Q4 2023 East West Bancorp Inc Earnings Call

Irene H. Oh: The allowance for C&I loans increased $9 million. The allowance for commercial real estate loans increased $4 million, and the allowance for residue, mortgage, and consumer remained unchanged from the prior quarter. The reserve for office loans increased by $2 million to 243 basis points of total office loans. We believe we are adequately reserved for the content of our loan portfolio given the current economic outlook. Time to fly 13.

Okay.

Thank you.

Good afternoon and welcome to the East West Bank Corp's fourth quarter and full year 2023 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero, on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Adrian Atkinson, Director of Investor Relations.

Good afternoon, and welcome to the East West Bancorp's fourth quarter and full year towards <unk> 23 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

Pat.

After todays presentation, there will be an opportunity each west questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Irene H. Oh: As shown on this slide, all of our capital ratios expanded quarter over quarter due to the strength of our earnings in Israel. The CET-1 capital ratio stands at a robust 13.3%, while the tangible common equity ratio increased 34 basis points to 9.373%. These capital levels place us among the most well-capitalized banks in the industry. The East West Board of Directors has declared first quarter 2024 dividends for the company's common stock, resulting in a 15% increase in the dividend. The quarterly common stock dividend of $0.55 per share will be payable on February 15, 2024, to stockholders of record on February 2, 2024. East West repurchased 1.5 million shares of common stock during the fourth quarter of 2023 for $82 million.

Please note this event is being recorded.

I'd now like to turn the conference over to Adrian Atkinson Director of Investor Relations. Please go ahead.

Adrian Atkinson: Please go ahead.

Thank you operator, good afternoon, and thank you everyone for joining us to review East West Bancorp's fourth quarter and full year 2000, 2030 financial results with me are Dominic <unk>, Chairman and Chief Executive Officer, Christopher Don Morel, Niles, Chief Financial Officer, and Irene Oh, our chief risk Officer.

Adrian Atkinson: Thank you, operator. Good afternoon, and thank you everyone for joining us to review EastWest Bank Corp's fourth quarter and full year 2023 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Del Moro-Narrow, Chief Financial Officer, and Irene Oh, Chief Risk Officer.

Sure.

Adrian Atkinson: This call is being recorded and will be available for replay on our Investor Relations website.

Call is being recorded and will be available for replay on our Investor Relations website.

Adrian Atkinson: The slide deck referenced during this call is available on our Ambassador Relations site. Management may make projections for other forward-looking statements which may differ materially from the actual results due to a number of risks and uncertainties.

Slide deck referenced during this call is available on our Investor Relations site management may make projections or other forward looking statements, which may differ materially from the actual results due to a number of risks and uncertainties management may discuss non-GAAP financial measures for a more detailed description of the risk factors and a reconciliation of GAAP.

Adrian Atkinson: Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8K filed today. I will now turn the call over to Dominic.

GAAP to non-GAAP financial measures. Please refer to our filings with the Securities and Exchange Commission, including the form 8-K filed today I will now turn the call over to Dominic.

Thank you Adrian.

Dominic Ng: Thank you, Adrian.

Dominic Ng: Good afternoon.

Good afternoon.

Dominic Ng: Thank you everyone for joining us for your own earnings call.

And thank you everyone for joining us for year end earnings call.

Chris: We currently have $172 million of repurchase authorization, and there remains available future buybacks. I'll now turn it over to Chris to share our outlook for the 2024 four-year. Thank you, everybody.

2023 was another record breaking year for east West.

Dominic Ng: 2023 was another record-breaking year for East West.

Dominic Ng: Our highlights include new record levels for revenue, net interest income,

Highlights include new record levels for revenue net interest income.

Dominic Ng: Net income, loans, and deposits.

Net income loans and deposits.

Dominic Ng: Our 2023 results speak to the resilience of our business model.

Our 2023 results speak to the resilience of our business model.

Chris: To summarize, as stated on slide 14, our full-year 2024 outlook assumes a softened economy with a more modest growth profile in 2023 and takes into consideration the year-end forward curve with cuts assumed to begin in the second quarter. We expect end-of-period loan worthiness requirements to be in the range of 3% to 5%, driven by monitoring demand but also by relative strength in residential mortgage and CMI lending activity. We expect net income to decline in the range of 4-6% driven by the expected rate.

Dominic Ng: The loyalty of our customers and the persistence of our bank.

The loyalty of our customers.

And the persistence of our bankers.

Dominic Ng: Despite the turbulence in the earlier half of the year, we grew customer deposits by $1 billion in each of the past two quarters.

Despite the turbulence in the earlier half of the year, we grew customer deposits by 1 billion yes.

Each of the past two quarters.

Dominic Ng: We did this by adding 40,000 new deposit accounts over the past year.

We did this by adding 40000, new deposit accounts over the past year.

Both consumer and commercial.

And driving a more granular deposit base.

Dominic Ng: and driving a more granular depository.

Dominic Ng: Our loan growth was driven by our differentiated residential mortgage product,

Our loan growth was driven by our differentiated residential mortgage product.

Dominic Ng: and a sense of our commercial lending relationship.

And the strength of our commercial lending relationships.

Asset quality remained strong and we continue to proactively manage our credit risk.

Dominic Ng: As a quality, we remain strong and we continue to proactively manage our predators.

Oh 2023 annual net charge offs to average loans were just nine basis points.

Dominic Ng: 2023 annual net charge-offs to average loans with just nine basis points.

Dominic Ng: A just-ignorance expense is expected to increase in the range of 6% to 8%, driven again primarily by constant benefits and partially offset by lower deposit-related expenses. First quarter net charge-off levels are expected to be in line with the fourth quarter of 2023, with subsequent quarters increasing modestly as we expect full-year net charge-offs will fall within the range of 15 to 25 days. We expect our effective tax rate to increase modestly for the full year. With that recap, now, let me turn the call back to Dominic. Those are your marks.

Dominic Ng: and a non-performing asset to total asset ratio was just 16 basis points at year end.

And of nonperforming assets to total asset ratio was just 16 basis points at year end.

Dominic Ng: We continue to deliver industry-leading efficiency supported by our simple, proven business model and effective branch network.

We continue to deliver industry, leading efficiency supported by a simple and proven business model and effective branch network.

Oh efforts drove a 20% adjusted return on average tangible common equity.

Dominic Ng: Our efforts drove a 20% adjusted return on average tangible common equity.

Dominic Ng: and a 1.7% return on average assets in 2023.

One 7% return on average assets in 2023.

Looking forward, we remain focused on driving core deposit growth.

Dominic Ng: Looking forward, we remain focused.

Dominic Ng: are driving core deposit growth.

Dominic Ng: And we are pleased by the early progress on continued net new customers and balances as we begin 2024.

And we are pleased by the early progress on continued net new customers and balances as we begin 2024.

Operator: Thank you, Kurt. Let's go to slide 15. As I look back, I'm very proud of our strong performance in 2023, marked by 18% growth in tangible book value per share year over year and by recognition from S&P Global, Forbes, and Bank Director as a top performing American bank. I also would like to thank our associates for their unwavering dedication to our clients. As Chris mentioned, economists are projecting a softening economy and a declining rate environment in 2024 for that eSquared. However, our goals remain the same, which are to help our commercial clients thrive, to meet the savings and investment needs of our branch customers, and to operate with strong capital and prudent risk management, allowing us to deliver top-tier returns to our shareholders in any environment. I will now open the call to questions. Operator? We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Dominic Ng: We have started the new year from a position of saints.

We have started the new year from a position of strength.

Dominic Ng: Given our earnest ability,

Given our earnings stability.

Dominic Ng: Solid credit performance.

Solid credit performance.

Dominic Ng: I am pleased to announce that our board of directors has approved a 15% increase to the quarterly common stock dividend to 55 cents per share.

And strong capital levels I am pleased to announced that our board of directors has approved a 15% increase to the quarterly common stock dividend to <unk> 55 per share.

Speaker Change: I will now turn the call over to Chris to provide more details on our fourth quarter financial performance Chris.

Dominic Ng: I will now turn the call over to Chris to provide more details on our four-quarter financial performance. Chris?

Chris: Thank you, Dominic. Our fourth quarter 2023 net income was $239 million.

Thank you Dominic our fourth quarter 2023, net income was $239 million.

Chris: Excluding the one-time FDIC charge and security gains, our Q4 adjusted EPS was 202.

Excluding the one time FDIC charge and securities gains our Q4 adjusted EPS was 202.

Chris: Turning to loans on slide 4, East West flew total average loans by 9% for the year.

Turning to loans on slide four east West grew total average loans by 9% for the year, reflecting the strength and scale of our core residential mortgage and commercial real estate platforms. We note that over the last five years East West has grown loans at a very healthy 10% compound.

Chris: reflecting the strength and scale of our core residential mortgage and commercial real estate platform.

Chris: We note that over the last five years, EastWest has grown loans at a very healthy 10% compounded annual growth rate.

The annual growth rate.

Chris: Demand for residential mortgage remained quite strong. Despite the generally rising rate environment, we originated $3.5 billion of low-risk, low-LTV mortgages in 2023.

Demand for residential mortgage remain quite strong.

Fight the generally rising rate environment.

It added $3 5 billion of low risk low LTV mortgages in 2023.

Chris: And while we expect growth to moderate from Q4's trend, our pipelines remain resilient going into the first quarter of 2014.

And while we expect growth to moderate from Q4 its trend our pipelines remain resilient going into the first quarter of 'twenty four.

Okay.

Chris: Average CRE balance is ruined point three as we continue to work with long-standing relationship clients.

Average CRE balances grew in 'twenty three as we continue to work with long standing relationship clients.

Chris: We saw solid increases in both multifamily and industrial property lending.

Saw solid increases in both multifamily and industrial property lending.

Chris: While pocket loans declined,

While office loans declined.

If at any time your question has been addressed and you would like to withdraw your question, please press star then Q. At this time, we will pause momentarily to assemble our roster. The first question comes from Ebrahim H. Poonawala with Bank of America. Please go ahead. Thank you, and good afternoon.

Looking at Q4 end of period balances, our fourth quarter growth was driven by an uptick in C&I utilization and continued solid residential mortgage originations.

Chris: Looking at the Q4 end of period balances, our fourth quarter growth was driven by an uptick in CNI utilization and continued solid residential mortgage origination.

Chris: Looking forward, assuming the economy moderates into a top landing, we expect overall loan demand to moderate as well.

Looking forward, assuming the economy moderates into a soft landing, we expect overall loan demand moderate as well.

We expect our growth will continue to be driven by strong residential mortgage activity and continued growth in C&I lending leading to a further and better diversified loan portfolio.

Chris: We expect our growth will continue to be driven by stronger eventual market activity and continued growth in CNI lending, leading to a further and better diversified loan portfolio.

