Q4 2019 Earnings Call

Quarter 2019 that income was $188 million or a dollar twenty nine cents per share up by 10% compared to the third quarter that income of 171 million months or a dollar Seventeen cents per share and also up 9% compared to the fourth quarter of 2018 that income of 173 million or $1,000.18 Pusher for quarter 2019 adjusted net income was $187 billion or $1.20 per share up 9% quarter-over-quarter and up by 8% year-over-year.

In 2019 East was achieved record full-year revenue of 1.7 billion which grew by 5% year-over-year and record interest income of 1.5 billion which grew by 6% year-over-year. We ended the year with record lungs of 34.8 dollars an increase of 7% from last year and record deposit of 37.3 billion and increase of 5% off 2018.

2019 also end a transformational decade for East-West during which we moved with more than double our exercise off 44.2 billion and grew both our commercial loans and are non interest-bearing deposit nearly five-fold.

Over the past ten years, we achieved substantial growth and diversification in lungs deposits and revenue strengthening the resilience of our balance sheet earning wage and profitability. Our diluted earnings per share also grew by 458% in the decade.

How growth and profitability reflect the strength of our diverse business model, which is the foundation for continued solid financial performance for years to come in 2019 and a return on asset 1.59% return on Equity of 14.2% and the return on tangible Equity of 15.9% This is the fifth consecutive year of a return on tangible Equity above 15%

unsliced

Or you can see the five quarter Trend in our relations. Our profitability was once again strong in full course fourth quarter 2019 return on asset was a 1.68% return on Equity was 15% and a return on tangible Equity was 16.7%

Moving 2/5 our loan portfolio is well-balanced between commercial commercial and residential mortgage lungs over the past ten years. We said we made investments in people and our infrastructure building specialized commercial lending verticals expanding our cross-border capabilities and broadening our Lending Solutions. This has resulted in a diversified platform capable of generating above industry organic loan growth urine year round off as of December 31st, 2019. Total loans reached a record 34.8 billion.

an increase of

2.4 billion or 7% as I mentioned earlier for year 2019 average loans of 34 3.4 billion screw 3.1 billion months or 10% over last year by portfolio Residential Mortgage grew 15% year-over-year commercial real estate and see em, I both grew by 9% in dollar terms loan growth was evenly distributed across the three sectors which all grew just over 1 billion dollars each month.

For the fourth quarter of 2019 average lungs are 34.4 billion grew by 9% linked order and realized.

We saw a very strong growth from commercial real estate which increased by $505 billion or 15% linked quarter annualized followed by Residential Mortgage which increases by $247 billion or 12% linked quarter annualized. In fact, the fourth quarter of 2019 was the best quarter in the history of East-West interactions of single-family Residential Mortgage originations.

average

So long crew by 34 million or 1% quarter annualized and with that I will move on to review our 2020 Outlook.

Apologize for that. Let me go back to my script in order the average loan growth of 10% in 2019 was achieved in a challenging environment including three interest rate cuts by the Federal Reserve are slowing economies and an ongoing who has China trade tension to start to walk in 2018 and remains High throughout the past year at least West they have wins from the US China trade tensions are most easily visible in a wholesale trade portfolio, which typically shows seasonally strong growth in the fourth quarter instead last year. We saw a decrease in commitment off of 7% and a decrease in loan outstanding of 12% year-over-year as of December of 2019.

we have commitments of

2.35 billions as well as outstanding of 1.4 billion in a wholesale trade portfolio.

importantly

We have experienced only one charge of related trade terrorists and it was less than 1 million dollars East was a starting the new decade with confidence knowing that our portfolio is better position and stronger today and we are ready to support our customers as to geopolitical backdrop includes.

With the signing of the partial trade agreement on January fifteen would believe that there is more clarity surrounding the US China trade dispute in addition. Our customers have adapted to the new number of us China relations in terms of the operations and costs over the past two years and reduce tariffs uncertainty and geopolitical volatility should only allow them to resume this Cloud. It should have a positive impact Felice West in particular for our ability to grow our cross-border lungs and expand our cross-border customer relationships.

value of the

Expertise that our cross-border Bankers bring to the table has only increased we see renewed interest from Chinese firms exploring direct foreign investments or evaluating expansion opportunities in the United States in the manufacturing energy or service sectors furthermore the expected increase in purchasing a US manufactured goods by China provides cross-border trade expansion opportunity for our customers. Also now more than ever the need for US based business to develop a China strategy and understand the Chinese market dynamics is vital.

