Testing. Good afternoon, everyone. We're going to get started with our next presentation. Next up is East West Bancorp, ticker EWBC. East West is a uniquely positioned bank that bridges the U.S. and Asian, particularly Chinese markets. Its deep expertise in cross-border banking, combined with a strong commercial lending franchise in California and other key U.S. markets, differentiates it from other regional banks.
Assets at the end of the third quarter, $86 billion, with about 106 locations. With us today, very happy to have Chris Del Moral-Niles, Chief Financial Officer. Chris was appointed EVP and CFO of East West in October of 2023. Prior to East West, he served as the CFO for Associated Bank, a position he held for nearly a decade. We've been on the stage together at your prior bank, so thanks for coming back again today.
Always a pleasure.
Earlier in your career, I would like to mention, you were an investment banker at Merrill Lynch as well as Lehman Brothers.
Thank you.
Adrienne Atkinson, Head of Corporate Development and IR, is in the front row as well from the company. Same format, I will kick it off with some questions and then open it up to the audience to see if there is additional questions. Let us just talk with strategy platform, Chris. East West has built a unique position in connecting markets on both sides of the Pacific. What is driving cross-border business today, and how is East West positioned to benefit from future flows?
I think the real driver is despite all the headlines that we read about, despite perhaps what you might think would be the outcome of the tariffs and administration's policy, U.S. goods imports are at record highs. They are higher than they were in 2016, they are higher than they were in the last administration, back to the highest today that they have ever been.
The combined goods and services is at still an even higher level of growth. In fact, world trade, despite everything you might read from the headlines, is at its all-time high. As we sit here today, we are this unique perspective that the headlines do not seem to paint the right picture of the actual flow and activity.
If you think about a price-conscious American consumer, and our business is really to fund the lifeblood of the American consumer, the price-conscious American consumer continues to go to Costco, continues to go to Walmart, continues to shop from Amazon as a price point leadership sort of retailers.
The reality is, we are working with suppliers that are deeply embedded in those systems, in those networks, and supplying them the right goods for the American consumer in today's price-conscious economy. That flow has only continued to grow.
You compete with much larger global financial institutions for that cross-border business. Where can you kind of out-deliver those other banks with larger balance sheets, bigger scale, and essentially, why do clients choose East West?
It is interesting. We do compete with a handful of larger global banks, but there are 4,000 banks or so in the U.S., and interestingly, only a handful choose to open themselves up directly to the opportunity to participate in the cross-border flow. There are others that participate in the cross-border flow with Canada, others that participate with cross-border flows to Latin America.
It turns out there are not that many that have proactively sought to open an office, create a website, or engage with folks that say, "We are open to help you with your business in the U.S.," the way East West has. It is interesting. You have an entire Pacific Ocean of opportunity, an entire commerce between the two largest economies in the world, the two largest regional economies in the world.
You have a franchise that we have built around the ports of entry to the U.S., and there are remarkably few folks other than a handful of the largest banks that have chosen to participate in that flow. We think it is a bit of a blessing for us in that we are positioned to be helpful. We are helpful to retailers on this side, we are helpful to importers on this side, we are helpful to distributors on this side.
All of our business is on this side of the Pacific, but the fact that we can engage with and be present for folks on that side means they know who we are in a way that perhaps only they know the top five or so banks in the U.S. That creates an enormous set of opportunities for us.
Perhaps we are not going to capture the Fortune 1000 on the other side of the Pacific, but it is okay. We let the big five guys get that. The next 10,000 are plenty of opportunity for East West to participate across a range of industries, across a range of activity, all inward bound to the U.S., all driven by the U.S. consumer that wants to pick up that right price point good off the shelves at Walmart or Costco.
How important are East West's people, market knowledge, local presence, and the ability to operate across cultures? How important is that to your competitive position?
Again, if there is 4,000 banks, there is literally less than a dozen that have a presence there of any consequence. That puts us in a very attractive competitive set between two very large economies.
You have transformed yourself in the past decade into a commercial bank with significant scale capabilities, which we just talked about. What has remained constant in your strategy throughout that evolution, and then what has changed as the bank has grown?
The mission of the bank has been very much a constant. The mission of the bank was to serve the emerging needs of a growing immigrant community, first in Southern California and then broadly across all of the major metro markets where there was significant inbound Asian immigration.
