East West Bank Q4 2025 East West Bancorp Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 East West Bancorp Inc Earnings Call
Speaker #1: Good day,
Speaker #1: And welcome to the East West Bancorp's fourth quarter 2025 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.
Speaker #1: 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.
Speaker #1: To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations.
Speaker #1: Please go
Speaker #1: ahead. Thank you,
Operator: Thank you, Operator. Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's Q4 and full year 2025 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer, Christopher Moral-Niles, Chief Financial Officer, and Irene Oh, our Chief Risk Officer.
Speaker #2: Operator: Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's fourth quarter and full year 2025 financial results. With me are Dominic Ng, Chairman and Chief Executive Officer; Christopher Moral Niles, Chief Financial Officer; and Irene Oh, our Chief Risk Officer.
Speaker #2: This call is being recorded and will be available for replay on our Investor Relations website. The slide deck referenced during this call is available on our Investor Relations site.
Operator: This call is being recorded and will be available for replay on our Investor Relations website. 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. Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic. Thank you, Adrienne. 2025 was another record-breaking year for East West. Our highlights include new full-year record levels for multiple categories, including revenue, net interest income, fees, non-interest income, earnings per share, loans, and deposits. Again, every one of the above-mentioned categories reached record levels.
Operator: This call is being recorded and will be available for replay on our Investor Relations website. 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. Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic.
Speaker #2: 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.
Speaker #2: For a more detailed description of the risk factors, and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today.
Speaker #2: I will now turn the call over to Dominic.
Speaker #3: Thank you, Adrienne. 2025 was another record-breaking year for East West. Our highlights include new full-year record levels for multiple categories, including revenue, net interest income, fees, non-interest income, earnings per share, loans, and deposits.
Dominic Ng: Thank you, Adrienne. 2025 was another record-breaking year for East West. Our highlights include new full-year record levels for multiple categories, including revenue, net interest income, fees, non-interest income, earnings per share, loans, and deposits. Again, every one of the above-mentioned categories reached record levels.
Speaker #3: Again, every one of the above-mentioned categories reached record levels. The strength of our financial results reflects how our business model is designed to deliver meaningful value to clients, especially during periods of uncertainty when our ability to navigate challenging landscapes matters most.
Operator: The strength of our financial results reflects how our business model is designed to deliver meaningful values to clients, especially during periods of uncertainty when our ability to navigate challenging landscapes matters most. We grew end-of-period deposits by 6% year-over-year, with significant traction in both non-interest-bearing and time deposits. We also grew end-of-period loans by 6%, with growth in C&I and residential mortgage lending leading the way. 2025 was also another consecutive year of record fee income, driven in part by consistent sales execution across all of our fee-based businesses. This balance sheet growth, combined with our fee income growth and ability to grow our customer base, have collectively strengthened the durability of our business model and delivered substantial returns for shareholders. As a result, in 2025, we reported tangible book value per share growth of 17% and generated a 17% return on tangible common equity.
Operator: The strength of our financial results reflects how our business model is designed to deliver meaningful values to clients, especially during periods of uncertainty when our ability to navigate challenging landscapes matters most. We grew end-of-period deposits by 6% year-over-year, with significant traction in both non-interest-bearing and time deposits. We also grew end-of-period loans by 6%, with growth in C&I and residential mortgage lending leading the way. 2025 was also another consecutive year of record fee income, driven in part by consistent sales execution across all of our fee-based businesses. This balance sheet growth, combined with our fee income growth and ability to grow our customer base, have collectively strengthened the durability of our business model and delivered substantial returns for shareholders. As a result, in 2025, we reported tangible book value per share growth of 17% and generated a 17% return on tangible common equity.
Speaker #3: We grew in-period deposits by 6% year over year, with significant traction in both non-interest-bearing and time deposits. We also grew in-period loans by 6%, with growth in C&I and residential mortgage lending leading the way.
Speaker #3: 2025 was also another consecutive year of record fee income, driven in part by consistent sales execution across all of our fee-based businesses. This balance sheet growth, combined with our fee income growth and ability to grow our customer base, have collectively strengthened the durability of our business model and delivered substantial returns for shareholders.
Speaker #3: As a result, in 2025, we reported tangible book value per share growth of 17% and generated a 17% return on tangible common equity. I'm also pleased to announce our board declared a $0.20 increase to the quarterly dividend, up to $0.80 per share, or 33%.
Operator: I'm also pleased to announce our board declared a $0.20 increase to the quarterly dividend, up to $0.80 per share, or 33%. We remain committed to disciplined capital management and the delivery of top-tier returns for shareholders via prudent growth, moving efficiency, and robust risk management. Now, let me turn it to Chris for more details on the balance sheet and income statement. Thank you, Dominic. Let me start with deposits on slide four. East West continued to differentiate itself via core deposit growth in 2025. This deposit growth allowed us to fund our full-year loan growth while also bolstering our balance sheet liquidity. In 2025, we prioritized deposit growth through a dedicated business checking campaign that delivered strong results. We plan to maintain this focus strategy in 2026 to further expand our deposit base.
Operator: I'm also pleased to announce our board declared a $0.20 increase to the quarterly dividend, up to $0.80 per share, or 33%. We remain committed to disciplined capital management and the delivery of top-tier returns for shareholders via prudent growth, moving efficiency, and robust risk management. Now, let me turn it to Chris for more details on the balance sheet and income statement.
Speaker #3: We remain committed to disciplined capital management and the delivery of top-tier returns for shareholders via prudent growth, improved efficiency, and robust risk management. Now, let me turn it to Chris for more details on the balance sheet and income statement.
Speaker #4: Thank you, Dominic. Let me start with deposits on slide four. East West continued to differentiate itself via core deposit growth in 2025. This deposit growth allowed us to fund our full-year loan growth, while also bolstering our balance sheet liquidity.
Christopher Del Moral-Niles: Thank you, Dominic. Let me start with deposits on slide four. East West continued to differentiate itself via core deposit growth in 2025. This deposit growth allowed us to fund our full-year loan growth while also bolstering our balance sheet liquidity. In 2025, we prioritized deposit growth through a dedicated business checking campaign that delivered strong results. We plan to maintain this focus strategy in 2026 to further expand our deposit base.
Speaker #4: In 2025, we prioritized deposit growth through a dedicated business checking campaign that delivered strong results. We plan to maintain this focused strategy in 2026 to further expand our deposit base.
Speaker #4: During the fourth quarter, DDA levels improved by 1% to 25% of total deposits and reached an inflection point. In 2026, we expect continued strong core customer deposit growth.
Operator: During Q4, DDA levels improved by 1% to 25% of total deposits and inflection points. In 2026, we expect continued strong core customer deposit growth. Turning to loans on slide five, East West grew end-of-period loans in line with our prior guidance and total average loans by 4% for the year, also within our guidance range, led by C&I growth. C&I growth in Q4 was driven primarily by new relationships and with encouraging growth across many sectors. Our pipeline suggests that C&I will continue to lead our growth in lending for 2026. Residential mortgage also had a good quarter in Q4, and the pipelines there remained full going into Q1. We expect residential mortgage to be a consistent contributor to our growth at its current pace.
Operator: During Q4, DDA levels improved by 1% to 25% of total deposits and inflection points. In 2026, we expect continued strong core customer deposit growth. Turning to loans on slide five, East West grew end-of-period loans in line with our prior guidance and total average loans by 4% for the year, also within our guidance range, led by C&I growth. C&I growth in Q4 was driven primarily by new relationships and with encouraging growth across many sectors. Our pipeline suggests that C&I will continue to lead our growth in lending for 2026. Residential mortgage also had a good quarter in Q4, and the pipelines there remained full going into Q1. We expect residential mortgage to be a consistent contributor to our growth at its current pace.
Speaker #4: Turning to loans on slide five, East West grew end-of-period loans in line with our prior guidance. In total, average loans grew by 4% for the year.
Speaker #4: Also within our guidance range, led by CNI growth. CNI growth in Q4 was driven primarily by new relationships and with encouraging growth across many sectors.
Speaker #4: Our pipeline suggests that CNI will continue to lead our growth in lending for 2026. Residential mortgage also had a good quarter in the fourth quarter, and the pipelines there remain full going into the first quarter.
Speaker #4: We expect residential mortgage to be a consistent contributor to our growth at its current pace. Looking ahead, we expect total loan growth to be in the range of 5 to 7% for the year.
Operator: Looking ahead, we expect total loan growth to be in the range of 5% to 7% for the year, driven by continued strength in C&I and residential mortgage production, leading to an increasingly diversified and balanced loan portfolio. Switching now to net interest income and margin trends on slide six. Q4 net interest income was $658 million, reflecting the benefit of our short-term liability sensitivity over the near term in a quarter with two interest rate cuts, balance sheet growth, and favorable deposit mix shifts. We continue to proactively reduce our deposit costs, driving period-end cost of deposits down a further 23 basis points quarter over quarter.
Operator: Looking ahead, we expect total loan growth to be in the range of 5% to 7% for the year, driven by continued strength in C&I and residential mortgage production, leading to an increasingly diversified and balanced loan portfolio. Switching now to net interest income and margin trends on slide six. Q4 net interest income was $658 million, reflecting the benefit of our short-term liability sensitivity over the near term in a quarter with two interest rate cuts, balance sheet growth, and favorable deposit mix shifts. We continue to proactively reduce our deposit costs, driving period-end cost of deposits down a further 23 basis points quarter over quarter.
Speaker #4: Driven by continued strength in C&I and residential mortgage production, leading to an increasingly diversified and balanced loan portfolio. Switching now to net interest income and margin trends.
Speaker #4: On slide six, fourth quarter net interest income was $658 million, reflecting the benefit of our short-term liability sensitivity over the near term, in a quarter with two interest rate cuts, balance sheet growth, and favorable deposit mix shifts.
Speaker #4: We continue to proactively reduce our deposit costs, driving period-end cost of deposits down a further 23 basis points quarter over quarter. Looking back to the start of this cutting cycle, we have lowered our interest-bearing deposit costs by 105 basis points against a backdrop of 175 basis points of Fed cuts in their target rate.
Operator: Looking back to the start of this cutting cycle, we have lowered our interest-bearing deposit costs by 105 basis points against a backdrop of 175 basis points of Fed cuts in their target rate, achieving a down cycle beta of 0.6 while growing our total deposit base by nearly $4 billion over the course of the year. Looking ahead to 2026, we expect net interest income growth to be in the range of 5% to 7%, aligned with and driven by our expected balance sheet growth, outweighing our modestly otherwise asset-sensitive position. Our outlook assumes three cuts of 75 basis points occurring over the course of 2026, resulting in a gradually steepening yield curve as implied by the year-end forwards. Moving on to fees on slide 7, in 2025, fee income grew by a robust 12%. As Dominic mentioned, we achieved record fee income levels in 2025.
