Welcome to the third quarter 2008 East West Bancorp Earnings Call. My name is Ahmed, and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. Irene Oh, Senior Vice President of Corporate Finance.

Good morning, everyone, and thank you for joining us today to review the financial results of East West Bancorp for the third quarter 2008. 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, the 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 a number of risks and uncertainties. For a more detailed description of factors that affect the company's operating results, we refer to you our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31st, 2007. 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. Thank you for joining us on today's call. Yesterday afternoon we announced financial results for the third quarter 2008, and we declared the dividend payment on both our common and preferred stock. Our financial results for the quarter are indicative of the challenging economic environment we are currently faced with. Tom will discuss some of the details of our financial performance later in the call. First, I would like to provide an overview of our financial results and discuss credit trends we are seeing. We reported a net loss for the quarter of $31.2 million after non-cash other than temporary impairment charge of $53.6 million and provision for loan losses of $43 million. Excluding this one-time OTTI and loan loss reserve, core operating income was $48 million. The OTTI impairment charge resulted from $47 million impairment on Freddie Mac and Fannie Mae preferred stock and also $6.6 million impairment on pooled trust preferred securities. We believe that East West made significant progress in the third quarter by strengthening the balance sheet and improving both credit quality and overall liquidity. Unfortunately, the progress made during the third quarter and the core operating performance of East West is clouded by non-cash items. Again, Tom will address the securities impairment charges later in the call, but first I would like to call attention to the solid progress we made during the quarter. We tackled credit issues head-on and made strong progress during the third quarter in reducing total loan delinquencies. Quarter-to-date, we experienced a substantial decrease in overall loan delinquency and stabilization in overall credit issues. We continue to build the allowance for loan losses, which totaled $177.2 million, or 2.14% as on September 30, 2008. We also significantly improved liquidity by increasing our borrowing capacity. Additionally, the…

Thank you, Dominic. I would like to start with our third quarter reported net loss of $31.2 million or $0.50 per common share. As Dominic noted, the primary driver for the net loss reported for the third quarter was a non-cash other than temporary impairment charge on our Fannie and Freddie preferred stock, which cost 47 million and an additional $6.6 million OTTI charge against our pool trust preferred securities, which combined cost $0.85 per share pretax in the quarter. These charges, coupled with the $43 million provision for loan loss, drove the loss reported in the quarter. Ironically, it wasn't that long ago that an investment in Fannie Mae and Freddie Mac was thought to be a very solid one, yet this quarter many banks were confronted with a new reality having to write-down their entire investment in these securities to a market that was between $0.03 and $0.05 cents on the dollar at quarter end. The market for pooled trust preferred securities is inactive at this time, and this ill-liquidity has adversely impacted the fair value of these securities. However, these securities continue to be well collateralized and we were not impacted by recent downgrades by rating agencies. Given the recent US Treasury plan to strengthen bank capital, increase liquidity and likelihood of further consolidation of weaker banks we believe these events strengthen the prospects for these securities going forward. As noted in Dominic's earlier comments, positive developments are evident in the area of credit. Delinquency is down, progress is made in reducing problem assets, construction and land portfolio balances are reduced and nonperforming assets appear to be stable. The significant reduction in provision for loan loss from $85 million in the second quarter to $43 million in the third quarter was largely expected and we anticipate this…

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

(Operator Instructions) Your first question comes from the line of Joe Morford with RBC Capital Markets.

Thanks. Good morning.

Good morning.

I just wondered if you could comment on the values realized in the sales of non-performing loans and REO in the quarter, and how do they compare to the carrying values on your books at June 30th? Also, along those lines, based on your ongoing review of the portfolios, can you update where you think the current average LTV stand for the residential land and construction portfolios, either relative to last quarter or at origination? Thanks.

