EWBC - Earnings call transcript Q1 2024

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Operator

Good day. Welcome to the East West Bancorp's First Quarter 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

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

Adrienne Atkinson

Chief Good Officer. us operator. XXXX thank everyone, Irene Chairman you, Results. Chief Del Thank Officer; Financial review afternoon, East joining and and Ng, Dominic to me Chief Quarter Officer; West for Christopher With Moral-Niles, Risk you, Oh, are and Executive Bancorp's Financial First

this our website. The slide This call will and site. Relations recorded available be available our referenced Investor during call is being for is on replay on deck

statements, forward-looking risks which differ Management may may other make to of projections actual from number discuss due and may results measures. or materially Management non-GAAP a financial uncertainties.

Exchange detailed For including filed X-K measures, more reconciliation refer the of risk to today. description a and factors please and with the Commission, of the filings to Form financial non-GAAP our GAAP Securities the

to turn will now I call the Dominic. over

Dominic Ng

strong Thank joining for that I'm to thank report you, first earnings us for a for and Good results call. Adrienne. first quarter pleased foundation you quarter XXXX. afternoon, our laid

First income was or share. million quarter XXXX diluted net $X.XX per $XXX

charge, Excluding X% adjusted up share $X.XX, quarter. was fourth the from quarter the first earnings per FDIC

average quarter, assets during loans average X%. grew with We up the

We by mortgage Average commercial our balances mortgage, residential products. and continue remained real were differentiated higher, flat. loans grow C&I estate to driven

We success by record of grew new Year $X the campaign. average deposits level, our New reflecting billion a to CD branch-based Lunar

$X.X BTFP reducing while off of our by billion paid we $X borrowings quarter, billion. the During total

excess an cash floating invest Ginnie opportunity securities. took to We also into rate Mae

expected. solid, quality remains as asset and credit performing is Our

nonperforming up points XX asset XX net points points. First at The to basis were charge-offs basis was X annualized quarter quarter end. by ratio basis

with quarter-over-quarter loan share XX% allowance return XX% credit commercial return tangible X.X% and per our manage allowances, estate equity to value continue shareholder These our common on proactively to grew efforts for Tangible X.XX%. bringing year-over-year. value also book a drive real our to average X% to risk. and We on an loan assets. continue added total XX% losses We

quarter balance results to strength speak of conservatively business the managed our sheet. first diversified our Our model and

we and are well serving beyond. remain customers XXXX Looking the and and focused our forward, on positioned outperform in industry to growing relationships

turn now details call financial Chris quarter our Chris? performance. more to on first provide will I to the over

Christopher Del Moral-Niles

Dominic. you, Thank

to X. Slide loans Turning on

trends me major of comment Let on each categories. our the in lending

residential slowdowns. second First, we demand relatively environment, generally and with strengthening continue rate mortgage see for residential our despite pipelines to loans to residential quarter. add proved and mortgage QX, durable seasonal home elevated in are equity the into Even pleased both going we the

grew utilization decreases by was Kong to declined, Hong by in driven balances average balances we on the pick On uptick in line a pipeline, quarter. up our basis, and expect call C&I but capital part drops C&I in an at in period-end usage of really Based our driven end that X%, the Second, current we portfolio. of saw fourth primarily growth QX.

while Third, CRE remained quarter. balances the down for were average CRE balances flat, period-end

targeting XXXX. to relationship we work our for only are but growth modest long-standing continue We clients, CRE with

trends in portfolio. securities Slide X summarizes our

liquid enhance end in XXX, plus of added to putting of profile steps our work During our settled much took first the liquidity towards which cash rate the SOFR assets. Mae we Ginnie to high-quality a at quarter, the quarter. by floaters short-duration We of

X our purchase book end. basis portfolio of rose of yield to securities, quarter spot XX the at the With XX these points

a to see total XX% rose of portfolio we assets, our current sheet size. level of securities and liquidity appropriate cash at Our as on-balance

