East West Bancorp Q1 2025 Earnings Report

East West Bancorp EPS Results

• Actual EPS: $2.09
• Consensus EPS: $2.05
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

East West Bancorp Revenue Results

• Actual Revenue: $693.00 million
• Expected Revenue: $673.02 million
• Beat/Miss: Beat by +$19.99 million
• YoY Revenue Growth: N/A

East West Bancorp Announcement Details

• Quarter: Q1 2025
• Date: 4/22/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, April 22, 2025
• Conference Call Time: 5:00PM ET

East West Bancorp (NASDAQ:EWBC) operates as the bank holding company for East West Bank that provides a range of personal and commercial banking services to businesses and individuals in the United States. The company operates through three segments: Consumer and Business Banking, Commercial Banking, and Other. It accepts various deposit products, such as personal and business checking and savings accounts, money market, and time deposits. The company's loan products include mortgage and home equity, commercial and residential real estate, working capital lines of credit, construction finance, trade finance, letters of credit, commercial business, affordable housing loans, asset-based lending, asset-backed finance, project finance, loan syndication, and equipment financing, as well as financing services for clients to facilitate their business transactions between the United States and Asia. It also provides various wealth management, treasury management, foreign exchange, and interest rate and commodity risk hedging services; and mobile and online banking services. The company was founded in 1973 and is headquartered in Pasadena, California.

East West Bancorp Q1 2025 Earnings Call Transcript

Key Takeaways

• East West reported record first-quarter revenue with loans up 1% QoQ to $54 billion, net interest income rising to $600 million and net interest margin improving to 3.35%.
• The bank delivered another record quarter of fee income, which grew 8% QoQ across four of five major categories, as customer activity remained strong.
• Asset quality stayed strong with annualized net charge-offs of just 12 bps, nonperforming assets at 24 bps, and a bolstered allowance for loan losses of 1.35% amid economic uncertainty.
• Capital levels remained well above industry averages, with a CET1 ratio of 14.3% and tangible common equity of 9.9%, enabling $85 million in share repurchases and continued dividend payouts.
• Management emphasized the bank’s diversified balance sheet and relationship-driven model as it works with clients on tariff impacts and seeks to capitalize on emerging opportunities in any economic environment.

Presentation

[Operator]

Hello, and welcome to the East West Bancorp's First Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. Please note, this event is being recorded. I would now like to turn the conference over to Adrienne Atkins, Director of Investor Relations. Please go ahead.

[Adrienne Atkinson, Senior VP & Director of Investors Relations at East West Bancorp]

Thank you, operator. Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's first quarter twenty twenty five financial results. With me are Dominic Ng, Chairman and Chief Executive Officer Fritz DelMorel Niles, Chief Financial Officer and Irene Oh, Chief Risk Officer. 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.

[Adrienne Atkinson, Senior VP & Director of Investors Relations at East West Bancorp]

Management may make projections or other forward looking statements, which may differ materially from

[Adrienne Atkinson, Senior VP & Director of Investors Relations at East West Bancorp]

the actual results due to

[Adrienne Atkinson, Senior VP & Director of Investors Relations at East West Bancorp]

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 eight ks filed today. I will now turn the call over to Dominic.

[Dominic Ng, Chairman & CEO at East West Bancorp]

Thank you, Adrian. Good afternoon, and thank you for joining us for our first quarter earnings call. I'm pleased to report strong first quarter results. We continue to grow the bank and reported another quarter of record revenue. Loan growth was solid.

[Dominic Ng, Chairman & CEO at East West Bancorp]

We grew end of period loans 1% quarter over quarter to a new record level of $54,000,000,000 Our relationship driven business model helped support continued residential mortgage and commercial real estate lending. On the deposit side, we execute another successful Lunar New Year CD campaign and further optimize our pricing this quarter while continuing to add customers. We also delivered another record quarter of fee income. These were up 8% driven by strong customer activity across the board. We continue to see opportunity to grow and diversify our fee revenues.