Operator: Looking back to the start of this cutting cycle, we have lowered our interest-bearing deposit costs by 105 basis points against a backdrop of 175 basis points of Fed cuts in their target rate, achieving a down cycle beta of 0.6 while growing our total deposit base by nearly $4 billion over the course of the year. Looking ahead to 2026, we expect net interest income growth to be in the range of 5% to 7%, aligned with and driven by our expected balance sheet growth, outweighing our modestly otherwise asset-sensitive position. Our outlook assumes three cuts of 75 basis points occurring over the course of 2026, resulting in a gradually steepening yield curve as implied by the year-end forwards. Moving on to fees on slide 7, in 2025, fee income grew by a robust 12%. As Dominic mentioned, we achieved record fee income levels in 2025.
Speaker #4: Achieving a down cycle beta of 0.6, while growing our total deposit base by nearly $4.4 billion over the course of the year. Looking ahead to 2026, we expect net interest income growth to be in the range of 5 to 7%, aligned with and driven by our expected balance sheet growth.
Speaker #4: Outweighing our modestly otherwise asset-sensitive position. Our outlook assumes three cuts of 75 basis points occurring over the course of 2026, resulting in a gradually steepening yield curve as implied by the year-end forwards.
Speaker #4: Moving on to fees on slide seven, in 2025, fee income grew by a robust 12%. As Dominic mentioned, we achieved record fee income levels in 2025.
Speaker #4: Our performance over the past year was driven by sustained quality execution across wealth management, derivatives, foreign exchange deposit fees, and lending fees. Our continued investments and our Global Treasury Group have yielded strong traction in treasury management activity.
Operator: Our performance over the past year was driven by sustained quality execution across wealth management derivatives, foreign exchange deposit fees, and lending fees. Our continued investments in our global treasury group have yielded strong traction in treasury management activity. Wealth management fee growth over the past year was supported by the hires of financial consultants and licensed bankers to capitalize on opportunities in the marketplace. Ongoing hiring is further reflected in our 2026 outlooks, along with incremental fees and some expense growth. East West has been consistently growing fee income at double digits, and we remain focused on driving similar growth as we look into 2026. Now, let me turn to expenses on slide eight. East West continues to deliver industry-leading efficiency. The Q4 efficiency ratio was 34.5%.
Operator: Our performance over the past year was driven by sustained quality execution across wealth management derivatives, foreign exchange deposit fees, and lending fees. Our continued investments in our global treasury group have yielded strong traction in treasury management activity. Wealth management fee growth over the past year was supported by the hires of financial consultants and licensed bankers to capitalize on opportunities in the marketplace. Ongoing hiring is further reflected in our 2026 outlooks, along with incremental fees and some expense growth. East West has been consistently growing fee income at double digits, and we remain focused on driving similar growth as we look into 2026. Now, let me turn to expenses on slide eight. East West continues to deliver industry-leading efficiency. The Q4 efficiency ratio was 34.5%.
Speaker #4: Wealth management fee growth over the past year was supported by the hires of financial consultants and licensed bankers to capitalize on opportunities in the marketplace.
Speaker #4: Ongoing hiring is further reflected in our 2026 outlooks, along with incremental fees and some expense growth. East West has been consistently growing fee income at double digits, and we remain focused on driving similar growth as we look into 2026.
Speaker #4: Now let me turn to expenses on slide eight. East West continues to deliver industry-leading efficiency. The fourth quarter efficiency ratio was 34.5%. In 2025, total operating non-interest expense grew 7.5% as we invested in the expertise, systems, and technology necessary to support our continued and ongoing growth.
Operator: In 2025, total operating noninterest expense grew 7.5% as we invested in the expertise, systems, and technology necessary to support our continued and ongoing growth. As we look forward to 2026, total operating noninterest expense is expected to grow in the range of 7% to 9% as we continue to further our investments in the strategic priorities, which continue to develop apace. With that, let me turn the call over to Irene. Thank you, Chris, and good afternoon to all on the call. On slide nine, you can see our asset quality metrics, which continue to broadly outperform the industry. We recorded net charge-offs of 8 basis points or $12 million in Q4 and 11 basis points or $60 million for the full year of 2025. We recorded a provision for credit losses of $30 million for Q4, compared with $36 million for Q3.
Operator: In 2025, total operating noninterest expense grew 7.5% as we invested in the expertise, systems, and technology necessary to support our continued and ongoing growth. As we look forward to 2026, total operating noninterest expense is expected to grow in the range of 7% to 9% as we continue to further our investments in the strategic priorities, which continue to develop apace. With that, let me turn the call over to Irene.
Speaker #4: As we look forward to 2026, total operating non-expense is expected to grow in the range of 7% to 9%, as we continue to further our investments in the strategic priorities, which continue to develop the pace.
Speaker #4: With that, let me turn the call over to Irene.
Irene Oh: Thank you, Chris, and good afternoon to all on the call. On slide nine, you can see our asset quality metrics, which continue to broadly outperform the industry. We recorded net charge-offs of 8 basis points or $12 million in Q4 and 11 basis points or $60 million for the full year of 2025. We recorded a provision for credit losses of $30 million for Q4, compared with $36 million for Q3.
Speaker #5: Thank you, Chris, and good afternoon to all on the call. On slide nine, you can see our asset quality metrics, which continue to broadly outperform the industry.
Speaker #5: We recorded net charge-offs of eight basis points, or $12 million, in the fourth quarter, and 11 basis points, or $60 million, for the full year of 2025.
Speaker #5: We recorded a provision for credit losses of $30 million for the fourth quarter, compared with $36 million for the third quarter. Non-performing assets remain broadly stable at 26 basis points of total assets as of December 31, 2025.
Operator: Non-performing assets remain broadly stable at 26 basis points of total assets as of 31 December 2025. Criticized loans declined Q4 to 2.01%, compared with 2.14% as of 30 September 2025, reflecting declines in criticized loans for really all major loan categories. The absolute level of problem loans continues to remain at low levels that we believe are very manageable. We continue to be vigilant and proactive in managing any credit risk. Currently, we are projecting that full year 2026 net charge-offs will be in the range of 20 to 30 basis points. As seen on slide 10, we increased the allowance for credit losses during the Q4 from $791 million to $810 million, or maintaining the 1.42%. We believe our loan portfolio is appropriately reserved as of 31 December 2025.
Operator: Non-performing assets remain broadly stable at 26 basis points of total assets as of 31 December 2025. Criticized loans declined Q4 to 2.01%, compared with 2.14% as of 30 September 2025, reflecting declines in criticized loans for really all major loan categories. The absolute level of problem loans continues to remain at low levels that we believe are very manageable. We continue to be vigilant and proactive in managing any credit risk. Currently, we are projecting that full year 2026 net charge-offs will be in the range of 20 to 30 basis points. As seen on slide 10, we increased the allowance for credit losses during the Q4 from $791 million to $810 million, or maintaining the 1.42%. We believe our loan portfolio is appropriately reserved as of 31 December 2025.
Speaker #5: Criticized loans declined quarter over quarter to 2.01%, compared with 2.14% as of September 30, 2025, reflecting declines in criticized loans for really all major loan categories.
Speaker #5: The absolute level of problem loans continues to remain at low levels that we believe are very manageable. We continue to be vigilant and proactive in managing any credit risk.
Speaker #5: Currently, we are projecting that full-year 2026 net charge-offs will be in the range of 20 to 30 basis points. As seen on slide 10, we increased the allowance for credit losses during the fourth quarter from.
Speaker #5: 791 million to 810 million, or maintaining the 1.42%, we believe our loan portfolio is appropriately reserved as of December 31, 2025. Returning 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.
Operator: 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 1 capital ratio stands at a robust 15.1%, while our tangible common equity ratio stands at 10.5%. Our board of directors has declared a Q4 2026 common stock dividend of $0.80 per share, a 33% increase to the dividend. The dividend will be payable on 17 February to stockholders of record on 2 February. I'll now turn it back to Chris to share a few comments on our outlook for the full year. Chris? Thank you, Irene. With respect to our guidance, as I previously mentioned, our outlook assumes modest economic growth and about 50 basis points of rate cuts, as implied by the year-end yield curve.
Operator: 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 1 capital ratio stands at a robust 15.1%, while our tangible common equity ratio stands at 10.5%. Our board of directors has declared a Q4 2026 common stock dividend of $0.80 per share, a 33% increase to the dividend. The dividend will be payable on 17 February to stockholders of record on 2 February. I'll now turn it back to Chris to share a few comments on our outlook for the full year. Chris?
Speaker #5: East West common equity Tier 1 capital ratio stands at a robust 15.1%, while our tangible common equity ratio stands at 10.5%. Our Board of Directors has declared a first quarter 2026 common stock dividend of $0.80 per share, a 33% increase to the dividend.
Speaker #5: The dividend will be payable on February 17 to stockholders of record on February 2. I'll now turn it back to Chris to share a few comments on our outlook for the
Speaker #5: full year. Chris? Thank
Speaker #6: Thank you, Irene. With respect to our guidance, as I previously mentioned, our outlook assumes modest economic growth and about 50 basis points of rate cuts, as implied by the year-end yield curve.
Christopher Del Moral-Niles: Thank you, Irene. With respect to our guidance, as I previously mentioned, our outlook assumes modest economic growth and about 50 basis points of rate cuts, as implied by the year-end yield curve.
Speaker #6: We expect end-of-period loan growth to be in the range of 5% to 7%, with continued relative strength in both C&I and residential mortgage lending.
Operator: We expect end-of-period loan growth to be in the range of 5% to 7%, with continued relative strength in both C&I and residential mortgage lending. We expect net interest income to grow in the range of 5% to 7% also, driven by the above-referenced balance sheet growth. We aspire to grow fee income at a faster pace than the overall balance sheet growth. Total operating expenses are expected to increase in the range of 7% to 9% year-over-year, driven primarily by headcount additions, IT-related expenditures, and partially offset by expected lower deposit account costs. We expect full-year net charge-offs, as Irene mentioned, in the range of 20 to 30 basis points and our effective tax rate to land between 22% and 23%. With that, I'll now open the call up for questions. Operator? Thank you. We will now begin the question and answer session.
Operator: We expect end-of-period loan growth to be in the range of 5% to 7%, with continued relative strength in both C&I and residential mortgage lending. We expect net interest income to grow in the range of 5% to 7% also, driven by the above-referenced balance sheet growth. We aspire to grow fee income at a faster pace than the overall balance sheet growth. Total operating expenses are expected to increase in the range of 7% to 9% year-over-year, driven primarily by headcount additions, IT-related expenditures, and partially offset by expected lower deposit account costs. We expect full-year net charge-offs, as Irene mentioned, in the range of 20 to 30 basis points and our effective tax rate to land between 22% and 23%. With that, I'll now open the call up for questions. Operator?
Speaker #6: We expect net interest income to grow in the range of 5% to 7%, also driven by the above-referenced balance sheet growth. We aspire to grow fee income at a faster pace than the overall balance sheet growth.
Speaker #6: Total operating expenses are expected to increase to the range of 7% to 9% year over year, driven primarily by headcount additions and IT-related expenditures, and partially offset by expected lower deposit account costs.