As a son of an immigrant, as the husband of an immigrant, as the father-in-law to an immigrant, I have sort of lived my entire life observing the different waves of immigration in the last 50 years or so, and I resonate with the mission of the bank, which is to make sure that that process of integration to the U.S. economy, to the U.S. citizenship, is one that is smooth and hopefully successful for all that come and seek their American dream here.
I think the fact that we are able to not only provide that transition for businesses, for individuals, but then actually finance that American dream home for so many is a wonderful thing and something that I sincerely personally resonate with.
So, given the strength of your markets, where you are in the U.S., where is the greatest runway for growth, and will you continue to expand the branch footprint in the future?
Yeah. Thankfully, we are blessed to be in some very large metropolitan markets. We think about those not by accident. We entered those because they were the points of entry, places where goods and people came into the country and then made their way to the American consumer, or to the American education system, or to the American workforce, as it may be.
Those markets have turned out to be the magnets for educated workforces, and they have turned out to be the magnets for some very significant educational institutions, and they have turned out to be the magnets for a significant amount of commerce and activity. When you get that, and as it turns out, actually, several of those markets are also magnets for technology-driven sectors.
You sort of take that all together, whether you are talking Seattle, you are talking San Francisco and the Bay Area, whether you are talking some markets in Texas or some markets even here on the East Coast, you take that all together, you have some of the highest income markets with some of the highest educated people doing some of the most value-added things in the world.
Those are great markets to have as your core market. So, we are often put in the bucket of being a regional bank, and I have got a regional bank that covers Boston and Atlanta and Texas and Washington and California and Nevada. I am not sure how you define that region other than national and to a certain extent, international, because we are also in Hong Kong and in Shanghai meaningfully.
When you think about East West's capabilities of the future, what are the,
Singapore, by the way. Sorry.
From a product standpoint, what are the opportunities for future development, the products and services of capabilities
Yeah.
That you need to have today or would like to have for your clients?
We've been investing over the course of the last year in enhancing our ability to facilitate cross-border payments more seamlessly for our clients. We've successfully delivered that with direct connection to essentially the entire Hong Kong banking market. Moving money back and forth from Hong Kong has never been easier for our customers, and we think is a sort of best-in-class competitive positioning. We're in the process of doing that.
We actually just rolled out that solution for our clients in mainland China as well. I think you'll see hopefully accelerating trends from that. What we really expect that to bring will be a further development of our foreign exchange business, because the ability to do that seamless, timely transfer of funds really then facilitates the ability to do a related or next-step FX transaction, and that's what we're looking for.
The ability to be, again, this bridge between East and West, firmly centered, 95% or so of our balance sheet is in the U.S. It will always be the case. But the ability to have that bridge connection to the other side and be able to be this facilitator of payments drives our commercial deposit fees, drives our foreign exchange activity, and has been a nice tailwind, given the growth in trade that we've seen over the last decade.
Yeah. You talked about this on the call, the mainland China program you said would contribute to fees in the fourth quarter and more so into 2027. Can you size up the opportunity and how large that could be?
Look, I think we've seen growth in our fees, broadly commercial deposit fees, at the double-digit approaching rate from the activities we've done in Hong Kong, and we would expect a similar positive momentum into 2027. We haven't given guidance on non-interest income, and I'm not doing so here today, but I don't think it'll be It won't slow us down, for sure.
Okay. Just remind us what is structurally different about East West's operating model that allows you to be extremely efficient, and is that sustainable as you continue to grow?
Yeah, I think our strategy around these ports of entry markets allow us to be very focused on where we place branches. Generally speaking, our branches are exactly where people expect us to be. If you're looking for, and I sometimes refer to this jokingly as a Louis Vuitton strategy. If you're looking for a Louis Vuitton, you probably know you're going to find one on Fifth Avenue, Rodeo Drive, or the Miracle Mile.
You don't have to think too hard about it. You don't have to look it up in advance. You just go there, you'll know you'll find one. If you're looking for East West Bancorp , you know where to find it. All customers know where to find it. We don't have to advertise on billboards or commercials. Our customers know exactly where we are. They shop next to our branches.
They go to restaurants down the street from our branches. They walk by our branches every time they go to the markets and places that they otherwise frequent. We're exceptionally well-known within our markets. Our structural advantage is we don't have to be everywhere. We just need to be where people expect us to be,
Which means we have a lower footprint, which means we have more deposits per branch, which means we have more deposits per FTE. That structural advantage, combined with the fact that our advertising costs are lower, means that we have a better cost-to-income ratio than most banks competing in almost all the markets we serve.
