EAST WEST BANCORP INC Q1 FY2026 earnings call

• Deposits: Consumer and commercial depositors' trust helped grow total deposits 9% year-over-year, with strong growth in non-interest-bearing deposits driven by focus on retail and small business customers. - Loans: CNI loans were the primary driver of Q1 growth, with net line draws from existing customers. Residential mortgage had a seasonally slower Q1 but pipelines grew. Commercial real estate balances also grew. - Fee income: Record quarter with 12% year-over-year growth, strong momentum in wealth management due to structured notes and annuity sales, and focus on diversifying fee revenues. - Credit performance: Asset quality metrics stable, net charge-offs and non-performing assets low in absolute terms, reflecting disciplined risk management. - Capital position: Tangible capital ratio of 10.3%, maintaining capital level while growing balance sheet, increasing dividend, and opportunistically repurchasing shares.

Loans: Achieved 7% year-over-year growth, with CNI loans increasing by over $900 million quarter over quarter, driven by higher line utilization, particularly among capital call borrowers. Deposits: Total deposits grew 9% year-over-year, with end-of-period deposits up $1.8 billion quarter over quarter and average GBA growth up 12% year over year, and non-interest-bearing deposits up nearly $800 million. Fee income: Grew 12% year-over-year to a record $99 million for the quarter, with significant growth in wealth management fees driven by structured notes and annuity sales.

• Updated full year 2026 net income guidance to grow between 6% to 8%, up from prior 5% to 7% expectation. - Projected full year net charge-offs to fall between 15 and 25 basis points. - Reiterated full year loan growth guidance in the range of 5% to 7%.

• Management statements on forward-looking statements may differ materially from actual results due to a number of risks and uncertainties. - Impact of Fed's capital proposals on risk-weighted assets and subsequent effect on capital ratios. - Competitive deposit pricing environment which may affect deposit costs. - Slight increase in residential non-performers with no systemic stress but need for customer-by-customer and loan-by-loan monitoring.

Q: Given the capital proposals put out by the Fed last month, quantify the impact on capital ratios.

A: Risk-weighted asset adjustment from the proposal is roughly a $7 billion reduction in current risk-weighted assets, which would translate to a 1.6 to 1.8% increase in regulatory capital ratios.

Q: On private capital call line lending, confirm if drawdowns were stressed and why C&I growth not more diversified.

A: Drawdowns in quarter were not for stressed purposes, and there were green shoots in various industries with over $300 million of non-capital call line activity showing positive momentum.

Q: Update on deposit growth competitive environment and DDA trends.

A: DDA growth is result of long-term strategy, deposit landscape is competitive, and positive pricing pressure due to rate outlook.

Q: Trend of deposit pricing costs in flat environment.

A: Deposit pricing downhill phase has flattened, and incremental new CDs may not reprice with much benefit.

Q: Reason for credit guidance tweak.

A: It's based on current view of the portfolio regarding net charge-offs.

Q: Update on blockchain or stable coins for international business.

A: Monitoring crypto and stablecoin developments, exploring projects but not yet rolled out products.

Q: Deposit growth vs loan growth relationship.

A: Continues to be deposit-led growth, with deposits helping drive better funding mix, liquidity profile, etc.

Q: Loan growth in coming quarter and seasonality of commercial business lines.

A: Some capital call lines paid down in Q2, but private equity and mortgage private capital activity may offset, and no significant seasonality in other commercial business areas.

Q: ACL build status and expectation.

A: ACL built with multi-scenario model, downside scenario changed substantially from year end, and feel good about current allowance level based on charge-off visibility.