East was well positioned to take advantage of the evolving nature of the us-china cross-border business and we are confident about our ability to expand both our commercial consumer market share in this sector in 2020 and see what you use

For the full year 2020. Yeah, I'll look for n of. Long's is Grove of seven to eight percent. We expect that to grow in 2020 just come from across all of our major loan portfolios of commercial real estate Residential Mortgage and Sienna.

No, moving on to slide six for discussion of deposits as of December 31st, 2019 end of year long to deposit ratio was 93.2% as we have stated. We are comfortable operating with a long deposit ratio to the range of 90 to 95% total deposit fee for elected 37.3 billion as of June 31st, 2005 increase of one point nine billion or 5% year-over-year full year 2019 average deposit of $36 billion to fully 2.8 down 8%

from 2009

Deposit growth for the 2019 4 year primarily came from growth and deposits interest-bearing checking partially offset on a decrease in non-interest-bearing didn't see manage has that happened in the first quarter of last year. In fact after declining in the first quarter due to a shift in his parent checking out for certain customer balances our non-interest bearing demand deposits steadily grew up quarter-over-quarter in the second third and fourth quarters.

For the fourth quarter of 2019 average deposit of 37.4 billion grew by 10% linked quarter and realized average deposit Grove in the fourth quarter was led by growth interest-bearing checking which is seasonally strong and for for some of our commercial customers follow growth in non-interest-bearing to demand and money money account partially offset by a decrease in average time deposits as we actively reduce higher-cost deposit.

The 4th.

2019 average cause of deposit decreased by 11 basis points and then quoted to 94% and the average cost of interest-bearing deposit decreased by 15 basis-point to 1.34% a subtle rating the pace of decrease from the third quarter as a difference December 31st, 2019. The end up. Cause of deposits was off .9% down by 11:00 basis point from 1.01% at the end of third-quarter the end of. Cause of our interest-bearing deposit was off 1.28% as of December 31st down by 15 basis-point from 1.43% as of the September 30th. I'm pleased to note that said cutting the FED funds rate in July . We achieve a reduction in the cost of deposits across all of our major deposit types while at the same time.

also growing non-interest-bearing

Demand that one says I will now turn the call over to Irene for a more detailed discussion of our fourth quarter 2019 Financial results and our outlook for 2028. Thank you. Yep diluted EPS of a dollar $29 and adjusted EPS of a dollar $28 are tax expense in the fourth quarter was 31 million and our effective tax rate was 14% off this compares to a tax expense of thirty-five million an effective tax rate of 17% in the third quarter the decrease in the fourth quarter tax rate relative a third-quarter loss resulted from additional tax credit investments in previous years tax Reserves.

Our tax expense for the full year of 2019 with 170 million and the effective tax rate was 20% included in the full year 2019 income tax expense was a thirty million of certain previously claimed tax credits adjusted full year 2019 tax expense was a hundred and forty million and effective tax rate was 17% compared to a tax expense of 115 million and an effective tax rate of 14% for the full year 2018 and our outlook for 2020. We project that are effective tax rate will be 15% off moving on to the discussion of net interest income on page eight Port quarter net interest income of 368 million decreased by one point, six million or 4% linked quarter the fourth quarter Gap that interest margin was 347 a contraction of 12 basis points from the prior quarter the quarter-over-quarter change in our gaap net worth.

Margin is as follows.

15 basis-point decrease from lower low kneels before base is decrease from lower yields on other interests on other interest-earning assets including investment Securities a 4 basis-point decrease from the asset mix shift.

