Good day and welcome to the East West Bancorp third quarter 2022 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Julianna Balicka, Director of Investor Relations. Please go ahead. Thank you, Betsy. Good morning and thank you everyone for joining East West Bancorp's third quarter 2022 earnings call with Dominic Ng, our Chairman and Chief Executive Officer, and Irene Oh, our Chief Financial Officer. This call is being recorded and will be available for replay on our investor relations website. During their remarks, Dominic and Irene will reference a slide deck that is available on our investor relations site. Management may make projections or other forward-looking statements which may differ materially from the actual results due to a number of risks and uncertainties, and management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic. Thank you, Julianna. Good morning and thank you everyone for joining us for our earnings call. I will begin the review of our financial results with slide three of our presentation. This morning, we reported net income of $295 million and earnings per share of $2.08 for the third quarter 2022. Our earnings per share grew 58% annualized for the second quarter of 2022. Total revenue of $627 million grew 55% linked quarter annualized and included record net interest income of $552 million. Strong revenue growth and improved efficiency drove third quarter 2022 adjusted pre-tax, pre-provision income growth of 66% linked quarter annualized. Asset quality continued to be healthy with very low charge-off. Our bottom line returns are industry leading. We returned 1.9% on average assets, 20% on average equity, and 22% on average tangible equity this quarter. Quarter-over-quarter, all our profitability ratios expanded. Importantly, all our capital ratios grew. With our impressive operating margins and strong capital, we are well-positioned for continued success and to appropriately navigate a range of possible outcomes in an environment of elevated uncertainty. Slide four presents a summary of balance sheet. As of September 30, 2022, total loans reached a record $47.5 billion, an increase of $926 million or 2% from June 30. As anticipated, loan growth slowed in the third quarter. Year to date, loans are up 15%, excluding the forgiveness of PPP loans, and we continue to expect that full-year loan growth will be in the range of 16%-18%. Our loan portfolio is well-balanced between commercial real estate, commercial and industrial, and residential mortgage. This diversification is a fundamental strength that provides both stability and optionality to generate prudent growth as economic cycles change. Total deposits were $53.9 billion as of September 30, 2022, a decrease of $486 million or 1% from June 30. Third quarter average deposits were $54.1 billion, essentially unchanged from the second quarter. Our deposit book is well diversified by deposit type, and 40% of total deposits were in non-interest bearing demand accounts as of September 30. Turning to slide five, we have a resilient balance sheet with strong capital and high liquidity. As you can see in the exhibit on this slide, all our capital ratios expanded quarter-over-quarter. As of September 30, 2022, we had a Common Equity Tier 1 ratio of 12.3%, a total capital ratio of 13.6%, and a tangible common equity ratio of 8.35%. East West Bancorp board of directors has declared fourth quarter 2022 dividends for the company's common stock. The quarterly common stock dividend of $0.40 is payable on November 15, 2022 to stockholders of record on November 1, 2022. We did not execute any buybacks in the third quarter. Moving on to a discussion of our loan portfolio beginning with slide six. As of September 30, 2022, C&I loans outstanding were $15.6 billion, sequentially up 2%, and total C&I commitments were $22.2 billion, sequentially up 1%. Our C&I loan utilization rate was unchanged quarter-over-quarter at 70%. Our C&I portfolio is well diversified by industry and sector. Slide seven and eight show the details of our commercial real estate portfolio, which is well diversified by geography and property type, and consists of low loan-to-value loans. Total commercial real estate loans were $18.7 billion as of September 30, 2022, up 1% from June 30. In Slide nine, we provide details regarding our residential mortgage portfolio, which consists of single-family mortgages and home equity lines of credit, and is primarily originated through East West Bank branches. I will highlight that 83% of our home equity lines of credit are in a first lien position. Residential mortgage loan total $13 billion as of September 30, 2022, growing 4% from June 30. I will now turn the call over to Irene for a more detailed discussion of our asset quality and income statement. Irene. Thank you, Dominic. I'll start with our asset quality metrics and components of our allowance for loan losses on slides 10 and 11. The asset quality of