Speaker #6: We expect full-year net charge-offs, as Irene mentioned, in the range of 20 to 30 basis points, and our effective tax rate to land between 22 and 23 percent.
Speaker #6: With that, I'll now open the call up for questions.
Speaker #6: Operator? Thank
Operator: Thank you. We will now begin the question and answer session.
Speaker #7: We 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 speakerphone, please pick up your handset before pressing the keys.
Operator: To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. For any additional questions, you may re-enter the queue. And your first question today will come from Ibrahim Punawala with Bank of America. Please go ahead. Good afternoon, Ibbi. Good afternoon. Chris, so I guess first question, just in terms of loan growth, I guess the guidance makes sense. When we look at year-over-year, I think the expectation is 2026 growth could be better for the economy, for the industry on lending than '25.
Operator: To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. For any additional questions, you may re-enter the queue. And your first question today will come from Ebrahim Poonawala with Bank of America. Please go ahead.
Speaker #7: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up.
Speaker #7: For any additional questions, you may re-enter the queue. And your first question today will come from Ibrahim Punawalla with Bank of America. Please go ahead.
Operator: Good afternoon, Ibbi.
Speaker #8: Good
Speaker #8: afternoon, EV. Good
Ebrahim Poonawala: Good afternoon. Chris, so I guess first question, just in terms of loan growth, I guess the guidance makes sense. When we look at year-over-year, I think the expectation is 2026 growth could be better for the economy, for the industry on lending than '25.
Speaker #9: Afternoon, Chris. So I guess first question, just in terms of loan growth—the guidance makes sense. When we look at year-over-year, I think the expectation is 2026 growth could be better for the economy, for the industry on lending than '25.
Speaker #9: When we think about East West, I would think you should do much better in terms of loan growth this year versus last. Is there a reason why I'm missing something, or are you deliberately trying to manage the pace of growth when you think about just the overall balance?
Operator: When we think about East West, I would think you should do much better in terms of loan growth this year versus last. Is there a reason why I'm missing something, or are you deliberately trying to manage the pace of growth when you think about just the overall balance sheet? Let me take a first stab at that. Since I see Dominic smiling across the table, I'll let him chime in as well. I think we had a really strong Q4, and we saw really great traction in C&I in particular in the Q4. The reality is we know that's somewhat seasonal, and we saw a really nice Q4 last year, and then we saw a soft first half to some extent this year, 2025.
Operator: When we think about East West, I would think you should do much better in terms of loan growth this year versus last. Is there a reason why I'm missing something, or are you deliberately trying to manage the pace of growth when you think about just the overall balance sheet? Let me take a first stab at that. Since I see Dominic smiling across the table, I'll let him chime in as well. I think we had a really strong Q4, and we saw really great traction in C&I in particular in the Q4. The reality is we know that's somewhat seasonal, and we saw a really nice Q4 last year, and then we saw a soft first half to some extent this year, 2025.
Speaker #9: Sheet? Let me take a first.
Speaker #8: I'll take a stab at that since I see Dominic smiling across the table. I'll let him chime in as well. I think we had a really strong fourth quarter, and we saw really great traction in C&I in particular in the fourth quarter.
Speaker #8: The reality is, we know that's somewhat seasonal, and we saw a really nice fourth quarter last year, and then we saw a soft first half to some extent this year, 2025.
Speaker #8: And so we want to make sure we're thinking about the trends that we're seeing, the customer activity that we expect, and that we're reporting forward numbers that we know we can hit with good reason.
Operator: And so we want to make sure we're thinking about the trends that we're seeing, the customer activity that we expect, and that reporting forward numbers that we know we can hit with good reason. So I think there's a bit of recognizing the pattern that we saw last year and understanding that might repeat itself in 2026, even though I think you're right, things are set up to be a little more or a little less erratic, perhaps, in 2026 than they were in 2025. Dominic? Well, let us all reflect back in year 2025. I would think that during the Q1, not a whole lot of people would expect that this year turned out to be such a pretty good year because there was a lot of volatility of what the economy is going to be like and what are the changes that may be happening.
Operator: And so we want to make sure we're thinking about the trends that we're seeing, the customer activity that we expect, and that reporting forward numbers that we know we can hit with good reason. So I think there's a bit of recognizing the pattern that we saw last year and understanding that might repeat itself in 2026, even though I think you're right, things are set up to be a little more or a little less erratic, perhaps, in 2026 than they were in 2025. Dominic? Well, let us all reflect back in year 2025. I would think that during the Q1, not a whole lot of people would expect that this year turned out to be such a pretty good year because there was a lot of volatility of what the economy is going to be like and what are the changes that may be happening.
Speaker #8: So I think there's a bit of recognizing the pattern that we saw last year and understanding that might repeat itself in 2026, even though I think you're right, things are set up to be a little more—or a little less—erratic, perhaps, in 2026 than they were in 2025.
Speaker #8: Dominic? Oh,
Speaker #6: Well, let's all reflect back on the year 2025. I would think that during the first quarter, not a whole lot of people would have expected that this year would turn out to be such a pretty good year.
Speaker #6: Because there was a lot of volatility about what the economy is going to be like and what are the changes that may be happening.
Speaker #6: But it all worked out fine. In 2026, right now, it's looking pretty good. You are absolutely right that there should be momentum that makes us even having a stronger loan growth opportunity for the remainder of the year.
Operator: But it all worked out fine. In 2026, right now, it's looking pretty good. You are absolutely right that there should be momentum that makes us even have a stronger loan growth opportunity for the remainder of the year. However, we just never know exactly what's going to happen throughout the year due to whatever changes that may come. My view is very simple: good time, bad time, East West always outperformed the others. So if things are going really well, if you see that maybe the average is actually as a growth percentage higher than our outlook, then the likelihood East West is actually doing better than what we projected here is very high.
Operator: But it all worked out fine. In 2026, right now, it's looking pretty good. You are absolutely right that there should be momentum that makes us even have a stronger loan growth opportunity for the remainder of the year. However, we just never know exactly what's going to happen throughout the year due to whatever changes that may come. My view is very simple: good time, bad time, East West always outperformed the others. So if things are going really well, if you see that maybe the average is actually as a growth percentage higher than our outlook, then the likelihood East West is actually doing better than what we projected here is very high.
Speaker #6: However, we just never know exactly what's going to happen throughout the year, due to whatever changes that may come. My view is very simple.
Speaker #6: Good time, bad time, EAST WEST always outperformed the others. So if things are going really well, you see that maybe the average is actually, as a growth percentage, higher than our outlook.
Speaker #6: Then the likelihood of EAST WEST actually doing better than what we projected here is very high. On the other hand, if the economy didn't turn out to be what we expected, we probably may not even be able to get to this number, but rest assured, we're going to be doing better.
Operator: On the other hand, if the economy didn't turn out to be what we expected, and we probably may not even be able to get to this number, but rest assured, we're going to be doing better than our peers. So I'm much more focusing on making sure that we stay as a high-performing bank and, relatively speaking, compare with whether we're our peers or the entire banking industry. And that's something sort of is a given from an East West Bank position in terms of what we wanted to do and what we want to achieve. But in terms of projecting the economy, sometimes it's hard for us to do. No, that's helpful and makes sense.
Operator: On the other hand, if the economy didn't turn out to be what we expected, and we probably may not even be able to get to this number, but rest assured, we're going to be doing better than our peers. So I'm much more focusing on making sure that we stay as a high-performing bank and, relatively speaking, compare with whether we're our peers or the entire banking industry. And that's something sort of is a given from an East West Bank position in terms of what we wanted to do and what we want to achieve. But in terms of projecting the economy, sometimes it's hard for us to do. No, that's helpful and makes sense.
Speaker #6: Than our peers. So I'm much more focused on making sure that we stay a high-performing bank and, relatively speaking, compared with whether we're talking about our peers or the entire banking industry.
Speaker #6: And that's something that sort of is a given from an East West Bank position in terms of what we wanted to do and what we want to achieve.
Speaker #6: So, but in terms of projecting the economy, sometimes it's hard for us to—
Speaker #9: Well, that's helpful and makes sense. I guess maybe another question—just when you look at the expense growth number, just remind us: I know you're building out sort of the asset management and fee capabilities.
Operator: I guess maybe another question, just when you look at the expense growth number, just to remind us. I know you're building out sort of the asset management and fee capabilities, but when you think about the top two or three areas where the bank is spending today, is it hiring, opening new branches, compliance, and tech? Give us a sense of where these investments are going and how we should think about those driving future growth. Sure. We are certainly budgeting a higher degree of expense growth in technology writ large, but specifically data processing, software, computer expenses. Along with that, we have a higher level of growth in some consulting costs, and that's the largest growth category.
Operator: I guess maybe another question, just when you look at the expense growth number, just to remind us. I know you're building out sort of the asset management and fee capabilities, but when you think about the top two or three areas where the bank is spending today, is it hiring, opening new branches, compliance, and tech? Give us a sense of where these investments are going and how we should think about those driving future growth. Sure. We are certainly budgeting a higher degree of expense growth in technology writ large, but specifically data processing, software, computer expenses. Along with that, we have a higher level of growth in some consulting costs, and that's the largest growth category.
Speaker #9: But when you think about the top two or three areas where the bank is spending today, is it hiring, opening new branches, compliance, and tech?
Speaker #9: Give us a sense of where these investments are going, and how we should think about those driving.
Speaker #9: future growth. Sure.
Speaker #8: We are certainly budgeting a higher degree of expense growth in technology writ large, but specifically data processing, software, and computer expenses. Along with that, we have a higher level of growth in some consulting costs.
Speaker #8: And that's the largest growth category. But along with that, as you correctly mentioned, we're hiring—and we're hiring for Wealth, and we're hiring for Commercial Banking, and we're hiring for Technology, and we're hiring for Risk Management.
Operator: But along with that, as you correctly mentioned, we're hiring, and we're hiring for wealth, and we're hiring for commercial banking, and we're hiring for technology, and we're hiring for risk management. And all of those areas will be the second sort of biggest bucket. And of course, comp is our biggest bucket overall. But if I draw your attention to slide eight, Ebrahim, and you look at the last four years, I think East West has put up a pretty strong track record over the last four years. And alongside that very strong earnings and balance sheet track record has come a 10% CAGR in expenses, but I don't think our shareholders mind because all of those expenses have gone to support even stronger total returns. Got it. Thank you. The next question will come from Dave Rochester with Cantor Fitzgerald. Please go ahead. Good afternoon, Dave. Hey, guys.
Operator: But along with that, as you correctly mentioned, we're hiring, and we're hiring for wealth, and we're hiring for commercial banking, and we're hiring for technology, and we're hiring for risk management. And all of those areas will be the second sort of biggest bucket. And of course, comp is our biggest bucket overall. But if I draw your attention to slide eight, Ebrahim, and you look at the last four years, I think East West has put up a pretty strong track record over the last four years. And alongside that very strong earnings and balance sheet track record has come a 10% CAGR in expenses, but I don't think our shareholders mind because all of those expenses have gone to support even stronger total returns. Got it. Thank you. The next question will come from Dave Rochester with Cantor Fitzgerald. Please go ahead. Good afternoon, Dave. Hey, guys.