[Dominic Ng, Chairman & CEO at East West Bancorp]

Asset quality has remained solid and credit is performing as expected. First quarter annualized net charge offs total 12 basis points or 15,000,000. The non performing assets ratio decreased two basis points from the end of Q4 to 24 basis points at quarter end. Given the recent increase in economic uncertainty, we bolstered our allowance levels bringing our total allowance for loan losses to 1.35%. The strength of our diversified balance sheet continued to show this quarter allowing East West to continue to deliver top tier returns.

[Dominic Ng, Chairman & CEO at East West Bancorp]

We deliver a near 16% return on tangible common equity and a 1.6 return on average assets, while growing tangible book value per share 3% quarter over quarter and 15% year over year. Now before I hand the call over to Chris, I'd like to take a moment to talk about the current economic environment. Tariffs are not new for East West or our customers. We have been taking tariffs into consideration since 2017. Many of our clients decided to diversify their supply chains way back then and accelerated those efforts during COVID-nineteen pandemic.

[Dominic Ng, Chairman & CEO at East West Bancorp]

Since that time, we have seen our customers increase their investments in The U. S. And other markets. All the while, East West engaged with our customers and continue to grow. Over the past six months, we have seen our customers reposition themselves for a range of potential outcomes.

[Dominic Ng, Chairman & CEO at East West Bancorp]

In the past several weeks, our teams have spent a lot of time with our customers talking about their business plans. They are proving to be forward thinking, nimble and are mostly staying ahead of the curve. Our experience has taught us to confront challenges from a position of strength. We entered the second quarter with a diversified balance sheet, a granular and strong consumer and commercial banking network, top tier profitability, best in class operating efficiency and amounts to highest levels of capital in the banking industry. We have the capital and balance sheet flexibility to take care of our customers in any environment and are well positioned to capitalize on any opportunities ahead.

[Dominic Ng, Chairman & CEO at East West Bancorp]

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

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Thank you, Dominic. Let me start with loan growth on Slide four. We had over $05,000,000,000 of loans to the balance sheet in Q1. Demand for residential mortgage proved durable and new originations continued to be accretive to yields. Even with the current elevated rates, we continue to see steady mortgage origination activity in Q1 and have a strong pipeline going into the second quarter.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

As Dominic mentioned, we also grew commercial real estate balances this past quarter as we continue to support our long standing relationship clients and select multifamily projects. C and I balances also grew modestly in Q1, likely reflecting the pull forward activity we saw in Q4. Overall, we are encouraged by the lending trends we have seen so far, even into April. Moving on to Slide five. We strategically optimized our deposit pricing strategy this quarter to lower our overall funding costs.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

We successfully retained our Lunar New Year CD balances and incrementally captured some additional CD market share, even at much lower pricing. Average DDA balances, money market balances and time balances all grew quarter over quarter. We continue to expect customer deposit growth will fund all of our loan growth this year. Overall, we're encouraged by the deposit trends we have seen this year, even into April. Slide six covers our net interest income.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

We grew quarterly dollar net interest income to 600,000,000 up $12,000,000 from Q4 despite two fewer days in the quarter. Similarly, we grew our net interest margin by 11 basis points from Q4 to 3.35% in the first quarter, primarily by decreasing our end of period interest bearing deposit costs by 13 basis points and partly due to day counts. In both cases, dollar NII and margin were also assisted by the expiration of some of our legacy hedges. Looking back to the start of the cutting cycle, we have decreased interest bearing deposit costs by 62 basis points, successfully exceeding our 50% beta guide, which we've shared in prior quarters. We continue to expect net interest income expansion as we go through the balance of the year.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Moving on to fees on Slide seven. As Dominic mentioned, fee income grew 8% from Q4 to another record level, with growth in four of our five major fee categories. We will remain focused on driving growth in our fee categories and further diversifying our revenue streams. We are encouraged by the pace of growth in fee revenue so far this year. Turning to expenses on Slide eight.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

East West continued to deliver industry leading efficiency while investing for future growth. The Q1 efficiency ratio was 36.4%. Total operating non interest expense was $236,000,000 for the first quarter, including seasonally higher payroll related costs. Overall, we continue to expect expenses will be in line with our guidance for the year. Now I'll hand the call over to Irene for comments on credit and capital.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Irene?

