East West (EWBC) Q2 2025 Earnings Call Transcript

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DATE

Tuesday, July 22, 2025, at 5 p.m. EDT

CALL PARTICIPANTS

Chairman and Chief Executive Officer — Dominic Ng
Chief Financial Officer — Chris Del Moral-Niles
Chief Risk Officer — Irene Oh

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TAKEAWAYS

Quarterly Revenue: Achieved record revenue in Q2 2025, driven by both net interest income and fee-based income.
Net Interest Income: Net interest income reached $617 million in Q2 2025, increasing $17 million sequentially.
Loan Growth: Average loan balances rose by $940 million in Q2 2025. This represents a 2% quarter-over-quarter increase, with C&I lending as the largest contributor.
Deposit Growth: Total average deposits grew 2% quarter-over-quarter in Q2 2025 and end-of-period deposits rose 3%, with strength in both noninterest-bearing and interest-bearing segments.
Fee Income: Total non-interest income was $86 million in Q2 2025, and fee income stood at $81 million, which is the third-highest quarterly result in company history. Fee income grew 14% for the first half of the year compared with the same period last year.
Efficiency Ratio: Recorded at 36.4% in Q2, reflecting continued industry-leading operating efficiency, reflecting continued industry-leading operating efficiency.
Non-Interest Expense: Reported at $230 million in Q2 2025, consistent with expense guidance for the full year.
Asset Quality: Non-performing assets decreased to 22 basis points of total assets as of Q2 2025, while the criticized loans ratio improved to 2.15% of loans.
Loan Loss Provision and Net Charge-Offs: Provision for credit loss was $45 million in Q2 2025, compared with $49 million for the first quarter; net charge-offs were $15 million, or 11 basis points in Q2 2025.
Allowance for Credit Losses: Increased $25 million to $760 million as of Q2 2025, or 1.38% of total loans, reflecting the updated economic outlook in the CECL model.
Capital Ratios: Common equity Tier 1 ratio increased nearly 20 basis points to 14.5% as of Q2 2025; tangible common equity ratio reached 10%.
Share Repurchases: Approximately 26,000 shares, totaling $2 million, were repurchased in Q2 2025; $241 million remains authorized for future buybacks.
Dividend Announcement: Third quarter dividend to be paid August 15, 2025, to holders of record on August 4, 2025.
Tax Rate: Effective tax rate in Q2 2025 was 22.9%, including a $6 million one-time state expense; full-year effective tax rate is projected at approximately 23%, with subsequent quarters likely closer to 22%.
Recognition: Named Bank Director Magazine's number one performing bank above $50 billion in assets for the third consecutive year and fourth time in five years.

SUMMARY

East West Bancorp (EWBC -2.37%) reported record net interest income and revenue in Q2 2025, underscored by strong loan and deposit growth, improved asset quality metrics, and disciplined expense management. Capital levels remained robust with key regulatory ratios materially above well-capitalized thresholds, while low levels of non-performing assets (22 basis points of total assets) and criticized loans (2.15% of loans) support a stable credit outlook amidst incremental reserve strengthening. Regulatory and fiscal changes, including a one-time $6 million state tax expense, were explicitly quantified and incorporated into updated financial guidance.

Chris Del Moral-Niles emphasized the company's asset sensitivity and stated, "fewer rate cuts is better for us," indicating the firm could benefit from a higher-for-longer rate environment.
Management noted that commercial deposit growth complemented consumer and business balances, reinforcing customer relationship depth across key segments.
Renewable energy tax credit investments and lending tied to recent legislative changes remain unimpacted for existing commitments as of the Q2 2025 earnings call, but future investment strategies are under evaluation.
The commercial real estate portfolio experienced modest growth, as the bank continues to prioritize diversity across industries and lending products.
The company repurchased fewer shares primarily due to blackout periods tied to earnings preparation and market timing considerations.
Future expense growth will be driven by investments in talent, digital infrastructure, compliance, and fraud prevention to support the bank's strategic and regulatory evolution as it continues to grow in size.