And an increase in investment Securities all of which were partially offset by an 11:00 basis point increase to the net interest margin from a lower cost of funds ASC 3030 discount accretion was six million in the fourth quarter higher quarter of a quarter due to recovery and added six basis points to the net interest. Margin the fourth quarter adjusted net interest margin, excluding. The impact of discount accretion was 341 in the third quarter discount accretion income was two and half million, which added three basis points to the net interest margin off as of December 31st, 2019, the credible portion of the ASC 3 10:30 discount accretion was was ten million and the impact of action on our net interest income and our net interest margin in 2020. And Beyond is expected to be in material as such you will no longer separately report dead.

the S III 10:30

discount accretion

in our 2020 Outlook, we expect that the Gap net interest margin will range between $340 to $345 this translates to a stable margin relative to a quarter adjusted net interest margin of 3:41 and our interest rate Outlook. We assume that the FED funds rate will be unchanged in twenty-twenty a tail with Martin supporting our name outlook for 2020 is a near-term repricing benefit of our maturing time deposits in the first quarter of 2020. We have three point nine billion time deposits deterring at a weighted average rate of 179. And in the second quarter of 2020. We have another 2.3 billion maturing at a weighted average of 185 for comparison in the fifth fourth quarter of 2019 originated or renewed 3 and 1/2 billion of time deposit at a wage.

average interest rate of 1

28 down from a weighted average interest rate of 154 in the third quarter of 2019 for new and renewing time deposits.

For your reference, we inserted slide nine which provides the underlying interest rate detail of our loan portfolio our fourth quarter 2019 average low kneeled a Ford Edge declined by 20 basis points link order. Our loan portfolio is largely variable rate and the most impactful interest rate indices for our loans are the prime rate and the 1-month Libor dead. Now turning to slide ten total net interest income in the fourth quarter was $63 million compared to fifty one and a half million in the third quarter the income and net games on sales of loans totalled fifty two point five million in the fourth quarter a 3% increase from $51 billion in the third quarter of 2019 interest rate contracts and other jobs and income was $18 billion in the fourth quarter a linked quarter increase of nine million customer demand for interest rate hedging products continued to be strong the fourth quarter and customer.

related Revenue was

14 million an increase of three million quarter-over-quarter. The Associated Credit valuation adjustment was four million in the fourth quarter a linked quarter increase of six million reflecting the interest the increase in long-term interest rates at the end of the quarter moving on to slide 11:00 and on interest expense was 193,000 an increase of 9% linked quarter, excluding amortization of tax credit Investments and CDI are adjusted non interest expense for 165 moving in the fourth quarter of 2019 an increase of 4% quarter-over-quarter, the largest change quarter-over-quarter with a 3.2 million increase in compensation expense wage was $101 million in the fourth quarter. Our fourth quarter adjusted efficiency ratio was 38.3% compared to 37.7% in the third quarter over the place.

5 quarters are in

Relating adjusted efficiency ratio has been under 40%

Our full year 2019 non-interest expense was $735 excluding amortization of tax credit Investments and CDI. It was $645 an increase of 4% year-over-year. Our full-year adjusted 2019 efficiency ratio was 38.4% compared to 39.6% in 2018. The increase in on digits not interest expense for the full year 2019 compared to 2018 was largely driven by an increase in compensation expense reflecting hires throughout the year to add talent and Bakers to our front line and to ensure that we continue to strengthen our risk management and support functions additionally a 2019 and continuing in 2020. We have been making ongoing and important investments in technology to better serve our commercial and consumer customers and to grow our Market chef.

in 2020

Be launching a new FX system and a new commercial digital banking platform in Hong Kong which will provide our customers enhanced cross-border payment and ask that's hedging capabilities as long as better interactivity with our domestic commercial digital banking platform. Furthermore. We are continuing to build a new consumer digital banking platform Taylor down to the distinct needs of our consumer customer base inclusive of these investments in new systems and platforms and other ongoing efforts to invest in our business our outlook for twelve thousand dollar suits operating expense growth of 4% excluding amortization of tax credit Investments and core deposit intangibles. This is similar to the rate of operating expense growth in 2019.

And 12 of the presentation we detail out critical asset quality networks are allowance for loan losses total $358 million as of December 31st, 2019 or 1.03% of loans helper investment compared to 1.02% as of September 30th, 2019 and 96 basis points off as of December 31st, 2018 non-performing assets as of December 31st, 2019 or 122 million or 27 basis points of total assets compared to Thursday this point of total assets as of September 30th and 23 basis points total assets as of December 31st, 2018 for the fourth quarter of 2019 our net charges for eight million or and like ten basis points of average loans, and we recorded a provision for credit losses of nineteen million this compares to net charges of 22.5 million or annualized 26th.

Is this point of average loans?

