East West Bancorp Inc (EWBC) 2003 Q3 法說會逐字稿

Good morning.

My name is Cheryl, and I will be your conference facilitator.

At this time I would like to welcome everyone to the East West Bancorp 3rd quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question and answer period.

If you would like to ask a question during this time, then please press star and number 1 on your telephone keypad.

If you would like to withdraw your question, press the pound key.

Thank you.

Mr. Canup, you may begin your conference.

Thank you.

Good morning and thank you for joining us to discuss East West Bancorp's financial results for 3rd quarter of 2003.

In a moment, Dominic Ng, our Chairman, President, and Chief Executive Officer, will provide highlights for the quarter.

Then Julia Gouw, our Executive Vice President and Chief Financial Officer, will review the financial details.

We will then open the call to questions.

First, I would like to caution participants that during the course of today's conference call management may make projections or other forward-looking statements regarding the 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 number of risks and uncertainties.

For a more detailed description of factors that affect the company's operating results, we refer you to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2002.

I would also like to remind listeners that today's call is being recorded and is available in replay at eastwestbank.com and streetevents.com.

I'll now turn the call over to Dominic.

Thank you, Steven.

Good morning and thank you for joining us today.

We are pleased with the performance that we reported this morning, particularly our ability to deliver another quarter of record earnings despite the continued challenging environment.

As detailed in this morning's release, the 3rd quarter was highlighted by strong growth in both loan and core deposits, well-controlled expense levels of better than anticipated net interest margin and exceptional asset quality.

Earnings per share for the 3rd quarter totalled 65 cents, 25% above the 3rd quarter of last year.

As detailed in the release, during the quarter we recognized approximately $1.1 million in pretax interest income from interest, late charges, and prepayment penalty from the resolution and repayment of selected loans in amounts atypical to such line items.

Excluding the impact of these items, our earnings per share for the quarter equalled 62 cents, 19% above the comparable year-ago earning per share.

Pretax income, excluding the item, climbed about 25% to $23.7 million, also a record amount.

Later on Julia will provide an overview of the financial results for the quarter, and I would like to review a few items from the quarter.

Loan growth was, again, a highlight for the quarter.

Total loans outstanding increased by $590 million, or 25% above the year-ago level with organic growth excluding the Pacific Business Bank acquisition of 20%.

Sequential loan growth from last quarter was $170 million or over 6%, all of which was organic.

Similar to last quarter, we generated growth across all lending categories with the exception of construction loans which experienced a slight decrease.

Commercial real estate multifamily loans accounted for the majority of the increase with loan balance with commercial business finance also contributing.

We believe we have the ability to continue to generate strong loan growth in the 4th quarter.

Among the other highlights of the quarter include our core net interest margin for the quarter, excluding the previously mentioned items, equaled 4.26%, down only 2 basis points from last quarter despite the reduction in the Fed fund rate at the end of June.

The growth in our earnings asset base, combined with a higher percentage of core deposit and the lowest cost of funds in our recent history, supported the margin in the 3rd quarter.

We believe that we would continue growth in the loan portfolio, we can sustain the margin near the current level for the 4th quarter.

We anticipate, however, that the cost of deposits would not decrease meaningfully from the current level.

In addition to hitting for many of our core deposit rates, we have begun a retail time deposit marketing program that should increase time deposits as a percentage of total deposits.

With the higher anticipated balance of time deposits, combined with the current loan cost of our other deposit categories, we believe that the cost of deposits for the 4th quarter would not be meaningfully lower than the 86 basis points for the 3rd quarter.

Lastly, asset quality.

We were especially pleased with our asset quality ratios for the quarter.

The two nonperforming loans that we highlighted last quarter, a multifamily loan and the trade finance loan made under the EX-IM bank program, which together represent approximately $8 million, were repaid in full this quarter without any negative impact.

In fact, we recover approximately $480,000 in interest and late charges on the resolution of the multifamily loan.