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

Thank you, Chris, and good afternoon to all of the call. As you can see on Slide nine, our asset quality metrics continue to broadly outperform the industry. With quarterly net charge offs, non accrual loans and non performing assets metrics all improving. We recorded net charge offs of just 12 basis points in the first quarter or $15,000,000 compared to 48 basis points in the fourth quarter or 64,000,000 Quarter over quarter, nonperforming assets decreased by two basis points to 24 basis points of total assets as of 03/31/2025. The criticized loans ratio increased during the quarter to 2.3% of loans.

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

The special mentioned loans ratio increased eight basis points quarter over quarter, while the classified loans ratio decreased increased, excuse me, three basis points to 138. We recorded a lower provision for credit losses of $49,000,000 in the first quarter compared with $70,000,000 for the fourth quarter of twenty twenty four. We remain vigilant and proactive in managing our credit risk. Turning to slide 10. The allowance for credit losses increased $33,000,000,000 to $735,000,000,000 or 1.35% of total loans as of 03/31/2025.

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

We utilized a multi scenario methodology for the allowance and the increase in the quarter was largely driven by an increase in downside scenario weightings given the economic uncertainty in early April twenty twenty five. We believe we are adequately reserved for the content of our loan portfolio given the current economic outlook. Turning to slide 11. As Dominic mentioned, our strong capital levels allow us to operate from a position of strength and support our customers in any economic environment. All of East West's regulatory capital ratios remain well in excess of regulatory requirements for well capitalized institutions and well above regional and national bank averages.

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

East West CET1 capital ratio stands at a robust 14.3%, while the tangible common equity ratio rose to 9.9%. These capital levels place us amongst the best capitalized banks in the industry. In the first quarter, East West repurchased approximately 920,000 shares of common stock for $85,000,000 We currently have $244,000,000 of repurchase authorization that remains available for future buybacks. East West also distributed $85,000,000 to shareholders via quarterly dividends. East West second quarter twenty twenty five dividends will be payable on 05/16/2025 to stockholders of record on 05/02/2025.

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

I will now turn the call back to Chris to share our outlook. Chris?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Thank you, Irene. On Slide 12, we are reiterating our full year guidance. We're also providing some additional detail on tax items. Amortization of tax credit and CRE investment expense is now expected to be within the range of $70,000,000 to $80,000,000 this year. We continue to expect our full year 2025 effective tax rate to be below 23.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

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

[Operator]

Thank you. We will now begin the question and answer session. Today, we ask that analysts please limit themselves to one question and one follow-up. You may then rejoin the queue at any time for additional follow-up questions. Today's first question comes from Casey Haire with Autonomous.

[Casey Haire, Senior Research Analyst, Mid-Cap Banks at Autonomous Research]

So I guess first question, why is the NII guide not moving higher? It sounds like loan pipelines are in good shape and NIM is up. And at this current run rate, you're right at the middle of the guide level.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Sure. And to be honest, we could probably think about that a little bit harder.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

But the reality is there's a couple of rate cuts baked into the March 31 curve. And since then, probably the outlook has stemmed a little further for three to four cuts. So as we sit here today, we think the current guidance is appropriate, and we're comfortable.

[Casey Haire, Senior Research Analyst, Mid-Cap Banks at Autonomous Research]

Okay. And then so Chris, the deposit beta, as you pointed out, well ahead of what you're 50% expecting.

[Casey Haire, Senior Research Analyst, Mid-Cap Banks at Autonomous Research]

You what is can you sustain that at this level? Or is that is that normalized lower?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes, Casey, I think what we've told folks is we've been benefiting from rolling down the hill, particularly with the repricing of our CDs. And so as the forward curve starts to flatten out, that positive momentum will start to slow a bit. Nonetheless, we think we'll be above the 50% guide we've given you.

[Operator]

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

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Good afternoon, AB. Ebrahim, you might be on mute.

