East West Bancorp Inc
NASDAQ:EWBC
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East West Bancorp Inc
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Good day, everyone and welcome to the East West Bancorp First Quarter 2019 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. And please note that today’s event is being recorded.
I would now like to turn the conference over to Julianna Balicka, Director of Strategy and Corporate Development. Please go ahead.
Thank you, William. Good morning, and thank you everyone for joining us to review the financial results of the East West Bancorp for the first quarter of 2019. With me on this conference call today are Dominic Ng, our Chairman and Chief Executive Officer; and Irene Oh, our Chief Financial Officer.
We would like to caution you that during the course of the call, 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. These forward-looking statements may differ materially from the actual results due to a number of risks and uncertainties. For a more detailed description of the risk factors that could affect the Company's operating results, please refer to our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2018.
In addition, some of the numbers referenced on this call pertain to adjusted numbers. Please refer to our first quarter earnings release for the reconciliation of GAAP to non-GAAP financial measures. During the course of this call, we will be referencing a slide deck that is available as part of the webcast and on the Investor Relations site. As a reminder, today's call is being recorded and will also be available in replay format on our Investor Relations website.
I will now turn the call over to Dominic.
Thank you, Julianna. Good morning and thank you everyone for joining us for our first quarter 2019 earnings call. I will begin our discussion with a summary of results on slide 3. This morning, we reported first quarter 2019 net income of 164 million or $1.12 per share. Excluding an impairment charge, adjusted first quarter net income was 169 million and adjusted diluted earnings per share were $1.16.
Our capital levels are strong. As of March 31, 2019, our tangible equity to tangible asset ratio was 9.9%, a linked quarter increase of 16 basis points. I'm pleased to announce that East West Board of Directors approved a 20% increase to the quarterly common stock dividend, which is up from a 15% dividend increase last year. During this quarter, the quarterly dividend will increase by $0.045 to $0.275 per share, up from $0.23 per share, bringing the annualized dividend to $1.10 compared to $0.92 per share previously.
Turning to slide 4, we started off the year with solid balance sheet growth. As of March 31, 2019, total loans reached a record 32.9 billion, growing from 478 million or 6% linked quarter annualized from December 31, 2018 and growing by 11% year-over-year. In the first quarter, average loans of 32.4 billion grew by 11% linked quarter annualized. Average loan growth in the first quarter was broad based across our lending portfolio. Our strongest quarter-over-quarter growth in average balances was in commercial real estate loans, which were up by 352 million or 12% annualized, followed by C&I, which were up by 291 million or 10% annualized.
Our average consumer loans, which are predominantly single family mortgages, increased by 237 million or 12% annualized. Within CRE, you can see quarter-over-quarter balance sheet growth in our construction and land portfolio. Overall, the commitment amount of our construction and land portfolio has been stable, ranging between 1.1 billion and 1.2 billion for the past five quarters. This portfolio comes largely from long-time clients of the bank that are experienced real estate developers.
On an average basis, C&I loan growth was 10% annualized versus being essentially flat on a period end basis. This is somewhat a function of timing. As we have substantial commercial loan growth towards quarter and in last year, which impact growth in the first quarter of this year. Also, recall that some of our customers, especially in wholesale trade had a seasonally strong fourth quarter growth ahead of the holiday season, and they paid down their balances in the first quarter of this year. For the rest of the year, we anticipate a pickup in commercial loan growth, spread out across a variety of our loan portfolios.
On slide 5, you can see that total deposit grew to a record 36.3 billion as of March 31, 2019, an increase of 834 million or 10% annualized from December 31, 2018 and up by 3.7 billion or 11% year-over-year. Our first quarter average deposit of 34.9 billion declined slightly by 1% linked quarter annualized. Within that, you can see a decrease in our demand deposits. As we mentioned last quarter, our fourth quarter demand deposit was unusually high due to the seasonal nature of some of our customers’ business. These funds flowed out in the first quarter. In addition, some customers converted accounts from demand into interest bearing categories. At this point, we think we have seen the substantial bulk of categories within our deposit portfolio and expect this headwind to subside. As of March 31, our loan to deposit ratio was less than 91%.