In total we reduced nonperforming assets from $14.4 million in the 2nd quarter down to $5.6 million, or 15 basis points of total assets as of September 30 while actually recognizing net recoveries of $467,000.

Again, we remain pleased with our asset quality ratios and have not seen any systemic issues to date with our portfolio or our customer base.

Finally, I will provide an outlook for the 4th quarter.

Based on the strong performance to date, we estimate earnings per share for the final quarter of the year at 62 to 64 cents per share, resulting in a full year 2003 earnings per share of $2.35 to $2.37.

At the mid-point of this range our 2003 earnings per share would represent 17% growth in earnings per share and the highest annual earnings in the bank's history.

I would now turn the call over to Julia to discuss the details of these results.

Thank you, Dominic.

I will provide a brief review of the major financial results for the quarter.

Again, this quarter we generated record net income and earnings per share.

Net income climbed from $16.1 million an increase of 25% while earnings per share totalled 65 cents, 25% higher than a year ago.

As Dominic mentioned earlier, we recognized approximately $1.1 million of interest, late, and prepayment charges during the quarter.

Excluding the impact of these items, our core net income totalled $15.4 million and core earnings per share equals 62 cents, 19% above the year-ago figure.

Earnings growth was driven by higher earnings assets, gains in noninterest income, and a slight reduction in the loan offset by a higher tax rate.

The core net interest margin for the quarter, which excludes the aforementioned items, equals 4.26% compared to 4.32% a year ago and 4.28% in the 2nd quarter of this year.

We were able to sustain the margin at a level roughly equal to last quarter due to the higher level of earnings assets and the decrease in the cost of deposits to 86 basis points.

As Dominic mentioned earlier, we have initiated a retail marketing campaign to increase the level of time deposits.

The rate offer under this program approximately equivalent to the rate on the time deposits during the 4th quarter and, as a result, we will not see any meaningful reductions in the cost of time deposits due to repricing.

We anticipate that the margins for the 4th quarter will come in at 4.25% to 4.28% range driven primarily by earnings asset growth.

Loan continued at a strong pace in the 3rd quarter with total loans increasing by 25% from year end 2002 to $2.9 billion.

Average loan increased 14% over the prior year period to $2.6 billion.

We generated growth across all loan categories with the exception of construction loans.

We anticipate growth in the 4th quarter in the 15% annual range.

We also believe that we will begin to see an increase in the balance of construction loans.

We have experienced a repayment of a number of larger construction loans during the past two quarters which lead to the decrease in construction loans outstanding during the year.

Based upon our current commitment, this category to increase along with the rest of the portfolio in the 4th quarter.

Fee income growth was also strong during the 3rd quarter.

Core recurring noninterest income, which excludes the loans and other assets, climbed 43% to $8.6 million, the highest level in the bank's history.

The overall growth in our loan and deposit balances, as well as increased trade affordable housing finance activities, growth higher branch loan and letter of credit income, which together increased by 18% over the prior year period.

Residential lending operations generated approximately $2.2 million in fee income for the quarter, substantially higher than the last year's 3rd quarter.

We anticipate that income from secondary market activities have peaked and will decline moderately in the 4th quarter.

Approximately 60% of our recent single-family mortgage origination was for refinance, and we have experienced a slight decrease in the volume during October.

We believe that a sustainable run rate for this line item will be in the $1 million to $1.5 million per quarter range.

Noninterest expense for the quarter totalled $19.8 million, 22% above the prior year period.

Cash operating expenses, which exclude the amortization of intangibles and investments in affordable housing partnership, equals $17.5 million, 20% higher than the 3rd quarter of 2002.

The increase in expenses was driven by the higher staffing and other operating costs related to the overall growth at the bank.

The efficiency ratio for the quarter equalled 37.58%, and we anticipate an efficiency ratio for the 4th quarter in the same range.

We reported an effective tax rate for the 3rd quarter of 35% compared to 32% for the year-ago quarter.

The higher tax rate reflects the elimination of the investment companies for the 4th quarter of 2002 offset by additional tax credits from new investments in affordable housing partnerships made in 2003.