Chris: I guess maybe my first question, hey Dominic, maybe my first question for Chris just around the NII outlook and the sensitivity to the rate cuts. So it seems like the down 4 to 6% assumes the six state cuts that were there in the forward curve. Give us a sense of what if we get zero rate cuts or just get three rate cuts; should we assume proportionately NII holds up a lot better? And if we don't get rate cuts through until maybe even May, are you taking further actions to kind of neutralize the balance sheet? Yes, yes, and yes.

Yeah.

Moving on to deposits.

Chris: Moving on to deposits, we note that over the last five years, EastWest has grown deposits faster than loans overall.

Note that over the last five years east West has grown deposits faster than loans overall.

Chris: Despite volatility in the first half of 23, EastWest continued to grow average deposits year over year.

Despite volatility in the first half of 'twenty three east West continues to grow average deposits year over year.

Chris: We continue to show deposit momentum in the fourth quarter by adding another billion in deposit balance.

We continue to show deposit momentum in the fourth quarter by adding another billion in deposit balances our growth reflects the focus and dedication of our bankers and the loyalty and resilience of our broad base of customers.

Chris: Our growth reflects the focus and dedication of our vendors and the loyalty and resilience of our broad-based business.

Looking forward, we will continue to focus on adding granular low cost consumer and business deposits, while continuing to reduce our use of noncore brokered or wholesale funding.

Chris: Looking forward, we will continue to focus on adding granular, low-cost consumer and business deposits while continuing to reduce our use of non-core, pro-curse, or wholesale funding.

Chris: Turning to net interest income and margin, on slide six, Q4 net interest income increased by 1% to $575 million from the third quarter. We held our net interest margin stable at 3.48%.

Turning to net interest income and margin on slide six Q4 dollar net interest income increased by 1% to $575 million from third quarter, we held our net interest margin stable at 348%.

Chris: So, yes, if there are not as many wake-up calls as projected at year-end, NII will do better. Yes, if rate cuts start later, NII will do better. And yes, we are proactively taking a number of steps to make sure we manage our sensitivity to rates. But in particular, our focus on deposits is one that we think will yield us some benefits as we move through the course of the year. And I guess maybe another question, Dominic, for you.

Chris: While our $4.25 billion of capital hedges continue to be a net drag on NII and Q4,

Chris: on a mark-per-market basis.

On a mark to market basis. Some of these forward looking hedges are now in the money.

Chris: Some of these forward-looking hedgers are now in the money.

Chris: and expected

Expected rent cuts will only make that better.

Chris: Wraith House will only make that better.

Chris: While these hedgers cost us approximately $25 million of NII in the fourth quarter, they're expected to provide valuable earnings protection as rates decline.

While these hedges cost us approximately $25 million of NII in the fourth quarter. They are expected to provide valuable earnings protection as rates decline.

Given the current forward curve and consensus economic outlook, we expect NIM to decline by three to five basis points in Q1 as deposit costs continue to normalize and new asset yields continue to flatten out.

Chris: Given the current forward curve and consensus economic outlook, we expect NIM to decline by three deprived basis points in Q1 as deposit costs continue to normalize.

Chris: And you have to yield to continue to fly now.

We then expect our margin to be further compressed in Q2 and Q3 as a result of the expected rates moving lower.

Chris: We then expect our margin to be further compressed in Q2 and Q3 as a result of the expected rates moving lower.

Dominic Ng: So you managed through last year, very strong results, you have solid capital levels. It feels like there's a fair amount of disruption just across the banking sector, maybe in terms of people moving, loan portfolios, maybe banks up for sale. Just give us a sense of when you're looking at 2024, what do you see the opportunity set in terms of actually putting investment dollars to work and capitalizing on the disruption out there? Well, we actually continue to look into the market and see, you know, to a certain extent, you know, obviously, we all So what happened? Last year, a lot of our larger peers, well, two of them are gone, and then some of the others here are having some... financial difficulty or transitioning and whatnot. And so from a competitive landscape, I think it is marginally better for East West Bank. But we have always been prudent. And the reason we didn't get into trouble is because we didn't try to go all out in any one particular direction.

NIM likely trough in Q3, and we expect it to begin to rebound thereafter as assets grow.

Chris: Mim, Whiteley, Trost, and Q3, and we expect us to begin to rebound thereafter as assets grow.

Chris: Expected lower funding costs kick in.

Expected lower funding cost kick in.

Chris: and the expected positive cash flow benefits from balancing hedges begin to abstract where we're at.

And the expected positive cash flow benefits from a balance sheet hedges begin to offset what we're asking.

Chris: Speaking of asset yields, let's turn to slide seven.

Speaking of asset yield, let's turn to slide seven.

Chris: Our expectation for margin resilience is also supported by the enhanced levels of fixed-rate assets in our portfolio year-end.

Our expectation for margin resilience is also supported by the enhanced levels of fixed rate assets in our portfolio at year end fixed.

Chris: Fixed rate and hybrid loans in their fixed period represented 42% of our loan portfolio here in 2023 versus 35% at the beginning of 2022.

Fixed rate and hybrid loans and their fixed period represented 42% of our loan portfolio at year end 'twenty three versus 35% at the beginning of 2022.

Turning to funding costs on slide eight our average cost of deposits for the fourth quarter was 260 basis points up 17 basis points from the third quarter as Dominic previously mentioned, we remain laser focused on driving core deposit growth and growing net new customers and balances.

Chris: Turning to funding costs on Flight 8, our average cost of deposits for the first quarter was 260 basis points, up 17 basis points in the third quarter. As Dominic previously mentioned, we remain laser focused on driving core deposit growth and growing net new customers and balancers as we begin 2024. Looking forward, we are optimistic about our operational ability to rapidly reprice non-time deposits in a falling rate environment.

In 2024 looking forward, we are optimistic about our operational ability to rapidly reprice non time deposits in a falling rate environment.

Chris: Moving on to fees and non-existent income, East West has grown fee income at a 10% annual rate over the past five years.

Moving onto fees and non interest income east West has grown fee income at a 10% annual rate over the past five years 2023 fee income growth reflect the continuing strength in our customer derivatives business lending fees and foreign exchange income.

Chris: 2023 fee income growth reflected continuing strengths in our customer derivative business, lending fees, and foreign exchange income.

Chris: We note that QPAL 4 are both in every theme category.

We note that Q4 four saw growth in every category.

Moving onto slide 10 total annual adjusted noninterest expense trends are on the left adjusted noninterest expense has grown 7% annually over the past four years compared with our 11% annual revenue growth.

Chris: Moving on to slide 10, total annual adjusted non-ish expense trends are on the left. Adjusted non-ish expense has grown 7% annually over the past four years, compared with our 11% annual revenue growth.

Dominic Ng: We're always trying to look at making sure that we have a diversified portfolio. So, in terms of recruiting talent, and so forth, trying to make sure that there are talents out there that have the right mindset and that fit into the East-West culture. And also, they are in the kind of business that fits into our sweet spot. And then we will bring them over. And we'll continue to be out there recruiting and looking for the right talent to join us. And together with our own associates, who continue to grow. And so we feel that 2024 will be.

Chris: EastWest consistently delivers industry-leading efficiency. The fourth quarter adjusted efficiency ratio was 33.1%.

East West consistently delivers industry, leading efficiency the fourth quarter adjusted efficiency ratio was 33, 1%.

Compared with $31 two in the prior quarter.

Chris: I have a 31.2 in this prior quarter.

Chris: Adjusted monies expense was $215 million in the fourth quarter.

Adjusted Noninterest expense was 215 million in the fourth quarter comp and benefits did increase 8 million, reflecting higher commissions and incentive accruals and other operating expenses increased $6 million, reflecting some increased legal expense realized credit card fraud losses, and some advertising expense.

Chris: Common benefits did increase $8 million, reflecting higher permissions and incentive rules, and other operating expenses did increase $6 million, reflecting some increased legal expense, realized credit card fraud losses, and some advertising expense.

Chris: Looking forward, we expect adjusted non-interest expansion to increase to the range of 6-8% year-over-year.

Looking forward, we expect adjusted noninterest expense to increase in the range of 6% to 8% year over year, driven primarily by comp and benefits and partially offset by lower deposit account expense as earnings credit and related rate driven expense pressure begins to ease in the lower rate environment.

Chris: Driven primarily by constant benefits and partially offset by lower deposit account expense, as earnings, credit, and related rate-driven expense pressure begins to amuse in the lower rate environment.

Dominic Ng: We cannot predict exactly what the economy is going to be like, but we do know what each of us can do, which is that our team will find a way to continue bringing new customers, and we'll be able to continue to help support our existing customers, and with that, we'll be able to grow deposits, and we'll be able to grow loans and also have meaningful diversified fee income. And that's the plan. All right? I'll take you there.

I will now turn the call over to Irene for a discussion of our asset quality and capital position I mean.

Chris: I will now turn the call over to Irene for a discussion of our asset quality and capital position.

Irene H. Oh: Thank you, Chris. Good afternoon to all on the call.

Irene: Thank you, Chris and good afternoon to all on the call.

Irene H. Oh: As you can see on slide 11, the answer quality of our portfolio remains oddly stable.

As you can see on slide 11, the asset quality of our portfolio remains broadly stable during the fourth quarter. We recorded net charge offs of 20 million or 15 basis points, one basis point increase from the third quarter.

Irene H. Oh: During the fourth quarter, we recorded net charge-offs of $20 million, or 15 basis points, and one basis point increase from the third quarter.

Irene H. Oh: Quarter over quarter, non-performing assets as of December 31st increased modestly by 1 basis point to 16 basis points of total assets.

Quarter nonperforming assets as of December 31st increased modestly by one basis point to 16 basis point of total assets.

The criticized loan ratio decreased 14 basis points from September 30th two 187 of loans held for investment the special mention loans ratio decreased 18 basis points quarter over quarter to 77 basis points of total loans held for investment.

Irene H. Oh: The criticized loan ratio decreased 14 basis points from September 30th to 187 of loans held for investment.

Irene H. Oh: The special mention loans ratio decreased 18 basis points quarter over quarter to 77 basis points of total loan health or investment as of December 31st, and the crossbar loans ratio increased 4 basis points to 110 as credit continued to normalize.

At December 31st in the classified loans ratio increased four basis points to one.

Operator: Thank you. The next question comes from Ben Gerlinger with Citi. Please go ahead. Prasanna, and Tom Davis.

As credit continues to normalize we remain vigilant and proactive in managing our credit metrics, we recorded a provision for credit losses of 37 million in the fourth quarter compared with 42 million for the third quarter.

Irene H. Oh: We remain vigilant and proactive in managing our credibility.

Irene H. Oh: We recorded a provision for credit losses of $37 million in the fourth quarter compared with $42 million for the third quarter.

Irene H. Oh: 20 to slide 12.

Turning to slide 12.

Irene H. Oh: The allowance for loan losses increased $13 million quarter-over-quarter, primarily reflecting net loan growth.

Lounge for loan losses increased $13 million quarter over quarter, primarily reflecting not an umbrella.