[Ebrahim Poonawala, Analyst at Bank of America]

Hi. Can you hear me?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes, we can.

[Ebrahim Poonawala, Analyst at Bank of America]

There we go. Okay. Hey, Chris. So on capital, I think you bought back in the first quarter at an average price of, I mean, the 90s. Given the pullback that we've seen in stocks, I appreciate the macro is uncertain.

[Ebrahim Poonawala, Analyst at Bank of America]

Just talk to us in terms of how much of a ramp up can we see in terms of capital return and buybacks if the sell off continues? Or does the macro make you a little bit more cautious and stay on the sidelines and sit with the excess capital for now?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Sure. So if I look back over the last six quarters, we've purchased $310,000,000 with the stock at an average price of around 72. So we clearly think the price has value still below where we bought it in Q4 and in Q1, and we'll continue to look at it. But as you know, Ebrahim, we continue to want to position the bank to always be in a position of strength, to be in the best position to service and support our customers and to have the flexibility to do what's right for shareholders in all environments. So we'll continue to be opportunistic.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

But as Irene mentioned, we have $244,000,000 available and all the flexibility to consider what's best for our shareholders.

[Ebrahim Poonawala, Analyst at Bank of America]

Got it. And I guess maybe just one big picture question, maybe, Dominic, for you on client activity. So you've talked about the experience you all have had since 2018. It feels the rhetoric, the pushback between U. S.

[Ebrahim Poonawala, Analyst at Bank of America]

And China is a lot more sort of elevated this time around. And I'm just wondering when you think about your customers, their ability to withstand this, like do you think the risks are larger today than what we were faced in 2018, '20 '19? And have you seen any deceleration or a pickup in activity ahead of these tariff concerns?

[Dominic Ng, Chairman & CEO at East West Bancorp]

Well, I think in terms of from our clients' perspective who have business that may have a direct sort of may would actually be impacted by directly by tariff. I would say that back in 2017, it would be a little bit more challenging for them because it will be the first time they really went through this sort of like a surprise with the tariff. And so and then most of them were not as necessarily as well prepared. It took them a few years to get themselves in a position that be able to figure out how to deal with the supply chain. I think in a way, COVID-nineteen actually accelerate many of their desires to make sure they have a multiple alternative way to continue to do business in terms as either they are importer of goods from Asia region.

[Dominic Ng, Chairman & CEO at East West Bancorp]

So today, well, the tax the tariff rate is particularly for China is very high. And then even for other countries potentially can be high. But I guess all of that will be subject to negotiations. So we at East West Bank try not to put too much time focusing on the speculation about what the outcome, what we've done back then in 2017, '20 '18, and we pretty much just focusing on working with our clients, one customer at a time, helping these clients that have direct exposure and getting them through. And fortunately for us, in fact, as we have said it numerous times in earnings call that our trade finance portfolio did not suffer any losses during those period of time.

[Dominic Ng, Chairman & CEO at East West Bancorp]

And so today, very much the similar way, we see that the size at East West Bank that we can actually engage with our customers one at a time. In fact, so far we have already talked to over 500 commercial clients and that have sort of exposure due to the newly proposed tariff. And we feel pretty good with the discussions with these clients that everyone have a different way to manage it. Some of them actually have already set substantial amount of their manufacturing base to either other countries or even some of them in The United States for the last few years. There are some that are just holding back shipments for now and then to see how it goes.

[Dominic Ng, Chairman & CEO at East West Bancorp]

And then there are others who pass the cost, who are very much comfortable passing the cost ultimately to the consumers of U. S. And then there are others that who actually their products are exempted from the punitive tariff rates that are currently being proposed. So many of them have all different scenarios, but we talk to each and every one of these customers and work with them to make sure everybody is in good shape. So as of today, what we've noticed is that for clients, the commercial clients that have significant potential adverse impact due to tariff and they equate to about 1% of our total C and I loan balance portfolio.

