East West Bancorp Reports Net Income for Second Quarter 2019 of $150 Million and Diluted Earnings Per Share of $1.03; Record Operating Revenue of $420 Million

PASADENA, Calif.--()--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 second quarter of 2019. For the second quarter of 2019, net income was $150.4 million or $1.03 per diluted share. Second quarter 2019 return on average assets was 1.45% and return on average equity was 12.9%.

“Total loans grew $871 million, or 11% annualized, to a record $33.7 billion as of June 30, 2019 from $32.9 billion as of March 31, 2019. Loan growth was well-diversified across our major lending portfolios,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $204 million, or 2% annualized, to a record $36.5 billion from $36.3 billion as of March 31, 2019. A highlight was robust growth in noninterest-bearing demand deposits.”

“East West achieved record total operating1 revenue of $420 million in the second quarter of 2019, an increase of 4% from $405 million in the first quarter of 2019, and an increase of 8% from $390 million in the second quarter of 2018. Quarter-over-quarter, net interest income grew by 1% and we also saw substantial noninterest income growth of 25%. Year-over-year, net interest income grew by 8% and noninterest income grew by 9%,” continued Ng.

“The growth in revenue combined with strong operating expense control drove improvement in our operating efficiency and an expansion of our pre-tax, pre-provision profitability. Our pre-tax, pre-provision profitability ratio2 was 2.51% in the second quarter of 2019, expanding by 8 basis points linked quarter. Additionally, nonperforming assets, net charge-offs and the provision for credit losses all decreased.”

“Despite macro-economic and geopolitical volatility, East West continues to execute, delivering attractive growth and profitability, demonstrating the strength of our differentiated strategy and the value proposition that we provide for our customers. We are pleased with the solid results of the second quarter and look forward to continued strong performance in the second half of 2019,” concluded Ng.

____________________________________________

1

Operating revenue consists of net interest income before provision for credit losses and noninterest income, excluding non-operating items.

2

 See reconciliation of GAAP to non-GAAP financial measures in Table 14.

HIGHLIGHTS OF RESULTS

  • Second Quarter Earnings – Second quarter 2019 net income was $150.4 million and diluted earnings per share (“EPS”) were $1.03, compared to first quarter 2019 net income of $164.0 million and diluted EPS of $1.12. During the second quarter, the Company recorded $30.1 million of additional income tax expense to reverse previously claimed tax credits, equivalent to $0.21 per share. Adjusted3 second quarter net income was $180.5 million and adjusted3 diluted EPS were $1.24, both up by 7% from adjusted3 first quarter net income of $168.9 million and adjusted3 first quarter diluted EPS of $1.16.
  • Net Interest Income and Net Interest Margin – Second quarter 2019 net interest income (“NII”) was $367.3 million, a quarterly increase of $4.9 million or 1%, and a year-over-year increase of $25.6 million or 8%. Second quarter 2019 net interest margin (“NIM”) was 3.73%, compared to 3.79% in the previous quarter. Net interest income growth in the second quarter primarily reflects loan growth, partially offset by the change in the NIM.
  • Record Loans – Total loans of $33.7 billion as of June 30, 2019 were up $871.0 million, or 11% linked quarter annualized, from $32.9 billion as of March 31, 2019. Growth was well-diversified across commercial and industrial loans, commercial real estate and single family residential mortgage portfolios. Total loans grew by $3.5 billion, or 12% year-over-year.
  • Record Deposits – Total deposits of $36.5 billion as of June 30, 2019 were up $203.6 million, or 2% linked quarter annualized, from $36.3 billion as of March 31, 2019. Growth in time, noninterest-bearing demand and savings deposits was partially offset by declines in interest-bearing checking and money market balances. Total deposits grew by $3.7 billion, or 11% year-over-year.
  • Asset Quality Metrics – The allowance for loan losses was $330.6 million, or 0.98% of loans held-for-investment (“HFI”), as of June 30, 2019, compared to 0.97% of loans HFI as of March 31, 2019, and 1.00% of loans HFI as of June 30, 2018. For the second quarter of 2019, net charge-offs were $7.6 million, or annualized 0.09% of average loans HFI, a decrease from annualized net charge-offs of 0.18% of average loans HFI for the first quarter of 2019 and 0.14% for the year-ago quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $119.3 million, or 0.28% of total assets, as of June 30, 2019, compared to 0.33% of total assets as of March 31, 2019, and 0.27% of total assets as of June 30, 2018.
  • Capital Levels – Capital levels for East West continue to be strong. As of June 30, 2019, stockholders’ equity was $4.7 billion, or $32.53 per share. Tangible equity4 per common share was $29.20 as of June 30, 2019, an increase of 3% linked quarter and 17% year-over-year. As of June 30, 2019, the tangible equity to tangible assets ratio4 was 10.0%, the common equity tier 1 (“CET1”) capital ratio was 12.5%, and the total risk-based capital ratio was 13.9%.
____________________________________________

3

See reconciliation of GAAP to non-GAAP financial measures in Table 13.

4

See reconciliation of GAAP to non-GAAP financial measures in Table 16.

QUARTERLY RESULTS SUMMARY

 

 

Quarter Ended

($ in millions, except per share data and ratios)

 

June 30,
2019

 

March 31,
2019

 

June 30,
2018

Net income

 

$

150.4

 

 

$

164.0

 

 

$

172.3

 

 

Adjusted net income (1)

 

$

180.5

 

 

$

168.9

 

 

$

172.3

 

 

Earnings per share (diluted)

 

$

1.03

 

 

$

1.12

 

 

$

1.18

 

 

Adjusted earnings per share (diluted) (1)

 

$

1.24

 

 

$

1.16

 

 

$

1.18

 

 

Book value per common share

 

$

32.53

 

 

$

31.56

 

 

$

28.39

 

 

Tangible equity (1) per common share

 

$

29.20

 

 

$

28.21

 

 

$

25.01

 

 

Tangible equity to tangible assets ratio (1)

 

10.02

%

 

9.87

%

 

9.65

%

 

Return on average assets (2)

 

1.45

%

 

1.63

%

1.84

%

 

Return on average equity (2)

 

12.9

%

 

14.7

%

17.0

%

 

Return on average tangible equity (1)(2)

 

14.5

%

 

16.5

%

19.5

%

 

Adjusted return on average assets (1)(2)

 

1.74

%

 

1.68

%

1.84

%

 

Adjusted return on average equity (1)(2)

 

15.5

%

 

15.1

%

17.0

%

 

Adjusted return on average tangible equity (1)(2)

 

17.4

%

 

17.0

%

 

19.5

%

 

Adjusted pre-tax, pre-provision profitability ratio (1)(2)

 

2.51

%

 

2.43

%

 

2.50

%

 

Net interest income

 

$

367.3

 

 

$

362.5

 

 

$

341.7

 

 

Adjusted net interest income (1)

 

$

365.6

 

 

$

360.3

 

 

$

335.4

 

 

Net interest margin (2)

 

3.73

%

 

3.79

%

 

3.83

%

 

Adjusted net interest margin (1)(2)

 

3.71

%

 

3.77

%

 

3.76

%

 

Average loan yield (2)

 

5.28

%

 

5.30

%

 

4.95

%

 

Adjusted average loan yield (1)(2)

 

5.26

%

 

5.27

%

 

4.86

%

 

Cost of deposits (2)

 

1.11

%

 

1.07

%

 

0.64

%

 

Efficiency ratio

 

42.3

%

 

46.2

%

 

45.5

%

 

Adjusted efficiency ratio (1)

 

38.0

%

 

39.8

%

 

39.9

%

 

(1)

See reconciliation of GAAP to non-GAAP financial measures in Tables 13, 14, 15 and 16.

(2)

Annualized.

MANAGEMENT OUTLOOK FOR 2019

The Company has updated its outlook for the expected full year 2019 results, compared to our full year 2018 results. The components are as follows:

  • End of Period Loans: increase by approximately 10%.
  • Net Interest Income (excluding ASC 310-30 discount accretion income): increase at a percentage rate in the high single-digits.
  • Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): between 3.60% and 3.70%.
  • Noninterest Expense (excluding amortization of tax credit investments & core deposit intangibles): 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 20%, including the impact of the $30.1 million reversal of previously claimed tax credits in the second quarter of 2019, or approximately 15% excluding the tax credit reversal.
  • Interest Rates: Two 25-basis point cuts to the fed funds rate, in July and October of 2019.

OPERATING RESULTS SUMMARY

Second Quarter 2019 Compared to First Quarter 2019

Net Interest Income and Net Interest Margin
Net interest income totaled $367.3 million, a 1% increase from $362.5 million. Net interest margin of 3.73% contracted by six basis points from 3.79%.

  • Excluding the impact of ASC 310-30 discount accretion, adjusted5 NII of $365.6 million also increased by 1%, and adjusted5 NIM of 3.71% also decreased by six basis points. ASC 310-30 discount accretion income was $1.7 million, a decrease from $2.2 million last quarter.
  • Average loans of $33.0 billion grew by $566.6 million, or 7% linked quarter annualized. Growth was well-diversified across all our major commercial and consumer loan portfolios.
  • Average deposits of $35.3 billion grew by $403.0 million, or 5% linked quarter annualized. Growth was primarily in time and noninterest-bearing demand deposits, partially offset by a decline in money market balances.
  • The yield on loans contracted by two basis points to 5.28% from 5.30%. Excluding the impact of ASC 310-30 discount accretion, the adjusted5 yield on loans contracted by one basis point to 5.26% from 5.27%, reflecting an unchanged fed funds rate and the decline in Libor rates.
  • The cost of deposits increased by four basis points to 1.11% from 1.07% linked quarter. This is a deceleration from the linked quarter cost of deposits increases in the first quarter of 2019 and in the second quarter of 2018, which were 17 basis points and 15 basis points, respectively.