Speaker #8: And all of those areas will be the second sort of biggest bucket. And of course, comp is our biggest bucket overall. But if I draw your attention to slide 8, Ibrahim, and you look at the last four years, I think EAST WEST has put up a pretty strong track record over the last four years.
Speaker #8: And alongside that very strong earnings and balance sheet track record has come a 10% CAGR in expenses. But I don't think our shareholders mind, because all of those expenses have gone to support even stronger total.
Speaker #8: returns. Got it.
Speaker #9: Thank you.
Speaker #1: The next question will come from Dave Rochester with Canterford Gerald. Please go ahead.
Speaker #1: ahead. Afternoon,
Speaker #10: Hey, guys. How are you, Dave, doing? Just wanted to touch base on the fee income trends for '26. I know you mentioned those would grow faster than that 5 to 7% for the balance sheet.
Operator: How are you doing? Just wanted to touch base on the fee income trends for 2026. I know you mentioned those would grow faster than that 5% to 7% for the balance sheet. Last year, you did something around 12% growth. Is there any reason why that should slow this year, given the investments in the business you're making? And you're launching the FX platform. You just talked about wealth and other things. It seems like that should all help the growth rate this year, maybe even boost it a little bit versus last year. Just wanted to get your thoughts on all that. Yep. And that's why I think I try to say, and maybe I didn't come across clearly, we aspire to continuing the double-digit trajectory.
David Rochester: How are you doing? Just wanted to touch base on the fee income trends for 2026. I know you mentioned those would grow faster than that 5% to 7% for the balance sheet. Last year, you did something around 12% growth. Is there any reason why that should slow this year, given the investments in the business you're making? And you're launching the FX platform. You just talked about wealth and other things. It seems like that should all help the growth rate this year, maybe even boost it a little bit versus last year. Just wanted to get your thoughts on all that. Yep. And that's why I think I try to say, and maybe I didn't come across clearly, we aspire to continuing the double-digit trajectory.
Speaker #10: Last year, you did something around 12% growth. Is there any reason why that should slow this year, given the investments in the business you're making and you're launching the FX platform?
Speaker #10: You just talked about wealth and other things. It seems like that should all help the growth rate this year, maybe even boost it a little bit versus last year.
Speaker #10: Just wanted to get your
Speaker #10: thoughts on all that. Yeah.
Speaker #6: And that's why I think I tried to say, and maybe I didn't come across clearly, we aspire to continue the double-digit trajectory. I think if you look at page seven, the four-year CAGR there has been 10%.
Operator: I think if you look at page seven, the four-year CAGR there has been 10%, and we would like to aspire to continue to deliver that type of revenue growth on the fee income side. Great. And then just on the loan growth, I think you'd mentioned recently seeing some of your CRE customers getting more interested and getting more active, and you actually grew that fairly decently this year in the mid-single-digit range, which is probably stronger than what you thought this time last year. Do you think there's an opportunity to grow more in CRE this year? I think I'll jump in for Dominic.
Operator: I think if you look at page seven, the four-year CAGR there has been 10%, and we would like to aspire to continue to deliver that type of revenue growth on the fee income side. Great. And then just on the loan growth, I think you'd mentioned recently seeing some of your CRE customers getting more interested and getting more active, and you actually grew that fairly decently this year in the mid-single-digit range, which is probably stronger than what you thought this time last year. Do you think there's an opportunity to grow more in CRE this year? I think I'll jump in for Dominic.
Speaker #6: And we would like to aspire to continue to deliver that type of revenue growth on the fee income.
Speaker #6: side. Great.
Speaker #10: And then just on the loan growth, I think you’d mentioned recently seeing some of your CRE customers getting more interested and getting more active, and you actually grew that fairly decently this year.
Speaker #10: In mid-single-digit range, which is probably stronger than what you thought. This time last year, do you think there's an opportunity to grow more in CRE this year?
Speaker #6: I think I'll jump in for Dominic. I think what he said on a call about a year and a quarter ago, a year and a half ago, was if we saw rates come down into the sort of short end with a low to mid-3 handle, we would probably start to see traction pick up in commercial real estate.
Operator: I think what he said on a call about a year and a quarter ago, a year and a half ago, was if we saw rates come down into the sort of short end with a low to mid-three handle, we would probably start to see traction pick up in commercial real estate. We're approaching that level essentially now and expect to hit that lower bound over the course of this year. So our broad expectation is, yes, we'll see pick up overall in commercial real estate. But with that, what I think Dominic has emphasized to the team is where we are picking our partners is with folks that we have established long-term business relationships with, where we know they're savvy operators, and we know they're looking at the markets with the benefit of years and years of experience.
Operator: I think what he said on a call about a year and a quarter ago, a year and a half ago, was if we saw rates come down into the sort of short end with a low to mid-three handle, we would probably start to see traction pick up in commercial real estate. We're approaching that level essentially now and expect to hit that lower bound over the course of this year. So our broad expectation is, yes, we'll see pick up overall in commercial real estate. But with that, what I think Dominic has emphasized to the team is where we are picking our partners is with folks that we have established long-term business relationships with, where we know they're savvy operators, and we know they're looking at the markets with the benefit of years and years of experience.
Speaker #6: We're approaching that level essentially now and expect to hit that lower bound over the course of this year. So our broad expectation is, yes, we'll see pickup overall in commercial real estate.
Speaker #6: But with that, what I think Dominic has emphasized to the team is where we are picking our partners is with folks that we have established long-term business relationships with, where we know they're savvy operators, and we know they're looking at the markets with the benefit of years and years of experience.
Speaker #6: And we think that'll be the right place for us to play.
Operator: We think that'll be the right place for us to play. The market is there for us. But East West has a very, very strong discipline of our overall asset liability management and also concentration allocation, etc. So what we looked at is that at this moment, while we are in a very, very comfortable position with our CRE concentration, we're nowhere even remotely close to the level that we need to have high alert. However, we always understand that the ideal situation for the bank to have high-quality growth is to have a very balanced growth from multiple categories, which is C&I, CRE, residential mortgages, all growing in balance. So in that standpoint, on one hand, I expect that there's a good likelihood the market will be there for us to originate a lot more CRE loans.
Operator: We think that'll be the right place for us to play. The market is there for us. But East West has a very, very strong discipline of our overall asset liability management and also concentration allocation, etc. So what we looked at is that at this moment, while we are in a very, very comfortable position with our CRE concentration, we're nowhere even remotely close to the level that we need to have high alert. However, we always understand that the ideal situation for the bank to have high-quality growth is to have a very balanced growth from multiple categories, which is C&I, CRE, residential mortgages, all growing in balance. So in that standpoint, on one hand, I expect that there's a good likelihood the market will be there for us to originate a lot more CRE loans.
Speaker #11: The market is there for us. And what East West has is a very, very strong discipline of our overall asset-liability management, and also concentration allocation, etc.
Speaker #11: So what we looked at is that, at this moment, while we are in a very, very comfortable position with our CRE concentration, we're nowhere even remotely close to the level that we need to have high alert.
Speaker #11: However, we always understand that the ideal situation for the bank to have high-quality growth is to have a very balanced growth from multiple categories.
Speaker #11: Which is C&I, CRE, residential mortgages, all growing in balance. So from that standpoint, on one hand, I expect that there's a likely good likelihood the market will be there for us to originate a lot more CRE loans.
Speaker #11: We tend to be a little bit more selective, and making sure that we put our allocation primarily to our long-term, sustainable clientele. So with that, we are not out there aggressively chasing, just growing loans for the sake of growing.
Operator: We tend to be a little bit more selective in making sure that we put our allocation primarily to our long-term sustainable clientele. So with that, we are not out there aggressively chasing just growing loans for the sake of growing loans. Yep. Appreciate that. Maybe just one last one on the TCE ratio. We've talked about this a lot. Just in terms of where it is now, your 10.5% continues to grow. You had a very nice dividend increase there. So I know that cuts into it a little bit, but it still seems like returns and your expected balance sheet growth could ultimately end up pushing that to 11% and beyond. What are your thoughts on allowing that to continue to grow? And is there any new range that we should look for as to how you're thinking about where that should trend? Thanks.
Operator: We tend to be a little bit more selective in making sure that we put our allocation primarily to our long-term sustainable clientele. So with that, we are not out there aggressively chasing just growing loans for the sake of growing loans. Yep. Appreciate that. Maybe just one last one on the TCE ratio. We've talked about this a lot. Just in terms of where it is now, your 10.5% continues to grow. You had a very nice dividend increase there. So I know that cuts into it a little bit, but it still seems like returns and your expected balance sheet growth could ultimately end up pushing that to 11% and beyond. What are your thoughts on allowing that to continue to grow? And is there any new range that we should look for as to how you're thinking about where that should trend? Thanks.
Speaker #11: loans. Yeah.
Speaker #10: Appreciate that. Maybe just one last one. On the TCE ratio—and we've talked about this a lot—just in terms of where it is now, you're at 10.5%, continues to grow.
Speaker #10: You had a very nice dividend increase there. So I know that cuts into it a little bit, but it still seems like returns and your expected balance sheet growth could ultimately end up pushing that to 11% and beyond.
Speaker #10: What are your thoughts on allowing that to continue to grow, and is there any new range that we should look for as to how you're thinking about where that should trend?
Speaker #10: Thanks.
Speaker #6: As
Operator: As pointed out on our guidance page on slide 12, we remain committed to delivering top quartile returns alongside best-in-class efficiency. We think our capital levels are part of what attracts customers to East West and allows us to deliver the timely, effective service that we offer our clients in a way that banks can't. We think that capital supports that initiative, and we're very proud of having one of the strongest levels of capital of any bank in the industry, which we think will sustain us, particularly if there's continued volatility or uncertain times ahead. All right. Great. Thanks, guys. The next question will come from Casey Haire with Autonomous Research. Please go ahead. Hey, Casey. Good afternoon. Thanks. Yeah. Good afternoon, guys. Happy New Year. So I had a question on deposit costs.
Operator: As pointed out on our guidance page on slide 12, we remain committed to delivering top quartile returns alongside best-in-class efficiency. We think our capital levels are part of what attracts customers to East West and allows us to deliver the timely, effective service that we offer our clients in a way that banks can't. We think that capital supports that initiative, and we're very proud of having one of the strongest levels of capital of any bank in the industry, which we think will sustain us, particularly if there's continued volatility or uncertain times ahead. All right. Great. Thanks, guys. The next question will come from Casey Haire with Autonomous Research. Please go ahead. Hey, Casey. Good afternoon.
Speaker #6: As pointed out on our guidance page on slide 12, we remain committed to delivering top quartile returns, alongside best-in-class efficiency. We think our capital levels are part of what attracts customers to East West and allows us to deliver the timely, effective service that we offer our clients.
Speaker #6: In a way that things can't. We think that capital supports that initiative, and we're very proud of having one of the strongest levels of capital of any bank in the industry, which we think will sustain us, particularly if there's continued volatility or uncertain times.
