Conference Transcript - EWBC 2026-09-14

Jared Shaw, Analyst — Barclays

Good afternoon, everybody. My name is Jared Shaw. I cover the MidCap banks here at Barclays. We're excited to start the first MidCap panel of our fireside chat of our conference with Chris DelMorto-Niles from EastWest Bank, the CFO. Thanks a lot for coming. My pleasure. He's fresh off a trans-specific flight, so we appreciate you having the East Coast time.

Christopher Del Moral-Niles, CFO

Well, it's always a great event, one that I've been delighted to participate alongside you, Jerry, here for the last couple of years, and I look forward to many, many more years ahead.

Jared Shaw, Analyst — Barclays

Great music.

Christopher Del Moral-Niles, CFO

I will make sure everyone addresses Adrian here in the front row, who I think you all know is director of IR, and with us today is also Chris Mattern, our treasurer. And so we've been having good dialogue with folks all this morning and look forward to good dialogues over the next day or so. Thanks for a full lineup up until 530 every day.

Jared Shaw, Analyst — Barclays

I want to keep you busy, for sure. Thanks. Well, you know, at least kicking it off, EastWest remains differentiated through its exposure to both U.S. and Asian markets. As you look across the franchise today, what do you think continues to attract new customers on both the commercial and consumer side, and where are you seeing the strongest client acquisition opportunities?

Christopher Del Moral-Niles, CFO

Sure. And so we are a cross-border capable bank. It's important to recognize that 94% of our loans are in the U.S., and somewhere between 92% and 97% of dollar balances are in U.S. dollars. So we're a U.S.-centric bank that helps facilitate cross-border trade and activity for folks that have businesses and transactions to do abroad. Focus is American. And within that, what's been very interesting in case was if you had drawn a business-bound map for where to build the perfect bank in the last 50 years in the United States, you probably would have picked a market like California. You probably would have zoned in further on Southern California. You would have zoned in further on an educated, entrepreneurial subset of that market, and that would have gotten you to the core East-West client base, and that has been a great market to serve over the last 50 years and an even better market to serve arguably over the last 30, And it's been complemented, particularly over the last 15, by an incredible flow of activity across the Pacific, which has only become more and more diverse as we've grown. And so the reality is we are finding pockets to grow in our core Southern California markets, in our San Francisco, Seattle, Houston, Dallas, Boston, Atlanta, New York markets. We are finding pockets to grow in cross-border activity with Hong Kong. We're finding pockets to grow with cross-border activity with Shanghai. We're finding opportunities coming to us through our rep offices in Singapore, and all of that is contributing to a better-than-average level of inherent organic growth than for most regional banks, in part because they don't have that same exposure or density exposure to California, which continues to be very positive. and they don't have the added transactional flow of activity that we see from our cross-border activities which is the incremental sort of feel to the engine that we have and it's a very strong deposit engine where we've seen the growth it's in deposits first and foremost a derivative that is in wealth and both of those are fueled by those same demographic times high educational component high income component high wealth component all of with driving higher savings balances and higher wealth activity. And it's a very positive trend.

Jared Shaw, Analyst — Barclays

Many banks talk about relationship banking, but East-West seems to have an unusually sticky customer base. What do you think customers value most today, and how has that changed over time?

Christopher Del Moral-Niles, CFO

I think fundamentally our customers value the stability and strength of East-West Bank as a partner. And that stability, strength has only continued to enhance itself here over the last several years. And so we recognize that the banks that we primarily compete against, and our primary competitors are the big four, too big to fail banks, and we think about their presence, and all of them have some presence in Asia at different levels for different reasons, but they're all there, and they're all doing things to support a variety of folks, whether it's the Walmarts or the folks that Walmart's buying from. They're all transacting Fortune 1000-level entities on both sides. But below the portion of 1,000, it's still those four banks and then East-West Bank. And that's where we know that we have a disproportionate opportunity to win share and capture markets. And so that positive dynamic really is part of the differentiation. But part of that differentiation comes from the fact that people recognize that those banks that are too big to fail, they represent safe options. And so East-West has to position itself, if not too big to fail, then too strong to fail. And we have successfully positioned ourselves as that too strong to fail alternative bank, which is why we're able to capture share. And that too strong to fail is supported by strong capital levels, strong liquidity levels, and strong profitability, all of which leads to positive reinforcement of that too-strong-to-fail dimension, which allows us to report quarter after quarter of record earnings or record growth or record capital levels, reinforcing this message to the customers that we are the strongest alternative for them. And that has bred loyalty.

