Hello and welcome to the East West Bancorp’s third quarter 2009 earnings conference call. All participants will be in a listen-only mode for this event. (Operator Instructions). After today’s presentation there will be an opportunity to ask question. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Irene Oh, Ms. Oh the floor is your ma’am.

Thank you. Good morning everyone and thank you for joining us to review the financial results of East West Bancorp for the third quarter of 2009. In a moment Dominic Ng our Chairman, President and Chief Executive Officer will provide highlights for the quarter. Then Tom Tolda our Executive Vice President and Chief Financial Officer will review the financials. We will then open the call to questions. First I would like to caution participants that during the course of the conference call today management may make projections or other forward-looking statements regarding 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 & Exchange Commission including our annual report on Form 10K for the year ended December 31, 2008. Today’s call is also being recorded and will be available in replay format at www.eastwestbank.com and www.streetevents.com. I will now turn the call over to Dominic

Thank you Irene. Good morning. And thank you for joining us on today’s call. Yesterday afternoon, we reported a net loss of $68.5 million, and the loss was driven by the $159 million of provision for loan losses and a $24 million write down on our trust preferred securities. During the quarter, we made great strides in our efforts to reduce risks in our loan portfolio. We believe we are well on our way to getting our credit issues behind us in 2009, and returning to profitability in 2010. Now, the overall operating environment continues to remain difficult with a weak economy and unemployment rate still high. The latest figures show that unemployment in the California is still at 12.2% for September [albeit] as a slight decline from August. However for East West because of our aggressive actions throughout 2008 and 2009 to reduce credit risk and improve our capital position. We actually seen many positive signs that the majority of our credit issues are behind us. Our strategy of managing through this credit cycle was to be aggressive from the onset taking charge off as necessary and disposing of problem loans. In many instances, we have separated the charge offs by resolving problem loans quickly and aggressively to remove additional risk today and to reduce any of the additional deterrence for future profitability. We believe that our approach of quickly resolving problem loans today as opposed to waiting for the market to improve and slowly work out these problems has proven to be a success. Our strategy for reducing credit risks includes various actions. These actions include selling loans that are actually performing and current which we believe to have inherent risks. The $180 million in loans sold during the quarter includes sales of such performing current loans. Also…

Thanks very much, Dominic and good morning everyone. In third quarter, we recorded a net loss of $68.5 million where results were negatively impacted by loan loss provision of a $159.2 million coupled with a $24.2 million non cash charge but other than temporary impairment on our pooled trust preferred securities. As Dominic mentioned, we have been diligently derisking our balance sheet by reducing our credit risk exposures across all our loan portfolios and aggressively getting after problem credits, resolving them and taking appropriate charge-offs when short falls in values become evident. In third quarter, we recorded a $151.2 million in net charge-offs which largely drove a heightened provision for loan loss. In second quarter in a row, loan delinquencies declined. Should this indicator continue through fourth quarter, all the more reason why we feel more assured that the worst is over. Turning to the balance sheet for a moment, throughout this economic cycle, we have taken deliberate steps to harden the balance sheet, increase liquidity and reserves and build capital. That focus continues today. In third quarter, we purposely held total assets in check and shrunk the balance sheet modestly by $234 million quarter-to-quarter. With core deposits up 9% with $358 million from the second quarter and over $1 billion since December 2008, we took the opportunity to decrease wholesale funding. This allowed us to both gently view of the balance sheet and help improve our net interest margin. Throughout 2009, we demonstrated good success in growing core deposits, lessening reliance on high cost CTE while lowering the cost of deposits. These important actions are occurring as the focus on our sales efforts were renewed with emphasis placed on attracting new customers and expanding existing customer relationships by offering deposit, products and services that offer higher value. This focus…

Thank you tom, again I would like to thank everyone for joining the call today, and for your continued interest in East West, I would now open the call for questions.

We will now begin the question and answer session, (Operator Instructions). The first question we have comes from Ken Zerbe of Morgan Stanley.

First question I had was in terms of the decline in the land and construction loans, could you just tell how much of that decline was driven specifically loan to sales as well as moving say some of the construction loans into a permanents loan types, and asset because the mortgage balance has gone up a lot, just trying to figure out how that’s being reduced? Thanks.