our portfolio continues to be strong. Quarter-over-quarter, criticized loans decreased 11% and the criticized loan ratio improved 29 basis points. Special mention loans decreased 20%, largely from upgrades of CRE loans, largely hotel loans, due to improvements in financial performance and liquidity. Classified loans were essentially unchanged. As of September thirtieth, non-performing assets were $97 million or 16 basis points of assets. During the third quarter, we booked net charge-offs of $7 million or a low 6 basis points of average loans annualized, compared with net recoveries of 6 basis points annualized in the second quarter. Our allowance totaled $583 million as of September 30, or 1.23% of loans, compared with 1.21% of loans as of June 30. During the third quarter, we recorded a provision for credit losses of $27 million, compared to $13.5 million for the second quarter. The quarter-over-quarter build in reserve and allowance coverage largely reflects the current macroeconomic outlook, which is weaker than a quarter ago, as well as third quarter loan growth. While credit quality remains strong and the current credit environment is benign, we are watchful of various challenges affecting the economy and our customers, taking proactive actions where warranted, including conservatively building our allowance. Now moving to a discussion of our income statement on slide 12. This slide summarizes the key line items of the income statement, which I'll discuss in more detail on the following slides. Of note, amortization of tax credit and other investments in the third quarter was $20 million, compared with $15 million in the second quarter. This is lower than what we had previously anticipated because of timing. Certain tax credit projects are delayed and the recognition of the associated amortization expense will be in the fourth quarter. Accordingly, we currently expect the amortization of tax credit and other investment expense to be approximately $30 million in the fourth quarter. Third quarter 2022 income tax expense was $89 million, compared with income tax expense of $83 million for the second quarter of 2022. Year to date, the effective tax rate for the first nine months of 2022 was 23%. We currently expect that the full year effective tax rate will be approximately 22%, including the impact of tax credit investments expected in the fourth quarter. I'll now review the key drivers of our net interest income and net interest margin on slides 13 through 16, starting with the average balance sheet. Third quarter average loans of $46.9 billion grew $2.2 billion or 20% annualized. The strong growth across all loan categories drove a favorable mix shift in average earning assets quarter-over-quarter. In the third quarter, average loans made up 79% of average earning assets, compared with 76% in the prior quarter. Third quarter average deposits at $54.1 billion declined only $78 million quarter-over-quarter, remaining essentially flat. Growth in interest-bearing deposits nearly offset the decrease in demand deposits as some customers shifted excess balances to higher yielding options, reflecting market dynamics in a rising interest rate environment. Average non-interest-bearing deposits held up and made up 41% of total deposits in the third quarter. Turning to slide 14. Third quarter 2022 net interest income of $552 million was the highest quarterly net interest income in the history of East West Bancorp, growing 66% linked-quarter annualized. The net interest margin of 3.68% expanded by 45 basis points quarter-over-quarter. As you can see from the waterfall chart on this slide, net interest income and margin expansion in the third quarter reflected the impact of higher loan and earning asset yields, which increased the NIM by 71 basis points, plus a favorable earning asset mix shift, which expanded the NIM by 7 basis points. This was partially offset by 33 basis points of compression from the funding side. Turning to slide 15. The second quarter average loan yield was 4.75%, an increase of 80 basis points quarter-over-quarter. The average loan yield comprised an average coupon yield of 4.65% plus yield adjustments, which contributed 10 basis points to the overall loan yield in the third quarter. As of September thirtieth, the spot coupon rate on our loans was 5.10%. In this slide, we also present the coupon spot yields for each major loan portfolio through the last 4 quarter-end periods. You can see the positive impact of rising interest rates on each loan portfolio as loans are repricing. In total, 62% of our loan portfolio is variable rate, including 30% linked to prime rate and 27% linked to LIBOR or SOFR rates. Most of the loans reprice at least monthly. I would also highlight that 43% of our variable rate CRE loans have customer-level interest rate derivative contracts in place. We all help our customers enter into loan-level interest rate derivatives, helping to protect them