Q2 2024 East West Bancorp Inc Earnings Call

July 23, 2024

Operator: Good day, and welcome to the East West Bancorp's 2nd quarter 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Good day, and welcome to the East West Bancorp second quarter 2024 earnings call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead.

Unknown Executive, Christopher Moral, Irene Oh, Adrienne Atkinson

Speaker Change: Good day and welcome to the East West Bancorp's second quarter 2024 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone.

Adrienne Atkinson: I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead.

Speaker Change: To withdraw your question, please press star then 2. Please note this event is being recorded.

Speaker Change: I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead.

Dominic Ng: Thank you, operator.

Adrienne Atkinson: Thank you, operator. Good afternoon, and thank you everyone for joining us to review East West Bancorp's second quarter 2024 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Del Moral-Niles, Chief Financial Officer, and Irene Oh, Chief Risk Officer. This call is being recorded and will be available for reply on our investor relations website. 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.

Dominic Ng: Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's 2nd quarter 2024 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Downe Moral Miles, Chief Financial Officer, and Irene Oh, Chief Risk Officer.

Adrienne Atkinson: Thank you, operator. Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's second quarter 2024 financial results.

Speaker Change: With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Del Moral Niles, Chief Financial Officer, and Irene Oh, Chief Risk Officer.

Adrienne Atkinson: This call is being recorded and will be available for replay on our Investor Relations website. The 5DEC reference during this call is available on our Investor Relations site.

Speaker Change: This call is being recorded and will be available for reply on our investor relations website.

Adrienne Atkinson: 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 or a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP financial measures.

Speaker Change: The 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.

Adrienne Atkinson: Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and a 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 them.

Speaker Change: Management may discuss non-GAAP financial measures.

Speaker Change: For a more detailed description of the risk factors and a 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.

Adrienne Atkinson: Please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today.

Dominic Ng: I will now turn the call over to Dominic. Thank you, Adrienne. Good afternoon, and thank you for joining us for a 2nd quarter earnings call. I'm pleased to report that the strengths of East West diversified business model have continued to deliver for our shareholders in the 2nd quarter. 2nd quarter, 2024 net income was 288 million, or $2.6 per day to share. We grew end-of-period loans and deposits in a balanced way, growing each by 2%. Loans grew in line with our expectation, driven by CMI and residential mortgage. The deposits grew across commercial and consumer groups, marking the 4th consecutive quarter of customer deposit growth exceeding 1 billion.

Dominic Ng: And thank you for joining us for our second quarter earnings call. I'm pleased to report that the strength of East West's diversified business model continued to deliver for our shareholders in the second quarter of 2024. Second quarter 2024 net income was $288 million or $2.06 per diluted share. We grew end-of-period loans and deposits in a balanced way, growing each by two percent. Loans grew in line with our expectation, driven by C&I and residential mortgages.

Dominic: Thank you, Adrienne. Good afternoon, and thank you for joining us for our second quarter earnings call.

Dominic: I'm pleased to report that the strength of East West's diversified business model has continued to deliver for our shareholders in the second quarter.

Dominic: Second quarter 2024 net income was $288 million or $2.06 per diluted share.

Dominic: We grew end-of-period loans and deposits in a balanced way.

Dominic: growing each by two percent.

Dominic: Loans grew in line with our expectation, driven by CMI and residential mortgage.

Dominic Ng: Deposits grew across commercial and consumer groups, marking the fourth consecutive quarter of customer deposit growth exceeding $1 billion. Our balance sheet growth was complemented by record quarterly fee income of $77 million, up 8% quarter over quarter, as we focused on growing our feed business. Growth was driven by continued strength in foreign exchange income and wealth management fees. Second quarter annualized net charge-offs remain stable at $23 million. Our non-performing asset ratio was 27 basis points at quarter end, the lowest when compared to our peers, and our criticized loans decreased by 10%.

Dominic: Deposits grew across commercial and consumer groups.

Dominic: Marking the fourth consecutive quarter of customer deposit growth exceeding $1 billion.

Dominic Ng: A balance sheet growth was complemented by record quarterly fee income of 77 million, up 8% quarter over quarter, as we have focused on growing our fee business. This growth was driven by notable continued strength in foreign exchange income and wealth management fees. 2nd quarter annualized net charge-offs remained stable at $23 million. A non-performing asset ratio was 27 basis points at quarter end, among the lowest when compared to our peers. And our criticized loans decreased 10%. We are confident that our discipline on the writing and monitoring standards will service well through the cycle, and we remain path proactive in managing our credit.

Dominic: A balance sheet growth was complemented by record quarterly fee income of $77 million, up 8% quarter over quarter.

Dominic: as we have focused on growing our feed business.

Dominic: This growth was driven by notable continued strength in foreign exchange income and wealth management fees.

Dominic: Second quarter annualized net charge-offs remain stable at $23 million.

Dominic: Our non-performing asset ratio was 27 basis points at quarter end, amount the lowest when compared to our peers.

Dominic: And our criticized loans decreased 10%.

Dominic Ng: We are confident that our disciplined underwriting and monitoring standards will serve us well through the cycle, and we remain positive and proactive in managing our credit. Overall, our asset quality remains strong. We delivered top-tier value for our shareholders in the second quarter, generating a 1.6% return on average asset and a 17.5% return on tangible common equity. Tangible book value per share also grew by 3% quarter over quarter and 15% year over year.

Dominic: We are confident that our disciplined underwriting and monitoring standards will serve us well through the cycle, and we remain proactive in managing our credit risk.

Dominic Ng: Awards. Overall, our asset quality remained strong. We delivered top tier value for our shareholders in the second quarter, generating a 1.6% return on average assets and a 17.5% return on tangible common equity in the second quarter. Tandable book value per share also grew by 3% quarter over quarter, and 15% year over year. And lastly, I'm pleased to announce that East West Banc has once again been selected by Bank Director magazine as the number one performing bank above 50 billion dollars in assets. This is the second consecutive year we have earned the top spot and is our third title in the past four years.

Dominic: Overall, our asset quality remained strong.

Dominic: We deliver top-tier value for our shareholders in the second quarter, generating a 1.6% return on average assets.

Dominic: and a 17.5% return on tangible common equity in the second quarter.

Dominic: Tangible book value per share also grew by 3% quarter-over-quarter and 15% year-over-year.

Dominic Ng: And lastly, I'm pleased to announce that East West Bank has once again been selected by Bank Director Magazine as the number one performing bank above $50 billion in assets. This is the second consecutive year. You will have earned a top spot, and it's our third title in the past four years. This achievement is a testament to the steady execution of our associates and demonstrates our resilience. In what proved to be a challenging year for the banking sector, I will now turn the call over to Chris to provide more details on our second quarter financial performance.

Dominic: And lastly, I'm pleased to announce that East West Bank has once again been selected by Bank Director Magazine as the number one performing bank above $50 billion in assets.

Dominic: This is the second consecutive year we have earned the top spot.

Dominic Ng: This achievement is a testament to the steady execution of our associates and demonstrates our resilience in what proved to be a challenging year for the banking sector.

Dominic: And it's our third title in the past four years.

Dominic: This achievement is a testament to the steady execution of our associates and demonstrates our resilience in what proved to be a challenging year for the banking sector.

Christopher Moral: I will now turn the call over to Chris to provide more details on our second quarter financial performance. Chris, thank you, Dominic. Turning to loans on slide four, ended period loans grew 2% quarter over quarter, with overall growth in line with our expectations. C&I growth was driven by notable increases in entertainment lending and overall C&I utilization loans. However, our growth came very late in the second quarter. We expect C&I to continue to grow over the back half of the year, but likely at a more moderate pace. Residential mortgage Russian was consistent, and our pipeline levels remained strong going into Q3.

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

Chris: Thank you, Dominic. Turning to loans on slide four, end-of-period loans grew 2% quarter over quarter, with overall growth in line with our expectation. C&I growth was driven by notable increases in entertainment lending and overall C&I utilization. However, our growth came very late in the second quarter.

Dominic: Chris?

Chris: Thank you, Dominic. Turning to loans on slide four, end-of-period loans grew 2% quarter-over-quarter, with overall growth in line with our expectations.

Chris: C&I growth was driven by notable increases in entertainment lending and overall C&I utilization levels.

Chris: We expect C&I to continue to grow over the back half of the year, but likely at a more moderate rate. Residential mortgage production was consistent, and our pipeline levels remain strong going into Q3. We expect residential mortgage will continue to be a growth driver at the present level. In commercial real estate, we saw healthy growth in multifamily in Q2, offset by declines in the remainder of the CRE portfolio. We're continuing to work with our longstanding clients but foresee very modest CRE loan growth for us for the balance of 2024.

Chris: However, our growth came very late in the second quarter. We expect C&I to continue to grow over the back half of the year, but likely at a more moderate pace.

Chris: Residential mortgage reduction was consistent and our pipeline levels remain strong going into Q3. We expect residential mortgage will continue to be a growth driver at present levels.

Christopher Moral: We expect residential mortgage will continue to be a growth driver at present levels. In commercial real estate, we saw healthy growth in multi-family in Q2, offset by the clients in the remainder of the CRE portfolio. We are continuing to work with our longstanding clients, but for C, very modest CRB loan growth for us for the balance of 2024.

Chris: In commercial real estate, we saw healthy growth in multifamily in Q2, offset by declines in the remainder of the CRE portfolio. We are continuing to work with our longstanding clients, but foresee very modest CRE loan growth for us for the balance of 2024.

Christopher Moral: Moving on to deposits on slide five, we grew ended period deposits by 2% to a new record level of 60 billion, with growth coming across all of our customer groups. Q2 marks the fourth consecutive quarter of $1 billion-plus customer growth, reflecting our focus on full relationships. Notably, our ended period non-interest varying deposits remained stable at 25%.

Chris: Moving on to deposits, on slide five, we grew end-of-period deposits by 2% to a new record level of $60 billion, with growth coming across all of our customer groups. Q2 marks the fourth consecutive quarter of $1 billion plus customer growth, reflecting our focus on the full relationship. Notably, our end-of-period non-interest-bearing deposit mix remains stable at 25%.

Chris: Moving on to deposits on slide 5, we grew end-of-period deposits by 2% to a new record level of $60 billion, with growth coming across all of our customer groups.

Chris: Q2 marks the fourth consecutive quarter of $1 billion plus customer growth, reflecting our focus on full relationships.

Chris: Notably, our end-of-period, non-interest-bearing deposit mix remains stable at 25%.

Christopher Moral: Switching to margin, slide six covers are margin and net interest income trends. Second quarter dollar net interest income totaled $553 million, while our net interest margin was 3.27%. As expected, NIM compression for the quarter reflected higher overall deposit and funding costs, partially offset by improving mostly fixed rate asset yields. As we move through the second half of the year, we expect NIM to grind marginally lower before bottoming out. Out. Nonetheless, increasing asset growth is expected to drive growing dollar NII through the back half of the year.

Chris: Switching to margin, slide six covers our margin and net interest income trend. Second quarter dollar net interest income totaled $553 million. While our net interest margin was 3.27%, as expected, NIM compression for the quarter reflected higher overall deposit and funding costs, partially offset by improving mostly fixed-rate asset use. As we move through the second half of the year, we expect NIM to grind marginally lower before bottoming out. Nonetheless, increasing asset growth is expected to drive growing dollar NII through the back half of the year.

Chris: Switching to margin, slide six covers our margin and net interest income trends.

Chris: Second quarter dollar net interest income totaled $553 million, while our net interest margin was 3.27%.

Chris: As expected, NIM compression for the quarter reflected higher overall deposit and funding costs, partially offset by improving mostly fixed-rate asset yields.

Chris: As we move through the second half of the year, we expect NIM to grind marginally lower before bottoming out.

Chris: Nonetheless, increasing asset growth is expected to drive growing dollar NII through the back half of the year.

Christopher Moral: Slide seven summarizes our non-assist income trends. We achieve a record level of C income 77 million this quarter, up 6 million or 8% from the prior corner, with growth in every fee category. I think that says a lot.

Chris: Slide seven summarizes our non-income trend. We achieved a record level of fee income, $77 million this quarter, up $6 million, or 8% from the prior quarter, with growth in every fee category. I think that says a lot. With that, I'll turn the call over to Irene.

Chris: Slide 7 summarizes our non-income trends.

Chris: We achieved a record level of fee income, $77 million this quarter, up $6 million, or 8% from the prior quarter, with growth in every fee category.

Irene Oh: We're trying. Thank you, Chris, and good afternoon to all on the call. On slide eight, credit transform is stable, and the quality of our portfolio remains, as Dominic mentioned earlier. We reported net charge off from the second quarter of 23 million or 18 basis points to analyze compared to 23 million or 17 basis points to analyze in the first quarter of 2024. Quarter of recorder, non-performing assets rose by four basis points. The 27 basis points of total assets, primarily due to increases from CNI loans and commercial real estate loans we have foreclosed on. Nonetheless, the absolute level of non-accrual loans and non-performing assets remains relatively low and at manageable levels. Criticized loans decreased during the quarter by 10%.