We estimate an effective tax rate for the 4th quarter of 35%.

Asset quality.

Asset quality was the highlight of the quarter as Dominic mentioned earlier.

Total nonperforming assets equals $5.8 million, or 15 basis points of total assets, compared to $5.6 million, or 17 basis points a year ago, and $14.4 million, or 40 basis points, in the 2nd quarter of this year.

Nonaccrual loans totalled $4.6 million, or 16 basis points of total loans, compared to $2.9 million, or 13 basis points a year ago, and $8.2 million, or 30 basis points in the 2nd quarter.

The reduction in the nonperforming and nonaccrual loans compared to last quarter, we felt it primarily from the repayment of two loans previously mentioned as well as a number of other smaller loans.

We maintained our nonperforming asset target for 2003 at or under 50 basis points.

Equally encouraging was the $467,000 of net recoveries for the 3rd quarter compared to the net chargeoff of $364,000 or an annualized 6 basis points for the 3rd quarter of last year.

We anticipate net chargeoff for 2003 to be at or below 35 basis points for the year.

The allowance for loan losses at the end of the 3rd quarter equals $37.5 million, or 1.28% of total loans.

The reduction in the allowance compared to last quarter, we felt it from the reclassification of approximately $5.7 million from the allowance on liability line items.

This amount was previously allocated allowances for unfunded commitments and off balance sheet commitments for our trade finance and affordable housing activity.

Recent regulatory and accounting pronouncements regarding such off balance sheet commitments lead to a change in the classification of these amounts.

We provided $2 million for losses in the 3rd quarter, down from $2.6 million provided in the year-ago period.

We believe that given our recent loss history, the level of nonaccrual loans and our current underwriting guidelines and portfolio, that $2 million is sufficient provision and anticipate a $2 million provision for the 4th quarter.

Our portfolio remains well-diversified and and loan-to-value ratios remain very strong.

Commercial real estate loans as of September 30 had an average balance of $1.2 million, an added loan-to-value of 57.6% and 2.5 year seasoning.

Multifamily loans had an average balance of approximately $485,000, 64.3% loan-to-value, and 1.9 year seasoning.

Construction loans had an average balance of $1.8 million, 69.8% loan-to-value, and 1.3 year seasoning.

Finally, our commercial business interest finance loan had an average balance of $395,000 and 2.3 year seasoning.

I will now turn the call back to Dominic.

Thank you, Julia.

We will now open the call to questions.

At this time I would like to remind everyone in order to ask a question, please press star then the number 1 on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Your first question is from Bret Rabatin with FTN Midwest Research.

Good morning.

A couple of questions for you.

First off, I wanted to get a little more detail on the deposit growth in the quarter which was exceptionally strong.

How much of that was the Prime Bank related deposit growth?

Not much, actually, from Prime Bank from the 2nd quarter to 3rd quarter.

A good example is for the demand deposits for the whole year.

The increase from the Prime Bank from December to September 30 is about $16 million and the rest came from all the branches of East West Bank.

Okay.

And then can you talk about in terms of the CD strategy what kind of -- I'm assuming there is going to be some specials and that you'll be offering certain time frame CDs.

Can you elaborate on that?

Yeah.

We have a marketing program to attract more CDs.

We are offering an 8-month CD at about 1.68%, which approximately what our cost of time deposits right now.

We have been offering not very attractive CD rate in the beginning of the year, and that's the reason why we have a reduction in our CDs.

But we believe that now is a good time for us to gain some of the time deposits back.

And that's basically -- you're trying to grow CDs in order to fund loan growth is the way I understand you are couching that discussion.

Yes.

It will provide liquidity for -- because the loan growth has been pretty substantial.

Okay.

And then in relation to fee income, wanted to hear some thoughts on the letter of credit business.

And then as I understand the language you said on the call, fee income is basically going to be lower in the 4th quarter.

I just wanted to make sure I had that correct.

Yes.

On the secondary market activities that came from the refinancing, that peaked in the 3rd quarter so we expect a decline in the 4th quarter and also next year.