INDUSTRY GLOSSARY

CECL model: Current Expected Credit Loss; accounting method requiring banks to estimate expected lifetime credit losses on loans, incorporating forward-looking macroeconomic variables.
Criticized Loans: Loans identified by management as having elevated credit risk, typically including both special mention and classified assets under regulatory definitions.
Special Mention: Loans exhibiting potential credit weaknesses or trends that, if not corrected, may result in further deterioration -- ranked below classified but above pass assets.
Common Equity Tier 1 (CET1) Ratio: A regulatory capital ratio comparing core equity capital to risk-weighted assets, serving as a key measure of a bank’s capital strength.

Full Conference Call Transcript

Dominic Ng: Thank you, Adrienne. Good afternoon. And thank you for joining us for our second quarter earnings call. I'm pleased to report strong second-quarter results. We continued to grow the bank and reported record quarterly revenue and net interest income. Both loan and deposit growth were solid with average growth up 2% quarter over quarter in each. Our relationship-driven model continues to drive consumer and commercial growth on both sides of the balance sheet. This growth and another quarter of solid fee income fueled a 16.7% adjusted return on tangible common equity and a 1.6% return on average assets. Asset quality has remained resilient, and credit is performing as expected.

Both criticized and non-performing loans decreased from the end of the first quarter. We continue to focus on using our capital to support customers and capitalize on any market opportunities that arise. With approximately 10% tangible common equity, we are operating from a position of strength. Lastly, I'm pleased to announce that East West Bank has once again been ranked by Bank Director Magazine as the number one performing bank above $50 billion in assets. This is the third consecutive year we have earned a top spot and is our fourth title in the past five years. This achievement is a testament to the steady execution of our associates and our ongoing customer focus.

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

Chris Del Moral-Niles: Thank you, Dominic. Let me start with a recap on our deposits. As Dominic mentioned, total average deposits grew 2% quarter over quarter, while end-of-period deposits grew 3%. We were particularly encouraged by the strong growth in noninterest-bearing deposits this quarter. We also saw growth in interest-bearing checking, money market, and time deposit balances, rounding out another great deposit-led quarter. We saw notable growth in our commercial deposit segment, complemented by continued growth in our consumer and business banking balances, underscoring the value of our strong customer relationships across the board. We continue to expect customer deposits will fund our loan growth this year.

Turning to loans on Slide five, our average loan balances were up $940 million quarter over quarter. C&I lending was the largest contributor, with new originations coming from a broad range of industries, while utilization remained broadly stable quarter over quarter. Three weeks into this quarter, our pipelines remain active, and we expect to continue growing C&I throughout this quarter. Demand for residential mortgage products also proved relatively durable, and at current rates, we continue to see a strong pipeline into Q3. We would expect residential mortgage to contribute a similar or higher volume to the balance sheet in Q3. We also grew our commercial real estate balances modestly this quarter, as we continue to support our long-standing CRE clients.

Slide six covers our net interest income trends. We grew dollar net interest income to $617 million, up $17 million from Q1. Looking back to the start of the cutting cycle, we have decreased interest-bearing deposit costs by 67 basis points, successfully exceeding our 50% beta guidance shared in prior quarters. We continue to expect dollar net interest income growth as we progress throughout the year. Moving on to fees on slide seven, we note that total non-interest income was $86 million in the second quarter, and fee income was $81 million, the third-highest quarter for fees in East West history.

While these fees weren't as strong as the first quarter, which was a new record for us, we note that for the six months ended June 30, total fee income has grown 14% as compared to the first six months of last year. This sustained execution on fee income levels reflects our ongoing focus on the products, services, and capabilities that will further diversify our revenue over time. Turning to expenses on slide eight, East West continued to deliver industry-leading efficiency while investing for its future growth. The Q2 efficiency ratio was 36.4%. Total operating interest non-interest expense was $230 million for the second quarter.

We continue to expect expenses will come in line with our guidance for the full year. Regarding income tax expense, we note that second quarter income tax expense was $92 million with an effective tax rate of 22.9%. Second quarter income tax expense included $6 million of one-time expense related to California's adoption of a single state single sales factor apportionment method, which became effective on June 30. We continue to expect our full-year effective tax rate to be approximately 23%. However, subsequent quarters will likely be under that and closer to 22%. Now, let me hand the call over to Irene for some comments on credit and capital.