Chris: I think that says a lot. With that, let me turn the call over to Irene.

Irene H. Oh: Thank you, Chris, and good afternoon to all on the call. On slide eight, credit trends remain stable, and the asset quality of our portfolio remains strong. As Dominic mentioned earlier, we recorded net charge-offs in the second quarter of 23 million, or 18 basis points annualized, compared to 23 million, or 17 basis points annualized, in the first quarter of 2024. For the quarter, non-performing assets rose by four basis points to 27 basis points of total assets, primarily due to increases from C&I loans and commercial real estate loans we have foreclosed on. Nonetheless, the absolute level of non-accrual loans and non-performing assets remains relatively low and at a manageable level.

Irene: Thank you, Chris, and good afternoon to all on the call. On slide eight, credit trends remain stable and the asset quality of our portfolio remains strong.

Irene: As Dominic mentioned earlier, we recorded net charge-ups in the second quarter of $23 million, or 18 basis points annualized, compared to $23 million, or 17 basis points annualized, in the first quarter of 2024.

Irene: Quarter of a quarter, non-performing assets rose by four basis points to 27 basis points of total assets.

Speaker Change: Primarily due to increases from C&I loans and commercial real estate loans, we have foreclosed on. Nonetheless, the absolute level of non-accrual loans and non-performing assets remains relatively low and at manageable levels.

Irene H. Oh: Criticized loans decreased during the quarter by 10%, driven by decreases in both special mention and substandard loans. The special mention loan ratio decreased 22 basis points quarter over quarter to 0.83% of loans, and the classified loans ratio decreased three basis points to 122. We recorded a higher provision for credit losses of $37 million in the second quarter compared with $25 million for the first quarter.

Irene Oh: Driven by decreases in both special mention and substandard loans, the special mention loan ratio decreased 22 basis points quarter of a quarter to 0.83% of loans, and the classified loans ratios decreased three basis points to 120. We reported a higher provision for credit losses of 37 million in the second quarter compared with 25 million for the first quarter. With regards to commercial real estate loan maturity as of June 30th, 2024, 5% of outstanding balances are scheduled to mature by the end of 2024, and 10% of outstanding balances will mature in 2025. For office loans specifically, 8% of outstanding balances will mature in 2024, and 16% will mature in 2025.

Speaker Change: Criticized loans decreased during the quarter by 10%, driven by decreases in both special mention and substandard loans.

Speaker Change: The special mentioned loan ratio decreased 22 basis points quarter over quarter to 0.83% of loans, and the classified loans ratios decreased 3 basis points to 122.

Speaker Change: We reported a higher provision for credit losses of $37 million in the second quarter compared with $25 million for the first quarter.

Irene H. Oh: With regard to commercial real estate loan maturities, as of June 30, 2024, 5% of outstanding balances are scheduled to mature by the end of 2024, and 10% of outstanding balances will mature in 2025. For office loans specifically, 8% of outstanding balances will mature in 2024, and 16% will mature in 2025. We remain vigilant and proactive in managing our credit risk. Based on what we know today, we continue to expect quarterly net charges to be in the range of 15 to 25 basis points for the foreseeable future. Turning to slide nine.

Speaker Change: With regards to commercial real estate loan maturities, as of June 30, 2024, 5% of outstanding balances are scheduled to mature by the end of 2024, and 10% of outstanding balances will mature in 2025.

Speaker Change: For office loans specifically, 8% of outstanding balances will mature in 2024 and 16% will mature in 2025.

Irene Oh: We remain vigilant and proactive in managing our credit risks. Based on what we know today, we continue to expect quarterly net charge-offs to be in the range of 15 to 25 basis points for the foreseeable future. Turning to slide 9, the total allowance for loan losses increased 14 million quarter of a quarter, driven by the expected economic outlook and also loan growth during the quarter, resulting in a lounge for loan losses coverage ratio. Within commercial real estate, we increased the reserve for office loans by 7 million, bringing the total coverage ratio to 310 of office loans.

Speaker Change: We remain vigilant and proactive in managing our credit risk. Based on what we know today, we continue to expect quarterly net charge us to be in the range of 15 to 25 basis points for the foreseeable future.

Irene H. Oh: The total allowance for loan losses increased $14 million quarter over quarter, driven by the expected economic outlook and also loan growth during the quarter, resulting in an allowance for loan losses coverage ratio of 130. Within commercial real estate, we increased the reserve for office loans by $7 million, bringing the total coverage ratio to $3.10 of office. We believe our loan portfolio is appropriately reserved as of June 30, 2020. Turning to slide 10.

Speaker Change: Turning to slide 9.

Speaker Change: The total allowance for loan losses increased $14 million quarter over quarter, driven by the expected economic outlook and also loan growth during the quarter, resulting in an allowance for loan losses coverage ratio of 130.

Speaker Change: Within commercial real estate, we increased the reserve for office loans by $7 million, bringing the total coverage ratio to $3.10 of office loans.

Irene Oh: We believe our loan portfolio is appropriately reserved as of June 30th, 2024. Turning to slide 10, all of these less regulatory capital ratios remain well in excess of regulatory requirements for well-capitalized institutions and well above regional bank averages. East West Common Equity Tier 1 capital ratio stands at a robust 13.7%, while our tangible common equity ratio is at 9.4%. These capital ratios place us among the most well-capitalized banks in business. Street, East West repurchased 560,000 shares of common stock during the second quarter for approximately 41 million at an average price under $73 to share. We currently have 49 million of repurchase authorization.

Speaker Change: We believe our loan portfolio is appropriately reserved as of June 30, 2024.

Irene H. Oh: All of East West's regulatory capital ratios remain well in excess of regulatory requirements for well-capitalized institutions and well above regional bank averages. East West's common equity tier one capital ratio stands at a robust 13.7%, while our tangible common equity ratio is at 9.4%. These capital ratios place us among the most well-capitalized banks in the industry. East West repurchased 560,000 shares of common stock during the second quarter for approximately $41 million at an average price under $73 a share.

Speaker Change: Turning to slide 10. All of East West's regulatory capital ratios remain well in excess of regulatory requirements for well-capitalized institutions and well above regional bank averages.

Speaker Change: East West Common Equity Tier 1 Capital Ratio stands at a robust 13.7%, while our Tangible Common Equity Ratio is at 9.4%. These capital ratios place us among the most well-capitalized banks in the industry.

Speaker Change: East West repurchased 560,000 shares of common stock during the second quarter for approximately $41 million at an average price under $73 a share. We currently have $49 million of repurchase authorization that remains available for future buybacks.

Irene Oh: There remains available for future buybacks.

Irene Oh: East West third quarter of 2024 dividend will be payable on August 16th, 2024, to stockholders of record on August 2nd.

Speaker Change: East West third quarter 2024 dividend will be payable on August 16, 2024 to stockholders of record on August 2.

Christopher Moral: I will now turn it back to Chris to share outlook for the 2020 24 full year. Chris? Thank you, Irene. Our full year outlook remains largely unchanged from the first quarter. We are still assuming the forward curve as of this quarter end and have currently expected first rate cut in September. We continue to expect full year end of period long growth in the range of 3 to 5%. We expect full year netages to become to decline in the range of 2 to 4%. We also continue to expect adjusted non expense to increase in the range of 6 to 8%.

Chris: Chris? Thank you, Irene. Our full-year outlook remains largely unchanged from the first quarter. We are still assuming the forward curve as of this quarter end and currently expect a first rate cut in September. We continue to expect full-year end-of-period loan growth in the range of 3 to 5 percent. We expect full-year net interest income to decline in the range of 2 to 4 percent. We also continue to expect adjusted nonage expense to increase in the range of 6 to 8 percent.

Speaker Change: I will now turn it back to Chris to share our outlook for the 2024 full year. Chris? Thanks, Gary. Our full year outlook remains largely unchanged from the first quarter.

Irene H. Oh: We currently have $49 million of repurchase authorization that remains available for future buybacks. East West third quarter 2024 dividend will be payable on August 16, 2024 to stockholders of record on August 2. I will now turn it back to Chris to share our outlook for the 2024 full year. Chris. Thank you, Irene.

Chris: We are still assuming the forward curve as of this quarter end and currently expect a first rate cut in September .

Speaker Change: We continue to expect full-year end-of-period loan growth in the range of 3 to 5 percent.

Speaker Change: We expect full-year net interest income to decline in the range of 2-4%.

Speaker Change: We also continue to expect adjusted knowledge expense to increase in the range of six to eight percent.

Christopher Moral: Regarding tax items, we now expect for the effective tax rate to be lower in the range of 21 to 23% versus the prior range of 23 to 24%. We also now expect full year tax credit amortization expense to be within the range of 60 to 65 million.

Speaker Change: Regarding tax items, we now expect for the effective tax rate to be lower in the range of 21 to 23 percent versus the prior range of 23 to 24 percent.

Speaker Change: We also now expect full year tax credit amortization expense to be within the range of $60 to $65 million. With that, I will now open the call to questions. Operator?

Unknown Executive: With that, I will now open the call to questions.

Chris: Regarding tax items, we now expect the effective tax rate to be lower in the range of 21 to 23% versus the prior range of 23 to 24%. We also now expect full-year tax credit amortization expense to be within the range of $60-65 million. With that, I will now open the call to questions. Operator.

Operator: Operator? Thank you. You will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and would like to withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star and then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Rochester with Compass Point. Please go ahead.

Speaker Change: Thank you. You will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are 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 star then 2. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster.

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

David Rochester: The first question comes from Dave Rochester with Compass Point. Please go ahead. Good afternoon, guys.

Speaker Change: The first question comes from Dave Rochester with Compass Point. Please go ahead.

David Patrick Rochester: Hey, good afternoon, guys. Good afternoon, Dave. One of the things I wanted to start on fee income is that you guys highlighted this earlier. You had a solid quarter there with some pretty broad-based growth. So I was hoping you could talk about what you're expecting for that trajectory in the back half or what you're thinking for the full year in terms of growth overall.

David Rochester: Good afternoon, Dave. One of the start on C income. You guys that highlighted this earlier, you had a solid quarter there with some pretty broad base growth.

David Patrick Rochester: Hey, good afternoon guys.

David Patrick Rochester: Good afternoon, Dave.

David Patrick Rochester: Wanted to start on C-income. You guys had highlighted this earlier. You had a solid quarter there with some pretty broad-based growth. So I was hoping you could talk about, you know, what you're expecting for that trajectory in the back half or what you're thinking for the full year in terms of growth overall.

David Rochester: So I was hoping you could talk about what you're expecting for that trajectory in the back half or what you're thinking for the full year in terms of growth overall. Sure. So we've had about 10% full year-over-year growth through the midpoint. When I think about the core drivers of that, obviously deposit account fees are the biggest component, and that's also been growing at that same pace, and it's been growing, you know, call it in the range of the million dollars a quarter. I don't know that that will continue in a declining rate environment immediately, but it should both well going for another quarter or so.

Chris: Sure, so we've had about 10% full-year, year-over-year growth through the midpoint. When I think about the core drivers of that, obviously deposit account fees are the biggest component, and that's also been growing at that same pace, and it's been growing, you know, call it in the range of a million dollars a quarter. I don't know that that will continue in a declining rate environment immediately, but it should bode well for another quarter or so.

Speaker Change: Sure. So we've had about 10% full-year, year-over-year growth through the midpoint.

Speaker Change: When I think about the core drivers of that, obviously deposit account fees are the biggest component, and that's also been growing at that same pace.

Speaker Change: and it's been growing, you know, call it in the range of a million dollars a quarter. I don't know that that will continue in a declining rate environment immediately, but it should bode well going for another quarter or so.

David Rochester: Lending fees are a function of lending growth. I think we commented that we expect lending to moderate over the back half of the year. So I would expect that to case and derivatives goes along with lending to a certain extent. FX has been a wonderful piece of our business that's contributed greatly this quarter. It does have some volatility, and the wealth management fees, which have grown very nicely, have obviously been benefiting from the backdrop of positive overall equity markets and a strong fixed income yield opportunity.

Chris: Lending fees are a function of lending growth, and I think we commented that we expect lending to moderate over the back half of the year, so I would expect that to happen. And derivatives go along with lending to a certain extent. FX has been a wonderful piece of our business that's contributed greatly this quarter. It does have some volatility, and the wealth management fees, which have grown very nicely, have obviously been benefiting from the backdrop of positive overall equity markets and a strong fixed income yield opportunity. Again, that will probably moderate to some extent as we look over the back half.

Speaker Change: Lending fees are a function of lending growth, and I think we commented that we expect lending to moderate over the back half of the year, so I would expect that to be the case, and derivatives goes along with lending to a certain extent.