Okay. Then as you enter the next phase of growth with a look at the balance sheet, strong capital, strong liquidity position, how does your balance sheet position influence how East West thinks about its strategic options and really its ability to grow and gain clients?
When I step back to an earlier question and say, "Who do we really compete with in some of this business?" The reality is we compete with the largest banks in the world, which are broadly perceived as too big to fail. East West is not too big to fail, and so we have taken the position that in order to be competitive, to allay our customers' concerns,
To make sure they understand when something goes bump in the night for some other regional bank, that they don't need to worry about East West, we've taken the position of trying to be too strong to fail. That means we have higher capital ratios, almost as an advertising cost. That works. That works for our clients, that works for our communications internally, that works for our CEO, most importantly.
He is very comfortable keeping and maintaining a 10% tangible common equity ratio, particularly as long as we are delivering top quartile returns, and the most recent quarter was 17.2%. I think that is a pretty attractive top quartile level of returns for the industry. As long as we are delivering top quartile returns, he has no concerns maintaining that capital as an advertising cushion as part of the business plan.
It has been successful for him for better than three decades now with a similar philosophy. I cannot fault the plan because it has really worked exceptionally well. In fact, I think I have pointed out from time to time, Dominic took the bank public in 1999, and in that 26-year period, East West Bank has outperformed the QQQs, which people do not necessarily connect those dots because they are not obvious, but it is interesting.
Happening again today. How are you thinking about the 100- Sorry.
Well said.
How are you thinking about the $100 billion in the midst of this evolving regulatory guidance?
Sure.
What do you understand is the requirements to be at this point today, and then how is this contemplated in your expense run rate?
Look, we've had an expense run rate of roughly an 8% CAGR over the last several years. Thankfully, we've had a revenue CAGR that has exceeded that consistently, and so we look forward to continuing that to the extent we can. But we would expect expenses to stay on this general trajectory. We'll give formal guidance, obviously, in January, but I don't think it's going to slow down as we approach 100.
I don't think it's going to slow down as we continue to invest in businesses that are more fee-oriented. But we'll do so hopefully with revenue that will also offset that expense growth and allow us to show continuing positive operating leverage and a genuine positive momentum for our shareholders. Dominic has over 110 million reasons to be perfectly aligned with delivering shareholder value. I think he'll make sure that our plans reflect that.
With regard to, I think, the sort of the thrust of your question.
Yeah.
Maybe just repeat it.
The $100 billion
You know, I think we,
New regulatory
we have done a lot of work
100 billion.
To get to where we are. We are at $86 billion. We sort of see the $100 billion out there. We have heard from a number of folks in a number of different places that that threshold may move. Haven't seen it happen yet, but we are optimistic. We also understand that some things will be regulatory and supervisory judgments that may very readily be moved.
Some things have already been codified in the CFRs, and as someone put it to us, may require an act of Congress actually to change, unless the Fed takes a very different view of what its discretion is. If that is the case, then much of what is in Reg YY, the stress testing, and maybe much of what is in Reg WW, with regard to HQLA and LCR, might stand at $100 billion, because that has already been codified.
We think we approach this with humility, not fully understanding where all the powers that be will bring us to bear, but being prepared to be the most resilient bank we can be. I think we are very proud to be amongst the most well-capitalized and most liquid banks,
Which means we approach this from a perspective of probably not having to change our business model to be able to pass stress tests, and probably not having to change our business model to be able to pass liquidity tests. Because when you start with being one of the most liquid and most well-capitalized banks, you probably have a good starting point for whatever comes next.
Leads right into my next question. We have built up this reservoir of liquidity in the investment portfolio. Can you just explain your thought process behind the build, and then how you are thinking about on-balance sheet liquidity, going forward?
It's never been a better time in the last 20 years to buy bonds. Seems like a perfect idea.
Okay.
I mean, there used to be a quip, Terry, you probably remember this, California thrifts would take deposits at three, make loans at five, and California bankers would be at the beach or on a golf course by 3:00, right? Three, five, three. I don't think Dominic is going to allow me to get to the beach or golf course anytime in my career with him.
Yeah.
Taking deposits at three has been viable. I think our weighted average cost of funds last quarter was 2.81% on the interest-bearing. It's been rare for me to be able to invest in a Ginnie Mae security with zero risk weight and earn better than 5% like I can now. That means it's pretty easy to maintain a 3% margin, even if not much else is going on in the world.