We have some leftover pipelines that are still -- but, I believe, that refinancing will sooner or later really go down dramatically.

Okay.

And then what about the letter of credit business?

That should continue to increase.

In fact, I would say that all line items and the fee income barrier have shown very, very steady strong growth for the last few years.

And every quarter we -- the numbers get bigger.

But these are so numerous number of items, like what is the branch fee income, wire transfers, and international letter of credit fee income and so forth.

There are a lot of items in there that they all have continuously showing nice growth.

The only item that actually has shown a very strong growth last year was the refinancing of single-family mortgages, which we anticipate at this sort of like type of great environment but in order to slow down unless rates are changing again.

If the long rate starts changing again, then it may continue to get going.

But I would say that for now we anticipate that volume probably would drop about 30%, 40%.

Okay.

And then one last question and I'll turn it to someone else.

Dominic, can you talk about your appetite here for acquisitions?

Your capital ratios started to creep back up a little bit and you've got Pacific Business Bank fully on board now.

Do you feel like you are going to be in the market in the next six months for another potentially small bank acquisition?

Our acquisition strategy really hasn't changed for the last five years or so.

I mean, whenever there is someone out there on the south side willing to enterprise that we're interested, we don't wait.

But it's more or less finding the right partners to merge with and in terms of making sure that the seller is willing to let go of their shares at a reasonable price that East West feels that it can be not only immediate to our earnings but also with a very easy execution.

I mean, there are low execution rates, because we are located on both .

Because if you look at our organic growth right now, that's why it makes it more challenging for us to -- if we look at acquisition as something that we wanted to do, I would say that the more we have success in growing our core deposits and our loans the more challenging for the acquisition side because it makes it more unlikely for us to pay a higher premium for something that we could have easily done on our own.

Thank you very much.

Thank you.

Your next question comes from Richard Eckert with Roth Capital Partners.

Hi, Dominic, Julia.

I have a quick question about your prepayment experience.

Last quarter you indicated that you had approximately $160 million in prepayments.

Can you give any color on the 3rd quarter experience?

Are you talking about the --

Loans that repaid early.

Okay.

For the commercial, which includes multifamily, commercial real estate, construction, and business loans, for the 3rd quarter it's roughly about $200 million.

So it is still quite high, actually.

Our funding has been very strong, and that's why we have a pretty good net growth.

Are you seeing any changes in that trend developing as we head into the 4th quarter, with the spike up in long-term rates?

Probably slightly.

I would think that the prepayment will be under high side only because there are some customers that may have fixed rates and that may be one or two convert to adjustable because it's cheaper.

So there's always different possibility of people wanting to pay off.

Okay.

Thank you very much.

Your next question is from Jennifer Demba with SunTrust Robinson Humphrey

Good afternoon.

All my questions have really been asked, but I was wondering if maybe Dominic could comment on what he is seeing in the economy right now and maybe any changes maybe you've seen on the positive or negative side in the last few months.

I think the economy in general -- I'm focusing more with the customer base.

At this stage I think it still looks okay.

It doesn't look very strong, but it doesn't look weak either.

It's more or less okay.

And there always the concern about with the the state government being where it is right now with deficits.

People worry about if there's going to be massive cuts in terms of to the government entities throughout the State of California.

But that's an anticipation that as of now that we haven't seen much going on.

There's also the labor union strike.

I think there are a lot of uncertainties in California.

Whether it's going in the future or as it is right now that cause business to be somewhat conservative in terms of making investments.

It appears to me for the last few years California has been experiencing this type of problem is that when you look at the economic statistic -- I'm more focusing in Southern California because we don't have much exposure in Northern California.

But if you look at Southern California you look at the economic statistics, it doesn't look bad at all.

It continues to look pretty good.

However, there is always this uncertainty out there whether it's September 11th during the year 2001 or the port closure last year and then this year is now the labor union strike and the recall, so there is always something out there that will cause people to worry about it.

But, again, the numbers continue to show pretty strong.