Turning to slide 6, you can see that our first quarter return on assets was 1.63% and return on equity was 14.7%. Excluding the impairment charge, our operating return on assets was 1.68% and our operating return on equity was 15.1%. Our operating tangible return on equity was 17% this quarter. Overall, we are on track in terms of our 2019 outlook, the elements of which are unchanged from what we previously guided.
And now, I would turn the call over to Irene for a more detailed discussion of our income statement and outlook.
Thanks, Dominic. On page 7, we have a slide that shows the summary income statement. This quarter, we booked an impairment charge related to certain tax credit investments. The charge was 7 million pre tax or 5 million after tax, impacting our EPS by $0.04. Our adjusted EPS this quarter were $1.16 compared to $1.18 in the fourth quarter of 2018. This impairment charge is included in the amortization of tax credit and other investment, line items. We disclosed more information about these tax credits investments in our December 31, 2018 Form 10-K.
The 5 million after tax impairment booked this quarter as a writedown of the investments we held on the balance sheet related to these tax credits investments. Our total equity at risk is 53 [ph] million, which consists of 54 million in tax credit investments, partially offset by 6 million in related deferred tax liabilities and the 5 million investment writedown that we booked this quarter. At this point, we are evaluating the appropriateness of recording [indiscernible] in the future as we get more information. Such a reserve would be recorded in our tax line item in the income statement.
Moving on to slide 8, first quarter net interest income of 362 million declined by 2% linked quarter and grew by 11% year-over-year. Excluding 2.2 million of ASC 310-30 discount accretion income, first quarter adjusted net interest income was 360 million, 1% lower than the prior quarter, largely due to the day count in the first quarter. Year over year, our adjusted net interest income grew by 12%. The Q1 GAAP net interest margin of 3.79 was flat compared to last quarter and was up by 6 basis points from the year ago quarter.
Excluding the impact of accretion, adjusted NIM of 3.77 expanded by 4 basis points from the fourth quarter and expanded by 10 basis points from the first quarter of last year. Changes in yields and rates impacted our margin as followed this quarter, an 11 basis point increase stemming from higher loan yields, which reflect an upward pricing existing loans as well as higher yield on new loans across our portfolios. A 3 basis point increase from higher yield on other earning assets, offset by a 3 basis point decrease due to lower discount accretion income and 11 basis point decrease from higher rates paid on deposits.
At the end of March, the end of period cost of our total deposits was 1.12% compared to 95 basis points as of December 31. As of April 15, the cost of deposit of our total deposits was one-tenth, down 2 basis points quarter-to-date. Cycle to date, since the Federal Reserve started the Fed funds rates increases in December 2015, we have had an implied beta of 56% on our loan yields, excluding accretion and 35% on our total deposit costs, again, relative to the change in the average Fed funds rate.
Now turning to slide 9, total non-interest income in the first quarter was 42 million, up by 1% quarter over quarter. We saw increases in interest rate contracts and other derivatives revenue, wealth management fees and deposit account fees. This was partially offset by declines in foreign exchange income, lending fees and loan sale gains. Please note that we have separated interest rate contracts revenue and the mark to market and CDA adjustments in a table on the slide.
Also, please note that we have broken out foreign exchange income as its own category, and regrouped lending related fees into one category. We also renamed branch fees as deposit account fees. In January, we adopted the new lease accounting standards. As a result, we recognized 104 million in writing these assets and 113 million in associated liabilities. You can see these new items on our balance sheet. In addition, we recognized the remaining income from our prior lease -- sale leaseback transactions in retained earnings. Going forward, this will no longer be booked as gain on sales of fixed assets. In the fourth quarter, this income was 1.1 million.
