PASADENA, Calif.--(BUSINESS WIRE)--East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the fourth quarter and full year of 2018. For the fourth quarter of 2018, net income was $173.0 million or $1.18 per diluted share. For the full year 2018, net income was $703.7 million or $4.81 per diluted share.
“Total loans reached a record $32.4 billion as of December 31, 2018, growing $3.3 billion, or 11% year-over-year,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $3.2 billion, or 10% year-over-year, to a record $35.4 billion as of December 31, 2018.”
“In 2018, East West achieved record earnings for a ninth consecutive year. Our total revenue of $1.6 billion grew by 11%, and our net interest margin of 3.78% expanded by 30 basis points year-over-year,” continued Ng. “In addition, revenue growth outpaced expense increases, improving our operating efficiency. In 2018, we earned a return on average assets of 1.83% and a return on average equity of 17.0%. I would like to thank our 3,150 associates for their dedication and diligence in delivering another year of strong financial performance.”
“We look forward to the new year with confidence. With our presence in the U.S. and Greater China, we have built cross-border banking expertise that differentiates us from other banks. Our associates go beyond banking to provide clients with knowledge and understanding essential to conducting business in both markets. We believe this positioning will serve us well in 2019 and beyond,” concluded Ng.
HIGHLIGHTS OF RESULTS
- Full Year and Fourth Quarter Earnings – Full year 2018 net income of $703.7 million and diluted earnings per share (“EPS”) of $4.81 both grew by 39% compared to full year 2017 net income of $505.6 million and diluted EPS of $3.47. Fourth quarter 2018 net income of $173.0 million and diluted EPS of $1.18 both grew by 104% from fourth quarter 2017 net earnings of $84.9 million and diluted EPS of $0.58.
- Net Interest Income Growth and Net Interest Margin Expansion – Fourth quarter 2018 net interest income was $369.4 million, a quarterly increase of $20.7 million or 6%, and a year-over-year increase of $49.7 million or 16%. Fourth quarter 2018 net interest margin (“NIM”) of 3.79% expanded by three basis points linked quarter and 22 basis points year-over-year. Net interest income growth primarily reflected loan yield expansion and loan growth, partially offset by the increase in the cost of funds.
- Record Loans – Total loans of $32.4 billion as of December 31, 2018 were up $1.2 billion or 15% linked quarter annualized, from $31.2 billion as of September 30, 2018. The largest increase in loans this quarter was in commercial and industrial loans, followed by single-family mortgages. Total loans grew by $3.3 billion or 11% year-over-year.
- Record Deposits – Total deposits of $35.4 billion as of December 31, 2018 were up $1.8 billion or 21% linked quarter annualized, from $33.6 billion as of September 30, 2018. The sequential quarter growth in deposits was broad-based, including growth of $583 million, or 21% linked quarter annualized, in noninterest-bearing demand accounts. Total deposits grew by $3.2 billion or 10% year-over-year.
- Asset Quality Metrics – The allowance for loan losses was $311.3 million, or 0.96% of loans held-for-investment (“HFI”), as of December 31, 2018, compared to $310.0 million, or 0.99% of loans HFI, as of September 30, 2018. For the fourth quarter of 2018, annualized net charge-offs were 0.20% of average loans HFI, compared to annualized net charge-offs of 0.05% of average loans HFI for the previous quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets decreased to $93.0 million, or 0.23% of total assets, as of December 31, 2018, from $114.6 million, or 0.29% of total assets, as of September 30, 2018.
- Capital Levels – Capital levels for East West continue to be strong. As of December 31, 2018, stockholders’ equity was $4.4 billion, or $30.52 per share. Tangible equity1 per common share was $27.15 as of December 31, 2018, an increase of 5% linked quarter and 17% year-over-year. As of December 31, 2018, the tangible equity to tangible assets ratio1 was 9.71%, the common equity tier 1 (“CET1”) capital ratio was 12.2%, and the total risk-based capital ratio was 13.7%.
1 See reconciliation of GAAP to non-GAAP financial measures in Table 15
|
QUARTERLY RESULTS SUMMARY |
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| Quarter Ended | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| ($ in millions, except per share data) | 2018 | 2018 | 2017 | |||||||||
| Net income | $ | 173.0 | $ | 171.3 | $ | 84.9 | ||||||
| Adjusted net income (1) | $ | 173.0 | $ | 171.3 | $ | 126.6 | ||||||
| Earnings per share (diluted) | $ | 1.18 | $ | 1.17 | $ | 0.58 | ||||||
| Adjusted earnings per share (diluted) (1) | $ | 1.18 | $ | 1.17 | $ | 0.87 | ||||||
| Book value per common share | $ | 30.52 | $ | 29.29 | $ | 26.58 | ||||||
| Tangible equity (1) per common share | $ | 27.15 | $ | 25.91 | $ | 23.13 | ||||||
| Tangible equity to tangible assets ratio (1) | 9.71 | % | 9.73 | % | 9.12 | % | ||||||
| Return on average assets (2) | 1.69 | % | 1.76 |
% |
0.90 | % | ||||||
| Return on average equity (2) | 15.8 | % | 16.2 |
% |
8.7 | % | ||||||
| Return on average tangible equity (1)(2) | 18.0 | % | 18.5 |
% |
10.2 | % | ||||||
| Adjusted return on average assets (1)(2) | 1.69 | % | 1.76 |
% |
1.35 | % | ||||||
| Adjusted return on average equity (1)(2) | 15.8 | % | 16.2 |
% |
13.0 | % | ||||||
| Adjusted return on average tangible equity (1)(2) | 18.0 | % | 18.5 | % | 15.1 | % | ||||||
| Adjusted pre-tax, pre-provision profitability ratio (1)(2) | 2.50 | % | 2.44 | % | 2.27 | % | ||||||
| Net interest income | $ | 369.4 | $ | 348.7 | $ | 319.7 | ||||||
| Net interest margin (2) | 3.79 | % | 3.76 | % | 3.57 | % | ||||||
| Cost of deposits (2) | 0.90 | % | 0.78 | % | 0.43 | % | ||||||
| Efficiency ratio | 45.8 | % | 45.5 | % | 48.0 | % | ||||||
| Adjusted efficiency ratio (1) | 37.9 | % | 39.9 | % | 41.6 | % | ||||||
| (1) | See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13 and 15. | ||
| (2) | Annualized. |
MANAGEMENT OUTLOOK FOR 2019
Our current outlook for the expected full year 2019 results, compared to our full year 2018 results, is as follows:
- End of Period Loans: increase by approximately 10%.
- Net Interest Income (excluding the impact of ASC 310-30 discount accretion): increase at a percentage rate in the low double digits.
- Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): between 3.75% and 3.80%.
- Noninterest Expense (excluding tax credit amortization & deposit premium amortization): increase at a percentage rate in the mid-single digits.
- Provision for Credit Losses: in the range of $80 million to $90 million.
- Tax Items: projecting full year effective tax rate of approximately 15%, including the impact of tax credit investments, which reduce our tax liability from statutory rates.
- Interest Rates: No additional fed funds rate increases in the year 2019.
OPERATING RESULTS SUMMARY
Fourth Quarter 2018 Compared to Third Quarter 2018
Net Interest Income and Net Interest Margin
Net interest income totaled $369.4 million, a 6% increase from $348.7 million. Net interest margin increased by three basis points to 3.79% from 3.76%.
- Excluding the impact of ASC 310-30 discount accretion, adjusted2 net interest income of $363.6 million increased by 5% and adjusted2 NIM of 3.73% increased by one basis point. ASC 310-30 discount accretion income was $5.8 million, an increase from $2.9 million last quarter.
- Average loans of $31.5 billion grew by $1.0 billion, or 13% linked quarter annualized.
- Average deposits of $35.0 billion grew by $1.7 billion, or 21% linked quarter annualized.
- The yield on loans expanded by 20 basis points to 5.22% from 5.02%.
- The yield on interest-earning assets expanded by 14 basis points to 4.69% from 4.55%.
- The cost of deposits increased by 12 basis points to 0.90% from 0.78%.
- The cost of funds increased by 12 basis points to 0.98% from 0.86%.
Noninterest Income
Noninterest income totaled $41.7 million, a decrease of $4.8 million or 10% from $46.5 million. Excluding the impact of all gains on sales, total fees and other operating income of $38.9 million in the fourth quarter of 2018 decreased by 7% from $41.9 million.
- Increase in letters of credit fees and foreign exchange income reflected a greater volume of customer transactions.
- Decrease in derivative fees and other income reflected a lower volume of customer transactions.
The following table presents total fees and other operating income for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017.
| Quarter Ended | |||||||||||
| December 31, | September 30, | December 31, | |||||||||
| ($ in thousands) | 2018 | 2018 | 2017 | ||||||||
| Branch fees | $ | 9,512 | $ | 9,777 | $ | 10,287 | |||||
| Letters of credit fees and foreign exchange income | 16,358 | 14,649 | 9,974 | ||||||||
| Ancillary loan fees and other income | 5,835 | 6,795 | 6,457 | ||||||||
| Wealth management fees | 2,796 | 3,535 | 2,797 | ||||||||
| Derivative fees and other income | 1,125 | 4,595 | 4,737 | ||||||||
| Other fees and operating income | 3,318 | 2,569 | 4,144 | ||||||||
| Total fees and other operating income | $ | 38,944 | $ | 41,920 | $ | 38,396 | |||||
Noninterest Expense
Noninterest expense of $188.1 million included $155.9 million of adjusted3 noninterest expense, $31.0 million in amortization of tax credit and other investments, and $1.3 million in amortization of core deposit intangibles.
- Noninterest expense of $188.1 million increased by $8.3 million, or 5%, linked quarter, primarily reflecting an increase in the amortization of tax credit and other investments. Adjusted noninterest expense of $155.9 million decreased by $1.8 million, or 1%, linked quarter.