Irene Oh: Thank you, Chris. And good afternoon to all on the call. As you can see on Slide nine, our asset quality metrics continue to broadly outperform the industry. With criticized non-accrual loans and non-performing asset metrics all improving. Non-performing assets decreased by two basis points quarter over quarter to 22 basis points of total assets as of June 30, 2025. The criticized loans ratio decreased during the quarter by 14 basis points to 2.15% of loans. The special mention ratio decreased 10 basis points quarter over quarter to 81 basis points of total loans while the classified loans ratios decreased four basis points to 1.34%.

We recorded net charge-offs of 11 basis points in the second quarter or $15 million compared to 12 basis points in the first quarter or also $15 million. We recorded a lower provision for credit loss of $45 million in the second quarter compared with $49 million for the first quarter. We remain vigilant and proactive in managing our credit risk. Turning to Slide 10, the allowance for credit losses increased $25 million to $760 million or 1.38% of total loans as of 06/30/2025, considering changes to the economic outlook. We believe we are adequately reserved for the content of our loan portfolio given the current outlook.

Turning to Slide 11, as Dominic mentioned, our strong capital level allows us to operate from a position of strength and support our customers with confidence. All of East West's regulatory capital ratios remain well in excess of requirements for well-capitalized institutions, and well above regional and national bank peers. East West common equity Tier one capital ratio rose nearly 20 basis points to a robust 14.5% while the tangible common equity ratio rose to 10%. These capital ratios place us amongst the best-capitalized banks in the industry. In the second quarter, East West repurchased approximately 26,000 shares of common stock approximately $2 million. We currently have $241 million of repurchase authorization that remains available for future buybacks.

East West third quarter 2025 dividend will be payable on August 15, 2025, to stockholders of record on 08/04/2025. I will now turn it back to Chris to share our outlook.

Chris Del Moral-Niles: Thank you, Irene. We are making a few updates to our full-year outlook this time. We are assuming forward curves as of quarter-end, and we continue to expect full-year end-of-period loan growth will fall in the range of 4% to 6%. However, regarding net interest income and revenue trends, we see both trending above 7% for the full year. We're also adjusting our outlook on net charge-offs. And we now expect full-year net charge-offs to fall in the range between fifteen and twenty-five basis points.

As I mentioned earlier, we continue to expect our full-year tax rate to be about 23% and we continue to expect amortization of our tax credits and CRA investment expense will fall in the range of $70 million to $80 million. With that, let me turn the call over to the line for questions. Operator?

Operator: We will now begin the question and answer session. Before pressing the keys. Our first question today is from Casey Haire with Autonomous. Please go ahead.

Casey Haire: How are you doing? So first question just beyond the margin. You guys are doing a great job holding the line on loan yields and then obviously the beta pushing, you know, above 60%. Just wondering your ability to sustain both of them going forward.

Chris Del Moral-Niles: Yes. So I think we're looking at deposit cost optimization on a continuous basis. And in fact, that will probably be a continued focus for us here in Q3 whether or not we get a rate cut or not in September. We think there's opportunity for us to do some more work on that front and we'll continue to manage that. Obviously, we lowered our total deposit costs a few basis points this quarter and we remain focused and diligent on that. On the asset repricing side, I think we continue to expect I think there's always a bit of a day count effect from the first to the second quarter in mortgages and mortgage-backed securities.

But beyond that, I think we continue to expect that those fixed-rate asset classes will have an opportunity to reprice positively. So we're optimistic that we'll be able to maintain the margin within a range of reasonableness through the third quarter. And obviously, we'll see how and when rate cuts come after that.

Casey Haire: Gotcha. Okay. And then just wanted to touch on credit. You guys did build the reserve led by C&I. Looks like despite favorable migration and you took your charge-off guide down. Just maybe a little color on what's going on there. What are you seeing in C&I? Or did you just change the weightings around? Just a little color on reserve build.

Irene Oh: Hi. This is Irene. I'll answer that. It wasn't anything specific that we saw within the C&I book. I'll just kind of comment that it really has to do with the CECL model and the economic outlook and forecast.

Operator: The next question is from Manan Gosalia with Morgan Stanley. Please go ahead.

Manan Gosalia: Hey, good afternoon.