Speaker #6: ahead. All right.
Speaker #10: Great. Thanks,
Speaker #10: Guys, the next question will come.
Speaker #1: From Casey Hare with Autonomous Research. Please go ahead.
Speaker #1: ahead. Hey, Casey.
Speaker #8: Good afternoon.
Speaker #2: Thanks. Yeah. Good afternoon, guys. Happy New Year. So I had a question on deposit costs. So the 60% deposit beta—just wanted some color on where you think that can trend throughout.
Casey Haire: Thanks. Yeah. Good afternoon, guys. Happy New Year. So I had a question on deposit costs.
Operator: So the 60% deposit beta, just wanted some color on where you think that can trend throughout 2026. Well, I think we've been very disciplined about reacting very quickly to changes in market rates, but specifically to Fed rates. And so I think we've got that process very well-oiled now and moves very efficiently. So we'll continue to make those changes. But obviously, as rates continue to grind lower, our incremental ability to do that at higher levels becomes more challenging. So what we've guided is we're very comfortable that our betas will exceed 0.5, and we're very happy to have delivered 0.6 so far. Gotcha. Okay. And then, Irene, a question for you on the credit. So the charge-off guide for 2026 bumped up a little bit. Just wondering what's driving that. There was very little migration. NPA is very low. It feels pretty good.
Operator: So the 60% deposit beta, just wanted some color on where you think that can trend throughout 2026. Well, I think we've been very disciplined about reacting very quickly to changes in market rates, but specifically to Fed rates. And so I think we've got that process very well-oiled now and moves very efficiently. So we'll continue to make those changes. But obviously, as rates continue to grind lower, our incremental ability to do that at higher levels becomes more challenging. So what we've guided is we're very comfortable that our betas will exceed 0.5, and we're very happy to have delivered 0.6 so far. Gotcha. Okay. And then, Irene, a question for you on the credit. So the charge-off guide for 2026 bumped up a little bit. Just wondering what's driving that. There was very little migration. NPA is very low. It feels pretty good.
Speaker #2: 26. Well, I think we've been very
Speaker #6: Disciplined about reacting very quickly to changes in the market rates, but specifically to Fed rates. And so I think we've got that process very well-oiled now and it moves very efficiently.
Speaker #6: So we'll continue to make those changes, but obviously, as rates continue to grind lower, our incremental ability to do that at higher levels becomes more challenging.
Speaker #6: So what we've guided is we're very comfortable that our betas will exceed 0.5, and we're very happy to have delivered 0.6 so far.
Speaker #2: Gotcha. Okay. And then, Irene, question for you on the credit. So the charge-off guide for '26 bumped up a little bit. Just wondering what's driving that.
Speaker #2: There was very little migration, NPAs—very low. It feels pretty good. I'm just wondering why maybe '25 was just a very good year. Just wondering what you're seeing to bump up the—
Operator: I'm just wondering why maybe 2025 was just a very good year. Just wondering what you're seeing to bump up the charge-off guide for 2026. Yeah. Great question. So if you look at charge-offs for the quarter and then for the full year, the absolute levels are pretty low, right? And even if you compare to last year, we are 26 basis points, 11 basis points, 26 basis points. Historically, these are low levels. With the guidance for 2026, although the absolute levels of credit, the metrics are all in great shape, quite honestly, there are and there are no systemic issues that we see. From time to time, individual credits can turn, and the charge-off guidance simply reflects that. Gotcha. Thank you. The next question comes from David C. Varini with Jefferies. Please go ahead. Good afternoon, Dave. Hi. How's it going, Chris? Thanks for taking the question.
Operator: I'm just wondering why maybe 2025 was just a very good year. Just wondering what you're seeing to bump up the charge-off guide for 2026. Yeah. Great question. So if you look at charge-offs for the quarter and then for the full year, the absolute levels are pretty low, right? And even if you compare to last year, we are 26 basis points, 11 basis points, 26 basis points. Historically, these are low levels. With the guidance for 2026, although the absolute levels of credit, the metrics are all in great shape, quite honestly, there are and there are no systemic issues that we see. From time to time, individual credits can turn, and the charge-off guidance simply reflects that. Gotcha. Thank you. The next question comes from David Chiaverini with Jefferies. Please go ahead. Good afternoon, Dave.
Speaker #2: charge-off guide for '26. Yeah.
Speaker #3: Great question. So if you look at charge-offs for the quarter and then for the full year, their absolute levels are pretty low, right? And even if you compare to last year, we are at 26 basis points, 11 basis points, 26 basis points.
Speaker #3: Historically, these are low levels. With the guidance for 2026, although the absolute levels of credit—the metrics are all in great shape, quite honestly—there are, and there are no systemic issues that we see.
Speaker #3: From time to time, individual credits can turn, and the charge-off guidance simply reflects that.
Speaker #2: Gotcha. Thank you.
Speaker #1: The next question comes from David Cioverini with Jefferies.
Speaker #1: Please go ahead. Good
Speaker #12: afternoon, David. Hi.
David Chiaverini: Hi. How's it going, Chris? Thanks for taking the question.
Speaker #4: How's it going, Chris? Thanks for taking the question. So, I wanted to ask about the net interest margin and the outlook there. You mentioned how the near-term liability sensitivity has benefited you.
Operator: So, wanted to ask about the net interest margin, the outlook there. You mentioned about how the near-term liability sensitivity has benefited you. How should we think about your positioning as we kind of get into 2026? Sure. We broadly remain an overall asset-sensitive bank. That having been said, we've been focused on growing dollar NII, and we believe we'll offset the expected downdraft effects of declining rates with balance sheet growth over the course of the year. That should allow us to deliver a growing dollar NII as you look over the course of the year, supported by what we think will be continued consistent deposit repricing activity. Great. Thanks for that. On the deposit side, you mentioned about, and we saw in the numbers, the non-interest-bearing deposit growth was strong in Q4.
Operator: So, wanted to ask about the net interest margin, the outlook there. You mentioned about how the near-term liability sensitivity has benefited you. How should we think about your positioning as we kind of get into 2026? Sure. We broadly remain an overall asset-sensitive bank. That having been said, we've been focused on growing dollar NII, and we believe we'll offset the expected downdraft effects of declining rates with balance sheet growth over the course of the year. That should allow us to deliver a growing dollar NII as you look over the course of the year, supported by what we think will be continued consistent deposit repricing activity. Great. Thanks for that. On the deposit side, you mentioned about, and we saw in the numbers, the non-interest-bearing deposit growth was strong in Q4.
Speaker #4: How should we think about your positioning as we kind of get into 2026?
Speaker #12: Sure. We broadly remain an overall asset-sensitive bank—that hasn’t been said. We’ve been focused on growing dollar NII, and we believe we’ll offset the expected downdraft effects of declining rates with balance sheet growth over the course of the year.
Speaker #12: That should allow us to deliver a growing dollar NII as you look over the course of the year.
Speaker #12: That should allow us to deliver a growing dollar NII as you look over the course of the year. We think, great, we'll continue consistent deposit repricing.
Speaker #12: activity. Great.
Speaker #4: Thanks for that. And on the deposit side, you mentioned about, and we saw in the numbers, the non-interest-bearing deposit growth was strong in the fourth quarter.
Speaker #4: Can you talk about what drove that, and if that could be sustainable in the coming—
Speaker #4: Can you talk about what drove that, and if that could be sustainable in coming quarters? Yeah.
Operator: Can you talk about what drove that and if that could be sustainable in coming quarters? Yeah. So a shout-out to our retail team in particular, but also to our commercial team. There was an increased emphasis and focus on driving core commercial DDA balance activity throughout the year, starting really towards the end of Q1 and continuing over the subsequent three quarters with outstanding results here accumulating in Q4. And so that focus on that driving business checking account relationships continued to build momentum and steam both in our retail channels and our commercial relationship manager channels over the course of the year and drove the result that you're seeing. We have and continue to drive a focus on that, and that will be a key priority for 2026.
Operator: Can you talk about what drove that and if that could be sustainable in coming quarters? Yeah. So a shout-out to our retail team in particular, but also to our commercial team. There was an increased emphasis and focus on driving core commercial DDA balance activity throughout the year, starting really towards the end of Q1 and continuing over the subsequent three quarters with outstanding results here accumulating in Q4. And so that focus on that driving business checking account relationships continued to build momentum and steam both in our retail channels and our commercial relationship manager channels over the course of the year and drove the result that you're seeing. We have and continue to drive a focus on that, and that will be a key priority for 2026.
Speaker #12: So a shout-out to our retail team in particular, but also to our commercial team. There was an increased emphasis and focus on driving core commercial DDA balance activity throughout the year, starting really towards the end of the first quarter and continuing over the subsequent three quarters, with outstanding results here accumulating in the fourth quarter.
Speaker #12: And so, that focus on driving business checking account relationships continued to build momentum and steam, both in our retail channels and our commercial relationship manager channels, over the course of the year and drove the result that you're seeing.
Speaker #12: We have, and continue to, drive a focus on that, and that will be a key priority for 2026. And we think it will be something that will deliver additional value, particularly in a declining rate context.
Operator: We think it will be something that will deliver additional value, particularly in a declining rate context. Great. Thank you. The next question will come from Bernard von Gizycki with Deutsche Bank. Please go ahead. Hi, Bernard. Hey, good afternoon. So just on you've been dynamically hedging for the outlook and rates and have materially reduced the cash hedge headwinds. What was the headwind in 2024 and 2025, and what are you expecting in 2024 and 2026? The headwind for the quarter was $2 million. Keep in mind, rates came down over the course of the year. So we started at it was more than $20 million at one point in time per quarter, and it came down to $2 million in the fourth quarter. And I think what we have indicated previously was essentially the hedges we have on today are in the money today.
Operator: We think it will be something that will deliver additional value, particularly in a declining rate context. Great. Thank you. The next question will come from Bernard von Gizycki with Deutsche Bank. Please go ahead. Hi, Bernard.
Speaker #4: Great. Thank
Speaker #4: you. The next
Speaker #1: The question will come from Bernard Vangaziki with Deutsche Bank. Please go ahead.
Speaker #13: So Bernard, good afternoon. So just on—you've been dynamically hedging for the outlook and rates and have materially reduced the cash hedge headwinds. What would the headwind be in full year '25, and what do you expect in full year '26?
Bernard Von Gizycki: Hey, good afternoon. So just on you've been dynamically hedging for the outlook and rates and have materially reduced the cash hedge headwinds. What was the headwind in 2024 and 2025, and what are you expecting in 2024 and 2026? The headwind for the quarter was $2 million. Keep in mind, rates came down over the course of the year. So we started at it was more than $20 million at one point in time per quarter, and it came down to $2 million in the fourth quarter. And I think what we have indicated previously was essentially the hedges we have on today are in the money today.
Speaker #12: The headwind for the quarter was $2 million. Keep in mind rates came down over the course of the year, so we started at—it was more than $20 million at one point in time per quarter, and it came down to $2 million in the fourth quarter.