- The adjusted efficiency ratio3 was 37.9% in the fourth quarter, improving from 39.9% in the prior quarter.
2 See reconciliation of GAAP to non-GAAP financial measures
in Table 14.
3 See reconciliation of GAAP to non-GAAP
financial measures in Table 13.
TAX RELATED ITEMS
The Company’s full year 2018 effective tax rate was 14%, resulting in tax expense of $115.0 million, compared to an effective tax rate of 31% and tax expense of $229.5 million for the full year 2017.
- Tax expense in the fourth quarter of 2018 was $32.0 million, compared to a tax expense of $33.6 million in the third quarter of 2018. The effective tax rate for both the third and fourth quarters of 2018 was 16%.
- For the full year 2019, the Company expects to continue to invest in tax credits and projects an effective tax rate of approximately 15%.
CREDIT QUALITY
The allowance for loan losses totaled $311.3 million, or 0.96% of loans HFI, as of December 31, 2018, compared to $310.0 million, or 0.99% of loans HFI, as of September 30, 2018, and $287.1 million, or 0.99% of loans HFI, as of December 31, 2017.
- The provision for credit losses recorded for the current quarter was $18.0 million, compared to $10.5 million for the third quarter of 2018, and $15.5 million for the fourth quarter of 2017.
- Net charge-offs for the current quarter were $16.0 million, or annualized 0.20% of average loans HFI. This compares to net charge-offs of $3.7 million, or annualized 0.05% of average loans HFI, for the third quarter of 2018, and net charge-offs of $16.0 million, or annualized 0.22% of average loans HFI, for the fourth quarter of 2017.
- For the full year of 2018, the net charge-off ratio was 0.13% of average loans HFI, compared to 0.08% of average loans HFI for the full year of 2017.
- Non-PCI nonperforming assets of $93.0 million, or 0.23% of total assets, as of December 31, 2018, improved from $114.6 million, or 0.29% of total assets, as of September 30, 2018, and $115.1 million, or 0.31% of total assets, as of December 31, 2017.
CAPITAL STRENGTH
Capital levels for East West continue to be strong. The following table presents the regulatory capital ratios for the quarters ended December 31, 2018, September 30, 2018, and December 31, 2017.
|
EWBC Regulatory Capital Metrics |
Basel III | ||||||||||||||||||||||
|
|
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| Well |
Fully Phased- |
||||||||||||||||||||||
| Minimum | Capitalized | in Minimum | |||||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
Regulatory | Regulatory | Regulatory | ||||||||||||||||||
| ($ in millions) |
2018 (a) |
2018 | 2017 | Requirements | Requirements | Requirements | |||||||||||||||||
| CET1 capital ratio | 12.2 | % | 12.3 | % | 11.4 | % | 4.5 | % | 6.5 | % | 7.0 | % | |||||||||||
| Tier 1 risk-based capital ratio | 12.2 | % | 12.3 | % | 11.4 | % | 6.0 | % | 8.0 | % | 8.5 | % | |||||||||||
| Total risk-based capital ratio | 13.7 | % | 13.8 | % | 12.9 | % | 8.0 | % | 10.0 | % | 10.5 | % | |||||||||||
| Tier 1 leverage capital ratio | 9.9 | % | 10.0 | % | 9.2 | % | 4.0 | % | 5.0 | % | 4.0 | % | |||||||||||
| Risk-Weighted Assets (“RWA”) (b) | $ | 32,515 | $ | 31,210 | $ | 29,669 | N/A | N/A | N/A | ||||||||||||||
|
N/A Not applicable. |
|||
| (a) | The Company’s December 31, 2018 regulatory capital ratios and RWA are preliminary. | ||
| (b) | Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA. | ||
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared first quarter 2019 dividends for the Company’s common stock. The common stock cash dividend of $0.23 per share is payable on February 15, 2019 to shareholders of record on February 4, 2019.
Conference Call
East West will host a conference call to discuss fourth quarter and full year 2018 earnings with the public on Thursday, January 24, 2019 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses fourth quarter and full year 2018 results and operating developments.
- The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
- A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
- A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
- A replay of the conference call will be available on January 24, 2019 at 11:30 a.m. Pacific Time through February 24, 2019. The replay numbers are: within the U.S. – (877) 344-7529; within Canada – (855) 669-9658; International calls – (412) 317-0088; and the replay access code is: 10127117.
About East West
East West Bancorp, Inc. is a publicly owned company with total assets of $41.0 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 130 locations worldwide, including in the United States markets of California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.
Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to our current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, and the negative thereof. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; success and timing of our business strategies; our ability to retain key officers and employees; impact on our funding costs, net interest income and net interest margin due to changes in key variable market interest rates, competition, regulatory requirements and our product mix; changes in our costs of operation, compliance and expansion; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; impact of adverse changes to our credit ratings from the major credit rating agencies; impact of adverse judgments or settlements in litigation; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; changes in the United States (“U.S.”) economy, including inflation, deflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate selected as the preferred alternative reference rate to the London Interbank Offered Rate; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices, cost of operations and executive compensation; heightened regulatory and governmental oversight and scrutiny of our business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from our interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; changes in income tax laws and regulations and the impact of the Tax Cuts and Jobs Act; impact of other potential federal tax changes and spending cuts; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; changes in our ability to receive dividends from our subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations of our stock price; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; changes in the economy of and monetary policy in the People’s Republic of China; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on our financial performance; and other factors set forth in our public reports including its Annual Report on Form 10-K for the year ended December 31, 2017, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by such forward-looking statements. We assume no obligation to update or revise such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | ||||||||||||||||||
| ($ and shares in thousands, except per share data) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Table 1 | ||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||
| % Change | ||||||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | Qtr-o-Qtr | Yr-o-Yr | ||||||||||||||
| Assets | ||||||||||||||||||
| Cash and due from banks | $ | 516,291 | $ | 408,049 | $ | 457,181 | 26.5 | % | 12.9 | % | ||||||||
| Interest-bearing cash with banks | 2,485,086 | 1,810,738 | 1,717,411 | 37.2 | 44.7 | |||||||||||||
| Cash and cash equivalents | 3,001,377 | 2,218,787 | 2,174,592 | 35.3 | 38.0 | |||||||||||||
| Interest-bearing deposits with banks | 371,000 | 400,900 | 398,422 | (7.5 | ) | (6.9 | ) | |||||||||||
| Securities purchased under resale agreements (“resale agreements”) (1) | 1,035,000 | 1,035,000 | 1,050,000 | — | (1.4 | ) | ||||||||||||
| Investment securities | 2,741,847 | 2,676,510 | 3,016,752 | 2.4 | (9.1 | ) | ||||||||||||
| Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock | 74,069 | 73,729 | 73,521 | 0.5 | 0.7 | |||||||||||||
| Loans held-for-sale (“HFS”) | 275 | 3,114 | 85 | (91.2 | ) | 223.5 | ||||||||||||
| Loans held-for-investment (net of allowance for loan losses of $311,322, $310,041 and $287,128) | 32,073,867 | 30,900,144 | 28,688,590 | 3.8 | 11.8 | |||||||||||||
| Investments in qualified affordable housing partnerships, net | 184,873 | 148,097 | 162,824 | 24.8 | 13.5 | |||||||||||||
