Q3 2024 East West Bancorp Inc Earnings Call
Operator: Good afternoon, and welcome to the East West Bancorp 3rd quarter 2024 earnings conference call.
Good afternoon, and welcome to the East West Bancorp third quarter 'twenty 'twenty four earnings conference call.
Operator: All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.
All participants will be in 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 your telephone keypad. To withdraw your question, please press star, then two.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
To withdraw your question. Please press Star then two please.
Operator: Please note, this event is being recorded.
Please note this event is being recorded.
Adrienne Atkinson: I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead.
Speaker Change: I would now like to turn the conference over to Adrian Atkinson Director of Investor Relations. Please go ahead.
Adrienne Atkinson: Thank you, operator.
Thank you operator, good afternoon, and thank you everyone for joining us to review your East West Bancorp's third quarter 2024 financial results with me are Dominic <unk>, Chairman and Chief Executive Officer, Christopher Don Morel, Niall Chief Financial Officer, and Irene Oh, our chief risk Officer.
Adrienne Atkinson: Good afternoon, and thank you, everyone, for joining us to review East West Bancorp 3rd quarter 2024 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Dom Moral Niles, Chief Financial Officer, and Irene Owl, Chief Risk Officer.
Adrienne Atkinson: This call is being recorded and will be available for replay on our Investor Relations website. The slide deck reference during this call is available on our Investor Relations site.
Speaker Change: This call is being recorded and will be available for replay on our Investor Relations website.
Speaker Change: Slide deck referenced during this call is available on our Investor Relations site management may make projections or other forward looking statements, which may differ materially from the actual results due to a number of risks and uncertainties management may discuss non-GAAP financial measures.
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.
Adrienne Atkinson: For a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP financial measures, please refer to your file with the Securities and Exchange Commission, including the Form 8-K filed today.
Speaker Change: 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 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 our 3rd quarter earnings call. I'm pleased to report another strong quarter of balanced growth in support of our customers. 3rd quarter 2024 net income was $299 million, or $2.14 per dollar share. We grew average loans by 1% quarter over quarter, and further diversify our loan portfolio by emphasizing residential and CNI lending. We grew average deposits by 3% quarter over quarter through continued growth of granular customer deposits and relationships. Net interest income grew by 20 million or 4% from second quarter.
I'll now turn the call over to Dominic.
Dominic: Thank you Adrian.
Dominic: Afternoon, and thank you for joining us for our third quarter earnings call.
Dominic: I'm pleased to report another strong quarter of balanced growth.
Speaker Change: What about customers.
Speaker Change: Third quarter 2024, net income was $299 million or $2.14 per diluted share.
We grew average loans by 1% quarter over quarter and.
Speaker Change: And further diversify our loan portfolio by emphasizing a residential and C&I lending.
Speaker Change: We grew average deposits by 3% quarter over quarter.
Speaker Change: Through continued growth of granular customer deposits and relationships.
Speaker Change: Net interest income grew by $20 million or 4% from second quarter.
Dominic Ng: Primary driven by increased income from loans. We also lowered the cost of average interest-bearing deposit in the quarter. The average cost of time, money market, and savings deposit each declined from the second quarter. Our balance sheet growth was complemented by a consecutive quarter of record seed income. These revenues were driven by notable strengths in lending, wealth management, and deposit fees, reflecting our consistent execution and ability to broaden and deepen customer relationships. Our disciplined approach to credit management serves us well in the 3rd quarter. East West classified loans, non-accrual, and non-performing asset ratios improved during the quarter.
Speaker Change: Primarily driven by increased income from loans.
Speaker Change: We also lowered the cost of average interest bearing deposit in the corner.
Speaker Change: The average cost of time money market and savings deposits each declined from the second quarter.
Speaker Change: Our balance sheet growth.
Speaker Change: Complemented by eight consecutive quarter of record fee income.
Speaker Change: These revenues were driven by a notable strength in lending.
Wealth management and deposit fees.
Speaker Change: Reflecting our consistent execution and the ability to broaden and deepen customer relationships.
Speaker Change: Our disciplined approach to credit management served us well in the third quarter.
Speaker Change: East West classify loans, nonaccrual and nonperforming asset ratios improved during.
Speaker Change: During the quarter.
Dominic Ng: Nonetheless, we remain vigilant about managing our credit risk and are proactively managing our risk profile. We have delivered substantial returns for shareholders during the quarter. We reported tangible book value per share growth of 7% and generated over 17% return on average tangible common equity.
Speaker Change: Nonetheless, we remain vigilant about managing our credit risk.
Speaker Change: And are proactively managing our risk profile.
We have delivered substantial returns for shareholders during the quarter.
We reported tangible book value per share growth of 7%.
And generated over 17% return on average tangible common equity.
Christopher Moral: Chris, I would turn it to you for more detail on our financial performance. Thank you, Dominic. Turning to loans on slide 4, average and period and loans each grew by 1% quarter over quarter. Residential mortgage production was remarkably consistent for the quarter, and our pipeline levels remain strong going into Q4. We expect residential mortgage growth to continue at its current pace. With respect to CNI growth, it was those by notable strengths in our entertainment and private equity verticals. We also expect CNI to have similar growth in Q4. In commercial real estate, we saw healthy growth in multi-family during Q3.
Speaker Change: Chris I will turn it to you for more detail on our financial performance. Thank you Dominic turning to loans on slide four average and period end loan each grew by 1% quarter over quarter.
Speaker Change: Residential mortgage production was remarkably consistent for the quarter and our pipeline levels remain strong going into Q4, we expect residential mortgage growth to continue at its current pace.
Speaker Change: With respect to C&I growth it was driven by notable strength in our entertainment and private equity firms.
We also expect C&I to have similar growth in Q4.
Speaker Change: In commercial real estate, we saw healthy growth in multifamily during Q3.
Christopher Moral: Across the rest of our commercial real estate business, we continue to work with our longstanding clients and foresee only a modest level of CRE loan growth overall in Q4.
Across the rest of our commercial real estate business, we continue to work with our long standing clients and foresee only a modest level of CRE loan growth overall.
Speaker Change: Overall in Q4.
Christopher Moral: Moving on to deposits on slide 5, we grew average and end of period deposits by 3% to a record 61.7 billion, with growth across consumer, business banking and commercial customers. Our non-disparaging deposit mix stood at 24% of total deposits.
Speaker Change: Moving on to deposits on slide five we grew average and end of period deposits by 3% to a record $61 7 billion with growth across consumer and business banking and commercial customers, our noninterest bearing deposit mix stood at 24% of total deposits.
Christopher Moral: Slide 6 summarizes our on-balance-sheet liquidity. During the third quarter, we took further steps to enhance our liquidity profile while supporting earnings. We added a net 1.2 billion of securities in Q3, primarily short duration floaters, and grew our average cash and equivalence by nearly a billion dollars to 5 billion. The securities portfolio at your end stood at 13.1 billion, including 6 billion plus of genuine floating rate securities. Our average securities yield increased 10 basis points from Q2, reflecting the purchases. Our cash and securities portfolio rose to 24% of total average assets at the end of the third quarter.
Speaker Change: Slide six summarizes our on balance sheet liquidity during the third quarter. We took further steps to enhance our liquidity profile, while supporting earnings we added a net $1 2 billion of securities in Q3, primarily short duration floaters and grew our average cash and equivalents by nearly a 1 billion.
Two 5 billion.
Speaker Change: The securities portfolio at year end stood at $13 1 billion, including 6 billion plus of Ginnie Mae floating rate securities.