Yeah, there's other stuff going on in the world, so hopefully we'll do better than that, and we have. It's a pretty easy starting point to be a banker if you're somewhat risk-averse and have a high appreciation for liquidity.
Maybe one more question, then I'll open up to the audience. Rates have moved higher, expected to continue to move higher. Mortgage activity slowed down. That really hasn't been the case at East West.
No.
Just kind of remind us of your differentiated mortgage product and market position, and essentially how you are able to kind of keep that growth going.
The bank's founding product back in the early 1970s was to meet the needs of immigrants, at that point in time, Southern California, looking to buy into the American dream, looking to buy that home in what was not too many years after Brown v. Board of Education and sort of social, we will call it redlining, that was active and pervasive across many markets.
The bank stepped in to create the right environment, to create the financing to allow those folks. But traditional underwriting didn't often apply well, and the program landed on, well, if you can put half down, we will help you with the other half. Over a 50+ year period, that program has worked out really well.
What is interesting is, if you sort of think about the more recent years of that program, while it still is attractive for our immigrant communities, it is also attractive for anybody with episodic income. So think anybody filming a Netflix episodic series, or think about anybody filming a movie, where they make money for a year and then they don't, or they make money for five years and then they don't.
Those income flows don't often work very well in traditional underwriting models. But at East West, if you can put half down, we can help you find the other half and put it in place. An interesting byproduct of that is folks that are attracted to that product are sort of structurally, definitionally less rate-sensitive, because they are only borrowing five-eighths as much at most, and in some cases even less.
The reality is it becomes a less rate-sensitive, more consistent product for a niche customer that has outperformed all the credit boxes that I am aware of for more than 50 years. So it is a product that works really well for us and for the customers that find value there.
That niche is one that we have continued to grow. It was the largest source of growth for our loan portfolios in the third quarter, and it will likely be in the fourth quarter as well, despite perhaps others' mortgage slowdown.
Perfect. Any questions?
I'd also note that it's our least concentrated subset of our portfolio. And so, we think Dominic strives to be diversified in everything we do. If I think about the relative weights of CRE and C&I, we're relatively underweight in single- family and consumer. So doing more there is helpful to overall diversification. Sorry. Oh, like this.
Hey, Chris.
Hey, Jared.
From Barclays. You have been having good success growing DDA and retaining a lot of the earlier promotional CDs. What is your updated thoughts on deposit costs as we head into the end of the year? You have your Lunar New Year renewals coming up.
Yeah, the Lunar New Year will be a next year first quarter event, really kind of February-centric. I think the interesting question is what happens to market rates broadly between now and then. What we observe today is that our current CD specials, which are at 3.68% for six months,
3.78% for nine months, and 3.88% for 12 months, are markedly below perhaps marketplace levels, 50, 75, 87 basis points below what customers could probably go online to Schwab and Fidelity and find as alternatives. Despite that price discount, we are maintaining our CD balances. Now, will that hold if rates are another 25 or more basis points higher by the time we get to February? We will see.
Right now, we are able to retain that flow at a very attractive level for East West as a funding source without having to pay full market rate, and we appreciate our customers' loyalty and restraint during this interesting time. On the DDA side, where we have put an emphasis on growing the balances,
We have had, I think what can only be termed as remarkable success. We sort of changed the way we incented folks. We changed the way we goal folks last year. That had a positive effect, so we sort of doubled down going into this year, and the outcome has been fabulous.
I give credit to our retail team, who has gotten everybody they could out from behind their desks, walking up and down whatever Broadway, Main Street, Valley Boulevard is relevant to their particular neighborhood, 8th Avenue, Bowery, Canal Street, or wherever else you might be, and gotten people engaged one-on-one with the merchants in their communities with an outsized positive impact, and one that actually is providing benefits.
We look back at the cohort that we brought in the second and third quarter last year of those small business DDA customers, and their balances are up. Normally, you see account attrition. First-year attrition can be higher than most years' attrition. Sometimes you do not see balance growth year- over- year.
In this case, we've seen significant balance growth from that same account, same cohorts, year-over-year, which means not only did we get them to open the account, we got them to fund the account, we got them to use the account.
We've either picked the right merchants that are growing with us, or they've just brought in more money from other places to make it even more impactful. All of which is great news for us and one that we're leaning into as best we can. Yes, either one. We've got two. Ladies first. Oh, gentlemen.
