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Share Name | Share Symbol | Market | Type |
---|---|---|---|
East West Bancorp Inc | NASDAQ:EWBC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.41 | 1.87% | 76.64 | 69.01 | 78.80 | 77.06 | 75.93 | 76.79 | 1,173,505 | 01:00:00 |
East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the second quarter of 2021. Net income for the second quarter of 2021 was $224.7 million, or $1.57 per diluted share. Second quarter 2021 return on average assets was 1.56% and return on average equity was 16.6%.
“East West had a very strong quarter of robust growth, expanding profitability and improving asset quality,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “As of June 30, 2021, our total loans reached a record $40.1 billion and our total deposits reached a record $52.6 billion.”
“Excluding the impact of the Paycheck Protection Program, loans grew by 12% annualized in the second quarter, with solid growth across our residential mortgage, commercial, and commercial real estate loan portfolios. Total deposits grew by 25% annualized, and noninterest-bearing demand deposits reached 41% of total deposits as of June 30, 2021. Our diversified growth reflects the strength of our business model, our commercial and consumer customer mix, and our geographic footprint in dynamic metropolitan areas of the United States.”
“Quarter-over-quarter, our revenue grew by 17% annualized and operating expenses decreased, driving adjusted pre-tax, pre-provision income growth of 33% annualized and expanding profitability,” continued Ng. “Our solid financial performance for the second quarter resulted in adjusted pre-tax, pre-provision profitability1 of 2.0% and a return on average tangible equity2 of 18.3%.”
“Asset quality continues to be healthy. Criticized loans fell by 15% quarter-over-quarter; net charge-offs were 0.13% of average loans, annualized, and the nonperforming assets ratio declined by seven basis points to 0.38% of total assets. Accordingly, we recorded a negative $15.0 million provision for credit losses in the second quarter.”
“We are pleased with our results this quarter and are positive about our outlook for the rest of the year,” concluded Ng. “The hard work and outstanding execution by all our associates builds a strong foundation for East West’s continued growth and success in the years to come. We are well poised to help our communities and customers thrive as the economy expands.”
BALANCE SHEET
OPERATING RESULTS
Second Quarter Earnings – Second quarter 2021 net income was $224.7 million, or $1.57 per diluted share, an increase of 10% from $205.0 million, or $1.44 per diluted share, for the first quarter of 2021.
Second Quarter 2021 Compared to First Quarter 2021
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $376.5 million, an increase of 26% annualized from $353.7 million. Net interest margin (“NIM”) of 2.75% increased by four basis points from 2.71%.
Noninterest Income
Noninterest income totaled $68.4 million in the second quarter, down from $72.9 million in the first quarter. Quarter-over-quarter growth in foreign exchange income, lending fees, deposit account fees, and wealth management fees drove a 15% increase in customer-driven fee income. However, the growth in customer-driven fee income was offset by an unfavorable change in the credit valuation adjustment of interest rate contracts and other derivatives.
Noninterest Expense
Noninterest expense totaled $189.5 million. Second quarter noninterest expense consisted of $161.5 million of adjusted noninterest expense5, $27.3 million in amortization of tax credit and other investments, and $0.7 million in amortization of core deposit intangibles.
TAX RELATED ITEMS
Second quarter 2021 income tax expense was $45.6 million and the effective tax rate was 17%. Year-to-date for the first six months of 2021, the effective tax rate was 15%. For the full year, the Company expects the effective tax rate to be approximately 15%.
ASSET QUALITY
CAPITAL STRENGTH
Capital levels for East West are strong. The following table presents the regulatory capital ratios as of June 30, 2021, March 31, 2021, and June 30, 2020.
EWBC Regulatory Capital Metrics
Basel III
($ in millions)
June 30,
2021 (a)
March 31,
2021 (a)
June 30,
2020 (a)
Minimum
Capital
Ratio
Well
Capitalized
Ratio
Minimum
Capital Ratio +
Conservation
Buffer (b)
Risk-Based Capital Ratios:
CET1 capital ratio
12.8
%
12.7
%
12.7
%
4.5
%
6.5
%
7.0
%
Tier 1 capital ratio
12.8
%
12.7
%
12.7
%
6.0
%
8.0
%
8.5
%
Total capital ratio
14.3
%
14.3
%
14.4
%
8.0
%
10.0
%
10.5
%
Leverage ratio
9.1
%
9.1
%
9.7
%
4.0
%
5.0
%
4.0
%
Risk-Weighted Assets (“RWA”) (c)
$
40,609
$
39,572
$
36,199
N/A
N/A
N/A
N/A Not applicable.
(a)
The Company has elected to use the 2020 CECL transition provision in the calculation of its June 30, 2021, March 31, 2020, and June 30, 2020 regulatory capital ratios. The Company’s June 30, 2021 regulatory capital ratios and RWA are preliminary.
(b)
An additional 2.5% capital conservation buffer above the minimum capital ratios are 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.
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared third quarter 2021 dividends for the Company’s common stock. The common stock cash dividend of $0.33 per share is payable on August 16, 2021, to stockholders of record on August 2, 2021.
On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock. East West did not repurchase any shares during the second quarter of 2021, and has not repurchased any shares since the first quarter of 2020, under this authorization.