Noninterest Income
Noninterest income totaled $52.8 million, a 25% increase from $42.1 million.

  • The linked quarter increase in noninterest income was primarily attributable to interest rate contracts and other derivative income, which increased by $7.2 million, reflecting strong customer demand for interest rate swaps in response to the inverted yield curve.
  • Additionally, foreign exchange income increased by $2.3 million, reflecting revaluations of foreign currency-denominated balance sheet items, and lending fees increased by $1.4 million.

Noninterest Expense
Noninterest expense totaled $177.7 million, a 5% decrease from $186.9 million. Second quarter noninterest expense consisted of $159.8 million of adjusted6 noninterest expense, $16.7 million in amortization of tax credit and other investments, and $1.2 million in amortization of core deposit intangibles.

  • Adjusted noninterest expense of $159.8 million decreased by $1.1 million, or 1%, from $160.8 million. The linked quarter change primarily reflected a decrease in compensation and employee benefits expense.
  • The adjusted6 efficiency ratio was 38.0% in the second quarter, compared to 39.8% in the previous quarter.
___________________________________________

5

 

See reconciliation of GAAP to non-GAAP financial measures in Table 15.

6

 

See reconciliation of GAAP to non-GAAP financial measures in Table 14.

TAX RELATED ITEMS

Second quarter 2019 income tax expense was $72.8 million and the effective tax rate was 33%. Included in the second quarter 2019 income tax expense was a $30.1 million reversal of certain previously claimed tax credits related to DC Solar. Adjusted, tax expense was $42.7 million7 and the effective tax rate was 19%7 in the second quarter of 2019. This compares to a tax expense of $31.1 million and an effective tax rate of 16% in the first quarter of 2019.

  • For the full year 2019, the Company projects that its effective tax rate will be approximately 20%, including the impact of the $30.1 million tax credit reversal in the second quarter of 2019, or approximately 15% excluding the tax credit reversal.

CREDIT QUALITY

The allowance for loan losses totaled $330.6 million, or 0.98% of loans HFI, as of June 30, 2019, compared to $317.9 million, or 0.97% of loans HFI, as of March 31, 2019, and $301.6 million, or 1.00% of loans HFI, as of June 30, 2018.

  • The provision for credit losses recorded for the second quarter of 2019 was $19.2 million, compared to $22.6 million for the first quarter of 2019, and $15.5 million for the year-ago quarter.
  • Net charge-offs for the current quarter were $7.6 million, or annualized 0.09% of average loans HFI. This is a decrease from net charge-offs of $14.4 million, or annualized 0.18% of average loans HFI, for the first quarter of 2019, and net charge-offs of $10.6 million, or annualized 0.14% of average loans HFI, for the second quarter of 2018.
  • Non-PCI nonperforming assets were $119.3 million, or 0.28% of total assets, as of June 30, 2019, compared to $138.0 million, or 0.33% of total assets, as of March 31, 2019, and $103.5 million, or 0.27% of total assets, as of June 30, 2018.

CAPITAL STRENGTH

Capital levels for East West continue to be strong. The following table presents the regulatory capital ratios for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018.

EWBC Regulatory Capital Metrics

 

Basel III

($ in millions)

 

June 30,
2019 (a)

 

March 31,
2019

 

June 30,
2018

 

Minimum
Capital
Ratio

 

Well
Capitalized
Ratio

 

Minimum
Capital Ratio +
Conservation
Buffer (b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CET1 capital ratio

 

12.5

%

 

12.4

%

 

12.2

%

 

4.5

%

 

6.5

%

 

7.0

%

Tier 1 risk-based capital ratio

 

12.5

%

 

12.4

%

 

12.2

%

 

6.0

%

 

8.0

%

 

8.5

%

Total risk-based capital ratio

 

13.9

%

 

13.9

%

 

13.7

%

 

8.0

%

 

10.0

%

 

10.5

%

Tier 1 leverage capital ratio

 

10.4

%

 

10.2

%

 

10.0

%

 

4.0

%

 

5.0

%

 

4.0

%

Risk-Weighted Assets (“RWA”) (c)

 

$

34,161

 

 

$

33,162

 

 

$

30,415

 

 

N/A

 

 

N/A

 

 

N/A

 
N/A Not applicable.

(a)

The Company’s June 30, 2019 regulatory capital ratios and RWA are preliminary.

(b)

An additional 2.5% capital conservation buffer above the minimum capital ratios is required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.

(c)

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.

____________________________________________

7

See reconciliation of GAAP to non-GAAP financial measures in Table 12.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared third quarter 2019 dividends for the Company’s common stock. The common stock cash dividend of $0.275 per share is payable on August 15, 2019 to shareholders of record on August 1, 2019.

Conference Call

East West will host a conference call to discuss second quarter 2019 earnings with the public on Thursday, July 18, 2019 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses second quarter 2019 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 July 18, 2019 at 11:30 a.m. Pacific Time through August 18, 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: 10132709.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $42.9 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, the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China; 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 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; government intervention in the financial system, including 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 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 of 2017; 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 in 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 increases in funding costs, a reduction in 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; 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, 2018, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

% or Basis Point Change

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

Qtr-o-Qtr

 

Yr-o-Yr

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

 

 

425,949

 

 

$

 

 

462,254

 

 

$

 

 

415,653

 

 

(7.9

)%

 

2.5

%

 

 

Interest-bearing cash with banks

 

 

3,195,665

 

 

 

3,323,071

 

 

 

1,881,818

 

 

(3.8

)

 

69.8

 

 

 

Cash and cash equivalents

 

 

3,621,614

 

 

 

3,785,325

 

 

 

2,297,471

 

 

(4.3

)

 

57.6

 

 

 

Interest-bearing deposits with banks

 

 

150,273

 

 

 

134,000

 

 

 

360,900

 

 

12.1

 

 

(58.4

)

 

 

Securities purchased under resale agreements (“resale agreements”) (1)

 

 

1,010,000

 

 

 

1,035,000

 

 

 

975,000

 

 

(2.4

)

 

3.6

 

 

 

Available-for-sale (“AFS”) investment securities

 

 

2,592,913

 

 

 

2,640,158

 

 

 

2,707,444

 

 

(1.8

)

 

(4.2

)

 

 

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock

 

 

78,093

 

 

 

74,736

 

 

 

73,524

 

 

4.5

 

 

6.2

 

 

 

Loans held-for-sale (“HFS”)

 

 

3,879

 

 

 

 

 

14,658

 

 

100.0

 

 

(73.5

)

 

 

Loans held-for-investment (net of allowance for loan losses of $330,625, $317,894 and $301,550)

 

 

33,399,752

 

 

 

32,545,392

 

 

 

29,928,829

 

 

2.6

 

 

11.6

 

 

 

Investments in qualified affordable housing partnerships, net

 

 

198,466

 

 

 

197,470

 

 

 

152,556

 

 

0.5

 

 

30.1

 

 

 

Investments in tax credit and other investments, net

 

 

210,387

 

 

 

217,445

 

 

 

242,595

 

 

(3.2

)

 

(13.3

)

 

 

Goodwill

 

 

465,697

 

 

 

465,697

 

 

 

465,547

 

 

 

 

0.0

 

 

 

Operating lease right-of-use assets (2)

 

 

109,032

 

 

 

104,289

 

 

 

 

4.5

 

 

100.0

 

 

 

Other assets

 

 

1,052,252

 

 

 

891,921

 

 

 

824,672

 

 

18.0

 

 

27.6

 

 

 

Total assets

 

$

 

 

42,892,358

 

 

$

 

 

42,091,433

 

 

$

 

 

38,043,196

 

 

1.9

%

 

12.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

 

 

36,477,542

 

 

$

 

 

36,273,972

 

 

$

 

 

32,776,132

 

 

0.6

%

 

11.3

%

 

 

Short-term borrowings

 

 

19,972

 

 

 

39,550

 

 

 

58,523

 

 

(49.5

)

 

(65.9

)

 

 

FHLB advances

 

 

745,074

 

 

 

344,657

 

 

 

325,020

 

 

116.2

 

 

129.2

 

 

 

Securities sold under repurchase agreements (“repurchase agreements”) (1)

 

 

50,000

 

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

Long-term debt and finance lease liabilities

 

 

152,506

 

 

 

152,433

 

 

 

161,704

 

 

0.0

 

 

(5.7

)

 

 

Operating lease liabilities (2)

 

 

117,448

 

 

 

112,843

 

 

 

 

4.1

 

 

100.0

 

 

 

Accrued expenses and other liabilities

 

 

595,223

 

 

 

526,048

 

 

 

557,533

 

 

13.1

 

 

6.8

 

 

 

Total liabilities

 

 

38,157,765

 

 

 

37,499,503

 

 

 

33,928,912

 

 

1.8

 

 

12.5

 

 

 

Stockholders’ equity (2)

 

 

4,734,593

 

 

 

4,591,930

 

 

 

4,114,284

 

 

3.1

 

 

15.1

 

 

 

Total liabilities and stockholders’ equity

 

$

 

 

42,892,358

 

 

$

 

 

42,091,433

 

 

$

 

 

38,043,196

 

 

1.9

%

 

12.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

 

$

 

 

32.53

 

 

$

 

 

31.56

 

 

$

 

 

28.39

 

 

3.1

%

 

14.6

%

 

 

Tangible equity (3) per common share

 

$

 

 

29.20

 

 

$

 

 

28.21

 

 

$

 

 

25.01

 

 

3.5

 

 

16.8

 

 

 

Number of common shares at period-end

 

 

145,547

 

 

 

145,501

 

 

 

144,905

 

 

0.0

 

 

0.4

 

 

 

Tangible equity to tangible assets ratio (3)

 

 

10.02

%

 

 

9.87

%

 

 

9.65

%

 

15

 

bps

37

 

bps

 

 

 

 

 

 

 

(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 June 30, 2019, March 31, 2019 and June 30, 2018, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.