Speaker Change: Our average securities yield increased 10 basis points from Q2, reflecting the purchases are cash and securities portfolio Rose 24, what was the 24% of total average assets at the end of the third quarter.
Christopher Moral: Slide 7 covers our net interest income trends. Third quarter dollar net interest income total 573 million, a 20 million dollar increase from the second quarter driven primarily by greater income from loans. Our net interest margin was 3.24% at a client of 3 basis points from the prior quarter, partially reflecting Fed rate cuts. At the end of the third quarter, our total deposit cost stood at 284 basis points, down 10 basis points from the end of the second quarter. Our end of period total interest bearing deposit cost stood at 373 basis points at the end of the third quarter, down 19 basis points from the prior period.
Speaker Change: Slide seven covers our net interest income trends third quarter dollar net interest income totaled 573 million a $20 million increase from the second quarter, driven primarily by greater income from loans.
Speaker Change: Our net interest margin was 324% a decline of three basis points from the prior quarter, partially reflecting fed rate cuts.
At the end of the third quarter, our total deposit costs stood at 284 basis points down 10 basis points from the end of the second quarter.
Speaker Change: Our end of period total interest bearing deposit costs stood at 373 basis points at the end of third quarter down 19 basis points from the prior period.
Christopher Moral: Aditionally, total deposit costs have continued to decline since quarter end and are now approximately five to ten basis points lower still. We expect balance sheet growth to support medicine con-levels from here.
Speaker Change: Additionally, total deposit costs have continued to decline since quarter end and are now approximately five to 10 basis points lower still.
We expect balance sheet growth to support managed income levels from here.
Christopher Moral: Why eight summarizes our non-interest income trends? As Dominic mentioned, we achieved a record-be-income level of 81 million this quarter, up six percent quarter over quarter. The strength was driven by significant syndications activity and strong traction and commercial cash management solutions, while wealth management was bullied by focus execution on growth strategies and strong equity markets.
Speaker Change: Slide eight summarizes our noninterest income trends as Dominic mentioned, we achieved a record fee income level of $81 million this quarter up 6% quarter over quarter. The strength was driven by significant syndications activity and strong traction in commercial cash management solutions.
Speaker Change: While wealth management was buoyed by focused execution on growth strategies and strong equity markets I'll now turn the call over to Irene for comments on credit and capital.
Irene Oh: I'll now turn the call over to Irene for comments on credit and capital. Thank you, Chris, and good afternoon to all. On slide nine, credit trends remain stable, and the asset quality of our portfolio as a whole is being strong. For Vision-Pro, credit losses increased five million from the second quarter to 42 million. Net charge-offs in the third quarter for 29 million or 22 basis points annualized, compared to 18 basis points annualized in the second quarter. Non-performing assets fell by one basis point to 26 basis points of total assets quarter over quarter. The special mention loans ratio rose slightly to 0.88 percent, while total classified loans decreased to basis points to 120.
Irene: Thank you, Chris and good afternoon to all on slide nine credit trends remained stable in the asset quality of our portfolio as a whole and strong.
Irene: Provision for credit losses increased $5 million from the second quarter, and 42 million net charge offs in the third quarter were $29 million or 22 basis points annualized compared to 18 basis points annualized in the second quarter nonperforming assets fell by one basis point to 22.
Six basis points of total assets for the quarter.
Irene: Special mention loans ratio rose slightly to 0.88%, while total classified loans decreased two basis points to 120, the absolute level of problem loans criticized loans and nonperforming assets remain low and at manageable.
Irene Oh: The absolute level of problem loans, criticize loans, and non-performing assets remain low and at manageable levels. Regarding commercial real estate loan maturity, as of September 30th, 2024, 3 percent of total outstanding balances are scheduled to mature in the fourth quarter of 2024, and 11 percent of outstanding balances are set to mature in the year 2025. For office loans, specifically, 4 percent of outstanding balances are scheduled to mature in the fourth quarter of 2024, and 70 percent are set to mature in 2025. We remain vigilant and proactive in managing our credit risks. Based on what we know today, we continue to expect fourth quarter and full year net charge-offs to be in the range of 15 to 25 basis points.
Irene: Levels.
Irene: Regarding commercial real estate loan maturity as of September 30th pretty 24, 3% of total outstanding balances are scheduled to mature in the fourth quarter of 'twenty 'twenty, four and 11% of the outstanding balances are set to mature in the year 2025 for <unk>.
Irene: Office loans.
Irene: Typically 4% of outstanding balances are scheduled to mature in the fourth quarter 2024, and 70% are set to mature in 2025.
Irene: We remain vigilant and proactive in managing our credit metrics based on what we know today, we continue to expect fourth quarter and full year net charge offs to be in the range of 15% to 25 basis points.
Irene Oh: As seen on slide 10, our loans for credit losses ended the third quarter at 696 million, or 1.31 percent, one basis point higher than the prior period end. We believe our loan portfolio is appropriately reserved as of September 30th, 2024.
Irene: As seen on slide 10, our allowance for credit losses ended the third quarter at 696, Million% to 1.31% one basis point higher than the prior period and we.
Irene: We believe our loan portfolio is appropriately reserved as of September 30th 2024.
Irene Oh: Turning to slide 11, East West 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 one capital ratio stands at 14.1 percent, while the tangible common equity ratio is at 9.7 percent. We currently have 49 million repurchase authorization that remains available for future buybacks.
Irene: Turning to slide 11, East West regulatory capital ratios remain well in excess of regulatory requirements for well capitalized institution and well above regional bank averages.
Irene: This was common equity tier one capital ratio stands at 14, 1%, while the tangible common equity ratio is at 9.7%. We currently have 49 million of repurchase authorization remains available for future buybacks as well.
Irene Oh: East West fourth quarter 2024 dividends will be payable on November 15th, 2024, to stockholders of record on November 4th, 2024.
Speaker Change: Fourth quarter 2024 dividend will be payable on November 15, 2024 to stockholders of record on November 4th 2024, I will now turn it back to Chris to share a few comments on our outlook for the full year I.
Christopher Moral: I will now turn it back to Chris to share a few comments on our outlook for the FOIA. Thank you, Irene. Looking to slide 12, we've reiterated our full-year outlook. It's unchanged, assuming the forward curve as of year-end. These are unchanged from our September updates. We continue to expect a full year end of period long growth in the range of 2 to 4%, and I would note we've grown approximately 2% through the end of the third quarter. We also expect full year net income to still decline in the range of 2 to 4%, and year to date our net income has declined 3%.
Chris: Thank you I mean looking at slide 12, we've reiterated our full year outlook is unchanged.
Chris: Assuming the forward curve as of year end. These are unchanged from our September updates. We continue to expect our full year end of period loan growth in the range of 2% to 4% and I would note we've grown approximately 2% through the end of the third quarter. We also expect full year net interest income to still decline in the range of 2% to 4%.
Chris: And year to date, our interest net interest income has declined 3% with that I'll now open the call for additional questions operator.
Operator: With that, I'll now open the call for additional questions. Operator, we will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Please limit your questions to one and a single follower. If you have additional questions, you may re-enter the queue.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two please.
Speaker Change: Please limit your questions to one and a single follow up if you have additional questions. You may re enter the queue. At this time, we will pause momentarily to assemble our roster.
Operator: At this time, we will pause momentarily to assemble our roster.
Manan Gosalia: Our first question is from Manan Gosalia with Morgan Stanley. Please go ahead. Good afternoon.
Speaker Change: Our first question is from Monaco cilia with Morgan Stanley. Please go ahead.
Speaker Change: Hi, good afternoon.
Speaker Change: Good afternoon.