Jared Shaw, Analyst — Barclays

I think touching on competition, it remains intense across, I guess, all of your markets. How would you characterize the competitive environment today, and where do you believe East West is winning the most business?

Christopher Del Moral-Niles, CFO

So a competitive environment today is a shifting landscape, and so when we think about in the last couple of years, Adrian, Mr. Madden, and I all joined the bank in 2023, and 2023 is an interesting watershed moment for regional banks.

Jared Shaw, Analyst — Barclays

Did something happen then?

Christopher Del Moral-Niles, CFO

Yes, a dividing line, perhaps, between those that have the right risk management appetites and the right diversification. And I think our lesson learned from 2023 is you have to be diversified, diversified, diversified, and you have to be the fact that there will be shocks to the system and that since we're not too big to fail, we need to have that strength within the sort of four walls of the institution to support what's necessary. And so what we've been able to create is this balance of activity that's increasingly diversified. And that means finding new customers and new markets and new niches, to your question, I think, and finding the ability to service them in new and differentiated ways to create the diversification and create the sort of stability across markets and cycles that is necessary to succeed. We've been able to do that by entering new verticals and new niches and new channels in a way that I think has positively differentiated ourselves and led to this sort of sustained and continued growth in an environment that maybe hasn't seen all that much growth. We've also been able to do that in this environment post-2023 where we've had several, let's just call them name changes, right? Whether it's, you know, Union Bank used to be called something else or is called something else, and Bank of the West has changed names, and more recently Hereco America has changed names. And with each of those conversions and changes, there's been incremental opportunity for East-West to step in and capture more share. Not to mention a couple of banks that just went away altogether. And that combination of opportunities created by banks exiting the market because they weren't diversified enough, because they weren't risk-aware enough, or those exiting the market because they couldn't sustain the investor sentiment to keep them going without doing something radical for their balance sheets or their operations. Each of those changes has created incremental business opportunities for East-West to both hire people, make inroads into the business, or pick up clients in a way that has sustained our otherwise strong growth trajectory.

Jared Shaw, Analyst — Barclays

You talked about leading with deposit growth. DDA growth continues to be a major differentiator in the past quarter with non-interest-sparing deposits increasing meaningfully again. What do you think is driving that success? First and foremost, it's our retail bankers.

Christopher Del Moral-Niles, CFO

They're doing a phenomenal job of getting out there and pounding the pavement. We call it the shoe leather strategy of just walking up and down Valley Boulevard, walking up and down Rosemead Boulevard, walking up and down and knocking on doors and making sure that that knock is heard and following through and following up on opportunities. And that ability to get out at the grassroots level, literally at the street level, and make connections with folks in our communities has been driving that underlying strength of DDA for the last, it feels like, six quarters or so in a way that is far more sustained than I appreciated it could be. It's been complemented by, over that time, we've also struck a partnership with WorldPay that has allowed us to offer those small business customers a variety of new terminals and merchant card equipment that was an improvement from what we previously were offering at a price point that was positive, and that combination of us making the inroads, us making the call, us making the outreach, and then being able to offer them something different than you led to an improved penetration of that existing customer base.

Jared Shaw, Analyst — Barclays

And it was largely an existing customer base.

Christopher Del Moral-Niles, CFO

We are already approaching a lion's share of the market, and many of the Asian affinity communities we serve, we've been able to take that shoe leather strategy as well as the machinery and go to new markets and also make inroads. And in addition to that, we've been able to sort of take the capabilities online and offer them to a broader cross-section of small business clients sort of around the market. And the three of those strategies all working together have really perfect. And that's been the driver of that DDA growth and continues to be here. I would be remiss if I didn't point out we've also benefited from para-free funds. Para-free funds helped buoy the numbers in the second quarter. They've continued to come in positively in the third quarter. And while the flow has been approaching a billion dollars or so, the reality is the net residual balances were a couple hundred million at the end of the second quarter. They're probably in the same order of magnitude as we see here today. And those are residual flows that we think at this point in time are likely to stay within the bank. They may move from DBA to money market at some point in time or have already, but there will be incremental balances from that activity.