against rising debt service costs. At the same time, the loans remain variable rate on our balance sheets and the bank benefits from the asset sensitivity. Additionally, $2 billion of our, the 86% of variable rate C&I loans also have derivative contracts in place. Turning to slide 16. Our average cost of deposits for the third quarter was 51 basis points, up 34 basis points from the second quarter. Our spot rate on total deposits was 74 basis points as of September 30, 2022, a year-to-date increase of 65 basis points. This translates to a 22% cumulative beta relative to the 300 basis point increase in the target Fed funds rate over the same period. In comparison, the cumulative beta on our loans has been 55% as our loan coupon spot rates increased 166 basis points year-to-date. We started the rising interest rate cycle from a position of strength, with historically high levels of demand deposits for East West Bank and strong liquidity. This has bolstered the asset sensitivity benefits of our variable rate loan and securities portfolios, supporting strong revenue growth through the cycle as rates continue to rise. We're pleased with the lag in deposit beta cycle to date. This has come through careful deposit cost management. As rates continue to rise, we believe our approach will continue to support an expanding net interest margin and robust net interest income growth in the coming new year. With 41% of our average deposits in non-interest bearing accounts, and with the growth that we have had in treasury management products and analyzed accounts since before the pandemic, we feel comfortable about continuing to navigate the cycle well. Moving on to fee income on slide 17. Total non-interest income in the third quarter was $76 million, down from $78 million in the second quarter. Customer-driven fee income and net gains on sales of loans were $69 million, up 7% or 26% annualized from the second quarter and up 10% year-over-year. We saw growth across most of the fee income lines of business this quarter. Moving to slide 18. Third quarter noninterest expense was $216 million. Excluding amortization of tax credits and other investments and Core Deposit Intangible amortization, adjusted noninterest expense was $196 million in the third quarter, up $14 million or 8% sequentially, driven by higher compensation and employee benefits expense. In comparison, our sequential total revenue growth was 14%, exceeding expense growth and generating positive operating leverage. Quarter-over-quarter, our efficiency improved. Third quarter adjusted efficiency ratio was 31%, compared with 33% in the second quarter. Our adjusted pre-tax, pre-provision income grew 17% sequentially, or 66% annualized, and our pre-tax, pre-provision ROA was an attractive 2.7% in the third quarter. With that, I'll now review our updated outlook for the full year of 2022 on slide 19. For the full year 2022, compared to our full year 2021 results, we currently expect year-over-year loan growth excluding PPP of approximately 16%-18%, unchanged from our prior outlook. Year-over-year net interest income growth excluding PPP of approximately 35%. This narrows down to the upper end of our prior outlook, which was for net interest income growth ranging from 30%-35%. Underpinning our interest income assumptions is the forward interest rate curve as of September 30, 2022, with Fed funds expected to reach 450 basis points by year-end. Adjusted non-interest expense growth, excluding tax credit investment amortization of approximately 11% year-over-year, which is a slight increase from our previous outlook. With our strong revenue growth, we expect positive operating leverage and modestly improving efficiency next quarter. For the full year 2022, we now expect that the provision for credit losses will be approximately $80 million. This is up from our previous outlook and largely reflects the changed macroeconomic backdrop compared with a quarter ago. We currently expect that the full year 2022 effective tax rate will be approximately 22%. This is slightly higher than our previous outlook, which was for an effective tax rate of 21%. The change in our outlook reflects higher pre-tax income and a lower amount of tax credit investment as compared with our previous forecast. We currently expect that the fourth quarter tax credit investment amortization expense will be approximately $30 million. With that, I'll now turn the call back over to Dominic for closing remarks. Thank you, Irene. In closing, we are looking forward to finishing 2022 on a high note. Our strong operating margins and capital give us the confidence that we will navigate emerging and changing economic cycle well. I wish to thank all of our dedicated bankers for their excellent work, which is reflected in our strong financial performance. I will now open up the call to questions. Operator? We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ebrahim Poonawala with Bank of