| Investments in tax credit and other investments, net | 231,635 | 232,194 | 224,551 | (0.2 | ) | 3.2 | ||||||||||||
| Goodwill | 465,547 | 465,547 | 469,433 | — | (0.8 | ) | ||||||||||||
| Branch assets HFS (2) | — | — | 91,318 | — | (100.0 | ) | ||||||||||||
| Other assets | 862,866 | 919,084 | 800,161 | (6.1 | ) | 7.8 | ||||||||||||
| Total assets | $ | 41,042,356 | $ | 39,073,106 | $ | 37,150,249 | 5.0 | % | 10.5 | % | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Deposits | $ | 35,439,628 | $ | 33,629,124 | $ | 31,615,063 | 5.4 | % | 12.1 | % | ||||||||
| Deposits HFS (2) | — | — | 605,111 | — | (100.0 | ) | ||||||||||||
| Short-term borrowings | 57,638 | 56,411 | — | 2.2 | 100.0 | |||||||||||||
| FHLB advances | 326,172 | 325,596 | 323,891 | 0.2 | 0.7 | |||||||||||||
| Securities sold under repurchase agreements (“repurchase agreements”) (1) | 50,000 | 50,000 | 50,000 | — | — | |||||||||||||
| Long-term debt | 146,835 | 156,770 | 171,577 | (6.3 | ) | (14.4 | ) | |||||||||||
| Accrued expenses and other liabilities | 598,109 | 610,355 | 542,656 | (2.0 | ) | 10.2 | ||||||||||||
| Total liabilities | 36,618,382 | 34,828,256 | 33,308,298 | 5.1 | 9.9 | |||||||||||||
| Stockholders’ equity | 4,423,974 | 4,244,850 | 3,841,951 | 4.2 | 15.1 | |||||||||||||
| Total liabilities and stockholders’ equity | $ | 41,042,356 | $ | 39,073,106 | $ | 37,150,249 | 5.0 | % | 10.5 | % | ||||||||
| Book value per common share | $ | 30.52 | $ | 29.29 | $ | 26.58 | 4.2 | % | 14.8 | % | ||||||||
| Tangible equity (3) per common share | $ | 27.15 | $ | 25.91 | $ | 23.13 | 4.8 | 17.4 | ||||||||||
| Tangible equity to tangible assets ratio (3) | 9.71 | % | 9.73 | % | 9.12 | % | (0.3 | ) | 6.4 | |||||||||
| Number of common shares at period-end | 144,961 | 144,929 | 144,543 | 0.0 | 0.3 | |||||||||||||
| (1) |
Resale and repurchase agreements have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of each of December 31, 2018, September 30, 2018 and December 31, 2017, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements. |
||
| (2) | Represents the DCB branch assets and deposits that were classified as HFS as of December 31, 2017. Branch assets HFS were primarily comprised of loans. | ||
| (3) | See reconciliation of GAAP to non-GAAP financial measures in Table 15. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||
| TOTAL LOANS AND DEPOSITS DETAIL | ||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Table 2 | ||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||
| % Change | ||||||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | Qtr-o-Qtr | Yr-o-Yr | ||||||||||||||
| Loans: | ||||||||||||||||||
| Commercial: | ||||||||||||||||||
| Commercial and industrial (“C&I”) | $ | 12,056,970 | $ | 11,517,054 | $ | 10,697,231 | 4.7 | % | 12.7 | % | ||||||||
| Commercial real estate (“CRE”) | 9,449,835 | 9,262,327 | 8,936,897 | 2.0 | 5.7 | |||||||||||||
| Multifamily residential | 2,281,032 | 2,090,563 | 1,916,176 | 9.1 | 19.0 | |||||||||||||
| Construction and land | 538,794 | 605,033 | 659,697 | (10.9 | ) | (18.3 | ) | |||||||||||
| Consumer: | ||||||||||||||||||
| Single-family residential | 6,036,454 | 5,684,587 | 4,646,289 | 6.2 | 29.9 | |||||||||||||
| Home equity lines of credit (“HELOCs”) | 1,690,834 | 1,717,440 | 1,782,924 | (1.5 | ) | (5.2 | ) | |||||||||||
| Other consumer | 331,270 | 333,181 | 336,504 | (0.6 | ) | (1.6 | ) | |||||||||||
| Total loans held-for-investment (1)(2) | 32,385,189 | 31,210,185 | 28,975,718 | 3.8 | 11.8 | |||||||||||||
| Loans HFS (3) | 275 | 3,114 | 78,217 | (91.2 | ) | (99.6 | ) | |||||||||||
| Total loans (1)(2) | 32,385,464 | 31,213,299 | 29,053,935 | 3.8 | 11.5 | |||||||||||||
| Allowance for loan losses | (311,322 | ) | (310,041 | ) | (287,128 | ) | 0.4 | 8.4 | ||||||||||
| Net loans (1)(2) | $ | 32,074,142 | $ | 30,903,258 | $ | 28,766,807 | 3.8 | % | 11.5 | % | ||||||||
| Deposits: | ||||||||||||||||||
| Noninterest-bearing demand | $ | 11,377,009 | $ | 10,794,370 | $ | 10,887,306 | 5.4 | % | 4.5 | % | ||||||||
| Interest-bearing checking | 4,584,447 | 4,383,672 | 4,419,089 | 4.6 | 3.7 | |||||||||||||
| Money market | 8,262,677 | 7,608,191 | 8,359,425 | 8.6 | (1.2 | ) | ||||||||||||
| Savings | 2,146,429 | 2,142,105 | 2,308,494 | 0.2 | (7.0 | ) | ||||||||||||
| Total core deposits | 26,370,562 | 24,928,338 | 25,974,314 | 5.8 | 1.5 | |||||||||||||
| Time deposits | 9,069,066 | 8,700,786 | 5,640,749 | 4.2 | 60.8 | |||||||||||||
| Deposits HFS | — | — | 605,111 | — | (100.0 | ) | ||||||||||||
| Total deposits | $ | 35,439,628 | $ | 33,629,124 | $ | 32,220,174 | 5.4 | % | 10.0 | % | ||||||||
| (1) | Includes $(48.9) million, $(42.4) million and $(34.0) million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts. | ||
| (2) | Includes ASC 310-30 discount of $22.2 million, $24.5 million and $35.3 million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively. | ||
| (3) | Includes $78.1 million of loans HFS in branch assets as of December 31, 2017 |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||
| ($ and shares in thousands, except per share data) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Table 3 | ||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||
| Three Months Ended | % Change | |||||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | Qtr-o-Qtr | Yr-o-Yr | ||||||||||||||
| Interest and dividend income | $ | 457,334 | $ | 422,185 | $ | 359,765 | 8.3 | % | 27.1 | % | ||||||||
| Interest expense | 87,918 | 73,465 | 40,064 | 19.7 | 119.4 | |||||||||||||
| Net interest income before provision for credit losses | 369,416 | 348,720 | 319,701 | 5.9 | 15.6 | |||||||||||||
| Provision for credit losses | 17,959 | 10,542 | 15,517 | 70.4 | 15.7 | |||||||||||||
| Net interest income after provision for credit losses | 351,457 | 338,178 | 304,184 | 3.9 | 15.5 | |||||||||||||
| Noninterest income | 41,695 | 46,502 | 45,206 |
(10.3 |
) |
(7.8 | ) | |||||||||||
| Noninterest expense | 188,097 | 179,815 | 175,263 | 4.6 | 7.3 | |||||||||||||
| Income before income taxes | 205,055 | 204,865 | 174,127 | 0.1 | 17.8 | |||||||||||||
| Income tax expense | 32,037 | 33,563 | 89,229 | (4.5 | ) | (64.1 | ) | |||||||||||
| Net income | $ | 173,018 | $ | 171,302 | $ | 84,898 | 1.0 | % | 103.8 | % | ||||||||
| Earnings per share (“EPS”) | ||||||||||||||||||
| - Basic | $ | 1.19 | $ | 1.18 | $ | 0.59 | 1.0 | % | 103.2 | % | ||||||||
| - Diluted | $ | 1.18 | $ | 1.17 | $ | 0.58 | 1.0 | 103.7 | ||||||||||
| Weighted average number of shares outstanding | ||||||||||||||||||
| - Basic | 144,960 | 144,921 | 144,542 | 0.0 | % | 0.3 | % | |||||||||||
| - Diluted | 146,133 | 146,173 | 146,030 | 0.0 | 0.1 | |||||||||||||
| December 31, 2018 | ||||||||||||||||||
| Three Months Ended | % Change | |||||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | Qtr-o-Qtr | Yr-o-Yr | ||||||||||||||
| Noninterest income: | ||||||||||||||||||
| Branch fees | $ | 9,512 | $ | 9,777 | $ | 10,287 | (2.7 | )% | (7.5 | )% | ||||||||
| Letters of credit fees and foreign exchange income | 16,358 | 14,649 | 9,974 | 11.7 | 64.0 | |||||||||||||
| Ancillary loan fees and other income | 5,835 | 6,795 | 6,457 | (14.1 | ) | (9.6 | ) | |||||||||||
| Wealth management fees | 2,796 | 3,535 | 2,797 | (20.9 | ) | 0.0 | ||||||||||||
| Derivative fees and other income | 1,125 | 4,595 | 4,737 | (75.5 | ) | (76.3 | ) | |||||||||||
| Net gains on sales of loans | 1,509 | 1,145 | 2,210 | 31.8 | (31.7 | ) | ||||||||||||
| Net gains on sales of available-for-sale investment securities | 161 | 35 | 1,304 | 360.0 | (87.7 | ) | ||||||||||||
| Net gains on sales of fixed assets | 1,081 | 3,402 | 3,296 | (68.2 | ) | (67.2 | ) | |||||||||||
| Other fees and operating income | 3,318 | 2,569 | 4,144 | 29.2 | (19.9 | ) | ||||||||||||
| Total noninterest income | $ | 41,695 | $ | 46,502 | $ | 45,206 | (10.3 | )% | (7.8 | )% | ||||||||
| Noninterest expense: | ||||||||||||||||||
| Compensation and employee benefits | $ | 93,790 | $ | 96,733 | $ | 90,361 | (3.0 | )% | 3.8 | % | ||||||||
| Occupancy and equipment expense | 18,017 | 17,292 | 17,092 | 4.2 | 5.4 | |||||||||||||
| Deposit insurance premiums and regulatory assessments | 3,093 | 6,013 | 6,351 | (48.6 | ) | (51.3 | ) | |||||||||||
| Legal expense | 2,145 | 1,544 | 2,514 | 38.9 | (14.7 | ) | ||||||||||||