Moving on to slide 10, fourth quarter non-interest expense was 187 million and our adjusted non interest expense, excluding amortization of tax credit investments and core deposit intangibles was 161 million, up by 5 million or 3% linked quarter. This increase primarily came from higher compensation and employee benefits, reflecting higher payroll taxes in the first quarter. This was partially offset by a decrease in other operating expenses. Year-over-year, our adjusted expense is up by 7%. We expect year-over-year growth in expenses to decline over the course of the year, reflecting hiring in the second half of 2018. Our first quarter adjusted efficiency ratio was 39.8% compared to 37.9% in the fourth quarter. Over the past five quarters, our adjusted efficiency ratio has ranged from 40.6% to 37.9%. Our first quarter 2019 pre tax pre provision income of 244 million was down 5% quarter over quarter and our first quarter pretax pre provision profitability was 243 compared to 250 from the fourth quarter. Year over year, our pre tax pre provision is up by 11%. And our pre tax pre provision profitability has expanded by 5 basis points.
In slide 11 of the presentation, we detail out critical asset quality metrics. Our allowance to loan losses totaled 318 million as of March 31, 2019 or a 97 basis point of loans held for investment, compared to 96 basis points as of December 31, 2018. Non-performing assets, as of March 31, 2019, were 138 million or 33 basis points of total assets compared to 93 million or 23 basis points of total assets as of December 31, 2018 and 35 basis points of total assets as of March 31, 2018.
Our non-performing assets continue to be at historically low level. The linked quarter increase in non-performing assets came from increase in commercial non-accrual loans. C&I non-accrual loans were 86 million as of March 31, 2019 compared to 44 million as of December 31, and 81 million as of March 31, 2018. This fluctuation comes from a handful of loans and is part of the normal course of business. We do not see systemic weakness in our portfolio and overall asset quality remains sound.
We are vigilant in reviewing our portfolio and proactive in resolving problem loans quickly. For the first quarter of 2019, our net charge-offs were 14 million, annualized 18 basis points of average loans and we recorded the provision for credit losses of 23 million. This compares to net charge-offs of 16 million or 20 basis points of average loan and a provision for credit losses of 18 million in the fourth quarter of 2018. The annualized net charge-off ratio was 14 basis points of average loans in the year ago quarter.
Moving on to capital ratios on slide 12, East West Capital ratios remain strong. Tangible equity per share of $28.21 cents as of March 31 grew 4% linked quarter and grew by 17% year-over-year. Our regulatory capital ratios increased by 18 to 33 basis points year-to-date. As noted by Dominic earlier in the call, East West Board of Directors has declared a 20% or $0.045 increase to our common stock dividend.
And with that, I'll move on to reviewing our 2019 outlook on slide 13. Our current outlook for the full year is unchanged relative to a quarter ago. For the full year of 2019, compared to our full year 2018 results, we continue to expect end of period loan loss of approximately 10%, net interest income growth excluding ASC 310-30 discount accretion at a low double digit percent rate and an adjusted net interest margin, excluding the impact of ASC 310-30 discount accretion to range between 3.75 and 3.80.
We assume no change to the Fed funds rates in 2019. Our outlook implies an essentially steady margin from the first quarter levels and expanding NIM compared to 2018. Although interest rates stopped increasing, loan yields on new origination are coming in above blended portfolio yields which help support our margins. We also believe we experienced the major deposit category shifts in our portfolio and quarter-to-date, we are seeing a stabilization in deposit cost increases. For the year, we expect accretion income to add 2 basis points to the net interest margin.
We expect non-interest expense, excluding tax credit amortization, and core deposit premium amortization to increase at a mid single digit percentage rate. Given our current view of revenue growth, this does apply modest positive operating leverage in our full year efficiency ratio for 2019, relative to 40% in 2018. We are reiterating that the provision for credit losses is expected to range between 80 million and 90 million. Finally, we anticipate that the effective tax rate will be 15% in 2019, as we expect to continue to invest in tax credit investments, which reduce our tax liability from statutory rates. We anticipate tax credit investments to be at similar levels to 2018. Please note that this outlook of 50% excludes the potential impact of the reserve for tax credit investments I previously referenced.
