East West Bancorp Inc (EWBC) 2005 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the Q3 2005 Metrocorp Bancshares Incorporated Conference Call. My name is Candice and I'll be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's conference.

[Operator Instructions].

I would now like to turn the presentation over to your host for today's conference, President and Chief Executive Officer, Mr. George Lee. Please proceed, sir.

Thank you, Candice and good morning, everyone. Welcome to Metrocorp's Third Quarter Earnings Conference Call. We are pleased with our third quarter performance. The consistency of our improvements in earnings, loans, deposits and asset growth for the quarter was expected. And again, a reflection of how we are gaining traction with a fundamental improvement that we have made. Our net interest margin of 4.57% is one of the highest among the Asian-centric peer group banks.

The damage done by the September hurricanes was less than we anticipated, but nevertheless, caused a $2.8 million increase to our non-accrual loans. We continue to focus on the (inaudible) balance of earnings, asset quality and growth. We have made and continue to make investments to build our infrastructure for long-term growth, but we remain acutely sensitive to the near-term competitiveness in our own markets here.

After the closing of one of our 3 branches in Dallas-Fort Worth area several months ago, we have finally completed our research and preparation to open our newest branch in Dallas-Fort Worth early next year that we believe will provide us with a strategic location to expand our footprint in that market. Strong work (ph) in terms of regulatory approval, systems and management integration was also made during the third quarter for the acquisition and integration of First United Bank in California which was completed on October 5th. We believe that the management team of Metrocorp will be able to capitalize on what we have changed and achieved during third quarter '05 to continue to deliver satisfactory results.

This morning, joining me are some members of my executive management team. Mr. Terry Tangen, Chief Credit Officer, Mr. David Choi, Chief Financial Officer, Mr. Bert Baker, Chief Lending Officer, and our newest member, Mr. Mitch Kitayama, our CEO for First United Bank. We will be happy to answer your questions now.

[Operator Instructions].

Our first question comes from the line of Porter Collins. Please proceed.

Yes. Morning, guys. Good quarter.

Hi, Porter, good morning.

Morning. Couple questions. The quarter -- the loan growth seems a little slower than past quarters. Could you just talk about whether you're just getting ready for the new integration -- the merger? That's my first question.

In general terms, sometimes how the quarter cuts off some loans that might have been a few days early or a few days late which may make a big difference in the numbers. But I also want Bert Baker to comment on this.

Yes, if you look, I mean, from quarter to quarter you'll see changes in there as George mentioned -- it depends on where you are in the quarter. If you look year on year our average earning assets loans were about 7.8 -- 8% versus last year. And we're satisfied with the loan growth we have and so it's --

We're on track.

Right.

Okay. And then could you talk a little bit about the expenses going forward? Obviously there were some integration expenses in this quarter and then going forward you'll probably have some cost savings and some branch expenses, and so it's a lot of moving parts and sort of hard to figure out. Could you just kind of walk through as far as you have it, just what the expenses -- going to hopefully look like on a (inaudible) basis?

Yes, well, cost savings (inaudible) are things that we have been doing consistently in the past. The additional expenses I'm going to ask David Choi to give you some specific numbers. It's really a -- investment strategy into, like for instance, expanding our footprint in Dallas, and I would say that for First United Bank even though we'll be accretive (ph), but will be in a -- investment mode. Obviously we did not enter into that market just to save the 2 branches. But David, please take over.

On the expense side, I think everybody is probably more concerned about the merging expenses and so forth. So far, year to date our expectation is to the total merging expenses roughly about $0.5 million dollars. A majority of that will be capitalized. I think about 70% of that would be capitalized. The rest of that will be expenses. Some of that has already hit our bottom line, roughly about 50 -- $75,000 and so there will be a few more expenses that we will pick up going forward. And then the rest of the expenses is more -- that is a little bit higher than before is more on the Sarbanes-Oxley compliance that we have spent to try to get our certification for this year.

And Porter, obviously, our traveling back and forth would be quite intense in the first 6 months to a year -- between the management team of Metro and First United.

Okay. It looks like they have an expense structure of about -- as far -- in terms of expenses about $750,000 a quarter. Going forward that's going to grow and could you just talk about how the core Metro expenses will be and then expenses will be for the new franchise? Just so -- get a rough estimate.

I think overall as we look into '06, our plan on the non-interest expense would be held very tightly to what we have been in '05.

Okay.

So as we spend more money we're looking for savings, but I do see probably a small percentage of increase.

