East West Bancorp Inc (EWBC) 2005 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2005 MetroCorp Bancshares Inc. earnings conference call.

(OPERATOR INSTRUCTIONS)

I would now like to turn the presentation over to your host for today's call, Mr. George Lee, president and chief executive officer.

Please proceed, sir.

Thank you.

Good morning.

Good morning, everybody, and welcome again to the phone conference.

First quarter earnings are much to our expectation.

The focus during the quarter was no different from the past; it was on the execution and the fine-tuning of our plan.

We're encouraged by our earnings, as stated in our earnings report.

Excluding the general sale of foreclosed assets during the first quarter of '04, the increase in our earnings for the first quarter of '05 compared with the first quarter of '04 are even more evidence of the progress.

We continued to be on the conservative side with our new loan generation.

On the other hand, have made some changes to bring in new loan officers and underwriters, preparing ourselves for the future.

Our deposits dipped (ph) from where we finished off last year.

But this is the same trend for the past five years, whereby deposits had been lower in the first quarter than the previous fourth quarter.

We're satisfied with our management of interest income and margins and expect the same methodology and discipline to continue.

We're confident that the management of our asset quality will continue to improve to achieve our goals.

We're on track with Sarbanes-Oxley compliance and our branch analysis for both Houston and Dallas is about to complete.

And management focus will be again to stick to our plan and execute with precision and timeliness.

With this, I would like to open up for questions and answers.

(OPERATOR INSTRUCTIONS)

And your first question comes from Bryce Roe (ph) of Legg Mason.

Please proceed, sir.

I just have a question on the expense side.

You mentioned the consolidation, some level of consolidation in Dallas.

Wondering if something took place in the first quarter there?

Yes.

And I can tell you that there will be a branch that we'll be replacing that in a different part of Dallas in the near future.

Okay.

And what costs were incurred specifically in the first quarter related to the consolidation?

It was about $100,000.

Okay.

All right.

And then on the expense side as well, you mentioned donations to the tsunami victims.

Can you tell me how much that was as well?

Yes, we are -- we had a dollar for dollar matching program with the community and were able to generate about $50,000 from the community.

So the bank matched the 50,000.

However, only half of that, or $25,000, was in the first quarter and the other half will be in the second quarter.

Okay, that's great.

Thank you.

And then I guess on asset quality, George, you look at -- kind of saw an uptick in 90-days past due and in this press release you talk about those two runs (ph) being in the process of collection.

Maybe provide a little more color there if you don't mind.

And also, there's allowance (inaudible) of 1.86, 1.87% of total loans is relatively high.

What's a good level assuming the asset quality metrics continue to improve?

Let me answer the second part and I'll let Terry answer the first part.

There's a constant demand on OCC to have a higher percentage, then of course from our auditors, they want us to have a lower one.

So we're keeping that in balance.

So even internally we wish we know what the magic number is, but probably it will stay at that level for a little while.

With that, I'll turn this over to Terry.

Good morning, this is Terry Tangen, chief credit officer.

We had one relationship in the over 90-day category, a seasonal business that had gone through some difficulties.

That is improving and we anticipate that that problem will be resolved shortly and move that out of the over 90-days.

Okay.

And baselines were tied to that same relationship, Terry?

I'm sorry; what was that?

The baselines that you mentioned in the press release were tied to that same relationship?

Yes, that's correct.

And, sir, your nest question comes from Porter Collins (ph) of FrontPoint Partners (ph).

Just a couple of questions, first on MPAs.

Obviously your MPA level is a lot higher than a lot of other banks and over the past nine months, the MPAs really haven't -- they've been pretty constant.

What kind of confidence do you guys have that these MPAs will come down meaningfully in terms of sort of an industry norm or even historical norm for your bank?

Well, let me answer the first part, then again going to turn that over to Terry.

By having a more conservative approach to new loan generations, that answers what may come down the pipe.

And then Terry's going to answer what we have done so far.

This is Terry.

Basically all of these loans are being handled by our workout unit.

As I've mentioned in the past, once you get a problem loan, it takes a while to work some of these out.

As noted in the press release, the vast majority of these are real estate secured.

We are receiving payments, principal and interest, on -- again on the majority of these and so we continue to work these down.

Our goal is to continue on a long-term basis to have these continue to move down year to year.

Now, that doesn't mean on a periodic basis quarter to quarter you may have a blip where you have a change.

Loans still occasionally go bad, but overall, the trend we plan to continue downward movement.

And how concentrated is this MPA portfolio?

In terms of industry or -- ?

In terms of size.

Are the five credits make up 75% or 50% of that portfolio?

Yes, three credits probably make up 60 to 70%.

Okay.

And my second question is on loan growth for the quarter.

On a quarter over quarter basis it was sort of flat.

Can you just talk about your loan growth expectations, especially you talked about some new lenders and stuff like that?

Well, you know we have imposed a loan concentration guideline for ourselves and we want to stick to that so that our asset quality, the trending can be trending the right way.

So actually, sometimes it's difficult to get the same (ph) loan officers to go out of their comfort zone, if you will, to develop new types of zones or approach different industries.

So I'm going to let Bert Baker speak to this a little bit, but my feeling is that when we make changes to loan officers, actually the intent is to allow these people to get into segments that we have not been before.

But that would take little bit of time.

We continue, Porter, to build the team up here and brought in a couple more loan officers this last quarter and continue to build up the (inaudible) in that aspect.

So we're looking hopefully for some favorable growth going forward.

Okay.

And then last question's on the non-interest income.

You broke out the categories a little better this time.

Is this a pretty good run rate on a quarterly basis going forward?

Good morning, Porter, this is David Choi, CFO.

On the non-interest income side, we see that it is a little bit flat from last quarter.

The primary reason is on the lower mortgage fees here in our business.

But on the mortgage loan fees is not a major piece of business in here.

These are on residential mortgages.

But in terms of growth (ph) in here, we see that as constant in here.

One other change in here that we see is that on the late fees, we have changed from accrual basis to a cash basis, so you see that as a little bit lower for this starting first quarter.

But at the same time, we don't have to run into the issue that we ran into last year.

And your next question comes from K.C.

Ambright (ph) of Millennium.

Just a couple of follow-up questions to that.

The efficiency ratio is a little bit higher than expected, but I know there's some one-time stuff in there.

What should we kind of be modeling here going forward?

Say that again, please, K.C.

What type of efficiency ratio are you targeting going forward?

As I have said before, actually in -- we like to get into the high 50s.

But at the same time, in the future you'll see that we're doing a lot of things to prepare ourselves to improve our earnings and so forth.

So there are expenses that comes in that is really an investment for the future.

And I just hate to sacrifice the future for the present just to achieve quarterly improvement.

Sure.

The other thing is that we want to make sure that our Sarbanes-Oxley is totally in compliance.

So there are things that we were planning to do that we cannot execute because we'd rather be on the conservative side to keep the paper trail still in place and all that stuff.

So we're learning as we go, but we want to get into the high 50s.

Okay.

And then any other thoughts on how to kind of better position or better utilize the excess capital of the company?

I mean you kind of want to grow into it?

We are definitely looking seriously in the state of Texas.

But at the same time, we are not closing our mind to other opportunities that may come about.

And, sir, you have no more questions at this time.

We'll stay on the line for another couple of minutes in case people think of questions, we're happy to answer them.

Well, Erica, thank you very much and thank you very much, gentlemen, for this phone conference and it's always a pleasure to hear from you.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Have a good day.