Operator: Thank you. Thank you, and Craig Dickens. So Ben, I think we missed a good portion of your question, but I think your question was broadly around deposit betas and how we think deposit betas will unfold. And so I think there's a couple of thoughts here. The first part is that we had a reasonable uptick in deposit beta as rates rose. We would expect to have a reasonable downtick in deposit pricing as rates fall. Specifically, we are expecting our positive data to be north of 0.5 on the downtick, and I think that is a 0.5 that we could be more aggressive on, particularly if rate cuts come sooner or faster. And we would note that we think they're upside to that level if we can get our arms around the case of cuts that we expect.

The allowance for C&I loans increased 19, knowing that the allowance for commercial real estate loans increased 4 million and the allowance for resi mortgage and consumer remained unchanged from the prior quarter.

Irene H. Oh: The allowance for C&I loans increased $9 million, the allowance for commercial real estate loans increased $4 million, and the allowance for residence, mortgage, and consumer remained unchanged from the prior quarter.

Irene H. Oh: The reserve for office loans increased by $2 million to the 243 basis points of total office loans.

The reserve for office loans increased by 2 million to 243 basis points of total all the swaps. We believe we are adequately reserved for the content of our loan portfolio given the current economic outlook.

Irene H. Oh: We believe we are adequately reserved for the content of our loan portfolio given the current economic outlook.

Irene H. Oh: Turn to slide 13. As shown on this slide, all of our capital ratios expanded quarter over quarter due to the strength of our earnings.

Turning to slide 13 as shown on this slide all of our capital ratios expanded quarter over quarter due to the strength of our earnings East West.

Irene H. Oh: Isra

Irene H. Oh: CET1 capital ratio stands at a robust 13.3%, while the tangible common equity ratio drew 34 basis points to 9.374.

CET one capital ratio stands at a robust 13, 3%, while the tangible common equity ratio to three four basis points to nine point reached 70%.

These capital levels place us among the most well capitalized banks in the industry.

Irene H. Oh: These capital levels place us among the most well-capitalized banks in the industry.

Irene H. Oh: East West Board of Directors has declared first quarter 2024 dividends for the company's common stock, resulting in a 15% increase in the dividend. The quarterly common stock dividend of $55.7 per share will be payable on February 15, 2024, to stockholders of record on February 2, 2024. East West repurchased 1.5 million shares of common stock during the fourth quarter of 2023 for $82 million. We currently have $172 million of repurchase authorization that remains available to future buybacks.

East West Board of Directors has declared first quarter 2020 for dividends for the company's common stock, resulting in a 15% increase in the dividend.

Quarterly common stock dividend and 55 cents per share will be payable on February 15, 2024 to stockholders of record on February 2nd 2024, East watch repurchased one 5 million shares of common stock during the fourth quarter of 2023 for $82 million. We currently have.

Operator: And I think that will be feed path dependent, but I think we're very comfortable that there's an upside to that if we can get some clarity on that as we move through the course of the year. And the person earlier, if you could pick up a handset, perhaps if you're on the speakerphone, by any chance? Thank you. Thank you. I have a question. I have a curious question, but it is not an interesting question.

172 billion repurchase authorization remains available at your buybacks.

Irene H. Oh: I now turn it over to Chris to share an outlook for the 2024 full year.

I'll turn it over to Chris to share our outlook for the 2024 Fournier.

Chris: Thank you Irene. To summarize, as stated on slide 14,

Jeremy summarized as stated on slide 14.

Chris: Our full year 2024 outlook assumes a softening economy with a more modest growth profile in 2023 and takes into consideration the year-end forward curve with cuts assumed to begin in the second quarter.

Our full year 2024 outlook assumes a softening economy with a more modest growth profile in 'twenty three.

And it takes into consideration the yearend forward curve was cuts assumed to begin in the second quarter.

Operator: I just want to back up a few things and add a couple of others. You may have asked for an appreciation text, but it's not usually done. I don't know if you've heard about the FJIC, but I'm just trying to think.

Chris: We expect end-of-period loan growth in this environment to be in the range of 3% to 5%.

We expect end of period loan growth in this environment to be in the range of 3% to 5%.

Chris: Driven by Moderating Demand

Driven by moderating demand.

Chris: But do we find relative strength in our residential mortgage and CMRI lending activities?

Buoyed by relative strength in our residential mortgage and C&I lending activity.

Operator: At 68% growth, this is probably the most progressive number. How should we think about this, just from a data perspective, and kind of from a practical perspective? And then maybe we can be a little bit more aggressive if we're talking about the age of the worker or potentially the higher end of the age of the person.

Chris: We expect net income to decline in the range of 4-6% driven by the expected rate.

We expect net interest income to decline in the range of 4% to 6% driven by the expected rate cuts adjusted noninterest expense is expected to increase in the range of 6% to 8% driven again, primarily by comp and benefits and partially offset by lower deposit related expenses.

Chris: Adjusted 9-inch expanse is expected to increase in the range of 6% to 8%, driven again primarily by constant benefits and partially offset by lower deposit leaves.

Chris: First quarter net charge-off levels are expected to be in line with the fourth quarter of 0.3, with subsequent quarters increasing modestly as we expect full-year net charge-offs will fall within the range of 15 to 25 days.

First quarter net charge off levels are expected to be in line with the fourth quarter of 'twenty three with subsequent quarters, increasing modestly as we expect full year net charge offs will fall within the range of 15 to 25 basis points.

Chris: We expect our effective tax rate will increase moderately for the full year.

We expect our effective tax rate will increase modestly for the full year.

Chris: With that recap, now let me turn the call back to Dominic.

With that recap now let me turn the call back to Dominic for his.

Operator: I think we should be looking at the possibility. However, we continue to see 2024 as a year for continued investment in our core businesses and platforms. And so while we recognize that Up 6 may be a higher number than you've heard from some others, we would also suggest that a 33% efficiency ratio is a much better start point than you have heard from many others. And we think that's the right decision to make for the long-term strength of East-West transactions. But we would also note that 6% growth off of 33% efficiency is a lot lower than 6% growth, say, off of 65%. It's just for conversation.

Dominic Ng: Those are the remarks.

Closing remarks.

Thank you, Chris Let's go to slide 15.

Dominic Ng: Thank you, Chris.

Dominic Ng: Let's go to slide 15.

As I look back I'm very proud of our strong performance in 2023 marked by 18% growth in tangible book value per share year over year.

Dominic Ng: As I look back, I'm very proud of our strong performance in 2023, marked by 18% growth in tangible book value per share year over year.

Dominic Ng: and by recognition from S&P Global, Forbes, and Bank Director as a top-performing American bank.

And by recognition from S&P Global Forbes and Bank director as a top performing American bank.

Dominic Ng: I also would like to thank our associates for their unwavering dedication to our client.

I also would like to thank our associates for their unwavering dedication to our clients.

Dominic Ng: As Chris mentioned, economists are projecting a softening economy in a declining rate environment in 2024.

As Chris mentioned economists are projecting a softer softening economy in a declining rate environment in 2024.

Dominic Ng: But as he swears.

Irene: But at East West.

Dominic Ng: Our goals remain the same.

Our goals remain the same.

Which ought to help our commercial clients thrive.

Dominic Ng: Which are all to help our commercial clients thrive.

To meet the savings and investment needs of our branch customers.

Dominic Ng: to meet the savings and investment needs of our branch customers.

Dominic Ng: and to operate with strong capital and prudent risk management, allowing us to deliver top-tier returns to our shareholders.

And to operate with strong capital and prudent risk management.

Operator: Okay, the next question comes from Dave Rochester with CompassPoint. Please go ahead. Hey, good afternoon, guys. On your NII guide, what are you guys assuming for deposit growth on that, and what are you baking in for the BCIP maturity that's coming up? And if you can just give like a rough estimate, what are you seeing in terms of what a single cut means from a margin or NII impact at this point, just given the assumptions that you talked about on deposit basis? Yeah, so we fully expect to fund all of our loan growth with core deposit funding. We expect to pay down VTSD over the course of the year. It rolls over in March, we'll pay down some or roll over some, and we'll be exiting the program, in all likelihood, by year end. And with regard to sort of the rate sensitivity, it's somewhere in the one and a half to $2 million.

Allowing us to deliver top tier returns to our shareholders in any environment.

Dominic Ng: In any environment.

I would now open the call to questions operator.

Speaker Change: I will now open the call to questions. Operator?

We will now begin the question and answer session.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad.

Ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press stars and Q.

At any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our rosters.

Speaker Change: The first question comes from Ebrahim H. Poonawala with Bank of America. Please go ahead.

The first question comes from Ebrahim, each point of Waller with Bank of America. Please go ahead.

Thank you and good afternoon.

Speaker Change: Thank you and good afternoon.

Speaker Change: I guess maybe first question for Chris, just around the NII outlook and the sensitivity to the rate cuts, so it seems like the down 4-6% assumes the 6 rate cuts that were there in the forward curve, give us a sense of what if we get 0 rate cuts or just get 3 rate cuts, should we assume proportionately NII holds up a lot better? And if we don't get rate cuts through until maybe even May, are you doing, taking further actions to kind of neutralizing the balance?

I guess, maybe first question.

Hey, Don maybe first question for Chris just on the NII outlook and the sensitivity to the rate cut so it seems like the down 46% assumes just fixed scale cuts that what they are and the forward curve.

Operator: Percutt per month is one way to think about it, and I think we're sort of working our way through that. Great. And then the paydown of the VTFP, is that, are you expecting to do that with deposits? Or did you fund that with some wholesale funding as well?

Give us a sense of what if we get zero rate cuts I just got three rate cuts should we assume proportionately NII holds up a lot better.

And if we don't get rate cuts in two or maybe even me are you doing taking further actions to kind of neutralizing the balance sheet.

Operator: Well, at the March date, we'll pay down some, we'll roll over some, we'll have some new securities coming in, we'll have a variety of other things. If we have better than expected deposit growth, we'll certainly avail ourselves of that better deposit flow. But whatever is left over, we'll just refinance at the, Great. And then maybe one last one on the loan pipeline. It sounded like that was looking

Ah, Yes, yes, and yes. So yes, if there are not as many rate cuts as we projected at year end and I will do better.

Chris: Yes, yes, and yes. So yes, if there are not as many wake-ups as were projected at year-end, and I will do better.

Chris: Yes, if rates start later, NII will do better, and yes, we are proactively taking a number of steps to make sure we manage our sensitivity to rates, but in particular, our focus on deposits is one that we think will yield us some benefits as we move through the course of the year.

Yes, if rate cut start later and I will do better and yes, we are proactively taken a number of steps to make sure we manage our sensitivity to rates, but in particular, our focus on deposits.

It's one that we think will yield us some benefit as we move through the course of the year.

Speaker Change: Noted. And I guess maybe another question, Dominic, for you.

Noted and I guess, maybe another question Oh don't make for you.

So you've managed through last year very strong results.

Dominic Ng: So you managed through last year, very strong results, solid capital levels. It feels like there's a fair amount of disruption just across the banking sector, maybe in terms of people moving, loan portfolios, maybe banks up for sale. Just give us a sense in terms of when you're looking at 2024, how do you see the opportunity set in terms of actually putting investment dollars to work and capitalizing on the disruption out there?