With that, I’ll now turn the call back over to Dominic for closing remarks.
Thank you, Irene. In closing, we had a solid start to 2019 and look forward to delivering another year of attractive growth and profitability for our shareholders. And with that, I will now open the call to questions. Operator?
[Operator Instructions] And the first questioner today will be Aaron Deer with Sandler O'Neill and Partners.
I guess, given the increase we saw in the commercial non-accruals in the quarter, I was hoping maybe you could start by providing a little bit more detail on what's in there, maybe if you could provide the largest two to three loans that are in that category in terms of their size and the industry that they're in?
Sure. If you look at the non-accrual loans that we have, as of March 31, the categories are pretty broad based. When we look at it, we -- there are loans that came in, there are loans that went out. And the good news is, subsequent to quarter end, when we look at, we do expect approximately 45 million came in, we do expect, at this point, either there have been loans that have moved out or expected to move out approximately, and also 45 million in the course of the third quarter, second quarter, excuse me.
Okay. And then, just kind of thinking through some of the guidance items, the low double digit net interest income growth, I guess, if we're looking at loans up 10% and the kind of a flattish margin going forward, obviously, you get the benefit of the year-over-year strength that we had in 2018 planned through to 2019, but I'm still just kind of struggling to see how you get to the double digit NII growth, particularly if the securities book is going to continue to drift down. Can you maybe provide some additional thoughts on that?
Yeah, and maybe to clarify, when we're talking about the low double digits NII growth, it is year-over-year, right. And when we model that out with this kind of expectation that we have, and as we run through our models, we feel comfortable that we can hold on to a NIM at or close to the core that we have in the 3.77 in Q1. That comes out to low double digit NII growth year-over-year.
So would you expect then that the securities book will at least hold steady at this point or does that kind of continue to drift lower? Because I'm just, I'm thinking about it also in terms of the total earning assets and it's -- I just have a hard time believing that that too is going to hit a double digit kind of pace or even could struggle to get into the very high single digits.
Yeah, so the yield on our [indiscernible] at the end of March, also during the first quarter, and we expect that we will be able to hold around that level.
And our next questioner today will be Ebrahim Poonawala with Bank of America Merrill Lynch.
So I just wanted to follow-up, I get I think what Dominic and you mentioned, Irene, about the vast majority of the mix shift in deposits is behind you. Having said that, I think when I look at sort of the cost of deposits up 17 basis points versus 12, it was a little bit of a surprise to me. I expected things to moderate a little bit. So would appreciate in terms of, if you can at least put some numbers around what we should expect going forward, given the promotions you’re running, exception pricing that you're doing, does that 17 go down to 10, lower, if any framework that you can give would be quite helpful.
Yeah, Ebrahim, so when we -- the guidance that we gave out and I think that, I can see the questions around that earlier this year, fundamentally, there's really no change when we look at the full year guidance. From a NIM perspective, we have modeled in different assumptions as far as what would happen with the cost of this deposit, also with the loan yields. At the end of the day, loan yields are holding up a little bit better than we thought they would be at the beginning of the year, cost of deposits, the increase of that, a little bit more front ended for the year, but all in all, our full year kind of expectations are not that different. That's why we're comfortable with maintaining the margin and NII growth guidance that we gave.
And do you expect non-interest bearing deposit growth, like do you expect one, the mix of non-interest bearing to remain steady, go down and do you expect growth in that -- in those balances?
We've had a small growth in the quarter, second quarter thus far. We do not expect that that continue -- that mix change to continue to happen, Ebrahim. So we think it will be steady, slightly increasing from this point in time.