And a provision for credit losses of thirty-eight million in the third quarter of 2019 included in the fourth quarter net charge-offs of my loans, which totaled 11 million was an eight million for recovery. And I load as well as a 5 million charge off on an energy loan that have been placed on non-accrual status earlier in the year other cni charge-offs in the fourth quarter came from loans that were also previously on non-accrual status and these have largely been reserved for as of September 30th 2019 for the full year 2019 net charge-offs were 53 million or 16 basis points of average loans compared to 13 basis points in 2018 full year. 2019 per month for credit losses was $99 million compared to $64 million in 2018 overall as a quality continues to be stable quarter-over-quarter non-performing asset.

and the charge UPS decrease

As of December 31st 2019 classified and criticize assets totaled $974 million compared to $970 million home as of September 30th 2019. Currently we estimate that the day was seasonal related increase to our allowance for loan losses will be an increase of approximately 30% from the allowance for credit losses as of December 31st, 2019 our current outlook for twenty twenty projects at the day to provision for credit losses will range between 90 and 120 million for 20 20 this reflects our projected loan growth and our view that asset quality should be brought in a similar in 2020 as in 2019 further the range of our provision Outlook also takes into account the volatility that we expect to see a resolved.

all the forecast changes

During 2020 that will drive the Cecil model.

Moving onto Capital ratios on slide. Thirteen East West Capital ratios are strong tangible Equity or Thirty One Spot 15 as of December 31st, 2019 to 3% link water and group by 15% year-over-year the tangible Equity to tangible assets ratio increased by 67 basis points year-over-year and our regular time Capital issues increase by forty five to seventy five basis points, year-over-year East-West board of directors has declared first quarter 2020 dividends for the company common stock.

Dividend of $27.05 is payable on February 14th 2022 stockholders of record on February 3rd, 2020.

And with that I'll move on to reviewing our 2020 outlook on slide 14 for the full year of 2020 compared to our full year 2019 result. We expect dead end up. Loans increased by 78% We expect that the Gap net interest margin will range between $340 and $345 our Outlook page incorporates. No change to the FED funds rate in twenty-twenty with this outlook for loan growth and net interest margin and reflecting the decline in interest rates in the second half of 2019 as well as the wage increase in income in 2020. We expect that net interest income in 2020 will range from Flat to growth of 2% year-over-year.

We expect none.

Interest expense excluding the amortization of tax credit and investment and core deposit premiums to increase approximately 4% We anticipate that the provision for credit losses will range between 90 and 120 million.

finally

we project that be effective tax rate will be approximately 15% for 2020 as we expect to continue to invest in tax credit Investments.

We expect to make approximately a hundred million of historic and clean energy tax credit investments in 2020 and projects an amortization rate of approximately 85% off the first quarter of 2020. We currently expect tax credit amortization will be approximately 20 million with that. I will now turn the call back to Dominic for closing remarks. Thank yep. Open the call to questions operator.

Will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys off to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.

Our first question comes from Ibrahim poonawala with Bank of America Merrill Lynch, please go ahead.

Good morning.

Morning, I guess just first question Dominic, you know you talked about just the impact from the China trade dispute on the wholesale trade portfolio and I'm in enough conversation around whether how meaningful that impact has been on your growth. Would love to get your sort of thoughts around how you expect 20-22 play out for the lending wage board in terms of the specialty lending verticals, very stress has been focused on and in terms of geography is and all the hiring that you've done. Are you going into new markets? Like what's going to be in your View Drive or on the side?

At this point, I think that we expect a growth.

Comes from all you know many different industry verticals and then the general cni and also, of course including greater China and off our cross-border business and we feel that in general. There are different pockets of areas that are you know, we grow stronger than the others but overall, you know, economic condition based on a more clarity, which is us China dispute that result in the face when signing up, uh, gives many of the business and our customers Will Comfort to start investing and growing the business and in addition to that, you know, when you look at the agreement they're assigned which call for China.

Buying two hundred billion more of goods from United States in the from the Baseline of 2017 and that is $77 from 2020 and $123 billion in 2000 21 in the various sectors including manufacturing energy and service is ETC and we feel that clearly there are opportunities for some of our clients who are exporting to China and East-West. It's going to pay attention to those opportunities to make sure that we get all share of banking business. So all-in-all, I would say that 2020 particular in the second half and 2021 is looking pretty prompt.