Operator: Obviously, you're probably expecting to grow loans probably faster than other larger banks. How are you thinking about the composition of that growth this year? If you can just go through some of the puts and takes on that, that'd be great.

Solid capital levels. It feels like there's a fair amount of disruption just across the banking sector, maybe in terms of people moving loan portfolios. Many banks up for sale just give us a sense in terms of when you're looking at 2024.

Operator: Yeah, the pipeline strength that we're seeing today is primarily on the residential mortgage side, which has been a strong contributor to growth over the past year and we expect will be the strongest contributor here, certainly over the near term. Okay, great. Thanks, guys. The next question comes from Gary Tenner with D. A. Davidson. Please go ahead. Thanks for having me.

Well, how do you see the opportunity set in terms of actually putting investment dollars to work and capitalizing on the disruption out there.

Speaker Change: Well, we actually continue to...

Well, we actually continue to.

Speaker Change: Look into the market and see, you know, to a certain extent, you know, obviously we all...

Looking to the market and see.

You know to a certain extent you know obviously, we all are.

Speaker Change: So what happened?

So what happened.

Speaker Change: Lasher

Last year.

Speaker Change: that a lot of our larger peers, well,

A lot of all of our larger peers well.

Operator: Just a quick follow-up question on the Loan Growth Guide. Given the strength of growth in the back half of the year, near 10% annualized, I would have thought it would be maybe a little higher than that. Just wondering about the kind of C&I activity in the fourth quarter. Was there any sort of pull forward or drawdown that was more seasonal in nature that was kind of normalized here early in the first quarter that would impact the point-to-point loan growth outlook? And we did see an uptick in utilization in December. And so that utilization rate, as you may not be surprised, came back a little bit in January. But nonetheless, we would expect C&I to be an additional contributor to our 2024 growth. But, as I just mentioned to Mr. Rochester, I think residential growth will lead the way.

Speaker Change: Two of them are gone, and then some of the other peers are having some...

Two of them are gone and then some of the other peers are having some <unk>.

Speaker Change: Financial difficulty or transitioning and whatnot. And so from that, from a competitive landscape, I think it is marginally better for each of our things. But, you know, we have always been prudent. And the reason we didn't get into trouble is because we don't try to go all out in any one particular direction. We're always trying to look at making sure that we have a diversified portfolio. So in terms of recruiting talents,

Irene: Financial difficulty or transitioning and whatnot and so from that from a competitive landscape I think it is marginally better for east West Bank, but you know we have always been prudent and the reason we didn't get into trouble is because we don't want trying to go all out in any one particular direction, we're always trying to learn.

At making sure that we have a diversified portfolio. So in terms of recruiting talent and so forth we are.

Speaker Change: and so forth. We are very...

We're very selective we're trying to make sure that.

Speaker Change: We're trying to make sure that there are talents out there that have the right, you know, mindset that fit into the East West culture and also they are in the kind of like business that fit into our sweet spots and then we will bring them over. And we'll continue to be out there recruiting and looking for the right talents to join us and together with our own associates who continue to grow. And so we feel that 2024.

They'll have to they're all talents out there to have the right you know mindset that fit into the east West culture and also they are in the kind of like a business that fit into our sweet spot and then we will bring them over and we will continue to be out there recruiting.

And looking for the right talent to join us and together with our own associates, who continue to grow and so we feel that 2024.

Uh huh.

We cannot predict exactly what the economy is going to be like but we do know what east west can do.

Speaker Change: We cannot predict exactly what the economy is going to be like, but we do know what East West can do.

Operator: And from what we're hearing and seeing from our activity levels on the CRE side, CRE will have a muted level of growth net for the year. And I just add, the C&I utilization at year end, the trends are not that different, let's say, from the prior year as well. We'll pick up at your end. You'll need to look for us.

Speaker Change: which is that our team will find a way to continue bringing you good.

Which is that our team will find a way to continue to bring in new customers and we will be able to continue to help support our existing customers and with that we'll be able to grow deposit would be able to grow loans and also.

Speaker Change: and we'll be able to continue to help support our existing.

Speaker Change: And with that, we'll be able to grow deposits, and we'll be able to grow loans, and also have meaningful, diversify the income.

Have meaningful feet diversified fee income and that's the plan.

Got it. Thank you. Thank you.

Speaker Change: Lord, I'll take you. Thank you.

Yeah.

Speaker Change: The next question comes from Ben Gerlinger with Citi. Please go ahead.

The next question comes from Ben Garlinger with Citi.

Please go ahead.

Ben Gerlinger: Yes, sir.

Operator: Yep, gotcha. And then just as a follow-up. In terms of your guidance, in the past, and I had a chance to look back, and I apologize, had you not guided to a fee income growth rate? Correct me if I'm wrong if that's not the case, but if it was, I'm curious as to why you did not discover it.

Okay.

Ben Gerlinger: Thank you.

Good afternoon Ben.

Okay.

Ben Gerlinger: Ah, I was going to say,

The deposit.

Ben Gerlinger: Thank you for watching!

Irene: Deposit beta assumptions, I guess or her.

Uh huh.

Ben Gerlinger: A year has passed.

First of all it was pretty good.

Ben Gerlinger: You know, Clark's always pretty good at being with good food. When you do things that I've asked you to do,

It's food.

Okay.

Right.

Ben Gerlinger: What might be some of the positives?

French Fry floors.

What are your views on this.

Yeah.

So Ben I think we missed a good portion of your question, but I think your question was broadly around deposit betas and how do we think deposit betas unfold and so I think there's a couple of thoughts here. The first part is we had a reasonable uptick in deposit beta as rates Rose, we would expect to have a reasonable downtick.

Ben Gerlinger: So, Ben, I think we've missed a good portion of your question, but I think your question was broadly around deposit betas and how do we think deposit betas unfold. And so I think there's a couple of thoughts here. The first part is we had a reasonable uptick in deposit beta as rates rose. We would expect to have a reasonable downtick in deposit pricing as rates fall.

Operator: Hudson. I've only been here for one quarter, but it wasn't in the last quarter's number. Okay, no, fair enough. I apologize. I didn't have a chance to take a look back or to ask any questions.

And deposit pricing as rates fall.

Ben Gerlinger: Specifically, we are expecting our positive betas to be north of 0.5 on the downtick, and I think that is a 0.5 that we recognize we could be more aggressive on, particularly if rate cuts come sooner or faster.

Irene: Specifically, we are expecting our deposit beta to be north of <unk> five on the downtick and I think that is a 0.5 that we recognize we could be more aggressive on particularly if rate cuts come sooner or faster.

Operator: All right. Thank you. The next question comes from Casey Hare with Jeffreys. Please go ahead. Yeah, thanks. Good afternoon, everyone.

Ben Gerlinger: and we would note that we think there's upside to that level if we can get our arms around

And we would note that we think there's upside to that level. If we can.

Operator: Every first one, apologies if I missed this. The expense guide, is that tax amortization, or does that include that? And if so, what is the tax amortization expense going forward? It is excluding the one-time items and tax amortization. So it's what we report as adjusted expense, which is net of opening. So it's a clean operating expense level, and the clean level goes up a bit. Okay, but there will be attack amortization hitting the P&L, right? There will be, yeah. And so the tax amortization expense, as you can see from this quarter's numbers, can sometimes bounce around from quarter to quarter. We haven't given you a specific guide for that, but we're also looking at adopting PAM, which is a new county standard for that, which may move the numbers around geographically.

Get our arms around.

Ben Gerlinger: The pace of cuts that we expect.

The pace of cuts that we expect.

Ben Gerlinger: And I think that will be FedPath dependent, but I think we're very comfortable that there's upside to that if we can get some clarity on that as we move through the course of the year.

And I think that's that'll be fed path dependent but I think we're very comfortable that there's upside to that if we can if we can get some clarity on that as we move through the course of the year.

Got it.

Speaker Change: And the person earlier, if you could pick up a handset, perhaps, if you're on the speakerphone by any chance.

Growing or if you could pick up a handset, perhaps if you're on a speaker phone by any chance.

Sure.

Speaker Change: Yes, go ahead.

Hum.

Next question.

Speaker Change: I have a question. I was curious for a minute, but not an interesting question. I know you have a background with a few things, a few figures.

I was curious.

Irene: Non interest expense are you guys back.

A few things straight theatre.

Cooper.

Speaker Change: I'm just trying to think, I just think that it's kind of broad, it's a public or just a number, how should we think about this from a gap perspective, and kind of look back and see if that can do it, and if there's anything you can do to be a little bit more direct, I would say that it probably is larger, or potentially higher end, I think, looking at the possibilities.

Kind of conversation.

It makes sense.

I see.

I'm, just trying to think about six 8% growth.

Or how should we think about it.

Got it.

If I can do it and is there anything you can be a little bit more aggressive program is lighter or potentially I rented.

Looking at possibilities.

Speaker Change: We continue to see 2024 as a year for continued investment in our core businesses and platforms.

We continue to see 2024 as a year for continued investments in our core businesses and platforms.

Speaker Change: And so while we recognize that,

And so while we recognize that.

Speaker Change: Up six may be a higher number than you've heard from some others. We would also suggest that a 33% efficiency ratio is a much better start point than you have from any others. And we think that's the right decision to make for the long-term strength of EastWest franchise.

Up six may be a higher number than you've heard from some others. We would also suggest that a 33% efficiency ratio is a much better start point then you have from any others and we think that's the right decision to make for the long term strength of east West franchise.

Operator: So there'll probably be a reduction year-over-year in amortization expense and a slight uptick in the tax rate as a result for those who will net to the bottom. Gotcha. Okay, thanks for turning that up. And then just switching to capital, thoughts on buyback appetite going forward with a still strong 13.3 CT1. Well, that's correct. We do have strong capital.

Gotcha.

Speaker Change: We would also note that 6% growth off of 33% efficiency is a lot lower than 6% growth off of 65% efficiency, just for conversation.

Also note that six 6% growth off of a 33% efficiency is a lot lower than 6% growth off of a 65%.

Just for a conversation.

Yeah.

Okay. The next question comes from Dave Rochester, with Compass point. Please go ahead hey.

Speaker Change: The next question comes from Dave Rochester with Compass Point.

Dave Rochester: Please go ahead.

Dave Rochester: Hey, good afternoon, guys.

Good afternoon guys.

Dave Rochester: On your NII guide, what are you guys assuming for deposit growth in that, and what are you baking in for the BCFP maturity that's coming up? And if you can just give like a rough estimate, what are you seeing in terms of what a single cut means from a margin or NII impact at this point, just given the assumptions that you talked about on deposit basis?

On your NII guide what are you guys assuming for deposit growth in that and what are you baking in for the Beach P maturity, that's coming up and if you can just give like a rough estimate what are you seeing in terms of what a single cut means from a margin or NII impact at this point just give.