Slide X. on Moving on deposits to

and resilience retail, bankers We on the growth across growth dedication and reflects loyalty base. a grew our period-end saw deposits levels our mentioned, This this $X.X in Dominic commercial of growth average quarter, we of billion to broad-based and nearly of record with X% all $X focus basis. and As or geographies. customer and the billion

we deposits. business forward, to on Looking and focus consumer granular adding continue

$X.X quarter, have the the advances a at schedule, Loan Federal with $X.X laddered rate next maturing plus maturity and floating a balance Bank advances we cost billion basis Home up billion approximately XX of also in the These over XX put months points. During XXXX. of SOFR

Time Slide income more our XX. of net XX decided of income than to X basis for the interest we million, as margin net NIM expected deposits was was interest margin while extend net upsize dollar much CD trends. and X compressed $XXX covers our QX spot interest our impact points. campaign. accounted The

Nonetheless, the of shift environment. the asset expect We year. to continues we mix the will as NIM and through half further growth an as deposit this move stability bottoming expect lead in of the QX later of more in year, second NIM higher-for-longer a we NIM in compression acceleration

I'll hand Irene now to over quality. call And about talk asset the to

Irene Oh

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

As but with from broadly of to see you can the continues outperform industry, Slide beginning credit asset the our to X, normalize. quality portfolio

XX levels net the we of estate mentioned, XX first two charge-offs and real total Dominic X to rose one points quarter nonperforming recorded Nonetheless, of points basis was driven by The basis property. assets. remain Quarter-over-quarter, construction commercial million. basis in $XX points or relatively in by As office the low. credits: assets absolute one increase

mention X.X% XX quarter-over-quarter the loans classified and basis X.XX% quarter increased ratio loans. X.XX%. ratio to points also to The points basis during ratio loans, of increased to XX loans criticized special loans The of the increased

vigilant for We million in the provision $XX lower first and $XX CECL compared quarter, of credit and resilient managing quarter losses risks. a given million with credit proactive environment the in fourth the economic our for outlook. recorded remain We current

be to XX the forward, continue to points. basis quarterly net to expect range charge-offs we in of look we XX As

The commercial allowance primarily for for total $XX allowance losses increased Turning our to X. million quarter-over-quarter, losses million estate Slide a $X increase loans. for real loan in loan reflecting

portfolio believe for economic current ratio reserved outlook. we we We content loan points reserve million, loan. for given Specifically, basis adequately coverage the by are office Office increased the the XXX the $X bringing our of to for

XX. Slide to Turning

West bank Common national tangible capital in These capital above common averages. All regulatory of a institutions remain industry. Tier at us of West X well X.X%. stayed East in well-capitalized and XX.X%, ratio equity the capital regional ratio and among most flat robust place levels banks relatively ratios while East for and excess regulatory requirements the stands well Equity well-capitalized the

East East West a repurchase the available on XXXX million XXXX. first that repurchased the common for $XX X.X on also redeemed West million stock XXXX, of $XX authorization just stockholders quarter. have under East buybacks. West's first dividend $XX during million We of of remains for XX, shares at record X, currently quarter of future trust approximately share. preferred to securities be in payable May second $XXX May million will quarter

call Chris to the full back outlook year. the will I XXXX now share Chris? for to our turn

Christopher Del Moral-Niles

Thank you, Irene.

Our full year outlook shifted has slightly.

economy in first Let me with soften a now assume the year. We beginning highlight to to later resilient half expect QX. your We rate cuts the changes. now begin in

pick second expect residential C&I up growth range in loan and in the We end-of-year and growing portfolio. to a our X%, continued the mortgage be to for loan strength of still quarter buoyed to in growth by X%

decline guidance. from income in rate up prior expected now expect Given X% our X%, the interest of and our net guidance cuts, a fewer raising only to we're range

now With that, for questions. will I call Operator? the open

Operator

[Operator Barclays. with from Instructions] Your Shaw first question Jared comes

Jared David Shaw

seeing back being from at growth. what's holding more guess, You're margin you NII, and looking loan there? Just optimistic I

the that tailwind being deposit great. securities Maybe higher You through of all be just just from absorbed would have the expected us -- securities. that some costs? by walk Is that,