Let me answer the first question on the value of the sales of REO and notes. I think we won some and we lost some, but overall, it was a 9% discount from the carrying values for all the REO and note sales taken place. We have taken the path that we worked on these loans one at a time rather than doing a bulk sale, and currently I think the book sale value is quite depressed. Obviously if you looked at what major banks were doing, like Merrill Lynch and some of the other big out there are selling at a huge discounts. So if we go out there and do a big book sale, I think that we are probably not doing our service appropriately in terms of fiduciary responsibility. But, on the other hand, what we worked on these loans and REO one at a time, we are making some pretty good progress, and there are some of which we actually sold above the new appraised value and then there are some of them actually we did it below. All in all what we are doing is that we just work on one at a tame and making good progress, and as of, I think that September 30, it was a 9% discount from our carrying value. So that was the first question. Now I do not remember the second question.

It was just any read on current average LTVs for the residential land and construction portfolios?

Joe, this is Tom Tolda. With regard to the loan-to-values, on the residential construction we still are around that 80% level with land just short of 70% loan-to-value at this point.

Okay. Great. Then one last just housekeeping thing. Just to clarify, the guidance for the fourth quarter on the EPS being $0.11 to $0.13, I think you said, does that includes the $0.09 tax benefit?

Yes, it does.

Okay, perfect. Thanks so much.

Thank you.

Your next question comes from the line of Ken Zerbe with Morgan Stanley.

Hi, good morning.

Good morning.

On the trust portfolio, I was actually wondering if you could tell us, you took the $6.6 million write-down there. How much do you have left on your books? What is the unrealized loss on that amount as well?

Sure, Ken. With regard to the unrealized loss, currently we are at $54 million unrealized loss and the face value of the securities were $134 million.

That is the par value, $134 million.

That is correct.

Got you. Okay. Just in terms of compensation expense, obviously we saw a huge drop this quarter, and I know you said that you keep expenses down, but, was there any one-time adjustments in the comp expense, or is that really a correct ongoing number to use?

Yes, I mean, there were adjustments in there in terms of the compensation and so forth that I refer to. However, we do anticipate that this new level would continue into fourth quarter.

Got you. Okay. Great. Thank you very much.

Sure.

Your next question comes from the line of Aaron Deer with Sandler O'Neill. Please proceed.

Hi, good morning, everyone.

Good morning.

Tom, I just wonder if you could explain the deposit flows in the quarter. It looked like there were some big declines in money marks and jumbo CDs and then some big gains in consumer CDs. What was driving that?

Well, in terms of the decline, I think that a couple of things are happening. If you look at the chaotic banking market for the last few months, because of the fear of depositors about what exactly is FDIC insurance and all that, and this like affect the entire country. What we have done, actually, while most of our customers are feeling pretty calm and not doing anything, we actually took a very proactive action to educate our customers regarding FDIC insurance. Now, keep in mind that the vast majority of the time, for the last three months, I mean insurance only up to 100,000 versus 250,000. We were actually very busy educating our customers in terms of getting full insurance, and we have been a member of CEDAR for years. We do not need to do much with it, but with this changing environment, we feel that it is only appropriate for those customers who really do not understand banks financial performance, safety etcetera. It will be most prudent for us to take a proactive stand to encourage them to, if they want to sleep good at night and not worrying about anything, in terms of the safety of the deposits and that we will get them into the CEDARs program, which is get them fully insured up to $50 million. So through that process, we actually help a lot of our customers and what you find is that, our core deposits in the now account, money market account, and even some of the DDAs have slipped down to the time deposit area, because our active effort to helping the customers to go to the CEDARs program which can only be offer at time deposit. Therefore, you find many more deposits going in that direction. In terms of, there…

Okay, that is helpful. Then Dominic, what are your thoughts on the TARP capital? Were you approached by your regulators and is that something you will seek, and if so, how much would you think would be appropriate?

Yes. Our regulators have talked to us about this looks like a very attractive thing, and than they actually would have no problem to see us going in. They would love to like help us through the process and so forth. We at East West do not take this type of opportunity lightly. So, in fact, we spent the last two weeks gathering information from anyone out there who seems to know more than we do. We have been getting a lot of information, and in fact, just the past weekend, this Friday and Saturday we had a Board retreat and spent a significant amount of time discussing the pros and cons about joining this program. The key thing that we wanted to address with our Board members was, since East West has very good capital ratio, if we do get these additional capital coming in, how should we deploy our capital? This weekend we came to a conclusion about specific steps that we could have taken, if we were able to get this additional capital. We feel confident that we will be able to deploy this meaningfully, whether it is in lending, gathering deposit, and acquisition without ever thinking about going outside of our comfort zone or doing things that we do not feel that we are capable of doing. So with that conclusion, the Board has approved this management to go ahead and apply which we have done yesterday.