Speaker #12: And I think what we have indicated previously was, essentially, the hedges we have on today are in the money today. And so we are now in a position where we expect to have those be tailwinds as we look forward into 2026.
Operator: And so we are now in a position where we expect to have those be tailwinds as we look forward into 2026, in addition to the fact that we expect more rate cuts to come. We've got about $1 billion of recently swapped at roughly like a 370, 380 level, and those are in the money today. Great. And just to follow up, as you get closer to the $100 billion asset threshold for category four, where are you in your progress to fulfill the requirements with processes and expenses needed, and how does that change if the threshold is increased as regulators have been pointing to? Sure. We've been focused on making the investments, the technology, and the staffing we need to be successful for our customers today. And we always looked at $100 billion as being somewhere down the road.
Operator: And so we are now in a position where we expect to have those be tailwinds as we look forward into 2026, in addition to the fact that we expect more rate cuts to come. We've got about $1 billion of recently swapped at roughly like a 370, 380 level, and those are in the money today. Great. And just to follow up, as you get closer to the $100 billion asset threshold for category four, where are you in your progress to fulfill the requirements with processes and expenses needed, and how does that change if the threshold is increased as regulators have been pointing to? Sure. We've been focused on making the investments, the technology, and the staffing we need to be successful for our customers today. And we always looked at $100 billion as being somewhere down the road.
Speaker #12: In addition to the fact that we expect more rate cuts to come, we've got about a billion dollars every swap at roughly like a 3.70, 3.80 level.
Speaker #12: And those will be, those are in the money today.
Speaker #13: Great. And just to follow up, as we get closer to the $100 billion asset threshold for category four, where are you in your progress to fulfill the requirements with processes and expenses needed, and how does that change in the threshold?
Speaker #13: Has increased, as regulators have been pointing to?
Speaker #12: Sure. We've been focused on making the investments in the technology and the staffing we need to be successful for our customers today. And we always looked at $100 billion as being somewhere down the road.
Speaker #12: And so, the investments that we're making—the expenses that we're talking about, the computer software, the consulting services, the data processing solutions, the efforts—those are all to maximize the opportunity we see to work with our clients today and deliver value.
Operator: And so the investments that we're making, the expenses that we're talking about, the computer software, the consulting services, the data processing solutions, the efforts, those are all to maximize the opportunity we see to work with our clients today and deliver value. And so we don't think there's anything about that that changes over the near term, certainly 2026, but we look forward to what we expect will be some reconsideration of those thresholds. And we look forward to the opportunity to continue to grow and meet the needs of our customers over the long term. Great. Thanks for taking my questions. The next question will come from David Smith with Truist Securities. Please go ahead. Hey, good afternoon.
Operator: And so the investments that we're making, the expenses that we're talking about, the computer software, the consulting services, the data processing solutions, the efforts, those are all to maximize the opportunity we see to work with our clients today and deliver value. And so we don't think there's anything about that that changes over the near term, certainly 2026, but we look forward to what we expect will be some reconsideration of those thresholds. And we look forward to the opportunity to continue to grow and meet the needs of our customers over the long term. Great. Thanks for taking my questions. The next question will come from David Smith with Truist Securities. Please go ahead. Hey, good afternoon.
Speaker #12: And so we don't think there's anything about that that changes over the near term, certainly 2026, but we look forward to what we expect will be some reconsideration of those thresholds, and we look forward to the opportunity to continue to grow and meet the needs of our customers over the long.
Speaker #12: term. Great.
Speaker #13: Thanks for taking my questions.
Speaker #1: The next question will come from Yeah. David Smith with Truist Securities. Please go ahead.
Speaker #1: ahead. Hi, good
Speaker #14: Afternoon. On e-growth, I know that you all have been opportunistic at times in recent years about pursuing some inorganic tuck-in deals to bolster different parts of the fee growth engine.
Operator: On fee growth, I know that you all have been opportunistic at times in recent years about pursuing some inorganic tuck-in deals to bolster different parts of the fee growth engine. I'm just wondering, given how strong capital levels are today, are there any areas where you're contemplating some sort of partnership or other kind of inorganic deal to boost fee growth? Where might that come from? What areas are of interest for you right now? Thank you. Embedded in our projected expense trends is hiring and organic growth that will support and supplement our fee expectations as it's laid out. But in addition to that, yes, we have looked and continue to look for opportunities that are inorganic to bolster that growth and supplement that so that we have a better reach of either services, platforms, geographies, or talent to deliver even more value to our customers.
David Smith: On fee growth, I know that you all have been opportunistic at times in recent years about pursuing some inorganic tuck-in deals to bolster different parts of the fee growth engine. I'm just wondering, given how strong capital levels are today, are there any areas where you're contemplating some sort of partnership or other kind of inorganic deal to boost fee growth? Where might that come from? What areas are of interest for you right now? Thank you. Embedded in our projected expense trends is hiring and organic growth that will support and supplement our fee expectations as it's laid out. But in addition to that, yes, we have looked and continue to look for opportunities that are inorganic to bolster that growth and supplement that so that we have a better reach of either services, platforms, geographies, or talent to deliver even more value to our customers.
Speaker #14: I'm just wondering, given how strong capital levels are today, are there any areas where you're contemplating some sort of partnership or other kind of inorganic deal to boost fee growth?
Speaker #14: Where might that come from? What areas are of interest for you right now? Thank you.
Speaker #14: you. Sure.
Speaker #12: Embedded in our projected expense trends is hiring and organic growth that will support and supplement our fee expectations as it's laid out. But in addition to that, yes, we have looked and continue to look for opportunities that are inorganic to bolster that growth and supplement that, so that we have a better reach of either services, platforms, geographies, or talent to deliver even more value to our customers.
Speaker #12: And we'll continue to look for those opportunities. And as you correctly point out, capital is not the constraint, but as I think for those of you that have been around the story for long, the constraint really is Irene and Dominic's sense of where value is.
Operator: And we'll continue to look for those opportunities. And as you correctly point out, capital is not the constraint. But as I think for those of you that have been around the story for long, the constraint really is Irene and Dominic's sense of where value is and the relative cost of buy versus build. And when you're building and delivering 10% organic, it's a high bar for something that makes sense that you have to go spend a big premium for. And so I think we'll be very thoughtful about that. But we have the flexibility. We have the optionality. We have the capital. We're attracting the hires, and we're growing the fees all at the same time. Thank you.
Operator: And we'll continue to look for those opportunities. And as you correctly point out, capital is not the constraint. But as I think for those of you that have been around the story for long, the constraint really is Irene and Dominic's sense of where value is and the relative cost of buy versus build. And when you're building and delivering 10% organic, it's a high bar for something that makes sense that you have to go spend a big premium for. And so I think we'll be very thoughtful about that. But we have the flexibility. We have the optionality. We have the capital. We're attracting the hires, and we're growing the fees all at the same time. Thank you.
Speaker #12: And the relative cost of buy versus build. And when you're building and delivering 10% organic, it's a high bar for something that makes sense that you have to go spend a big premium for.
Speaker #12: And so I think we'll be very thoughtful about that, but we have the flexibility, we have the optionality, we have the capital, we're attracting the hires, and we're growing the fees all at the same time.
Speaker #12: And so I think we'll be very thoughtful about that, but we have the flexibility, we have the optionality, we have the capital, we're attracting the hires, and we're growing the fees all at the same time.
Speaker #14: Thank you. And just specifically then, I wonder if you could give us an update on any plans on how blockchain or cryptocurrency might fit into your business, helping clients with cross-border money movements or anything along those lines?
Operator: Just specifically then, I wonder if you could give us an update on any plans on how blockchain or cryptocurrency might fit into your business, helping clients with cross-border money movements or anything along those lines. I think at this point in the United States, when it comes to blockchain, that clearly can expedite payment, trade, and so forth. We really haven't seen from banks and clients because it's not like something that we can just do on our own without some sort of collaboration with another corresponding bank and so forth. I think at this point, it's still a little bit too early. We're continuing to watch the progress on these technologies. We'll just adjust accordingly. That's something that East West would always do, which is while being prudent, but stay agile. Thank you.
Operator: Just specifically then, I wonder if you could give us an update on any plans on how blockchain or cryptocurrency might fit into your business, helping clients with cross-border money movements or anything along those lines. I think at this point in the United States, when it comes to blockchain, that clearly can expedite payment, trade, and so forth. We really haven't seen from banks and clients because it's not like something that we can just do on our own without some sort of collaboration with another corresponding bank and so forth. I think at this point, it's still a little bit too early. We're continuing to watch the progress on these technologies. We'll just adjust accordingly. That's something that East West would always do, which is while being prudent, but stay agile. Thank you.
Speaker #14: lines. I
Speaker #12: I think at this point in the United States, when it comes to blockchain, that clearly can expedite payment, trade, and so forth. We really haven't seen—from a banks and clients perspective—because it's not like something that we can just do on our own.
Speaker #12: Without some sort of collaboration with another corresponding bank and so forth, I think at this point it's still a little bit too early. And we're continuing to watch and the progress on these technologies.
Speaker #12: And we'll just adjust accordingly. And that's something that eSWIPE would always do, which is, while being prudent, but stay—
Speaker #12: agile. Thank
Speaker #14: you. The next question
Operator: The next question will come from Gary Tenner with D.A. Davidson. Please go ahead. Good afternoon, Gary. Hey, guys. This is Emma Hassan on for Gary. Good afternoon. The strong loan growth across all segments this quarter was really nice to see. What are you seeing in terms of general sentiment out there? Are the GDP numbers translating into client sentiments, or? I think it's been interesting here seeing the volatility in the marketplace and recognizing that while the economy obviously impacts everything about banking, what's perhaps very clear about East West is what impacts East West is how we work with each of our clients.
Gary Tenner: The next question will come from Gary Tenner with D.A. Davidson. Please go ahead. Good afternoon, Gary. Hey, guys. This is Emma Hassan on for Gary. Good afternoon. The strong loan growth across all segments this quarter was really nice to see. What are you seeing in terms of general sentiment out there? Are the GDP numbers translating into client sentiments, or? I think it's been interesting here seeing the volatility in the marketplace and recognizing that while the economy obviously impacts everything about banking, what's perhaps very clear about East West is what impacts East West is how we work with each of our clients.
Speaker #1: The next question will come from Gary Tenner with D.A. Davidson. Please go ahead.
Speaker #1: ahead.
Speaker #14: Good afternoon, Gary. Hi, guys.
Speaker #15: This is Emma Hassan on for Gary.
Speaker #15: Good afternoon. Loan growth across all segments this quarter was really nice to see. What are you seeing in terms of general sentiment out there?
Speaker #15: Are the GDP numbers translating into client sentiments?
Speaker #15: Or? I think it's been interesting.
Speaker #12: Here, seeing the volatility in the marketplace and recognizing that while the economy obviously impacts everything about banking, what's perhaps very clear about East West is what impacts East West is how we work with each of our clients.