Operator: That's something we're very proud of. We do have the remaining authorizations. Certainly, that's something that we'll evaluate over the course of the coming months. Okay, the next question comes from... Manon Glasalvia with Morgan Stanley. Please go ahead. Hi, good afternoon.

The assumptions that you talked about on deposit betas.

Yeah, So we fully.

Speaker Change: Yeah, so we fully expect to fund all of our loan growth with core deposit funding. We expect to pay down VTSB over the course of the year. It rolls over in March. We'll pay down some, we'll roll over some, and we'll be exiting the program in all likelihood by year end.

We expect to fund all of our loan growth with core deposit funding, we expect to pay down B T F. B over the course of the year.

Rolls over in March will pay down some will roll over some and we'll be exiting the program in all likelihood by year end.

Speaker Change: And with regard to sort of the rate sensitivity.

And with regard to sort of the rate sensitivity.

It's somewhere in the one and a half to $2 million per cut per month is one way to think about it and I think we're we're sort of working our way through that.

Speaker Change: It's somewhere in the one and a half to two million dollars.

Operator: On the NIMP trough in the second half of 2024 is a little later than what others are suggesting. You know, Joe, your comments on the 50% beta on the downside, but are you modeling some sort of lag in zero deposit betas on the way down? Because, you know, you also mentioned that NIMP should rebound in 2025 after the lower funding costs kick in. So I was wondering if there's a little bit of a lag there.

Speaker Change: Per month is one way to think about it, and I think we're sort of working our way through that.

But that's in the Zip code.

Speaker Change: Great. And then the pay down of the VTFP, are you expecting to do that with deposits or could you fund that with some wholesale funding as well?

Great and then the pay down of the V. T. F. P is that are you expecting to do that with deposits or did you find that with some wholesale funding as well.

Well at the March date will pay down some more rollover. Some we'll have some securities coming due we'll have a variety of other things. If we have better than expected deposit growth will certainly avail ourselves of that better deposit slow, but whatever is left over we'll just refinance at the end.

Speaker Change: Well, at the March date, we'll pay down some, we'll roll over some, we'll have some securities coming new, we'll have a variety of other things. If we have better than expected deposit growth, we'll certainly avail ourselves of that better deposit flow, but whatever is left over, we'll just refinance at the end.

Speaker Change: Great. And then maybe one last one on the loan pipeline. It sounded like that was looking pretty good. Obviously, you're expecting to grow loans really faster than other larger banks. How are you thinking about the composition of that growth this year? If you could just go through some of the puts and takes on that, it would be great.

Great and then maybe one last one on the loan pipeline. It sounds like that was looking pretty good obviously, you're expecting to grow loans probably faster than.

Operator: There's a little bit of a lag, I would say, driven by the fact that we have a fair amount of CDs on the books. And so those CDs, for example, our Lunar CD special that's in the market today, will be in place for the next six months. So we'll book those here from January into February. They'll be with us until June. Dela Luca.

Irene: And then other larger banks, how are you thinking about the composition of that growth. This year. If you can just go through some of the puts and takes on that would be great.

Speaker Change: Yeah, the pipeline space that we're seeing today is primarily on the residential mortgage side, which has been a strong contributor for growth over the past year, and we expect will be the strongest contributor here, certainly over the near future.

Yeah, the pipeline strength that we're seeing today is primarily on the residential mortgage side, which has been a strong contributor to our growth over the past year and we expect will be the strongest contributor here certainly over the near term.

Speaker Change: Okay, great. Thanks, guys.

Speaker Change: Okay, great. Thanks, guys.

Hum.

Speaker Change: The next question comes from Gary Tenner with D.A. Davidson.

The next question comes from Gary Tenner with D. A Davidson.

Gary Peter Tenner: Please go ahead.

Operator: And maybe flipping over to credit, you know, there remains a lot of concerns around California commercial real estate. Can you talk about why your book is different, and also what you're hearing from borrowers right now? And, you know, how negotiations are going, given that, given the outlook for lower rates coming up? Yeah, thanks. That's a great question.

Please go ahead.

Gary Peter Tenner: Thanks for having me.

Thanks, Good afternoon.

Gary Peter Tenner: Just a quick follow-up question on the loan growth guide. Given the strength of growth in the back half of the year, near 10% annualized, I would have thought it would be maybe a little higher than that. Just wondering about kind of the C&I activity in the fourth quarter. Was there any sort of pull forward or drawdowns that were more seasonal in nature that were kind of normalized here early in the first quarter that would impact a point-to-point loan growth outlook?

Hey, a quick follow up question on the on the loan growth guide given the strength of growth in the back half of the year are you on your near 10% annualized I would've thought it would be maybe a little a little higher than that.

Wondering about you know kind of a C&I activity in the fourth quarter, our reserve any sort of pull forward or drawdowns that were more seasonal in nature that were kind of normalized here early in the first quarter that would impact that.

Point to point loan growth outlook.

Gary Peter Tenner: And we did see an uptick in utilization in December, and so that utilization rate, as you may not be surprised, came back a little bit in January. But nonetheless, we would expect C&I to be additionally a contributor to our 2024 growth, but as I just mentioned to Mr. Rochester, I think residential growth will lead the way. And from what we're hearing and seeing from our activity levels on the CRE side, CRE will be a muted level of growth net for the year.

Yeah, we did see an uptick in utilization in December and so that utilization rate.

Operator: And then, as you can see from what we've reported, when we look at the pre-assigned classified assets, those ratios, the non-performing loan ratios, you know, the pre-assigned loans are down, and non-performing loans are down. We're pleased with that. As we look at the different categories, office, multifamily, et cetera, with the increase, we're comfortable with the loan rates. We're also very pleased to see that there are not a lot of new problem loans that are coming up.

You may not be surprised it came back a little bit in January.

Nonetheless, we would expect C&I to be additionally, contributor towards 'twenty 'twenty four growth, but as I just mentioned to Mr. Rochester, I think residential growth will lead the way and from what we're hearing and seeing from our activity levels on the CRE side CRE will be muted level of growth in that for the year.

Speaker Change: And I just add, the CNI utilization at year-end, the trends are not that different, let's say, from the prior year as well.

Speaker Change: We'll pick up at your end. It's pretty normal for us.

We will pick up in Iraq.

Speaker Change: Right Yep.

Speaker Change: Yep, gotcha. And then just as a follow-up...

Speaker Change: Gotcha.

Operator: So, overall, you know, these conversations with customers, certainly there are some that we're working through, but it's very manageable at this point, and we're very pleased to see that. All the efforts and work that we've gone through in the last couple years to shore up borrowers, have them pay down, have them swap, buy caps, those are all things that we see as positive today. Also, as we highlighted in previous calls before, that we don't have that many loans. Number two, well, neither in 2023 nor in 2024, you know, with a very small percentage of loans coming due. So we actually really don't have much of an opportunity to have too many conversations with our customers in terms of dealing with some of the challenges when it comes to refinancing.

And then just as a as a follow up.

Speaker Change: In terms of your guidance, in the past, and I had a chance to look back, and I apologize, had you not guided to also a fee income, growth rate, correct me if I'm wrong, if that's not the case, but if it was, curious as to why you did not discover.

In terms of your guidance in the past when <unk> and I had a chance to look back and I apologize.

Have you not guided to also a fee income growth rate correct me, if I'm wrong, if that's not the case, but if but if it was curious as to why you did not this go round.

I see.

Speaker Change: and

Speaker Change: I've only been here one quarter, but it wasn't in the last quarter's numbers.

I've only been here one quarter, but it wasn't in last quarter's numbers.

[laughter].

Okay, No fair enough I apologize I didn't have a chance to take a look back prior to asking your questions up alright. Thank you.

Speaker Change: Okay, no, fair enough. I apologize. I didn't have a chance to take a look back or to ask any questions. All right. Thank you.

Yeah.

Speaker Change: The next question comes from Casey Hare with Jefferies. Please go ahead.

The next question comes from Casey Haire with Jefferies. Please go ahead.

Casey Hare: Yeah, thanks. Good afternoon, everyone.

Yeah. Thanks, good afternoon, everyone.

Casey Hare: Maybe first one, just apologies if I missed this, the expense guide, is that ex-amortization or does that include that? And if so, what is the tax amortization expense going forward?

Maybe first one just apologies if I missed this the expense guide is that is that ex amortization or as far as or does that include that and if so what what is the the tax amortization expense going forward.

Speaker Change: It is excluding the one-time items and excluding the tax amortization. So it's what we report as adjusted expense, which is net of those things. So it's a clean operating expense level, and when the clean level comes up a bit.

It is excluding the one time items and excluding the tax amortization. So it's what we reported as adjusted.

<unk> expense, which is net of those things. So it's a clean operating expense level and we need to clean level. It comes up with it.

Okay, but there will be a tax amortization hitting the P&L correct.

Speaker Change: Okay, but there will be attacks, amortizations hitting the P&L, correct?

Operator: And keep in mind that we have very low LTE and our portfolio is quite granular. So I think that's the reason why our portfolio so far stands up really well versus some of the others. Got it.

Speaker Change: There will be, yeah. And so the tax amortization expense, as you can see from this quarter's numbers, can sometimes bounce around from quarter to quarter. We haven't given you a specific guide for that, but we're also looking at adopting PAM, which is a new county standard for that, which may move the numbers around geographically. So there will probably be a reduction year over year in amortization expense and a slight uptick in the tax rate as a result for those who will net out to the bottom.

Yeah, and so the tax amortization expense as as you can see from this quarter's numbers can sometimes bounce around from quarter to quarter. We haven't given you a specific guide for that but.

But we're also looking at adopting a Pam with the new accounting standard for that which may move the numbers around them geographically, so there'll probably be a reduction year over year and amortization expense and a slight uptick in the tax rate as a result of those two will net out to the bottom line.

Operator: And I'm sorry if I missed it, but did you update what your reserve levels were in CRE Office? And, you know, if it's around 2.3% or so as it was last quarter, can you talk about what keeps you comfortable with that level of reserve? It's on page 12 of the slide deck, and it was 243 at your end, which is obviously up from the 2.3 you cited. Got it. And what keeps you?

Speaker Change: Gotcha. Okay, thanks for turning that up. And then, just switching to capital, just thoughts on buyback appetite going forward with a still strong 13-3 CT1.

Gotcha, Okay. Thanks for clearing that up and then.

Just switching to capital I'm, just thoughts on buyback appetite going forward with it where they're still strong 13th Tracey do you want.

Speaker Change: Well, that's correct. We do have strong capital. That's something we're very proud of. We do have the remaining authorization. Certainly, that's something that we'll evaluate over the course of the coming months.

Well, Oh crap, we do have strong capital and that's something we're very proud of our we do have a remaining authorization certainly that's something that we'll evaluate over the course of the coming months.

Okay.

Yeah.

Speaker Change: The next question comes from...

The next question comes from <unk>.

Speaker Change: Manan Gosalia with Morgan Stanley. Please go ahead.

And on the go Salvia with Morgan Stanley.

Please go ahead.