Dominic Ng: I wanted to check in on the deposit growth rate. It looks like you grew deposits at a faster pace than loans yet again. Can you talk about the rationale for that? Are you deliberately working towards a lower loan-to-deposit ratio and building more liquidity?
Monaco cilia: So what is it checking on that on the deposit growth rate. It looks like you grew deposits at a faster pace than launch yet again.
Speaker Change: Can you talk about the rationale for that are you deliberately walking into a lower loan to deposit ratio and building more liquidity or did it just happened that you were able to grow deposits faster and do you expect that that gives you more flexibility for for funding loan growth as we get into 2025.
Dominic Ng: Did it just happen that you were able to grow deposits faster, and you expect that that gives you more flexibility for funding loan growth as we get into 2025?
Dominic Ng: Thank you, Mono, for the question. Yes, we think it affords us more flexibility. As you'll know, we actually lowered deposit pricing during the quarter, and it continued to lower here into queue 4, and it still benefited from net inflows. So we'll take this organic net inflow and think about how that can help us optimize our liability profile as we move forward. But it's been nice wind in our sails. Got it.
Thank you Martin for the question, Yes, we think it affords us more flexibility as you'll note, we actually lowered deposit pricing during the quarter and have continued to lower here into Q4 and have still benefited from net inflows and so we'll take this organic net inflow and think about how that can help us optimize our liability pro.
Speaker Change: While as we move forward.
Speaker Change: But it's been nice wind in our sails.
Speaker Change: Got it and then you know.
Christopher Moral: And then the midpoint of the guide implies NII slightly down from 3Q levels.
Speaker Change: The midpoint of the guide implies NII slightly down from a tree Q levels is.
Christopher Moral: Is that a function of lower rates? And I know you have some swaps maturing in 1Q.
Martin: Is that a function of lower rents and I know you have some swaps maturing in one queue. So can you just remind us how you expect a NIM and NII to trend over the next few quarters.
Christopher Moral: So can you just remind us how you expect NIM and NII to trend over the next few quarters? I would say that we're inside of the range. I didn't say we'd be at the midpoint or one side of the other, but I feel pretty good about the Q4 dynamics. And I would say that the swaps won't really have an impact until Q1. And we do think they will come off throughout the quarter in Q1 and are January into February. And they will have a positive effect. I think we've previously modified that north of $10 million, running into the numbers.
Speaker Change: I would say that were inside of the range I didn't say, we'd be at the mid point or one side or the other but I feel pretty good about the Q4 dynamics and I would say that the swaps won't really have an impact until Q1, and we do think they will come off throughout the quarter in Q1, the end of January into February.
Speaker Change: And they will have a positive effect.
Speaker Change: I think we've previously quantified that north of $10 million run rate until the end of the numbers.
Manan Gosalia: Okay. Thank you.
Speaker Change: Great. Thank you.
David Rochester: The next question is from Dave Rochester with Compass Point. Please go ahead. Hey, good afternoon, guys. This on capital, it seems like it's just hard to keep that TCE ratio down, and I know you got some help with low rates this quarter, but just want to get your updated thoughts on buybacks as TCE continues to grow here. It kind of seems like we're going to hit that 10% level without buybacks unless balance sheet growth really continues at a strong pace here. So, any update there would be great. We were targeting that sort of 949-ish level.
Speaker Change: The next question is from Dave Rochester with Compass point. Please go ahead.
Dave Rochester: Hey, good afternoon guys.
Speaker Change: Afternoon, Dave.
Dave Rochester: Just on capital it seems like it's just hard to keep that TCE ratio down and I know you've got some help with lower rates this quarter, but just wanted to get your updated thoughts on buybacks as TCE continues to grow here. It kind of seems like where we're going to hit that 10% level without buybacks and was balanced.
Speaker Change: Gross.
Speaker Change: Really continues at a strong pace here, so any update there would be great.
Speaker Change: Sure we were targeting that sort of 94 nine ish level without the Aoc I, we were right there obviously.
David Rochester: Without the AOCI, we were right there.
Christopher Moral: Obviously, we are thankful for the pickup and AOCI that brought that level plus or 9.7, but we continue to be patient and opportunistic in our approach to capital, and we'll continue to look for opportunities to optimize the balance sheet as we move forward.
We are thankful for the pick up in a OCI that bought that level, plus or 97, but we continue to be.
Speaker Change: Patient and opportunistic in our approach to capital and we will continue to look for opportunities to optimize the balance sheet as we move forward.
David Rochester: Okay, great. And then I just don't want to quit any management.
Speaker Change: Okay, Great and then just on liquidity management.
Christopher Moral: Will the cash continue to grow here, assuming the deposit exceeds one growth, or is the plan to start to plow those into or continue to build the securities book here and any thought to going with some fixed rate stuff here, just reduce that sensitivity. So I'll take those as two different parts: first part on the deposits. I think we're taking a look at a deposit pricing, being very disciplined about that, and we'll continue to do so. That may lead us to run off some of the higher cost deposits as it moves through Q4, and that will be perfectly fine.
Speaker Change: Well the cash continued to grow here, assuming deposits exceed loan growth or is the plan to start to plow those into or continue to build the securities book here and then he thought to going with some some fixed rate stuff here.
Speaker Change: To reduce asset sensitivity.
Speaker Change: So I'll take those as two different parts first part on the deposits I think we're taking a look at our deposit pricing and being very disciplined about that and we'll continue to do so that may lead us to run off some of the higher cost deposits as we move through Q4 and that will be perfectly fine we are not necessarily looking to overlap.
Christopher Moral: We are not necessarily looking to over leverage or further leverage the balance sheet, and we will obviously be very focused on driving the right optimization.
Average or further leveraged the balance sheet and we will obviously be very focused on.
Speaker Change: Driving the right optimization on the second part of your question fixed versus floating yeah. I think we've been thoughtful about that we've benefited from the strong.
Christopher Moral: On the second part of your question, fix versus floating. I think we've been thoughtful about that. We've benefited from the strong opportunities to put my work in floating. We've put a little bit of money to work and fixed and with the backup and rates that we've seen here, particularly over the last month, a few opportunities that present themselves. So we'll be thoughtful about putting on the right mix in that portfolio. We will have 4 to 600 million of portfolio churn every quarter, and we're looking at that portfolio and constantly re-optimizing the position. All right.
Speaker Change: Opportunities to put my Youre working floating we've put a little bit of money to work in fixed and with the backup in rates that we've seen here, particularly over the last month, a few opportunities that present themselves. So we'll be thoughtful about putting it on the right mix in that portfolio, we will have.
Speaker Change: $4 million to $600 million of portfolio churn every quarter and so we're looking at that portfolio and constantly re optimizing the positioning.
Speaker Change: Alright, great. Thanks, guys.
David Rochester: Great. Thank you, guys.
Jared Shaw: The next question is from Jared Shaw with Barclays. Please go ahead. Hey, good afternoon, Jared. Thanks.
Speaker Change: Okay.
Speaker Change: Next question is from Jared Shaw with Barclays. Please go ahead.
Jared Shaw: Hey, good afternoon Dara thanks.
Jared Shaw: Yeah, just sticking with the capital.
Dominic Ng: Just sticking with the capital observation or discussion, you referenced in the past that you're not in the business of warehousing capital, but we've seen it grow consecutively over the last two quarters and no buy back this quarter. What other, you know, with the expectation for growth where it is, what else could we expect in terms of capital management out of you and if we're not going to see the buy back here? Yeah, obviously our first and highest priority is to be there for our customers and the meter needs. And we've seen relatively slower, long growth than we might have otherwise desired.