| Data processing | 3,160 | 3,289 | 3,084 | (3.9 | ) | 2.5 | ||||||||||||
| Consulting expense | 1,424 | 2,683 | 4,147 | (46.9 | ) | (65.7 | ) | |||||||||||
| Deposit related expense | 3,043 | 2,600 | 2,655 | 17.0 | 14.6 | |||||||||||||
| Computer software expense | 6,205 | 5,478 | 4,360 | 13.3 | 42.3 | |||||||||||||
| Other operating expense | 26,262 | 23,394 | 22,808 | 12.3 | 15.1 | |||||||||||||
| Amortization of tax credit and other investments | 30,958 | 20,789 | 21,891 | 48.9 | 41.4 | |||||||||||||
| Total noninterest expense | $ | 188,097 | $ | 179,815 | $ | 175,263 | 4.6 | % | 7.3 | % | ||||||||
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||||||||
| ($ and shares in thousands, except per share data) | |||||||||||
| (unaudited) | |||||||||||
| Table 4 | |||||||||||
| December 31, 2018 | |||||||||||
| Year Ended | % Change | ||||||||||
| December 31, 2018 | December 31, 2017 | Yr-o-Yr | |||||||||
| Interest and dividend income | $ | 1,651,703 | $ | 1,325,119 | 24.6 | % | |||||
| Interest expense | 265,195 | 140,050 | 89.4 | ||||||||
| Net interest income before provision for credit losses | 1,386,508 | 1,185,069 | 17.0 | ||||||||
| Provision for credit losses | 64,255 | 46,266 | 38.9 | ||||||||
| Net interest income after provision for credit losses | 1,322,253 | 1,138,803 | 16.1 | ||||||||
| Noninterest income | 210,909 | 257,748 | (18.2 | ) | |||||||
| Noninterest expense | 714,466 | 661,451 | 8.0 | ||||||||
| Income before income taxes | 818,696 | 735,100 | 11.4 | ||||||||
| Income tax expense | 114,995 | 229,476 | (49.9 | ) | |||||||
| Net income | $ | 703,701 | $ | 505,624 | 39.2 | % | |||||
| EPS | |||||||||||
| - Basic | $ | 4.86 | $ | 3.50 | 38.8 | % | |||||
| - Diluted | $ | 4.81 | $ | 3.47 | 38.9 | ||||||
| Weighted average number of shares outstanding | |||||||||||
| - Basic | 144,862 | 144,444 | 0.3 | % | |||||||
| - Diluted | 146,169 | 145,913 | 0.2 | ||||||||
| December 31, 2018 | |||||||||||
| Year Ended | % Change | ||||||||||
| December 31, 2018 | December 31, 2017 | Yr-o-Yr | |||||||||
| Noninterest income: | |||||||||||
| Branch fees | $ | 39,859 | $ | 40,925 | (2.6 | )% | |||||
| Letters of credit fees and foreign exchange income | 56,282 | 44,344 | 26.9 | ||||||||
| Ancillary loan fees and other income | 24,052 | 23,333 | 3.1 | ||||||||
| Wealth management fees | 13,785 | 13,974 | (1.4 | ) | |||||||
| Derivative fees and other income | 18,980 | 17,671 | 7.4 | ||||||||
| Net gains on sales of loans | 6,590 | 8,870 | (25.7 | ) | |||||||
| Net gains on sales of available-for-sale investment securities | 2,535 | 8,037 | (68.5 | ) | |||||||
| Net gains on sales of fixed assets | 6,683 | 77,388 | (91.4 | ) | |||||||
| Net gain on sale of business | 31,470 | 3,807 | NM | ||||||||
| Other fees and operating income | 10,673 | 19,399 | (45.0 | ) | |||||||
| Total noninterest income | $ | 210,909 | $ | 257,748 | (18.2 | )% | |||||
| Noninterest expense: | |||||||||||
| Compensation and employee benefits | $ | 379,622 | $ | 335,291 | 13.2 | % | |||||
| Occupancy and equipment expense | 68,896 | 64,921 | 6.1 | ||||||||
| Deposit insurance premiums and regulatory assessments | 21,211 | 23,735 | (10.6 | ) | |||||||
| Legal expense | 8,781 | 11,444 | (23.3 | ) | |||||||
| Data processing | 13,177 | 12,093 | 9.0 | ||||||||
| Consulting expense | 11,579 | 14,922 | (22.4 | ) | |||||||
| Deposit related expense | 11,244 | 9,938 | 13.1 | ||||||||
| Computer software expense | 22,286 | 18,183 | 22.6 | ||||||||
| Other operating expense | 88,042 | 82,974 | 6.1 | ||||||||
| Amortization of tax credit and other investments | 89,628 | 87,950 | 1.9 | ||||||||
| Total noninterest expense | $ | 714,466 | $ | 661,451 | 8.0 | % | |||||
NM Not Meaningful
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||
| SELECTED AVERAGE BALANCES | ||||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||
| Table 5 | ||||||||||||||||||||||||||||||||
| December 31, 2018 | December 31, 2018 | |||||||||||||||||||||||||||||||
| Three Months Ended | % Change | Year Ended | % Change | |||||||||||||||||||||||||||||
| December 31, | September 30, | December 31, | Qtr-o- | December 31, | December 31, | |||||||||||||||||||||||||||
| 2018 | 2018 | 2017 | Qtr | Yr-o-Yr | 2018 | 2017 | Yr-o-Yr | |||||||||||||||||||||||||
| Loans: | ||||||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||
| C&I | $ | 11,554,737 | $ | 11,127,338 | $ | 10,518,121 | 3.8 | % | 9.9 | % | $ | 11,037,992 | $ | 10,180,582 | 8.4 | % | ||||||||||||||||
| CRE | 9,363,625 | 9,134,784 | 8,917,681 | 2.5 | 5.0 | 9,136,783 | 8,485,323 | 7.7 | ||||||||||||||||||||||||
| Multifamily residential | 2,162,877 | 2,056,456 | 1,909,933 | 5.2 | 13.2 | 2,034,258 | 1,785,210 | 14.0 | ||||||||||||||||||||||||
| Construction and land | 582,311 | 622,272 | 674,337 | (6.4 | ) | (13.6 | ) | 632,303 | 669,073 | (5.5 | ) | |||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||||||||||
| Single-family residential | 5,854,551 | 5,495,824 | 4,498,180 | 6.5 | 30.2 | 5,309,689 | 4,013,542 | 32.3 | ||||||||||||||||||||||||
| HELOCs | 1,709,022 | 1,741,890 | 1,783,762 | (1.9 | ) | (4.2 | ) | 1,754,071 | 1,780,377 | (1.5 | ) | |||||||||||||||||||||
| Other consumer | 307,752 | 319,473 | 344,447 | (3.7 | ) | (10.7 | ) | 324,918 | 338,649 | (4.1 | ) | |||||||||||||||||||||
| Total loans (1)(2) | $ | 31,534,875 | $ | 30,498,037 | $ | 28,646,461 | 3.4 | % | 10.1 | % | $ | 30,230,014 | $ | 27,252,756 | 10.9 | % | ||||||||||||||||
| Investment securities | $ | 2,777,381 | $ | 2,727,219 | $ | 2,925,817 | 1.8 | % | (5.1 | )% | $ | 2,773,152 | $ | 3,026,693 | (8.4 | )% | ||||||||||||||||
| Interest-earning assets | $ | 38,688,647 | $ | 36,822,293 | $ | 35,491,424 | 5.1 | % | 9.0 | % | $ | 36,707,142 | $ | 34,034,065 | 7.9 | % | ||||||||||||||||
| Total assets | $ | 40,525,188 | $ | 38,659,262 | $ | 37,262,618 | 4.8 | % | 8.8 | % | $ | 38,542,569 | $ | 35,787,613 | 7.7 | % | ||||||||||||||||
| Deposits: | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 11,447,345 | $ | 10,639,554 | $ | 11,531,181 | 7.6 | % | (0.7 | )% | $ | 11,089,537 | $ | 10,627,718 | 4.3 | % | ||||||||||||||||
| Interest-bearing checking | 4,449,541 | 4,515,256 | 4,313,732 | (1.5 | ) | 3.1 | 4,477,793 | 3,951,930 | 13.3 | |||||||||||||||||||||||
| Money market | 8,180,426 | 7,613,030 | 8,198,133 | 7.5 | (0.2 | ) | 7,985,526 | 8,026,347 | (0.5 | ) | ||||||||||||||||||||||
| Savings | 2,124,697 | 2,194,792 | 2,472,207 | (3.2 | ) | (14.1 | ) | 2,245,644 | 2,369,398 | (5.2 | ) | |||||||||||||||||||||
| Total core deposits | 26,202,009 | 24,962,632 | 26,515,253 | 5.0 | (1.2 | ) | 25,798,500 | 24,975,393 | 3.3 | |||||||||||||||||||||||
| Time deposits | 8,783,068 | 8,277,129 | 5,735,014 | 6.1 | 53.1 | 7,431,749 | 5,838,382 | 27.3 | ||||||||||||||||||||||||
| Total deposits | $ | 34,985,077 | $ | 33,239,761 | $ | 32,250,267 | (3) | 5.3 | % | 8.5 | % | $ | 33,230,249 | (3) | $ | 30,813,775 | (3) | 7.8 | % | |||||||||||||
| Interest-bearing liabilities | $ | 24,122,509 | $ | 23,190,465 | $ | 21,280,348 | 4.0 | % | 13.4 | % | $ | 22,709,554 | $ | 20,930,965 | 8.5 | % | ||||||||||||||||
| Stockholders’ equity | $ | 4,335,110 | $ | 4,197,675 | $ | 3,856,802 | 3.3 | % | 12.4 | % | $ | 4,130,822 | $ | 3,687,213 | 12.0 | % | ||||||||||||||||
| (1) | Includes ASC 310-30 discount of $23.8 million, $25.9 million and $37.7 million for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively, and $28.4 million and $43.3 million for the years ended December 31, 2018 and 2017, respectively. | ||
| (2) | Includes loans HFS. | ||
| (3) | Includes deposits HFS. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| Table 6 | ||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||
| December 31, 2018 | September 30, 2018 | |||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||
| Balance | Interest | Yield/Rate (1) | Balance | Interest | Yield/Rate (1) | |||||||||||||||||
| Assets | ||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||
| Interest-bearing cash and deposits with banks | $ | 3,267,484 | $ | 18,791 | 2.28 | % | $ | 2,521,002 | $ | 13,353 | 2.10 | % | ||||||||||
| Resale agreements (2) | 1,035,000 | 7,819 | 3.00 | % | 1,002,500 | 7,393 | 2.93 | % | ||||||||||||||
| Investment securities | 2,777,381 | 15,216 | 2.17 | % | 2,727,219 | 15,180 | 2.21 | % | ||||||||||||||