Hi, good afternoon.

Manan Gosalia: Hi, good afternoon. On the NIM prof in the second half of 24 is a little later than what others are suggesting. You know, here are your comments on the 50% beta on the downside, but are you modeling some sort of lag into your deposit betas on the way down? Because I know you also mentioned that the NIM should rebound in 2025 after the lower funding costs kick in. So I was wondering if there's a little bit of a lag there.

Arm.

The NIM trough in the second half of 'twenty for his job.

Later than what Oh does this suggest saying Oh you commented the 50% beta on the downside, but are you modeling some sort of lag and your deposit betas and the way down because you know I know you also mentioned that the.

Damn should rebound in 2025 after the lower funding cost kick in so I was wondering if there is a little bit of a lag there.

Operator: Yeah, the office and all of CRE have a rigorous process where we go through the portfolios. Our RNs, our team leaders, credit supervision, all work together. And I think as we're going through these loan reviews on a regular basis, and the cash from the clients, the properties, those are all things that help us. And the cash, like candidly, and the network, many of our borrowers and going towards that are all things that give us a thank you. Just a reminder, if you have a question, please press star then one. The next question comes from Matthew Clark with Piper Sandler. Please go ahead. Hey, good afternoon.

Speaker Change: There's a little bit of a lag I'll say driven by the fact that you have to remember we have a fair amount of Cds on the books and so those Cds for example, our lunar CD special that's in the market today will be in place for the next six months, so well booked out here January and February there'll be with us until June.

Speaker Change: There's a little bit of a lag, I would say, driven by the fact that, yes, remember, we have a fair amount of CDs in the book.

Speaker Change: And so those CDs, for example, our Lunar CD special that's in the market today will be in place for the next six months. So we'll book those here January into February. They'll be with us until June.

Speaker Change: July, August. And so there'll be a bit of a lag because of the fees that we're pricing today versus what will happen. But again, depending on the timing and the pace of rate cuts, we could outperform that. And certainly as those roll over six months from now, we would expect to fully participate in the benefit of a low responding cost at that point.

July August and so there'll be a bit of a lag because of the cities that we're pricing today versus what'll happen. So again, depending on the timing and the pace of rate cuts, we could outperform that and certainly as those roll over six months from now we would expect to fully participate in the benefit of the lowest.

Funding costs at that point in time.

Yes.

Great and maybe flipping over to credit are you there.

Speaker Change: Great, and maybe flipping over to credit, you know, there remain a lot of concerns around California commercial real estate. Can you talk about, you know, why your book is different and also what you're hearing from borrowers right now and, you know, how negotiations are going given that, given the outlook for lower rates coming up?

A lot of concerns around our California commercial real estate.

Can you talk about you know why why your book is is their friend.

Operator: Thank you for the questions. First one just around deposits, if you can speak to your outlook on non-incurse revenue bearing down here this quarter, just your expectation on where that might draw off relative to the mix. And then it also looks like your Chinese New Year special is five and a quarter, at least on your website.

And also what are you hearing from borrowers right now and you know how negotiations are going given that given the outlook for a low rates coming up.

Speaker Change: Yeah, thanks. That's a great question. And as you can see from what we've reported, when we look at the criticized classified assets, those ratios, the non-performing loan ratios, the criticized loans are down, non-performing loans are down.

Yeah. Thanks, that's a great question and and you as you can see from what we've reported our when we look at the criticized classified assets those ratios of nonperforming loan ratios.

Criticized loans were down nonperforming loans are down we're pleased with that as we look at the different categories office multifamily et cetera, with the decree are we're comfortable with the low grades were also very pleased to see that they're not a lot of new problem loans that higher.

Speaker Change: We're pleased with that. As we look at the different categories, office, multifamily, et cetera, within Cree, we're comfortable with the loan rate. We're also very pleased to see that there are not a lot of new problem loans that are coming up. So, overall, you know, these conversations with customers, certainly there are some that we're working through, but it's very manageable at this point, and we're very pleased to see that. All the efforts and work that we went through the last couple of years to shore up borrowers, have them pay down, have them swap, bypass, those are all things that we see as positives today.

Operator: So just thoughts, there is around kind of growth going forward. Is it going to continue to be dominated by CDs? In the near term, we expect C.D. growth in the first quarter to be a significant contributor. Our current lunar C.D.

They not so overall yeah. These conversations with customers certainly there are some that we're working through but it's very manageable at this point and we're very pleased to see that all the efforts and work that we went through the last couple of years to shore up borrowers have been paid down have them swap by cash.

Those are all things that we.

Positive today.

Also as we have highlighted in the previous calls before that we don't have.

Speaker Change: Also, as we highlighted in the previous calls before, that we don't have

Speaker Change: That many loans mature, well, neither in 2023 nor in 2024. There's very small percentage of loans coming due, so we actually really don't have much opportunity to have too many conversations with our customers in terms of dealing with some of the challenge when it comes to refinancing. And keep in mind that we have very low LTV and our portfolio is quite granular. So I think that's the reason why our portfolio so far stands up really well versus some of the other banks.

That many loans a couple of them.

Operator: Special will attract good flows. It's been out there for about a week, and the early read on that has been very positive, both on the consumer side and in the private banking sector. So we're encouraged by that, and that will result partly in some of the deposit compression we expect to see in the first quarter. With regard to overall levels of non-interest-bearing demand accounts, we have previously bottomed out in the high 20s. We were at 27%, 28% at sort of a low point.

Sure well neither in 2023, nor in 2020 for very small percentage of loans coming due so we actually what are you don't have much opportunity do you have too many quick conversation without without customers in terms of dealing with some of the challenge when it comes to refinancing and keep in mind that we.

We have very low LTV and our portfolio is quite granular. So I think that's the reason why our portfolio. So far set us up really well versus some of the other banks.

Speaker Change: Got it. And I'm sorry if I missed it, but did you update what your reserve levels were on CRE office? And, you know, if it's around 2.3% or so as it was last quarter, can you talk about what keeps you comfortable with that level of results?

Got it got it and I'm, sorry, if I missed it but did you update what your reserve levels were on CRE office.

And yeah, I mean, if it's still around that two 3% or so.

Operator: We think we are trending at that level today, and we think that is a relative benchmark from which we will grow over time. Okay, and then just on some spot rates. It looks like that slide is no longer in there that details the spot rate on deposits at your end. And then just a related question: well, on the other side, on the resi mortgage book, you show a rate sheet price for a foot of your fix is $7.88. Your portfolio is at $5.49, which obviously includes hybrids. But can you give us a sense of the kind of spot rate on that book as well? Or you would think you'd get some decent lift out of that rate.

As it was last quarter can you talk about what keeps you comfortable with that level of reserve.

Speaker Change: It's on page 12 of the slide deck, and it was 243 at your end, which is up, obviously, from the 2.3 you cited.

It's on page 12 of the slide deck and it was $2 43 at year end, which is up obviously from the 2.3 years later.

Yeah.

Speaker Change: Office and all of CRE, we have a rigorous process where we go through the portfolios, our RNs, our team leaders, credit supervision, all work together, and I think as we're going through these loan reviews on a regular basis, and the cash from the clients, the properties, those are all things that help us, and the cash quite candidly, and the network, many of our borrowers and going towards that are all things that help us.

Got it and what keeps you up Yep office and all of CR rate, we have a rigorous process progress a process, where we go through the portfolios. Our R&R team leaders quite a supervision all work together and I think as we're going through these long lived he is on a regular basis.

And the cash flow from the clients. The properties. Yeah. Those are all things that help us and the cash quite candidly in the network many of our borrowers and going towards how are all things that give us comfort.

Speaker Change: Thank you.

Great. Thank you.

Just a reminder, if you have a question. Please press Star then one.

Speaker Change: Just a reminder, if you have a question, please press star, then 1.

Speaker Change: The next question comes from Matthew Clark with Piper Sandler. Please go ahead.

The next question comes from Matthew Clark with Piper Sandler. Please go ahead.

Hey, good afternoon, and thank you for the questions.

Matthew T. Clark: Hey, good afternoon. Thank you for the questions. First one's just around deposits. If you can speak to your outlook on non-interest bearing down here this quarter, just your expectation on where that might trough relative to the mix. And then it also looks like your Chinese New Year special is five and a quarter, at least on your website. So just thoughts.

First one just around deposits. If you can speak to kind of your outlook on noninterest bearing down down here. This quarter, just your expectation on where that might trough relative to the mix and then.

Operator: So two questions in there, sorry. Yeah, so I would say we have started to see, aside from the CDs, other deposit rates basically flatten out, and some have even started to trend lower. And on the mortgages, yes, it was 788 at year end, and it's in the seven and a half zone, as we said here today. The spot rate on a deposit that you're in was $265.

It also looks like your Chinese new year special it's five in a quarter at least on your website. So just thoughts.

Matthew T. Clark: There around kind of growth going forward, is it going to continue to be dominated by CDs?

They're around kind of growth going forward is it going to continue to be dominated by C. DS.

Speaker Change: In the near term, we expect CD growth certainly in the first quarter to be a significant contributor to our current lower CD special will attract good flows it's been out there for about a week and the early read on that has been very positive both on the consumer side.

Matthew T. Clark: In the near term, we expect CD growth during the first quarter to be a significant contributor. Our current lower CD special will attract good flows. It's been out there for about a week, and the early read on that has been very positive, both on the consumer side and in the private banking client base. So we're encouraged by that, and that will result partly in some of the deposit compression we expect to see in the first quarter. With regard to overall levels of non-interest-bearing demand accounts,

Operator: Okay, thank you. The next question comes from Andrew Terrell with Stevens. Please go ahead. Hey, thanks. Good afternoon, everybody.

And in the private banking.

So we're encouraged by that and that will result, partly in some of the deposit compression we expect to see in the first quarter.

With regard to overall levels of non interest bearing demand accounts.

Matthew T. Clark: We have previously bottomed out in the high 20s. We were at 27, 28% at sort of a low point. We think we are trending in that level today, and we think that is a relative benchmark from which we will grow from over time.

Operator: I'm going to circle back to the expense guidance just a little bit. Can you talk, maybe, Chris, just about how we should expect the expense run rate to progress throughout the year? It feels like we could seek out the seasonal bump earlier in the year and then have run rate moderation in the back half, especially if we're to get the forward curve to play out and you get that relief from the deposit cost. So any comment on the run rate throughout the year on expenses would be helpful. I think you called that correctly.

We have previously bottomed out in the high Twenty's.

We're at 27, and 28% that's sort of a low point, we think we are trending in that level today, and we think that is a relative benchmark from which we will grow from over time.

Okay, and then just on.

Speaker Change: Okay, and then just on...

Speaker Change: Some spot rates. It looks like that slide is no longer in there, that detail. Give a spot rate on deposits at your end and then just a related question. Well, on the other side, on the Resi Mortgage book.

Some spot rates it looks like that that slides no longer in there that detail get the spot rate on deposits at year end and then just a related quite well on the other side on the mortgage book.