Zerbe in terms of the reduction of the construction loans actually it’s a combination of mainly from loan sales and also pay down form borrowers when they find other, when this condo units are being sold, they found other buyers, retail buyers coming and starts buying these condo units and that’s not paying down, if you recall in my last conference call of a quarter or two ago. I have talked about that more and more of these projects are coming to finish line as we expected that in the third and the fourth quarter, there will be substantially more pay down simply because of the construction loans is getting completed and moving on. Now, we did not do that much residential financing for the single family units, such as the condos, the reason is that out pricing is not as attractive as (Inaudible) Wells Fargo and so forth so its hard for us to compete for that, that single family residential mortgage growth are mainly either through our own retail banking origination and also some purchases, we have done one bulk purchases in the third quarter, so for that reason I don’t think that there is much mature impact at all form the some of like, our single family residential mortgage growth really doesn’t have much to do with the construction pay down simply because we do not have asset attractive of a product in terms of long-term fixed rate, low interest rate type of mortgages for these condo buyers. Now on the commercial construction area also as of the last three months I don’t recall that we have any construction loans that are taking now as a permanent mortgage in our commercial real estate category, so mainly these projects pay down when projects finish and taking out by some other vendors.

Okay that’s perfect, and then the other thing I have was, when you mention that your credit issues are going to be behind you by year end, are you trying to personally make the statement that you are going to post a profitable quarter in first quarter 2010?

Ken I think what we’re saying is that the provisioning level will taper off from the peak that we’re at today and that we returned to profitability in 2010. First quarter may be a little bit premature but overall, we expect the profitability to come back in 2010, probably closer to that mid-year mark.

The next question we have comes from Joe Morford of RBC Capital Markets.

I guess may be Tom, if you could just talk a bit more about what gives you the confidence to say the credit issues have peaked, you know is the delinquency trends or the inflows to classifieds and why you see provisions and charge-offs going down from here, and should NPAs go down as well or will the decrease in construction and land issues be offset by increased commercial real estate problems where you just don’t see a lot of lost contents.

Yeah, First of all, if you look at our lost content mainly driven by the land and construction loans, we went from over $3 billion exposure and now down to $1 billion and as we speak, everyday the construction and land portfolio continues to reduce in size. So by the end of this year, clearly our construction and land portfolio will be substantially reduced to a very, very manageable level. Plus the fact that, all the write down that needs to be taken would have always been taken place. Then the question will be on the other loan categories. Now, everyone was concerned about commercial real estate income producing property, which is the next wave, but in a way the next wave started already. If you look at most of these banks in the country, many of them already experienced high delinquency in commercial real estate loans including retail, hotel, office buildings, etcetera, etcetera. If you look at our current portfolio, it still stands pretty good in terms of having only 1.2% delinquency and 0.9% nonaccrual. So, we feel pretty good about well, I am not saying 2010 as the economy is going to come back. To me, I think it's going to get worse, but the fact is, even as our commercial real estate loans having a little bit more pressure going into 2010, we wouldn’t have the kind of massive losses that we had experienced in the construction and land portfolio. And we feel that the loss content probably would be substantially lower, and in fact, if you look at the charge-off that we have taken, we have actually sold many loans and resolved many problem credits that have not even been delinquent. A good example is when we talk about the troubled debt restructure, and some of…

Okay that’s helpful, and one separate question was on the acquisition front, are you just interested in Chinese, American banks and what about going outside California? Have you reconsidered your positioned there at all?