America. Please go ahead. Good morning. Good morning. I guess, maybe first question just around deposits. Obviously, a lot of focus in terms of, client behavior and, given the rising rates. The loan to deposit ratio crept up 88%. One, maybe just talk about how high you think that loan to deposit ratio going before you start being more active in terms of managing deposits. Second, how does this translate into where you think the margin peaks? For East West, would that also mark a little bit of a peak in NII, or do you expect NII growth to continue until you're driven by loan growth? There are a lot of questions there, Ebrahim. I don't know if I remember them all, but I'll try to get through it. I'm sorry. It's early for me here. Okay. If we look at, I'm gonna start with, I think, the end of your question, which is probably the more important one, given where things are at right now. We do expect the margin will continue to grow from here, right? We expect it to grow in the fourth quarter. When we look year-over-year, we also expect the margin and net interest income to increase in 2023. We won't go into guidance and specifics around that, but I just wanted to make sure that was very clear, right? Even though we do expect that deposit betas will increase and have continued to increase, you saw that a little in the third quarter results. With that said, from our loan book and our securities book, the increase that we're seeing and the pickup we're seeing there far outpaces that. I think on the question about the deposits and the loan to deposit ratio, we ended the quarter at 88%, a little under that from an average perspective, 87 or so. We do feel comfortable increasing from this point in time. I don't think that we have said that publicly in the past, and that still is our position right now. Our core funding is very strong, and I think going to kind of the low 90s is something that we're comfortable with. Got it. I guess, just a separate question. You talked about the hedging that your customers have done, but talk to us if we are heading into a recession where you see the biggest drivers of credit risk for East West loan book. Yeah. I think at this point in time, so the hedging, I think honestly for us, it's been a balance sheet management strategy in this period of time until this year when rates were so low. Certainly, we wanted to share that it certainly protects our customers in this period of time because the debt service is easier for CRE, for multifamily, also for C&I loans. On the credit side, you know, at this point in time, credit is still very benign. We certainly, if you look at kind of the results that we have in the third quarter, criticized loans are down. Charge-offs are still very benign. You know, as we look through the portfolios, I wouldn't say there's an area that we're really concerned with from a credit perspective, but we continue to monitor and continue to evaluate our portfolio. I think from a macroeconomic perspective, you know, and that's why we have increased our provision simply because with this kind of spike in interest rate, one would expect that the economy will slow down. Therefore, we are anticipating maybe things are gonna slow down. However, we just haven't seen much in terms of credit quality issues at this point. You know, everything seems to look pretty good as you see that our criticized asset actually come down and then so forth. The next question comes from Chris McGratty with KBW. Please go ahead. Hey, good morning. Irene, I wanna circle back to the NII question. Just I think that's part of the reason your stock's weak this morning. The NII guide, the implied guide for Q4, can you just put a little bit more of a clarity around it? Because the $1.5 billion that you cite as a starting point, your actual number is a little bit lower than that, yeah, excluding PPP. I just wanted to get a little bit of a fine tune on the fourth quarter. When we look at the fourth quarter, maybe I'll just share a little bit more specifics, right? Based on the forward curve at 9/30., if you kind of break it down, and maybe this will help you, Chris, in kind of the analysis. You know, we expect the loan yield to continue to increase, right? Maybe not the same pace of the increase that we saw in the fourth, but close to that. On the security side, based on the variable rate and the nature of the portfolio, probably another 20-30 basis points, right? In total, especially if you look at from a NIM perspective, NII, I think the timing of the increase in the cost of deposits is something where, you know, we're modeling that the deposit betas will continue to increase. We've been very fortunate, as we talked about in our prepared remarks, of the lag, but I think we're just realistic as rates continue to increase, that may inch up. Overall, I think the guidance that we gave and the specifics as far as NII growth at that higher end of that range, 35% is a number that