(2)

The Company’s adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of $104.3 million and $112.8 million increase in right-of-use assets and associated lease liabilities, respectively, arising from operating leases in which the Company is the lessee. We adopted this guidance using the alternative transition method, which allows the adoption of the accounting standard prospectively without adjusting comparative prior period financial information and also recognized a cumulative effect adjustment of approximately $14.7 million that increased retained earnings related to deferred gains on our prior sale-leaseback transactions.

(3)

See reconciliation of GAAP to non-GAAP financial measures in Table 16.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

 

 

 

 

 

 

 

 

 

 

June 30, 2019
% Change

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

Qtr-o-Qtr

 

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial (“C&I”)

 

$

 

 

12,402,967

 

 

$

 

 

12,040,806

 

 

$

 

 

11,059,019

 

 

3.0

%

 

12.2

%

 

Commercial real estate (“CRE”)

 

 

9,868,433

 

 

 

9,636,338

 

 

 

9,054,567

 

 

2.4

 

 

9.0

 

 

Multifamily residential

 

 

2,372,345

 

 

 

2,270,590

 

 

 

2,032,522

 

 

4.5

 

 

16.7

 

 

Construction and land

 

 

674,798

 

 

 

647,380

 

 

 

623,837

 

 

4.2

 

 

8.2

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

 

6,494,882

 

 

 

6,309,331

 

 

 

5,316,895

 

 

2.9

 

 

22.2

 

 

Home equity lines of credit (“HELOCs”)

 

 

1,575,150

 

 

 

1,626,222

 

 

 

1,769,511

 

 

(3.1

)

 

(11.0

)

 

Other consumer

 

 

341,802

 

 

 

332,619

 

 

 

374,028

 

 

2.8

 

 

(8.6

)

 

Total loans held-for-investment (1)(2)

 

 

33,730,377

 

 

 

32,863,286

 

 

 

30,230,379

 

 

2.6

 

 

11.6

 

Loans HFS

 

 

3,879

 

 

 

 

 

14,658

 

 

100.0

 

 

(73.5

)

 

Total loans (1)(2)

 

 

33,734,256

 

 

 

32,863,286

 

 

 

30,245,037

 

 

2.7

 

 

11.5

 

Allowance for loan losses

 

 

(330,625

)

 

 

(317,894

)

 

 

(301,550

)

 

4.0

 

 

9.6

 

 

Net loans (1)(2)

 

$

 

 

33,403,631

 

 

$

 

 

32,545,392

 

 

$

 

 

29,943,487

 

 

2.6

%

 

11.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

 

 

10,599,088

 

 

$

 

 

10,011,533

 

 

$

 

 

10,739,333

 

 

5.9

%

 

(1.3

)%

 

Interest-bearing checking

 

 

5,083,675

 

 

 

6,123,681

 

 

 

4,323,698

 

 

(17.0

)

 

17.6

 

 

Money market

 

 

8,009,325

 

 

 

8,243,003

 

 

 

7,634,850

 

 

(2.8

)

 

4.9

 

 

Savings

 

 

2,188,738

 

 

 

2,049,086

 

 

 

2,218,228

 

 

6.8

 

 

(1.3

)

 

Total core deposits

 

 

25,880,826

 

 

 

26,427,303

 

 

 

24,916,109

 

 

(2.1

)

 

3.9

 

 

Time deposits

 

 

10,596,716

 

 

 

9,846,669

 

 

 

7,860,023

 

 

7.6

 

 

34.8

 

 

Total deposits

 

$

 

 

36,477,542

 

 

$

 

 

36,273,972

 

 

$

 

 

32,776,132

 

 

0.6

%

 

11.3

%

 

(1)

Includes $(43.8) million, $(46.0) million and $(40.4) million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.

(2)

 

Includes ASC 310-30 discount of $18.9 million, $20.4 million and $26.8 million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

($ and shares in thousands, except per share data)

(unaudited)

Table 3

 

 

 

 

 

Three Months Ended

 

June 30, 2019
% Change

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

Qtr-o-Qtr

 

Yr-o-Yr

Interest and dividend income

 

$

 

474,844

 

 

$

 

463,311

 

 

$

 

400,311

 

 

2.5

%

 

18.6

%

Interest expense

 

 

107,518

 

 

 

100,850

 

 

 

58,632

 

 

6.6

 

 

83.4

 

Net interest income before provision for credit losses

 

 

367,326

 

 

 

362,461

 

 

 

341,679

 

 

1.3

 

 

7.5

 

Provision for credit losses

 

 

19,245

 

 

 

22,579

 

 

 

15,536

 

 

(14.8

)

 

23.9

 

Net interest income after provision for credit losses

 

 

348,081

 

 

 

339,882

 

 

 

326,143

 

 

2.4

 

 

6.7

 

Noninterest income

 

 

52,759

 

 

 

42,131

 

 

 

48,268

 

 

25.2

 

 

9.3

 

Noninterest expense

 

 

177,663

 

 

 

186,922

 

 

 

177,419

 

 

(5.0

)

 

0.1

 

Income before income taxes

 

 

223,177

 

 

 

195,091

 

 

 

196,992

 

 

14.4

 

 

13.3

 

Income tax expense

 

 

72,797

 

 

 

31,067

 

 

 

24,643

 

 

134.3

 

 

195.4

 

Net income

 

$

 

150,380

 

 

$

 

164,024

 

 

$

 

172,349

 

 

(8.3

)%

 

(12.7

)%

Earnings per share (“EPS”)

 

 

 

 

 

 

 

 

 

 

- Basic

 

$

 

1.03

 

 

$

 

1.13

 

 

$

 

1.19

 

 

(8.5

)%

 

(13.1

)%

- Diluted

 

$

 

1.03

 

 

$

 

1.12

 

 

$

 

1.18

 

 

(8.4

)

 

(12.7

)

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

145,546

 

 

 

145,256

 

 

 

144,899

 

 

0.2

%

 

0.4

%

- Diluted

 

 

146,052

 

 

 

145,921

 

 

 

146,091

 

 

0.1

 

 

0.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 30, 2019
% Change

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

Qtr-o-Qtr

 

Yr-o-Yr

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

Lending fees

 

$

 

16,242

 

 

$

 

14,796

 

 

$

 

14,692

 

 

9.8

%

 

10.5

%

 

Deposit account fees

 

 

9,788

 

 

 

9,641

 

 

 

10,140

 

 

1.5

 

 

(3.5

)

 

Foreign exchange income

 

 

7,286

 

 

 

5,015

 

 

 

6,822

 

 

45.3

 

 

6.8

 

 

Wealth management fees

 

 

3,800

 

 

 

3,812

 

 

 

4,501

 

 

(0.3

)

 

(15.6

)

 

Interest rate contracts and other derivative income

 

 

10,398

 

 

 

3,216

 

 

 

6,570

 

 

223.3

 

 

58.3

 

 

Net gains on sales of loans

 

 

15

 

 

 

915

 

 

 

2,354

 

 

(98.4

)

 

(99.4

)

 

Net gains on sales of AFS investment securities

 

 

1,447

 

 

 

1,561

 

 

 

210

 

 

(7.3

)

 

589.0

 

 

Other income

 

 

3,783

 

 

 

3,175

 

 

 

2,979

 

 

19.1

 

 

27.0

 

Total noninterest income

 

$

 

52,759

 

 

$

 

42,131

 

 

$

 

48,268

 

 

25.2

%

 

9.3

%

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

$

 

100,531

 

 

$

 

102,299

 

 

$

 

93,865

 

 

(1.7

)%

 

7.1

%

 

Occupancy and equipment expense

 

 

17,362

 

 

 

17,318

 

 

 

16,707

 

 

0.3

 

 

3.9

 

 

Deposit insurance premiums and regulatory assessments

 

 

2,919

 

 

 

3,088

 

 

 

5,832

 

 

(5.5

)

 

(49.9

)

 

Legal expense

 

 

2,355

 

 

 

2,225

 

 

 

2,837

 

 

5.8

 

 

(17.0

)

 

Data processing

 

 

3,460

 

 

 

3,157

 

 

 

3,327

 

 

9.6

 

 

4.0

 

 

Consulting expense

 

 

2,069

 

 

 

2,059

 

 

 

5,120

 

 

0.5

 

 

(59.6

)

 

Deposit related expense

 

 

3,338

 

 

 

3,504

 

 

 

2,922

 

 

(4.7

)

 

14.2

 

 

Computer software expense

 