Christopher Del Moral-Niles

Sure.

for the NII record, guidance the our are year. raising we for So

And the and what so I second think said, more for we little rest pace stay on for optimistic be yes, That of year. has been environment, the if are we we seems more we to quarter. mix sort as expect here here that higher-for-longer the we're a a deposit into in move of migration

cost up we'll mix some deposits. the in So the of give of deposit that and

that late with refinanced those And I also BTFP, CD had that balances, level. the higher campaign the cost. a attractive March, and that And a replace obviously remind would largely are been we at we'll very but in of you

that's in. So the baked higher just that also course. slightly drag Federal a And Home there's inherent at cost, of Bank Loan an refinancing advances from

Jared David Shaw

as of How and we still Okay. upper buyback higher. the buyback my of should follow-up, looking just would capital? you where the capital. redemption loan the grow with And capital, be trust growth CETX of about seeing thinking limits comfortable sort we're feel Even guess, way limit be preferred, And limits of with or expectation? to upper the given primary the the the I that control at

Christopher Del Moral-Niles

capital. was we're in focused We've maintaining a warehousing on, in we that longer no us TCE and and thought commented focus relevant to for that on additional measure

of to, today. support and again And be course, announced have sheet proactive balance some optimize balance authorization, all we our our dividend we'll capital. we'll Obviously, our the sheet and continue so actions. We still to use customers grow to in a

Operator

Jefferies. Next Your question with from comes Casey Haire

Casey Haire

the follow-up on one So margin. other

So -- how there? get do Chris, mix? more side. but the does What your you shift the funding the you I BTFP about assume much if on guide reading terms expect and what more I'm DDA negative correctly, understanding borrowings, in of mix attrition

Christopher Del Moral-Niles

at Look, XX%, today, here April XX, we're XX. still as even we sit

will has probably number to. mid-XXs feel be it in might reasonable, area, come which So we that, and bottom comfortable we somewhere down that close the

shift we move that's we think later of how into I function see as outlook quarter. the a the

hasn't we that move been that to would expectation rates, somewhat migration of deposit so we when is rates Fed had through, it's started to started that lower previously and continuing Our Fed as month-over-month the sort outlook-dependent. yet, ease. see lower

Casey Haire

you. Got

Okay. And to just Irene, guess, you. I credit, then for switching

trends. that from your guidance migration You sticking loss some guys with seen rates other We've decent despite are banks. on

these confidence what gives rather guide trends? benign wondering loss Just given keep to you the a migration

Irene Oh

question. Great Yes.

that the when loan the we and our are and far very grounds-up the as by reserving guidance. think that we portfolio a on at we're we're the kind loan, of level, analysis look the charge-offs doing, it loan at of doing, as granular comfortable reviews I

and you it my honestly, at kind look a of kind portfolio of the if quarter-by-quarter, in today, range understanding right? mind, reflects views think of but it I our quite is, our wide

Operator

with Your Dave question comes from next Rochester Point. Compass

David Rochester

kind think, Should on see of buybacks you're sort forward in that ratio to solve guys Just some whatever mentioned, back on or of that, sort to quarterly do assume you I going just a lines for to here you we ratio need buyback forward? should of capital. focused flat since and TCE CETX we just going the expect from -- those

Christopher Del Moral-Niles

I opportunistically growth still it sheet customers. be and capital, softer, a think use use going little also is the always balance primary is be buybacks lending strong and our maybe as call to add one We'll upon to continue continue case. and right will our choice, dividend, the perhaps of environment. we to QX, extent a support see that that to that we sort manage the number. the And our but can the when growth we're in might was we that have to of obviously flexibility will securities, lending To pay last