| Loans (3) | 31,534,875 | 414,517 | 5.22 | % | 30,498,037 | 385,538 | 5.02 | % | ||||||||||||||
| FHLB and FRB stock | 73,907 | 991 | 5.32 | % | 73,535 | 721 | 3.89 | % | ||||||||||||||
| Total interest-earning assets | 38,688,647 | 457,334 | 4.69 | % | 36,822,293 | 422,185 | 4.55 | % | ||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||
| Cash and due from banks | 482,767 | 424,350 | ||||||||||||||||||||
| Allowance for loan losses | (314,019 | ) | (301,557 | ) | ||||||||||||||||||
| Other assets | 1,667,793 | 1,714,176 | ||||||||||||||||||||
| Total assets | $ | 40,525,188 | $ | 38,659,262 | ||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||
| Checking deposits | $ | 4,449,541 | $ | 9,963 | 0.89 | % | $ | 4,515,256 | $ | 9,551 | 0.84 | % | ||||||||||
| Money market deposits | 8,180,426 | 27,640 | 1.34 | % | 7,613,030 | 21,411 | 1.12 | % | ||||||||||||||
| Savings deposits | 2,124,697 | 2,257 | 0.42 | % | 2,194,792 | 2,308 | 0.42 | % | ||||||||||||||
| Time deposits | 8,783,068 | 39,459 | 1.78 | % | 8,277,129 | 31,762 | 1.52 | % | ||||||||||||||
| Federal funds purchased and other short-term borrowings | 57,198 | 624 | 4.33 | % | 58,218 | 643 | 4.38 | % | ||||||||||||||
| FHLB advances | 325,826 | 2,903 | 3.53 | % | 325,246 | 2,732 | 3.33 | % | ||||||||||||||
| Repurchase agreements (2) | 50,000 | 3,396 | 26.95 | % | 50,000 | 3,366 | 26.71 | % | ||||||||||||||
| Long-term debt | 151,753 | 1,676 | 4.38 | % | 156,794 | 1,692 | 4.28 | % | ||||||||||||||
| Total interest-bearing liabilities | 24,122,509 | 87,918 | 1.45 | % | 23,190,465 | 73,465 | 1.26 | % | ||||||||||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||||||||||
| Demand deposits | 11,447,345 | 10,639,554 | ||||||||||||||||||||
| Accrued expenses and other liabilities | 620,224 | 631,568 | ||||||||||||||||||||
| Stockholders’ equity | 4,335,110 | 4,197,675 | ||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 40,525,188 | $ | 38,659,262 | ||||||||||||||||||
| Interest rate spread | 3.24 | % | 3.29 | % | ||||||||||||||||||
| Net interest income and net interest margin | $ | 369,416 | 3.79 | % | $ | 348,720 | 3.76 | % | ||||||||||||||
| Adjusted net interest income and adjusted net interest margin (4) | $ | 363,606 | 3.73 | % | $ | 345,857 | 3.72 | % | ||||||||||||||
| (1) | Annualized. | ||
| (2) |
Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.72% and 2.63% for the three months ended December 31, 2018 and September 30, 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.77% and 4.65% for the three months ended December 31, 2018 and September 30, 2018, respectively. |
||
| (3) | Includes loans HFS and ASC 310-30 discount of $23.8 million and $25.9 million for the three months ended December 31, 2018 and September 30, 2018, respectively. | ||
| (4) | See reconciliation of GAAP to non-GAAP financial measures in Table 14. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | |||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Table 7 | |||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| December 31, 2018 | December 31, 2017 | ||||||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||||||
| Balance | Interest | Yield/Rate (1) | Balance | Interest | Yield/Rate (1) | ||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||
| Interest-bearing cash and deposits with banks | $ | 3,267,484 | $ | 18,791 | 2.28 | % | $ | 2,743,548 | $ | 11,092 | 1.60 | % | |||||||||||
| Resale agreements (2) | 1,035,000 | 7,819 | 3.00 | % | 1,102,174 | 6,873 | 2.47 | % | |||||||||||||||
| Investment securities | 2,777,381 | 15,216 | 2.17 | % | 2,925,817 | 14,734 | 2.00 | % | |||||||||||||||
| Loans (3) | 31,534,875 | 414,517 | 5.22 | % | 28,646,461 | 326,401 | 4.52 | % | |||||||||||||||
| FHLB and FRB stock | 73,907 | 991 | 5.32 | % | 73,424 | 665 | 3.59 | % | |||||||||||||||
| Total interest-earning assets | 38,688,647 | 457,334 | 4.69 | % | 35,491,424 | 359,765 | 4.02 | % | |||||||||||||||
| Noninterest-earning assets: | |||||||||||||||||||||||
| Cash and due from banks | 482,767 | 417,798 | |||||||||||||||||||||
| Allowance for loan losses | (314,019 | ) | (285,490 | ) | |||||||||||||||||||
| Other assets | 1,667,793 | 1,638,886 | |||||||||||||||||||||
| Total assets | $ | 40,525,188 | $ | 37,262,618 | |||||||||||||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||
| Checking deposits | $ | 4,449,541 | $ | 9,963 | 0.89 | % | $ | 4,313,732 | (4) | $ | 5,767 | 0.53 | % | ||||||||||
| Money market deposits | 8,180,426 | 27,640 | 1.34 | % | 8,198,133 | (4) | 13,772 | 0.67 | % | ||||||||||||||
| Savings deposits | 2,124,697 | 2,257 | 0.42 | % | 2,472,207 | (4) | 1,906 | 0.31 | % | ||||||||||||||
| Time deposits | 8,783,068 | 39,459 | 1.78 | % | 5,735,014 | (4) | 13,143 | 0.91 | % | ||||||||||||||
| Federal funds purchased and other short-term borrowings | 57,198 | 624 | 4.33 | % | 16,070 | 126 | 3.11 | % | |||||||||||||||
| FHLB advances | 325,826 | 2,903 | 3.53 | % | 323,598 | 2,013 | 2.47 | % | |||||||||||||||
| Repurchase agreements (2) | 50,000 | 3,396 | 26.95 | % | 50,000 | 1,938 | 15.38 | % | |||||||||||||||
| Long-term debt | 151,753 | 1,676 | 4.38 | % | 171,594 | 1,399 | 3.23 | % | |||||||||||||||
| Total interest-bearing liabilities | 24,122,509 | 87,918 | 1.45 | % | 21,280,348 | 40,064 | 0.75 | % | |||||||||||||||
| Noninterest-bearing liabilities and stockholders’ equity: | |||||||||||||||||||||||
| Demand deposits | 11,447,345 | 11,531,181 | (4) | ||||||||||||||||||||
| Accrued expenses and other liabilities | 620,224 | 594,287 | |||||||||||||||||||||
| Stockholders’ equity | 4,335,110 | 3,856,802 | |||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 40,525,188 | $ | 37,262,618 | |||||||||||||||||||
| Interest rate spread | 3.24 | % | 3.27 | % | |||||||||||||||||||
| Net interest income and net interest margin | $ | 369,416 | 3.79 | % | $ | 319,701 | 3.57 | % | |||||||||||||||
| Adjusted net interest income and adjusted net interest margin (5) | $ | 363,606 | 3.73 | % | $ | 312,678 | 3.49 | % | |||||||||||||||
| (1) | Annualized. | ||
| (2) |
Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements are 2.72% and 2.40% for the three months ended December 31, 2018 and 2017, respectively. The weighted-average interest rates of gross repurchase agreements are 4.77% and 3.66% for the three months ended December 31, 2018 and 2017, respectively. |
||
| (3) |
Includes loans HFS and ASC 310-30 discount of $23.8 million and $37.7 million for the three months ended December 31, 2018 and 2017, respectively. |
||
| (4) | Includes deposits HFS. | ||
| (5) | See reconciliation of GAAP to non-GAAP financial measures in Table 14. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||
| YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| Table 8 | ||||||||||||||||||||||
| Year Ended | ||||||||||||||||||||||
| December 31, 2018 | December 31, 2017 | |||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||
| Balance | Interest | Yield/Rate | Balance | Interest | Yield/Rate | |||||||||||||||||
| Assets | ||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||
| Interest-bearing cash and deposits with banks | $ | 2,609,463 | $ | 54,804 | 2.10 | % | $ | 2,242,256 | $ | 33,390 | 1.49 | % | ||||||||||
| Resale agreements (1) | 1,020,822 | 29,328 | 2.87 | % | 1,438,767 | 32,095 | 2.23 | % | ||||||||||||||
| Investment securities | 2,773,152 | 60,911 | 2.20 | % | 3,026,693 | 58,670 | 1.94 | % | ||||||||||||||
| Loans (2) | 30,230,014 | 1,503,514 | 4.97 | % | 27,252,756 | 1,198,440 | 4.40 | % | ||||||||||||||
| FHLB and FRB stock | 73,691 | 3,146 | 4.27 | % | 73,593 | 2,524 | 3.43 | % | ||||||||||||||
| Total interest-earning assets | 36,707,142 | 1,651,703 | 4.50 | % | 34,034,065 | 1,325,119 | 3.89 | % | ||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||
| Cash and due from banks | 445,768 | 395,092 | ||||||||||||||||||||
| Allowance for loan losses | (298,600 | ) | (272,765 | ) | ||||||||||||||||||
| Other assets | 1,688,259 | 1,631,221 | ||||||||||||||||||||
| Total assets | $ | 38,542,569 | $ | 35,787,613 | ||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||
| Checking deposits (3) | $ | 4,477,793 | $ | 34,657 | 0.77 | % | $ | 3,951,930 | $ | 18,305 | 0.46 | % | ||||||||||
| Money market deposits (3) | 7,985,526 | 83,696 | 1.05 | % | 8,026,347 | 44,181 | 0.55 | % | ||||||||||||||