And our next questioner today will be Dave Rochester with Deutsche Bank.
On the loan growth, I know you reiterated the 10% guide for the year and you had highlighted this quarter might be softer on the growth front. But it looks like the average balance this quarter was barely above the end of period balance for 4Q, which implies a big skew for the growth to the latter part of the quarter. Can you just talk about how the loan pipeline looks, heading into 2Q, if you're writing some positive momentum here into the coming quarter.
I think the pipeline looks decent right now. In fact, we all along anticipated the first quarter, because of the seasonality with wholesale trade, fourth quarter usually has the highest outstanding balance and then in the first quarter, it’s got payoff. And also Chinese New Year, that also slows things down. So first quarter normally is always going to be slower. And we look at the pipeline. In fact, we see pretty decent pipeline across different categories. So therefore, we feel pretty comfortable that going forward in the next three quarters, just similar like last year, that we will continue to sort of like catch -- over the last year, fourth quarter, also very slow.
And then we gradually pick it up and we expect something very similar in 2019, granted, if you looked at the latest economic data that came out from China have shown that the economy in China has stabilized. And in fact, the numbers came out stronger than what the street had expected. And in addition to that, we looked at the likelihood of signing a trade deal by June is very high.
And all of that will create positive sentiments to customers who may be a little bit more hesitant to either put an investment of -- hesitant about making any kind of like potential growth acquisition, all of those hopefully, we expect, that to give better. In fact, all the signs from customers and sentiments on the customers have been getting more positive. So we feel that there's a high likelihood that we should be able to beat the guidance expectation in terms of loan growth.
Appreciate the color. And just a follow up on what you just said there on a potential trade deal. If we do get one mid-year, do you think that your loan growth guidance for the year might actually be conservative, just give some of the positives that could come from that?
We'll see at that point. I think right now, the way I see it is that we try not to get too much of exuberance to what may potentially happen. Our view is that we also wanted to manage our balance sheet in a much more steady pace. This is -- East West has been a growth engine for many, many years. Consistently, if you look at our record earnings has been consecutive for many, many years. So we would not want it to grow too much to make it too difficult for us to have a decent number to show you guys. So therefore, I hope that overall optimistically, everything is fine. Then, we will be able to just make sure that we do our job and deliver strong results for our shareholders.
And our next questioner today will be Michael Young with SunTrust.
Wanted to touch on the expense front, you sound pretty confident on kind of the revenue growth outlook, but it sounds a little back half weighted. So, just on the expense front, if there were to be a little bit more of a shortfall in revenue versus current expectation, should we expect that mid single digit to drift lower to low single digit, kind of as an offset or what ability do you have to manage that?
Michael, we're not planning for that today, because we think that revenue will be there. But certainly, there are levers to reduce the operating expenses if we need to.
Okay. And also, can I just touch on the intangible or the amortization on the tax credits? Obviously, the 7 million was kind of a one-timer this quarter, is the run rate now lower, kind of at 17 million, 18 million per quarter, or will that pop back up?
We do expect that to increase in the latter half of the year. And that's factored in also with the tax rate that we’re assuming.
And our next questioner today will be Jared Shaw with Wells Fargo.
Maybe following up on the average earning assets, so when you look at the cash balance compared to securities balance and then end of period versus average, should we assume that that cash balance is being deployed down? And maybe we see that grow through the security side, as we're trying to calculate the margin.
Yeah, I think, I don't know if the cash is -- certainly, yes, we have excess cash, sometimes, that can be redeployed into the securities book, but honestly, it's more of a function of the deposits and the balances that we have in our expectations of the needs of that. So I think if you're looking at kind of changing the earning asset mix from what we've been averaging, I don't know if that makes a lot of sense, and the mix that we have right now is probably fine.
Okay, okay, that's helpful. And then on the fee income side, if we -- one that it was the FX fee income meaningfully impacted by all of the trade discussion and if we do see some type of resolution from that, do you think that there should be a good flow through to fee income recovery?