Dominic Ng: Good afternoon, Al. So can you talk about the impact of the recent legislative changes on the renewable energy tax credits business?

Chris Del Moral-Niles: Sure. We're taking a look at the renewable energy investments that we make as well as the lending that we do and obviously that will have implications for the go forward. However, as we looked at all the projects we had already committed to, and all the ones that were in flight, they seemed to fall in under the exemption or under the period of grace until the new rules kick in. So as we sit here today, all of the existing investments, all of the existing loan commitments are unimpacted and we're rethinking about some of our go-forward tax credit investment strategies as we look down the road.

Manan Gosalia: So, presumably that means that, all else equal, that tax rate would go up. Are there any offsets to that we should be thinking about for next year?

Chris Del Moral-Niles: I think the good news is there's an army of consultants that have ideas for us. So I think we're thinking through lots of them. I don't know that I would write off our ability to find something to offset those changes in the long run.

Manan Gosalia: Got it. Thank you.

Operator: The next question is from Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Poonawala: Good afternoon, Ebrahim.

Dominic Ng: Hey. Good afternoon. Were you trying to finish something, Chris?

Chris Del Moral-Niles: No. Go ahead. Go ahead.

Ebrahim Poonawala: Okay. So I guess, going back to one on the NII side, the 7% plus guidance. It implies no growth relative to where we've been in the first half or the second quarter. I'm just wondering if we don't get rate cuts and you hit your loan growth outlook, shouldn't we assume generally to sort of drift higher and track loan growth? Is that sort of the right way to think about direction and pace of NII growth relative to loan growth?

Chris Del Moral-Niles: Yeah. So let me use the framework that you put forward. So yes, we are fundamentally asset sensitive. So, yes, fewer rate cuts is better for us. So the extent that rate cuts are slower, come later, or of a lesser magnitude, we will do better. You're also correct. It's a function of loan growth and asset growth. And, thankfully, we've had great deposit growth that's allowed us to continue to fund profitable loan growth. And to the extent that continues at a good pace, that could be better. And so those are the two key factors that could lead that to be better. I think, Ebrahim, I would say it maybe slightly differently as well.

I think we came out assuming this year that our NII growth will be in line with our overall asset or loan growth specifically in that four to six range. We raised that estimate when we went not from four to six but the six plus back in June. And I think we're-raising today as we go to seven plus. And to the extent rates are higher for longer or loan growth comes in better, there's still upside to that. And obviously, as Dominic would remind me, part of my task is to make sure we're putting our best foot forward and doing the best we can. And so we'll continue doing that every day.

Ebrahim Poonawala: Understood. And I guess maybe just a separate question. Feels like industry-wide, there's some momentum on loan growth. Obviously, your loan growth guidance implies a pickup in the back half. But maybe Dominic, talk to us about just client sentiment around pace of investment picking up. I think there's some seasonality to lending. For East West in the second half. And are we through the worst of, like, the tariff noise in terms of the clients navigating that, or are there more structural changes that are happening this time, which was different than what happened in 2018, 2019?

Dominic Ng: Thank you. I think the client sentiments are definitely getting better. Not that they love it, just that the fact is they are I think they are more comfortable with the fact that there will be tariffs. However, I think they have more certainty now than in the beginning of the year when everyone was confused about exactly what would happen. And I think that at this point, while there will be tariffs, there also will be pass-through to consumers to a certain extent. And we also noticed that as I indicated at the last call, quite a few imports were exempted from the tariff. So there are many, many products out there that are exempted.

So then sort of, like, each and every one of these businesses has different nuances there. Some of them are able to pass through to consumers. Some of them actually, you know, are exempted. And by and large, I would say the vast majority of the customers are feeling more comfortable. I do want to highlight that our East West Bank customers tend to be much more experienced and sophisticated in terms of dealing with tariffs because we got them going back in 2017. And so they've been having quite a bit of experience dealing with the situation. So many of them even prior to the current administration they have already started sort of like working on different strategies.

So they tend to be much more adept and agile to deal with the situation. So all in all, I would say that from that standpoint for East West Bank, we will be fine. The other thing I wanted to point out is that you know, in terms of our loan portfolio, we have such a diversified loan portfolio with different industries, different product types, and the import-export business today is actually quite a small part of our business. Because we have just diversified our overall portfolio so much. So the fact is with or without tariff, the impact to our P&L is somewhat now more minimal than it used to be.