Speaker Change: Observation or discussion.
Jared Shaw: You referenced in the past that you're not in the business of warehousing capital, but we've seen it grow consecutively over the last few quarters.
Jared Shaw: No buyback this quarter, what other you know with with with the expectation for growth where it is what else could we expect in terms of capital management out of even if we're if we're not going to see the buyback here.
Yeah, obviously, our first and highest priority is to be there for our customers and to meet their needs and we've seen relatively slower loan growth than we might have otherwise desired so that but that will continue to be our growth priority second priority will always be.
Dominic Ng: So that will continue to be our growth priority. Second priority would always be a competitive dividend. I think we will be very thoughtful as we approach your end of the next year about where that should go, given our outlook. Third, we consider non-organic opportunities from time to time, and we'll continue to have some dry powder to explore those. If, if an appropriate, if and when appropriate. And lastly, we'll be the buy back, and we'll continue to be very patient and thoughtful and diligent about how we approach that and make sure that we're making the right call on the first three before putting money to work in the fourth.
Jared Shaw: Pay a competitive dividend and I think we'll be very thoughtful as we approach year end and into next year about where that should go given our outlook a third as we consider nonorganic opportunities from time to time, and we will continue to have some dry powder to explore those if if an appropriate if and when appropriate and laughs.
Jared Shaw: They will be the buyback and we will continue to be very patient and thoughtful and diligent about how we approach that and make sure that we're making the right call on the first three before putting money to work in the fourth.
Dominic Ng: Okay, all right, thanks for that. And then on the deposit side, you know, you had a lot of success growing, growing time, and it sounds like the pricing on the new offerings is working in your favor.
Okay, alright, thanks for that and then on the deposit side.
You've had a lot of success growing our growing time and it it sounds like the pricing on the new offerings is this working in your favor or is there a is there a sort of a maximum percentage of deposits you'd like to see time deposits or youre happy to to get the money in the door here at these pricing at least.
Dominic Ng: Is there sort of a maximum percentage of deposits you'd like to see time deposits, or you're happy to get the money in the door here at these prices? I think we looked at the opportunity to bring the money in earlier in the year during our lunar campaign special as the opportunity, and I would, at the risk of vomits writing me a further negative note in my year review, went out a little higher than he was comfortable with at five and a quarter, with the idea that we be able to roll that down the curve at lower price points through the year.
Jared Shaw: Yes.
Speaker Change: I think we looked at the opportunity to bring the money in earlier in the year during our lunar campaign special as the opportunity.
Jared Shaw: I would at the risk of.
Jared Shaw: Dominic.
Jared Shaw: Writing me a further negative note in my ear review [laughter] went out a little higher than he was comfortable with at five in a quarter.
Jared Shaw: With the idea that we'd be able to roll that down the curve at lower price points through the year.
Dominic Ng: I would note that we're seeing good retention, and on those new deposits that we brought in from those customers this year, we're rolling them over today at 428. And so, despite the fact that the Fed has only cut 50 basis points, RCD pricing has essentially dropped prospectively by 100 basis points already, and we'll continue to feed positively. So I think our timing of that was bring them in early, roll down the curve as the Fed moved, and at CNC working in our favor right now.
Jared Shaw: I would note that we're seeing good retention on those new deposits that we brought in from those customers. This year and we're rolling them over today at 428, and so despite the fact that the fed has only cut 50 basis points. Our CD pricing has essentially dropped prospectively by 100 basis points already.
Jared Shaw: And we will continue to be positively so I think our timing of that was.
Jared Shaw: Bring them in early roll down the curve as the fed moved and that seems to be working in our favor right now.
David Rochester: Great, thanks.
Speaker Change: Great. Thanks.
Ibrahim Poonawala: The next question is from Ibrahim Punewala with Bank of America. Please go ahead. So I guess maybe this falling up on loan growth, like I was looking back since 2015 loan growth CNI or consolidated has been about 8 to 10%.
The next question is from Ebrahim, Pune wallet with Bank of America. Please go ahead.
Hey, good excuse me.
Speaker Change: So I guess, maybe just falling up on loan growth like I was looking back.
Speaker Change: Since 2015.
Speaker Change: Loan growth C&I, our consolidated has been about 8% to 10%.
Dominic Ng: I would love to hear your thoughts, maybe Chris, and maybe if you don't like it, if you could share your perspective from a client standpoint. Once we get out of the elections, does it feel like we return back to that high single-digit loan growth for East West next year, if there is, if the economy continues to kind of progress as it has over the last? 621. Okay, from the bank's perspective, we have planned a capital that we just talked about. Chris just mentioned earlier, so we have all the flexibility to do what declines sort of demand.
I would love to hear your thoughts, maybe Chris and maybe a dumb Nic.
Speaker Change: If you could share your perspective from a client standpoint, once we get out of the elections and does it feel like we need to turn back to that high single digit loan growth for east West next year. If there is if the economy continues to kind of progress at the times or what the loss.
Speaker Change: Oh six to 12 Oh, yeah.
Speaker Change: Okay from the banks perspective, we have plenty of capital that we just talked about a Christian you had mentioned earlier. So we have all the flexibility to do what declines.
Speaker Change: Set up demand.
Dominic Ng: Well, we'll see how the election goes.
Speaker Change: Well, we'll see how the election goes.
Dominic Ng: And so right now, I mean, I think it would be unwise for me to make too much of a prediction because since like autumn, media calling for a close race, and we don't even know the race will finish in one day or not. So, in that standpoint, I think that what our position is, is that East West just got to take care of East West business, and in the way that we always position ourselves with a fortress-like balance sheet and, you know, very strong cushion in terms of our capital. And we have great customers that we work with.
Speaker Change: And so right now I mean, I think it would be.
Speaker Change: And wise for me to make too much of a project.
Speaker Change: Prediction because.
Speaker Change: Like all the media calling for.
Speaker Change: A close race.
Speaker Change: And we don't even know the race will finish in one day or whatnot. So in that standpoint, I think that now what our position is that east West just got to take care of east West business and in a way that we always.
Speaker Change: Positioned ourselves with a fortress like balance sheet.
Speaker Change: And you know.
Speaker Change: Very strong cushion in terms about capital.
Speaker Change: And we have great customers that we work with.
Dominic Ng: And when the opportunity arrives, that call for higher demand of loans from our customers, obviously, we respond. And then, naturally, then we'll have a higher loan growth rate. But if for some reason, that economic condition is still kind of like a little bit muddy and then make it difficult for customers to punch in and make capital investment or trying to accelerate growth, we naturally would slow down a bit.
Speaker Change: And when the opportunity of eyes that call for higher demand.
Speaker Change: Oh.
Speaker Change: Loans from our customers, obviously will respond and then naturally than we would have a higher loan growth rate, but if for some reason that economic condition and still kind of like a little bit muddy and that makes it difficult for customers to punch in and make capital investment all all.
Speaker Change: Trying to accelerate growth, we naturally would slow down a bit so I think what happened. This year I would say, it's somewhat unusual to the normal east West Bank loan growth pattern.
Christopher Moral: So I think what happened this year, I would say somewhat unusual to the normal East West Bank long growth pattern. This year, you know, our customers are holding off. And you can see it in the utilization rate. We normally add about 70% plus and drop to 67% in this quarter. And that's, you know, 300 basis points of difference. So if customer continue to be concerned about... Whatever uncertainty there's out there to cause them to not want to draw down the loans, and then I think that a loan growth would not be strong. But what we notice is that despite these reductions in loan utilization, East West still finds a way to grow our CNI loans because we're adding new customers.