we're comfortable with at this point in time. Okay. I guess as my follow-up, just again, going back to the 1.5%, is that's the starting point or is it like 1.476%? Sorry to get this in the weeds, but there's a big difference in the, in the implied trajectory. Sure. I'm trying to get a sense of whether NII into Q1 will grow off of the Q4 number that we're talking about. This is Julianna Balicka. If I can jump in with the precision level of that you are looking for guidance that has the word approximately in it. If you start with the 1.47 starting point from 2021, a 35% increase on that implies an NII growth of $560 million. But a NII increase of 36% off of that implies NII growth of $574.5 million, right? Now we put in the word approximately because quite frankly whether it's going to be 35% or 36% right now, impossible for us to tell given the fact that some of the things such as deposit betas, you cannot know two months in advance. What we are comfortable telling you is that we are hitting at the upper end of our guidance and we're moving higher as we're talking about it because as Irene said, we expect our NII to continue to grow. In terms of the actual precision, that unfortunately from where we sit, we cannot provide that level of detail. Just take the word approximately and use your judgment. The next question comes from Gary Tenner with D.A. Davidson. Please go ahead. Hi there. This is Clark Wright on for Gary Tenner this morning. I just had some thoughts on capital. Or excuse me, some questions. In terms of the buyback, you know, the stock is now trading below where you're, where you repurchased in 2Q. How are you thinking about the buyback here moving forward into kind of an economic headwinds and in a revised economic outlook? At this point, we don't anticipate to do any buyback simply because we are looking at that macroeconomic situation with the Fed making these unprecedented like a rate spike that I think it would be prudent for us to hold on to our very healthy capital ratio. You know, one of the great thing about where we are today is when we looked at East West incredible earnings power, very high margin, high liquidity, benign credit quality issue, very strong capital ratio. East West have always done well whenever economic cycle go down. That's where we actually make most of our money. Well, we're very proud of our financial performance for the first three quarters so far. However, I think we will be even prouder if actually economy situation get worse, simply because we've always have a very strong balance sheet that allow us to have all the flexibility to do whatever we want. That's the reason why we have always been somewhat stingy in terms of not wanting to do too much buyback because having all the dry powder in place, in a down cycle may be much more advantageous for us. Got it. Thank you. If I could just pivot over to loan growth in your outlook. Where are your thoughts on the mix heading into 2023? You know, you had strong single-family growth here this quarter. Just in terms of CRE and, you know, C&I, where is that going to be going in at? What are your kind of thoughts heading into the next year? Well, we obviously expect loan growth to slow down compared with 2022 or 2021 simply because with that kind of rate environment, naturally we'll expect that investors may not or you know, business enterprises are not going to go in there and start making aggressive acquisition of, let's say, commercial real estate investment or building apartments, buying warehouses. A lot of those activities that were taking place in a much more normal interest rate environment. Looking at in the early part of 2023, I would expect that those type of activities will slow down. Massively sort of like increasing inventory is also something that I would say most likely out of the question. With that, we'll expect the C&I and CRE growth will most likely be coming down. We will provide guidance, you know, at the time we release our fourth quarter earnings. When it comes to residential mortgages, we are also expecting somewhat of a slowdown, simply that I would expect that there would not be as much refinancing or even home purchases. As of today, we're still seeing pipeline both in C&I, CRE, and also in single-family mortgages. While we are seeing those numbers in the pipeline report that feel very positive about it, we also are very prudent and looking at the macroeconomic situation and the interest rate environment coming forward, and we are taking a more conservative outlook in terms of what it may be. The next question comes from Jared Shaw with Wells Fargo Securities. Please go ahead. Hey, good morning, everybody. I guess first just back on the deposits, what's your expectation for sort of a through cycle data on deposits? Does that assume that DDA stays roughly stable as a percentage of the total? Yeah, great question. Earlier in the year, I think we shared that given the expectation