Speaker Change: You show a rate sheet price for 30-year fix at $7.88. Your portfolio is at $5.49, which obviously includes hybrids.

You show a rate cheap price for 30 year fixed at 70 80 788. Your portfolio is at 549, which obviously includes hybrids.

Operator: So we're not going to see a material savings in deposit-related costs in the first quarter after some Fed rate action and maybe even a slight delay in the second quarter. So those cost savings and those benefits will really come in the third and fourth quarters. And on the other hand, we are going to see an increase in our comp and benefit expense as we move through the first quarter as we go through the normal round of salary adjustments that we do here every year.

Speaker Change: But can you give us a sense for kind of the spot rate on that book as well? You would think you'd get some decent lift out of that rate.

But can you give us a sense for.

Kind of the spot rate on that book as well you would think you'd get some decent lift out of that right.

Speaker Change: So two questions within there, sorry.

So two questions within there sorry.

Yeah. So I would say we have started to see aside from the C. DS other deposit rates basically flattened out.

Speaker Change: Yeah, so I would say we have started to see, aside from the CDs, how the deposit rates basically flatten out, and some even start to trend lower. And on the mortgages, yes, it was 7.88 at year end, and it's in the 7.5 zone, as we said here today.

And some even start to trend lower and on the mortgages. Yes. It was 788 at year end and it's in the seven and a half zone as we sit here today the spot rate on deposits at year end was 265.

Speaker Change: The spot rate on a deposit that you're in was 265.

Speaker Change: Okay, thank you.

Operator: And so as those numbers roll through, which will pick up at the end of the first quarter, they'll impact expenses a little bit in the first quarter, and then we'll see the offsets coming as rates decline later in the year. Okay, great. I appreciate it. And if I can also ask, as we think about maybe the opportunity for some of the BTFP reduction that you talked about earlier, can you just remind us the cash flow you'd expect from the bond book coming in 2024? Roughly a quarter billion or 250 million, Corrett.

Okay. Thank you.

Speaker Change: The next question comes from Andrew Terrell with Stevens.

The next question comes from Andrew Terrell with Stephens. Please go ahead.

Andrew Terrell: Please go ahead.

Andrew Terrell: Hey, thanks. Good afternoon, everybody.

Hey, Thanks, good afternoon everybody.

I wanted to circle back to the the expense guidance, just a little bit.

Andrew Terrell: I wanted to circle back to the expense guidance just a little bit.

Speaker Change: Can you talk maybe, Chris, just about how we should expect the expense run rate to progress throughout the year? It feels like we could see kind of a seasonal bump earlier in the year and then kind of run rate moderation of the back half, especially if we're to get the forward curve to play out and you get that relief from the deposit cost. So any comment on kind of the run rate throughout the year on expense would be helpful.

Maybe Chris just about how we should expect the expense run rate to progress throughout the year. It feels like we could see kind of a seasonal bump earlier in the year, and then kind of a run rate moderation to the back half, especially afford again.

Before I cover to play out and you get that relief on the deposit cost so any any color on kind of a run rate throughout the year on expenses would be helpful.

Chris: I think you've called that correctly, so we're not going to see a material savings in deposit-related costs in the first quarter after some of that rate action, and maybe even a slight delay in the second quarter. So those cost savings and those benefits will really come in the third and fourth quarter, and on the other side, we are going to see an increase in our comp and benefit expense as we move through the first quarter, as we go through the normal round of...

I think you've called out correctly, so we're not going to see a material savings and deposit related costs in the first quarter absent some fat fed rate action and maybe even a slight delay in the second worst so those cost savings and those benefits will really come in the third and fourth quarter and on the other side, we are going to see an increase in there.

Operator: Okay, great. I appreciate it. The next question comes from Brandon Kane with Truist Securities. Please go ahead. Hey, good afternoon.

Comp and benefit expense as we move through the first quarter as we go through the normal round of.

Operator: Rahim, So on the strong CNI loan growth in the quarter, and I didn't see this in the deck, but could you comment on what the utilization levels were? And then just give us your expectations for utilization levels. And we could potentially see maybe a potential uptick if rates come down. Utilization levels were 67% at year end. I think when we look at when we think about an uptick, it's a demand-dependent question, though, and we would say in a softening economy that we don't expect demand to run away with that number in 2024.

Chris: Salary adjustments that we do every year. And so as those numbers roll through, which will pick up at the end of the first quarter, there will impact expenses.

Salary adjustments that we do here every year and so as those numbers roll through which will pick up at the end of the first quarter they'll impact expenses.

Chris: A little bit in the first quarter, and then we'll see the offset coming as rates decline later in the year.

Little bit in the first quarter and then we'll see the offsets coming as rates decline later in the year.

Okay, Great I appreciate it and if I could also ask just as we think about maybe the opportunity for some of the.

Speaker Change: Okay, great. I appreciate it. And if I can also ask, as we think about maybe the opportunity for some of the BCFP reduction that you talked about earlier, can you just remind us the cash flow you'd expect off the bond book coming in 2024?

The B T. S. P. A reduction that you talked about earlier can you just remind us the cash flow you'd expect off the bond book coming in 2024.

Roughly a quarter billion or $250 million.

Speaker Change: Roughly a quarter billion or 250 million.

Speaker Change: of course.

A court.

Okay great.

Speaker Change: Okay, great. I appreciate it.

Great I appreciate it.

Yeah.

Speaker Change: The next question comes from Brandon King with Truist Securities. Please go ahead.

The next question comes from Brandon King with Truest Securities. Please go ahead.

Hey, good afternoon.

Brandon King: Hey, good afternoon.

Brandon King: Press in.

Yeah.

So on the strong C&I loan growth in the quarter and I didn't see this in the deck, but could you comment on what the utilization levels were and then just give us your expectations for utilization levels.

Brandon King: So on the strong CNI loan growth in the quarter, and I didn't see this in the deck, but could you comment on what the utilization levels were and then just give us your expectations for utilization levels and we could potentially see maybe a potential uptake if, you know, race.

Speaker Change: We could potentially see maybe you couldn't see uptake if rates come down.

Operator: Okay. And then lastly, just on the hedges you have and the thoughts you have, how do you currently feel about your position, and are you looking to potentially add? I feel that we certainly got comfort in the fourth quarter that our forward starting edges were a good call. As I mentioned in my comments, some of them are already in the money. So you don't need to put a crate on them, expecting to be in the money in the same quarter. But I'm glad we did it.

So utilization level was 67% at year end I think when we look about when we think about uptick demand dependent question, though and we would say in a softening economy, we don't expect demand to run away with that number in 2024.

Brandon King: The utilization level was 67% at year-end. I think when we look about, when we think about uptick, it's a demand-dependent question, though, and we would say in a softening economy, we don't expect demand to run away with that number in 2023.

Okay.

Speaker Change: Okay, and then lastly, just on the hedges you have and the spots you have, how do you currently feel about your position and are you looking to particularly add?

And then lastly, just on the hedges you have in and stuff you have how do you currently feel about your position in or are you looking to potentially add more.

I felt we certainly got comfort in the fourth quarter that our forward starting hedges were a good call as I mentioned in my comments some of them are already in the money. So you don't usually put a trading unexpected to be in the money in the same quarter, a but I'm glad we did and we're looking forward to.

Speaker Change: We certainly got comfort in the fourth quarter that our forward starting hedges were a good call. As I mentioned in my comments, some of them are already in the money. So you don't usually put a trade on expecting to be in the money in the same quarter, but I'm glad we did. And we're looking forward to an outlook that should have those cash flowing as we move to the end of the year, which is always a wonderful thing.

Operator: And we're looking forward to an outlook that should have cash flowing as we move to the end of the year, which is always a wonderful thing. Guys, so feel pretty comfortable where you're at is the fair way to say it. Have a good one. Thank you. The next question comes from Brody Preston with UBS. Please go ahead.

And outlook.

That should have those cash flowing as he moved to the end of the year, which is always a wonderful thing.

Speaker Change: Guys, so feel pretty comfortable where you're at. It's a great way to say it.

Got it so feel pretty comfortable where you're at as it's a fair way to say it.

Speaker Change: Absolutely.

Absolutely.

Okay.

Speaker Change: Thanks for taking our question.

For taking my questions.

Thank you.

Speaker Change: Thank you.

The next question comes from Brody Preston with UBS.

Speaker Change: The next question comes from Brody Preston with UBS.

Brody Preston: Please go ahead.

Please go ahead.

Brody Preston: Hey, good afternoon everyone.

Hey, good afternoon, everyone.

I just wanted to follow up on a couple of things real quick on the NII. The cash flow hedges are there any maturities through 2025 on the on the swaps that we need to be.

Brody Preston: I just wanted to follow up on a couple things real quick on the NII. The cash flow hedges, are there any maturities through 2025 on the swaps that we need to be aware of? And then you said earlier that you expected a 0.5 deposit beta on the way down. Just wanted to clarify if that was 50% interest there in deposit beta on the way down through 4Q24. Is that a correct interpretation?

Operator: I just wanted to follow up on a couple things real quick on the NII, the cash flow hedges, are there any maturities through 2025 on the swaps that we need to be aware of? And then you said earlier you expected a 0.5 deposit beta on the way down; just wanted to clarify if that was 50% interest there in deposit beta on the way down through 4Q24, is that a correct interpretation? Yeah, that will we will save at least half of every move in the Fed fundraise at the FedEngineer in the form of the reduced deposit costs collectively across the deposit base on the interest-bearing. With regard to the cash flow hedges, there really are no material maturities in 2024. However, two of our earliest or oldest trades will actually mature early in 2025, and they're two of the lowest strike points, so it gets better Okay, do you happen to have the dollar amount for those two? Thank you. Uh, yeah, those two hedge funds are both underwater at $2 billion.

And then you said earlier that you expected a 0.5.

The deposit beta on the way down just wanted to clarify if that was 50% interest bearing deposit beta on the way down through for Q 'twenty four is that a correct interpretation.

Speaker Change: Yeah, we will save at least half of every move in the Fed fund rate that the Fed engineers.

Yeah that will we will save at least half of every move in the fed funds rates that the fed engineers.

Speaker Change: and the form of reduced deposit costs collectively across our deposit base on the interest-bearing deposit.

And the formula to reduce deposit costs collectively across our deposit base on the interest bearing deposits.

Speaker Change: With regard to the cash flow hedges, there really are no material maturities in 2024. However, two of our earliest or oldest trades will actually mature early in 2025, and they're two of the lowest strike points. So it gets better as we move into 2025.

With regard to the cash flow hedges, there really are no material maturities in 'twenty 'twenty. Four however, two of our earliest are oldest trades will actually mature early in 'twenty five and there are two of the lowest strike points. So it gets better as we move into 'twenty five.

Okay do you happen to have the dollar amount of those two.

Speaker Change: Okay, do you happen to have the dollar amount of those two?

Speaker Change: and I just

Hedges.