[Dominic Ng, Chairman & CEO at East West Bancorp]

So we feel pretty good where we are today. And in terms of potential credit loss as of today, we don't see any at this moment. But we continue to work with our clients on a day to day basis, continue to help them through. And we feel that actually this exercise not only is great for credit risk management for East West Bank, but more importantly, that's how we help build loyalty with our C and I customers. And more importantly, I do want to point out that through this process, their likelihood we're going to end up gaining more business from other banks because there are other banks who actually are not as familiar of how they manage the tariff situation that may potentially trigger disappointment from some of their high quality clients.

[Dominic Ng, Chairman & CEO at East West Bancorp]

So we feel that we may have opportunity going forward in that regard.

[Ebrahim Poonawala, Analyst at Bank of America]

Got it. Thanks for the color, Dominic.

[Operator]

Thank you. The next question comes from Manon Gosalia with Morgan Stanley. Please go ahead.

[Manan Gosalia, Analyst at Morgan Stanley]

Hi, good afternoon. Dominic, if you can comment on what you just said. As you work with clients, as it drives a bigger opportunity for East West, does that imply that it's a bigger opportunity for bringing in more clients, getting higher loan growth, getting more deposits as soon as this year? Or is that more of a longer term opportunity in your mind?

[Dominic Ng, Chairman & CEO at East West Bancorp]

I look at everything sort of more of a longer term perspective. In terms of the current environment is that there are uncertainty out there. So whatever that I projected, predicted, I think that sometimes in a few days things change, right? We saw the volatility of the stock market and whatnot. So our position is that number one, we want to make sure that we are in a position of strength.

[Dominic Ng, Chairman & CEO at East West Bancorp]

That's why we're very proud that our tangible capital ratios approach 10%. And we have plenty of liquidity. And so as long as we're in this position, we feel very confident within our control. We have plenty of flexibility and very fortress like balance sheet that can work with anybody. Now how would that end up either getting more customers to us this year versus a year from now, two years from now?

[Dominic Ng, Chairman & CEO at East West Bancorp]

It all depends on how everything plays out in the economic environment in the next six to nine months. And that is something that somewhat beyond my control.

[Manan Gosalia, Analyst at Morgan Stanley]

Got it. So you're saying that East West has the capital, has the balance sheet to work with clients. And at the same time, there is an elevated level of risk for The U. S. Economy as a whole as well.

[Manan Gosalia, Analyst at Morgan Stanley]

What would cause you to pull back on loan growth in this environment?

[Dominic Ng, Chairman & CEO at East West Bancorp]

A multiple scenario. I mean, what caused us to pull back several because economic condition, if it dramatically go downward, obviously, there are not going to be that much demand and we will be prudent and not to even engage with clients to talk about a fantasizing growth strategy when in fact, if it's going to a recession. So, but all of that, these are what I wouldn't call a substantial heightened risk at this point. I would just say that there are uncertainty because no one really know what's going to happen in the next few months and then that is something that we would just have to wait and see how things turn out. And it's just uncertainty and that's why the best thing to deal with uncertainty is to be financially strong.

[Dominic Ng, Chairman & CEO at East West Bancorp]

If you look at it, the past three out of five years, we had from COVID to the regional banks, Silicon Valley Bank crisis and then to now, this sort of like potential tariffs impact to economy, three out of five years, we felt really good about our strong capital ratio because we position ourselves as a very, very strong financial institution. We give tremendous confidence to both our commercial and our retail customers so that they do not feel panic worrying about East West Bank. And that automatically help us down the road getting organic growth momentum. So we'll see how this all plays out, but I feel good about our financial positioning. And so but whether how the economic will go up or down or sideways, that's beyond my pay rate.

[Manan Gosalia, Analyst at Morgan Stanley]

Appreciate that. Thanks so much.

[Dominic Ng, Chairman & CEO at East West Bancorp]

Thank you.

