Ahmad Hasan

Ahmad Hasan inquired about the PAA accretion number, the outlook for deposit costs and spot rates, and the company's strategy and targets for new hiring in 2026 to support loan growth.

Answer

CFO Julianna Balicka stated the PAA accretion number is not separately disclosed. Regarding deposit costs, she provided the spot rate as 2.68% at December 31, 2025, and explained that downward repricing of CDs, alignment with Fed funds cuts, and investments in Treasury Management would drive future reductions. For new hiring, Ms. Balicka indicated no specific targets but noted hiring focuses on revenue generation and frontline support, suggesting using the Q4 run rate for OpEx growth.

Ahmad Hasan inquired about the PAA accretion number, details on deposit costs including pricing and spot rates, and the outlook for new hiring in 2026 as a lever for loan growth.

Answer

CFO Julianna Balicka stated that the PAA accretion number is not separately disclosed. Regarding deposit costs, Ms. Balicka provided the spot rate for total deposits as 2.68% at December 31, 2025, and outlined future reductions driven by CD portfolio repricing, non-maturity deposit rate adjustments following Fed cuts, and an improved deposit mix from investments in Treasury Management Products and Services. For new hiring, Ms. Balicka indicated no specific targets but confirmed hiring is focused on revenue generation and frontline support, suggesting the fourth-quarter run rate for operating expense growth.

Ahmad Hasan asked about the general client sentiment driving strong loan growth across segments and if GDP numbers are translating into this sentiment, and inquired about specific hiring goals for revenue producers this year.

Answer

Christopher Del Moral-Niles, CFO, emphasized that East West's loan growth and progress stem from relationship managers working closely with individual clients to provide agile solutions, rather than solely broad economic trends. He referred to the 7%-9% expense guidance and 12% compensation growth in 2025, indicating a continued focus on hiring talented individuals to drive business.

Ahmad Hasan inquired about the general client sentiment and whether positive GDP numbers are translating into client activity and loan growth for East West Bancorp. He also asked for specific hiring goals for the year, particularly concerning revenue producers.

Answer

CFO Christopher Del Moral-Niles emphasized that while the economy provides a backdrop, East West's loan and fee growth primarily stem from relationship managers working closely with individual clients to deliver solutions. He directed attention to the 7%-9% year-over-year expense guidance and the 12% compensation growth in 2025, indicating a continued focus on hiring talented people to drive business growth.

Ahmad Hasan of D.A. Davidson & Co. inquired about the health of the loan pipeline, the potential impact of tariffs on clients, guidance for expense modeling, and the likelihood of increased share repurchases given the stock's valuation.

Answer

Chief Banking Officer Anthony Kim described the Q2 loan pipeline as healthy but noted that loan demand could soften later in the year due to economic uncertainty. He added that US KC customers are well-prepared for potential tariffs. CFO Romolo Santarosa projected a 3-4% increase in salaries and benefits for Q2 due to annual merits, with other expenses tracking inflation. Regarding capital, Santarosa stated that the board reviews repurchases quarterly and that recent activity levels are a reasonable, though not guaranteed, expectation.

Ahmad Hasan, on behalf of Gary Tenner, asked for commentary on the loan pipeline for the upcoming quarter and inquired about the expected repricing costs for the significant volume of certificates of deposit (CDs) maturing.

Answer

Chief Banking Officer Anthony Kim stated that the Q4 loan pipeline is similar in size and yield to Q3, making him optimistic for comparable production. Regarding CDs, he noted that new production rates are between 4.1% and 4.3% and expects to reprice maturing CDs favorably. Executive Bonita Lee added that historical CD retention rates have ranged from 78% to 85% over the past year.

Ahmad Hasan questioned why the company is not actively repurchasing shares, given its strong capital position, modest loan growth outlook, and a stock price just modestly above tangible book value.

Answer

President Jay Brogdon responded that the bank's capital deployment priorities are, in order: 1) funding organic growth and opportunistic securities restructuring, and 2) supporting the dividend. He stated that preserving capital for optionality is prudent in the current uncertain macro environment. While not a current priority, the buyback authorization remains an available tool should a significant market dislocation make it highly attractive.

Ahmad Hasan, on for Gary Tenner, asked for the spot deposit rate as of December 31, requested a breakdown of the out-of-state loan portfolio, and inquired about the outlook for the SBA and USDA loan business in 2025.

Answer

CFO Terry Earley provided the spot deposit rates as of 12/31: 3.99% for interest-bearing deposits and 3.19% for total deposits. He also clarified details of the out-of-state portfolio. Both CEO Malcolm Holland and CFO Terry Earley reiterated their bullish outlook for the government-guaranteed loan business, citing strong momentum, robust pipelines, and the benefits of combining the SBA and USDA teams, while cautioning that the USDA portion can be lumpy.

Ahmad Hasan of D.A. Davidson & Co. asked for the near-term outlook on expenses after the quarterly increase and questioned the bank's deposit pricing strategy in light of expected rate cuts. He also requested the quarter-end spot rate for deposit costs.

Answer

CFO Terry Earley explained that the expense increase was driven by higher incentive accruals, which will persist, and OREO-related costs, which will decrease. He does not expect a significant drop in near-term expenses, with efficiency gains being a longer-term 2025 initiative. On deposits, Earley highlighted that all business lines are contributing to attracting lower-cost deposits and the strategy is to continue remixing away from wholesale funding. He provided quarter-end spot rates of 4.38% for interest-bearing deposits and 3.33% for total deposits.

Ahmad Hasan, on for Gary Tenner, asked about the bank's strategy for the $1.3 billion in term funding maturing in Q3 and inquired about the low SBA and USDA production during the quarter.

Answer

CEO Malcolm Holland stated that the bank intentionally kept its funding profile short in anticipation of falling rates and expects to reprice the maturing CDs lower than their current 5.17% average rate. He also clarified that a graph was mislabeled; SBA production was decent but comprised of smaller loans. He noted the hiring of a new SBA team and expects better fee income in the second half of the year due to a strong pipeline and recent restructuring efforts.

Ahmad Hasan from D.A. Davidson & Co. questioned the specific timing of the $385 million in securities purchases during the fourth quarter and asked if further sale-leaseback or securities transactions are planned.

Answer

Executive E. Nicholson stated that the Q4 securities purchases were weighted more towards the end of the quarter based on settlement dates. President and CEO David Brager confirmed that there are no further sale-leaseback transactions contemplated, as the bank decided against selling two additional properties and considers its 'mini balance sheet restructuring' to be largely complete.