Yeah. Those those two hedges are both under water at $2 billion and so the there are currently part of the drag and as we move through 2024, obviously as rates decline they they incrementally improve as well, but when they go away there'll be a probably a net pick up in <unk>.

Speaker Change: Yeah, those two hedges are both underwater at $2 billion, and so they're currently part of the drag, and as we move through 2024, obviously as rates decline, they incrementally improve as well, but when they go away, there'll be probably a net pickup in 2024.

Operator: And so they're currently part of the drag. And as we move through 2024, obviously, as rates decline, they incrementally improve as well. But, uh, when they go away, there'll probably be a net pickup, uh, in 2024, in the first quarter. Okay. And then, of course, my last one, I just wanted to clarify on the tax stuff. You know, we've seen a couple other banks, I think, adopt that this earning season, where I think, effectively, the amortization almost went to zero.

25.

Speaker Change: in the first quarter. Okay.

In the first quarter okay.

Speaker Change: And then, Chris, my last one, I just wanted to clarify on the tax stuff.

And then Chris My My my last one I just wanted to clarify on the <unk>.

On the tax stuff.

You know we've seen a couple of other banks I think adopt that this earnings season, where I think effectively you know the amortization almost went to zero.

Speaker Change: You know, we've seen a couple other banks, I think, adopt that this earnings season where I think effectively, you know, the amortization almost went to zero and it's going to show up in a higher tax rate. I just wanted to ask if you guys adopted that treatment, should we expect something similar? And if so, you know, I know that you guys have some lumpy amortization, so would that kind of introduce...

Operator: And it's going to show up in a higher tax rate. Just wanted to ask if, if you guys adopted that treatment, should we expect something similar? And if so, I know that you guys have some lumpy amortization. So would that kind of introduce, you know, quarter to quarter kind of peaks and valleys in the tax rate itself?

And it's going to show up in a higher tax rate just wanted to ask if it's if you guys have adopted that treatment should we expect something similar and if so you know I know that you guys have some lumpy.

Speaker Change: Organization, so with that kind of introduce you know quarter to quarter kind of peaks and valleys in the tax rate itself.

Speaker Change: you know quarter to quarter kind of peaks and valleys in the tax rate it's

Operator: And so our goal in adopting TAM will be to dampen out the volatility that you've seen, to introduce a great amount of mobility, and it will help us with certain of the tax credits. However, on those tax credits, such as the energy tax credit that we place in the service fund. As far as a completed basis, that level of volatility from when the project gets placed in service will continue to be with us and will continue to flow as amortization, sort of above the line. So we will not go to zero.

Yeah. So our goal in adopting Pam will be to dampen out the volatility that you've seen.

Speaker Change: And so our goal in adopting TAM will be to dampen out the volatility that you've seen.

Speaker Change: to introduce a greater level of civility.

To introduce a greater level of stability.

Speaker Change: And it will help us on certain of the tax credits. However, on those tax credits, such as the energy tax credits that we place in the service line,

And it will help us on certain of the tax credits. However on those tax credits such as the energy tax credits that we placed into service.

Speaker Change: as project completed basis, that level of volatility from when the projects get placed in service will continue to be with us and will continue to flow as amortization in sort of above the line. So, we will not go to zero. It will be dampened and reduced and it will be both a function of how much we do in the different types of credits and how we moderate that activity as we think about making this the left volatile component of our extension moving forward.

You know as project completed basis that level of volatility from when the projects get placed in service. We will continue to be with us and will continue to flow as amortization in sort of above the line. So we will not go to zero.

It will be dampened and reduce and it will be both a function of how much we do in the different types of credits and how we moderate that activity as we think about making this a less volatile component of our expense rate moving forward.

Operator: It will be dampened and reduced, and it will be both a function of how much we do in the different types of credits and how we moderate that activity as we think about making it the volatile component of our extension moving forward. But our goal is to make it less of a coffee point and more of a steady state number for you guys. Awesome! I appreciate it. Thank you. The next question comes from Timur Reziller with Wells Fargo. Please go ahead. Hi, good afternoon.

But our goal is to make it very much less of a talking point and more of a steady state number for you guys.

Speaker Change: But our goal is to make it less of a coffee point and more of a steady space number for you guys.

Speaker Change: Awesome. I appreciate it. Thank you.

Awesome I appreciate it thank you.

The next question comes from tumor Brazilian with Wells Fargo.

Speaker Change: The next question comes from Timur Reziller with Wells Fargo. Please go ahead.

Please go ahead.

Timur Reziller: Hi, good afternoon. How should we think about the interplay of lower interest rates in your residential product? That seems pretty rate agnostic. Does demand actually pick up as rates fall? And then just maybe talk more broadly what factors impact that line item most?

Operator: How should we think about the how should we think about the interplay of lower interest rates in your residential product? Does that seem pretty rate agnostic? Does demand actually pick up as rates fall? And then, just maybe, talk more broadly about what factors impact that line item most? Yeah, well, I think it's a relatively unique product that really caters to our core, you know, Asian American customers, and we always think that the rate is not anywhere like as sensitive as these traditional Fannie Mae, Freddie Mac type of products.

How should we think about the how should we think about the interplay of lower interest rates and your residential product is that seems pretty rate agnostic does demand actually pick up as rates fall and then just maybe talk more broadly what factors impact that line item most.

Speaker Change: Yeah, well, I think if

Speaker Change: Yeah, well I think it's.

Speaker Change: A relatively unique product that really catered to our core, you know,

A relatively unique product that really cater to our call you know.

Asian American customers and.

Speaker Change: and

Speaker Change: We always think that the rate is not anywhere, like, as sensitive like these traditional Fannie Mae, Freddie Mac type of products, so we feel pretty good about...

We always think that the.

Speaker Change: Right, it's not anywhere like a sensitive like these traditional.

Fannie Mae Freddie Mac type of products, So we feel pretty good about.

Operator: So we feel pretty good about Even when rates are going down, the rate reduction from our home mortgages would not be going in the same direction, proportionally or at a higher pace, like the normal products in the box. Got it. Okay. And then, looking at your multifamily portfolio, can you provide the composition geographically there? And more specifically, what portion is in New York City and what portion of that is rent-regulated?

Speaker Change: Even when rates start going down, the rate reduction from our home mortgages would not be going in the same direction.

Even when rates start going down the way reduction from our home mortgages would not be going in the same.

Proportionally higher pace like the.

Speaker Change: Proportionally at a higher pace like the

Normal products in the market.

Speaker Change: Normal products in the market.

Speaker Change: Got it. Okay. And then looking at your multifamily portfolio, can you provide the composition geographically there and more specifically what portion is in New York City and what portion of that is rent regulated?

Got it okay.

And then looking at your multifamily portfolio can you provide the composition geographically there and more specifically what portion is in New York City and what portion of that is rent regulated.

Operator: Yeah, so we have that over $5 billion multifamily portfolio. The vast majority is in California and also in Southern California, you know, in our backyard where a lot of our presences are, Pasadena, San Gabriel Valley, those areas are the largest sectors. In New York, Tyra State of New York, we have under 300 million, and there's no veterans-related exposure. Okay, great. Thank you. And we have a follow-up from Ebrahim H. Poonawala with Bank of America. Please go ahead.

Speaker Change: Yeah, so we have, of our $5 million multifamily portfolio, the vast majority is in California and also in Southern California. You know, in our backyard where a lot of our presence is, Pasadena, San Gabriel Valley, those areas are the largest sector. In New York,

Yeah. So we have that all of our $5 billion multifamily portfolio. The vast majority is in California and also in Southern California, you know in our backyard, where a lot of our presence is Pasadena, San Gabriel Valley.

Those areas are the largest sector in New York.

Speaker Change: The entire state of New York, we have under $300 million, and there's no rent-regulated exposure.

Higher state of New York, we have under 300 million and there's no rent regulated exposure.

Okay, great. Thank you.

Speaker Change: Okay, great. Thank you.

And we have a follow up from Ebrahim <unk> with Bank of America. Please go ahead.

Speaker Change: And we have a follow-up from Ebrahim H. Poonawala with Bank of America. Please go ahead.

Speaker Change: Thank you. Another question in terms of when you think about deposit liquidity, loan to deposit ratio around 93%, just structurally, do you expect the bank will operate with a 90% plus loan to deposit ratio more or less? Or do you see that as resetting lower? And on the asset side, do you expect ECF to run with a larger securities book, more HVLA securities, etc? Even though you fall well below the 100 billion thresholds that the Fed has kind of identified as the dividing line. Thank you.

Yeah. Thank you.

Thank you. Another question in terms of when you think about deposit liquidity, the loan-to-deposit ratio is around 93%. Just structurally, do you expect the bank will operate with a 90% plus loan-to-deposit ratio, more or less? Or do you see that as resetting lower? And on the asset side, do you expect East-West to run with a larger securities book, more HTLA securities, etc.? Even though you fall well below the 100 billion threshold that the Fed has kind of identified as the dividing line.

Another question in terms of when you think about deposit liquidity.

The issue around it.

92% just structurally do you expect the bank will operate with a 90% plus loan to deposit ratio more or less or do you see that as a descending door and on the asset side do you expect east who has to run with a larger securities book mortgage related securities et cetera.

Even though you fall well below the 100 billion threshold that the fed has kind of identified them. So dividing line. Thank you.

Operator: Thank you. I think broadly the answers are yes and yes. Yes, we expect to operate in sort of the lower 90s from a loan-to-deposit ratio, even if it's a comfortable place to be.

Speaker Change: I think broadly the answers are yes and yes. Yes, we expect to operate in sort of the lower 90s from a loan-to-deposit ratio. It's a comfortable place to be. And over time, yes, it's likely our portfolio will migrate to be more HQLA-like in profile.

I think broadly the answers are yes, and yes, yes, we expect to operate and sort of the lower nineties from a loan to deposit ratio, that's a comfortable place to be and over time, yes, it's likely our portfolio will migrate to be more HQ L. A like and profile.

Operator: And over time, yes, it's likely our portfolio will migrate to be more HQLA-like in profile. Got it. Thanks for all the yeses. I'm Mark Weiser.

Speaker Change: Got it. Thanks for all the years.

Got it thanks for all the yeses.

Speaker Change: My pleasure. Always happy to say yes to the green.

[laughter] my pleasure always happy to say, yes to a degree.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks.

Dominic Ng: I am always happy to say yes to your questions. This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks. Again, thank you all for joining our call this afternoon, and we are looking forward to speaking to you again in April. Back to you, Operator. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

This concludes our question and answer session I would like to turn the conference back over to Dominic Inc. For any closing remarks.

Dominic Ng: Again, thank you all for joining our call this afternoon.

Again, thank you all for joining our call. This afternoon.

Dominic Ng: and we are looking forward to speaking to you again in April.

And we are looking forward to speaking to you again in April.

Speaker Change: Back to you, operator.

Back to you operator.

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

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Okay.

Speaker Change: Thank you for watching! Thanks for watching!

[music].

Speaker Change: Thank you.

Speaker Change: Thank you for watching. Thank you for watching.