[Operator]

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

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Hi, good afternoon.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

I'm wondering just on the fee income side, how much of the broader fee income is somehow generated one way or another through cross border trade? And then just maybe following up on the conversation we're just having, how would you balance the view that East West expertise maybe becomes more coveted as complexity starts to increase in cross border trade versus maybe some of those fees at risk if cross border activity actually does slow?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Sure. So a small portion of the commercial deposit related fees are cross border, but the reality is the lending fees are domestic, the wealth management fees are domestic and the derivative activity is tied to our domestic customers. So it's really just the FX fees. And obviously, the FX fees are you could almost say by definition cross border related, but everyone has a little bit of them. So they're not specific to East West.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

But I think it's just really a portion of the commercial fees and the FX fees that are tied in some way to cross border activity.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Okay. And then maybe one for Irene. Just can you talk us through the allowance build, the rationale on the C and I side, if there are any specific segments where maybe that allowance was more so applied? And then on CRE, I guess I was a little bit surprised to see that allowance tick down quarter on quarter even though classifieds were up sequentially.

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

Yes. Good question. So the increase in the allowance for us was largely based on our increasing the waiting for the downside scenario. As I said in the prepared remarks we use a multi scenario for calculating the allowance. And we haven't closed the books yet in early April.

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

So with kind of the fact pattern that was out there and the market disturbance with the tariffs, we increased the downside scenario. The impact of that was multifold. So what we highlighted there for the reserves of the C and I and the increase of seven basis points or $37,000,000 for C and I was a result of that.

[Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo]

Great. Thank you.

[Operator]

The next question is from Ben Gurlinger with Citi. Please go ahead.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Hi. Good afternoon. Appreciate it. If we could take a minute here talking about expenses. I know you guys you have a guide of seven to 9%.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

It seems like 1Q over 1Q last year is pretty de minimis in total change. Just trying to think about how to look at the remainder of the year, the nine months and any time investments might hit or what we should expect for 2Q, 3Q and 4Q?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes. Look, I think we're still comfortable with the overall guide for expenses for the year. We continue to invest in cyber and technology and enterprise risk and in growing the infrastructure to be a better and stronger bank for our customers. And all of those investments continue at pace. Some will come into play in Q2 and Q3 as technology gets implemented and placed in service.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

Got you. That's helpful. And then when you just kind of think holistically, if we're kind of in a vacuum here, no rate cuts, like first quarter had the impact of lowering CD pricing and deposit costs overall. Then you also had partial headwind reprieve from your derivative or swaps, I should say.

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

When you think about

[Ben Gerlinger, Vice President of Equity Research at Citigroup]

it kind of in the 2Q, it should naturally work higher, day count included. And then if you layer in a cut in the middle of the year, like that's the headwind? Is that what you're trying to convey, Krish?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes. So I think we naturally expect the balance sheet continue to grow. That will be a positive. The positive from the derivatives that expired have already been recognized. The CD repricing opportunity in a flat rate environment will dissipate towards zero.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

And what will be offsetting the balance sheet volume growth will be potentially the risk of: a, slower growth on one hand than perhaps our expectations given just how the economy might slow in the later half of the year and the potential for rate cuts, which at least at March 31, there were two rate cuts baked in. And we've previously said each rate cut is worth $2,000,000 per month. So that's a negative to offset essentially the positive balance sheet volumes that we expect. A million per rate cut per month. The

[Operator]

next question is from Matthew Clark with Piper Sandler.

[Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Hey, good afternoon, everyone. Thanks for

[Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies]

the questions. Hey, just on the

[Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies]

deposit cost side, it looks like

[Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies]

the spot rates at 3.3%, just four basis points below the average in the quarter. Could you just remind us what you have in the way of CDs coming due in 2Q, maybe even 3Q and kind of the differential in rate before it drifts to zero?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes. We have about $10,000,000,000 coming due in the next quarter here, Q2, and about $8,000,000,000 in third quarter. Rate wise, most of the things that we'll say in the third quarter rollover have just been repriced now, right? So essentially, the stuff that's coming on in the third quarter is all going to be in the low 4s, 4,000,000 to $4.08 a little bit at $4.18 kind of range. So the incremental benefit in a flat rate context will be eight basis points.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Of course, if we see one or two rate cuts by then, it will get better. And then with regard to stuff that we'll roll over here in Q2, it's stuff that generally we put on the books in December or January that will come due in an ordinary course, and that's going to be sort of in the low 4s, 4.25% area, roughly.

[Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Got it. Okay. Thank you. And then just on the uptick in criticized commercial real estate ex multifamily, I think from went from three zero eight to three seventy six. Can you just give us a sense for the types of properties that drove that increase and your plans there?

[Irene Oh, Executive VP & Chief Risk Officer at East West Bancorp]

Yeah. The increase there was pretty broad based. Some related to no concentration really honestly from a customer perspective or really relative to the portfolio through the geography. The areas where we had kind of downgrades were industrial and largely retail and then some of in our other category as well, which is broad based. Nothing we saw or thought was systemic at this point.

[Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Okay. Thanks for the color.

[Operator]

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

[Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson]

Thanks. Good afternoon. Dominic, I appreciate your comments earlier on tariffs. Wondering if as it relates to the trade finance business, have you or do you expect to see sort of an earlier year level of activity there as any of your customers kind of pull in supplies or inventory earlier than they might typically do. Have you seen any of that yet?

[Dominic Ng, Chairman & CEO at East West Bancorp]

That's already happened. I mean, customers that react to the sort of like potential tariffs that may be coming to place, pretty much I think stocking and putting more inventory in place early on. So I looked at it right now is that I don't anticipate in the next two to three months there will be any more balances increases because I hope right now it's going to be the kind of worst case scenario. So I mean, doesn't make sense for any of the importers to start part of more inventory at this stage.

[Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson]

Okay. So that's already kind of embedded in some of the C and I activity in the first quarter, it sounds like.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes. As I mentioned, Gary, we may have seen part of that actually in the fourth quarter as well. So that was a pull forward of activity. So we probably saw some of it in Q4, some of it here in Q1. And as Dominic mentioned, we don't expect to see a buildup on the C and I side, at least, of materiality related to that activity at this time.

[Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson]

Got it. Okay. Makes sense. And then second question I had was just on the wealth management fee income, the year over year end sequential quarter increase, pretty significant. Was that I think in the slide deck, it just notes higher customer activity.

[Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson]

But the sequential quarter number is so strong, I'm just wondering if there was anything in there that did impact the quarter that may not recur here in the second quarter.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

I think there was a lot of volatility in the quarter. And so customers came and asked for advice, and we were happy to provide it. And the reality was that it was a combination of putting money to work into fixed income products, putting money to work into insurance products, putting money to work just in allocating some to insurance policies and putting some money to work in structured notes and other activities along with the normal ordinary course investments in the markets that we usually support our customers with. So it really was across the board and on many fronts, but in response to some very active conversations, which create opportunity to reposition some things.

[Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson]

Thank you.

[Operator]

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

[Jared Shaw, Managing Director at Barclays]

Maybe

[Jared Shaw, Managing Director at Barclays]

following up on the wealth management question. What's the broader strategy for growing that line? Is there an opportunity for M and A to come in and play a part in growing wealth management? Or is it really just going be continual blocking and tackling and growing customers one at a time?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Well, we have been successful at the blocking and tackling and growing customers one at a time, which I think is a hallmark of East West capabilities. But in addition to that, as you're aware, we made an investment in Thuraleon back in 2023, and we would selectively look at opportunities to continue to expand our capability for our customers and offer a broader set of both products and services and solutions because we think there's incremental demand within our customer base, within our core domestic customer base for those services and solutions that will continue to sort of tap into with each quarter that passes, and we know we can do more.

[Jared Shaw, Managing Director at Barclays]

Okay. All right. And then on the hedge strategy, can you maybe give us an update on what the expected sort of volume or appetite is going forward? And then what's the blended received fixed rate on the existing swap book after that $1,000,000,000 rolled off in first quarter?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

It got a lot better. I don't know that I have the blended right at my fingertips. But the next sort of relevant trade that will impact the portfolio is we've had about $500,000,000 of forward starting swaps, just under 4% that we'll receive fixed on starting in Q3. And so to the extent we see rate cut in Q3, we're poised to be in the money on those. And actually, I'm sorry, 5,000,000 early in Q3 and then another $500,000,000 later.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

So there'll be a total of $1,000,000,000 over the back half of 2025, again, both with the received fixed rate at around 4%.