Well, we anticipate that the FX fee income will grow in 2019. So, again, all relatively speaking, if you look at the first quarter, FX fee income was not as strong as the fourth quarter last year, but then, we always have very strong fourth quarter, because of the nature of the business in the wholesale trade and so forth. So, but relatively speaking, if we look at the first quarter of this year versus the first quarter of last year, the FX fee income have grown. And so we anticipate that there will be much stronger growth on the FX fee income in the balance of the year. So, with or without the trade agreement, I think that we will be able to continue to bring in new customers and continue to add value in our foreign exchange advisory services so that we will be able to generate more fee income.
And the next questioner today will be Matthew Clark with Piper Jaffray.
First one just on the spot rate, I think you gave the total cost of deposits, can you give us the spot rate on interest bearing deposits at the end of March and how it looked in April as well?
One minute, as we’re pulling that information together for you.
Okay, I can move on to the next one then. And then just on loan yields, it sounds like some new businesses coming in above the core portfolio yield, can you give us a sense for what the weighted average rate is on new production and then remind us how much of your loan portfolio is tied to three month LIBOR because I think that's the rate that's really rolled over, at the one month LIBOR based loans.
So if we look at the C&I loan, as of the end of the quarter, weighted average, obviously repeating things, it's a little bit different. But all in, probably, we're looking at from weighted average as at the end of March, versus like new originations in the first couple of weeks of April, we're at probably about 20 basis points on those C&I loans. CRE continues to be challenging. So on those balances, it's lower, single family also picking up a little bit as well.
And can you give us as absolute rates in the C&I portfolio and the CRE, up 20 to what?
About 5.5 for C&I. CRE, we’re down a little bit to about 4.80 on a weighted average interest rate coupon basis.
Okay. And again, the three month LIBOR based loans of your total portfolio, again, that's the rate that's rolled over.
Yeah, so of the total portfolio, we probably have about that 12 billion, about 7 billion of that probably in about is a three month LIBOR.
And the next questioner today will be Chris McGratty with KBW.
Just going back to credit for a second, the handful of credits that are moving in or out, just interested if those were all self originator or are there any clubbers, shared national credits in there.
Of those loans, majority of – it was a mix. There were some that was a cloud or syndication loan, there are also ones that were self originated as well.
And then maybe getting back to the margin for a second, some of your competitors have been taking the forward curve and reducing asset sensitivity. I'm interested in maybe in any steps you might be taking, given that it seems like the Fed has presumably done the cycle. Thanks.
Sorry, Chris, one second on your question, we want to -- Matt was asking about the three month LIBOR loans, and the 7 billion relates to one month LIBOR loans, so we just want to make that correction. Could you ask your question again, please?
Oh, sure. The rate sensitivity, you guys are fairly asset sensitive and it feels like the Fed is done, any steps you might be taking to kind of extend duration or kind of take some of that rate sensitivity off.
Great question. We started doing that at the latter half of 2018. First and foremost, we started originating 30 year fixed single family mortgages, which are about 40% of our pipeline today. So slowly, that is changing the mix. Also, I’ll note that those are assets that we're generating at attractive deals and rates, given the flat rate environment and the curve. Additionally, we also started implementing floors in our C&I loans. Obviously, we tend to get forward on every loan, but that is helping change that mix of that dynamic and helping us to preserve our net interest income, if rates to decrease from this point in time.
And the next questioner today will be Brock Vandervliet with UBS.
I noted that you mentioned the 91% loan to deposit ratio in the opening comments, as I look across the rest of the sector, many peers are well above that, with the Fed kind of stepping to the side here, is there an opportunity to crank that up and therefore improve profitability?
That's certainly a lever that we have. We want to make sure we have enough liquidity and core funding to fund our growth and that has been a focus of the bank and that has also been a reason why we've kept that loan to deposit ratio relatively low, but certainly at that level that we have, there's some opportunity there and we would be comfortable moving that up a little.