Jared Shaw, Analyst — Barclays

You've highlighted the importance of core relationship deposits and operating accounts. As you look ahead, how much opportunity remains to continue to improve the overall deposit mix?

Christopher Del Moral-Niles, CFO

Well, I think we have done a nice job of finding the floor, first and foremost. And so at around 24%, 25% of our total deposit mix feels like a transactional floor. And the good news is we've worked off the bottom of that floor towards the 25, 26-plus percent. And in the current rate environment, that feels about the right level. Should rates move lower, which doesn't seem to be the expectation at this point in time, we would expect that to continue to improve. Should rates remain relatively stable, which is our current expectation, we would assume that mix holds relatively steady at the sort of mid to high 20s. Should rates move higher, they might trend back towards that floor of 24%, 25% over time. But that feels like a threshold level for our floor at this point in time, and it feels like there's more upside than downside.

Jared Shaw, Analyst — Barclays

You have roughly $13 billion of CDs repricing this year and continue to discuss deposit remixing.

Christopher Del Moral-Niles, CFO

No, $12 or $13 a quarter.

Jared Shaw, Analyst — Barclays

$12 or $13 billion a quarter, right? How should investors think about the balance between retention, growth, and funding cost optimization? And how are you thinking about pricing in this market to grow and retain?

Christopher Del Moral-Niles, CFO

So at the moment, we're priced exclusively to retain. And so we're not trying to grow share or capture balances through pricing. In fact, arguably our pricing today, our CD special for the Lunar New Year back in February of this year was initially set for a six-month CD at $368. Our current today CD offering for six months is $365, so that obviously does not reflect an uptick. Now, we would be the first to remind you all that when we booked investors back in January, we told you that the forwards for CDs were already reflecting a more competitive deposit They were already reflecting a shift higher period in funding levels and an expectation that loan growth would be stronger in 26. It turns out those things all came together, and so we're not surprised at where we find ourselves now. But what we do see is at 365, we would probably be losing some deposits. So we've complemented that with a 375 nine month and a 380 12 month fee rate. And that blend is looking in some further duration extension of our client's deposits with us, the deposit tenors, more shifting to the nine and 12 month, holding the overall balance is relatively steady. but probably increasing our cost just a smidge. But that combination means that we will probably be in very good circumstances should there be further future rate hikes because we're locking in these funding levels at 375, 380, where others will be paying more in the future. We'll also note that even those levels of 375, 380 feel like they're a good 25 basis points, if not more, under market from what we see in the general marketplace. and in general marketplace feels like that could be a four handle and where we are at threes feels like a relative healthy level of discount reflecting the relationship value we have with these sustained DB customers which we've developed over many, many years.

Jared Shaw, Analyst — Barclays

Switching over to the loan growth side, loan growth guidance was raised again with second quarter. What's giving you the confidence that the current pace of growth remains sustainable with the broader macro uncertainty.