| Savings deposits (3) | 2,245,644 | 8,621 | 0.38 | % | 2,369,398 | 6,431 | 0.27 | % | ||||||||||||||
| Time deposits (3) | 7,431,749 | 107,778 | 1.45 | % | 5,838,382 | 47,474 | 0.81 | % | ||||||||||||||
| Federal funds purchased and other short-term borrowings | 32,222 | 1,398 | 4.34 | % | 34,546 | 1,003 | 2.90 | % | ||||||||||||||
| FHLB advances | 327,435 | 10,447 | 3.19 | % | 391,480 | 7,751 | 1.98 | % | ||||||||||||||
| Repurchase agreements (1) | 50,000 | 12,110 | 24.22 | % | 140,000 | 9,476 | 6.77 | % | ||||||||||||||
| Long-term debt | 159,185 | 6,488 | 4.08 | % | 178,882 | 5,429 | 3.03 | % | ||||||||||||||
| Total interest-bearing liabilities | 22,709,554 | 265,195 | 1.17 | % | 20,930,965 | 140,050 | 0.67 | % | ||||||||||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||||||||||
| Demand deposits (3) | 11,089,537 | 10,627,718 | ||||||||||||||||||||
| Accrued expenses and other liabilities | 612,656 | 541,717 | ||||||||||||||||||||
| Stockholders’ equity | 4,130,822 | 3,687,213 | ||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 38,542,569 | $ | 35,787,613 | ||||||||||||||||||
| Interest rate spread | 3.33 | % | 3.22 | % | ||||||||||||||||||
| Net interest income and net interest margin | $ | 1,386,508 | 3.78 | % | $ | 1,185,069 | 3.48 | % | ||||||||||||||
| Adjusted net interest income and net interest margin (4) | $ | 1,366,336 | 3.72 | % | $ | 1,164,017 | 3.42 | % | ||||||||||||||
| (1) |
Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements are 2.63% and 2.19% for the years ended December 31, 2018 and 2017, respectively. The weighted-average interest rates of gross repurchase agreements are 4.46% and 3.48% for the years ended December 31, 2018 and 2017, respectively. |
||
| (2) | Includes loans HFS and ASC 310-30 discount of $28.4 million and $43.3 million for the years ended December 31, 2018 and 2017, respectively. | ||
| (3) | Includes deposits HFS. | ||
| (4) | See reconciliation of GAAP to non-GAAP financial measures in Table 14. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||
| SELECTED RATIOS | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| Table 9 | |||||||||||||||||
| December 31, 2018 | |||||||||||||||||
|
Three Months Ended (1) |
Basis Point Change | ||||||||||||||||
| December 31, | September 30, | December 31, | |||||||||||||||
| 2018 | 2018 | 2017 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||||
| Return on average assets | 1.69 | % | 1.76 | % | 0.90 | % | (7 | ) | bps | 79 | bps | ||||||
| Adjusted return on average assets (2) | 1.69 | % | 1.76 | % | 1.35 | % | (7 | ) | 34 | ||||||||
| Return on average equity | 15.83 | % | 16.19 | % | 8.73 | % | (36 | ) | 710 | ||||||||
| Adjusted return on average equity (2) | 15.83 | % | 16.19 | % | 13.02 | % | (36 | ) | 281 | ||||||||
| Return on average tangible equity (2) | 17.97 | % | 18.47 | % | 10.17 | % | (50 | ) | 780 | ||||||||
| Adjusted return on average tangible equity (2) | 17.97 | % | 18.47 | % | 15.10 | % | (50 | ) | 287 | ||||||||
| Interest rate spread | 3.24 | % | 3.29 | % | 3.27 | % | (5 | ) | (3 | ) | |||||||
| Net interest margin | 3.79 | % | 3.76 | % | 3.57 | % | 3 | 22 | |||||||||
| Adjusted net interest margin (2) | 3.73 | % | 3.72 | % | 3.49 | % | 1 | 24 | |||||||||
| Average loan yield | 5.22 | % | 5.02 | % | 4.52 | % | 20 | 70 | |||||||||
| Adjusted average loan yield (2) | 5.14 | % | 4.97 | % | 4.42 | % | 17 | 72 | |||||||||
| Yield on average interest-earning assets | 4.69 | % | 4.55 | % | 4.02 | % | 14 | 67 | |||||||||
| Cost of interest-bearing deposits | 1.34 | % | 1.14 | % | 0.66 | % | 20 | 68 | |||||||||
| Cost of deposits | 0.90 | % | 0.78 | % | 0.43 | % | 12 | 47 | |||||||||
| Cost of funds | 0.98 | % | 0.86 | % | 0.48 | % | 12 | 50 | |||||||||
| Adjusted pre-tax, pre-provision profitability ratio (2) | 2.50 | % | 2.44 | % | 2.27 | % | 6 | 23 | |||||||||
| Adjusted noninterest expense/average assets (2) | 1.53 | % | 1.62 | % | 1.62 | % | (9 | ) | (9 | ) | |||||||
| Efficiency ratio | 45.75 | % | 45.50 | % | 48.03 | % | 25 | (228 | ) | ||||||||
| Adjusted efficiency ratio (2) | 37.92 | % | 39.89 | % | 41.59 | % | (197 | ) | bps | (367 | ) | bps | |||||
| December 31, 2018 | |||||||||||||||||
| Year Ended | Basis Point Change | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2018 | 2017 | Yr-o-Yr | |||||||||||||||
| Return on average assets | 1.83 | % | 1.41 | % | 42 | bps | |||||||||||
| Adjusted return on average assets (2) | 1.77 | % | 1.41 | % | 36 | ||||||||||||
| Return on average equity | 17.04 | % | 13.71 | % | 333 | ||||||||||||
| Adjusted return on average equity (2) | 16.50 | % | 13.66 | % | 284 | ||||||||||||
| Return on average tangible equity (2) | 19.48 | % | 16.03 | % | 345 | ||||||||||||
| Adjusted return on average tangible equity (2) | 18.87 | % | 15.97 | % | 290 | ||||||||||||
| Interest rate spread | 3.33 | % | 3.22 | % | 11 | ||||||||||||
| Net interest margin | 3.78 | % | 3.48 | % | 30 | ||||||||||||
| Adjusted net interest margin (2) | 3.72 | % | 3.42 | % | 30 | ||||||||||||
| Average loan yield | 4.97 | % | 4.40 | % | 57 | ||||||||||||
| Adjusted average loan yield (2) | 4.90 | % | 4.31 | % | 59 | ||||||||||||
| Yield on average interest-earning assets | 4.50 | % | 3.89 | % | 61 | ||||||||||||
| Cost of interest-bearing deposits | 1.06 | % | 0.58 | % | 48 | ||||||||||||
| Cost of deposits | 0.71 | % | 0.38 | % | 33 | ||||||||||||
| Cost of funds | 0.78 | % | 0.44 | % | 34 | ||||||||||||
| Adjusted pre-tax, pre-provision profitability ratio (2) | 2.46 | % | 2.24 | % | 22 | ||||||||||||
| Adjusted noninterest expense/average assets (2) | 1.61 | % | 1.58 | % | 3 | ||||||||||||
| Efficiency ratio | 44.73 | % | 45.84 | % | (111 | ) | |||||||||||
| Adjusted efficiency ratio (2) | 39.55 | % | 41.44 | % | (189 | ) | bps | ||||||||||
| (1) | Annualized except for efficiency ratio. | ||
| (2) | See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES | ||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Table 10 | ||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||
| 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||
| Non-Purchased Credit Impaired (“Non-PCI”) Loans | ||||||||||||||||||||
| Allowance for non-PCI loans, beginning of period | $ | 310,010 | $ | 301,511 | $ | 285,858 | $ | 287,070 | $ | 260,402 | ||||||||||
| Provision for loan losses on non-PCI loans | 17,321 | 12,650 | 16,945 | 65,043 | 49,129 | |||||||||||||||
| Net (charge-offs) recoveries: | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| C&I | (21,227 | ) | (4,051 | ) | (16,150 | ) | (48,827 | ) | (26,747 | ) | ||||||||||
| CRE | 4,763 | 2 | 570 | 5,194 | 2,111 | |||||||||||||||
| Multifamily residential | 286 | 77 | (607 | ) | 1,757 | 722 | ||||||||||||||
| Construction and land | 24 | 23 | 86 | 740 | 110 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Single-family residential | 106 | 295 | 117 | 1,213 | 545 | |||||||||||||||
| HELOCs | 38 | — | — | 38 | (31 | ) | ||||||||||||||
| Other consumer | (2 | ) | (5 | ) | 10 | (185 | ) | 135 | ||||||||||||
| Total net charge-offs | (16,012 | ) | (3,659 | ) | (15,974 | ) | (40,070 | ) | (23,155 | ) | ||||||||||
| Foreign currency translation adjustments | (19 | ) | (492 | ) | 241 | (743 | ) | 694 | ||||||||||||
| Allowance for non-PCI loans, end of period | 311,300 | 310,010 | 287,070 | 311,300 | 287,070 | |||||||||||||||
| Purchased Credit Impaired (“PCI”) Loans | ||||||||||||||||||||
| Allowance for PCI loans, beginning of period | 31 | 39 | 68 | 58 | 118 | |||||||||||||||
| Reversal of loan losses on PCI loans | (9 | ) | (8 | ) | (10 | ) | (36 | ) | (60 | ) | ||||||||||
| Allowance for PCI loans, end of period | 22 | 31 | 58 | 22 | 58 | |||||||||||||||
| Allowance for loan losses | 311,322 | 310,041 | 287,128 | 311,322 | 287,128 | |||||||||||||||
| Unfunded Credit Facilities | ||||||||||||||||||||
| Allowance for unfunded credit reserves, beginning of period | 11,919 | 14,019 | 14,736 | 13,318 | 16,121 | |||||||||||||||
| Provision for (reversal of) unfunded credit reserves | 647 | (2,100 | ) | (1,418 | ) | (752 | ) | (2,803 | ) | |||||||||||
| Allowance for unfunded credit reserves, end of period | 12,566 | 11,919 | 13,318 | 12,566 | 13,318 | |||||||||||||||
| Allowance for credit losses | $ | 323,888 | $ | 321,960 | $ | 300,446 | $ | 323,888 | $ | 300,446 | ||||||||||