Speaker Change: FX has been a wonderful piece of our business that's contributed greatly this quarter. It does have some volatility, and the wealth management fees, which have grown very nicely, have obviously been benefiting from the backdrop of positive overall equity markets and a strong fixed income yield opportunity.

David Rochester: Again, that will probably moderate to some extent as we look over the back half of the year. Okay, so all in maybe a little bit of moderation but still with you, person decent growth there it sounds like. It's a core focus of us to drive overall be income levels higher over time. Okay, maybe appreciate that.

Speaker Change: Again, that will probably moderate to some extent as we look over the back half of the year.

Chris: Okay, so maybe a little bit of moderation, but still looking for some decent growth there.

Speaker Change: Okay so all in maybe a little bit of moderation but still looking for some decent growth there it sounds like.

Chris: It's a core focus of us to drive overall fee income levels higher over time.

Speaker Change: It's a core focus of us to drive overall fee income levels higher over time.

Chris: Okay, maybe I'll appreciate that. Maybe it's my follow-up on capital. Last quarter, I know you were talking about a target TCE ratio range around where it is right now, 9.3, 9.4. Any changes to the thinking on that? And should we expect that range for at least the back half of the year?

David Rochester: Maybe it's my follow up on Capitol last quarter, and now you were talking about a target TCE ratio range around where it is right now. 9394, any changes to that the thinking on that, and should we expect that range for at least the back half of the year. I think we continue to believe it's not in our shareholder interest for us to warehouse additional capital beyond these levels. Obviously, it'll bounce around a few basis points, but we're trying to be thoughtful about managing that in the best interest of returns. All right. Great.

Speaker Change: Okay, maybe, appreciate that. Maybe it's my follow-up on capital. Last quarter I know you were talking about a target TCE ratio range around where it is right now 9.3, 9.4. Any changes to that, the thinking on that and should we expect that range for at least the back half of the year?

Chris: I think we continue to believe it's not in our or shareholders' interest for us to wear out the additional capital beyond these levels. Obviously, it'll bounce around a few basis points, but we're trying to be thoughtful about managing that in the best interest of return.

Speaker Change: I think we continue to believe it's not in our or shareholders interest for us to wear out the additional capital beyond these levels. Obviously, it'll bounce around a few basis points, but we're trying to be thoughtful about managing that in the best interest of returns.

Chris: All right, great. Thanks, guys.

David Rochester: Thanks, guys.

Speaker Change: All right, great, thanks, guys.

Jared Shaw: The next question comes from Jared Shaw with Barclays Capital. Please go ahead.

Jared David Wesley Shaw: The next question comes from Jared Shaw with Barclays Capital. Please go ahead.

Speaker Change: The next question comes from Jared Shaw with Barclays Capital. Please go ahead.

Jared Shaw: Hey, good afternoon. Good afternoon, Jared.

Chris: How should we be thinking about margin over the next few quarters with that backdrop?

Jared Shaw: Maybe just looking, they're starting with margin and taking into account the strong growth that you just pointed out and see, and I at the end of the quarter as well as maybe some of the dynamics around, you know, potentially getting to the end of a deposit. Remix pressure. How should we be thinking about margin over the next few quarters with that backdrop? Yeah, we still expect margin to have some downward compression over the back half of the year. We're not sure if the trough will come in Q3 or Q4, but we think it does trough later this year.

Jared Shaw: Hey, good afternoon.

Jared Shaw: Good afternoon, Jared.

Speaker Change: Maybe just looking or starting with margin and taking into account the strong growth that you just pointed out in C&I at the end of the quarter, as well as maybe some of the dynamics around

Speaker Change: You know, potentially getting to the end of a deposit remix pressure, how should we be thinking about margin over the next few quarters with with that backdrop?

Chris: Yeah, we still expect margin to have some downward compression over the back half of the year. We're not sure if the trough will come in Q3 or Q4, but we think it will peak later this year. That having been said, while we think marginal will come down a bit, we do see dollar NII growing precisely because the balances grew here in the second quarter, and we still see incremental growth, although at a more moderate pace, in the third and fourth quarters. So balance sheet growth will keep the NII moving higher, NIM will still see compression, and we expect it to trough as we get later in the year.

Speaker Change: Yeah, we still expect margin to have some downward compression over the back half of the year.

Speaker Change: We're not sure if the trough will come in Q3 or Q4, but we think it does trough later this year.

Jared Shaw: That having been said, while we think margin will come down a bit, we do see dollar and I growing precisely because the balance grew here in the second quarter, and we still see incremental growth, although at a more moderate pace in the third and fourth quarters. So balance growth will keep the NII moving higher. Nim will still see compression, and we expect it to trough as we get later in the year.

Speaker Change: That having been said, while we think margin will come down a bit, we do see dollar NII growing precisely because the balances grew here in the second quarter, and we still see incremental growth, although at a more moderate pace, in the third and fourth quarters.

Speaker Change: So balance sheet growth will keep the NII moving higher. NIM will still see compression, and we expect it to trough as we get later in the year.

Chris: Okay, and is that margin compression, I guess coming more from just some tail on funding costs, or are you not getting the... You know, maybe the same spreads on the incremental CNI loan as you have in maybe the existing portfolio?

Jared Shaw: Okay, and is that is that margin compression? I guess coming more from just some tail on funding costs or are you not getting the, you know, maybe the same spreads on the incremental CNI loan as you have and maybe the existing portfolio? I think we expect some downward compression on fixed rate assets as the expectation for red Fed cut comes into play. And so the higher yields, for example, that we've been earning here more recently on mortgages will start to come down and some other fixed-rate options as well as fixed-rate investments. Those will put incremental downward pressure on the fixed rate asset repricing at the same time.

Speaker Change: Okay, and is that margin compression, I guess, coming more from just some tail on funding costs, or are you not getting the...

Speaker Change: You know, maybe the same spreads on the incremental C&I loan as you have in maybe the existing portfolio.

Chris: I think we expect some downward compression on fixed-rate assets as the expectation for a Fed cut comes into play. The higher yields, for example, that we've been earning here more recently on mortgages will start to come down, and some other fixed-rate options, as well as fixed-rate investments, those will put incremental downward pressure on fixed-rate asset repricing. At the same time, we don't think the Fed cut, which probably won't come until mid-September, will do much to dampen the near-term deposit costing that we have to roll over here in the third quarter.

Speaker Change: I think we expect some downward compression on fixed-rate assets as the expectation for a Fed cut comes into play, and so the

Speaker Change: Higher yields, for example, that we've been earning here more recently on mortgages will start to come down and some other fixed rate options, as well as fixed rate investments, those will put incremental downward pressure on the fixed rate asset repricing. At the same time, we don't think the Fed cut, which

Jared Shaw: We don't think the Fed cut, which probably won't come until mid September, will do much to dampen the near term deposit costing that we have to roll over here in the third quarter.

Speaker Change: probably won't come until mid-September, will do much to dampen the near-term deposit costing that we have to roll over here in the third quarter. So you'll recall we had a fairly significant first quarter Lunar New Year CD campaign.

Jared Shaw: So you'll recall we had a fairly significant first quarter in our new year city campaign. We're out there today rowing deposit and managing that, but it's not at a 25 or 30 basis points lower level because rates haven't really moved that far down. Okay, great. Thanks.

Chris: So you'll recall we had a fairly significant first quarter Lunar New Year CD campaign. We're out there today growing deposits and managing that, but it's not at a 25 or 30 basis points lower level because rates haven't really moved that far down.

Speaker Change: We're out there today growing deposits and managing that, but it's not at a 25 or 30 basis points lower level because rates haven't really moved that far down.

Irene H. Oh: Okay, all right, great, thanks. And then maybe, as my follow-up, just on credit, any color around sort of the dynamic with CNI, NPL is up, but criticized down, any broader trends there, or are those more one-off? Now, I would say, I mean,

Jared Shaw: And then maybe it was my follow-up to some credit, any color around sort of the dynamic with CNI MPLs up, but the criticized down any broader trends there or those more one-off. Yeah, I would say, I mean, obviously those levels, they're off very low basis. So there are loans that we're looking at, and borrowers that we're looking at carefully for CNI, and then also see areas as well. But there is nothing I would say that systemic at this point, industry concentrations, we humans, or anything overly concerned about.

Speaker Change: Okay, all right, great. Thanks. And then maybe as my follow-up, just on credit, any color around sort of the dynamic with CNI, MPL is up, but criticized down, any broader trends there, or are those more one-off?

Irene H. Oh: Yeah, I would say, obviously, those levels are off a very low basis. So there are loans that we're looking at and borrowers that we're looking at carefully for C&I, and then also CRE as well. But there is nothing I would say that's systemic at this point, industry concentrations, readings or anything.

Speaker Change: Yeah, I would say, I mean, obviously, those levels, they're all very low bases.

Speaker Change: There are loans that we're looking at and borrowers that we're looking at carefully for C&I, and then also CRE as well. But there is nothing, I would say, that's systemic at this point, industry concentrations, unions, or anything we're overly concerned about.

Jared Shaw: Great. Thanks.

Casey Haire: And the next question comes from Casey Haire with Jeffries. Please go ahead. Great. Thanks.

Speaker Change: Great, thanks.

Operator: The next question comes from Casey Haire with Jeffries. Please go ahead.

Speaker Change: The next question comes from Casey Haire with Jeffries. Please go ahead.

Casey Haire: Great, thanks. Good afternoon, everyone. Another follow-up on NIM. So if we do get this trough in the back half of the year, like what is the expectation if the forward curve plays out as is, is it NIM stability with CD repricing benefits and maturing hedges? Offsetting the pressure you feel on the on the floating rate loan book, just a little color on what happens post-second half here.

Casey Haire: Good afternoon, everyone. After another follow-up on the NIM. So if we do get this trough in the back half of the year, what is the expectation if the forward curve plays out as is, you know, is it NIM's stability with CD repricing benefits and maturing hedges offsetting the pressure you feel on the floating rate loan book, just a little color on what happens post second half here. Yeah, so order of magnitude, I think we've said that for every 25 basis point rate cut, we would assume there be something in the neighborhood of two to maybe three million of downward pressure from the rate cuts.

Casey Haire: Great. Thanks. Good afternoon, everyone.

Speaker Change: Another follow-up on the NIM so if we do get this trough in the

Casey Haire: In the back half of the year, like, what is the expectation if the forward curve plays out as is, you know, is it is it NIMS stability with CD repricing benefits and maturing hedges?

Speaker Change: Offsetting the pressure you feel on the floating rate loan book, just a little color on what happens post second half here.

Chris: Yeah, so order of magnitude, I think we've said that for every 25 basis point rate cut, we would assume there'd be something in the neighborhood of 2 to maybe 3 million of downward pressure from the rate cuts. But we've also said we expect about a 50% deposit beta baked into those numbers. So I think those are two things that are in play in our forward look. With both of those assumptions baked in, given the growth that we see ahead of us, we think the answer is rising dollar NII, fairly consistently, third quarter into fourth, and margin coming down, again, modestly, from current levels down into a slightly lower 320 range and then finding its footing, and we assume it will move higher, particularly as a number of negative cash flow hedges that currently weigh on us come off in the first quarter of 2025.

Speaker Change: Yeah, so order of magnitude, I think we've said that for every 25 basis point rate cut, we would assume there'd be something in the neighborhood of 2 to maybe 3 million of downward pressure from the rate cuts.

Casey Haire: But we've also said we expect about a 50% deposit beta baked into those numbers. So I think those are two things that are in play in our forward look with both of the assumptions baked in, given the growth that we see ahead of us. We think the answer is rising dollar NII fairly consistently third quarter into fourth, and margin coming down again, modestly from current levels down into a slightly lower 320 range, and then finding its footing. And we assume moving higher, particularly as a number of negative cash flow hedges that currently weigh on us come off in the first quarter of 25.

Speaker Change: But we've also said we expect about a 50% deposit beta baked into those numbers. So I think those are two things that are in play in our forward look.

Speaker Change: With both of those assumptions baked in, given the growth that we see ahead of us, we think the answer is rising dollar NII, fairly consistently, third quarter into fourth, and margin coming down.

Speaker Change: Again, modestly, from the current levels.

Speaker Change: Down into a slightly lower 320 range and then finding its footing and we assume moving higher Particularly as a number of negative cash flow hedges that currently weigh on us come off in the first quarter of 25

Casey Haire: Yeah, true. Okay.

Chris: Gotcha. Okay. And then just the loan growth outlook, if it sounds like you guys, I mean, obviously, the CRE, you guys are holding the line on that near term and enjoying the CNI and resi growth. But it sounds as if you are looking to open that up, or get reengaged in commercial real estate in 25, unless I'm misreading that. But just wondering, you know, where the CRE concentration is, what's the strategy there? Like, when can you turn that back on? Is there a certain level?