David Rochester

then as quarter. Does range mentioned rate All on I a million right. million that. work? the month know impact $X.X like of a last And follow-up, your what's Appreciate a you'd $X cut NII? to just now that still something

And half mentioned the I you in NIM the of second bottoming know year.

you had it guess, Does bottoming? that? growth? XQ is And that the or could your If what's that of XQ? bottom bit sooner Or NII coincide a to because little with actually of timing

Christopher Del Moral-Niles

trend it back and So believe a of the yes, to follows second NII, the will stronger think I also it comes the of Likely end same the year. quarter we do in fourth third the regard the basis. I somewhere And dollar that sort second believe similarly With on half. towards half. bottom and both and

And has a little just And more because our NII $X in that added billion over cumulatively actual increased floating part of sensitivity. introduces securities. rate we sensitivity

cut And look $X million forward so closer it's to now. per as we

Operator

from comes Ben question Citi. with next Your Gerlinger

Benjamin Gerlinger

the I extrapolating into deposit that the New now was or you see special? quarter what deposit growth, I any seeing Lunar to possibly think seen kind year? other a I curious, largely trends obviously, of just curious, Anything big you've of are Year rest was rent. due the of on QX outside might specialty we

Christopher Del Moral-Niles

money and the the spectrum are time to we growth market see product speaking, we and to broadly contribute think, in growth in our commercial, saw side, overseas deposits. I deposits. From customers consumer checking, all pleased interest-bearing a of broad

fundamental the on there's essentially, and in think context. is customers saw their we long reallocate we're downside see as the and all DDA. understand that migration the the So the noninterest-bearing Obviously, higher-for-longer And in continues trying as portfolio shrinkage yields, to willing that make to in to that are I that's evolve we sure to balances. this how some zeroed

Benjamin Gerlinger

a is then guidance, this And on helpful. That's I you. the nuanced. bit question Got know

So ramps it average just picking do more it's late sheet And it think and QX. that pretty it of is entire think kind a hate the I balance fair throughout but growth in up minimal, loan to Or ask, to you June? quarter? is

Christopher Del Moral-Niles

of evidence our positive pipelines. see We in trends

trends And see we'll think QX. pick so we up in positive here

Operator

comes next Your from question Gosalia Manan Morgan Stanley. with

Manan Gosalia

there drivers a note in outlook, first you loan Can for then if with Can from that you the macro you're soften XQ. softening loan second to the resilient half, in upside it half? half. economy pick you up it I those growth numbers? some should out second a about the talk economy you broader why talk know your called doesn't, here? in the to And is about And expecting growth in

Christopher Del Moral-Niles

Sure.

they're trying that our we're think landing. the from following a said I Fed, So the has engineer to softer and cues proactively Fed

to that confident seems the be we're our The and up with our reason environment we'll the that pick that's by that see. the into own And baked loan pipelines forward see interactions that is context, really curve. customers driven we're given we so assuming. growth And the

we would us lead growth to C&I we expect to because to So happen have are term those conversations see going and close. sheets that that expect

They're through residential expect pipeline. close. in are of we they're already come loans those in see because too process know through We moving there, just to the and the

see we again, we'll too. of see And growth, growth, And see residential so CRE focused C&I on some we're we'll growth. that, not may but

Manan Gosalia

peers. question CRE have guess I what peers. I which haven't the it's it. assets follow-up at one Got difference seen on we've maybe seen criticized assets. that in And also rise, on point the to did But a similar is of at criticized the you many know we book

up And shed How you Was criticized you loan deep bit overall. wondering credits? are was the move I this loss did? why more with some those assets? you comfortable not little if just higher a So reserve dive a can light of given this level that

Irene Oh

Yes. Great question.