Christopher Del Moral-Niles, CFO

So let's take sort of the three different portfolios in stride. First, you know, the strongest growth in the second quarter was in our single-family mortgage book, and that business has been sustained. Interestingly, despite the fact that long rates have backed up and that mortgage pricing hasn't come down, the reality is the American dream is alive and well, the desire for owning a home continues to be a driving force for many American households, and the ability to work with a bank like EastWest, where we'll provide a 50% down payment mortgage solution for you, has two curious side effects. One is, for a subset of customers, the fact that they're only borrowing 50% means they're five-eighths less rate-sensitive than the other customer. On average, you're borrowing less, you're less rate-sensitive. That seems to track, and we're seeing that. The other component is the reality for some of our customers is the reason they're talking to us and engaged in a 50% down mortgage program is because they have uneven earnings or a lack of track record of earnings, and it's difficult for them to qualify for additional mortgage products, period, in which case the 50% is the only option, and they're slightly less rate-sensitive because there's not a competing marketplace for those loans. And so what we found over the 50-year history we've been operating this product is it's a very attractive risk-return product because our risk has effectively been zero over 50 years. And so on the residential mortgage side, what we're seeing is a continued flow of funds at a level that's sustained and reflects the durability of that business into the third quarter. I can say that with confidence because, well, we're three-quarters of the way through the third quarter at the one hand, and I know what's closing in the next several weeks, so it'll be a good quarter for mortgage. On the CRE side, which has not been a focal point for us, The reality is it looks better at 6.25% yield than it did at 5-something yield. And so the reality is we're able to sort of lock in some of those pricing points for developers and customers that we've had for decades. We're more than happy to do that for the right borrowers. And so we've been able to sort of apply ourselves to execute on some transactions for them and support their interests at what we think is an attractive level as well. And so that will be an area of growth for us, whereas it's been a more muted level of growth for us in prior quarters. And then finally on the CNI side, when we think about that, we sort of break that into two pieces. The NDFI loans or the PE loans and other loans that we've done, which were a big driver of the first quarter's outperformance, and we told you they would pay down in the second quarter, and they did. We've continued to see pay down in that activity and volume into the third quarter. And so that will be a soft point on that side. On the other hand, we've made up for that with some core C&I growth, which will put it back in the positive territory. And so you'll see positive lung growth in all three of our verticals led by a single family.

Jared Shaw, Analyst — Barclays

On the commercial, the C&I side, are there any specific industries or customer segments that are producing the most attractive opportunities today?

Christopher Del Moral-Niles, CFO

I think what we've been endeavoring to do on the C&I side is diversify, diversify, diversify. And so, you know, we have the North Star of balancing the three portfolios as a third, a third, a third, between the single families, the CRE, and the commercial. And then within each set of commercial, we endeavor that no subset of that should exceed more than 5% of the balance sheet. And that's not a fixed, formal cap, but through our risk management approaches, we're managing essentially caps in that neighborhood. And to date, none of the portfolio categories have exceeded 5%. And so we'll continue to diversify that as we continue to grow. That means, you know, we're relatively more capped out in, say, PE and entertainment, which are two big verticals of ours, and less capped out in some other areas. And so we'll be focusing on trying to continue to build out more diversification of the volume in the business mix.

Jared Shaw, Analyst — Barclays

You know, when we were here last year, we were looking at the potential for rate cuts.

Christopher Del Moral-Niles, CFO

This year we're looking at the potential for rate hikes. investors are often focused on the margin but management continually emphasizes net interest income how are you thinking about balancing growth deposit remixing and margin to maximize earnings in an environment like we're seeing today I'll continue to deliver double digit ROTCE continue to deliver bottom line EPS growth and I will continue to pull the levers along with my friend Mr. Matter here in the front row on deposit pricing, loan pricing, and balance sheet allocation to create that environment. And if that means the margin goes up or down a few basis points, I'm less worried about that as long as I'm driving top quartile ROTC returns on capital, which we have a good track record of a couple of decades of delivery, and at least under Mr. Amater and I, three years of sustained and continued expansion of that. While rates went up, while rates have come back down, while rates may or may not go up again in this last three-year window at least with some liquidity questions thrown into the industry, with some tariffs thrown into the industry, with some oil price hikes and oil price drops and a few other curveballs. We've managed to consistently deliver approaching 17% ROTCEs. That'll be the North Star top four trial returns with a strong level of efficiency And the balance sheet management, I think we have enough levers to pull to make that happen.

Jared Shaw, Analyst — Barclays

Earlier, Ron, you mentioned the importance of revenue diversification. Fee income has consistently grown faster than I think many investors have expected. Which fee businesses are creating the most opportunity today?