for where rates were and where the Fed was moving, that we thought our through cycle betas for deposits would be about 30%. As a reminder, in the last cycle, although a very different cycle I'll add, our through cycle beta was 37%. As we shared on the details of the presentation, cumulatively, our cumulative beta to date has been 22%. Quite a bit of a lag, and then also but up, right, from where we were at 6/30, which was 15%. At this point in time, given the pace of the rate increases from the Fed. We do expect that the through cycle deposit betas will increase from that 30%. You know, more specifics as far as what's happening next year, as Dominic mentioned, we'll share next year. I'll also add that with that said, you know, we expect the loan betas to continue to increase and there will still be significant NII expansion. Okay, that's good color. Thanks. Looking at the allowance for loan loss and the growth this quarter, should we think that the ratio of allowance to loans can continue to march up if we don't see a significant change in the economy? Or will that really be more dependent upon either you know, portfolio performance or incremental deterioration from here? Yeah, great question. You know, I think so when we look at our models, largely the drivers for the models are GDP growth, unemployment, CPI for CRE, the market dynamics in the areas where we have CRE loans, and also for the single family and HELOC, also HPI. As these deteriorate or change, you know, we are appropriately booking the reserve. I think at this point in time, as we talked about earlier, there's no major weaknesses that we see. But we wanna just be realistic and prudent, especially with the way the calculations are for allowance, to increase as appropriate if that macroeconomic factors decrease. That was one of the reasons for the increase in the allowance of two basis points. I'll share, of the $27 million that we booked, approximately $10 million was related to the new loan growth that we had in the quarter. If I can add, Jared, to your prior question about the deposit betas that Irene was answering. One of your questions was about the deposit mix. Let me just highlight that before the pandemic, we were at 30% DDA at the end of 2019. Today, we're at 40% DDA. We do not think we're gonna go back to the pre-pandemic levels. We are confident we're gonna be above pre-pandemic because of the growth in DDA has come from operating accounts, treasury management products and services linked accounts. So we have a much stronger deposit mix than last cycle. Also I wanna add that those accounts come from a lot of new customers or existing customers that used to use other banks for operating accounts because we did not offer the services. That's because East West Bank have improved our GTS product offerings, that we are able to transition many of these East West Bank clients to move their operating accounts from other larger banks to us. The last two years, that operating accounts growth has been quite phenomenal. In fact, it reflect even on some of the GTS fee income growth there too. As a reminder, if you have a question, please press star then one to be joined into the question queue. The next question comes from Brandon King with Truist Securities. Please go ahead. Thank you. Good morning. Morning, Brandon. Yes. I was curious if you can give us an update on kind of the planning strategically as far as potentially locking in your rate sensitivity for the balance sheet and protecting against the downside of rates potentially in the future? Brandon, you know, it came in and out. Would you mind repeating your question? I'm sorry, I didn't quite catch it. Yes, yes. I was curious if you can update us on your plan or thoughts on potentially locking in the asset sensitivity of the balance sheet against kind of falling rates into the future. Oh, okay, great. We have increased kind of our balance sheet hedging strategy with our asset sensitivity, as you noted, you know, trying to lock in, I think those are great words, our asset sensitivity. I can share that, as of 9/30. Well, actually we entered into a trade just after 9/30 as well. As of today, we have about $2.75 billion of hedges and also collars that we have entered into to help preserve our margin and NII if and when rates fall. That's something that we'll continue to evaluate, looking at with our ALCO committee as far as what's appropriate given the asset sensitivity and the balance sheet of the bank. Gotcha. If you don't mind sharing, what is kind of the duration of those hedges and collars? They range, I think, 4-5 years. Okay. This concludes our question and answer session. I would like to turn the conference back over to Dominic for any closing remarks. Well, thank you all for joining us for this call, and we are looking forward to speaking with you in January to share with you our 2022 year-end result. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.