Got it. And just I guess on a separate topic you mentioned investments in the Forex platform in Hong Kong and then the consumer digital platform year. Where should we see the benefits on the upsurge of all all those Investments? Is it in higher fee Revenue in better deposit growth in just kind of should we expect these to be needle movers in terms of growth a bowl. I mean like obviously for the ethics new system it will be predominate for fee income but keep in mind when we have a strong ethics value proposition that can be a lead in for us to get a Commercial Banking business, which will then result in loans and deposits to now but that's more indirect. I think the director will be fee income from the digital banking side is really predominant focus on our consumer call customer base and so for that I think will be dead.

consumer core deposits interest-bearing checking account non-interest-bearing

Can you cancel you know and we expect that there will be more core deposit coming and that will be in the next few years.

Our next question comes from Chris mcgrotty with KBW, please go ahead.

Great. Thanks for the question. Mm. Interesting that credit quality of a scene for a pretty notably sequentially. There are some concerns. I believe on residual effects of the energy stress in the third quarter. Could you provide me maybe an update on what you're seeing in that portfolio maybe Trends in classifieds and I believe there was a notable bankruptcy early in the quarter. I'm wondering if that's kind of an address in the current current Reserve. Yes. So if we look at the energy portfolio, you know just to answer your question specifically, you know, the problem loans that we identified earlier in the year and talked about and little bit more detail on the last earnings call. You know, I think the good news is there really hasn't been a lot of new problem loans that have been identified with the the one loan that you are referring to, you know was downgraded and in you know in our views appropriately reserved for in the fourth quarter, and yep.

If you look at the balances as of September .

End of kind of actually the outstanding balances as of the end of September for criticized and classified off assets was about $68 million. And as of the end of December that was a hundred and thirteen non-accrual loans same kind of a levels for the phone number were twenty 1 million versus thirty-three as of the end of December . Hopefully that helps to clarify some of those questions you had press

Our next question comes from Jared Shaw with Wells Fargo, please go ahead.

Hey, good morning. Good morning. Good morning, Garrett. You're looking at the the growth expectations the loan growth expectations for twenty twenty 78% Does that assume that the month sale trade business balances stay under pressure and if we saw more, you know, these two or more confidence on the consumer on the customer side, could you see loan growth potential to be higher than that with a with a resumption of stronger wholesale trade lending? Well, I think that we expect a positive turnaround. Hopefully sometime 2020 and but now we have to keep in mind is that it's going to be a gradual process and if you've looked at as I indicated that my remarks earlier, in fact, normally in the fourth quarter, we would have a search of the wholesale trade portfolio balances and the dead

last quarter

Actually this and it's because everybody holding out everyone knew that.

I'll president will be signing a phase one. And so we all saw the standards Sidelines and then so why do something until we see what exactly is going to be signed on and now off that once we get that Clarity I think people is going to start, you know, focusing on what needs to be done. Some got great benefit because exported to China some of them even as important because of the

The agreement of not putting tariff on those particular products or the agreement to drop from 15% to 707.5% that helps and then While others off basically stay the same at that 25% tariff. Now the fact is even for those to have to pay tariff. I mean in a way the good news is that now they you know, it's not jumping to 35% or 40% or 50% or it's not having the very high uncertainty that's going on with the veterans from coming from our president and so forth. So in that standpoint people had dealt with those terrorists and managers for the last two years manager many of them have managed pretty well in terms of weather is cutting costs a little bit here and there having to Chinese government to provide tax credit tax subsidies. Yes.

Passed right through to Consumers and US consumers also seem to be taking those pass through very nicely as we've seen in the retail jobs, you know report for the fourth quarter so far. So all-in-all. I see that there will be a little bit more normalization of activities going on a 2020 it's going to take a few months to ramp up and so I would expect that in the first two quarters. We should be expecting a whole lot of faith stands for growth, but then we'll be more or less maybe like last year. But then in the third and fourth quarter it ought to be picking up. That's what I seen the trade side, but for the other portfolio, I think will be more or less of people looking at the general economy that I think clearly with the uncertainty of trade is built by the way is not just with China but also with dead