And if I look it up and if I sort of, like scale it back down to our customers, I found that most of them are still doing pretty good; and that's why allows us to continue to have a pretty nice growth in our loan category.

Thanks.

Your next question comes from Scott Valentin with Friedman, Billings, Ramsey.

Good morning.

Congratulations on a good quarter.

Thank you.

Thank you.

Question with regard to -- you've had outstanding loan growth, particularly commercial real estate growth, and you are far outstripping your competitors as far as growth goes.

How do you source your loans and what would you attribute your success to as far as gathering new loans?

I think in terms of our loan growth one of the keys -- I mean, there are several reasons there.

It's just a matter of one is a lot of our repeated customers continue to be active in the real estate market.

We have always been very big in real estate lending.

For 30 years in history now East West started in lending and real estate, has always been successful in lending and real estate, and so we have continued to have our customers that are doing well and come to us for either refinancing or buying property and so forth.

That's one area that we have continued to be able to find growth.

The other part is that for the last few years there are more and more consolidations taking place in California which allow East West, even though we are only $3.8 billion in size, but we were able to pride ourselves as the third largest independent bank headquarters in Los Angeles County.

Now that has continued to create more and more bigger exposure of East West in the community so now there are more and more customers out there, or potential customers out there, who say they are looking for a bank to do a real estate transaction.

Who do they go to?

There is still a lot of sentiment within California that customers do not like to deal with out-of-state banks or huge banks.

So when they look for independent banks and then they start looking at -- they start narrowing it down to three or four of the large ones and then they focus on who really are specialized in real estate, very quickly many of them start focusing on East West, and we are able to pick up a lot of customers through that process.

I think it's a combination of these two that result in us having that kind of very nice loan growth.

Okay.

And then, I guess, the same question for your core deposit growth.

You had, I think, 10% quarter length quarter increase in your core deposits.

That's still very strong compared to almost any other peer member out there.

What are you doing on that front to really differentiate yourself and get the business?

We have -- in fact last year started -- well, we have always had nice core deposit growth.

I mean that's just part of the East West business strategy for the last several years ever since we converted to a commercial bank in 1995.

But the last two years we have made a very strong initiative within the branch network.

Let me sort of further explain this better.

That is that for the last many years, we have been very aggressive in getting commercial core deposits from our corporate lenders.

We have many commercial lenders out there when they bring in a relationship, in terms of making a loan, it comes with a business operating account and so forth.

That has always been the case.

So we have not, let's say two years ago, we have not used our branch network to go after small business customers who may or may not have any commercial lending needs.

We talk about small mom-and-pop customers that most of them do their business, use their own equity, cash, or credit card and they do not necessarily need to borrow money from the bank.

And we have not in the past gone after this type of customer.

These are usually customers very much -- there are many of them in California, by the way, but most of them are with the BofA, Wells Fargo, or a large bank as one of these tiny little customers that get no attention, no respect, and so forth.

And so we made a conscientious effort within the last two years to go after also this type of customer, and we had got some very good results.

Now, in the meantime we continue to have better and better growth from the commercial lending groups who continue to bring in more commercial deposits.

And I think it's the combination of these two that result in having some very nice continued core deposit growth.

Okay.

And, sorry, but one final question.

You mentioned 99 Ranch, the branch initiative, has been successful but you wanted to slow down because the reinvestment return on deposits wasn't that great.

Given the loan demand you have now, or you're seeing in the pipeline, is there any thoughts to reaccelerate that, maybe open three or four branches in the next year?

Not at this point, because the rate at really hasn't changed that much.

I mean, we feel that at this stage unless we see that fund start going up, then it makes sense for us to be more aggressive in opening more branches; but at this point I don't see that is necessary.

Okay.

Thank you very much.

Thank you.

Once again I would like to remind everyone in order to ask a question, please press star then the number 1 on your telephone keypad.

Your next question is from Campbell Chaney with Andrews [sic] Morris Harris.

Good morning, Dominic.

Good morning, Julia.