This year you know our customers are holding off and you can see it in the utilization rate, we'd normally at about 70% plus and dropped to 67% in this quarter and as you.
Speaker Change: You know 300 basis point of the difference so if customer continued to be concerned about.
Speaker Change: What about uncertainty there's out there that caused them to not wanted to draw down the loans and then I think that our loan growth would not be strong, but what we noticed is that despite D shop.
Speaker Change: Reduction in.
Speaker Change: Loan utilization east was to find a way to go to grow our C&I loans, because we're adding new customers. We've continued to add new customers were confident in 2025 continued to add new customers, but in terms of existing customers, whether they were you know.
Christopher Moral: We continue to add new customers. We're confident in 2025; continue to add new customers.
Christopher Moral: But in terms of existing customers, whether they will, you know, do a bit more drawdown or not, I think that will have to wait to see how the economy goes and then whatever circumstances dictate what they would do. And further on that, I was just noting we've seen commitments continue to grow. In fact, commitments grew 2% this quarter in a period where we only grew end of period and average loans 1%. So we moved commitments faster than our standing, echoing the point that Dominic made about utilization trends. But if we look year over year, it's actually up 9%.
Speaker Change: Do a bit more draw down and whatnot I think that we'll have to wait to see how the economy goes and what whatever circumstances dictate.
Speaker Change: What they would do.
And just further on that it'd be I would just note in.
Speaker Change: Now we've seen commitments continue to grow in fact commitments grew 2% this quarter.
Speaker Change: In a period, where we only grew end of period and average loans, 1%. So we move commitments faster than Outstandings echoing the.
Speaker Change: Point that Dominic made about.
Utilization trends, but if we look year over year, it's actually up 9% and so the reality is our customers have continued to engage with us. They continue to come to us to talk about opportunities to continue to put credit in place. They just haven't pulled the trigger on it yet and so we're optimistic that if the right conditions present themselves it could be a good year for us.
Christopher Moral: And so the reality, as our customers have continued to engage with us, is that they continue to come to us to talk about opportunities. They continue to put credit in place. They just haven't pulled the trigger on it yet.
Ibrahim Poonawala: And so we're optimistic that if the right conditions present themselves, it could be easier for us to head. That's helpful.
Speaker Change: That's helpful and then I guess just the other question around investments.
Ibrahim Poonawala: And I guess just the other question around investments, when we look at me, I was just looking at the branch account year over year, it's been around 1998, 1999. The mind is in terms of team hiring, any new markets or any of your regions on slide 14 where you're adding branches or offices beat in the United States, or there are opportunities and greater China.
Speaker Change: We looked at mean.
Speaker Change: I was just looking at the branch correct Collin Theater Weird, it's been around 1999 remind us in terms of team hiring any new markets or any of your regions on slide 14, where you're not adding branches or offices beat in the United States, where there are opportunities in Oh go to China.
Dominic Ng: So we're not currently contemplating opening additional branches in additional markets, and we don't have any current plans that the further or deep in our network across China. We do have a rep office in Singapore that we've talked about. At what point I'm appropriate to upgrade that, but that hasn't that call has been made and will be in the future. But we continuously look at our branch network, and we've done some pruning, and we'll do some replacements, but we're not entering new markets.
Speaker Change: So we're not currently contemplating opening additional branches in additional markets and we don't have any current plans to further deepen our network across China.
Speaker Change: We do have a rep office in Singapore that we've talked about at what point in time, it was appropriate to upgrade that but that hasnt that call has been made and will be in the future, but we continuously look at our branch network and we've done some pruning and we'll do some replacements, but we're not entering new markets.
Ibrahim Poonawala: If I may follow up, Chris, if I heard you correctly on capital priorities, you did mention non-organic opportunities.
Speaker Change: Got it and if I may follow up Chris If I heard you correctly on capital priorities. You did mentioned nonorganic opportunities I don't think it'll be used vessel Super Acquisitive Bank just talk to us what may make sense to me. They know elections might have an impact but you got it from a bank standpoint are there non bank.
Dominic Ng: I don't think of these dresses as a super-acquisitive bank. Just talk to us what may make sense.
Dominic Ng: I mean, I know elections might have an impact, but either from a bank standpoint, are there non-bank deals that would also make sense for the bank? Thank you. Last year, the bank made a fairly significant investment in an asset management company. I think those kinds of feed-driven opportunities are always going to be of interest. I think our appetite for depositories is light right now.
Speaker Change: Because that would also make sense for the bank.
Speaker Change: Last year, the bank made a fairly significant investment in an asset management company I think those kind of feed driven opportunities are always going to be of interest.
Speaker Change: I think our appetite for depository is light.
Speaker Change: Like right now.
Ibrahim Poonawala: Thank you.
Speaker Change: That's helpful. Thank you.
Timmer Braziler: The next question is from Timmer Braziler with Wells Fargo. Please go ahead. Hi, Hayward. Hi, good afternoon. Just looking back on the deposit conversation, can you maybe just provide us some color around what the turn is for time deposits in 4Q, and then Chris, you had made some comments about your willingness to maybe let some higher-cost dollars walk in 4Q if they choose. Maybe you quantify that statement as well. Police. You're sure.
Speaker Change: The next question is from Tim or Brazil, or with Wells Fargo. Please go ahead.
Speaker Change: I can't remember hi, good afternoon.
Speaker Change: Hi, I'm just looking back on the deposit conversation can you maybe just provide us some color around what the churn is for time deposits and <unk> and then Chris you had made some comments about your willingness to maybe let some higher cost dollars walk in for Q, if they choose maybe.
Speaker Change: Intifada that statement as well please.
Speaker Change: You're sure. So we've got about 8 billion of Cds that will roll here in the fourth quarter. Another 8 billion that'll roll in the first quarter of 'twenty Fives, and then about another 4 billion behind that in the second quarter of 25, and the rest is spread out into future periods.
Christopher Moral: So we've got about 8 billion of CDs that'll roll here in the fourth quarter, another 8 billion that'll roll in the first quarter of 25, and another 4 billion behind that in the second quarter of 25. The rest is spread out in future periods. We are being very active around anything that's not accretive to, you know, what happens if you take the incremental dollar and put it just in the Fed Funds. Given that we've got a pretty hefty cash position, it has to be incrementally accretive, and so we're not doing anything that's, you know, high fours, frankly, anymore. And we're continuing to move everything to add or below our CD special rate, which is from the 428.
Speaker Change: We are being very active around anything that's not accretive to.
Speaker Change: You know what happens if you get the incremental dollar and put it just in the fed funds given that we've got a pretty hefty cash position. It has to be incrementally accretive and so we're not doing anything that's a high for us frankly anymore, and we're continuing to move everything to at or below or a CD special rate, which is currently.
Speaker Change: 128.
Christopher Moral: Great, thanks. And then maybe just looking at fee income, strong quarter and 3Q. I'm just wondering to the sustainability of those results.
Speaker Change: Great. Thanks, and then maybe just looking at fee income a strong quarter and three Q I'm just wondering to the sustainability of those results is there anything that was maybe rate driven where the frenzied last month drove some of those higher revenue skus or is that 80.
Christopher Moral: Is there anything that was maybe rate-driven, where the frenzy last month drove some of those higher revenue users? Is that 84, 85 million dollar level? Is that a good run rate here in the near term? Yeah, look, I think the core fee business number has benefits from a lot of trends. Rate volatility has helped some cases on the engagement with our rates teams. The positive markets have facilitated some great, but focused sales efforts by our wealth management teams. So those dynamics are real, but obviously, if the market conditions change, that could soften. But nonetheless, we're pleased by the efforts of our sales teams, and we would largely ascribe it to good and focused sales efforts that have driven our results here over the last couple of quarters, which have both been record quarters.