 

6,211

 

 

 

6,078

 

 

 

5,549

 

 

2.2

 

 

11.9

 

 

Other operating expense

 

 

22,679

 

 

 

22,289

 

 

 

20,779

 

 

1.7

 

 

9.1

 

 

Amortization of tax credit and other investments

 

 

16,739

 

 

 

24,905

 

 

 

20,481

 

 

(32.8

)

 

(18.3

)

Total noninterest expense

 

$

 

177,663

 

 

$

 

186,922

 

 

$

 

177,419

 

 

(5.0

)%

 

0.1

%

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

($ and shares in thousands, except per share data)

(unaudited)

Table 4

 

 

 

 

Six Months Ended

 

June 30, 2019
% Change

 

 

 

June 30, 2019

 

June 30, 2018

 

Yr-o-Yr

Interest and dividend income

 

$

 

938,155

 

 

$

 

772,184

 

 

21.5

%

Interest expense

 

 

208,368

 

 

 

103,812

 

 

100.7

 

Net interest income before provision for credit losses

 

 

729,787

 

 

 

668,372

 

 

9.2

 

Provision for credit losses

 

 

41,824

 

 

 

35,754

 

 

17.0

 

Net interest income after provision for credit losses

 

 

687,963

 

 

 

632,618

 

 

8.7

 

Noninterest income

 

 

94,890

 

 

 

122,712

 

 

(22.7

)

Noninterest expense

 

 

364,585

 

 

 

346,554

 

 

5.2

 

Income before income taxes

 

 

418,268

 

 

 

408,776

 

 

2.3

 

Income tax expense

 

 

103,864

 

 

 

49,395

 

 

110.3

 

Net income

 

$

 

314,404

 

 

$

 

359,381

 

 

(12.5

)%

EPS

 

 

 

 

 

 

- Basic

 

$

 

2.16

 

 

$

 

2.48

 

 

(12.9

)%

- Diluted

 

$

 

2.15

 

 

$

 

2.46

 

 

(12.5

)

Weighted average number of shares outstanding

 

 

 

 

 

 

- Basic

 

 

145,402

 

 

 

144,782

 

 

0.4

%

- Diluted

 

 

146,016

 

 

 

146,046

 

 

0.0

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

June 30, 2019
% Change

 

 

 

June 30, 2019

 

June 30, 2018

 

Yr-o-Yr

Noninterest income:

 

 

 

 

 

 

 

Lending fees

 

$

 

31,038

 

 

$

 

28,705

 

 

8.1

%

 

Deposit account fees

 

 

19,429

 

 

 

20,570

 

 

(5.5

)

 

Foreign exchange income

 

 

12,301

 

 

 

7,992

 

 

53.9

 

 

Wealth management fees

 

 

7,612

 

 

 

7,454

 

 

2.1

 

 

Interest rate contracts and other derivative income

 

 

13,614

 

 

 

13,260

 

 

2.7

 

 

Net gains on sales of loans

 

 

930

 

 

 

3,936

 

 

(76.4

)

 

Net gains on sales of AFS investment securities

 

 

3,008

 

 

 

2,339

 

 

28.6

 

 

Net gain on sale of business

 

 

 

 

31,470

 

 

(100.0

)

 

Other income

 

 

6,958

 

 

 

6,986

 

 

(0.4

)

Total noninterest income

 

$

 

94,890

 

 

$

 

122,712

 

 

(22.7

)%

Noninterest expense:

 

 

 

 

 

 

 

Compensation and employee benefits

 

$

 

202,830

 

 

$

 

189,099

 

 

7.3

%

 

Occupancy and equipment expense

 

 

34,680

 

 

 

33,587

 

 

3.3

 

 

Deposit insurance premiums and regulatory assessments

 

 

6,007

 

 

 

12,105

 

 

(50.4

)

 

Legal expense

 

 

4,580

 

 

 

5,092

 

 

(10.1

)

 

Data processing

 

 

6,617

 

 

 

6,728

 

 

(1.6

)

 

Consulting expense

 

 

4,128

 

 

 

7,472

 

 

(44.8

)

 

Deposit related expense

 

 

6,842

 

 

 

5,601

 

 

22.2

 

 

Computer software expense

 

 

12,289

 

 

 

10,603

 

 

15.9

 

 

Other operating expense

 

 

44,968

 

 

 

38,386

 

 

17.1

 

 

Amortization of tax credit and other investments

 

 

41,644

 

 

 

37,881

 

 

9.9

 

Total noninterest expense

 

$

 

364,585

 

 

$

 

346,554

 

 

5.2

%

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

June 30, 2019
% Change

 

Six Months Ended

 

June 30, 2019
% Change

 

 

 

June 30,

2019

 

March 31, 2019

 

June 30,

2018

 

Qtr-o-Qtr

 

Yr-o-Yr

 

June 30,

2019

 

June 30,

2018

 

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C&I

 

$

 

12,003,277

 

 

$

 

11,845,860

 

 

$

 

10,747,074

 

 

1.3

%

 

11.7

%

 

$

 

11,925,003

 

 

$

 

10,729,924

 

 

11.1

%

 

CRE

 

 

9,700,208

 

 

 

9,568,571

 

 

 

9,038,228

 

 

1.4

 

 

7.3

 

 

 

9,634,753

 

 

 

9,022,498

 

 

6.8

 

 

Multifamily residential

 

 

2,311,629

 

 

 

2,307,374

 

 

 

1,970,538

 

 

0.2

 

 

17.3

 

 

 

2,309,513

 

 

 

1,957,599

 

 

18.0

 

 

Construction and land

 

 

675,967

 

 

 

584,445

 

 

 

667,997

 

 

15.7

 

 

1.2

 

 

 

630,459

 

 

 

662,811

 

 

(4.9

)

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

 

6,373,715

 

 

 

6,151,550

 

 

 

5,103,008

 

 

3.6

 

 

24.9

 

 

 

6,263,246

 

 

 

4,938,134

 

 

26.8

 

 

HELOCs

 

 

1,607,311

 

 

 

1,652,211

 

 

 

1,787,036

 

 

(2.7

)

 

(10.1

)

 

 

1,629,637

 

 

 

1,783,160

 

 

(8.6

)

 

Other consumer

 

 

309,267

 

 

 

304,774

 

 

 

332,885

 

 

1.5

 

 

(7.1

)

 

 

307,033

 

 

 

336,411

 

 

(8.7

)

 

Total loans (1)(2)

 

$

 

32,981,374

 

 

$

 

32,414,785

 

 

$

 

29,646,766

 

 

1.7

%

 

11.2

%

 

$

 

32,699,644

 

 

$

 

29,430,537

 

 

11.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AFS investment securities

 

$

 

2,551,383

 

 

$

 

2,642,299

 

 

$

 

2,735,023

 

 

(3.4

)%

 

(6.7

)%

 

$

 

2,596,590

 

 

$

 

2,794,350

 

 

(7.1

)%

Interest-earning assets

 

$

 

39,461,101

 

 

$

 

38,745,004

 

 

$

 

35,767,808

 

 

1.8

%

 

10.3

%

 

$

 

39,105,030

 

 

$

 

35,641,438

 

 

9.7

%

Total assets

 

$

 

41,545,441

 

 

$

 

40,738,404

 

 

$

 

37,568,895

 

 

2.0

%

 

10.6

%

 

$

 

41,144,152

 

 

$

 

37,475,515

 

 

9.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

 

10,237,868

 

 

$

 

10,071,370

 

 

$

 

10,984,950

 

 

1.7

%

 

(6.8

)%

 

$

 

10,155,079

 

 

$

 

11,136,389

 

 

(8.8

)%

 

Interest-bearing checking

 

 

5,221,110

 

 

 

5,270,855

 

 

 

4,387,479

 

 

(0.9

)

 

19.0

 

 

 

5,245,845

 

 

 

4,473,111

 

 

17.3

 

 

Money market

 

 

7,856,055

 

 

 

8,080,848

 

 

 

7,880,601

 

 

(2.8

)

 

(0.3

)

 

 

7,967,831

 

 

 

8,075,796

 

 

(1.3

)

 

Savings

 

 

2,106,626

 

 

 

2,091,406

 

 

 

2,214,793

 

 

0.7

 

 

(4.9

)

 

 

2,099,058

 

 

 

2,332,966

 

 

(10.0

)

 

Total core deposits

 

 

25,421,659

 

 

 

25,514,479

 

 

 

25,467,823

 

 

(0.4

)

 

(0.2

)

 

 

25,467,813

 

 

 

26,018,262

 

 

(2.1

)

 

Time deposits

 

 

9,904,726

 

 

 

9,408,897

 

 

 

6,907,174

 

 

5.3

 

 

43.4

 

 

 

9,658,181

 

 

 

6,315,194

 

 

52.9

 

 

Total deposits

 

$

 

35,326,385

 

 

$

 

34,923,376

 

 

$

 

32,374,997

 

 

1.2

%

 

9.1

%

 

$

 

35,125,994

 

 

$

 

32,333,456

 

 

8.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

$

 

25,860,541

 

 

$

 

25,452,835

 

 

$

 

21,938,134

 

 

1.6

%

 

17.9

%

 

$

 

25,657,814

 

 

$

 

21,746,927

 

 

18.0

%

Stockholders’ equity

 

$

 

4,684,348

 

 

$

 

4,537,301

 

 

$

 

4,062,311

 

 

3.2

%

 

15.3

%

 

$

 

4,611,231

 

 

$

 

3,993,004

 

 

15.5

%

 

(1)

Includes ASC 310-30 discount of $19.9 million, $21.6 million and $30.0 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, and $20.8 million and $32.0 million for the six months ended June 30, 2019 and 2018, respectively.