Christopher Del Moral-Niles, CFO

Wealth, wealth, and wealth, followed by some FX and deposit-related fees. And so when we think about where we see the opportunities and where we've seen the most growth, that's been on the wealth front, and that continues to be where we're investing incrementally. We have spent the better part of the last year earnestly in dialogue trying to find a wealth partner that perhaps we could bring into the fold that would help accelerate those endeavors. That has proved unfruitful so far, and so we, I won't say capitulated, but we finally threw in the towel and opened up our own RIA this quarter. We've begun the process of pulling people into the IRA from the private bank and other areas, and we'll continue to build that up, and we'll continue to hire into that group, and we'll be a source of further growth and expansion of our fee revenue lines within that capability with that addition. And that has proven early returns positively, and we have optimism that it will continue to be a fueling force for fee income growth in the quarters ahead.

Jared Shaw, Analyst — Barclays

When you look at the investments in wealth management, how much more outright investment is there? And how would you describe sort of the runway that remains for growth?

Christopher Del Moral-Niles, CFO

The runway is unbelievable. What we are seeing is a combination of, in our richest core domestic markets, there's a huge untapped opportunity for us that, to date, we have allowed to flow out through the likes of Morgan Stanley and Merrill Lynch and Fidelity and Schwab, where we know we can see the outgoing wires and the activity from our longstanding customers who have built their wealth over, you know, if not generations, certainly their lifetimes. And we're disappointed that they haven't looked to us as that partner for that next leg of their investment because perhaps we didn't have the full breadth of capability. And so we're making amends here to sort of bridge that gap and offer them more and more solutions, more services, and more compelling support. But that's an existing base that's been there and is now flowing away from us that we know we can capture and we are bringing people on to help us retain those funds and then capture that incremental activity. In addition, we recognize there's an additional newer set of funds and flows that are coming from abroad, where people continue to look at the U.S. markets as an attractive place to put money to work or, alternatively, as a place where money has come to them because Walmart paid them and they decided to leave those funds in the U.S. for further investment and decided that part of that investment strategy would be either fixed income or equate securities. And as part of that strategy, we're providing some solutions and support for that. And that combination of that core consumer market that's really fueling this, Some private banking that's additive to that and some corporate cash management that's additive to that is all driving a very positive dynamic.

Jared Shaw, Analyst — Barclays

Not to take anything away from the momentum and wealth, but beyond wealth, are there other opportunities to grow the income that are?

Christopher Del Moral-Niles, CFO

FX and commercial deposit services. So on the FX side, we have a very robust FX business, but the reality is we also recognize we haven't delivered the full suite of solutions. that some of our larger bank competitors have, the largest bank competitors, right? And so the reality is we're competing in solutions offered by HSBC or Citibank that are at levels that we haven't seamlessly integrated the way they have. We can deliver the outcomes as quickly and efficiently as they can because we, too, have licenses in Hong Kong and in mainland China to deliver those solutions and services in real time. We just haven't packaged, delivered it the same way they have, and so we're in that repackaging and delivery mode. But the early returns on our most recent integrations have been extremely positive, and we continue to see that lift come through in deposit management fees, and we're beginning to see that lift come through in foreign exchange activities. So up until very recently, if you wanted to trade FX with ESOS Bank, it required a phone interaction at some point. It wasn't a fully online-enabled solution. We are now offering that for certain customers in certain segments, the ability to do straight through from multiple currencies back to dollars and back to other currencies in various ways, and that is creating a new pipeline of revenue streams that we haven't really tapped into before that we're able to deliver on directly now. And I think that's an incremental opportunity for us that has been about a year-plus in the making, but we're seeing now beginning the fruit to be born from that activity and we see tremendous upside from that as we continue to deploy that in a way that's more seamless and visualized to our customer because the reality is if it's not on their mobile phone the capability doesn't really exist and so the reality is we need to offer that seamless ability to move from euros to dollars or dollars to Hong Kong dollars or Singapore dollars seamlessly on their phone from account to account and and offer them a real live exchange rate as they make that transfer in order for this business to really take off. And we've just started to offer that capability, and we can already see there's upside there.

Jared Shaw, Analyst — Barclays

Maybe shifting a little bit, you know, the bank has consistently invested in technology and customer-facing capabilities. Where are you seeing the best returns on those investments today?