At these moment, I wouldn’t think that we need to think about outside of California and we have made acquisition outside of the Chinese-American community and we actually had a pretty good success in prime bank that we acquired in 2001 and we do retain all the customers and grew deposit by three or four fold. The Desert Community Bank acquisition was much more challenging well, but we have to keep in mind it was made in late 2007. They came with a big construction and land book and on top of that, it’s in the high desert area that currently with an employment rate closed to 20%, and so obliviously, that was challenging. However, we look at the Desert Community Bank deposit base; we actually were able to retain the deposit very, very nicely despite the very, very challenging economy. Well now we pretty much guarantee the problem loans behind us, in most of the problems, I wouldn’t say all of that, we still have some customers settling in the high desert area, but if we had a much better shake than we were obviously in early 2008. So, we were able to do pretty well in the non Chinese-American community acquisition. Now, that’s been said, the likelihood that we're doing that type of acquisition in 2010 or the next 12 months, I would say is somewhat remote. The reason is that, I think there will opportunity just within the Asian community. There will be a lot more opportunities in the next 12 months in California within Asian community. So therefore, there is really no reason for us to get beyond that. Now, two the three years from now, whether we'll even considered looking beyond that I think that there’s always a likelihood.

The next question we have comes from David Rochester with FBR Capital Markets.

First, just real quick on the construction and land exposure, you mentioned we'll see that decline in the fourth quarter. Should we expect to see another, maybe 200 or 300 million reduction in the bucket?

Possible, yeah. I think at this moment right now the pace that we are going in right now I think that most likely would above another 200 to 300 million.

Where do you anticipate that eventually leveling off over the next few quarters.

It should be. I mean that’s about it. I think that once we get to that level I think that in 2010, if I can encourage our staff to be brave enough to go back on and start making some construction loans because, I mean one of the issues here is that there is no better loan to [make] it today than construction loan because nobody is doing it you can call any terms that you want, you can be as prudent as you ever wanted to be in terms of loan to value and then the required liquidity that the personal guarantee requirement, all sort of things that you can ask for is available because nobody is doing it. Obviously we won’t jumping into it because we recognize that we have a pretty large substantial construction loan book to start with and I really didn’t wanted to have our staff to get confused in terms of when we said that our primary focus is to pair down the toxic asset and we are going to do it as fast as we can and we are going to be as focused as we wanted to be and this is the number one priority. It will be quite confusing if we immediately at the same time start getting them to say that oh, by the way just go ahead and book these constructions on (Inaudible) and I think that may be a little bit confusing for our staff in terms of focus. But once we get down to that you know $300 million level out of I mean loan broke up $8.4 billion, $8.5 billion suddenly particularly recognizing these loans going to be very high quality full and full in the future and also we are getting a little bit closer to economic recovery. All of that would be a reason for us to potentially thinking about getting into the business again, but with obviously substantial better caution and knowledge about what to do, make sure that we are not making the same mistake like we used to. And so I think that I don’t expect it to go down to zero. Let’s put it that way.

Got you, makes sense.

I also wanted to highlight that in the land loans you would not expect that kind of dramatic drop like the construction loans for the following reason: The construction loan we allow many of them to keep building up and while we at the last I mean 17 months or so we've been aggressively paring them down, cutting down the unfunded commitments and selling some of the loans and also funding some of some these project etcetera. But most of the projects were allowed to continue to finish up and third quarter is one of the I think at the end of second quarter and the beginning of third quarter and now I think going into the fourth quarter also many of these projects have completed and they are in the process of selling, if there are condos projects there in the process of 71 condo unit at time and impairing down these loans. And so what you see is that constructional build up to the maximum outstanding balance, and then they just drop off very rapidly loan-by-loan. In the land category, it doesn’t work that way. In the land, no matter how we are trying to get rid of this. So we have actually made a lot of replacement of old borrowers and new borrowers. New borrowers have like substantial liquidity who bought these land loans at a substantial discount. However, there is nobody out in the world making land loans right now. So, when we actually sold some of these land loans we have or may be we did short pay and etcetera, etcetera. We usually still have to provide financing. So, therefore while we were able to reduce the land loan by either charge-offs and additional pay down and principal reduction through work out etcetera, etcetera the…

Okay, Thanks for that and on the CRE portfolio you talked about debt service coverage ratio is being supported matter of fact that a large part of that portfolio is variable rate, can you talk about updated debt service coverage ratio on that portfolio I know they used to be maybe around two times which is one of the stronger levels in the industry?

Well, obviously know what’s happening with real estate in the economy though are this way where borrowers are having more difficulty and their NOIs are decreasing. So we find just kind of with the updated financial that we get from our borrows net-net, because so many of them do have their variable rate loans and net-net debt service covers it substantially different.