Casey Haire: And then just the loan growth outlook, if it sounds like you guys, I mean obviously the CRE, you guys are holding one on that near term and enjoying the C&I and Rezzy growth, but it sounds as if you are looking to open that up or get re-engaged in commercial real estate in 25 unless I'm misreading that, but just wondering, you know, where, you know, CRE concentration, what's the strategy there? Like when can you turn that back on, as there are certain levels? Well, to be clear, we're always here for our core customers, and we're always engaged to support them.

Speaker Change: Gotcha, okay.

Speaker Change: And then just the loan growth outlook, it sounds like you guys, I mean, obviously the CRE, you guys are holding the line on that near term and enjoying the CNI and RESI growth.

Speaker Change: It sounds as if you are looking to open that up or get reengaged in commercial real estate in 2025, unless I'm misreading that, but just wondering, you know, where...

Speaker Change: You know, CRE concentration, what's the strategy there, like when can you turn that back on, is there a certain level?

Dominic Ng: Well, to be clear, we're always here for our core customers, and we're always engaged to support them. We just haven't been pursuing marginal new transactions. And so we will continue to engage with our core customers and service our portfolios and help them with whatever comes their way. With regard to the overarching loan strategy, I think Dominic has articulated a long-term plan to get to a third, a third, a third, and that will involve us growing our C&I and residential portfolios over time at a faster clip than CRE.

Speaker Change: Well, to be clear, we're always here for our core customers, and we're always engaged to support them. We just haven't been pursuing marginal new transactions.

Casey Haire: We just haven't been pursuing marginal new transactions, and so we will continue to engage with our core customers and service our portfolios and help them with whatever comes their way. With regard to the overarching loan strategy, I think Dominic has articulated a long-term plan to get to a third, a third, a third, and that will involve us growing our C&I and residential portfolios over time at a faster clip than CRE. I just want to add one additional comment here: is that we it's not like that we are looking for marginal business in the past and that we're not.

Speaker Change: And so we will continue to engage with our core customers and service our portfolios and help them with whatever comes their way.

Speaker Change: With regard to the overarching loan strategy, I think Dominic has articulated a long-term plan to get to a third, a third, a third, and that will involve us growing our C&I and residential portfolios over time at a faster clip than CRE.

Dominic Ng: I just want to add one additional comment here is that we, it's not like that, we were looking for marginal business in the past. And now we're not, it's really coming back to the issue that our core customers don't really see a lot of interesting activities for them to engage in. So our volume on CIE has dropped. A lot has, no, this is simply because of the fact that, You know, there's just not a lot of great deals out.

Speaker Change: I just want to add one additional comment here is that

Speaker Change: It's not like that we are looking for marginal business in the past and now we're not. It's really coming back to the issue is that our core customers.

Casey Haire: It's really coming back to the issue is that our core customers don't really see a lot of their interesting activity for them to engage in. So our volume on the fact that, you know, there's just not a lot of great deals out there. So we expect CIE activities will probably continue to slow simply because that then the external environment factor. And so our position is that we always have the capital and the balance sheet to support our core customers in any kind of economic environment. But for them to be our core customers that worthy of support, they obviously are the people that are very savvy and know what they're doing.

Speaker Change: I don't really see a lot of very interesting activity for them to engage in, so our volume on CIE has dropped.

Speaker Change: A lot has...no, this is simply because of the fact that...

Dominic Ng: So, we expect CRE activities will probably continue to slow simply because of the external environment factors. And so our position is that we always have the capital and the balance sheet to support our core customers in any kind of economic environment. But for them to be our core customers, that worthy of support, they obviously are the people that are very savvy and know what they're doing. And so they wouldn't be foolishly getting involved in transactions that don't make sense.

Speaker Change: You know, there's just not a lot of great deals out there.

Speaker Change: So, we...

Speaker Change: expect CLE activities will probably continue to slow simply because of the external environment factor.

Speaker Change: And so our position is that we always have the capital and the balance sheet to support our core customers in any kind of economic environment. But for them to be our core customers,

Speaker Change: that's worthy of support. They obviously are the people that are very savvy and know what they're doing.

Casey Haire: And so they wouldn't be foolishly getting involved in transactions that don't make sense. So that's why the volume of C&I to CRE, et cetera, is very much tied into, to a certain extent, the interest rate environment and also the economic circumstances. And so that's how we see utilization in C&I also relatively low for the last couple of years, simply because for that kind of interest rate, it's hard for people to draw down because the cost of borrowing is so much higher. So all in all, I think that that's the beauty of having strong capital and a strong balance sheet and being in the position to always take good care of our customers.

Speaker Change: And so they wouldn't be foolishly getting involved in transactions that don't make sense. So that's why the volume of CNI to...

Dominic Ng: So that's why the volume of CNI to CRE, etc., is very much tied into, to a certain extent, the interest rate environment and also the economics. And so that's how we see utilization in CNI also relatively low for the last couple of years, simply because at this kind of interest rate, it's hard for people to draw down because the cost of borrowing is so much higher. So, all in all, I think that that's the beauty of having strong capital and a strong balance sheet and being in the position to always take good care of our customers. These good customers, in turn, will continue to take care of us.

Speaker Change: CRE, et cetera, very much tie into, to a certain extent, the interest rate environment and also the economic circumstances.

Speaker Change: And so that's how we see utilization in CNI also relatively low for the last couple of years simply because for this kind of interest rate.

Speaker Change: It's hard for people to draw down.

Speaker Change: because the cost of borrowing is so much higher. So all in all, I think that that's the beauty of having strong capital and strong balance sheet and be in the position to always take good care of our customers. These good customers, in turn, will continue to take care of us.

Casey Haire: These good customers, in turn, will continue to take care of us.

Abraham Poonawala: The next question comes from Abraham Poonawala with Bank of America.

Ebrahim Huseini Poonawala: The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead.

Abraham Poonawala: Please go ahead. Good afternoon.

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

Dominic Ng: I guess maybe the first one; just click on, like, slide 22. So you saw some mixed shift from cash into securities during the quarter. Is that kind of steady state, just remind us one, when we think about securities to earning assets, are we where we want to be? And then, in terms of the level of cash you want to be holding, is the $4 billion relative to the $16 billion the right sort of level to think about?

Abraham Poonawala: Maybe first one, just click on slide 22. So you saw some mixed shift from cash into security is during the quarter. Is that kind of steady state?

Ebrahim Huseini Poonawala: Well, good afternoon.

Speaker Change: I guess maybe first one, just click on like slide 22.

Ebrahim Huseini Poonawala: So you saw some mixed shift from cash into securities during the quarter. Is that kind of steady state? Just remind us one.

Abraham Poonawala: Just remind us one, when we think about securities to earning assets, are we where we want to be? And then, in terms of the level of cash you want to be holding, if the 4 billion related to the 16, the right sort of level to think about. Yeah, and I think we said last quarter we thought the overall cash and securities, and we kind of look at that as one basket, would stay relatively stable relative to the total balance sheet. I think that's certainly happening on an average basis. The amount that can be invested, you know, I think from a variety of factors probably doesn't come down a lot off of the 4 billion in cash component, but could come down a little bit more.

Speaker Change: When we think about securities to earning assets, are we where we want to be? And then in terms of the level of cash you want to be holding, is the $4 billion relative to the $16 billion the right sort of level to think about?

Chris: Yeah, and I think we said last quarter that we thought the overall cash and securities, which we kind of look at that as one basket, would stay relatively stable relative to the total balance sheet. That's really happening on an average basis.

Speaker Change: Yeah, and I think we said last quarter, you know, we thought the overall cash insecurities and we kind of look at that as one basket would stay relatively stable relative to the total balance sheet.

Chris: The amount that can be invested, you know, I think from a variety of factors, probably doesn't come down a lot from the $4 billion in cash component but could come down a little bit more. We certainly have the bandwidth and flexibility to do that. But we're not pushing that where again, our focus is on core customer activity, core loan growth, and core deposit growth. And I think that will shape most of the change in the balance sheet over the back half of the year.

Speaker Change: That's really happening on an average basis.

Speaker Change: The amount that can be invested.

Speaker Change: You know, I think from a variety of factors.

Speaker Change: We certainly have the bandwidth and flexibility to do that, but we're not pushing that where, again, our focus is on core customer activity.

Abraham Poonawala: We certainly have the bandwidth and flexibility to do that. But we're not pushing that; where again, our focus is on core customer activity, core long growth, core deposit growth. And I think that will shape most of the change in the balance sheet over the back half of the year. Got it.

Speaker Change: Core loan growth, core deposit growth, and I think that will shape most of the change in the balance sheet over the back half of the year.

Dominic Ng: Got it. And I guess the other one, maybe Dominic for you, this sentiment among your commercial customers as we think about maybe getting a September rate cut, you're going to get to the elections. Do you see that being a trigger where we could see an acceleration in loan growth and loan demand? Like, do you feel there is some pent-up demand that could lead to a rebound in some form of loan growth looking into 2025? And is the beginning of the rate cut cycle and elections enough to do that? Well, basically,

Abraham Poonawala: And I guess the other one may be Dominic for you. Just sentiment among your commercial customers as we think about. Maybe getting a September 8 card, you're going to get through the elections.

Speaker Change: Got it. And I guess just the other one, maybe Dominic, for you, just sentiment among your commercial customers as we think about...

Abraham Poonawala: Do you see those being a trigger where we could see an acceleration in loan growth and loan demand, like do you feel there is some pent up demand that could lead to a rebound in sort of loan growth, looking into 2025 and is the beginning of the rate cut cycle and elections enough to do that. While based on the current expectation on the right cuts, I wouldn't think that the rate cut will be sort of like significant enough that can really move that much of a needle. The fact is 25 basis point cut here and there.

Speaker Change: May be getting a September 8 card. You're going to get through the elections. Do you see those being a trigger where we could see an acceleration in loan growth and loan demand? Like, do you?

Speaker Change: I feel there is some pent-up demand that could lead to a rebound in sort of loan growth looking into 2025 and is the beginning of the rate cut cycle and elections enough to do that?

Dominic Ng: Well, based on the current expectation for the rate cuts, I wouldn't think that the rate cut will be sort of like significant enough that it can really move that much of a needle. The fact is, a 25 basis point cut here and there. I mean, if we even do it two to three times, it's less than one percent.

Speaker Change: Well, based on the current expectation on the rate cuts, I wouldn't think that the rate cut will be...

Speaker Change: So, like, significant enough.

Speaker Change: that can really move that much of a needle.

Abraham Poonawala: I mean, if we even if we do it two to three times, it's less than 1%, and when we're sitting at 5.5%, that one rate, I don't think there's material enough to really drive a lot of excitement in terms of making investment and whatnot.

Speaker Change: The fact is, 25 basis points here and there, I mean, even if we do it two to three times, it's less than 1%, and when we're sitting at 5.5% set fund rate, I don't think that's material enough to really drive a lot of...

Dominic Ng: And when we're sitting at five point five percent, that fund rate, I don't think that's material enough to really drive a lot of excitement in terms of making investment and whatnot. So, and then also, well, the election is something that, you know, no one knows right now. I mean, there's a lot of drama going on.

Abraham Poonawala: So and then also about election is something, you know, no one knows right now. I mean, there's a lot of drama going on. So we'll just all have to watch it and see how it goes and then see how we did affect business sentiment. But at this stage right now, my expectation is still going to be everything stays more than the same here. It's like maybe it's exactly what the Fed is driving and soft lending. I think that's what it looks like going in that direction so far. You know, business seems to be holding up pretty good, but no one's going out there trying to aggressively chase new business at this point. You know, I expect that's going to be the way it is for the fourth quarter and possibly even the first quarter, and then we'll see how election may affect policy and so forth.

Speaker Change: Excitement in terms of making investment and whatnot.

Speaker Change: So, and then also, well, election is something, you know, no one knows right now. I mean, there's a lot of drama going on, so we'll just all have to watch it and see how it goes and then see how would that affect business sentiment. But at this stage right now, my expectation is still going to be...

Dominic Ng: So we'll just all have to watch it and see how it goes and then see how that affects business sentiment. But at this stage right now, my expectation is still gonna be that everything stays more or less the same here. It's like, maybe that's exactly what the Fed is driving, soft lending. I think that's what it looks like; it's going in that direction. So far, you know, business still seems to be holding up pretty well, but no one's going out there trying to...

Speaker Change: Everything stays more or less the same here. It's like...

Speaker Change: Maybe it's exactly what the Fed is driving, soft lending. I think that's what it looks like, it's going in that direction. So far, you know, business still seems to be holding up pretty good, but no one's going out there trying to...

Dominic Ng: Aggressively chased new business at this point, you know, and I expect that's going to be the way it is for the fourth quarter and possibly even the first quarter. And then we'll see how the election may affect, you know, policy and Thank you.

Speaker Change: aggressively chase new business at this point you know and I expect that's going to be the way it is.

Speaker Change: for the fourth quarter, and possibly even the first quarter, and then we'll see how election may affect policy and so forth.

Abraham Poonawala: Thank you.

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

Speaker Change: Thank you.