Okay, great. And separately, just on salary and benefit expenses and seasonal dynamics, I know Q1 is strong, like last year, it was up 6% sequentially, this year, it was up, it looks like 9%. Should we expect and I guess part of that's driven by hiring in the back half of last year, should we expect a step down in Q2, similar to last year's pattern or not?
Yeah, we do expect so, because Q1 is also seasonal, payroll taxes. Other things that are seasonal in nature probably contribute about 5 million, 6 million as far as the expense in the first quarter, so that we wouldn't necessarily see recur.
[Operator Instructions] And the next questioner today will be David Chiaverini with Wedbush.
Hi, thanks. I wanted to start off on deposit. So average deposits you noted was down about 1% and then end of period deposits were up about 10%. So clearly, back end loaded. Should we expect the momentum to continue into the second quarter? Or was this primarily the result of the New Year promotion?
Yeah, so for the deposits, our customers, their business activities vary. That's not something necessarily we have control over as far as the average balances of the year end. I don't think that that is something that we try to be [indiscernible] necessarily manage, but certainly in the course of this quarter, the average balances did fall with some of the seasonality that Dominic mentioned in the fourth quarter, and especially the DDA balances increasing. I don't know, if particularly the CD promotions had a big impact on that from a retail deposit perspective, those balances didn't fluctuate as much. But certainly, especially for our corporate customers, they can fluctuate.
I think net-net, we are bringing in more customers and net-net, we are opening more accounts. However, the day-to-day fluctuations of the deposits have particularly on the business side. The nature of the business always would have fluctuations. And so it's very difficult for us to time exactly what quarter and number is going to be. So, but our focus is to continue to bring in more customers and continue to bring in more -- open more accounts to ensure in the sort of like a 12 month span, to actually would have deposit growth.
And then shifting gears back to credit quality, so, the non-performers that went up to 138 million from 93 million and you mentioned that 45 million should move out in the second quarter, which just happens to be the exact increase from the fourth quarter to the first quarter. So, would you expect this to go back to that level, because that's clearly barring any new inflows, the non-performers? So I guess another way of asking is, what's a typical non-performing loan inflow during a quarter?
I think certainly, the inflows and the outflows first quarter and also what we expect in to the second quarter with the outflow that happened to be around the same amount, it's a little bit higher than normal. But I would also say, and these are largely the C&I loans, as in the other asset categories, non-accrual loan levels are de minimis, but I’d say with a $12 billion book, there's going to be some inflow and outflow and at the end of the day, the level of non-accrual loans for the C&I book or in total is still a relatively low basis.
And we were at a historical low level as of fourth quarter. And then so we went back up, it’s still at a relatively low level. So I wouldn't wanted to sort of like get the expectation that just because we have outflow that may potentially equal to the inflow, that doesn't mean that we would not have new inflow coming in. So I think we just have to make sure we get the perspective in the right level, because it is still at a relatively low level. So it's hard for us to really project because it's very easy to add one or two, that looks like wow, it went up again. As an organization, we will do the best we can to make sure we manage credit risk and try to minimize losses and then that's what we're trying to do.
And I’ll just add, at this point, we are comfortable with our guidance for the provision to remain at that 80 million to 90 million for the year.
And I would like to turn the conference over to Julianna Balicka for a follow-up answer.
Hi, everybody. Just to follow-up the answer, the question from Matt about interest bearing deposit cost, so our total – our spot rate on total deposit cost, as Irene said, as of March 31, was 1.12%, down to 1.10% by mid-April and the interest bearing costs were 1.55 down to 1.53. So 2 basis point change in both.
And this will conclude our question-and-answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks.
Well, thank you very much for joining our call today and I – we are looking forward to speaking with all of you in July. Bye-bye.
And the conference has now concluded. Thank you all for attending today’s presentation. You may now disconnect your lines.