Speaker #12: And so, while the economy is a great backdrop for continued positive momentum in some sectors, the credit for our loan growth, and the credit for our progress, and the credit for our fee growth comes down to RMs working with individual clients, delivering individual solutions to help them nimbly and agilely navigate the landscape that we've seen over the course of the last year.
Operator: And so while the economy is a great backdrop for continued positive momentum in some sectors, the credit for our loan growth and the credit for our progress and the credit for our fee growth comes down to RMs working with individual clients, delivering individual solutions to help them nimbly and agilely navigate the landscape that we've seen over the course of the last year. And so to Dominic's earlier comments, while the economy matters, what matters more is that we're working really closely with our clients to stay one step ahead of the competition and meet their needs. All right. That is fair. And I heard you talk about hiring this year. Is there any sort of numbers you can give around in terms of hiring goals this year, like revenue producers or anything?
Operator: And so while the economy is a great backdrop for continued positive momentum in some sectors, the credit for our loan growth and the credit for our progress and the credit for our fee growth comes down to RMs working with individual clients, delivering individual solutions to help them nimbly and agilely navigate the landscape that we've seen over the course of the last year. And so to Dominic's earlier comments, while the economy matters, what matters more is that we're working really closely with our clients to stay one step ahead of the competition and meet their needs. All right. That is fair. And I heard you talk about hiring this year. Is there any sort of numbers you can give around in terms of hiring goals this year, like revenue producers or anything?
Speaker #12: And so, to Dominic's earlier comments, while the economy matters, what matters more is that we're working really closely with our clients to stay one step ahead of the competition and meet their
Speaker #12: needs. All
Speaker #15: Right, that is fair. And I heard you talk about hiring this year. Is there any sort of numbers you can give around, in terms of hiring goals this year?
Speaker #15: Like revenue per user or anything?
Speaker #12: Well, I think I would draw you back to page eight, and I would just note that year-over-year, our expense guidance is 7 to 9 percent.
Operator: Well, I think I would draw you back to page eight, and I would just note that year over year, our expense guidance is 7% to 9%. But if you look at year over year 2025, we grew compensation by 12%. Obviously, the focus on our growth is hiring talented people that can help drive our business in the right direction. And that continues to be a focus. All right. Thank you for taking my questions. The next question will come from Janet Lee with TD Cowen. Please go ahead. Hey, good afternoon, Janet. Good afternoon. Apologies if this is covered already. In terms of your hiring plans, I guess that's part of the expansion of your business plan. Is there any plan to more aggressively move to other cities or other port cities other than California?
Operator: Well, I think I would draw you back to page eight, and I would just note that year over year, our expense guidance is 7% to 9%. But if you look at year over year 2025, we grew compensation by 12%. Obviously, the focus on our growth is hiring talented people that can help drive our business in the right direction. And that continues to be a focus. All right. Thank you for taking my questions. The next question will come from Janet Lee with TD Cowen. Please go ahead. Hey, good afternoon, Janet. Good afternoon. Apologies if this is covered already. In terms of your hiring plans, I guess that's part of the expansion of your business plan. Is there any plan to more aggressively move to other cities or other port cities other than California?
Speaker #12: But if you look at year over year 2025, we grew compensation by 12%. Obviously, the focus of our growth is hiring talented people that can help drive our business in the right direction.
Speaker #12: And that continues to be a focus.
Speaker #15: All right. Thank you for taking my questions.
Speaker #1: The next question will come from Janet Lee with TD Cowen. Please.
Speaker #1: go ahead. Hey, good
Speaker #17: Good afternoon, Janet. Apologies if this is covered already. In terms of your hiring plans, I guess that's part of the expansion of your business plan.
Speaker #17: Is there any plan to more aggressively move to other cities, or other port cities, other than—
Speaker #17: California? I think we
Operator: I think we continuously look at opportunities to diversify our branch network in positive ways. We continue to look for the right people and the right talent to help us drive that. And I think we'll be talent-driven more than putting pins on a map-driven. So far, that's worked really well and allowed us to focus on making sure we concentrate our presence in places where people expect us to be with talent that can meet those needs. And that'll continue to be a driving focus for us. But we see other markets for growth. We know there are pockets of opportunity for us, and we are looking at both organic and inorganic ways we could tap into those. I think on the commercial banking side, we made some; in fact, it's not just last year.
Janet Lee: I think we continuously look at opportunities to diversify our branch network in positive ways. We continue to look for the right people and the right talent to help us drive that. And I think we'll be talent-driven more than putting pins on a map-driven. So far, that's worked really well and allowed us to focus on making sure we concentrate our presence in places where people expect us to be with talent that can meet those needs. And that'll continue to be a driving focus for us. But we see other markets for growth. We know there are pockets of opportunity for us, and we are looking at both organic and inorganic ways we could tap into those. I think on the commercial banking side, we made some; in fact, it's not just last year.
Speaker #12: We continuously look at opportunities to diversify our branch network in positive ways. We continue to look for the right people and the right talent to help us drive that.
Speaker #12: And I think we'll be talent-driven more than putting pins on a map driven. So far, that's worked really well and allowed us to focus on making sure we concentrate our presence in places where people expect us to be, with talent that can meet those needs.
Speaker #12: And that'll continue to be a driving focus for us. But we see other markets for growth. We know there are pockets of opportunity for us.
Speaker #12: And we are looking at both organic and inorganic ways we could tap into those. I think on the commercial banking side, we made some—in fact, it's not just last year.
Speaker #12: I think for the last several years, we made quite a few hires in Texas and New York. And so we'll continue to look at these other regions where we already have a presence and look at opportunities to grow it even further.
Operator: I think for the last several years, we made quite a few hires in Texas and New York. And so we'll continue to look at these other regions that we already have a presence and to look at opportunities to grow it even further. Got it. Thanks for the color. For your allowance for loan loss, the reserve rate ratio, it has gone up quite a bit over the past three years while your credit trends have obviously been very resilient. I think credit size levels have also been going down. At what point would you be comfortable? What kind of environment would that be where you feel more comfortable maybe lowering down reserve levels a bit because it really doesn't look like the underlying credit warrants? I will point out that it's completely flat on a percentage basis quarter over quarter.
Operator: I think for the last several years, we made quite a few hires in Texas and New York. And so we'll continue to look at these other regions that we already have a presence and to look at opportunities to grow it even further. Got it. Thanks for the color. For your allowance for loan loss, the reserve rate ratio, it has gone up quite a bit over the past three years while your credit trends have obviously been very resilient. I think credit size levels have also been going down. At what point would you be comfortable? What kind of environment would that be where you feel more comfortable maybe lowering down reserve levels a bit because it really doesn't look like the underlying credit warrants? I will point out that it's completely flat on a percentage basis quarter over quarter.
Speaker #12: further. Got it.
Speaker #17: Thanks for the color. And for your allowance for loan loss, the reserve ratio, it's gone up quite a bit over the past three years while your credit trends have obviously been very resilient, and I think criticized levels have also been going down.
Speaker #17: At what point would you be comfortable—what kind of environment would that be—where you feel more comfortable maybe lowering down reserve levels a bit, because it really doesn't look like the underlying credit warrants?
Speaker #16: And I will point out that it's completely flat on a percentage basis, quarter over quarter.
Speaker #18: Yeah, and as you know, right, with the CECL allowance model, and the methodology that we and other organizations also have to use, a lot of it is based on the assumptions and the macroeconomic factors.
Operator: As you know, right, with the CECL allowance model and the methodology that we and other organizations also have to use, a lot of it is based on kind of the assumptions and the macroeconomic factors. We use a multi-scenario model and continue to. Honestly, that's going to be the largest driver of where the allowance is going, right, the modeling and understanding about what's happening quarter over quarter. There wasn't really that much change. We use Moody's models as those scenarios, and there hasn't been that much change. But I think it is a little bit; your comments are fair. Maybe there is a little bit kind of a forecast of this versus where the charge-offs and the credit quality is because, as you noted, it continues to be very strong. I would also say the allowance is kind of like capital, right?
Operator: As you know, right, with the CECL allowance model and the methodology that we and other organizations also have to use, a lot of it is based on kind of the assumptions and the macroeconomic factors. We use a multi-scenario model and continue to. Honestly, that's going to be the largest driver of where the allowance is going, right, the modeling and understanding about what's happening quarter over quarter. There wasn't really that much change. We use Moody's models as those scenarios, and there hasn't been that much change. But I think it is a little bit; your comments are fair. Maybe there is a little bit kind of a forecast of this versus where the charge-offs and the credit quality is because, as you noted, it continues to be very strong. I would also say the allowance is kind of like capital, right?
Speaker #18: We use a multi-scenario model and continue to. Honestly, that's going to be the largest driver of where the allowance is going, right? The modeling and understanding about what's happening quarter over quarter.
Speaker #18: There wasn't really that much change. We use Moody's models as those scenarios, and there hasn't been that much change. But I think it is a little bit—your comments are fair.
Speaker #18: Maybe there is a little bit of a forward cast of this versus where the charge-offs and the credit quality is, because, as you noted, it continues to be very strong.
Speaker #18: I would also say the allowance is kind of like capital, right? It's an extra cushion for us and a buffer for us in—
Operator: It's an extra cushion for us and buffer for us in general. Got it. Thank you. That hasn't been said. As Irene said, the allowance is perfectly appropriate at year-end. The next question will come from Jared Shaw with Barclays. Please go ahead. Hi, this is John Rowe. I'm in for Jared. Hey, John. Good afternoon. Most of my questions have been asked and answered. But just thinking about the rate sensitivity positioning, it looks like the floating rate portion of securities has been going down the last few quarters. Is there any target level for that, or has it just been what you've been adding has been more fixed rate lately? We've seen more relative value in the fixed rate side.
Operator: It's an extra cushion for us and buffer for us in general. Got it. Thank you. That hasn't been said. As Irene said, the allowance is perfectly appropriate at year-end. The next question will come from Jared Shaw with Barclays. Please go ahead. Hi, this is John Rowe. I'm in for Jared. Hey, John. Good afternoon. Most of my questions have been asked and answered. But just thinking about the rate sensitivity positioning, it looks like the floating rate portion of securities has been going down the last few quarters. Is there any target level for that, or has it just been what you've been adding has been more fixed rate lately? We've seen more relative value in the fixed rate side.
Speaker #18: general. Got it.
Speaker #17: Thank
Speaker #17: you. That hasn't been said.
Speaker #16: As Irene said, the allowance is perfectly appropriate at your end.
Speaker #1: The next question will come from Jared Shaw with Barclays. Please go ahead.
Speaker #1: ahead. Hi, this
Speaker #19: This is John Rao. I'm from Jared.
Speaker #16: Hey, John. Good afternoon.
Speaker #19: Good afternoon. Most of my questions have been asked and answered, but just thinking about the rate sensitivity positioning—it looks like the floating-rate portion of securities has been going down the last few quarters.
Speaker #19: Is there any target level for that, or has it just been that what you've been adding has been more fixed rate lately?