(2)

Includes loans HFS.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 6

 

 

 

Three Months Ended

 

 

June 30, 2019

 

March 31, 2019

 

 

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

 

$

 

2,852,060

 

 

$

 

16,861

 

 

2.37

%

 

$

 

2,578,686

 

 

$

 

15,470

 

 

2.43

%

Resale agreements (2)

 

 

999,835

 

 

 

7,343

 

 

2.95

%

 

 

1,035,000

 

 

 

7,846

 

 

3.07

%

AFS investment securities

 

 

2,551,383

 

 

 

15,685

 

 

2.47

%

 

 

2,642,299

 

 

 

15,748

 

 

2.42

%

Loans (3)

 

 

32,981,374

 

 

 

434,450

 

 

5.28

%

 

 

32,414,785

 

 

 

423,534

 

 

5.30

%

FHLB and FRB stock

 

 

76,449

 

 

 

505

 

 

2.65

%

 

 

74,234

 

 

 

713

 

 

3.90

%

Total interest-earning assets

 

 

39,461,101

 

 

 

474,844

 

 

4.83

%

 

 

38,745,004

 

 

 

463,311

 

 

4.85

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

439,449

 

 

 

 

 

 

 

468,159

 

 

 

 

 

Allowance for loan losses

 

 

(321,335

)

 

 

 

 

 

 

(314,446

)

 

 

 

 

Other assets

 

 

1,966,226

 

 

 

 

 

 

 

1,839,687

 

 

 

 

 

Total assets

 

$

 

41,545,441

 

 

 

 

 

 

$

 

40,738,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

 

5,221,110

 

 

$

 

15,836

 

 

1.22

%

 

$

 

5,270,855

 

 

$

 

14,255

 

 

1.10

%

Money market deposits

 

 

7,856,055

 

 

 

28,681

 

 

1.46

%

 

 

8,080,848

 

 

 

30,234

 

 

1.52

%

Savings deposits

 

 

2,106,626

 

 

 

2,477

 

 

0.47

%

 

 

2,091,406

 

 

 

2,227

 

 

0.43

%

Time deposits

 

 

9,904,726

 

 

 

50,970

 

 

2.06

%

 

 

9,408,897

 

 

 

45,289

 

 

1.95

%

Federal funds purchased and other short-term borrowings

 

 

35,575

 

 

 

361

 

 

4.07

%

 

 

60,442

 

 

 

616

 

 

4.13

%

FHLB advances

 

 

533,841

 

 

 

4,011

 

 

3.01

%

 

 

338,027

 

 

 

2,979

 

 

3.57

%

Repurchase agreements (2)

 

 

50,000

 

 

 

3,469

 

 

27.83

%

 

 

50,000

 

 

 

3,492

 

 

28.32

%

Long-term debt and finance lease liabilities

 

 

152,608

 

 

 

1,713

 

 

4.50

%

 

 

152,360

 

 

 

1,758

 

 

4.68

%

Total interest-bearing liabilities

 

 

25,860,541

 

 

 

107,518

 

 

1.67

%

 

 

25,452,835

 

 

 

100,850

 

 

1.61

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

10,237,868

 

 

 

 

 

 

 

10,071,370

 

 

 

 

 

Accrued expenses and other liabilities

 

 

762,684

 

 

 

 

 

 

 

676,898

 

 

 

 

 

Stockholders’ equity

 

 

4,684,348

 

 

 

 

 

 

 

4,537,301

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

 

41,545,441

 

 

 

 

 

 

$

 

40,738,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

3.16

%

 

 

 

 

 

3.24

%

Net interest income and net interest margin

 

 

 

$

 

367,326

 

 

3.73

%

 

 

 

$

 

362,461

 

 

3.79

%

Adjusted net interest income and adjusted net interest margin (4)

 

 

 

$

 

365,607

 

 

3.71

%

 

 

 

$

 

360,283

 

 

3.77

%

 

(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 2.70% and 2.80% for the three months ended June 30, 2019 and March 31, 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 4.93% and 5.01% for the three months ended June 30, 2019 and March 31, 2019, respectively.

(3)

Includes loans HFS. ASC 310-30 discount was $19.9 million and $21.6 million for the three months ended June 30, 2019 and March 31, 2019, respectively.

(4)

GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 7

 

 

 

Three Months Ended

 

June 30, 2019

 

June 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

 

$

 

2,852,060

 

 

$

 

16,861

 

 

2.37

%

 

$

 

2,316,194

 

 

$

 

11,715

 

 

2.03

%

Resale agreements (2)

 

 

999,835

 

 

 

7,343

 

 

2.95

%

 

 

996,154

 

 

 

7,182

 

 

2.89

%

AFS investment securities

 

 

2,551,383

 

 

 

15,685

 

 

2.47

%

 

 

2,735,023

 

 

 

15,059

 

 

2.21

%

Loans (3)

 

 

32,981,374

 

 

 

434,450

 

 

5.28

%

 

 

29,646,766

 

 

 

365,555

 

 

4.95

%

FHLB and FRB stock

 

 

76,449

 

 

 

505

 

 

2.65

%

 

 

73,671

 

 

 

800

 

 

4.36

%

Total interest-earning assets

 

 

39,461,101

 

 

 

474,844

 

 

4.83

%

 

 

35,767,808

 

 

 

400,311

 

 

4.49

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

439,449

 

 

 

 

 

 

 

432,401

 

 

 

 

 

Allowance for loan losses

 

 

(321,335

)

 

 

 

 

 

 

(292,645

)

 

 

 

 

Other assets

 

 

1,966,226

 

 

 

 

 

 

 

1,661,331

 

 

 

 

 

Total assets

 

$

 

41,545,441

 

 

 

 

 

 

$

 

37,568,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

 

5,221,110

 

 

$

 

15,836

 

 

1.22

%

 

$

 

4,387,479

 

 

$

 

8,416

 

 

0.77

%

Money market deposits

 

 

7,856,055

 

 

 

28,681

 

 

1.46

%

 

 

7,880,601

 

 

 

18,805

 

 

0.96

%

Savings deposits

 

 

2,106,626

 

 

 

2,477

 

 

0.47

%

 

 

2,214,793

 

 

 

2,035

 

 

0.37

%

Time deposits

 

 

9,904,726

 

 

 

50,970

 

 

2.06

%

 

 

6,907,174

 

 

 

22,009

 

 

1.28

%

Federal funds purchased and other short-term borrowings

 

 

35,575

 

 

 

361

 

 

4.07

%

 

 

11,695

 

 

 

124

 

 

4.25

%

FHLB advances

 

 

533,841

 

 

 

4,011

 

 

3.01

%

 

 

324,665

 

 

 

2,552

 

 

3.15

%

Repurchase agreements (2)

 

 

50,000

 

 

 

3,469

 

 

27.83

%

 

 

50,000

 

 

 

3,042

 

 

24.40

%

Long-term debt and finance lease liabilities

 

 

152,608

 

 

 

1,713

 

 

4.50

%

 

 

161,727

 

 

 

1,649

 

 

4.09

%

Total interest-bearing liabilities

 

 

25,860,541

 

 

 

107,518

 

 

1.67

%

 

 

21,938,134

 

 

 

58,632

 

 

1.07

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

10,237,868

 

 

 

 

 

 

 

10,984,950

 

 

 

 

 

Accrued expenses and other liabilities

 

 

762,684

 

 

 

 

 

 

 

583,500

 

 

 

 

 

Stockholders’ equity

 

 

4,684,348

 

 

 

 

 

 

 

4,062,311

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

 

41,545,441

 

 

 

 

 

 

$

 

37,568,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

3.16

%

 

 

 

 

 

3.42

%

Net interest income and net interest margin

 

 

 

$

 

367,326

 

 

3.73

%

 

 

 

$

 

341,679

 

 

3.83

%

Adjusted net interest income and adjusted net interest margin (4)

 

 

 

$

 

365,607

 

 

3.71

%

 

 

 

$

 

335,380

 

 

3.76

%

(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 2.70% and 2.63% for the three months ended June 30, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.93% and 4.48% for the three months ended June 30, 2019 and 2018, respectively.

(3)

Includes loans HFS. ASC 310-30 discount was $19.9 million and $30.0 million for the three months ended June 30, 2019 and 2018, respectively.