And so at this stage, I would say right now, things are looking better. The issue is that there's still uncertainty out there in the market. On one hand, the good news is that the tax reform is done. And overall is more relatively speaking fit for business. However, the tariff is still touch-and-go here and there. Meanwhile, it appears to be coming to more certainty, but things can change minute by minute. But we are watching it closely. Been there, done that. But we are pretty confident about how to manage it.

Ebrahim Poonawala: Sure. Thank you.

Operator: The next question is from Jared Shaw with Barclays. Please go ahead.

Jared Shaw: Hey, good afternoon, everybody.

Dominic Ng: Afternoon.

Jared Shaw: Maybe just on the deposit side, when we look at sort of the trends this quarter, it looks like average cost was higher than both end of period for first quarter and second quarter. Can you just sort of walk us through how that's moving and your thoughts on how that's gonna move through the rest of the year?

Chris Del Moral-Niles: So sorry, Jared. If I look at table eight or sorry, table six, press release, average total deposit costs were down two basis points. Total interest-bearing deposit costs were down three basis points. So on a quarter-over-quarter basis, I think we're moving in the right direction. And if I'm looking at page six in our deck, would note that the end-of-period interest-bearing deposit costs were down to 3.25%. Which is a low point here relative to last quarter or prior period. So I think we're moving the deposit cost down.

Jared Shaw: Okay. And the pace of that you feel like is you know, that you'll be able to be consistent with that as we move forward given the forward curve.

Chris Del Moral-Niles: Well, I think if you look at Page six, that might be a good graph and I think I've described this in prior conversations. We have had the benefit that we have a good amount of CDs and the CDs essentially price in the forward curve expectations. And so we actually get to lower the deposit cost as we approach future rate cuts. And so when you look at the step down that occurred late last year, that's because there were several cuts that occurred late last year. And as we look at the slower pacing, so the line is becoming gradually less steep with each step. Reflects the sort of slower pacing of Fed cuts that we've seen.

So this year, you know, we're expecting, potentially some rate cuts later in the year. To the extent we get something in September, you'll see a step down there certainly at September period end. To the extent we see further down Q4 we'll see a little bit more in Q4. It probably won't be as steep as last year's we saw 100 basis points, but it'll be a good move in the right direction.

Jared Shaw: Okay. Thanks. And then just as a follow-up on the core expenses, to get to the guidance it really implies a step up in the second half of the year. Where are those investments coming from? And how much of that is tied to potentially $100 billion threshold? And if we see that adjusted, would that impact the expense outlook?

Chris Del Moral-Niles: So I think what we've tried to communicate is that we are being very programmatic about finding the right people to bring in and hire. And help us build the bank that's going to be as robust and resilient as we need to be as we continue to grow in size. To a certain extent, while the $100 billion is a real number today, the reality is there's depth and strength and resiliency to our total management functions that are going to require additional investments.

And so when you look at our expense guidance, it fully reflects our expectation we're going to continue to round out the team, continue to build our cyber capabilities, continue to build our online and mobile strengthening, continue to build our fraud capabilities as well as all the things we do for regulatory as well as develop new tools and solutions for our customers. And so all of that growth is still in process. And in motion. And I expect you will see increasing line items because most of our expenditures are in comp and benefits. You'll see that continue to grow as we grow through the year and into the years ahead.

We're focused on hiring to help us build the bank we want to be. And we're focused on then supporting those hires with the right systems and solutions to be as strong a bank as we can be. All in a very East West efficient manner of course, but our costs are going to go up.

Jared Shaw: Thank you.

Operator: And the next question is from, and please excuse any mispronunciation, Timur Braziler with Wells Fargo. Please go ahead.

Timur Braziler: Afternoon, Timur.

Chris Del Moral-Niles: Hi, good afternoon, guys. Appreciate your comments around SFR for the third quarter. I'm just wondering, maybe looking out a little bit some of the noise regarding Trump presidency. Do you think that line item is at risk in the longer term with just some of the migration trends? Or is it isolated enough or insulated enough, I should say, that growth rate really shouldn't change all that much?