Hi, Janet Lee from TD Cowen. On the organic RIA build-out.
How long do you think it takes to really get to scale? You already have existing very affluent customers that are using other firms like Schwab and Morgan Stanley and whoever. I know that it could be that getting the right talent that are bilingual on the wealth side may be a bottleneck, but at what point could it be meaningful? Can this start to become meaningful next year, or is it more of a multi-year build-out? How do you think about the timeline?
Yeah, I think two layers to that question. One is, yes, it is challenging to find the right people with the right licenses, with the right backgrounds, and the right language skills or other skills to be positively successful and impactful with our higher value-add customers. We're being very careful about that selection process and about that onboarding process.
To your broader point, I think the reality is this is the opening innings of what could be a 30-year strategy for us of substantial growth. Today, Hong Kong has emerged as the world's largest offshore financial center. It is larger than Switzerland as an offshore financial center for asset manager assets, et cetera.
The reality is, some of that money will find its way to the U.S., and when it does, we will be exceptionally well-positioned, along with some very large finance institutions that have presence in Asia as well. We will be amongst those dozen or so that will position to capture some of that inward flow into the American markets, and we see that as a positive.
Today, Hong Kong is one of the leading IPO markets by number of IPOs, which means that there is a constant flow of business activity and capital that is being freed up into the international marketplace, and some of those companies will find reasons to move that capital and to invest the capital, to direct operations, to otherwise allow that capital to come to the American marketplace.
If it does, we will be uniquely positioned again amongst maybe a dozen folks that will be participating in that flow. When we look at the opportunity, it is not a, "Let's hire a bunch of folks and see what we can do with it." It is, "How do we capitalize on this likely multi-decade positive flow of activity that will come from the maturation of the second-largest economy in the world and its transition to perhaps at some point in time more ready capital flows,
The flow of those capital into other investment opportunities?" We think the U.S. will feature prominently amongst because, well, it has for every other global investor, so it probably will here too. It is beginning of a very long journey, but one that we take great care in making sure we find the right people to help us build.
We spent the better part of two years trying to find the right partnership to strike or buy, and turned to the do it ourselves because we couldn't quite find that right partnership. We will be very careful, again,
To build the franchise around the right people and the right processes to make sure we are doing it the right way, but also in a way that meets the needs of our most sophisticated clients today and the needs of what we expect to be a larger subset of clients in the future. A much larger subset of clients in the future.
Hi. Ryan Kenny with Morgan Stanley.
All right.
You mentioned you like bonds. It is a good environment for bonds. Can easily earn 3% of them. Any change in how you are thinking about the securities portfolio strategy? Any more willingness to take duration or use the HTM book, which historically was not as large for you guys? Any change at all?
No. We are a high-quality liquid asset shop. I think we are 97% HQLA. I think we have more floaters than most, which has turned out to be a blessing. I think we will stay focused on the investment portfolio as a liquidity portfolio that sits there to help us maintain the credibility as one of the most liquid banks in the country, which we think is a very strong place to operate from.
As a follow-up to the last conversation around the wealth business, it seems like you are leaning more into building it organically. My sense is that historically, East West has been more transactional in nature, structured products, less so on the advisory side. Is there a strategy to maybe build out different products like advisory and gain share there? It seems like you are doing more on the mortgage side. If you could just walk us through.
Sure.
What the future of that business would look like.
Yeah. Look, I think there are clients that I have met at the bank that have been with the bank for over 40 years, so I do not know that transactional is the way I would ever describe the relationship model at East West.
I think the reality is we have provided mortgages to folks who have actually, much to my surprise, kept them and paid them off after a full 30 years, which at other banks, they never thought that was possible, but they do at East West. I do not see us as a transactional bank.
On the wealth side, our capabilities. Since we did not have an RIA before, we are limited to a brokerage model, which was commission or transaction-based, which is why we knew we had to build out a different capability set so that our relationship clients could feel that we were operating consistent with them in either a fiduciary model or at least an advisory model that they felt comfortable with over the long haul,
Which is why we ultimately decided to create our own RIA and move to that fee-based model as opposed to the commission-based model. I think this is a further deepening of East West's relationship orientation with our best clients in a way that we think will be very positively received.
I will continue on. I guess the question I should ask is, you talked about why you maintain high capital levels. Can you just talk about capital priorities? That is the question I should ask you. The question I want to ask you is, how could M&A and depository acquisitions be a part of that capital allocation?