(4)

See reconciliation of GAAP to non-GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 8

 

 

Six Months Ended

June 30, 2019

 

June 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

 

$

 

2,716,128

 

 

$

 

32,331

 

 

2.40

%

 

$

 

2,319,962

 

 

$

 

22,660

 

 

1.97

%

Resale agreements (2)

 

 

1,017,320

 

 

 

15,189

 

 

3.01

%

 

 

1,022,928

 

 

 

14,116

 

 

2.78

%

AFS investment securities

 

 

2,596,590

 

 

 

31,433

 

 

2.44

%

 

 

2,794,350

 

 

 

30,515

 

 

2.20

%

Loans (3)

 

 

32,699,644

 

 

 

857,984

 

 

5.29

%

 

 

29,430,537

 

 

 

703,459

 

 

4.82

%

FHLB and FRB stock

 

 

75,348

 

 

 

1,218

 

 

3.26

%

 

 

73,661

 

 

 

1,434

 

 

3.93

%

Total interest-earning assets

 

 

39,105,030

 

 

 

938,155

 

 

4.84

%

 

 

35,641,438

 

 

 

772,184

 

 

4.37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

453,725

 

 

 

 

 

 

 

437,848

 

 

 

 

 

Allowance for loan losses

 

 

(317,909

)

 

 

 

 

 

 

(289,259

)

 

 

 

 

Other assets

 

 

1,903,306

 

 

 

 

 

 

 

1,685,488

 

 

 

 

 

Total assets

 

$

 

41,144,152

 

 

 

 

 

 

$

 

37,475,515

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

 

5,245,845

 

 

$

 

30,091

 

 

1.16

%

 

$

 

4,473,111

 

 

$

 

15,143

 

 

0.68

%

Money market deposits

 

 

7,967,831

 

 

 

58,915

 

 

1.49

%

 

 

8,075,796

 

 

 

34,645

 

 

0.87

%

Savings deposits

 

 

2,099,058

 

 

 

4,704

 

 

0.45

%

 

 

2,332,966

 

 

 

4,056

 

 

0.35

%

Time deposits

 

 

9,658,181

 

 

 

96,259

 

 

2.01

%

 

 

6,315,194

 

 

 

36,557

 

 

1.17

%

Federal funds purchased and other short-term borrowings

 

 

47,939

 

 

 

977

 

 

4.11

%

 

 

6,314

 

 

 

131

 

 

4.18

%

FHLB advances

 

 

436,475

 

 

 

6,990

 

 

3.23

%

 

 

329,367

 

 

 

4,812

 

 

2.95

%

Repurchase agreements (2)

 

 

50,000

 

 

 

6,961

 

 

28.07

%

 

 

50,000

 

 

 

5,348

 

 

21.57

%

Long-term debt and finance lease liabilities

 

 

152,485

 

 

 

3,471

 

 

4.59

%

 

 

164,179

 

 

 

3,120

 

 

3.83

%

Total interest-bearing liabilities

 

 

25,657,814

 

 

 

208,368

 

 

1.64

%

 

 

21,746,927

 

 

 

103,812

 

 

0.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

10,155,079

 

 

 

 

 

 

 

11,136,389

 

 

 

 

 

Accrued expenses and other liabilities

 

 

720,028

 

 

 

 

 

 

 

599,195

 

 

 

 

 

Stockholders’ equity

 

 

4,611,231

 

 

 

 

 

 

 

3,993,004

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

 

41,144,152

 

 

 

 

 

 

$

 

37,475,515

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

3.20

%

 

 

 

 

 

3.41

%

Net interest income and net interest margin

 

 

 

$

 

729,787

 

 

3.76

%

 

 

 

$

 

668,372

 

 

3.78

%

Adjusted net interest income and adjusted net interest margin (4)

 

 

 

$

 

725,890

 

 

3.74

%

 

 

 

$

 

656,873

 

 

3.71

%

 

(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 2.75% and 2.57% for the six months ended June 30, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.97% and 4.21% for the six months ended June 30, 2019 and 2018, respectively.

(3)

 

Includes loans HFS. ASC 310-30 discount was $20.8 million and $32.0 million for the six months ended June 30, 2019 and 2018, respectively.

(4)

 

See reconciliation of GAAP to non-GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED RATIOS

(unaudited)

Table 9

 

 

 

Three Months Ended (1)

 

June 30, 2019

Basis Point Change

 

 

 

June 30,

2019

 

March 31,

2019

 

June 30,

2018

 

Qtr-o-Qtr

 

Yr-o-Yr

 

 

Return on average assets

 

1.45

%

 

1.63

%

 

1.84

%

 

(18

)

bps

(39

)

bps

 

Adjusted return on average assets (2)

 

1.74

%

 

1.68

%

 

1.84

%

 

6

 

 

(10

)

 

 

Return on average equity

 

12.88

%

 

14.66

%

 

17.02

%

 

(178

)

 

(414

)

 

 

Adjusted return on average equity (2)

 

15.45

%

 

15.10

%

 

17.02

%

 

35

 

 

(157

)

 

 

Return on average tangible equity (2)

 

14.51

%

 

16.53

%

 

19.50

%

 

(202

)

 

(499

)

 

 

Adjusted return on average tangible equity (2)

 

17.39

%

 

17.02

%

 

19.50

%

 

37

 

 

(211

)

 

 

Interest rate spread

 

3.16

%

 

3.24

%

 

3.42

%

 

(8

)

 

(26

)

 

 

Net interest margin

 

3.73

%

 

3.79

%

 

3.83

%

 

(6

)

 

(10

)

 

 

Adjusted net interest margin (2)

 

3.71

%

 

3.77

%

 

3.76

%

 

(6

)

 

(5

)

 

 

Average loan yield

 

5.28

%

 

5.30

%

 

4.95

%

 

(2

)

 

33

 

 

 

Adjusted average loan yield (2)

 

5.26

%

 

5.27

%

 

4.86

%

 

(1

)

 

40

 

 

 

Yield on average interest-earning assets

 

4.83

%

 

4.85

%

 

4.49

%

 

(2

)

 

34

 

 

 

Cost of interest-bearing deposits

 

1.57

%

 

1.50

%

 

0.96

%

 

7

 

 

61

 

 

 

Cost of deposits

 

1.11

%

 

1.07

%

 

0.64

%

 

4

 

 

47

 

 

 

Cost of funds

 

1.19

%

 

1.15

%

 

0.71

%

 

4

 

 

48

 

 

 

Adjusted pre-tax, pre-provision profitability ratio (2)

 

2.51

%

 

2.43

%

 

2.50

%

 

8

 

 

1

 

 

 

Adjusted noninterest expense/average assets (2)

 

1.54

%

 

1.60

%

 

1.66

%

 

(6

)

 

(12

)

 

 

Efficiency ratio

 

42.29

%

 

46.20

%

 

45.50

%

 

(391

)

 

(321

)

 

 

Adjusted efficiency ratio (2)

 

38.03

%

 

39.75

%

 

39.89

%

 

(172

)

bps

(186

)

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended (1)

 

June 30, 2019

Basis Point Change

 

 

 

 

 

 

 

June 30,

2019

 

June 30,

2018

 

Yr-o-Yr

 

 

 

 

 

Return on average assets

 

1.54

%

 

1.93

%

 

(39

)

bps

 

 

 

 

 

Adjusted return on average assets (2)

 

1.71

%

 

1.81

%

 

(10

)

 

 

 

 

 

 

Return on average equity

 

13.75

%

 

18.15

%

 

(440

)

 

 

 

 

 

 

Adjusted return on average equity (2)

 

15.28

%

 

17.03

%

 

(175

)

 

 

 

 

 

 

Return on average tangible equity (2)

 

15.50

%

 

20.87

%

 

(537

)

 

 

 

 

 

 

Adjusted return on average tangible equity (2)

 

17.21

%

 

19.59

%

 

(238

)

 

 

 

 

 

 

Interest rate spread

 

3.20

%

 

3.41

%

 

(21

)

 

 

 

 

 

 

Net interest margin

 

3.76

%

 

3.78

%

 

(2

)

 

 

 

 

 

 

Adjusted net interest margin (2)

 

3.74

%

 

3.71

%

 

3

 

 

 

 

 

 

 

Average loan yield

 

5.29

%

 

4.82

%

 

47

 

 

 

 

 

 

 

Adjusted average loan yield (2)

 

5.26

%

 

4.74

%

 

52

 

 

 

 

 

 

 

Yield on average interest-earning assets

 

4.84

%

 

4.37

%

 

47

 

 

 

 

 

 

 

Cost of interest-bearing deposits

 

1.53

%

 

0.86

%

 

67

 

 

 

 

 

 

 

Cost of deposits

 

1.09

%

 

0.56

%

 

53

 

 

 

 

 

 

 

Cost of funds

 

1.17

%

 

0.64

%

 

53

 

 

 

 

 

 

 

Adjusted pre-tax, pre-provision profitability ratio (2)

 

2.47

%

 

2.44

%

 

3

 

 

 

 

 

 

 

Adjusted noninterest expense/average assets (2)

 

1.57

%

 

1.65

%

 

(8

)

 

 

 

 

 

 

Efficiency ratio

 

44.21

%

 

43.81

%

 

40

 

 

 

 

 

 

 

Adjusted efficiency ratio (2)

 

38.88

%

 

40.26

%

 

(138

)

bps

 

 

 

 

 

 

(1)

Annualized except for efficiency ratio.