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

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

Brandon King: Hey, good evening. Good evening, Brandon. So, hey.

Chris: Good evening, Brandon. So, Hey, from what I understand, residential is going to lead loan growth in the back half of the year. So could you just talk about what you're seeing in that category as far as demand is concerned? I know there are concerns about housing supply. I know you have a unique product, but just give us some context behind your outlook of ready driving growth for the back half of the year, how sensitive that could be

Brandon Thomas King: Hey, good evening.

Brandon King: So from what I understand, residential is going to lead long growth in the back half of the year. So could you just talk about what you're seeing in that category as far as demand. You know, there's concerns about housing supply. I know you have a unique product, but just give us some context behind your outlook of ready driving growth for the back half of the year and how sensitive that could be to interest rate moves and other things. Yeah, and let me just make sure we're clear: residential growth will continue to be a consistent contributor to the growth at about the pace it's been here over the first half of the year into the second half of the year.

Brandon Thomas King: Good evening, Brandon.

Speaker Change: Thanks. So from what I understand, residential...

Speaker Change: is going to lead loan growth in the back half of the year. So could you just talk about what you're seeing in that category as far as demand? I know there's concerns about housing supply. I know you have a unique product, but just give us some context behind your outlook of where you're driving growth for the back half of the year.

Chris: Yeah, and let me just make sure we're clear, residential growth will continue to be a consistent contributor to growth at about the pace it's been here over the first half of the year into the second half of the year. And our pipelines already here in the third quarter would support that. I don't see that necessarily shifting much in our outlook. CNI will be, as was today, this quarter, you know, a prominent contributor to the quarter.

Speaker Change: How sensitive that could be to interest rate moves and other things.

Speaker Change: Yeah, and let me just make sure we're clear, residential growth will continue to be a consistent contributor to the growth at about the pace it's been here over the first half of the year into the second half of the year. Our pipelines already here in the third quarter would support that. I don't see that necessarily shifting much in our outlook.

Brandon King: Our pipelines already here in the third quarter would support that and see that necessarily shifting much in our outlook.

Brandon King: C and I will be as was today this quarter, you know, the prominent contributor to the quarter. It will moderate, but it could also still be a good contributor to the overall growth. We do have a unique product offering, and one way to think about it is most of our borrowers are only borrowing 50 cents on the dollar. And so, by definition, there's sort of five eighths as rate sensitive as your typical 80% health TV borrower. And therefore we have not seen the same down draft in overall origination activities. And we think that will hold here as Dominic mentioned. You know, we don't think a rate cut or two will make too much difference to the outlook.

Speaker Change: C&I will be, as was today, this quarter, you know, is a prominent contributor to the quarter. It will moderate, but it could also still be a good contributor to the overall growth.

Chris: It will moderate, but it could also still be a good contributor to overall growth. We do have a unique product offering, and one way to think about it is that most of our borrowers are only borrowing 50 cents on the dollar, and so by definition, they're sort of five-eighths as rate-sensitive as your typical 80% LTV borrower. And therefore, we have not seen the same downdraft in overall origination activities, and we think that will hold here. As Dominic mentioned, we don't think a rate cut or two will make too much difference to the outlook, and those people that are coming to us pursuing the American dream of home ownership are not going to be turned away or more excited, necessarily, by give or take 25 days.

Speaker Change: We do have a unique product offering, and one way to think about it is most of our borrowers

Speaker Change: are only borrowing 50 cents on the dollar.

Speaker Change: And so by definition, there's sort of five eighths.

Speaker Change: As rate sensitive as your typical 80% LTV borrower. And therefore, we have not seen the same down draft.

Speaker Change: in overall origination activities.

Speaker Change: And we think that will hold here, as Dominic mentioned, you know, we don't think a rate cut or two will make too much difference to the outlook, and those people that are

Brandon King: And those people that are coming to us pursuing the American dream of ownership are not going to be turned away or more excited initially by give or take 25 days. Mrs. Once. Got it, got it. Okay.

Dominic: coming to us pursuing the American dream of home ownership are not going to be turned away or more excited necessarily by give or take 25 aces once.

Chris: Got it. Got it. Okay. And then, in regards to the NIM commentary, I think you briefly mentioned the kind of CD repricing, particularly the Lunar New Year deposit. Could you just give us some context, Mr. Hunt, of what you're expecting as far as CDB pricing in the back half of the year and how dependent that is on rate cuts?

Brandon King: And then in regards to the NIM commentary, I think you briefly mentioned kind of CD real pricing, particularly Lunar New Year deposits. Could you just give us some context of the hot, what you're expecting as far as CDU pricing in the back half of the year and how dependent that is on rate cuts or not. The bulk of the lunar CD pricing and the CD pricing driver in the first quarter was at a rate of five and a quarter. Our current special offerings today are at five and four point eight. And we therefore expect that we will be able to reprice somewhat lower.

Speaker Change: Got it, got it. Okay, and then in regards to the NIMM commentary, I think you briefly mentioned the kind of CD route pricing, particularly the Lunar New Year deposits.

Speaker Change: Could you just give us some context, Mr. Hunt, of what you're expecting as far as CDB pricing in the back half of the year and how dependent that is on rate cuts or not?

Chris: The bulk of the Lunar CD pricing and the CD pricing driver in the first quarter was at a rate of five and a quarter. Our current special offerings today are at five and 4.88, and we therefore expect that we will be able to reprice them somewhat lower, but that's also a function of all of that coming through. And most of that activity happens sort of in February and into March, so the proof will be in August and into September when those come off, and we think right now we have a competitive rate that will keep us managing and maintaining those balances, but we'll see how that plays out over the next 45 days.

Mr. Hunt: The bulk of the Lunar CD pricing and the CD pricing driver in the first quarter was at a rate of five and a quarter.

Brandon Thomas King: Got it. Thanks for taking my questions.

Speaker Change: Our current special offerings today are at $5 and $4.88.

Brandon King: But that's also a function of all that coming through. And most of that activity is sort of February into March. So the proof will be in August and in September when those come off. And we think right now we have a competitive rate that will keep us managing and maintaining those balances. But we'll see how that plays out over the next 45 days. Got it.

Speaker Change: And we therefore expect that we will be able to reprice somewhat lower.

Speaker Change: But that's also a function of...

Speaker Change: All of that coming through, and most of that activity is sort of February into March, so the proof will be in August and into September , when those come off. And we think right now we have a competitive rate that will keep us managing and maintaining those balances, but we'll see how that plays out over the next 45 days.

Unknown Executive: Let's take more questions. Thank you.

Speaker Change: Got it. Thanks for taking my questions.

Timmer Braziler: The next question comes from Timmer, Brazil, with Wells Fargo. Please go ahead.

Timur Felixovich Braziler: The next question comes from Timur Braziler with Wells Fargo.

Speaker Change: Thank you.

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

Timmer Braziler: Hi, good afternoon. Speaking with a line of questioning, sticking with a line of questioning on deposits, nice reversal and trends within DDA. Is that sustainable going forward? Do you think that we've kind of trust within excess liquidity, exiting the balance sheet? Or is there still some risk, maybe in the back end of the year, that there's some more migration in that line? We definitely see it as rate dependent. And so what we've said previously, and we still believe these cases, as long as rates remain elevated, there will be incremental push for deposit migration. That did somewhat slow here in the second quarter.

Chris: Hi, good afternoon. Sticking with the line of questioning on deposits, nice reversal of trends within DDA. Is that sustainable going forward? Do you think that we've kind of troughed within excess liquidity exiting the balance sheet? Or is there still some risk, maybe at the back end of the year, that there's some more migration in that line?

Timur Felixovich Braziler: Hi, good afternoon.

Speaker Change: Sticking with the line of questioning...

Speaker Change: Sticking with the line of questioning on deposits, nice reversal in trends within BDA.

Speaker Change: Is that sustainable going forward? Do you think that we've kind of troughed within excess liquidity exiting the balance sheet or is there still some risk maybe in the back end of the year that there's some more migration in that line?

Chris: We definitely see it as rate-dependent. And so what we've said previously, and we still believe to be the case is, as long as rates remain elevated, there will be an incremental push for deposit migration. That did somewhat slow here in the second quarter, and there was a little pop at the end of the quarter, but the trend would still be somewhat negative migration until the rate cuts start. And at that point, as expectations dip lower, we think the incremental bid away from money market funds and from other offerings will be less enticing and result in less migration and even possibly stabilization, and then subsequent reversal. And, you know, that's our modeling view. But we also see anecdotally that other banks have reported similar stabilization, and we think that's consistent with industry trends.

Speaker Change: We definitely see it as rate dependent, and so what we've said previously, and we still believe to be the case, is as long as rates remain elevated, there will be incremental push for deposit migration.

Timmer Braziler: And there was a little pop at the end of the quarter, but the trend would be still somewhat negative migration until the rate cuts start. And at that point, as expectations dip lower, we think the incremental bit away from money market funds and from other offerings will be less enticing and result in less migration and even possibly stabilization and then subsequent reversal.

Speaker Change: That did somewhat slow here in the second quarter, and there was a little pop at the end of the quarter, but the trend would be still somewhat negative migration.

Speaker Change: Until the rate cuts start. And at that point, as expectations dip lower, we think the incremental bid away from money market funds and from other offerings

Speaker Change: will be less enticing and result in less...

Timmer Braziler: And we think that's our model-being view, but we also see anecdotally that other banks have reported similar stabilization, and we think that's consistent with industry trends. Great.

Speaker Change: Migration, and even possibly stabilization and then subsequent reversal. And you know, we think that's our model being viewed, but we also see anecdotally that other banks have reported similar stabilization, and we think that's consistent with industry trends.

Dominic Ng: And then maybe following up on Ebrahim's question, just looking at some of the uncertainties with the election, I'm just wondering if your Greater China clientele are maybe pulling forward some of the activity and anticipation of some of the uncertainty maybe at the back end of the year. I guess what is your temperature gauge for your Greater China client base and how are they thinking about the election risk or lack thereof at the back end of the year?

Timmer Braziler: And then maybe following up on Ebering's question, just looking at some of the uncertainties with the election. I'm just wondering if you're greater China clientele or maybe pulling forward some of the activity in anticipation of some of the uncertainty maybe in the back end of the year. I guess what is the temperature gauge of your greater China client base, and how are they thinking about the election risk or lack thereof in the back end of the year? Well, if you look at our greater China customers, I think that I don't think they have a much big anticipation of.

Speaker Change: Great. And then maybe following up on Ebrahim's question, just

Ibram: Looking at some of the uncertainties with the election, I'm just wondering if your Greater China clientele are maybe pulling forward some of the activity and anticipation of some of the uncertainty, maybe in the back end of the year, I guess, what is the temperature gauge of your Greater China client base? And how are they thinking about the election risk or lack thereof in the back end of the year?

Dominic Ng: Well, if you look at our Greater China customers, I don't think they have much anticipation of what's going to come out from the election one way or the other. And I mean, as we look at it interesting enough for the last eight years under two different administrations.

Speaker Change: Well, if you look at our Greater China customers, I think that

Speaker Change: I don't think they have...

Timmer Braziler: What's going to come out from the election one way or the other? And I mean, as we looked at interesting enough for the last eight years on the two different administrations. And if you look at, you know, the tariff started, you know, in 2017, but then in the current year. The current administration, not only is it going on, in fact, it added a little more. So, but then if you take a look at East West Bank, we haven't really stopped growing our cross-border business. And we consistently, I'll perform all of your groups in terms of financial performance.

Speaker Change: A much big anticipation of...

Speaker Change: What's going to come out from the election one way or the other?

Speaker Change: And, I mean, as we...

Speaker Change: look at

Speaker Change: interesting enough for the last eight years.

Speaker Change: Thank you, everyone. Thanks for joining us. Thank you.

Dominic Ng: If you look at, you know, the tariff started in 2017, but then under the current administration, not only does it keep going on, but it added a little bit more. So, but then if you take a look at East West Bank, we haven't really stopped growing our cross-border business, and we consistently outperform all our peer groups in terms of financial performance.

Speaker Change: under two different administrations.

Speaker Change: And if you look at, you know, the tariff started, you know,

Speaker Change: in 2017, but then, uh,

Speaker Change: In the current administration, not only does it keep going on, in fact, it adds a little bit more.

Speaker Change: So, but then if you take a look at East West Bank, we haven't really stopped growing our cross-border business.

Speaker Change: and we consistently outperform all our peer groups.

Timmer Braziler: I think it all get down to the end of the day. Despite political reverence, and there are some US, China, geopolitical issues, when it get down to national security, etc. The common goods that have been shipped between US and China, important export, really hasn't slowed down that much. There are a lot of business still, a commerce that going back and forth. And I would say that the vast majority of the business are really business going as usual. They don't like to hear those rhetoric. However, the business is still going as usual. What we found is that many of our customers, whether they're an import business, export business from the greater China region, or US to Asia region.