assets I are or movement more we very concentrations So industry There with about. it's criticized maybe we're importantly, say real broad-based. pretty the we believe more of we concerned not would that have sector, risk do estate, areas for isn't one with. concerned commercial geography And

and CECL approach. multi-scenario some the use calculation model. allowance On this you the are the us, as the far we far as the fact as calculation, CECL that as there confines we've And disclosed as for for in know, a past

weighted as So I think that bit little a -- gives me comfort to it's downside scenario. a as heavily more far

the said, the want us in that appropriate. feasible little And happen you've if to that with things that's I With continue now add, think are sure that something to reserve, bit quantitative for with side, we the seen on what quarter. a and make that's this qualitative we qualitative

Operator

from comes King question Brandon with Truist. Next

Brandon King

I in noticed there healthy a yields in was loan quarter. the pickup

call few if wondering So out to if I was over quarters the pace there? to a anything there's that's reasonable next expect and

Christopher Del Moral-Niles

No.

additive. is yields been, a portfolio, and with the line Broadly rate I loan that's and pricing mortgages think, at roughly our the a uptake. it's where speaking, in volume not coming obviously, new higher and there's our on residential are material than commercial

Brandon King

your and this maybe rolling schedule, then back kind And or of when on at CD, for Okay. tailwind half to you at the a point maybe over year? a into rate CDs CDs repricing that in stable are maturity and what turns of if when the maybe look

Christopher Del Moral-Niles

Yes.

of quarters. over off each quarter. billion billion CDs on Obviously, CD $X that to the quarter billion $X Lunar $X.X come in see put next of the the will and couple third we'll special, the of So roll just over we

that into that the that. rate the that be anticipating heavy might movements quarter, And there the play and that's in happened is will third some third quarter. So quarter we're

Operator

comes Poonawala question next with of from Bank America. Your Ebrahim

Ebrahim Poonawala

just on a against credit, contracts, CRE XX% them on I like I XX, derivative where think interest guess have you disclosed Slide follow-up I higher of customers hedging rates. guess,

X you've over that at book? of us portfolio in CRE to contracts? if much to assuming within terms just these that book this potential the a time and the are some I'm talk assessed of point How increases deep as the done risk how Just higher-for-longer terms the in roll-off next of derivative exposure the reviews in you've we of risk years.

Christopher Del Moral-Niles

Sure, Ebrahim.

of our good to of is the the news customers maturity So most their swaps on loan. put

so the risk majority them. And rollover rate isn't inter-maturity on vast really there significant of a

and us that's highly for design to way we risk solution that So is by the and market contained, the customers. our

on in as We chart. locking have more been more sheet swaps inherently be at forwards to the the and there we towards a future, staring balance hedge we're been that put portfolio, we're side rate growing to fixed in lower in steadily And other and might expectation combination means the fixed the in about that, environment. the that we so extent rate we that the future. move fixed downdraft the that And all rate XXXX, rates as have a of our think

our of think combination And will we that play today, all benefits. factors into

Our customers in declining who and benefit. our what to we balance fine receiving sheet, And through will will benefit locked our be and is our be fixed be outlook, perfectly perfectly fix expect rate continue maturity. to be to fine, shareholders' we have more a we which in think more

Ebrahim Poonawala

sheet? these Are loan into Chris, loans they And of another for give fixed of getting of sort these what's cetera? refied are by a happening? companies, et refying out perspective, are coming Or terms just in moving maturity, how on when up the insurance many balance rate

Christopher Del Moral-Niles

LTV history The is here we high of think relatively I there's of news activity. low lending. good see the a gamut

not find these outlet, us. back And so with if there's with guys always to another plenty of for equity

Operator

comes question McGratty Chris with KBW. from next Your

Christopher McGratty

Great. the back to HQLA. Chris, the going on comments

to need you the -- about You where be. referenced you're

to is size of the XXX? think comment kind Or of about you need cross sheet of for balance today? when you kind the where If you you a be that more zoom out,

Christopher Del Moral-Niles

to for where comment only going current I'm way we Keep XXX. long in institution. mind, a It's we're on pretty No, the XX. are from

Christopher McGratty

it. get No, I

Okay. question asking differently. a I little bit But in the capital guess, terms of,