Okay great and finally can you talk about the status of your discussions with the auditors on [DTA], it sounds like those conversations have been going pretty well recently?

Yeah Dave, we at the start of the year, we anticipated the [credibility] credit situations so for we would be taking some losses this year, I think the aggressiveness that, the aggressive approach that we’ve taken aside from getting the credit problem behind us is also helping us to return to profitability sooner, so we have gone about documenting our assumptions on our return to profitability, we feel very confident that we can do that, as we approach the new year and at these point in time there’s no reason to believe that the likelihood of the realization of that the DTA, in not unlikely. So at this point in time we have no [sunset] and allowance needs to be put against that in fact profitability is near at hand

Okay great thanks a lot guys.

The next question we have comes from Aaron Deer of Sandler O'Neill & Partners

Hi, good morning Dominic, good morning Tom. Can you give a little bit more color on your thoughts with respect to capital I am curious to know if you guys would have been a intention of doing any additional comment equity raise or converting some of the additional prefer share is still outstanding and what are your thoughts on repaying TARP and timing of that?

I think in terms of repaying TARP our desire is that we want to make sure that we get these credit issues behind us in 2009 and in 2010 when we thought looking at getting this momentum of profitability quarter -by-quarters and then I think that will be the time that is appropriate for us to look in to paying our TARP. And clearly at that point I would imagine that it would be very appropriate for us to raise additional capital to pay TARP. Now in the mean time I would say that our capital ratio is adequate if we anticipate that there will be more opportunities for acquisitions that will be coming in the next quarter or two then obviously we will be also looking potentially getting ourselves geared up, so I mean what I’m looking at is that from a capital raising standpoint is more or less like its not a need for our current balance sheet but then if we raise some additional capital assuming that the market is still positive then it may not be a bad idea to raise some just to gear up ample capital for future acquisition and in case that the acquisition may not be available then we always can save those money for top payment eventually anyways, so I think we are going to be very flexible in that regard.

Okay, and then I believe you guys are in the midst of over maybe completed your regulatory exam I am wondering has the, have you guys had your exit interview done is that done?

Not yet.

Not yet.

Okay and then just a technical thing. The deposit insurance premium backing out the special charge in the prior quarter seems like that was up a bit, is there anything behind that might have driven that?

We had a special assessment in the last quarter earned and with the increased deposits and so forth and so our higher deposit insurance. But that was about it.

A higher rate or just a higher overall dollar amount?

We did see a slightly higher rate that’s true.

Okay. All right. Thank you very much.

The next question we have comes from Lana Chan of BMO Capital Markets.

Hi good morning.

Good morning.

I was wondering if you could give us a number of the new inflows into nonaccrual loans this quarter I think it was about $211 million last quarter, would you happen to have that yet for this quarter.

We were a little bit higher than that Lana but that’s pretty close, close to last year.

Last quarter?

Last quarter I am sorry.

And do you have any color about where the inflows are coming from is it still primarily from the residential construction side or are you seeing more of an increase on the commercial real estate side?

Actually both residential and commercial construction and also land loans. So I mean it has been pretty I would say that overall if you look at land and construction loan as still the dominant force of going to nonaccrual, creating charge offs and causing us for additional provisions.

Okay and then I guess as we go through your I guess land and construction portfolio now I have been through a couple of innovation in terms of reassessment. I mean how much further do you think that there is in terms of new recognition of problems in that portfolio as you are looking at further the stress points.

Actually it’s not that much of a new recognition of problems. I mean we identify them pretty much in 2008, the challenge is that actually a lot of them seem kind of resolved in 2008 when we first identified these problems and we nearly worked with dollars that they may be appropriate, substantial principal pay down or some of them set up a P&I payment and also set up payment reserve and so forth. But this land value despite the fact that back then we have reduced the values substantially but 9, 12, 13 months later they come down even more and on top of that when it comes down to truly if we want to get rid of them, the buyers are expecting discounts on today’s ridiculously low appraisal value. So, I mean we are just trying to face to the truth is that if we do want to get rid of these, I mean we can always write down to net current appraisal value and then feel good about it. But the fact is if we can just see that I think they are doing better [analysis] in there and that’s why we are going in and start taking these slide down. And so I think that most of the problem has been identified in the past but the severity of these problems have increased and caused us to continue or have to lay them down than further and as a combination, we no longer took the 2008 approach. I mean if you look at it that its kind of ironic I think that we are more aggressive than most of our peer banks but I wish I was substantially more aggressive in 2008 because back in 2008 we were aggressive to take the write down by doing…

Okay Dominic. Thank you for the answer, I appreciate it.