Perfect. Thank you, Dominic.

Your next question comes from the line of William Wallace with FBR. Please proceed. James Abbott - Friedman, Billings, Ramsey & Co.: This is James Abbott. How are you?

Good. James Abbott - Friedman, Billings, Ramsey & Co.: Just a couple of questions. Several of mine have been answered, but do you have the reserve on your past grade loans, a ratio for us on that? I know that you have built your reserve ratio to a very significant percentage relative to most of the other companies in the industry, also looking for the reserve for the past grade loans.

Do you have that number, Dominic, with you?

We do not have that readily available, but we can get back to you James, shortly with that.

James its Irene, let me just let you know. So our total allowance is about $177 million of that, $144 million are for past five loans. So we do not separately breakout what it is for past loans or for past five it is 144. The remaining $33 million are for the impaired past [114] loans. James Abbott - Friedman, Billings, Ramsey & Co.: Okay. Thank you. Then another quick, this is on the expense issue, as the deposit insurance expense as we go into the next year. What basis point run rate do you anticipate or right now currently it is running around nine, 10 basis points annualized, unless there is someplace in there that I am not aware of. Where do you see this moving to?

Well, we expect that the FDIC deposit insurance assessment will go up, because FDIC Chairwoman has indicated very clearly that is going to happen. So, we have not yet, finalized our guidance at this point for 2009, because of all these changes that may be happening. We will beat it definitely, you can count on the fact that we will make sure the minute we get better information from the FDIC that we will put that number through and be able to come up with a finalized number. Because what is happening, right now is that, with the Fed fund rate dropping another 50 basis points, with this the likelihood that we may be getting significant amount of capital, which we would deploy in doing different things. I think that there are enough factors that are taking place for 2009 that it will be rather unproductive for us at this moment to put our 2009 guidance and that is the reason why we only put out the 2008 fourth quarter guidance. We feel very comfortable, because it is only three months and we are already almost into one month, and we feel pretty confident about where that is. But, when it comes to 2009, there is so many additional factors that may affect the numbers. We feel at this point that what we are going do is just focus on doing what we set to do at the beginning of the year. That is said, pare down nonperforming loans to a level that we will be ahead of our peers and increase the liquidity, so that we will be a very safe and sound balance sheet. Pare down the operating expenses, so that when we are ready to go out and start aggressively doing more business, when the economy starts…

Yes. It will go up, but because of the increase from the FDIC, that is one, and secondly, we expect deposits to grow in '09. So both volume and both rate will affect the expenses to go up substantially. James Abbott - Friedman, Billings, Ramsey & Co.: Okay. Then lastly, I appreciate you taking all these questions, but on the trust preferred securities pools, I know there were some income notes and a lot of BBB rated product in there. Where did the impairments come, on what tranches?

James, we had impairment on the trapeza 12, I am sorry. Irene, would you?

James, We had five trust preferred securities where there was impairment. Three of those were income notes and two of them were BBB rated. One of them in particular, most of the impairment came in one security which had been downgraded by Moody's. Additionally, this was a security where there was REIT and homebuilder exposure, so there was a little bit of a credit issue with that one. James Abbott - Friedman, Billings, Ramsey & Co.: Okay.

Yes. Also the income note balances as of September 30th was about 1.5 million.

That is the total. James Abbott - Friedman, Billings, Ramsey & Co.: Okay. Thank you very much.

Your next question comes from the line of Joe Gladue with B. Riley & Company. Please proceed. Joe Gladue - B. Riley & Company: Good morning. I know this is somewhat of a moving target, but just in terms of the guidance, particularly on the provision, any reason to believe there is any greater visibility this quarter than you might have had last quarter or you might have any better comfort level for where you think that will end up in the fourth quarter?