Chris Del Moral-Niles: I think Irene pointed out to me a little over a year ago so after I joined that the American dream is alive and well. Despite where rates are at, despite where sentiment is around anything else. And so the reality is, we see ourselves providing a solution that supports that dream of American homeownership. And that demand for the clients we serve is not flacking at all.

Timur Braziler: Okay. And then maybe another question just around some of the tariff uncertainty. Your ability to sustain fee income here has been pretty impressive over these last two quarters. I'm just wondering, did you get any sense if there's a pull forward that occurred earlier in the quarter or any type of broader cross-border trade disruption within your fee income lines or is this a good steady state to base future assumptions off of?

Chris Del Moral-Niles: If I look at the graph that's out there on fee income, on Page seven in the deck, three of the quarters have come in at a pretty solid $81 ish million. Through the last four quarters. So I'd say that's a pretty good run rate for us. And the reality is, where we gave up fees was a little bit on the derivatives, FX side of things, which are a little more transactional. And some of the wealth stuff that was one-time in nature. But our other fees are relatively steady and just steadily building. So we continue to expect that to be a pretty steady contributor.

Timur Braziler: Great. Thanks, Chris.

Operator: The next question is from Gary Tenner with D. A. Davidson. Please go ahead.

Gary Tenner: Lot. Gary.

Gary Tenner: Hi. A lot of questions were asked, but just wanted to kind of follow-up on the buyback Chris, you had some comments on that in your prepared remarks, I think. The amount of buyback in the second quarter pretty light in terms of shares. And I'm wondering how much of that was simply being kind of cautious in the wake of kind of the tariff announcements because obviously there was an opportunity to be repurchasing shares quite a bit lower than the stock trading now.

Chris Del Moral-Niles: Yes. I think part of that might just be timing. Gary, in the context of that, I'll say that we the first couple of weeks of the quarter, which were the weeks immediately following Liberation Day, stock took a bit of a swoon. And we generally, since we prepare our financials, don't buy back when we're in possession of our results, and we haven't publicly disclosed them. And so there's sort of a bit of a blackout window that we self-imposed just to be on the right side of any SEC questions later on. And so we weren't active in that period before the earnings call. And we know but the price action was there.

And so when we sort of came back active, we set price expectations not able to forget that there had been a seven handle at one point in the quarter. And, of course, we never saw that handle again. So, you know, I think we just sort of went through the quarter a bit trying to keep up with the market movement and never quite got ahead of it. I think we'll be thoughtful about where we're headed as we look at the back half of the year and continue, obviously, to think that there's an appropriate level of repurchase. And obviously, have the $241 million available to us at the right levels.

But we'll continue to deploy on an opportunistic basis.

Gary Tenner: I appreciate the thoughts. Thank you.

Operator: The next question is from Matthew Clark with Piper Sandler. Please go ahead.

Matthew Clark: Good afternoon. Hey, good afternoon.

Chris Del Moral-Niles: First one for me just on the macro changes that you made with the CECL model. Can you just speak to the assumptions you made and how they changed just to give us a sense for conservatism that's built in around C&I in particular?

Chris Del Moral-Niles: So, I think as Irene mentioned earlier in one of our responses, I think it was macro-driven. And as we think about it, we didn't necessarily change the weighting assumptions about recessionary outlook versus the core outlook. But the Moody's model itself did have some degradation. And so we factor degradation into our core and also factored into our other scenarios that we do run and that contributed a good portion of the net change. We also took some specific look at some of the C&I portfolios. And obviously, we're constantly evaluating those and essentially grading and risk rating those. And that was also part and parcel obviously, of our risk rating takes into consideration the outlook.

So that's all baked in. Irene, would you care to add more to that?

Irene Oh: So I think that's a good summary. As a reminder, you know, I think many people use the same kind of Moody's models. But we also use multi scenarios I wanted to just kind of factor that in as well. So that is part of maybe just the conservatism you alluded to.

Matthew Clark: Okay, great. And then on the criticized migration in non-multifamily CRE. Can you just speak to what asset classes within non-multifamily CRE drove that and kind of what the line of sight is in that area?