Speaker Change: For $85 million level is that a good run rate here in the near term.
Speaker Change: Yeah look I think the core fee business number has.
Speaker Change: Has benefited from a lot of trends rate volatility has helped some cases on the.
Speaker Change: Your engagements with our rates teams are the positive markets have facilitated some great but focused sales efforts by our wealth management teams. So those dynamics are real but obviously, if the market conditions change that could soften.
Speaker Change: But nonetheless, we're we're pleased by the efforts of our sales teams and we would largely ascribe it to good and focused sales efforts that have driven our results here over the last couple of quarters, which have both been record quarters.
Irene Oh: I do want to point out that the fee incomes growth, wealth management, private banking, these fees, obviously maybe rate environment do have something to do with equity market situation, but I would say for the eastward bank situation is relatively less influenced by the rate environment. Obviously, you can see it in the line items on our earnings release, which shows that depository fee income, continued growth from cash management side, and also foreign exchange. It's really hitting in all the areas, and from the long side, mainly some authentication fees when we need syndication. So those are really efforts that I would say more that we are very pleased with this kind of incremental growth, and we expect that we'll continue to work on these areas, whether it's cash management, treasury management services that we provide to sophisticated clients for the operating accounts or the foreign exchange services that we offer and interest rate hedge.
Speaker Change: I do wanted to point out that Oh.
Speaker Change: The fee income growth.
Speaker Change: If management private banking you know are they.
Speaker Change: These fees you know obviously maybe rate environment do you have something to do with equity market situation, but I would say for the east West Bank situation is relatively less influenced by the rate environment and you know obviously you can see it in the line items of note.
Speaker Change: Earnings release, which shows that you know.
Depository fee income continue to grow from cash management side and also foreign exchange you know and then so it's really hitting in all the areas.
Speaker Change: From demand side, mainly something about syndication fees when we'd eat syndication.
Speaker Change: So those all.
Speaker Change: Rudy.
With that I would say more that we all do.
Speaker Change: Very pleased with these kind of incremental growth and we expect that will continue to work on these areas you know, whether it's cash management Treasury management services that we provide to sophisticated clients.
Client for their operating accounts or the foreign exchange of services that we offer.
Speaker Change: No.
Speaker Change: Ray Hatch plus you know continue to be the lead lender.
Irene Oh: Plus continue to be the lead lender to do more syndication; these are things that are important for Eastward Bank in order to help us to continue to have meaningful sort of core banking growth.
Speaker Change: Do more syndication diesel things at all are important for east West Bank in order to help us to continue to have meaningful sort of core banking growth in the future.
Irene Oh: YouTube. And then maybe one last one for Irene.
Got it and then maybe one last one for Irene.
Irene Oh: It looks like commercial real estate non-performers declined pretty nicely in 3Q, but then if you look at the allowance build, the all other pre-line that actually ticked up quite a bit. I'm just wondering what drove that incremental reserve build? Yeah, well first, I would just want to clarify that the allowance isn't just for necessarily non-cool loans or substandard loans. The drivers for those as far as the allowance and the chip, you know, there we do still have a fair amount of qualitative factors, not just quantitative, and we look at it from the perspective of is there enough coverage, regionally other things that we're looking at, etc.
Speaker Change: And it looks like commercial real estate non performers declined pretty nicely in <unk>, but then if you look at the allowance build the all other Cree line that actually ticked up quite a bit I'm, just wondering what drove that incremental reserve build.
Irene: Yeah, well first I just wanted to clarify the allowance isn't just Florida necessarily non accrual loans are a substandard loans are the drivers for that is as far as the allowance Nix checks that we do still have a fair amount of qualitative factors not just the quantitative and when you look at it from the perspective.
Irene: Is there enough coverage regionally are there things that we're looking at et cetera.
Irene Oh: So not necessarily something very specific related to one loan, just from a world-wide base, but overall for the real estate portfolio and specific as far as a loan portfolio is something that we continue to actively monitor. But overall, you know, we're comfortable as far as the grading, the allowance level, and just overall how we're monitoring the portfolio.
Speaker Change: So not necessarily something very specific related to one I'm just from a broad base.
Speaker Change: But overall for the real estate portfolio and specific as far as our loan portfolio. It's something that we continue to actively monitor but overall, yeah, we're comfortable as far as the grading of the allowance level and just overall how are you going to portfolio.
Irene Oh: Great. Thank you.
Speaker Change: Great. Thank you.
Matthew Clark: The next question is from Matthew Clark with Piper Sandler. Please go ahead. Good afternoon, everyone.
Speaker Change: The next question is from Matthew Clark with Piper Sandler. Please go ahead.
Matthew Clark: Hey, good afternoon, everyone.
Christopher Moral: Can you remind us or update us on what deposit beta you're assuming for this easy cycle? Sure, we've assumed today that we would have a 50% or beta 50% or better beta, which seems to materialize for us here over the last several weeks. Okay, through this cycle, and then obviously, initially, but through this cycle. Yep. Okay. Great.
Matthew Clark: Hum.
Can you remind us or update us on what deposit beta youre, assuming for this easing cycle.
Speaker Change: Sure. We've assumed today that we would have a 50 per center abated, 50% or better beta, which seems that materialized for us here over the last several weeks.
Speaker Change: Okay through this cycle and then obviously initially but through the cycle.
Speaker Change: Yep, Okay great.
Christopher Moral: And then just don't, you know, you're adjusted non-interest expense growth. You know, going to be in that 68% range this year. Any reason to believe that might slow, or should we assume you kind of sustain that level of growth as you march toward becoming 100 billion assets? I think we continue to look at that. Obviously, we'll go and have some conversations with the board here about budgets and outlooks for next year, and it will be somewhat growth dependent. But I would continue to expect that we will continue to make the investments we need to be the bank that we want to be, and that will be probably a slightly faster spend rate than longer-term historical averages.
Speaker Change: Great and then just on your adjusted noninterest expense growth I'm gonna be in that 6% to 8% range. This year.
Speaker Change: Any reason to believe that might slow or should we assume you kind of sustain that level of growth as you March towards becoming a 100 billion of assets.
Speaker Change: I think we continue to look at that obviously will go and have some conversations with our board here about budgets and outlooks for next year and it'll be somewhat growth dependent but I would continue to expect that we will continue to make the investments we need to be the bank that we want to be and that will be probably a slightly faster spend rate.
Speaker Change: Sure.
Speaker Change: Longer term historical averages.
Christopher Moral: But again, I would remind folks that 68% off a 37% base is a lot less than that kind of world's off a 60% efficiency ratio or something. Yep.
Speaker Change: But again I would remind folks that 6% to 8% off of 37% base is a lot less than that kind of growth off a 60% efficiency ratio or something.
Speaker Change: Yep.
Matthew Clark: Thank you.
Speaker Change: Thank you.
Christopher Moral: The next question is from Chris McGrady with KBW. Please go ahead. Great. Chris, coming back to the NII for a moment, I mean, it feels like NII should be flated up in the fourth floor. I guess what it would take for NII down in Q4? Look, if you think about how many rate cuts there are, the point I think the yield curve was assuming that in Q2, we are asset sensitive; that would put downward pressure. We're assuming we're going to have asset growth that will positively offset that and get us to something better than down.
The next question is from Chris Mcgratty with K B W. Please go ahead.
Speaker Change: Alright, Chris.
Speaker Change: Chris coming back to the NII for a moment I mean, it feels like.