Well, actually every quarter is getting better. I would say that from my perspective, the hardest time for me was actually December 31. I absolutely had no idea what on earth was going on then. Came March 31st, it became more apparent that the economy was going to be getting substantially worse, and that is why we took the approach of doing a 100% review of every single one of these residential construction loans and land loans, and later on even including the commercial construction loans and even some of the high LTV commercial real estate. We also implement a pretty much now almost 100% review of C&I loan and trade finance loan. The whole idea was to get ourselves in a position that we know better in detail every single loan in our portfolio. While we are doing all that I think we have a very good feel of these characteristics of our loans. We have no way of controlling the market. So while I knew the market is going to be really ugly back in June, I had no idea Lehman Brothers would file bankruptcy, AIG would be taken over by government, and Fannie and Freddie and all these other stuff that are happening also. After all that some bad stuff happened, I have no idea now we got talks and then most banks will get capital. So these are all changing targets that is hard for us to predict. I can assure you that our loan portfolio, I think we have got a much better visibility today than a month ago or two months ago or three months ago simply because every day we are paring down these, not only that by selling the REO and the notes, the problem notes, that makes us feel comfortable that…

Hi Joe, this is Irene. Joe if we look at our exposure in the Inland Empire for land, we have about 40 million as of September. Residential, excuse me, a 157 million, and then residential construction total of about 70 million, and about 100 million commercial construction. Joe Gladue - B. Riley & Company: All right. Lastly, I will ask the 2.8 billion of new liquidity, is that all new unused liquidity or is part of that already used?

Joe, of the 2.8 billion this is both FHLB and Federal Reserve borrowing capacity which is not utilized. Joe Gladue - B. Riley & Company: Okay, all right. Thank you. That is it.

Your next question comes from the line of Julianna Balicka with KBW. Please proceed. Julianna Balicka - Keefe, Bruyette & Woods: Good morning. I wanted to follow up on some of your comments on the call so far. You had mentioned the decrease in unfunded commitments from 684 million to 499 million. Was that residential construction only or did that include land and, if not land, what is the land commitments, please?

Julianna, primarily that decrease is residential construction. There is a little bit of unfunded commitment on the land but very low, maybe 15 million. Julianna Balicka - Keefe, Bruyette & Woods: Very good, and then continuing on, you discussed the reinvestments of payoffs into treasuries and other low yielding securities. So going forward in the fourth quarter are you going to continue that strategy or are going to change to different securities?

Yes, Julianna, what we will be doing is paying down those FHLB borrowing that are coming due in the fourth quarter and into next year. So that will give us a boost on the margin as we move forward here.

We parked this cash into low yielding securities back in the third quarter because there was not much Federal Home Loan Bank advances coming due in the third quarter, but we would have pretty sizable Federal Home Loan Bank advances due.

Correct, so we also have these borrowings that are coming due at, like climate change, 5% range, and given that the Fed funds right now are invested at the 2% range. We should pick up some additional margin as this occurs. Julianna Balicka - Keefe, Bruyette & Woods: I know you are not giving guidance for 2009, but assuming no TARP capital, how would you expect your margin to behave?

We would expect the margin to improve going forward. I think that that is a function of the lower cost borrowings. I think to the extent that the environment improves, I think we can go a little bit long with some of the investments that we have been making to also enhance yield, and then to the extent that we can come back into the lending space. I think new production would also enhance the yields on the portfolio going forward. Julianna Balicka - Keefe, Bruyette & Woods: Very good. You said you applied for TARP and how much money did you apply for?

We are looking at to get close to the max, and that is what we are planning to do, which about 300 million.

350 million.

Simply over 350 million. Julianna Balicka - Keefe, Bruyette & Woods: That is very good. I will step back now. Thank you.

(Operator Instructions). Your next question comes from the line of Lana Chan with BMO Capital Markets. Please proceed.

Hi. Good morning.

Good morning.

Most of my questions have been answered, but could you just give us an update on where you are with the loan review process? I know you have completed much of the commercial loans reviewed in the third quarter, but if you could give us an update where you are on the commercial real estate front?