many of the other countries have calls can

Sign for many US businesses and now when the business overall see what the uh, overall interest rate climate Plus off some of these settlements of the trade tariffs and so forth. I think in general the business sentiment that getting a little bit more comfortable. So we hope that the other cni verticals that we are dead. Hopefully also be picking up a little bit. So that's that's the assumption that we have, you know, and in terms of looking at 2020 Outlook and Beyond and then just, you know, took him back on the Capital Management. I know this is something you know a sedan on other calls, but Capital continues to grow the tce ratio, you know still growing and substantial level. What else should we be thinking about in terms of Capital Management, you know with with the growth and the similar range as we saw in 2019, I guess why not come in and and do a buyback and wage

manage capital

At this point I think in I would reiterate what we share. I think I guess more than welcome to conference calls before that while first and foremost. We are a management team that our shareholders friendly including our board by the way. So we're constantly at our board meetings evaluate and review this sort of opportunity cost of our Capital show issue will not buy back and and that I'm pretty sure our next board meeting will have another very detailed discussion of this sort of alternative out there versus buyback one of the things that we do look at those that as we just share in this earnings call, you know, we have uh, well above industry average return of asset in Return of equity our loan. No,

You know last year average loan growth. It's about 10%

And so we're still doing pretty well. And the other interesting part is that we just new Dynamic that we're seeing right now that China have sign a agreement in terms of better protect intellectual property and better protect companies who let's say I'm being pushed to transfer technology and China now have mechanism in place to penalize, you know, stay on Enterprises or any government entities to do that. So when we see there's a better Clarity in these laws that attract foreign investment.

When the vice Minister just announced that how much China wanted to attract foreign direct Investments. And in fact direct investments in China, even in 2019 have grown by a few percent and all of those are indication that we at least WesBanco wanted to make sure while we are looking at the obvious good choice of potential Capital buyback. We also need to balance to see that is it likely there will be a great opportunity. What is in the US or in Greater China that we would we wanted to further invest to ensure we have an even stronger.

Sustainable profitable performance for many years to come and I can only reflect back on the last ten years. We have deliberately spent our Capital into investing in people and infrastructure, which allow us to build such a very diverse.

and the possible for you so that allow at any particular time and year that if some particular sector slow down the other factors picked up there are not many banks in the country that have a very evenly spread of

CN i c r e n presidential Consumer Portfolio that sprayed out very nicely in different categories and allow us to put lever a different time. We would like to continue to further diversify our loan portfolio in proof of income Etc. And so we'll continue to make those Investments. But any point of time we feel that even with those Investments and we still have excess Capital that is redundant that obviously will step in and start making a buyback. So that's the plan.

our next

Question comes from Bronco vandervliet with UBS, please. Go ahead. Thank you for the question the facts of his business was obviously a great quarter great couple of quarters here, you know with the FED probably done. Should we be looking for us to kind of tail off or or not?

Yeah Brock. So if you look at 2019 from a customer Revenue perspective, you know the revenue from interest rate contracts and other derivatives was forty-six Million net of the adjustment, you know rounding there at forty million, but we look at twenty twenty. Although we're confident that we will be able to grow fee income line items for all other categories. Just given the nature of the rate curve, you know, the inversion earlier this year that really supported, you know, the volume increase we had in the third quarter in particular and second quarter, you know, we did not expect this level of customer Revenue in 2024 IRC.

Gotcha.

Gotcha, okay and and separately, you know as you can imagine Cecil's providing all sorts of fun with numbers for four analysts. No, no bath and it as I look at your Reserve at the true up and what you're anticipating for Provisions. Can you help us Dimension? What you may be looking at in terms of of charge-offs is a you know is a number of you know, twenty basis points. Is that reasonable to expect going forward or to high?

Yeah, so Brock, that's a great question. And you know, I want to just kind of caution. You know, this is our view today for the day one reserved, you know, actually that may change as our models change a forecast change and there's some finalization that we're still doing particular on the qualitative factors, but, you know given the call we wanted to share what our views were today and get that 30% increase from the year and in current model calculation on Day to you know, we have traditionally given the guidance on the provision for the full year as you probably have noted the range that we're providing for the provision is wider and that's largely given our kind of view that compared to the incurred model, you know likelihood is that they'll be more volatility on the provision over the course of the Year driven by kind of changes to the forecast Thursday.

That certainly that we're factoring.

Overall, when we look at the credit environment, we think it'll be relatively the same and with those numbers we're modeling in kind of gross charge-offs at similar levels wage 2019 if that's helpful for you or next question comes from Michael Young with SunTrust, please go ahead.