You what perhaps NIM you're doing commented thinking more higher kind about buybacks. of But to be dynamic of a is sheet NII about should lower producing the now? liquidity, but we at balance right a

Christopher Del Moral-Niles

we up NIM of But contribute growing that second the optimistic to, drive and and towards the the and continue first quarter, Probably we've we'll year for we growth still to that play in loan implication that in loan that itself quarter pick what will while the out, out. guidance helping the did in sure, back NII. see laid will again, later the think bounce we're

Operator

next comes [Operator Instructions] Varga UBS. question Your from Samuel with

Samuel Varga

wanted How the follow up growth on just I loan cash backdrop the HQLA understanding loan use funding some build. to much willingness of do of of the fund the to sort of a I growth? actually have question, to you guess, the

Christopher Del Moral-Niles

Sure.

So throw per million $XXX of proceeds. net portfolio the will investment quarter off

as And we so fund the of is forward. part we think how look could growth of we that some

Samuel Varga

just always CDs funding Okay. in the And mix? rates how between think then of preference? CD that competitive at that simple the versus to terms Or of very be going is about do putting sort a on trade-off you FHLB,

Christopher Del Moral-Niles

we a customers. know think create outcome the is we a margin, value the for a institution. and outcome a Look, both better pay is I for obviously And better economic franchise rather FHLB that and wholesale Yes. from our think clearly customers, our us. borrow the there than would the at better we rate for We that

in course and we a we think is the do forward. the I cost right of ordinary there, So incrementally preference there thing our to as look funding will move but optimize

Irene Oh

just I'll rate. one on floor And thing. ] put is variable we maybe [ The add

the part us. a So that was also analysis of for

Operator

Poonawala from is Bank next question of follow-up a Your question Ebrahim America. with

Ebrahim Poonawala

Again...

Christopher Del Moral-Niles

you. We cannot hear

Ebrahim Poonawala

me hear now? you Can

Christopher Del Moral-Niles

We hear Go you ahead. now. can

Ebrahim Poonawala

Yes.

just West's banker in share slow? in Just investment and is capital terms us world talent overall move be to to Like and wanted of it East given the disruption, to attract hiring. fertile market positioning, how where maybe talk understand, a growth may market

Dominic Ng

The Yes. question talent. on investment in

join fact, ago, there's market. -- for that organization. lookout, months of on we disruption think new always happened And XX talent I in a the to will the frankly, what in with lot we're the

are plenty of possibly do And there the looking new there that talents feel in we for are out market so homes. that

much very, the fit the to selective culture. every been it's do very at things lot because that we diversification look have Bank bankers that we've habitually into that you bigger banker if do. strategy. that there fit it our and But that a loans, banker actually of that And that not East like West doesn't every are It's there banks is oftentimes, into not out have do

very And terms selective we them be finalize so absolutely -- do we in the we'll fit. East to we Bank be And of and West making of it, are going delighted we to part find continue sure right family. be to choosy when welcome to the

who be something for is going an it. be there attractive of feel going that may talent do this to a big into looking we're to rushing We are group necessarily other bank specific notice strategy having And I getting not from don't East all is be some Bank. West that And are that turmoil. to actually banks that that,

last almost been able pretty for the to have now. organically We years nicely XX grow

So have acquisition small And was made of since January not that even very XXXX. acquisition. an a we

for So our most spend XX through organic of last years direction. and the growth

we management fit a talents, and identify the balance that type and also us value So the specific of understand talents them these into on. bring importance will think those we between that well, and like that are and we continue East that risk proposition people growth, to understanding the bringing and then the approach, right and West of

Operator

like back the turn remarks. would to I session. question-and-answer our concludes closing This for conference

Dominic Ng

Well, call and joining you today, July. to to speaking in our again, forward thank you for looking earnings we're

Operator

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

now may disconnect. You

East West Bancorp (EWBC) 23 Apr 242024 Q1 Earnings call transcript