Yes. Actually, we much have completed the one-time review of just about everything, and also now is what I call the ongoing review. So just because we review it once with the market condition changed a lot of things just need to be revisited again. If you look at commercial real estate markets, let's say three months ago versus today, I would say that there is some dramatic economic factors that have changed that potentially can add risk to the portfolio. Now, the good news for us is that this very low LTV does make a difference. That is why as of today we still have very little problem that we identified from the commercial real estate portfolio. We continue to look at industry specific risk to try to determine, for example, in California, how would this economic crisis that are happening globally would affect, let's say tourist industry, which ultimately would affect hotel business. How would it affect like general business would affect office buildings market. How would that affect retail business that would ultimately hurt the retail centers? How about commenting on the import-export business that will actually cause a negative impact to industrial warehouse? These are the things that we are going through right now, step by step, and trying to analyze the economic situation globally and which ultimately will affect what is happening within our portfolio. Both from a commercial real estate and also C&I and trade finance loan. Fortunately for us at this point, because we are such a small consumer lending business, so what is been happening right now, and throughout the country regarding consumer credits such as home equity line and credit cards, auto loans and stuff like that, really does not have much of a impact to us at all. So in that regard I think that we feel pretty good about where we are today and that we will continue to diligently review and monitor the C&I trade finance and commercial real estate portfolio, in addition to these construction and land loans that we are now very, very familiar with.

Thanks, Dominic. Also as a follow-up question, on the residential construction and land portfolios. Is there any way to give us an estimate of what you think the cumulative remaining losses are on those portfolios?

Cumulative remaining loss, are you talking about the reserve that we set?

Yes, and price it.

Yes, so if we look at the specific reserve that we set for the land and construction loan, Irene, can you take a look at the number to see whether you can provide some color?

If we look at the reserve for land loans we have about $27 million. For residential construction loans, specifically, we have about $70 million.

Okay, that is helpful. Thank you.

I want to clarify, that that is total, including the general reserve plus any allocated general reserve for the impaired loans.

Yes. We do not expect that we would have that losses coming soon. The reason is that this reserve includes general factors and then like for example even we have a quite a few very strongly performing construction or land loans that we have due to the fact that construction and land is a high-risk loan portfolio today, we assign a higher percentage factor to these past loans. So therefore what Irene has shared with you is the total reserve that we provide for land and construction loans.

Okay. Thank you.

Okay.

Your next question is a follow-up from the line of Julianna Balicka with KBW. Please proceed. Julianna Balicka - Keefe, Bruyette & Woods: Hi good morning. Thank you for taking my question again. Just looking back for your '09 expectations and I know with the TARP capital there is a lot of moving parts of how you can leverage and deploy it. So I understand that there is no point in thinking about it too precisely, but in terms of your credit expectations, the ones that you gave back over this summer. How are you thinking about that? The provisions cost I believe it was 60 million for '09.

Yes. I think that we still feel pretty comfortable that because that expectation is basically through other pretty detailed analysis. I think that number would not have anything to do with TARP from our standpoint. From discussion with our board on the board retreat, we have very specific plans, some of deployment of this capital. When we looked at the credit cost for 2009, and that is based on our understanding of our entire portfolio, and projecting continued deterioration in the market. The one thing that potentially affects the $60 million in total of credit costs for 2009 would be mainly from a major deterioration in the market. Or the other thing is that now, if there is an acquisition, now, so I want to cushion, I mean, make sure that we take out any potential acquisition that will come. Because, if there is an acquisition, obviously there will be a different potential adjustment to provision and so forth. Now, obviously, we have set a notion of, if we do get the capital, there is a few specific niche lending and deposit initiatives that we feel very comfortably that with our expertise that we would do really well at. Because also the illiquid market today that we may potentially be able to take advantage on. Now, in that regard, when those loans start growing to a certain manner, obviously we would need to provide the proper general reserve to it. So again, if you ask us the total number, I mean if we start putting the loan production in the fashion that we expect, based on our strategic position this weekend, then I would expect that, of course, we would have to provide additional provision due to the loan growth. But, I do not think there will be anything above and beyond that. Julianna Balicka - Keefe, Bruyette & Woods: Very good. Thank you very much.

Thank you.

Ladies and gentlemen, that concludes the question-and-answer session. Now, I would like to turn the call back to East West Bancorp management for closing remarks.

Thank you. We look forward to talk to you again in the fourth quarter earnings release. In the mean time, we are going to go back and start paring down more problem loans. Good-bye.

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