(2)

See reconciliation of GAAP to non-GAAP financial measures in Tables 13, 14, 15 and 16.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR CREDIT LOSSES

($ in thousands)

(unaudited)

Table 10

 

 

Three Months Ended

 

Six Months Ended

June 30,

2019

 

March 31,

2019

 

June 30,

2018

 

June 30,

2019

 

June 30,

2018

Non-Purchased Credit Impaired (“Non-PCI”) Loans

 

 

 

 

 

 

 

 

 

 

 

Allowance for non-PCI loans, beginning of period

 

$

 

317,880

 

 

$

 

311,300

 

 

$

 

297,607

 

 

$

 

311,300

 

 

$

 

287,070

 

 

Provision for loan losses on non-PCI loans

 

 

20,740

 

 

 

20,648

 

 

 

15,139

 

 

 

41,388

 

 

 

35,072

 

 

Net (charge-offs) recoveries:

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

C&I

 

 

(10,032

)

 

 

(14,993

)

 

 

(12,383

)

 

 

(25,025

)

 

 

(23,549

)

 

CRE

 

 

1,837

 

 

 

222

 

 

 

2

 

 

 

2,059

 

 

 

429

 

 

Multifamily residential

 

 

53

 

 

 

281

 

 

 

1,061

 

 

 

334

 

 

 

1,394

 

 

Construction and land

 

 

439

 

 

 

63

 

 

 

258

 

 

 

502

 

 

 

693

 

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

 

72

 

 

 

2

 

 

 

629

 

 

 

74

 

 

 

812

 

 

HELOCs

 

 

 

 

2

 

 

 

 

 

2

 

 

 

 

Other consumer

 

 

(7

)

 

 

(14

)

 

 

(162

)

 

 

(21

)

 

 

(178

)

 

Total net charge-offs

 

 

(7,638

)

 

 

(14,437

)

 

 

(10,595

)

 

 

(22,075

)

 

 

(20,399

)

 

Foreign currency translation adjustments

 

 

(362

)

 

 

369

 

 

 

(640

)

 

 

7

 

 

 

(232

)

 

Allowance for non-PCI loans, end of period

 

 

330,620

 

 

 

317,880

 

 

 

301,511

 

 

 

330,620

 

 

 

301,511

 

Purchased Credit Impaired (“PCI”) Loans

 

 

 

 

 

 

 

 

 

 

 

Allowance for PCI loans, beginning of period

 

 

14

 

 

 

22

 

 

 

47

 

 

 

22

 

 

 

58

 

 

Reversal of loan losses on PCI loans

 

 

(9

)

 

 

(8

)

 

 

(8

)

 

 

(17

)

 

 

(19

)

 

Allowance for PCI loans, end of period

 

 

5

 

 

 

14

 

 

 

39

 

 

 

5

 

 

 

39

 

 

Allowance for loan losses

 

 

330,625

 

 

 

317,894

 

 

 

301,550

 

 

 

330,625

 

 

 

301,550

 

Unfunded Credit Facilities

 

 

 

 

 

 

 

 

 

 

 

Allowance for unfunded credit reserves, beginning of period

 

 

14,505

 

 

 

12,566

 

 

 

13,614

 

 

 

12,566

 

 

 

13,318

 

 

(Reversal of) provision for unfunded credit reserves

 

 

(1,486

)

 

 

1,939

 

 

 

405

 

 

 

453

 

 

 

701

 

 

Allowance for unfunded credit reserves, end of period

 

 

13,019

 

 

 

14,505

 

 

 

14,019

 

 

 

13,019

 

 

 

14,019

 

 

Allowance for credit losses

 

$

 

343,644

 

 

$

 

332,399

 

 

$

 

315,569

 

 

$

 

343,644

 

 

$

 

315,569

 

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CREDIT QUALITY

($ in thousands)

(unaudited)

Table 11

 

Non-PCI Nonperforming Assets

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

 

 

 

 

 

Nonaccrual loans:

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

C&I

 

$

 

73,150

 

 

$

 

86,466

 

 

$

 

57,097

 

CRE

 

 

20,914

 

 

 

25,209

 

 

 

25,748

 

Multifamily residential

 

 

1,027

 

 

 

1,620

 

 

 

1,727

 

Consumer:

 

 

 

 

 

 

Single-family residential

 

 

13,075

 

 

 

10,467

 

 

 

7,625

 

HELOCs

 

 

7,344

 

 

 

10,473

 

 

 

8,135

 

Other consumer

 

 

2,504

 

 

 

2,506

 

 

 

2,491

 

Total nonaccrual loans

 

 

118,014

 

 

 

136,741

 

 

 

102,823

 

Other real estate owned, net

 

 

130

 

 

 

133

 

 

 

709

 

Other nonperforming assets

 

 

1,167

 

 

 

1,167

 

 

 

Total nonperforming assets

 

$

 

119,311

 

 

$

 

138,041

 

 

$

 

103,532

 

 

 

Credit Quality Ratios

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

 

 

 

 

 

 

Non-PCI nonperforming assets to total assets (1)

 

 

0.28

%

 

 

0.33

%

 

 

0.27

%

Non-PCI nonaccrual loans to loans held-for-investment (1)

 

 

0.35

%

 

 

0.42

%

 

 

0.34

%

Allowance for loan losses to loans held-for-investment (1)

 

 

0.98

%

 

 

0.97

%

 

 

1.00

%

Allowance for loan losses to non-PCI nonaccrual loans

 

 

280.16

%

 

 

232.48

%

 

 

293.27

%

Annualized quarterly net charge-offs to average loans held-for-investment

 

 

0.09

%

 

 

0.18

%

 

 

0.14

%

 

(1)

Total assets and loans held-for-investment include PCI loans of $270.9 million, $290.3 million and $383.7 million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 12

 

 

 

 

 

 

 

 

During the second quarter of 2019, the Company reversed $30.1 million of certain previously claimed tax credits related to the DC Solar tax credit investments (“DC Solar”). The table below shows the computation of the Company’s effective tax rate excluding the impact of the DC Solar tax credits reversal. Management believes that excluding the impact of the DC Solar tax credits reversal from the effective tax rate computation allows comparability to prior periods.

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Income tax expense

 

(a)

 

$

 

72,797

 

 

$

 

31,067

 

 

$

 

24,643

 

Less: Reversal of certain previously claimed tax credits related to DC Solar

 

(b)

 

 

(30,104

)

 

 

 

 

Adjusted income tax expense

 

(c)

 

$

 

42,693

 

 

$

 

31,067

 

 

$

 

24,643

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

(d)

 

 

223,177

 

 

 

195,091

 

 

 

196,992

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

(a)/(d)

 

 

32.6

%

 

 

15.9

%

 

 

12.5

%

Less: Reversal of certain previously claimed tax credits related to DC Solar

 

(b)/(d)

 

 

(13.5

)%

 

%

 

%

Adjusted effective tax rate

 

(c)/(d)

 

 

19.1

%

 

 

15.9

%

 

 

12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

June 30, 2019

 

June 30, 2018

 

 

Income tax expense

 

(e)

 

$

 

103,864

 

 

$

 

49,395

 

 

 

Less: Reversal of certain previously claimed tax credits related to DC Solar

 

(f)

 

 

(30,104

)

 

 

 

 

Adjusted income tax expense

 

(g)

 

$

 

73,760

 

 

$

 

49,395

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

(h)

 

 

418,268

 

 

 

408,776

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

(e)/(h)

 

 

24.8

%

 

 

12.1

%

 

 

Less: Reversal of certain previously claimed tax credits related to DC Solar

 

(f)/(h)

 

 

(7.2

)%

 

%

 

 

Adjusted effective tax rate

 

(g)/(h)

 

 

17.6

%

 

 

12.1

%

 

 

 

 

 

 

 

 

 

 

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ and shares in thousands, except for per share data)

(unaudited)

Table 13

During the first quarter of 2019, the Company recorded a $7.0 million pre-tax impairment charge related to DC Solar. During the second quarter of 2019, the Company reversed $30.1 million of certain previously claimed tax credits related to DC Solar. 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 after-tax impact of the impairment charge related to DC Solar, the reversal of certain previously claimed tax credits related to DC Solar and the after-tax impact of the gain on the sale of the 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

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Net income

 

(a)

 

$

 

150,380

 

 

$

 

164,024

 

 

$

 

172,349

 

Add: Impairment charge related to DC Solar (1)

 

 

 

 

 

 

6,978

 

 

 

Tax effect of adjustment (2)

 

 

 

 

 

 

(2,063

)

 

 

Add: Reversal of certain previously claimed tax credits related to DC Solar

 

 

 

 

30,104

 

 

 

 

 

Adjusted net income

 

(b)

 

$

 

180,484

 

 

$

 

168,939

 

 

$

 

172,349

 

 

 

 

 

 

 

 

 

 

Diluted weighted average number of shares outstanding

 

 

 

 

146,052

 

 

 

145,921

 

 

 

146,091

 

Diluted EPS

 

 

 

$

 

1.03

 

 

$

 

1.12

 

 

$

 

1.18

 

Diluted EPS impact of impairment charge related to DC Solar, net of tax

 

 

 

 

 

 

0.04

 

 

 

Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar

 

 

 

 

0.21

 

 

 

 

 

Adjusted diluted EPS

 

 

 

$

 

1.24

 

 

$

 

1.16

 

 

$

 

1.18

 

 

 

 

 

 

 

 

 

 

Average total assets

 

(c)

 

$

 

41,545,441

 

 

$

 

40,738,404

 

 

$

 

37,568,895

 

Average stockholders’ equity

 

(d)

 

$

 

4,684,348

 

 

$

 

4,537,301

 

 

$

 

4,062,311

 

Return on average assets (3)

 

(a)/(c)

 

 

1.45

%

 

 

1.63

%

 

 

1.84

%

Adjusted return on average assets (3)

 

(b)/(c)

 

 

1.74

%

 

 

1.68

%

 

 

1.84

%

Return on average equity (3)

 

(a)/(d)

 

 

12.88

%

 

 

14.66

%

 

 

17.02

%

Adjusted return on average equity (3)

 

(b)/(d)

 

 