Hey, good morning. Thanks for taking the question. I wanted to ask about the sort of loan-to-deposit ratio. I know Dominic you mentioned that you wanted to continue to operate within the 90 to 95% range. But given kind of where rates are and the stability here. Do you think that you'd allow that maybe to drift higher as it may be easier to put on new deposits at lower rates now dead. Yeah, you know, I think a person for most we will always want to ensure that we have enough liquidity right and that we have enough core deposit to fund our loan growth that you know franchise value for a bank is that core deposit off franchise. So, you know that range that we have the nineteen ninety-five percent is arranged that we're comfortable with, you know, at this point in time. I do not think we'll inch that up much higher wage and and to kind of more specifically address your question if we have the opportunity to reduce kind of bring on additional deposits at a lower cost dead.

We'll probably do what that is.

Let some of the higher operating cost of operating higher cost deposits run out.

Okay, and then as a follow-up, I think at the beginning of last year you had mentioned a couple of demand deposit focused initiatives particularly on the consumer side. I just wanted to get an update if any of those were months ahead or if we've seen any benefits from those at this point.

It went really well in 2019. And so with that in momentum, we will continue in 2020. So consumer banking team, you know, specific detail branches are all gear up to keep going out there and bringing in small business customers one at a time. And then we're open Thursday many many accounts last year and I I expect them to continue to use their center of influence to help them, you know CPA lawyers and so forth to help them to come back to open the small business account one at a time. Yeah.

Our next question comes from Gary Tanner with d a Davidson, please. Go ahead. Thanks. Good morning. Good morning. Good morning. I wanted to ask a question or a question on Monday long rope Outlook, maybe a little different different way. If we look at 2019 the end of. You're over your loan growth was a little over 6% and you know certainly pressured in the fourth quarter off by not having wholesale trade benefit that you typically do. So I'm going to give him your comments about you know, better outlook for the back half of the year on wholesale trade as there are some more clarity approved for your customers, Why wouldn't that normalization maybe for 2020 help better more positive rebound an overall bone growth. Is it is it the expectation of a slow down slow pace of growth in the other loan seconds?

Well, I think that overall what we project right now is based on, you know, our current activity and we do expect that some of these jobs some sort of positive momentum. It's going to take a little bit of time to ramp up so therefore and right now we prudently projected to the 78. Obviously we revised our guidance if we actually see even stronger momentum going forward.

okay, the rest of my questions were asked and answered so I think

Thank you.

Again, if you have a question, please press * then 1 our next question comes from David chiaverini with wedbush Securities, please go ahead home. I Thanks a couple of questions for you. So the first one I wanted to follow up on energy. Are you planning to grow the energy book or do you or conversely do you plan to age, you know reduce or exit this portfolio given the the credit issues.

At this point, I don't think there's any hot and it's going to be very low likelihood of any growth. The reason is because you know, obviously long as everyone though in in in the industry that you know, the equity investors, uh hard to find in these days. So therefore in order for us to do good deeds. We need to have you know, strong Equity Partners to have us to put on senior debt quite frankly at this point right now. I think the likelihood what's growing is there is a very low wage. I think that there will be a a higher likelihood. We probably reduce the portfolio just naturally because of some pay down and so forth.

Thanks for that and then shifting gears more of a housekeeping question. But you mentioned about the guidance for tax credit amortization expense. You said, you know twenty million for the first quarter and you gave the full package, but do you happen to have you know any guidance for the second quarter third quarter and fourth quarter, we do not at this point.

But you have to put your number and that will help you.

Yep. Thank you.

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 the call first. I wanted to apologize for being a little bit of a confusion of my remarks earlier because my mind is already gone to celebrating the Chinese Lunar New Year. There will be coming this Saturday. By the way. This is a very very special the year of the golden rat is one of these one out of every 60 year that would happen is the longest year ever.

for Chinese New Year, because it's

384 days and there are a lot of special days throughout this year, which I will see that many of our customers will have weddings off. Give it burst, you know and sorting new business, etc. Etc. So East West Bank going to be busy, and so we hope that this Moses page here that happens only once every sixty years will bring better fortune and success to everyone around the world and on behalf of all my associate that you suspect I would like to wish you all a Happy Lunar New Year. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.