Irene Oh: Good question. About half were special mentioned, half were substandard. Pretty evenly distributed there. As far as the income-producing CRE from an asset class perspective, pretty broad-based as well. There were some loans that we downgraded because cash flow kind of shortfall that we saw a reduction. For some properties that were impacted after the fires. But others kind of broad-based. As we look at these loans, loans by loan, and the underlying collateral, I would say at this point, I don't see these moving to non-accrual or something that will result in a charge-off at this point in time. But certainly, we're looking at the cash flows very carefully and ensuring that and the grading is appropriate as well.

Matthew Clark: Okay. Great. Thank you.

Operator: The next question is from Chris McGratty with KBW. Please go ahead.

Chris McGratty: Good afternoon, Chris. Thanks.

Chris Del Moral-Niles: Hey, Hey, Don. Hey, Irene. Afternoon, Chris, a question for you on the balance sheet. Your mid-80s loan to deposit ratio, a lot of capital. Is there anything you want to do to the balance sheet over the next several quarters? That maybe not have been, you know, done yet.

Chris Del Moral-Niles: Well, I think we meet regularly with Irene and Dominic through the ALCO process, and we're always trying to optimize the balance sheet. I think we've made good strides towards that direction, but the reality is we know there's more on the deposits that can be optimized. And we know that there's a component of the investment portfolio that could be further optimized. And we continue to think about how we're going to grow the C&I book in particular, so that's further optimized. A percentage of the total loans. And so those are all works in progress that we continue to sort of try and push in the right direction. Each day we come in.

Chris McGratty: Great. And then on capital, I hesitate to even ask the question, but you've got, you know, 10% TCE going to 11 probably, and you know, CET one to 15. It's a high-class problem. But is there anything you wanna do with your capital beyond what we've talked about over the medium term to either build out fee income capabilities, you know, portfolio acquisitions, anything like that? Thanks.

Chris Del Moral-Niles: Yeah. So, I mean, I think in the long term, of course, our first goal, as we've always highlighted is to deliver top quartile returns. And so as long as we're delivering sixteen, 17 type quarter after quarter returns on tangible capital, we hope shareholders feel we're doing the right thing for them. The second thing, of course, as we've said publicly, we have every intention to continue to build out our key businesses. And we continue to have conversations and ongoing dialogue with different providers about different services that we could offer our customers, about different solutions that we could sell, and about different ways of building out our fee and business fee income businesses. Continue to grow.

I think there's opportunity in many of them, and Dominic has encouraged us and directed us to make hires to bolster and grow a variety of those business lines here over the last six months. We're continuously looking at not only hires, but also potentially purchase solutions and or even acquired solutions.

Chris McGratty: All right. Great. Thanks, Chris.

Operator: The next question is from Andrew Terrell with Stephens. Please go ahead.

Andrew Terrell: Good afternoon, Andrew. Hey.

Andrew Terrell: If I could just go back to some of the loan growth quickly, the single-family and C&I, Chris, your comments sounded pretty optimistic on kind of the third-quarter setup. I'm curious just on commercial real estate, any selective kind of slowing of the growth potential in that business that you guys are seeing right now, just either managed concentrations or maybe based on a competitive environment. Just hoping to unpack maybe a little bit of the CRE business.

Chris Del Moral-Niles: I mean, I think if I look at page seven of the press release, table two, you'll see that on a year-over-year basis, we've grown our single-family book by 5%, almost 6% our C&I book by 5% almost 6%, and our CRE book by a little less than 2%. And so if I think about, hopefully, the comments that I've been making at the last several quarterly earnings calls and at the last several earnings presentations, if they focus on continuing to grow the bank overall, with a particular emphasis on growing our C&I and single-family in a balanced manner.

To get towards the third, a third, a third balance that Dominic has encouraged the bank to sort of shoot for the medium to long term. I think we're continuing to make progress on that. Quarter after quarter, year after year, and this is another good quarter of balanced growth. In the way we'd like to see it.

Andrew Terrell: Okay. The rest of mine have already been addressed. Thanks for the question.

Operator: Thank you.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks.

Dominic Ng: Thank you. Once again, I would like to thank everyone for joining our call today. And we are looking forward to speaking with you in October. Bye.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.