Speaker Change: NII should be flat to up in the fourth quarter I guess, what would it take for NII to be down in Q4.
Speaker Change: Look it depends on how many rate cuts there are you know.
Speaker Change: Point I think the yield curve was assuming a quarter and two we are asset sensitive that would put downward pressure. We're assuming we're going to have asset growth that will positively offset that and get us to you know.
Speaker Change: Better than down.
Christopher Moral: And that's worth it. for, but the function it is that it specifies us with 50 basis points, we're probably not going to get there with another 50 that single stuff on top of it. Yeah. So, so with the November and December 25 in kind of orderly fashion, that would support, perhaps, an I growth in the fourth quarter. So you're saying orderly, orderly to small modest spec cuts as was sort of projected quarter end, and that we're very responsive. So that we were on managing the positive cost lower, and that we see as it will put us in the right frame for a good outcome.
Speaker Change: And that's what we're shooting for.
Speaker Change: But it's a function of is it that surprised us with 50 basis points, we're probably not going to get there.
Speaker Change: Well, then another 50 or so on top of it yeah. So.
Speaker Change: So if we see November and December 'twenty, fives, and kind of orderly fashion that would that would support perhaps NII growth in the fourth quarter is what you're saying.
Speaker Change: Orderly orderly too small modest spend cuts as well sort of projected at quarter end and that we're very responsive as we were on managing deposit costs lower and that we see asset growth puts us in the right frame for a good outcome and if we fall short of that you'll you'll see it in January but I think we feel pretty good about where we're headed.
Christopher Moral: And if we fall short of that, you'll see it in January, but I think we feel pretty good about where we're headed. Oh, we have to, we'll call it, but we have to work harder. Got it. Thanks for that.
Speaker Change: Oh, we have to work harder we have to work harder [laughter].
Speaker Change: Got it thanks for that and then maybe just broadly on 100 billion you guys have a you know really made a dent on the HQ away can you just remind us how you're thinking about the all in cost as you I know you've got you know several years, but how youre thinking about just planning and the the the overall P&L. Thanks.
Dominic Ng: And then maybe just broadly on 100 billion. You guys have, you know, really made a, a dent on the HQA.
Dominic Ng: Can you just remind us how you're thinking about the all-in cost. As you kind of got, you know, several years, but how you're thinking about just planning in the the overall piano. Thanks. Yeah, you're right. We have plenty of time, but on the other hand, we do not wait. We've been working towards, you know, but at one point, as I don't know when, but at some point, we're going to be over 100 billion now. I mean, well, that's a fact that we will be over 100 billion. It's just that when. So our position is that we will continue to just work in a rational way.
Speaker Change: Yeah, you're right, we have plenty of time, but on the other hand, we do not wait we've been working towards you know, but at one point and I don't know when but at some point, we're going to be over 100 billion. I mean, that's the fact that we will be over 100 billion. It's just Edwin so our position is that we will continue to just work.
Speaker Change: In a rational way to build up you know all the appropriate you know infrastructure that is needed to be at that level. So all our senior executives are well aware of the rule and the criteria and what we have currently that you know that.
Dominic Ng: To build up, you know, all the appropriate, you know, infrastructure that is needed to be at that level. So our senior executives are well aware of the rule and the criteria. And what we have currently that, you know, they already met the requirement or what we potentially have a gap and what kind of resources that we need to fill in both human resources and also technology or infrastructure resources, et cetera. So we are just very in a very disciplinary manner and walking towards, you know, the goal of at some point, we'll be ready. And then the likely who it is at most, not just like we will be ready before we turn into 100 million.
Speaker Change: He met the requirement or what we potentially have a gap and what kind of resources that we need to fill in both human resources and also technology or infrastructure resources et cetera. So we are very in a very disciplined manner and working towards.
Speaker Change: Our goal at some point, we'll be ready and then the the likelihood is that well it's not just like we will be ready before we turn it into 100 million that's the position.
Dominic Ng: That's the position.
Dominic Ng: Great. Thanks, Owen.
Speaker Change: Great. Thanks, Don.
Benjamin Gerlinger: The next question is from Ben Girlinger with City. Please go ahead. Good afternoon, then. Chris, I think you gave the city bounces for 421Q and beyond those. Going to give the rates. One reason to ask is I think you have a little bit of pig in the Python. And if I'm calling correctly, it was five and a quarter, six months. So it's kind of 1Q 3Q 1Q. It's a 7 to 1Q's kind of the 5% like when you could cut. So I think there is a reasonable expectation to kind of see a 100 basis points lower on city pricing and 1Q assuming we get another 25-25.
The next question is from Ben Garlinger with Citi. Please go ahead.
Speaker Change: Hey, good afternoon Ben.
Ben Garlinger: I was wondering.
Ben Garlinger: Chris I know you gave the CD balances even for for Q1 Q2 and beyond I was curious.
Ben Garlinger: Willing to give us the rates only reason I ask because I think you have a little bit of a pig in a python lunar new year.
Am I correct, there was a fire in the quarter.
Ben Garlinger: Six months. So it really was kind of one in Q3 Q1 Q.
Speaker Change: That's the southern <unk> kind of a 5% like two cuts I think is it a reasonable expectation to kind of see hopefully 100 basis points lower on the CD pricing in <unk>, assuming we get another 25 25 coupon.
Christopher Moral: I think as we look forward, Ben, what we have observed into 3 is that we got roughly that 100 basis point savings into 3 versus what we did in Q1. So that's there. And your question is, will we potentially see something similar as we roll into the first quarter? I think we'll see how the yield curve shapes out. We're benefiting today from the fact that the forwards have got those next two rate cuts priced in. So if we get to the first quarter and there's still additional cuts priced in, which the yield curve says there may be, we'll probably see that kind of savings again.
Speaker Change: I think as we look forward than what we what we have observed in Q3 is that we got roughly about 100 basis point savings in Q3 versus what we did in Q1. So that's there and your question is will we potentially see something similar as we roll into first quarter you know look.
Speaker Change: We'll see how the yield curve shapes out we're benefiting today from the fact that the forwards have got those next two rate cuts priced in so if we get to the first quarter and there's still additional cuts priced in which the yield curve says there, maybe we'll probably see that kind of savings again.
Christopher Moral: Gotcha, okay. So it's kind of at the same time you also see a swap, I mean, with preview. But that's like a positive for sure.
Got it okay. So it's kind of at the same time, you also see the swap agreement with Cree.
Speaker Change: Possible for sure.
Dominic Ng: When you think about just kind of client conversations, a lot of banks have kind of been, for most of the year, there are positive and growths and then walked it back as a growth and materialized. Are you client saying anything in terms of like a catalyst point on rates? I mean, today you talked through a couple of silos. Are we looking for some other 50 basis points to start of a calendar next year? Are people pointing at anything specifically that kind of might spark reflection higher? Well, I mean, there's really no, I mean, clients are not in this line of business that we are.
Speaker Change: When you think about just kind of client conversations a lot of back and kind of getting it.
Speaker Change: For most of the year there are positive on grosses.
Speaker Change: And walked it back cause the growth to materialize are your clients, saying anything in terms of like a catalyst point on the rates I know you talked to a couple of silos.
Speaker Change: We're looking for just another 50 basis points to starve. Our calendar next year is there are people pointed anything specifically that kind of might spark an inflection higher.
Speaker Change: Okay.
Speaker Change: Well I mean, there's really no I mean clients are not in this line of business like we are saying they don't they don't think about he's sort of like a fed fund rate all the time, but it's really and also it's a mixed bag of people from all different industries. So everyone have their own view it just in general you know right.
