & Co., Research Division

Presentation

Operator

Good morning, and welcome to the East West Bancorp First Quarter 2012 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kelly Adams. Please go ahead.

Kelly Adams

Good morning, and thank you for joining us to review the financial results of East West Bancorp for the first quarter of 2012. Here to review the results are Dominic Ng, Chairman and Chief Executive Officer; Julia Gouw, President and Chief Operating Officer; and Irene Oh, Executive Vice President and Chief Financial Officer. We will then open the call to questions.

First, we would like to caution you that during the course of the call, management may make projections or other forward-looking statements regarding events or future financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may differ materially from the actual results due to a number of risks and uncertainties. For a more detailed description of factors that affect the company’s operating results, please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2011.

Today's call is also being recorded and will be available in replay format at eastwestbank.com and 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 for our earnings call. Yesterday afternoon, we were pleased to report financial results for the first quarter of 2012. East West reported strong earnings of $68 million or $0.45 per diluted share for the first quarter of 2012. As compared to the prior year, East West grew earnings by $12 million or 21% and increased earnings per share by $0.06 or 22%. East West demonstrated operating performance across a number of key areas in the first quarter. Our return on assets improved to 1.26% and our return on equity improved to 12.01%. Our net interest margin is strong. Noninterest income is up. Cost of deposit is down. Credit costs are down. And noninterest expense remains stable.

By focusing on attracting and retaining sustainable and profitable clients while maintaining high credit quality and interest rate risk management, we selectively and purposely grew our long and deposit portfolios during the first quarter of 2012. We grew our noncovered loans by $212 million or 2% and increased core deposit by $256 million or 2% to a record $10.6 billion. This increase in our loan portfolio was primarily driven by growth in our single-family residential and commercial and trade finance portfolio, which grew to $2 billion and $3.2 billion, respectively, as of March 31, 2012. Additionally, growth in core deposit was fueled by a 6% increase in the demand deposits to a record $3.6 billion as of quarter end. Our strong results again demonstrated the core strength of our organization and our ability to perform well regardless of the economic conditions.

East West is outperforming many of its peers in overall profitability and our ability to win new business, increase top line revenue and maintained strong expense control. These successes are in part due to prudent decisions and actions we have taken in the past to build a strong foundation for our organization. The same thing, East West is currently taking actions and making investments to ensure future growth opportunities for many years to come.

As in the past, in our earnings release, we provided guidance with second quarter of 2012 and the full year. We currently estimate a fully diluted earnings per share for the full year will range from $1.78 to $1.82 per diluted share, or an increase of 11% to 14% from $1.60 per diluted share last year. Also, we currently estimate that fully diluted earning per share for the second quarter will range from $0.43 to $0.45 per diluted share. This earnings per share guidance for the second quarter is based on the following assumptions: A stable balance sheet; a stable interest rate environment; and an adjusted net interest margin of approximately 3.9% to 4%. Provision for loan losses of approximately $15 million to $20 million for the quarter. Total noninterest expense of approximately $100 million for the quarter, net of amounts to be reimbursed by the FDIC. And finally, an effective tax rate of approximately 36%.

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