Christopher Del Moral-Niles, CFO

The short answer is cyber, cyber, cyber, and multi-factor, multi-factor, multi-factor. Ensuring our clients' safety and stability of access to their funds in a fraud-free environment is sort of job one, and that's where the investment dollars have gone. You know, sometimes that doesn't come across as the most client-friendly, but I think clients who understand that safety is job one appreciate it and respect it. And so I think that's where the dollars have incrementally been funded. On the secondary part, as I was just saying, this ability to seamlessly look across your accounts. There are 4,000 banks out in the United States. I don't think many of them offer multi-currency accounts in multiple jurisdictions. So we're one of the handful of banks that do that with regularity. But the ability to then offer that on a mobile platform will position us as a small handful of banks. And I think that's an important capability for us to have, and we're building that capability.

Jared Shaw, Analyst — Barclays

Can you share with us how you're currently evaluating AI across the franchise? Where do you see the most promising opportunities internally and where could AI specifically eventually help with, you know, improving that client experience you've been talking about?

Christopher Del Moral-Niles, CFO

So first and foremost, as probably many of us have, you know, AI is now sort of an integrated part of everything, whether it's my email or my Word document, you know. I used to think I had to click on the sort of spell check and sort of somehow seem to do it for me. now automatically, which is great. One of the things I noticed is the consistency of language use across the departments and teams has improved. I don't know if that's because we all took remedial English classes or because AI just makes everything come across more consistently. I'll go with the latter at this point in time. The consistency of PowerPoint decks internally, and Dominic's not big on PowerPoint decks, but I can't lose my investment banker background, so I am, has improved dramatically. But the other dynamic is, you know, I had a treasury team before, and Mr. Matters here, you know, we had a couple of people that would be the go-to people to get something new or different built, different way of looking at things, and then it would take time. And today we have, it feels like, at least a half dozen, if not more, maybe more like a dozen of people that we can say, hey, can you go build this dashboard? And in a matter of days, I'll get back a dashboard that shows me something that I had never seen before from a different perspective. And the reality is the combination of having the data, which, as I said, I think to many forums before, East-West is one of the most data-rich, it is the most data-rich bank I've ever had the opportunity to work with. If there's a question you have about where a transaction happened, who did it, when it happened, what dollar amount it was, what fees were paid, any of those questions, we can get to that answer faster at East-West than any place I've ever worked before. And now we can display it, and I can take a new question and give it to someone, and that will come back to me in HTML, Python web page, and or as a Power BI dashboard in, it feels like, a very short time frame, telling me exactly what I need to know, as well as perhaps a bunch of things I didn't know I needed to know that jump out at me from the data. But the ability to sort of get to the data, scrub the data, present the data, and come to conclusions is remarkable, and it's only accelerating every day. Part of it's AI, part of it's dashboard and technology, part of it's just training your team how to use stuff, and the fact that we don't have to go to IT. Three years ago, I wanted to see all the ACH and wires were coming from, from which customers to, from which senders. just how much is Walmart sending to how many of our customers every day and how much of that Walmart deposit goes to how many different accounts over the course of a month, a quarter, a year, and I could see that. But I had to go to IT, have them develop that Power BI, half a dozen people on Chris Madden's team that could create that dashboard for me, and I would have it within a day or two. And so that cycle turned for ask for something, get something back, ability to ask questions.

Jared Shaw, Analyst — Barclays

Maybe shifting to credit, you know, credit quality remains among the strongest in your peer group. What areas are you receiving the most attention internally today, and where are you becoming more comfortable?

Christopher Del Moral-Niles, CFO

Unfortunately, CRE continues to be sort of the focal asset class, CRE office specifically, and it's where we'll continue to expect to see some things go bump in the night. But the reality is we literally only have 10 credits that are CRE office credits, It's over $30 million. That total is $387 million. So as an order of magnitude of exposure to the entire bank, no single CRE credit is going to do much of a challenge. It's not going to pose much of a challenge to Eastwood Bank. The reality is much of the other portfolios, it's not a particular moment in time of concern the way it has been in other moments. We had some warbles in technology. back a couple of years, we had some warbles in energy. Going back more years today, those industry-specific...

Jared Shaw, Analyst — Barclays

Anything that's a new opportunity coming out of some of that evaluation, where you feel like you could get...