Thank you

The next question we have comes from Julianna Balicka of KBW

(Inaudible)

Julianna, we cannot hear you.

Are you on a speaker phone or something?

No (inaudible) maybe I will just call back after the call is over.

No you’re okay now, now your okay. Go ahead..

(Inaudible) update you showed some of the current performing loans at a discount what kind of discount were you seeing on the performing and as in excluding loans versus the discounts that you saw on the sales of the more problem loans

It varies, I mean every one of them that the (Inaudible) because we did not go in as you said so, just like other assets, we did some slow book sales on a single family and then on starting single family, but because of most of these construction land and commercial real estate loans that we sold are selling them all one by one it goes from all the way from selling them at par all the way to I mean a large discount so everyone of them are different. Irene if you can look at the numbers made and then give Julianna a bit more details.

We’ll do that Juliana.

And then (Inaudible) complete last year at this time we were doing the very solid portfolio being rolled up into the appraisal sector. So all these to be appraisals are not cutting up to a one-year mark do you have a plan on leaving them or how you looking at that going forward?

We really don’t need to go with this full one time re-appraisal because what happened is that on these construction and land loans they have very short maturities. So pretty much so first of all many of them have already been resolved and also it’s pretty much the remaining whatever that comes to maturity because it’s not like that we will sit there and then wait another year or two because they all have become due anyway. So we constantly had to into July of last year, we constantly got new appraisals for these construction and land loans. So I think right now we are in pretty good shape as far as getting more up-to-date information now obviously not 100% of them on a snapshot as of today but I can tell you that we've got all the more spread value but I think we have a vast majority of them are pretty current. Secondly, these appraisal value to me is not going to be crucial anymore because either they are going to be found and what we've found is a lot of our construction loans that we expect them to decline and they turn out to be fine. Now they’ve finished projects finished and they stop selling and they stop reducing our balance one by one. So whatever their appraisal value is, whatever they feel getting out just right. And then there are others even the appraised value looks pretty good but when they start having difficulties and they cannot move forward and we decided that we cannot continue to fund interest reserves and we don’t want to have it sit in nonaccrual we end up starting to note, we end up picking losses that are higher than the appraised value anyway. So at this stage right now I think that we feel pretty good about while we have this exposure kind of contained and all the updated value that we appraised value we get in, we continue to go through our methodology to know write, and basically provide you with statistical write down and et cetera. But then when it comes to sell, then we would look at what exactly the kind of losses that we were willing to take and then we get over with. And the main thing about it is that we’ve done so much right now I mean I think that after fourth quarter we probably are not going to be doing much of regional sales going into 2010.

Okay Dominic. See you in the next quarter call.

Thank you

The next question we have comes from Jeannette Daroosh of JMP Securities.

Good morning and thank you for taking my call. Most of my questions have been asked so let me just go for just a couple of smaller items. Given the position that you have taken to clear out all of your problem assets as quickly as possible I was wondering the REO expense that we saw on the quarter, is that an anomaly or should we think about the expense being that low also for the fourth quarter?

Jeanette I think its hard to make a call on that specific time the transactions that we had in the fourth quarter at this point we certainly benefited from some gain on sales. We wouldn’t be surprised if that would repeat but at the same time you don’t know once you have a deal closed and really hard to call on that.

Okay. Would you say that perhaps the better performance in the third quarter was that investors were coming back of at the sidelines and that perhaps there is a trend that one if it’s looking see from this or…?