Dominic Ng: I think it all gets down to, at the end of the day, Despite political rhetoric, and there are some US-China geopolitical issues, and get down to national security, etc., the common goods that have been shipped between the US and China, import and export, really haven't slowed down that much. There are a lot of businesses still doing commerce that is going back and forth, and I would say that the vast majority of businesses are really doing business as usual. They don't like to hear from those veterans.

Speaker Change: In terms of financial performance.

Speaker Change: I think it will all get down to, at the end of the day,

Speaker Change: Despite political rhetorics,

Speaker Change: and there are some US-China geopolitical issues when it gets down to national security.

Speaker Change: etc.

Speaker Change: The common goods that have been shipped between the U.S. and China, import and export.

Speaker Change: really hadn't slowed down that much.

Speaker Change: There are a lot of business still, commerce, that's going back and forth.

Speaker Change: And I would say that the vast majority of the business are really business going as usual.

Dominic Ng: However, the business is still going as usual. What we found is that many of our customers, whether they're in the import business, Export Business, from the Greater China Region or the U.S. 2. Asia, the region, and they continue to do business; they continue to find ways to do business. And we at East West continue to navigate this rough sea, somehow, Understanding the Dynamic, and I think we've done a pretty good job of managing this overall US geopolitical situation, and that's why we uniquely find a way to continue to be one of the highest-forming banks in a country simply because we know what we're doing.

Speaker Change: They don't like to hear those rhetorics, however, the business is still going as usual. What we found is that many of our customers, whether they're in the import business,

Speaker Change: Export Business

Speaker Change: from the Greater China Region.

Speaker Change: or U.S. too.

Timmer Braziler: And they continue to do business. They continue to find where to do business. And we at East West continue to navigate in this rough sea, and somehow understanding the dynamic. And I think we've done a pretty good job in managing this overall US geopolitical situation. And that's why we uniquely find a way to continue to be one of the highest performing banks in a country, simply because we know what we're doing. And we continue to go in through eight years. For many others who look at significant turmoil, but for us somehow we get by just fine.

Speaker Change: [inaudible]

Speaker Change: region, and they continue to do business. They continue to find ways to do business. And we at East West continue to navigate.

Speaker Change: in this rough sea, and somehow...

Speaker Change: Understanding the Dynamic.

Speaker Change: And I think we've done a pretty good job in managing this overall, you know, U.S. geopolitical situation. And that's why we uniquely find a way to continue to be one of the highest-

Speaker Change: performing bank in the country simply because we know what we're doing and we continue to going through eight years of for many others we looked at

Dominic Ng: And we continue to go through eight years of, for many others we looked at, significant turmoil, but for us, somehow, we get by just fine. And this is something that we feel very confident about in the next 48 years. I don't know who's going to be the president. It really doesn't matter to us because we're here to run East West Bank. We know how to run our business. And so far, so good.

Timmer Braziler: And this is something that we feel very confident in the next 48 years.

Speaker Change: significant turmoil, but for us somehow we get by just fine. And this is something that we feel very confident in the next 48 years.

Timmer Braziler: I don't know who's going to be the president. It's really that maverick to us because we're here to run East West Bank. We know how to run our business, and so far, so good. Thank you.

Speaker Change: I don't know who's going to be the president.

Speaker Change: It really doesn't matter to us because we're here to run East West Bank. We know how to run our business.

Speaker Change: And so far, so good.

Dominic: Thank you, Dominic.

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

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

Dominic: Thank you.

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

Chris: The first one for me is just around capital. Given that you're not looking to accrete more capital at this stage, should we just assume you repeat the buyback when you're done? Or are you more price sensitive at this level? And then, if not, any other ways to return capital that you might be considering.

Matthew Clark: The first one for me is just around capital. Given that you're not looking to accrete more capital at this stage, should we just assume you re-up the buyback when you're done, or are you more price sensitive at this level? And then, if not any other ways to return capital that you might be considering.

Matthew Timothy Clark: Okay, thank you.

Matthew Timothy Clark: First one for me is just around capital.

Unknown Speaker: Given that you're not looking to accrete more capital at this stage, should we just assume you re-up the buyback when you're done, or are you more price sensitive at this level?

Speaker Change: And then if not, any other ways to return capital that you might be considering.

Matthew Clark: Both begin with, "We've always been both opportunistic and shareholder friendly, and those guiding principles will remain." During the quarter, I think we were fairly opportunistic in the repurchases we did. We didn't fully utilize what we have left. We have 49 million yet to go and will continue to look at it on an opportunistic basis.

Chris: Well, to begin with, we've always been both opportunistic and shareholder-friendly, and those guiding principles will remain. During the quarter, I think we were fairly opportunistic in the repurchases we did. We didn't fully utilize what we had left. We have $49 million yet to go, and we'll continue to look at it on an opportunistic basis. We would not expect to reauthorize until we've exhausted our current program, and so, you know, we'll update you on that...

Chris: Well, to begin with, we

Speaker Change: Well, to begin with, we've always been both opportunistic and shareholder-friendly, and those guiding principles will remain. During the quarter, I think we were fairly opportunistic in the repurchases we did.

Speaker Change: We didn't fully utilize what we have left. We have $49 million yet to go, and we'll continue to look at it on an opportunistic basis.

Matthew Clark: We would not expect to reauthorize until we've exhausted our current program. And so, you know, we love that you. As that comes together.

Speaker Change: We would not expect to reauthorize until we've exhausted our current program, and so, you know, we'll update you as that comes together.

Matthew Clark: Okay, but you're not considering any other types of capital return at this stage, other than organic growth. We traditionally look at our dividend on an annual basis, and we'll obviously look at that as we look to our expectations for 2025. I think obviously our first and foremost use of capital is to support our customers; that will always be our first use capital.

Chris: Okay, but are you not considering any other types of capital return at this stage other than organic growth? We traditionally

Speaker Change: Okay, but you're not considering any other types of capital return at this stage other than organic growth?

Chris: We traditionally look at our dividend on an annual basis, and we'll obviously look at that as we look to our expectations for 2025. And I think, obviously, our first and foremost use of capital is to support our customers. That'll always be our first use of capital. We are not currently contemplating any meaningful M&A activity, and we certainly think about the other uses of capital in a shareholder-friendly manner.

Speaker Change: We traditionally look at our dividend on an annual basis, and we'll obviously look at that as we look to our expectations for 2025.

Speaker Change: And I think, obviously, our first and foremost use of capital is to support our customers. That'll always be our first use of capital. We are not currently...

Matthew Clark: We are not currently contemplating any meaningful eminent activity, and we certainly, you know, think about the other use of capital in a shareholder-friendly manner.

Speaker Change: Contemplating any meaningful M&A activity, and we certainly, you know, think about the other use of capital in a shareholder-friendly manner.

Matthew Clark: Okay, great. And then for the question just on the loan side, I think you hired the head of entertainment lending from City National in the last two to three months. Have they contributed in the first quarter, okay? Have they contributed to that entertainment growth yet? And how large of a contributor would you like that vertical to be, or what's your limit in that vertical? Yes, they have already contributed, and yes, one of the key drivers of growth in our CNI business for this quarter was an uptick in entertainment lending.

Chris: Another question just on the loan side. I think you hired the head of entertainment lending from City National in the last two to three months. Um, have they contributed to the first quarter? Okay, have they contributed to that entertainment growth yet? And how large of a contributor would you like that vertical to be, or what's your limit in that vertical?

Speaker Change: Okay, great. And then... Okay, great.

Speaker Change: Another question just on the loan side. I think you hired the head of entertainment lending from City National in the last two to three months.

Speaker Change: Have they contributed in the first quarter? Okay. Have they contributed to that entertainment growth yet?

Speaker Change: How large of a contributor would you like that vertical to be or what's your limit in that vertical?

Chris: Yes, they have already contributed. And, yes, one of the key drivers of growth in our C&I business for this quarter was an uptick in entertainment lending. And I think we like all of our verticals, but we particularly like the entertainment vertical being based here in the Los Angeles region. Dominic, anything you would care to add? Sorry, anything you'd care to add? Oh, well, I think that as much as we always like to have various industry verticals to continue to excel, but we at East West Bank very much put, you know, overall risk oversight as a

Speaker Change: Yes, they have already contributed. And yes, one of the key drivers of growth in our C&I business for this quarter was an uptick in entertainment lending. And I think we like all of our verticals, but we particularly like the entertainment vertical being based here in the Los Angeles region. Dominic, anything you would care to add?

Dominic Ng: And I think we like all of our verticals, but we particularly like the entertainment vertical, being based here in the Los Angeles region. Dominic, anything you'd care to add? I'm sorry. Anything you'd care to add? Oh, well, I think that as much as we always like to have, there's industry vertical to continue to excel, but we at East West Bank is very much put, you know, overall risk oversight. As a priority, that's why if you reflect back in March 2023, we didn't have the kind of problems like some of the other larger banks had in California because we did not overload ourselves with private equity, entry capital.

Dominic: Well, I think that as much as we always like to have various industries vertical to continue to excel, but we at East West Bank

Dominic: is very much put, you know, overall risk oversight.

Dominic Ng: That's why, if you reflect back in March 2023, we didn't have the kind of problems that some of the other larger banks had in California because we did not overload ourselves with private equity and venture capital. Not that we didn't like the business. We love those businesses. We're doing good with those businesses, but we'll never allow ourselves to overextend to one particular industry so that, potentially, when there is a run or here and there, that causes harm.

Dominic: as a priority. That's why, if you reflect back in March 2023,

Dominic: We didn't have the kind of problems like some of the other larger banks had in California.

Dominic: because

Dominic: We did not overload ourselves with private equity, venture capital. Not that we didn't like the business. We love those businesses. We're doing good with those businesses.

Dominic Ng: Not that we didn't like the business; we love those business. We're doing good with those businesses, but we'll never allow us to overextend to one particular industry that potentially, when there's a run or here and there, it causes harm. So I very much expect an entertainment business to continue to grow not only in the United States, but also in the Greater China region. We expect the entertainment business to go at a very healthy pace, with the exception that we will never allow it to grow so much that it becomes over-concentrated, potentially causing regret someday when there's so much concentration in one particular industry.

Dominic: but will never allow us to overextend to one particular industry.

Dominic Ng: So I very much expect the entertainment business to continue to grow, not only in the United States but also in the greater China region. We expect the entertainment business to go at a very healthy pace, with the exception that we'll never allow it to grow so much that it becomes overconsumption, that potentially causes regret someday when there's so much concentration in one. So East West will always run a very diversified portfolio. As you can see, actually, quarter by quarter.

Speaker Change: that potentially, when there is a run or here and there, that causes harm. So I very much expect the entertainment business to continue to grow, not only in the United States, but also in the greater China region. We expect the entertainment business to grow in a very healthy pace.

Speaker Change: with the exception that we'll never allow it to grow so much.

Speaker Change: That becomes over-concentrated.

Speaker Change: That potentially causes regret someday when there's so much concentration in one particular industry.

Dominic Ng: So East West always run a very diversified portfolio, as you can see actually quarter by quarter. We're always at different winners. When Chris talked about this quarter, it is an attainment and something else. Next quarter probably be somebody else again. It's nice to see those different units all competing positively to get that championship for a quarter. And by doing that, we don't have an issue of over concentration.

Speaker Change: So, East West always runs a very diversified portfolio, as you can see, actually quarter by quarter.

Dominic Ng: We always have different winners. When Chris talked about this quarter being entertainment and something else, next quarter it will probably be somebody else. You know, it's nice to see those different units, all competing positively, to get that championship for a quarter. So, and then by doing that, we don't have an issue of over-concentration.

Speaker Change: We always have different winners. When Chris talked about this quarter is entertainment and something else, next quarter will probably be somebody else again. You know, it's nice to see those different units.

Chris: All competing, you know, positively.

Chris: to get that championship for a quarter. So and then by doing that,

Chris: We don't have an issue of overconcentration.

Matthew Clark: Great. Thank you.

Unknown Executive: Thanks.

Speaker Change: Great, thank you.

Christopher McGratty: Next question comes from Chris McGratty with KBW.

Christopher Edward McGratty: The next question comes from Chris McGratty with KBW. Please go ahead.

Speaker Change: Thanks.

Christopher McGratty: Please go ahead. Oh, thanks.

Speaker Change: The next question comes from Chris McGratty with KBW. Please go ahead.

Christopher McGratty: I noticed several times on the call you talked about the optimism for the fiend come out.

Chris: I noticed on the call you talked about the optimism for the fee income outlook. Is there a scenario where there could be a slowdown in acquisition and use of capital to grow that business?

Christopher Edward McGratty: Oh, thanks.

Christopher McGratty: Look, is there a scenario where there could be a tuck-in acquisition and use the capital to grow that business? There could be an obviously last year, Chris, you'll recall the company made a significant investment in Reliant, the asset management entities that we took the 49% stake in. And so those types of opportunities may present themselves, but it's not top of the agenda, as we said here today, looking forward.