Sure. It is not that we have not looked, and it is not that people have not sometimes come and knocked on Dominic's door. It is just that we have not found the right opportunity that would allow us to leverage our capabilities more effectively in partnership with one of those opportunities that became present.
I think Dominic likes the idea of being this exceptionally well-capitalized bank. It helps him in his communications with colleagues, with customers. I think he also knows that it affords him the flexibility to consider things at times, perhaps stressful times, that others cannot consider. I think he puts value in that optionality, perhaps a slightly higher rate than some others, and so he is prepared to carry that.
I think there was a commentary from a gentleman here from a $5 trillion bank this morning, and he kind of made the same comment about Jamie Dimon's approach to capital. I think Dominic has observed that over the last three decades and has a similar view on some of those values to being prepared, always being prepared for what you do not know.
I think Dominic knows well enough that he does not know everything, and he knows that I do not, and therefore he wants to be prepared for everything. So whether it is stress testing, or whether it is just having a little cushion,
He feels more comfortable operating from that perspective. Over the long haul, he has built a business model that allows him to because it is more efficient, because it is more focused, because it is actually a simpler business model in many ways.
It allows him to have this flexibility in a way that it is more difficult or challenging for others who have a higher cost structure or more complex product set to compete with. It is interesting that we are an internationally active at the margin bank, but with a simpler business model, but the reality is we are. We focus on limited sets of geographies and limited product things that we do exceptionally efficiently and exceptionally well, and it has proven out over several decades.
Okay. Other large banks up here today have credit card products, have high relative service charges. Why is that not a part of East West's growth strategy?
I think we have less than $1 million year to date of overdraft fees and a smallish number of service charges, in part because our customers generally maintain balances well in excess of any minimums that we ask them to maintain. We have the benefit of a fairly affluent client base writ large that is a saving-oriented client base that maintains notable balances per account.
In addition to having perhaps more balances per branch, we can observe anecdotally that we also have more balances per customer than most banks, and that is an unmitigated good thing, because that means there are fewer checks per customer, there are fewer ATM visits per customer,
There are fewer branch visits per customer, and that means our cost to deliver to those customers relative to our balances is lower, which translates into higher ROAAs and ultimately higher ROTCEs, which is why we can deliver a 17% return on capital even when we maintain 10% tangible capital.
Okay. Any other questions? If not, I will continue. Maybe a follow-up on Jared's question on, I think it was CD pricing. On the call, you talked about deposit costs have been well contained in the first couple weeks of the fourth quarter.
Yeah.
That was several weeks ago you made that comment. Care to provide an update fast-forward through today?
They continue to be reasonably contained.
Okay. Appreciate that. Other banks up until recently have been shrinking CRE. How are you thinking about the commercial real estate business? You mentioned the concentration earlier in our conversation.
I think we've been focused on growing the other planks of our business, growing our C&I business, which has been fairly attractively growing for the last several years, and growing our single- family business. Right now, single- family growth is coming in stronger. When we see sort of some of the dynamics in the C&I book, what we recognize is twofold. One is we are continuing to grow our direct bilateral general business activities,
We're also seeing, as rates have moved higher, less and less of the NDFI or third-party lending or third-party leverage as a demand force driving balance growth. In fact, we've seen it be a net negative. Mortgage warehouse lines as an example. If people aren't drawing traditional 80% LTV mortgages at the rate they were, then there'll be less mortgages put on mortgage warehouse lines and NDFI mortgage credit will start to shrink.
You've seen that across the board, and we have about $1 billion of such credit, and it's shrunk for us too. If private equity looks to leverage its purchases and its activities and the cost of that leverage goes up, they pull back from that activity, then the amount of incremental draws on capital call lines also comes down over time, and we've seen that happen as well.
If business credit funds are out of favor and there's no new money going into new funds or less leverage being applied to those particular investments, then business credit NDFI comes down broadly, as well as everything else that's got leverage in it, and that is a shrink. We see that happening across many NDFI portfolios, and our portfolios are not immune from that shrinkage.
We are offsetting that by focusing on the core bilateral commercial things where we have the direct relationships, and in the long run, that is the better place for us to focus anyway.
Great. With that, I think we will wrap it up. Thank you, Chris, and thank you, East West Bank.
Thank you, Terry. Appreciate it.
Thank you.