I think there is always buyers out there but it’s always going to be a like, they are always buyers as long as dealing is still cheap. And as long as the price look ridiculous, there are always people who wants buy. So, buyers are always there. Now, if it looks like there are more buyers I think so. But on the other hand one of my fears that I am pretty sure and make sure there are even more buyers but then I think there should have been a lot more inventories because most community banks have not even recognized these losses, have not even taken them to market. But 2010 most of them have to, there is no way around it. When I am looking out, many of our peer banks have these 4%, 5% or even 8% to 9% MPA. It’s just not sustainable, at some point of time they are going to have to start resolving these problem assets and when that happens then market will be flooded with a lot more inventory. I think there will be a healthy demand from a buyer standpoint but also that may be a healthy inventory available. So what we are trying to do is to get it a little bit ahead of the curve. Now from the REO expenses standpoint if you look at it is that three quarters in a row now our REOs balances have continued to decrease. It’s down 38, 28 and its coming down. So, I think in the fourth quarter we will try to do the best we can to may be having even less. But it’s at the very, very small level. So, I don’t think there should be a substantial risk. Now, come 2010 and may be a little bit different…

Okay. That’s very helpful. Now of the sales that you did do in the third quarter, I think you said $206 million is what you sold? Did you finance any of those or were they all outright sales for cash?

Combinations. Actually there were more cash fired in the third quarter than the second quarter. However, some of that we feel have to do with financing, specifically on the land loans we obviously have to do financing for these buyers who would be able, many of these buyers who bought these land and to just sit on as well in the next four to five years, because they bought it cheap enough and so what they do is they set up payment returns and then they make sure that the loan to value is appropriate and then they come in and get a loan from us.

Okay and then separately on a different topic your [pool] trust preferred securities I think in the second quarter you had taken a approximate $101 million impairment charge and most of that was through the OCI I think you have taken a $37 million credit charge through the P&L in the second quarter and now another $24 million in the third quarter. Given the current economic environment how should we think about the balance of I think its about $39 million in the OCI account, is it likely that this will also eventually be run through the P&L?

Well I think if there’s any good news on the securities one is that we from a capital standpoint we now have the securities written down to about $0.04 on the dollar so from a capital perspective I think we’ve insulated ourselves from the issue. From a credit deterioration perspective this one is a hard thing to call, would not be surprised if we see more deferral defaults. On the other hand, we do have a lot of banks that are recapitalizing so that is working sort of accounted to that. So it would be we’ll see how this plays through, but we certainly have hit it hard this year and we’ll see like I say what happens in the fourth quarter it’s difficult to forecast this one.

Okay. All right, thank you so much for your time and your answers.

And the next question we have comes from Joe Gladue of B. Riley & Company.

Hi. I think most of my questions have been answered, but just wondering if you could give us some idea of how much the non-performing land and development loans have been marked down from their original values?

How much the land and construction loans have been marked down from original values?

The non performers?

The original value, we don’t have that because every quarter we keep marking them down and down since early 2008. So, at this stage right now we wouldn’t have that number right of at the top of my head. I think that we can look into that numbers and they may be provide to you later on.

Okay. That would be fine. Thank you.

(Operator Instructions). The next question we have comes from Jennifer Demba of SunTrust.

Thank you. Good morning. Just wondering as we looked out towards a more normal environment, where do you think your margin can get back to?

Yeah, Jennifer. I think interesting question I think we certainly have great momentum right now and getting the margin and up. As we hit next year I am sure we’ll be will around that 350 or more level, I think a lot comes back to also our ability to bring back some new assets or originate some new loans that would be further momentum, coupled with the decrease in any reduction and nonaccrual loans that is the interest reversal on nonaccrual loans to the extent that decline that would give us additional lift on the net interest margin, so I think its reasonable to think that we can get close to the 4% may be by the end of next year if all things works out.

How much of a drag are the nonaccrual loans right now on the margin?

Probably somewhere around 12.

Thank you very much.

(Operator Instructions). We show no further question at this time, I will like to turn the conference back over to management for any closing remarks.

Thank you, well if there is no other questions, I look forward to speaking with you all of you on our come January 2010. Thank you.

Thank you sir, the conference is now concluded, we thank you for attending today’s presentation, you may now disconnect.