15.45

%

 

 

15.10

%

 

 

17.02

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

June 30, 2019

 

June 30, 2018

 

 

Net income

 

(e)

 

$

 

314,404

 

 

$

 

359,381

 

 

 

Add: Impairment charge related to DC Solar (1)

 

 

 

 

6,978

 

 

 

 

 

Less: Gain on sale of business

 

 

 

 

 

 

(31,470

)

 

 

Tax effect of adjustments (2)

 

 

 

 

(2,063

)

 

 

9,303

 

 

 

Add: Reversal of certain previously claimed tax credits related to DC Solar

 

 

 

 

30,104

 

 

 

 

 

Adjusted net income

 

(f)

 

$

 

349,423

 

 

$

 

337,214

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average number of shares outstanding

 

 

 

 

146,016

 

 

 

146,046

 

 

 

Diluted EPS

 

 

 

$

 

2.15

 

 

$

 

2.46

 

 

 

Diluted EPS impact of impairment charge related to DC Solar, net of tax

 

 

 

 

0.03

 

 

 

 

 

Diluted EPS impact of gain on sale of business, net of tax

 

 

 

 

 

 

(0.15

)

 

 

Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar

 

 

 

 

0.21

 

 

 

 

 

Adjusted diluted EPS

 

 

 

$

 

2.39

 

 

$

 

2.31

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

 

(g)

 

$

 

41,144,152

 

 

$

 

37,475,515

 

 

 

Average stockholders’ equity

 

(h)

 

$

 

4,611,231

 

 

$

 

3,993,004

 

 

 

Return on average assets (3)

 

(e)/(g)

 

 

1.54

%

 

 

1.93

%

 

 

Adjusted return on average assets (3)

 

(f)/(g)

 

 

1.71

%

 

 

1.81

%

 

 

Return on average equity (3)

 

(e)/(h)

 

 

13.75

%

 

 

18.15

%

 

 

Adjusted return on average equity (3)

 

(f)/(h)

 

 

15.28

%

 

 

17.03

%

 

 

 

(1)

Included in Amortization of tax credit and other investments.

(2)

Applied statutory rate of 29.56%.

(3)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 14

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 gain on the sale of the DCB branches that were sold in the first quarter of 2018 (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

 

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Net interest income before provision for credit losses

 

(a)

 

$

 

367,326

 

 

$

 

362,461

 

 

$

 

341,679

 

Total noninterest income

 

 

 

 

52,759

 

 

 

42,131

 

 

 

48,268

 

Total revenue

 

(b)

 

$

 

420,085

 

 

$

 

404,592

 

 

$

 

389,947

 

 

 

 

 

 

 

 

 

 

Total noninterest expense

 

(c)

 

$

 

177,663

 

 

$

 

186,922

 

 

$

 

177,419

 

Less: Amortization of tax credit and other investments

 

 

 

 

(16,739

)

 

 

(24,905

)

 

 

(20,481

)

Amortization of core deposit intangibles

 

 

 

 

(1,152

)

 

 

(1,174

)

 

 

(1,373

)

Adjusted noninterest expense

 

(d)

 

$

 

159,772

 

 

$

 

160,843

 

 

$

 

155,565

 

Efficiency ratio

 

(c)/(b)

 

 

42.29

%

 

 

46.20

%

 

 

45.50

%

Adjusted efficiency ratio

 

(d)/(b)

 

 

38.03

%

 

 

39.75

%

 

 

39.89

%

Adjusted pre-tax, pre-provision income

 

(b)-(d) = (e)

 

$

 

260,313

 

 

$

 

243,749

 

 

$

 

234,382

 

Average total assets

 

(f)

 

$

 

41,545,441

 

 

$

 

40,738,404

 

 

$

 

37,568,895

 

Adjusted pre-tax, pre-provision profitability ratio (1)

 

(e)/(f)

 

 

2.51

%

 

 

2.43

%

 

 

2.50

%

Adjusted noninterest expense (1)/average assets

 

(d)/(f)

 

 

1.54

%

 

 

1.60

%

 

 

1.66

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

June 30, 2019

 

June 30, 2018

 

 

Net interest income before provision for credit losses

 

(g)

 

$

 

729,787

 

 

$

 

668,372

 

 

 

Total noninterest income

 

 

 

 

94,890

 

 

 

122,712

 

 

 

Total revenue

 

(h)

 

 

824,677

 

 

 

791,084

 

 

 

Noninterest income

 

 

 

 

94,890

 

 

 

122,712

 

 

 

Less: Gain on sale of business

 

 

 

 

 

 

(31,470

)

 

 

Adjusted noninterest income

 

(i)

 

$

 

94,890

 

 

$

 

91,242

 

 

 

Adjusted revenue

 

(g)+(i) = (j)

 

$

 

824,677

 

 

$

 

759,614

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expense

 

(k)

 

$

 

364,585

 

 

$

 

346,554

 

 

 

Less: Amortization of tax credit and other investments

 

 

 

 

(41,644

)

 

 

(37,881

)

 

 

Amortization of core deposit intangibles

 

 

 

 

(2,326

)

 

 

(2,858

)

 

 

Adjusted noninterest expense

 

(l)

 

$

 

320,615

 

 

$

 

305,815

 

 

 

Efficiency ratio

 

(k)/(h)

 

 

44.21

%

 

 

43.81

%

 

 

Adjusted efficiency ratio

 

(l)/(j)

 

 

38.88

%

 

 

40.26

%

 

 

Adjusted pre-tax, pre-provision income

 

(j)-(l) = (m)

 

$

 

504,062

 

 

$

 

453,799

 

 

 

Average total assets

 

(n)

 

$

 

41,144,152

 

 

$

 

37,475,515

 

 

 

Adjusted pre-tax, pre-provision profitability ratio (1)

 

(m)/(n)

 

 

2.47

%

 

 

2.44

%

 

 

Adjusted noninterest expense (1)/average assets

 

(l)/(n)

 

 

1.57

%

 

 

1.65

%

 

 

 

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 15

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.

 

Yield on Average Loans

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

2019

 

March 31,

2019

 

June 30,

2018

 

June 30,

2019

 

June 30,

2018

Interest income on loans

 

(a)

 

$

 

434,450

 

 

$

 

423,534

 

 

$

 

365,555

 

 

$

 

857,984

 

 

$

 

703,459

 

Less: ASC 310-30 discount accretion income

 

 

 

 

(1,719

)

 

 

(2,178

)

 

 

(6,299

)

 

 

(3,897

)

 

 

(11,499

)

Adjusted interest income on loans

 

(b)

 

$

 

432,731

 

 

$

 

421,356

 

 

$

 

359,256

 

 

$

 

854,087

 

 

$

 

691,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans

 

(c)

 

$

 

32,981,374

 

 

$

 

32,414,785

 

 

$

 

29,646,766

 

 

$

 

32,699,644

 

 

$

 

29,430,537

 

Add: ASC 310-30 discount

 

 

 

 

19,909

 

 

 

21,639

 

 

 

29,997

 

 

 

20,769

 

 

 

32,017

 

Adjusted average loans

 

(d)

 

$

 

33,001,283

 

 

$

 

32,436,424

 

 

$

 

29,676,763

 

 

$

 

32,720,413

 

 

$

 

29,462,554

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loan yield (1)

 

(a)/(c)

 

 

5.28

%

 

 

5.30

%

 

 

4.95

%

 

 

5.29

%

 

 

4.82

%

Adjusted average loan yield (1)

 

(b)/(d)

 

 

5.26

%

 

 

5.27

%

 

 

4.86

%

 

 

5.26

%

 

 

4.74

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Margin

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

(e)

 

$

 

367,326

 

 

$

 

362,461

 

 

$

 

341,679

 

 

$

 

729,787

 

 

$

 

668,372

 

Less: ASC 310-30 discount accretion income

 

 

 

 

(1,719

)

 

 

(2,178

)

 

 

(6,299

)

 

 

(3,897

)

 

 

(11,499

)

Adjusted net interest income

 

(f)

 

$

 

365,607

 

 

$

 

360,283

 

 

$

 

335,380

 

 

$

 

725,890

 

 

$

 

656,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average interest-earning assets

 

(g)

 

$

 

39,461,101

 

 

$

 

38,745,004

 

 

$

 

35,767,808

 

 

$

 

39,105,030

 

 

$

 

35,641,438

 

Add: ASC 310-30 discount

 

 

 

 

19,909

 

 

 

21,639

 

 

 

29,997

 

 

 

20,769

 

 

 

32,017

 

Adjusted average interest-earning assets

 

(h)

 

$

 

39,481,010

 

 

$

 

38,766,643

 

 

$

 

35,797,805

 

 

$

 

39,125,799

 

 

$

 

35,673,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

(e)/(g)

 

 

3.73

%

 

 

3.79

%

 

 

3.83

%

 

 

3.76

%

 

 

3.78

%

Adjusted net interest margin (1)

 

(f)/(h)

 

 

3.71

%

 

 

3.77

%

 

 

3.76

%

 

 

3.74

%

 

 

3.71

%

 

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 16

 

 

 

 

 

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

March 31, 2019

 

June 30, 2018

Stockholders’ equity

 

(a)

 

$

 

4,734,593

 

 

$

 

4,591,930

 

 

$

 

4,114,284

 

Less: Goodwill

 

 

 

 

(465,697

)

 

 

(465,697

)

 

 

(465,547

)