Christopher Edward McGratty: I noticed several times on the call you talked about the optimism for the fee income outlook. Is there a scenario where there could be a tuck-in acquisition and use of capital to grow that business?

Chris: There could be, and obviously, last year, Chris, you'll recall the company made a significant investment in Reliant, the asset management entity that we took a 49% stake in. And so those types of opportunities may present themselves, but they're not top of the agenda as we sit here today looking ahead.

Speaker Change #101: There could be and obviously last year, Chris, you'll recall the company made a significant investment in Rayleant, the asset management entity that we took the 49% stake in. And so those types of opportunities may present themselves but it's not

Christopher McGratty: Okay.

Christopher Edward McGratty: Top of the agenda as we sit here today, looking forward.

Chris: And Chris, while I have you, I just want to get a little bit of a better understanding on slide six, where you talk about the billion dollars of cash flow hedges that come off in the first quarter at the negative carry and then the hedges and the spec cap. How should we think about just the impact on margin and NII from those actions next year? So the current cash flow hedges are

Christopher Moral: And Chris, while I have you, just want to get a little bit out of better understanding on flight six where you talk about the billion dollars of cash flow hedges that come off in the first quarter at the negative carry and then the hedges and the spec. How should we think about just the impact on margin and NII from those actions in next year? So the current cash flow hedges are cost in this. It looks like the top of that page, you know, the impact is about 25 million quarter and it's pulling down the name about 15 basis points in the current period.

Christopher Edward McGratty: Okay. And Chris, while I have you, I just want to get a little bit of a better understanding on slide six where you talk about the...

Christopher Edward McGratty: Billion dollars of cash flow hedges that come off in the first quarter at the negative carry and then the the hedges in the back half How should we think about just the the impact on margin and NII from those actions? in next year

Chris: So the current cash flow hedges are costing us, if you look sort of at the top of that page, you know, the impact is about $25 million a quarter, and it's pulling down the NIM by about 15 basis points in the current period. And those hedges largely expire come Q1 2025. And so, essentially, that negative drag will work its way down.

Christopher Edward McGratty: So the current cash flow hedges are costing us, if you look sort of at the top of that page,

Speaker Change #103: The impact is about $25 million a quarter, and it's pulling down the NIM by about 15 basis points.

Chris: Of course, if there's a rate cut in September and additional ones in Q4, it'll incrementally chip away at that, but that whole amount will come off Q125. And, you know, what will happen then is, somewhere, you know, in the second half of the year, a billion of new hedges will come on, you know, with a blended average return of four. So the extent by the middle of 25, the Fed's down to four, no harm, no foul. If it's above there, it'll cost us a little for the interim. If it's below there, we'll see the benefit of that in our bottom line in the second half of 25.

Christopher Moral: And those hedges largely expire come Q1 2025. And so essentially that negative drag will work its way down. Of course, if there's a rate cut in September and additional ones in the Q4. It'll incrementally chip away at that. But that whole amount will come off Q125. And you know, what will happen then is somewhere, you know, in the second half of the year, a billion of new hedges will come on. You know, it's a blended habit; receive a four. So the extent by the middle of 25, the feds down to four, no harm no foul.

Speaker Change #103: in the current period.

Speaker Change #103: And those hedges largely expire come Q1 2025.

Speaker Change #103: And so, essentially, that negative drag will work its way down. Of course, if there's a rate cut in September and additional ones in the Q4, it'll incrementally chip away at that. But that whole amount will come off Q125.

Speaker Change #103: And, you know, what will happen then is somewhere, you know, in the second half of the year, a billion of new hedges will come on.

Speaker Change #103: You know, it's a blended AVID Receiver 4, so the extent...

Christopher Moral: If it's above there, it'll cost us a little for the interim. If it's below there, we'll see the benefit of that in our bottom line, beginning in the second half of 25. Perfect.

Speaker Change #103: By the middle of 25, the Fed's down to four, no harm, no foul. If it's above there, it'll cost us a little for the interim. If it's below there, we'll see the benefit of that in our bottom line beginning the second half of 25.

Gary Tenner: Thank you. The next question comes from Gary Tenor with DA Davidson.

Speaker Change #104: Perfect. Thank you.

Gary Peter Tenner: The next question comes from Gary Tenner with D.A. Davidson. Please go ahead. Thanks.

Gary Tenner: Please go ahead. Thanks for the afternoon. I just wanted to ask on the loan side on the CNI side in particular, Christopher. Your mention of, you know, the surge late quarter.

Speaker Change #104: The next question comes from Gary Tenner with D.A. Davidson. Please go ahead.

Chris: Thank you all for joining us this afternoon. I just wanted to ask on the loan side, on the CNI side in particular, Christopher, your mention of the surge late quarter. I don't think I've heard a comment on this, but wondering if there's any through line in terms of, you know, types of loans, business purpose, commentary from borrowers that you think kind of drove that surge.

Gary Peter Tenner: Thanks, good afternoon. I just wanted to ask on the loan side, on the C&I side in particular, Christopher, your mention of the surge late quarter.

Gary Tenner: I don't think I heard you comment on this, but wondering if there's any through line in terms of, you know, types of loans, business purpose, commentary from borrowers that you think kind of drove that surge. There was a little bit more activity late in the day from some private equity and one particular biotech related entity, and, you know, I think we were a little bit surprised by the volatility, but it was positive. So we took it. And I think we've seen some of that activity move back already, which, you know, when not exactly we expected, but you know, there's a bit of volatility; but nonetheless, we expect to grow balances in total throughout the third quarter and the fourth quarter.

Gary Peter Tenner: I don't think I heard a comment on this, but wondering if there's any through line in terms of types of loans, business purpose, a commentary from borrowers that you think kind of drove that surge.

Chris: There was a little bit more activity late in the day from some private equity and one particular biotech-related entity. And, you know, I think We were a little bit surprised by the volatility, but it was positive, so we took it. And I think we've seen some of that activity move back already, which, you know, was not exactly what we expected. But, you know, there's a bit of volatility. But nonetheless, we expect to grow balances in total throughout the third quarter and the fourth quarter.

Christopher: There was a little bit more activity late in the day from some private equity and one particular biotech related entity.

Speaker Change #107: We were a little bit surprised by the the volatility, but it was positive. So we took it And I think we've seen some of that activity

Speaker Change #107: move back already, which, you know, was not exactly what we expected, but, you know, there's a bit of volatility, but nonetheless, we expect to grow balances in total throughout the third quarter and the fourth quarter.

Gary Tenner: Okay, great.

Chris: Okay, great. And then if you could update us on the thoughts around the FHLB borrowings you have that replace the BTFP, is that purely going to be a function of liquidity trends over time in terms of paying that down, or is there a more specific focus on the Yeah, I think we're focused on making sure

Gary Tenner: And then if you could update us on the thoughts around the FHLB barrings you have that replaced the BTFP, is that purely going to be a function of liquidity transfer over time in terms of paying that down, or is there a more specific focus on that? I think we're focused on making sure we get past sort of this roll over period here with the CDs in Q3, and if we continue to see positive trends, which we have seen and continue to see so far into the Q3 period, additional on boarded customers on the deposit side, we'll consider where we put those incremental dollars to work, whether that's to earn cash at the Fed, or pay down liabilities is about a push.

Speaker Change #108: Okay, great. And then if you could update us on the thoughts around the FHLB borrowings you have that replace the BTFP, is that purely going to be a function of liquidity trends over time in terms of paying that down or is there a more specific focus on on that?

Chris: I think we're focused on making sure we get past sort of this rollover period here with the CDs in Q3 and if we continue to see positive trends, which we have seen and continue to see so far into the Q3 period, additional onboarded customers on the deposit side, we'll consider where we put those incremental dollars to work, whether that's to, you know, earn cash at the Fed or pay down liabilities. It's about So, you know, we'll look at that and put some money to work, obviously, every day.

Speaker Change #109: Yeah, I think we're focused on making sure we get past sort of this rollover period here with the CDs.

Speaker Change #110: in Q3. And as we continue to see positive trends, which we have seen and continue to see

Speaker Change #111: So far into the Q3 period, additional onboarded customers on the deposit side, we'll consider where we put those incremental dollars to work, whether that's to, you know,

Speaker Change #111: earn cash at the Fed or pay down liabilities. It's about a push. So, you know, we'll we'll look at that and put the money to work, obviously, every day.

Gary Tenner: So we'll look at that and put the money to work, obviously, every day.

Gary Tenner: Thank you. That happened; I would expect that we'll keep a good portion of the FHLB outstanding for an extended period of time, as we think that's going to become a component of what otherwise maintains a very strong liquidity profile.

Chris: That having been said, I would expect that we'll keep a good portion of that FHLB outstanding for an extended period of time as we think that's going to become a component of what otherwise maintains a very strong liquidity profile.

Speaker Change #112: Thank you.

Speaker Change #112: That having been said, I would expect that we'll keep a good portion of that FHLB outstanding.

Speaker Change #112: for an extended period of time, as we think that's going to become a component of what otherwise maintains a very strong liquidity profile.

Samuel Varga: The next question comes from Samuel Varga with UBS. Please go ahead.

Speaker Change #113: I hope you enjoyed the video. If you did, please like and subscribe. I'll see you in the next video.

Speaker Change #113: The next question comes from Samuel Varga with UBS. Please go ahead.

Samuel Varga: Yeah, I just want to go back to the deposit conversations for a little bit. Could you provide an update on private banking deposits, and specifically I guess how they've trended over the past 12 months, and what sort of growth you anticipate over the next 12 to 18 months? Yeah, our private banking customers participated in our CV specials, and I found that a positive place to put incremental balances of work, and so those balances have generally grown. We expect them to likely continue to grow, as wealth management solutions overall have grown nicely, and as they come in, they allocate a portion of their portfolio, or they reallocate the record equity levels into fixed income and stable products, and that has generally been a win for us.

Chris: Good afternoon. I just want to go back to the deposit conversation for a little bit. Could you provide an update on private banking deposits and, specifically, how they've trended over the past 12 months and what sort of..., or else you anticipate over the next 12 to 18 months.

Samuel Varga: Good afternoon. I just want to go back to the deposit conversation for a little bit. Could you provide an update on private banking deposits and specifically, I guess, how they've trended over the past 12 months and what sort of growth you anticipate over the next 12 to 18 months?

Chris: Yeah, our private banking participants, customers participated in our C.D. specials and have found that a positive place to put incremental balances of work, and so those balances have generally grown. We expect them to likely continue to grow as wealth management solutions overall have grown nicely, and as they come in, they allocate a portion of their portfolio or they reallocate record equity levels into fixed income and stable products. And that has generally been a win for us; think private bank.

Speaker Change #115: Yeah, our private banking participants, customers participated in our CV specials, and I found that a positive place to put incremental balances of work, and so those balances have generally grown.

Speaker Change #116: We expect them to likely continue to grow as wealth management solutions overall have grown nicely, and as they come in, they allocate a portion of their portfolio, or they reallocate.

Speaker Change #116: record equity levels into fixed income and stable products, and that has generally been a win for us.

Chris: I think private banking continues to bring in new customers, and they are new customers both from the... From the fee income perspective in terms of the wealth management product side and also on the deposits and loans.

Samuel Varga: I think private banking continues bringing new customers, and they are new customers both from the fee incomes perspective, in terms of wealth management products, I, and also on the deposits and loans.

Speaker Change #116: I think private banking continues to bring in new customers and they are new customers both from the

Speaker Change #116: From the fee income perspective, in terms of wealth management product side, and also on the deposits and loans.

Samuel Varga: Great, thanks for having just being. If you're backing off of that on the wealth management side, then just share sort of broader thoughts around this business. Where do you see it going on the wealth management over the next couple of years? The sort of opportunities are there in the market from disruption that they would like to take advantage of? I think on the wealth management area, we see tremendous potential for East West Bank. Our approach is not to try to do a quick hit, and rather, take our time to strategically plan it in the right way, and then have gradual, sustainable, recurring, and profitable type of business.

Samuel Varga: Great. Thanks for that.

Speaker Change #117: Great. Thanks for that. And just piggybacking off of that, on the wealth management side, can you just share sort of broader thoughts around this business? Where do you see it going on the wealth management over the next couple of years? What sort of opportunities are there in the market from disruption that you'd like to take advantage of?

Dominic Ng: And piggybacking off of that, on the wealth management side, can you just share your sort of broader thoughts around this business? Where do you see it going in the wealth management over the next couple years? What sort of opportunities are there in the market from disruption that you'd like to take advantage of?

Speaker Change #118: I think on the wealth management area, we see tremendous potential for East West Bank.

Dominic Ng: I think in the wealth management area, we see tremendous potential for East West Bank. Uh, our approach is not to try to, uh, do a quick hit but rather take our time to strategically plan it in the right way, and then have a gradual sustainable, recurring, and profitable, you know, type of business. So far, it's been going well.