Dominic Ng: They don't think about these sort of like a test fund rate all the time, but it's really, and also it's a mixed back of people from all different industries. So everyone has their own view. It's just in general, rate, as we looked at a few months ago; even today, it's still relatively high. And so we do expect that, you know, and one by just conversation without different customers from different industries that would rate being where it is, makes it a little bit difficult for them to make substantial investments or maybe acquisition and whatnot. And then also with rate being where it is right now, other than folks that are really good at distressed asset that look into commercial would say opportunities.
Speaker Change: You know.
Speaker Change: As we looked at you know two months ago, you know and I know even today, it's still relatively high and so we do expect that you know one five just compensation without different customers from different industries that are with rate being where it is it makes it a little bit difficult for them to make.
Substantial investments or maybe acquisition and whatnot and then also what rate being where it is right now other.
Speaker Change: Other than.
Speaker Change: Folks out goody good at distressed asset look into.
Speaker Change: Commercial real estate opportunities Oh.
Dominic Ng: I would say, by and large, a lot of the traditional would say investors that are not in the distressed category, they may not necessarily feel this is the right time to make acquisition. And so all in all, I would say that that's what just overall in the whole banking industry, the lending size been the demand of the land of the loans slow down a bit. But, you know, we'll see how it goes as long as there is indication from the fact that they will continue to drop rate, you know, and not necessarily abruptly in a big way, but if they just do 25 basis points, 125 basis points, and then continue to make.
Speaker Change: I would say by and large a lot of the.
Speaker Change: Traditional real estate investors.
Speaker Change: They're not not in the distressed category. They they may not necessarily feel that this is the right time to to make acquisition and so all in all I would say that that's what I just.
Speaker Change: Just overall and that the whole banking industry are the lending side has been the demand of the land, although the loans has slowed down a bit.
Speaker Change: You know well, we'll see how it goes as long as there is indication from the fact that they will continue to drop right you know and not necessarily a roughly end up in a big way, but if they just do 25 basis points 25 basis point and then continue to make.
Samuel Varga: It's a number of cuts even didn't make sure, and I do believe that, you know, that sort of message would most likely cause many business to start, you know, and then have the confidence to move forward. Thank you.
Speaker Change: <unk> X number of cuts even next year and I do believe that you know that.
Speaker Change: So the message.
Speaker Change: Wood.
Speaker Change: Most likely cause.
Speaker Change: Many business to start picking up and then have the confidence to move forward.
Speaker Change: Got you. Thank you.
Christopher Moral: The next question is from Samuel Varga with UBS. Please go ahead. Good afternoon. Chris, on the 428 CD specials that you mentioned, were those six-month specials? Yes. Okay, great. And then just on the beta, some sort of looking at the commentary gave on the, you know, past 930 progress, you've been in deposit costs. I guess I kind of get to like a 40% quarter to date beta on total deposits given the given the maturity is laid out for the next three quarters here on CDs. Is there one quarter where the step down between the roll and roll-off rates is such that you expect to make sort of a bigger step up in the cycle to date.
The next question is from Samuel Varga with UBS. Please go ahead.
Speaker Change: Hey, good afternoon.
Speaker Change: Chris on the on the 428 CD specials that you mentioned, where those six months specials.
Speaker Change: Yes.
Speaker Change: Okay, Great and then and then just on the beta.
Speaker Change: Sort of looking at the commentary you gave on the on the you know past 930 progress you've made on deposit costs, I guess I kind of get to like a 40% quarter to date beta on total deposits.
Speaker Change: The given the maturities you laid out for the next three quarters here on C. DS is is there one quarter, where the step down between the roll on roll off rates has such that did you expect to make sort of a bigger.
Speaker Change: Up in the cycle to date, our betas or or should we expect more of a gradual path towards that 50% Mark that you like that.
Christopher Moral: Or should we expect more of a gradual path towards that 50% mark that you laid out?
Christopher Moral: I think it's more of a gradual path, and again, the 50% beta through the cycle feels very achievable based on what we've seen here in the first rate cut. But that'll be proven out with the next couple. I think we're comfortable if that's a good guidepost for now, and that will be fairly gradual and consistent, assuming the Fed, as Donna just said, is sort of 25, 25, 25 kind of cut path.
Speaker Change: I think it's more of a gradual path again, the 50% beta through the cycle feels very achievable based on what we've seen here in the first re cut but that'll be proven out with the next couple, but I think we're comfortable with that as a good guide post for now and that'll be fairly gradual and consistent.
Speaker Change: Assuming the fed is Dominic just said is a sort of.
Speaker Change: 25, 25, 25 kind of cut path.
Samuel Varga: Understood, thanks for taking the questions.
Speaker Change: Understood. Thanks for taking the questions.
Andrew Toro: The next question is from Andrew Toro with Stevens. Please go ahead. Good afternoon. Hey, Christians want to clarify a couple of points from the preparator marks, the five to ten basis point drop into positive costs. So far in October, you mentioned was that total or interest-bearing deposits? Five ish for total, ten ish for interest bearing, closer to five for total, closer to ten for interest bearing. Got it. Okay. Easy enough. Okay.
Speaker Change: Your next question is from Andrew <unk> with Stephens. Please go ahead.
Speaker Change: Hey, good afternoon.
Speaker Change: Hey, Chris just wanted to clarify a couple of points on the prepared remarks, the the five to 10 basis point drop in deposit costs. So far in October you mentioned was that total or interest bearing deposits.
Speaker Change: Five ish for total 10 ish for interest bearing.
Speaker Change: We're closer to closer to five for total closer to 10 for interest bearing got it okay.
Speaker Change: Okay, and then the 10.
Christopher Moral: And then the 10 million positive impact from the slop rolling off, is that prior to rate cuts? Does it assume or make an assumption around kind of the forward curve, or is it just as is kind of today? That was kind of the end of order number, right? So we've seen the first 50. I think if you'd asked me that in August, I would have cited a number closer to 12. And so it comes down, and it'll come down a little bit. It'll get chipped away at with each Fed action, but it'll still largely roll away.
Speaker Change: 10 million positive impact.
Speaker Change: Impact from the swap rolling off is that prior to.
Speaker Change: Right got it does it assume or make an assumption around kind of the foreign curve or is it just as is kind of today.
Speaker Change: Hey that was kind of the end of quarter number right. So we've seen the first 50 I think if you'd asked me that in August I would've thought that number closer to 12, and so it comes down and it will come down a little bit it'll get chipped away at with each fed action.
Speaker Change: It'll still largely local weather.
Andrew Toro: Pretty much. Yep. Okay. Got it. Just wanted to double check.
Speaker Change: Pretty much.
Speaker Change: Yeah, Okay got it and just wanted to double check thanks for taking the questions.
Operator: Thanks for taking the questions. Again, if you have a question, please press star, then one. Please stand by as we pull for questions.
Speaker Change: Yeah.
Speaker Change: Again, if you have a question. Please press Star then one please standby as we poll for questions.
Operator: Showing no further questions.
Speaker Change: Showing no further questions. This concludes our question and answer session I would like to turn the conference back over to Dominic <unk> for any closing remarks.
Dominic Ng: This concludes our question and answer session.
Dominic Ng: I would like to turn the conference back over to Dominic Eng for any close remarks. Thank you. I just want to thank everyone for joining our call today and looking forward to talking to you all in late January.
Dominic: Thank you I just wanted to thank everyone for joining our call today and looking forward to talking to you all are in late January.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.
Dominic: Okay.
Dominic: [music].
Dominic: Yeah.
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Dominic: [music].