I missed some of the -- the first part of your call, so if you've already covered this I apologize.

Since you took a reallocation of 5.7 million from your reserve to other liabilities, do you plan on building up that reserve again to something in the 1.5% of loan.

And then kind of a follow-up to kind of get your color on what's going on with the U.S. and China with regard to trade policy.

What impact do you think there would be, No. 1 -- two points -- if you think that the one will be unpegged with the dollar, just kind of your opinion.

And No. 2, if you do can you speculate how that would impact your business?

In two months of reserve it really doesn't change the adequacy of the reserve only because we always provided for all those off balance sheets except that it was classified as contra-assets.

Unfortunately, given our low, nonperforming and classified assets, our analysis shows that we cannot really increase the ratio that much from what we are right now.

We actually would like to provide more, but in our calculations, how much per different category of the loans and the classification of the loans, just do not result in the need to book more reserve .

Is it fair to say you gave it some color that it would be $2 million in provisions for less than Q4, do you think that trend is going to continue through '04, 2004?

I don't think so for '04.

If our loan growth started to -- or continue like this I believe that we probably should provide more.

But for the 4th quarter probably safe to say that even $2 million may be pretty adequate for the 4th quarter.

Okay.

And then, Dominic, any thoughts on the China policy in the ?

I think that the U.S.-China situation is more political than economic.

I think at this stage right now we would have to take a look at and see how successful U.S. in terms of dealing with the Middle East crisis.

If for some reason that we were able to track down Osama bin Laden and Saddam Hussein in a very quick period of time and then we run out of issues in the Middle East and I think the U.S.-China economic issue will become the highly debated items for the presidential election of 2004.

So I think China clearly is very concerned that they will get into this political situation for 2004 U.S. presidential debate.

With that being said, I think that when we look at it in our perspective about how did that affect our customers who are in the import business, and how would that affect our customers who are in the export business?

When it comes to the import side, the irony about this current situation, when we hear about certain politicians talked about the China currency needs to be a little bit freer and so that there will be the opportunity for U.S. dollars to come down a little bit compared with China currency and it would allow better competition, I think that that theory really doesn't work; because quite frankly right now if Wal-Mart is paying, let's say $2,000 a year for labor versus, let's say $35,000 a year for, let's say a union labor in the United States, you can increase -- you can spike up that currency for 30% or 40%, let's say spike up 40%, which is going to be a major global crisis economically.

If China ever spiked up the currency 40%, it would be a global crisis in terms of how it affects everybody.

But even at 40%, and that's only going to get the labor up to $2,800 a year, Wal-Mart's still going to buy from China.

And then that's the thing that I looked at is that at the end of the day it's good political talk but has not economic substance.

But on the other hand, so that's why I look at our importers, customers will still be able to ship goods from Asia to the United States because I think that the competition issue in the United States was with the Asian country not China particularly.

But all over, whether it's Mexico or Asia or somewhere in Latin America, there are much bigger issues out there that people need to address than just fixing the currency.

And so, therefore I don't think that if there is a change it would have much impact as one.

Secondly, for the exporters.

In fact, China is getting a lot more exports from the U.S. for the last few years, substantially more.

So we expect that that trend will continue even more aggressively in the future because China clearly is aware of the pressure, and they are clearly aware that political pressure is not something to be looked upon lightly.

And so, therefore, I can expect that China is going to start coming up with some ideas to encourage more exports from the United States so as to ease the pressure; and, therefore, I see that there will be a lot more opportunities for exporters from the U.S. to look into opportunities to sell goods to China.

And all of that will be positive for us.

And I also continue to see more easing up in terms of allowing U.S. investments to be more active in China.

And, again, that also will be positive for East West because of our Beijing office over there can help coordinate a lot of these activities for our clients in China.

Great.

Appreciate the comments, Dominic.

Thank you.

Your next question comes from Joe Morford with RBC Capital Markets.

Good morning, everyone.