Speaker Change #119: Our approach is not to try to

Speaker Change #120: Do a quick hit and

Speaker Change #121: but rather

Speaker Change #122: take our time to strategically plan it in the right way and then have gradual sustainable recurring and profitable you know type of business.

Samuel Varga: So far has been going good. I mean, oftentimes people may look at our overall growth management income; it's really not at a very high level from a percentage standpoint to our overall profitability, but we're trying to grow it in the right way. And we see it tremendous opportunity and potential for the demographic of the customers that we have so far. And we just see that there's going to be great opportunity, not only just here in the United States and even potentially in Asia area.

Dominic Ng: I mean, oftentimes, people may look at our overall wealth management fee income; it's really not at a very high level from a percentage standpoint as compared to our overall profitability, but we're trying to grow it in the right way. And we see a tremendous opportunity and potential for the demographic of the customers that we have so far. And we just see that there's just going to be great opportunity, not only just here in the United States but even potentially in Asia.

Speaker Change #122: So far it's been going good. I mean, oftentimes, people may look at our overall wealth management fee income. It's really not at a very high level from a percentage standpoint to our overall profitability.

Speaker Change #122: But we're trying to grow it in the right way.

Speaker Change #122: And we see a tremendous opportunity and potential for the demographic of the customers that we have so far. And we just see that there's just gonna be great opportunity, not only just here in the United States, and even potentially in Asia area.

Samuel Varga: Thanks for taking that question.

Speaker Change #123: Thanks for taking my questions.

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

Samuel Varga: Thanks for taking my question. The next question comes from Andrew Terrell with Stevens. Please go ahead. Hey, good afternoon.

Andrew Terrell: The next question comes from Andrew Terrell with Stevens. Please go ahead. Hey, good afternoon. [inaudible] Most of mine were addressed already.

Speaker Change #123: The next question comes from Andrew Terrell with Stevens. Please go ahead. Hey, good afternoon.

Andrew Terrell: Hey, good afternoon. Good afternoon. Most of mine were addressed already, but just a quick modeling question, Chris, can you remind us the repricing dynamics on the securities portfolio, just how much of that is floating rate at this point? And then what does it correlate cash flow look like? Sure, so it's roughly 6040 on the overall mix, 60% fixed, 40% floating. The floating is all Ginny made floaters at so-for-plus; you'll call it 115 for conversation. And the cash flow on a recurring monthly basis is 110 to 120 million, obviously with some variability. Got it. Okay.

Andrew Terrell: Most of mine were addressed already, but just a quick modeling question, Chris, can you remind us the repricing dynamics on the securities portfolio, just how much of that is floating rate at this point?

Chris: Sure, so. It's roughly 60-40 on the overall mix, 60% fixed, 40% floating. The floating is all GinniMaid floaters at SoakerPlus; call it 115 for conversation.

Speaker Change #125: And then what does the quarterly cash flow look like?

Christopher Edward McGratty: Sure, so...

Christopher Edward McGratty: It's roughly 60-40 on the overall mix, 60% fixed, 40% floating. The floating is all Ginnie Maid floaters at SoaProPlus.

Chris: And the cash flow on a recurring monthly basis is 110 to 120 million, you know, obviously, with some variability. Got it. Okay.

Speaker Change #126: Call it 115 for conversation. And the cash flow on a recurring monthly basis is 110 to 120 million, you know, obviously, with some variability.

Chris: And then do you have, offhand, just the yield on the securities purchased during the second quarter? Just trying to think about where the securities yield heads into 3Q? Yeah, there was about 200 million of six that call it five and a half ish. And there was the balance with all floaters that so for plus 115.

Andrew Terrell: And then do you have the off-hand, just the yell of the securities purchased during the second quarter? Just trying to think about where the securities yelled heads into 3Q. Yeah, there was about 200 million of fixed that call it five and a half-ish. And there was the balance with all floaters at so-for-plus, 115-ish. Perfect.

Speaker Change #127: Got it. Okay, and then do you have the offhand, just the yield on the securities purchased during the second quarter? Just trying to think about where the securities yield heads into 3Q.

Speaker Change #128: Yeah, there was about 200 million of six that call it five and a half-ish, and there was the balance was all floaters at SOFR plus 115-ish.

Manan Gosalia: Thank you for taking the questions. Next question comes from Manin, Gassalia with Morgan Stanley.

Speaker Change #129: Perfect. Thank you for taking the questions.

Manan Gosalia: The next question comes from Manan Gosalia with Morgan Stanley. Please go ahead.

Speaker Change #130: Thanks for the interview.

Manan Gosalia: Please go ahead. Hey, good afternoon. Good afternoon.

Speaker Change #131: The next question comes from Manan Gosalia with Morgan Stanley . Please go ahead.

Chris: I wanted to ask about the spreads that you're getting on your new loans. Some of your peers have highlighted that there's tougher competition from both banks and non-banks and that's putting pressure on CNI spreads. Is that something you're seeing in your portfolio as well?

Manan Gosalia: I wanted to ask on the spreads that you're getting on your new loans. Some of your peers have highlighted that there's stuff of competition from both banks and non-banks, and that's putting pressure on CNI spreads. Is that something you're seeing in your portfolio as well? I think we're seeing CNI generally in the so-for-plus 250 zone for most of the stuff that we're putting on balance sheet. I don't know that that's atypical for the traditional business range that we've done, but that's where we're seeing it.

Manan Gosalia: Hey, good afternoon.

Manan Gosalia: Good afternoon.

Manan Gosalia: I wanted to ask on the spreads that you're getting on your new loans. Some of your peers have highlighted that there's tougher competition from both banks and non-banks and that's putting pressure on CNI spreads. Is that something you're seeing in your portfolio as well?

Chris: Yeah, I think we're seeing C&I generally in the SOFR plus 250 zone for most of the stuff that we're putting on the balance sheet. I don't know that that's atypical for the traditional business range that we've done, but that's where we're seeing it.

Speaker Change #133: I think we're seeing C&I generally in the SOFR plus 250 zone for most of the stuff that we're putting on balance sheet. I don't know that that's atypical for the traditional business range that we've done, but that's where we're seeing it.

Manan Gosalia: Got it.

Chris: Got it. And then on the commercial real estate front, can you talk about what your conversations have been like with borrowers? Do you think two or three rate cuts from here will alleviate some of the pressure that they're feeling, especially on the office and multifamily side? And more recently, as you've maybe extended, or whatever loans have come up for extension, what has been the reaction from the borrowers? Have they brought in more equity? I'm just looking to get some more color there. Thanks.

Manan Gosalia: And then on the commercial real estate front, can you talk about what do your conversations have been like with borrowers? Do you think two or three rate cuts from here will alleviate some of the pressure that they're feeling, especially on the office and multi-family side? And more recently, maybe extended, or whichever loans have come up for extension, what has been the reaction from the borrowers that brought in more equity? Just looking to get some more color there. Thanks.

Speaker Change #134: Got it. And then on the commercial real estate front

Speaker Change #135: Can you talk about what your conversations have been like with borrowers? Do you think two or three rate cuts from here will alleviate some of the pressure that they're feeling, especially on the office and multifamily side? And more recently, as you've...

Speaker Change #135: [inaudible]

Manan Gosalia: So, as Dominic said a few minutes ago, I don't know that a rate cut or two will make that much difference in the near term. And so if rates are elevated in the 5 plus zip code for an extended period of time on the base rate, it's likely there will be pain to be felt by a number of borrowers, many of whom bought into projects at cap rates of 5 percent, you know, a few years ago. So that'll be a challenge for many of them. We have taken a very hard look with Irene and Dominic, but also obviously credit teams and RRMs, etc., all the way down to figure out what's coming due, what's the situation, whether the cash flows, where's the debt service coverage, what else can we do with these customers that are up for renewal from now through the end of 2025 has been the primary focus, but looking at things even beyond that just to make sure that we're on top of things.

Dominic Ng: So, as Dominic said a few minutes ago, I don't know that a rate cut or two will make that much difference in the near term. And so, if rates are elevated in the 5-plus zip code for an extended period of time on the base rate, it's likely there will be pain to be felt by a number of borrowers, many of whom bought into projects at cap rates of 5%, you know, a few years ago.

Speaker Change #135: So, as Dominic said a few minutes ago, I don't know that a rate cut or two will make that much difference in the near term, and so if rates are elevated...

Speaker Change #137: In the 5-plus zip code for an extended period of time on the base rate, it's likely there will be pain to be felt by a number of borrowers.

Speaker Change #139: Many of whom buy into projects.

Dominic Ng: So, that'll be a challenge for many of them. We have taken a very hard look with Irene and Dominic, but also obviously our credit teams and our RMs, et cetera, all the way down to figure out what's coming due, what's the situation, where are the cash flows, where's the debt service coverage, what else can we do with these customers that are up for renewal from now through the end of 2025 is then the primary focus, but looking at things even beyond that just to make sure that we're on top of things.

Speaker Change #135: at cap rates of 5%, you know, a few years ago, so that'll be a challenge for many of them. We have taken a very hard look.

Speaker Change #136: with Irene and Dominic, but also, obviously, our credit teams and our RMs, etc., all the way down to figure out what's coming due, what's the situation, where are the cash flows, where's the debt service coverage.

Speaker Change #136: What else can we do with these customers that are up for renewal from now through the end of 2025 has been the primary focus, but looking at things even beyond that just to make sure that we're on top of things. So I think the short answer is we're doing all of the above to make sure that we're proactive and ahead of it.

Manan Gosalia: So I think the short answer is we're doing all of the above to make sure that we're proactive and ahead of it. It is an issue, but to the extent that rates come down, you know, not one or two cuts, but 150 basis points, things get easier; and obviously, if rates come down 200 basis points, well, probably there's a lot of issues that just go away. I'll just add to certainly the macro environment for office; it is what it is. But this continuous review of the portfolio, this is something we started before the pandemic, and that puts that we did there for borrowers to kind of shore up, pay down loans, you know, pledge additional asset, what have you.

Dominic Ng: So, I think the short answer is we're doing all of the above to make sure that we're proactive and ahead of it. It is an issue, but to the extent that rates come down, you know, not one or two cuts, but 100, 150 basis points, things get easier. And obviously, if rates come down 200 basis points, well, probably there's a lot of issues that just go away.

Speaker Change #138: It is an issue, but to the extent that rates come down, you know, not one or two cuts, but

Speaker Change #140: 150 basis points, things get easier, and obviously if rates come down 200 basis points, well, probably there's a lot of issues that just go away.

Dominic Ng: I'll just add to it, certainly the macro environment for office, it is what it is. But this continuous review of the portfolio, this is something we started before the pandemic, and efforts that we did there for borrowers to kind of shore up, pay down loans, you know, pledge additional assets, what have you. But today, I think if you look at the results that we have, the still very, very good credit quality across the board, a lot of that is the proactive actions that we took years ago.

Speaker Change #141: I'll just add to it, certainly the macro environment for office, it is what it is. But this continuous review of the portfolio, this is something we started before the pandemic and efforts that we did there for borrowers to kind of

Speaker Change #142: Transcripts provided by Transcription Outsourcing, LLC.

Manan Gosalia: But today I think if you look at the results that we have, the still very, very good credit quality across the board; a lot of that is the proactive actions that we took years ago. Got it. And what what matters more is the belly of the colors that are the short end of the cut for that. You referring to questions? Oh, just in terms of, you know, the short end, the vast majority of our customers are floating rate borrowers, and while they might fix their need to refinance, if they can, we'll be best met on the short end.

Dominic Ng: Got it. And what matters more, is it the belly of the cow, or is it the short end of the cow for that?

Speaker Change #143: Got it. And what matters more, is it the belly of the cow or is it the short end of the cow for that?

Operator: Can you reframe the question?

Manan Gosalia: Oh, just in terms of, you know, more... Yeah, the short end. The vast majority of our customers are floating rate borrowers, and while they might fix their need to refinance, if they can, we'll be best served on the short end.

Speaker Change #144: Can you reframe the question?

Speaker Change #145: Oh, just in terms of, you know, morator.

Speaker Change #146: Yeah, the short end. The vast majority of our customers are floating-rate borrowers, and while they might fix their need to refinance if they can, we'll be best met on the short end.

Unknown Executive: Got it.

Dominic Ng: Thank you. This includes our question and answer session.

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

Dominic Ng: I would like to turn the conference back over to Dominic for any closing remarks. I just wanted to thank everyone for joining us on the call today, and we are looking forward to talking to you again in October. Thank you.

Speaker Change #146: This concludes our question and answer session. I would like to turn the conference back over to Dominic for any closing remarks.

Dominic Ng: I just wanted to thank everyone for joining us on the call today, and we are looking forward to talking to you again in October. Thank you.

Dominic: I just wanted to thank everyone for joining us on the call today and we are looking forward to talking to you again in October . Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation.

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

Operator: You may now disconnect.

Speaker Change #147: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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