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
| CREDIT QUALITY | ||||||||||||
| ($ in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| Table 11 | ||||||||||||
| Non-PCI Nonperforming Assets | December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
| Nonaccrual loans: | ||||||||||||
| Commercial: | ||||||||||||
| C&I | $ | 43,840 | $ | 72,797 | $ | 69,213 | ||||||
| CRE | 24,218 | 24,752 | 26,986 | |||||||||
| Multifamily residential | 1,260 | 1,761 | 1,717 | |||||||||
| Construction and land | — | — | 3,973 | |||||||||
| Consumer: | ||||||||||||
| Single-family residential | 5,259 | 5,222 | 5,923 | |||||||||
| HELOCs | 8,614 | 6,872 | 4,006 | |||||||||
| Other consumer | 2,502 | 2,491 | 2,491 | |||||||||
| Total nonaccrual loans | 85,693 | 113,895 | 114,309 | |||||||||
| Other real estate owned, net | 133 | 748 | 830 | |||||||||
| Other nonperforming assets | 7,167 | — | — | |||||||||
| Total nonperforming assets | $ | 92,993 | $ | 114,643 | $ | 115,139 | ||||||
| Credit Quality Ratios | December 31, 2018 | September 30, 2018 | December 31, 2017 | |||||||||
| Non-PCI nonperforming assets to total assets (1) | 0.23 | % | 0.29 | % | 0.31 | % | ||||||
| Non-PCI nonaccrual loans to loans held-for-investment (1) | 0.26 | % | 0.36 | % | 0.39 | % | ||||||
| Allowance for loan losses to loans held-for-investment (1) | 0.96 | % | 0.99 | % | 0.99 | % | ||||||
| Allowance for loan losses to non-PCI nonaccrual loans | 363.30 | % | 272.22 | % | 251.19 | % | ||||||
| Annualized quarterly net charge-offs to average loans held-for-investment | 0.20 | % | 0.05 | % | 0.22 | % | ||||||
| Annual net charge-offs to average loans held-for-investment | 0.13 | % | N/A | 0.08 | % | |||||||
|
N/A: Not applicable |
|||
| (1) | Total assets and loans held-for-investment include PCI loans of $308.0 million, $345.0 million and $482.3 million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively. | ||
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||
| ($ and shares in thousands, except for per share data) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Table 12 | ||||||||||||||
| During the first quarter of 2017, the Company consummated a sale and leaseback transaction on a commercial property and recognized a pre-tax gain on sale of $71.7 million. During the third quarter of 2017, the Company sold its insurance brokerage business, East West Insurance Services, Inc. (“EWIS”) and recognized a pre-tax gain on sale of $3.8 million. During the fourth quarter of 2017, the Tax Cuts and Jobs Act was enacted, which resulted in an additional income tax expense of $41.7 million. During the first quarter of 2018, the Company sold its Desert Community Bank (“DCB”) branches and recognized a pre-tax gain on sale of $31.5 million. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that exclude the impact of the Tax Cuts and Jobs Act and after-tax gains on the sales of the commercial property, EWIS business and DCB branches (where applicable) provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. | ||||||||||||||
| Three Months Ended | ||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||
| Net income | (a) | $ | 173,018 | $ | 171,302 | $ | 84,898 | |||||||
| Add: Impact of the Tax Cuts and Jobs Act | — | — | 41,689 | |||||||||||
| Adjusted net income | (b) | $ | 173,018 | $ | 171,302 | $ | 126,587 | |||||||
| Diluted weighted average number of shares outstanding | 146,133 | 146,173 | 146,030 | |||||||||||
| Diluted EPS | $ | 1.18 | $ | 1.17 | $ | 0.58 | ||||||||
| Diluted EPS impact of the Tax Cuts and Jobs Act | — | — | 0.29 | |||||||||||
| Adjusted diluted EPS | $ | 1.18 | $ | 1.17 | $ | 0.87 | ||||||||
| Average total assets | (c) | $ | 40,525,188 | $ | 38,659,262 | $ | 37,262,618 | |||||||
| Average stockholders’ equity | (d) | $ | 4,335,110 | $ | 4,197,675 | $ | 3,856,802 | |||||||
| Return on average assets (1) | (a)/(c) | 1.69 | % | 1.76 | % | 0.90 | % | |||||||
| Adjusted return on average assets (1) | (b)/(c) | 1.69 | % | 1.76 | % | 1.35 | % | |||||||
| Return on average equity (1) | (a)/(d) | 15.83 | % | 16.19 | % | 8.73 | % | |||||||
| Adjusted return on average equity (1) | (b)/(d) | 15.83 | % | 16.19 | % | 13.02 | % | |||||||
| Year Ended | ||||||||||||||
| December 31, 2018 | December 31, 2017 | |||||||||||||
| Net income | (e) | $ | 703,701 | $ | 505,624 | |||||||||
| Add: Impact of the Tax Cuts and Jobs Act | — | 41,689 | ||||||||||||
| Less: Gain on sale of the commercial property | — | (71,654 | ) | |||||||||||
| Gain on sale of business | (31,470 | ) | (3,807 | ) | ||||||||||
| Add: Tax effect of adjustments (2) | 9,303 | 31,729 | ||||||||||||
| Adjusted net income | (f) | $ | 681,534 | $ | 503,581 | |||||||||
| Diluted weighted average number of shares outstanding | 146,169 | 145,913 | ||||||||||||
| Diluted EPS | $ | 4.81 | $ | 3.47 | ||||||||||
| Diluted EPS impact of the Tax Cuts and Jobs Act | — | 0.29 | ||||||||||||
| Diluted EPS impact of gain on sale of the commercial property, net of tax | — | (0.28 | ) | |||||||||||
| Diluted EPS impact of gain on sale of business, net of tax | (0.15 | ) | (0.02 | ) | ||||||||||
| Adjusted diluted EPS | $ | 4.66 | $ | 3.46 | ||||||||||
| Average total assets | (g) | $ | 38,542,569 | $ | 35,787,613 | |||||||||
| Average stockholders’ equity | (h) | $ | 4,130,822 | $ | 3,687,213 | |||||||||
| Return on average assets | (e)/(g) | 1.83 | % | 1.41 | % | |||||||||
| Adjusted return on average assets | (f)/(g) | 1.77 | % | 1.41 | % | |||||||||
| Return on average equity | (e)/(h) | 17.04 | % | 13.71 | % | |||||||||
| Adjusted return on average equity | (f)/(h) | 16.50 | % | 13.66 | % | |||||||||
| (1) | Annualized. | ||
| (2) | Statutory rates of 29.56% and 42.05% were applied for the twelve months ended December 31, 2018 and 2017, respectively. |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||
| ($ in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Table 13 | ||||||||||||||
| Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of adjusted revenue less adjusted noninterest expense, divided by average total assets. Adjusted revenue represents the aggregate of net interest income and adjusted noninterest income, where adjusted noninterest income excludes the gains on the sales of the commercial property, EWIS business and DCB branches that were sold in the first quarter of 2017, third quarter of 2017 and first quarter of 2018, respectively (where applicable). Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods. | ||||||||||||||
| Three Months Ended | ||||||||||||||
| December 31, | September 30, | December 31, | ||||||||||||
| 2018 | 2018 | 2017 | ||||||||||||
| Net interest income before provision for credit losses | (a) | $ | 369,416 | $ | 348,720 | $ | 319,701 | |||||||
| Total noninterest income | 41,695 | 46,502 | 45,206 | |||||||||||
| Total revenue | (b) | $ | 411,111 | $ | 395,222 | $ | 364,907 | |||||||
| Total noninterest expense | (c) | $ | 188,097 | $ | 179,815 | $ | 175,263 | |||||||
| Less: Amortization of tax credit and other investments | (30,958 | ) | (20,789 | ) | (21,891 | ) | ||||||||
| Amortization of core deposit intangibles | (1,265 | ) | (1,369 | ) | (1,621 | ) | ||||||||
| Adjusted noninterest expense | (d) | $ | 155,874 | $ | 157,657 | $ | 151,751 | |||||||
| Efficiency ratio | (c)/(b) | 45.75 | % | 45.50 | % | 48.03 | % | |||||||
| Adjusted efficiency ratio | (d)/(b) | 37.92 | % | 39.89 | % | 41.59 | % | |||||||
| Adjusted pre-tax, pre-provision income | (b)-(d) = (e) | $ | 255,237 | $ | 237,565 | $ | 213,156 | |||||||
| Average total assets | (f) | $ | 40,525,188 | $ | 38,659,262 | $ | 37,262,618 | |||||||
| Adjusted pre-tax, pre-provision profitability ratio (1) | (e)/(f) | 2.50 | % | 2.44 | % | 2.27 | % | |||||||
| Adjusted noninterest expense (1)/average assets | (d)/(f) | 1.53 | % | 1.62 | % | 1.62 | % | |||||||
| Year Ended | ||||||||||||||
| December 31, 2018 | December 31, 2017 | |||||||||||||
| Net interest income before provision for credit losses | (g) | $ | 1,386,508 | $ | 1,185,069 | |||||||||
| Total noninterest income | 210,909 | 257,748 | ||||||||||||
| Total revenue | (h) | 1,597,417 | 1,442,817 | |||||||||||
| Noninterest income | 210,909 | 257,748 | ||||||||||||
| Less: Gain on sale of the commercial property | — | (71,654 | ) | |||||||||||