Christopher Del Moral-Niles, CFO

We've seen a lot of data center related activity, and we just haven't found the right way to approach those credits to be a more active participant, so we haven't been. I think we've seen a lot of newer PE-related activity come our way, and in part because of our concentration already in that asset class, and in part because I don't think we feel like we need to stretch at this point in the cycle. We haven't pursued a lot of those, but there's more out there. Where we have seen opportunity is, in fact, as there's been competitive disruption in the landscape of other banks, we've seen the opportunity to pick up specific individuals in some cases, and so we have been actively picking up additional expertise, whether that as in chartered schools or aerospace or specific verticals within, say, the entertainment industry. You know, we've added selectively to the teams and are looking at some team with Delta to further bolster our capabilities. We've also added on the credit side and the syndication side. I think those ads on the personnel side will give us the opportunity to tap into some new opportunities, specifically, I'd say.

Jared Shaw, Analyst — Barclays

You know, EastWest continues to hold on to strongest capital positions in the regional banking group. while still producing approximately 17% ROTCE. How do you think about the balance between maintaining strategic flexibility and optimizing capital?

Christopher Del Moral-Niles, CFO

I think the core strategic and financial outcome for us is to continuously drive towards top portal returns. I think as long as we keep that as sort of the north star for our activities and we continue to live against that, I think we'll find ourselves erring on the balance of maintaining our position as the strongest bank amongst the regional peers with the strongest levels of capital as long as we're delivering a top-core trial level of return. If that balance changes, we'll certainly be quick to reevaluate that. But so far, it's been a pretty good track record. And at the margin, the reality is we have more than ample capital to meet all of the customer loan demand that we're seeing, which is great. We're also funding that from core deposit demand, which is even better, which means that's a very attractive organic core business that sustains that high-teens ROTCE level, and we're very, very, very engaged and interested. I found it's important to have a competitive dividend over time. We raised the dividend by 33% earlier this year. I think we'll be happy to revisit the dividend at the end of this year again, and probably if the economy continues to be fairly robust and our trends are as they are, we'll probably be looking to increase the dividend again as we have in prior years. And beyond that, we've looked at M&A, and I think the phrase I used in one of the meetings earlier today is we found the opportunity is sparse. And with that in mind, that will leave us probably with some capital. And what we've done in most recent quarters, we've applied some of that incremental capital and funding from deposits to help bolster the liquidity profile of the bank. We'll probably do that some more. And beyond that, we've also proven our chops to buy back stocks, sometimes in size, and that will always be a lever for us.

Jared Shaw, Analyst — Barclays

On the M&A front, it's been a little while since you've done a deal. Twelve years. When you look at the environment being sparse, what would you look for in a bank? What would be attractive to get you off that 12-year hiatus?

Christopher Del Moral-Niles, CFO

Yeah, I think some of the acquisition history of the bank was in rolling up smaller community banks. I think at this point in time, Dominic has given us direction that a billion or $2 billion banking addition maybe isn't the right way to spend our energy, that that's a quarter or two of growth, and that's until we'll take a couple of quarters to close. It might just be more of a distraction than value-added opportunities. And so that has taken our attention away from those small opportunities on the core banking side. If it's 5% or 10% of our balance sheet, it's probably enough of a level to get our interest. There are fewer of those opportunities out there. And the reality is they tend to either be priced relatively inexpensively because they have hair on them or growth challenges or both. Or they're doing very well and they're priced exceptionally well, which is not really of interest to Dominic either. And so I think he's looking for something that he can bring value to as a franchise that we can add value to through our customer relationships in a way to some capability that they have, and we just haven't found that combination yet that makes sense for us. We've also spent the last year, as I mentioned earlier, focused on wealth management-oriented M&A and just hasn't proved to be fruitful the way we thought it would be. And so we'll continue to keep that door open and continue to look for opportunities while we continue to build out now our own RIA and our own capabilities along the way.

Jared Shaw, Analyst — Barclays

Great. Well, thank you very much. We're at the end of our time, but thanks for joining us and looking forward to seeing you next year.

Christopher Del Moral-Niles, CFO

Great. Thank you.