Speaker #12: We've seen more relative value in the fixed-rate side. And given the anticipation of a few more rate cuts coming, it seems to be prudent to sort of lean on that side of the securities purchases.
Operator: Given the anticipation of a few more rate cuts coming, it seems to be prudent to sort of lean on that side of the securities purchases. It's worked out for us so far. Okay. Great. Thanks for that. Then just on lending spreads overall, how have those been trending? I know you're pretty selective on the client base that you work with, but just overall competitive levels and pricing trends in your market. Yeah. Broadly speaking, we've seen some compression. So if you'd asked us where would that be over the course of the last year, we probably saw things broadly compressed, approaching something on the order of about a quarter of a percentage point. Don't know where that's going from here, but we think we've seen a lot of that competitive pressure come to the fore, and we're working with it.
John Rowes: Given the anticipation of a few more rate cuts coming, it seems to be prudent to sort of lean on that side of the securities purchases. It's worked out for us so far. Okay. Great. Thanks for that. Then just on lending spreads overall, how have those been trending? I know you're pretty selective on the client base that you work with, but just overall competitive levels and pricing trends in your market. Yeah. Broadly speaking, we've seen some compression. So if you'd asked us where would that be over the course of the last year, we probably saw things broadly compressed, approaching something on the order of about a quarter of a percentage point. Don't know where that's going from here, but we think we've seen a lot of that competitive pressure come to the fore, and we're working with it.
Speaker #12: And it’s worked out for us so far.
Speaker #19: Okay, great, thanks for that. And then just on lending spreads overall, how have those been trending? I know you're pretty selective on the client base that you work with, but just overall, competitive levels and pricing trends in your—
Speaker #19: market. Yeah.
Speaker #12: Broadly speaking, we've seen some compression. And so, if you'd asked us where would that be, over the course of the last year, we probably saw things broadly compress, approaching something on the order of about a quarter of a percentage point.
Speaker #12: Don't know where that's going from here, but we think we've seen a lot of that competitive pressure come to the fore, and we're working with it.
Speaker #12: It seems to be holding, at least relative to the term sheets we're sending out now, somewhat comparable to what we saw in the fourth quarter.
Operator: It seems to be holding at least relative to the term sheets we're sending out now, somewhat comparable to what we saw in the fourth quarter. So I can't tell you there's been incremental compression over the last 30, 60 days, but clearly it's been compressing relative to what it was a year ago. Okay. Great. Thank you. The next question will come from Chris McGrady with KBW. Please go ahead. Hey, afternoon, Chris. Hey, good afternoon. This is Chris O'Connell filling in for Chris McGrady. All right. It's still a Chris. It's okay. Yeah, exactly. I was just hoping to circle back to the capital discussion. Obviously, you guys remain in a very strong position and had a big increase in the dividend this quarter. But capital levels continue to grow, and the buyback was a little bit lighter than the last quarter.
Operator: It seems to be holding at least relative to the term sheets we're sending out now, somewhat comparable to what we saw in the fourth quarter. So I can't tell you there's been incremental compression over the last 30, 60 days, but clearly it's been compressing relative to what it was a year ago. Okay. Great. Thank you. The next question will come from Chris McGrady with KBW. Please go ahead. Hey, afternoon, Chris. Hey, good afternoon. This is Chris O'Connell filling in for Chris McGrady. All right. It's still a Chris. It's okay. Yeah, exactly. I was just hoping to circle back to the capital discussion. Obviously, you guys remain in a very strong position and had a big increase in the dividend this quarter. But capital levels continue to grow, and the buyback was a little bit lighter than the last quarter.
Speaker #12: So, I can't tell you there's been incremental compression over the last 30 or 60 days. But clearly, it's been compressing relative to what it was a year ago.
Speaker #19: Okay. Great. Thank
Speaker #19: The next question will come from Chris.
Speaker #1: McGrady with KBW. Please go
Speaker #1: ahead. Hey.
Speaker #20: Afternoon,
Speaker #20: Chris.
Speaker #21: Hey. Good afternoon. This
Speaker #21: Is Chris O'Connell filling in for Christopher Moral?
Speaker #21: Chris McGrady. All
Speaker #21: It's still a Chris. It's right. Okay. Yeah, exactly. I was just hoping to circle back to the capital discussion. Obviously, you guys remain in a very strong position.
Speaker #21: And had a big increase in the dividend this quarter. But capital levels continue to grow, and the buyback was a little bit lighter than last quarter.
Operator: just was hoping to get thoughts around kind of the pace of buyback and opportunistically using it going forward. Yeah. Our buyback will be always opportunistic. So from our perspective, is that when the price is right, we do more. And we've always been able to do buyback in an opportunistic way that creates a lot more value for our shareholders. And we'll continue to do that practice because there's no urgency for us to have to do anything simply because, as you just noticed, that we just announced this return of tangible common equity at 17%. And so at this kind of capital level, and we also, by the way, by making this meaningful size increase of dividend.
Chris O'Connell: just was hoping to get thoughts around kind of the pace of buyback and opportunistically using it going forward. Yeah. Our buyback will be always opportunistic. So from our perspective, is that when the price is right, we do more. And we've always been able to do buyback in an opportunistic way that creates a lot more value for our shareholders. And we'll continue to do that practice because there's no urgency for us to have to do anything simply because, as you just noticed, that we just announced this return of tangible common equity at 17%. And so at this kind of capital level, and we also, by the way, by making this meaningful size increase of dividend.
Speaker #21: Just was hoping to get thoughts around kind of the pace of buyback and opportunistically using it going forward.
Speaker #12: Yeah. Our buyback will be always opportunistic. So from our perspective, when the price is right, we do more. And we've always been able to do buybacks in an opportunistic way that creates a lot more value for our shareholders.
Speaker #12: And we'll continue to do that practice because there's no urgency for us to have to do anything. Simply because, as you just noticed, we just announced this return of tangible common equity at 17%.
Speaker #12: And so, at this kind of capital level—and we also, by the way, by making this meaningful size increase of dividend—so we are doing what we need to do.
Operator: So we are doing what we need to do, but we also always look at the potential opportunity out there, whether it's a market that allows a meaningful organic growth or a market that allows some unusual great fit, inorganic growth opportunities. And we look at it as that it's just very, very good in that position that we have all this flexibility that we can pull trigger at the right time in the right way. So that's why we are not in any kind of sort of urgent situation that we have to sort of announce some big buyback and so forth because we really are not in that kind of position like many others. Got it. Thank you. And then I was hoping to just dive into the commentary on the margin, the near-term liability sensitivity versus the broader asset-sensitive position.
Operator: So we are doing what we need to do, but we also always look at the potential opportunity out there, whether it's a market that allows a meaningful organic growth or a market that allows some unusual great fit, inorganic growth opportunities. And we look at it as that it's just very, very good in that position that we have all this flexibility that we can pull trigger at the right time in the right way. So that's why we are not in any kind of sort of urgent situation that we have to sort of announce some big buyback and so forth because we really are not in that kind of position like many others. Got it. Thank you. And then I was hoping to just dive into the commentary on the margin, the near-term liability sensitivity versus the broader asset-sensitive position.
Speaker #12: But we also always look at the potential opportunity out there, whether it's a market that allows meaningful organic growth or a market that allows some unusual quick fit.
Speaker #12: Inorganic growth opportunities. And we look at it that it's just very, very good in that position that we have all this flexibility. That we can put trigger at the right time in the right way.
Speaker #12: So that's why we are not in any kind of, sort of urgent situation that we have to sort of announce some big buyback and so forth, because we really are not in that kind of position like many.
Speaker #12: others. Got it.
Speaker #21: Thank you. And then I was hoping to just dive into the commentary on the margin, the near-term liability sensitivity versus the broader asset-sensitive position.
Speaker #21: I think you had talked a little bit last quarter about the near-term liability-sensitive position—just being kind of a timing issue with the pace of deposit rate repricing.
Operator: I think you had talked a little bit about last quarter about the near-term liability sensitive position just being kind of a timing issue with the pace of deposit rate repricing. I guess the setup into the early part of the year, does that imply, given the rate movement this quarter, that the margin could head in a similar upward direction kind of early next year and then kind of trend down modestly after that? I think we've seen some of the benefit already of the December rate cut in the December numbers. Some of it will continue to bleed through into January, but I don't think anyone's really expecting much more to happen this quarter. So it'll probably balance and wash itself out in Q1.
Operator: I think you had talked a little bit about last quarter about the near-term liability sensitive position just being kind of a timing issue with the pace of deposit rate repricing. I guess the setup into the early part of the year, does that imply, given the rate movement this quarter, that the margin could head in a similar upward direction kind of early next year and then kind of trend down modestly after that? I think we've seen some of the benefit already of the December rate cut in the December numbers. Some of it will continue to bleed through into January, but I don't think anyone's really expecting much more to happen this quarter. So it'll probably balance and wash itself out in Q1.
Speaker #21: I guess to set up into the early part of the year, does that imply, given the rate movement this quarter, that the margin could head in a similar upward direction kind of early next year?
Speaker #21: And then kind of trend down modestly after that?
Speaker #12: I think we've seen some of the benefit already from the December rate cut in the December numbers. Some of it will continue to bleed through into January.
Speaker #12: But I don't think anyone's really expecting much more to happen this quarter. So we'll probably balance and wash itself out in Q1. And then, when we see the next rate cut, we would assume we'll see an immediate lift in that next 30- to 45-day period.
Operator: Then when we see the next rate cut, we would assume we'll see an immediate lift in that next 30- to 45-day period and then sort of revert back to the broad asset-sensitive profile. So again, we think the reality is over the course of 60-day lag, it's probably $2 million a month for a 25 basis point cut as a negative impact. But the reality is in that first 30 to 45 days, it ends up being a short-term positive. Great. Very helpful. That's all I had. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks. I just want to say thank you for all of you joining our call today, and we are looking forward to speaking with you in April. Thank you. The conference has now concluded.
Operator: Then when we see the next rate cut, we would assume we'll see an immediate lift in that next 30- to 45-day period and then sort of revert back to the broad asset-sensitive profile. So again, we think the reality is over the course of 60-day lag, it's probably $2 million a month for a 25 basis point cut as a negative impact. But the reality is in that first 30 to 45 days, it ends up being a short-term positive. Great. Very helpful. That's all I had. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks. I just want to say thank you for all of you joining our call today, and we are looking forward to speaking with you in April. Thank you. The conference has now concluded.
Speaker #12: And then sort of revert back to the broad asset-sensitive profile. So again, we think the reality is, over the course of 60 days' lag, it's probably $2 million a month for a 25 basis point cut as a negative impact.
Speaker #12: But the reality is, in that first 30 to 45 days, it ends up being a short-term.
Speaker #12: positive. Great.
Speaker #21: Very helpful. That's all I had. Thank you.
Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks.
Speaker #22: Well, I just want to say thank you to all of you for joining our call today, and we are looking forward to speaking with you in April.
Speaker #22: Thank
Speaker #22: you. The
Operator: Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for attending today's presentation. You may now disconnect.