| Gain on sale of business | (31,470 | ) | (3,807 | ) | ||||||||||
| Adjusted noninterest income | (i) | $ | 179,439 | $ | 182,287 | |||||||||
| Adjusted revenue | (g)+(i) = (j) | $ | 1,565,947 | $ | 1,367,356 | |||||||||
| Total noninterest expense | (k) | $ | 714,466 | $ | 661,451 | |||||||||
| Less: Amortization of tax credit and other investments | (89,628 | ) | (87,950 | ) | ||||||||||
| Amortization of core deposit intangibles | (5,492 | ) | (6,935 | ) | ||||||||||
| Adjusted noninterest expense | (l) | $ | 619,346 | $ | 566,566 | |||||||||
| Efficiency ratio | (k)/(h) | 44.73 | % | 45.84 | % | |||||||||
| Adjusted efficiency ratio | (l)/(j) | 39.55 | % | 41.44 | % | |||||||||
| Adjusted pre-tax, pre-provision income | (j)-(l) = (m) | $ | 946,601 | $ | 800,790 | |||||||||
| Average total assets | (n) | $ | 38,542,569 | $ | 35,787,613 | |||||||||
| Adjusted pre-tax, pre-provision profitability ratio | (m)/(n) | 2.46 | % | 2.24 | % | |||||||||
| Adjusted noninterest expense/average assets | (l)/(n) | 1.61 | % | 1.58 | % | |||||||||
(1) Annualized.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | |||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Table 14 | |||||||||||||||||||||||
| Management believes that presenting the adjusted average loan yield and adjusted net interest margin that exclude the ASC 310-30 discount accretion impact provides clarity to financial statement users regarding the change in loan contractual yields and allows comparability to prior periods. | |||||||||||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||||||
| Yield on Average Loans | 2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
| Interest income on loans | (a) | $ | 414,517 | $ | 385,538 | $ | 326,401 | $ | 1,503,514 | $ | 1,198,440 | ||||||||||||
| Less: ASC 310-30 discount accretion income | (5,810 | ) | (2,863 | ) | (7,023 | ) | (20,172 | ) | (21,052 | ) | |||||||||||||
| Adjusted interest income on loans | (b) | $ | 408,707 | $ | 382,675 | $ | 319,378 | $ | 1,483,342 | $ | 1,177,388 | ||||||||||||
| Average loans | (c) | $ | 31,534,875 | $ | 30,498,037 | $ | 28,646,461 | $ | 30,230,014 | $ | 27,252,756 | ||||||||||||
| Add: ASC 310-30 discount | 23,833 | 25,852 | 37,660 | 28,400 | 43,341 | ||||||||||||||||||
| Adjusted average loans | (d) | $ | 31,558,708 | $ | 30,523,889 | $ | 28,684,121 | $ | 30,258,414 | $ | 27,296,097 | ||||||||||||
| Average loan yield | (a)/(c) | 5.22 | % | (1) | 5.02 | % | (1) | 4.52 | % | (1) | 4.97 | % | 4.40 | % | |||||||||
| Adjusted average loan yield | (b)/(d) | 5.14 | % | (1) | 4.97 | % | (1) | 4.42 | % | (1) | 4.90 | % | 4.31 | % | |||||||||
| Net Interest Margin | |||||||||||||||||||||||
| Net interest income | (e) | $ | 369,416 | $ | 348,720 | $ | 319,701 | $ | 1,386,508 | $ | 1,185,069 | ||||||||||||
| Less: ASC 310-30 discount accretion income | (5,810 | ) | (2,863 | ) | (7,023 | ) | (20,172 | ) | (21,052 | ) | |||||||||||||
| Adjusted net interest income | (f) | $ | 363,606 | $ | 345,857 | $ | 312,678 | $ | 1,366,336 | $ | 1,164,017 | ||||||||||||
| Average interest-earning assets | (g) | $ | 38,688,647 | $ | 36,822,293 | $ | 35,491,424 | $ | 36,707,142 | $ | 34,034,065 | ||||||||||||
| Add: ASC 310-30 discount | 23,833 | 25,852 | 37,660 | 28,400 | 43,341 | ||||||||||||||||||
| Adjusted average interest-earning assets | (h) | $ | 38,712,480 | $ | 36,848,145 | $ | 35,529,084 | $ | 36,735,542 | $ | 34,077,406 | ||||||||||||
| Net interest margin | (e)/(g) | 3.79 | % | (1) | 3.76 | % | (1) | 3.57 | % | (1) | 3.78 | % | 3.48 | % | |||||||||
| Adjusted net interest margin | (f)/(h) | 3.73 | % | (1) | 3.72 | % | (1) | 3.49 | % | (1) | 3.72 | % | 3.42 | % | |||||||||
(1) Annualized.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||
| ($ in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Table 15 | ||||||||||||||
| The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Tangible equity and tangible equity to tangible assets ratio are non-GAAP financial measures. Tangible equity and tangible assets represent stockholders’ equity and total assets, respectively, which have been reduced by goodwill and other intangible assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. | ||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||
| Stockholders’ equity | (a) | $ | 4,423,974 | $ | 4,244,850 | $ | 3,841,951 | |||||||
| Less: Goodwill | (465,547 | ) | (465,547 | ) | (469,433 | ) | ||||||||
| Other intangible assets (1) | (22,365 | ) | (23,656 | ) | (28,825 | ) | ||||||||
| Tangible equity | (b) | $ | 3,936,062 | $ | 3,755,647 | $ | 3,343,693 | |||||||
| Total assets | (c) | $ | 41,042,356 | $ | 39,073,106 | $ | 37,150,249 | |||||||
| Less: Goodwill | (465,547 | ) | (465,547 | ) | (469,433 | ) | ||||||||
| Other intangible assets (1) | (22,365 | ) | (23,656 | ) | (28,825 | ) | ||||||||
| Tangible assets | (d) | $ | 40,554,444 | $ | 38,583,903 | $ | 36,651,991 | |||||||
| Total stockholders’ equity to total assets ratio | (a)/(c) | 10.78 | % | 10.86 | % | 10.34 | % | |||||||
| Tangible equity to tangible assets ratio | (b)/(d) | 9.71 | % | 9.73 | % | 9.12 | % | |||||||
| Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax effects of the amortization of core deposit intangibles and mortgage servicing assets and the after-tax gains on the sales of the commercial property, EWIS business and DCB branches, and the impact of the Tax Cuts and Jobs Act (where applicable). Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. | ||||||||||||||
| Three Months Ended | ||||||||||||||
| December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||
| Net Income | $ | 173,018 | $ | 171,302 | $ | 84,898 | ||||||||
| Add: Amortization of core deposit intangibles | 1,265 | 1,369 | 1,621 | |||||||||||
| Amortization of mortgage servicing assets | 448 | 461 | 437 | |||||||||||
| Less: Tax effect of adjustments (2) | (506 | ) | (542 | ) | (865 | ) | ||||||||
| Tangible net income | (e) | $ | 174,225 | $ | 172,590 | $ | 86,091 | |||||||
| Add: Impact of the Tax Cuts and Jobs Act | — | — | 41,689 | |||||||||||
| Adjusted tangible net income | (f) | $ | 174,225 | $ | 172,590 | $ | 127,780 | |||||||
| Average stockholders’ equity | $ | 4,335,110 | $ | 4,197,675 | $ | 3,856,802 | ||||||||
| Less: Average goodwill | (465,547 | ) | (465,547 | ) | (469,433 | ) | ||||||||
| Average other intangible assets (1) | (23,130 | ) | (24,530 | ) | (29,527 | ) | ||||||||
| Average tangible equity | (g) | $ | 3,846,433 | $ | 3,707,598 | $ | 3,357,842 | |||||||
| Return on average tangible equity (3) | (e)/(g) | 17.97 | % | 18.47 | % | 10.17 | % | |||||||
| Adjusted return on average tangible equity (3) | (f)/(g) | 17.97 | % | 18.47 | % | 15.10 | % | |||||||
| Year Ended | ||||||||||||||
| December 31, 2018 | December 31, 2017 | |||||||||||||
| Net Income | $ | 703,701 | $ | 505,624 | ||||||||||
| Add: Amortization of core deposit intangibles | 5,492 | 6,935 | ||||||||||||
| Amortization of mortgage servicing assets | 1,814 | 1,843 | ||||||||||||
| Less: Tax effect of adjustments (2) | (2,160 | ) | (3,691 | ) | ||||||||||
| Tangible net income | (h) | $ | 708,847 | $ | 510,711 | |||||||||
| Add: Impact of the Tax Cuts and Jobs Act | — | 41,689 | ||||||||||||
| Less: Gain on sale of the commercial property | — | (71,654 | ) | |||||||||||
| Gain on sale of business | (31,470 | ) | (3,807 | ) | ||||||||||
| Add: Tax effect of adjustments (2) | 9,303 | 31,729 | ||||||||||||
| Adjusted tangible net income | (i) | $ | 686,680 | $ | 508,668 | |||||||||
| Average stockholders’ equity | $ | 4,130,822 | $ | 3,687,213 | ||||||||||
| Less: Average goodwill | (466,346 | ) | (469,433 | ) | ||||||||||
| Average other intangible assets (1) | (25,337 | ) | (32,238 | ) | ||||||||||
| Average tangible equity | (j) | $ | 3,639,139 | $ | 3,185,542 | |||||||||
| Return on average tangible equity | (h)/(j) | 19.48 | % | 16.03 | % | |||||||||
| Adjusted return on average tangible equity | (i)/(j) | 18.87 | % | 15.97 | % | |||||||||
| (1) | Includes core deposit intangibles and mortgage servicing assets. | ||
| (2) | Statutory rate of 29.56% was applied for the three months ended September 30, 2018 and December 31, 2018, and twelve months ended December 31, 2018. Statutory rate of 42.05% was applied for the three and twelve months ended December 31, 2017. | ||
| (3) | Annualized. |