[Operator]

The

[Operator]

next question comes from Chris McGratty with KBW.

[Christopher Mcgratty, Managing Director at Keefe, Bruyette & Woods (KBW)]

Chris, just on the securities purchases and the liquidity management, can you elaborate on what you bought in the quarter, yield, duration and expectations for kind of the mix between cash and bonds going forward?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Sure. So during the first quarter, we continue to mostly buy Ginnie Mae floaters, although we did begin to layer in some fixed rate Ginnie Mae. Our focus is all on purchasing HQLA Level one secondurities. So far, in Ginnie Mae's has been sort of exclusively the focus. Our duration at the end of the quarter basically ended up at around three, and that's a blend of the floaters, which obviously are less than one and the legacy portfolio of mix fixed that we had and the HFS, the whole portfolio comes out to about three.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

But again, if we're buying mostly floaters at the short end, we're adding less than one stuff, although incrementally and today, we do see value in the fixed side of the equation at levels above 5.5%.

[Christopher Mcgratty, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay, great. And then just a clarifying comment.

[Christopher Mcgratty, Managing Director at Keefe, Bruyette & Woods (KBW)]

The tariff exposure, I think you talked about reviewing $500,000,000 or 500 customers. Was it 1% of the C and I that was the statistic? I missed that before that you were watching a little bit closer.

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

Yes. 1% of the C and I outstanding balances is the portion of the customers that are we know that we're actively engaged, which is why we engage with them. And those are the outstanding balances. Again, we're not saying any of those are necessarily at risk, but we know they're actively engaged and they'll be impacted to some extent. The

[Operator]

next question is a follow-up from Gary Tenner with D. A. Davidson. Please go ahead.

[Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson]

Hi, thanks for the follow-up question. I just wanted to ask about the FHLB advances at $3,500,000,000 kind of expectations for I know there's some maturities there this year. Would you expect to just continue to roll those? Or do you have a different approach in mind as it relates to paying down that liquidity or funding?

[Christopher Del Moral-Niles, Executive VP & CFO at East West Bancorp]

I think we'll continue to look at the Federal Home Loan Bank advances as a flexible component of our overall balance sheet to the extent that there's an opportunity to pay those down with excess deposits. Happy to do so from time to time. To the extent there's an opportunity to put the money to work in securities that has a better profile for us and better return to our shareholders. We've been doing that essentially over the course of last year, and I think we'll continue to reevaluate that as we move through the year.

[Operator]

Thank

[Operator]

you. This concludes our question and answer session. I will now turn the call back over to management for any closing remarks.

[Dominic Ng, Chairman & CEO at East West Bancorp]

Thank you. Thank you for joining us on today's call, and we are looking forward to speaking with you again in July. Bye bye.

[Operator]

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

Participants

Executives

• Adrienne Atkinson, Senior VP & Director of Investors Relations
• Dominic Ng, Chairman & CEO
• Christopher Del Moral-Niles, Executive VP & CFO
• Irene Oh, Executive VP & Chief Risk Officer

Analysts

• Casey Haire, Senior Research Analyst, Mid-Cap Banks at Autonomous Research
• Ebrahim Poonawala, Analyst at Bank of America
• Manan Gosalia, Analyst at Morgan Stanley
• Timur Braziler, Director - Mid-Cap Bank Equity Research at Wells Fargo
• Ben Gerlinger, Vice President of Equity Research at Citigroup
• Matthew Clark, Managing Director & Senior Research Analyst at Piper Sandler Companies
• Gary Tenner, Managing Director & Senior Research Analyst at D.A. Davidson
• Jared Shaw, Managing Director at Barclays
• Christopher Mcgratty, Managing Director at Keefe, Bruyette & Woods (KBW)