Most of my questions have been answered as well, but, I guess, just in thinking -- some of the banks that have reported so far have actually seen either declines in commercial real estate loans or slower growth there because they've commented that of the aggressive market pricing they are not necessarily willing to compete or put such loans on the books at these levels.

From your standpoint, is the competitive environment not that bad, or is it really your relationships that have allowed you to continue to post the growth that you have?

Well, I think the environment has always been competitive.

In fact, for the last many years there's always -- in different environment and different competition, but at the end of the day it's always competitive.

The only time that I've seen that the environment wasn't competitive was in the early '90s, from '92 through '95, when Southern California went through a severe recession and went down quite a bit.

And the only reason at that time there wasn't that much competition was most of the banks were so thick and they weren't able to lend and -- but for the last many years have always been very competitive and we always see crazy pricing going out from somewhere.

Nonrecourse loan had a very high loan-to-value.

And I think the key thing is just have to have the discipline to stay away from those fields .

We've been very fortunate that for the service that we provide that very much of a high assurance of closing deals in the very, very quick turnaround time have allowed us to have customers that continue to bank with us just for the reliability.

Now that also -- the reason that we are so reliable is that we try not to do deals that have too much brain damage to it.

When someone comes I want nonrecourse, I want this sort of like very much funny assortment of rates that you have to it here and there, plus the the fact that a high loan-to-value, then there is a likelihood if it's too much hair to it then it's likely that you may not necessarily be able to deliver either on a timing manner or may be able to even deliver at all, and which is going to get customers very, very frustrated or will create a lot of ill will.

But if you stick with deals that are very much cookie cutters, when it comes to real estate, we don't try to be too fancy about it and we try and stick with deals that -- go with customers that tend to be more conservative, have a low loan-to-value.

And by doing it that way, then we can even provide a much better service than most other banks would expect.

So I think that's a part that I think that we have been successful with.

And I think the other things -- again, going back to what I said earlier is that as long as there is consolidation out there, when we look maybe at the overall real estate financing market might not have grown; however, East West is such a small player in the entire universe of the California real estate market, and our growth really doesn't make a dent to many of the major banks.

But to us it's somewhat substantial.

And that's something I have been talking to our staff for the last two years.

And I told them that don't get hung up with overall economic statistics, because it really should have no relevancy to East West Bank because what we can make -- what we can impact to our organization is something that really does not have any material facts to the overall economy.

And I think that's pretty much what's happening here, is that overall market is not necessarily growing very aggressively, but we get just enough for us to have pretty decent numbers.

Okay.

Thanks very much, Dominic.

Thank you.

Your next question comes from Manuel Ramirez with KBW.

Hi.

Good morning.

A couple of questions for you.

First, I know the average size of your commercial real estate loans has not changed all that significantly, but given that you've had a lot of growth and your comments about getting more business from existing customers, has the average size of your relationships increased significantly over the last year or so let's say?

And then secondly, it looks like there is a pretty noticeable sequential slow down in multifamily growth, and I was just wondering if there was anything specific going on?

Thank you.

the average price, so our relationship growth because there may be a new relationship that like after they are pleased with our service, continue to give us more.

But the average -- we are very focused on the average size per deal and also the loan-to-value on that individual deal, so that is on the commercial real estate.

I hope that answers your question on the commercial real estate.

And then in terms of the multifamily, it's the repayment.

It's a slowdown because we have quite a bit of payoffs in that category.

We are still funding some, but we also have some payoffs.

Maybe on the commercial real estate just give us, maybe a sense of the size range of your top five relationships, not individual loans, but just relationships.

In terms of --

I assume you don't have the number right there but --

I think that some of the bigger relationships we have multiple properties could add up to about $30 million, $35 million in terms of relationships; but individual real estate we have been limiting it to maximum $10 million per deal.

Terrific.

Thank you.

There no further questions at this time.

Mr. Canup, are there any closing remarks?

Well, I just want to thank you all for joining us for the call today, and we look forward to speaking with you all in January.

Thank you.

This concludes today's East West Bancorp 3rd quarter earnings conference call.

You may now disconnect.