Okay. That's Okay. And then on -- my last question -- if you take out the shrimp loan and NPAs were down nicely. 15% or so. Could you just talk about trends in that overall NPA book? And the asset quality is getting better but it's obviously -- it's still high versus peers. And just talk about that. And the NPA book you do have, could you just talk about what type of loss content (ph) you think is in there.

Yes. Again, overall I think everyone would be pleased for the trend (ph) as we're going to the next quarter or couple of quarters. But I'll let Terry answer to some of the specifics.

Not outside of that particular one there hasn't been significant shift. We're still have -- worked out plans going forward with the larger assets there. As we've noted in the past we still have some performing, non-performing loans. We would anticipate they'll continue to go down. Timing, as with any work out plan, is not in line (ph) completely. We would hope that we could still see some more continued improvement this quarter, and certainly into the first and second quarter next year -- and continue to see those decline.

Okay. Thanks very much guys. Good quarter.

Thank you, Porter.

[Operator Instructions].

Our next question comes from the line of Bryce Rowe of Legg Mason. Please proceed.

Thank you. Morning, guys.

Morning, Bryce.

Hey, I apologize. I was having a hard time getting onto the call. But wondering if you guys specified what the merger-related expense would be for the fourth quarter?

Yes. David will get to that, but I was surprised that you let Porter beat you to the first call.

I know. He's got quick hands.

David?

We are estimating a total of roughly about $0.5 million total merging expenses. Majority of that will be capitalized and about 70% of that will be capitalized. So far, I think that going forward we will have another 75 to $100,000 of expenses that may hit us in the next couple months. So, that's our guesstimate right now.

Okay. And on the -- part of the goodwill created in that transaction, what was the core deposit intangible and what does the amortization schedule and method look like?

That is being evaluated by a third party that we have engaged in here. We haven't come to those numbers yet. It will be coming up in the next few weeks.

Okay. Thanks, David.

Yes.

Thank you, Bryce.

Thanks, George.

[Operator Instructions].

Our next question comes from the line of Casey Embrick of Millenium. Please proceed.

Hi, George. Thanks for taking a question.

Okay.

Great quarter.

Thank you.

Just, could you talk about -- I'm sorry if I got on late, but could you just talk a little bit about pricing trends you're seeing on deposits, and what's going on in the markets?

Yes. Obviously there's pressure. As you can see that our interest margin is still holding up pretty well. But as compared to the expansion in the past, it has slowed down a bit. David, can you comment on our depositary costs?

Sure. Yes. The expansion on the interest margin for this month does not reflect all the impact on the rate increase for end of September because the (inaudible) rate higher at the end of September. But so far we -- on our market -- in our market, in terms of deposits we see that the trend of the interest rate picking up, but at the same time I think that there are some still -- some uncertainties. We have seen some competition in lowering their rate too. So it's across the board in here (ph). Overall, we do see that the rate is trending up a little bit here. But with the structure of our assets and so forth, we have still managed, I think (ph) very well with the rise of the interest rates.

And, Casey, to add to -- expand on this point, what we're trying to really manage to is a very steady growth formula in terms of earnings and so forth.

Okay.

Because as you see, with the rising interest rates there'll be more and more demand on fixed interest loans and so forth and we are really very, very cautious and prudent that we don't get caught up in chasing loans. That's why even though we probably could have grown our assets a little bit faster, but we are quite conservative.

Okay. Great. Thank you very much.

Thank you, Casey.

We have a follow-up question from the line of Porter Collins. Please proceed.

Sorry, guys. Just on the margin -- obviously after quarter-end you've raised the trust preferred to pay for the acquisitions and you have much new assets coming on. Could you just give us a little bit of guidance in terms of the net interest margin? The trust preferred, I think, was close to 6% and just talk about that quickly?

All in all, I think that they will be -- we have looked at it in comparison with (inaudible-background noise) of First United itself. I think that we (inaudible-background noise) based on the financing rate that we have been able to get on the trust preferred. So, I do not anticipate that it's going to have too big of an impact on the net interest margin, pulling (ph) it down. Well, certainly because we have picked up a piece of asset on the First United. So I think that it's going to be accretive (ph).

Well, what was the -- roughly was the margin of First United?

Let's see --

It's --

I think it's about 4.23 or 4.32 the last time we looked at it.

Okay. All right. Great. I appreciate it, guys.

Thank you.

[Operator Instructions].

Sir, there are no further questions at this time. I will return the conference back to yourself for closing remarks.

Well, thank you, everyone for your questions and taking the time to call in. And feel free, again, to communicate with us and we're anxious for another good quarter coming up. And thank you. And have a great day, even though the Astros lost in 4. Bye, bye.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a wonderful day.