Conference Call
East West will host a conference call to discuss second quarter 2021 earnings with the public on Thursday, July 22, 2021, 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 2021 results and operating developments.
About East West
East West Bancorp, Inc. is a public company with total assets of $59.9 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, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, 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) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (the “SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are statements that are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control, such as the future impacts of the COVID-19 pandemic. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to: changes in the U.S. economy, including an economic slowdown, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; changes in local, regional and global business, economic and political conditions and geopolitical events; the impacts of the ongoing COVID-19 pandemic and any other pandemic, epidemic or health-related crisis; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau and the California Department of Financial Protection and Innovation - Division of Financial Institutions, and the SBA; 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; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies; the soundness of other financial institutions; success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; impact of the benchmark interest rate reform in the U.S. including the transition away from USD LIBOR to alternative reference rates; impact of a communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does 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 and materially impact the Company’s ability to provide services to its clients; adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; impact on the Company’s international operations due to political developments, disease pandemics, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s 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 the Company’s 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; impact of other potential federal tax changes and spending cuts; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; impact on the Company’s liquidity due to changes in the Company’s ability to pay dividends and repurchase common stock and to receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; impact of climate change, social and sustainability concerns; 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 allowance for credit losses on securities held in the Company’s AFS debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts, terrorism or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.
For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2020 Form 10-K under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
__________________________________________________________
1 See reconciliation of GAAP to non-GAAP financial measures in Table 12. 2 See reconciliation of GAAP to non-GAAP financial measures in Table 13. 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 14. 5 See reconciliation of GAAP to non-GAAP financial measures in Table 12.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in thousands, except per share data)
(unaudited)
Table 1
June 30, 2021 % or Basis Point Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Assets
Cash and due from banks
$
626,716
$
582,270
$
602,974
7.6
%
3.9
%
Interest-bearing cash with banks
5,371,089
4,036,863
3,930,528
33.1
36.7
Cash and cash equivalents
5,997,805
4,619,133
4,533,502
29.8
32.3
Interest-bearing deposits with banks
830,279
741,923
531,591
11.9
56.2
Assets purchased under resale agreements (“resale agreements”)
2,299,184
2,160,038
1,260,000
6.4
82.5
Available-for-sale (“AFS”) debt securities (amortized cost of $8,411,142, $7,904,546 and $3,823,714)
8,399,460
7,789,213
3,884,574
7.8
116.2
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock
76,931
83,250
78,963
(7.6
)
(2.6
)
Loans held-for-sale (“HFS”)
1,819
—
3,875
100.0
(53.1
)
Loans held-for-investment (''HFI'') (net of allowance for loan losses of $585,724, $607,506 and $632,071)
39,485,775
38,981,242
36,597,341
1.3
7.9
Investments in qualified affordable housing partnerships, net
287,432
284,862
201,888
0.9
42.4
Investments in tax credit and other investments, net
364,187
361,438
251,318
0.8
44.9
Goodwill
465,697
465,697
465,697
—
—
Operating lease right-of-use assets
102,609
94,483
94,898
8.6
8.1
Other assets
1,543,698
1,292,867
1,503,946
19.4
2.6
Total assets
$
59,854,876
$
56,874,146
$
49,407,593
5.2
%
21.1
%
Liabilities and Stockholders’ Equity
Deposits
$
52,582,575
$
49,547,136
$
40,672,678
6.1
%
29.3
%
Short-term borrowings
—
—
252,851
—
(100.0
)
FHLB advances
248,464
653,035
656,759
(62.0
)
(62.2
)
Assets sold under repurchase agreements (“repurchase agreements”)
300,000
300,000
300,000
—
—
Long-term debt and finance lease liabilities
151,997
152,195
1,580,442
(1)
(0.1
)
(90.4
)
Operating lease liabilities
110,105
101,828
102,708
8.1
7.2
Accrued expenses and other liabilities
914,187
834,925
854,912
9.5
6.9
Total liabilities
54,307,328
51,589,119
44,420,350
5.3
22.3
Stockholders’ equity
5,547,548
5,285,027
4,987,243
5.0
11.2
Total liabilities and stockholders’ equity
$
59,854,876
$
56,874,146
$
49,407,593
5.2
%
21.1
%
Book value per common share
$
39.10
$
37.26
$
35.25
4.9
%
10.9
%
Tangible equity (2) per common share
$
35.75
$
33.90
$
31.86
5.5
12.2
Number of common shares at period-end
141,878
141,843
141,486
0.0
0.3
Tangible equity to tangible assets ratio (2)
8.54
%
8.53
%
9.21
%
1
bp
(67
)
bps
(1)
Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) as of June 30, 2020.
(2)
See reconciliation of GAAP to non-GAAP financial measures in Table 13.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
June 30, 2021 % Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”) (1)
$
13,790,461
$
14,081,110
$
13,422,691
(2.1
)%
2.7
%
Commercial real estate (“CRE”):
CRE
11,711,369
11,563,034
10,902,114
1.3
7.4
Multifamily residential
3,219,796
3,066,515
3,032,385
5.0
6.2
Construction and land
460,678
459,254
567,716
0.3
(18.9
)
Total CRE
15,391,843
15,088,803
14,502,215
2.0
6.1
Consumer:
Residential mortgage:
Single-family residential
8,869,370
8,524,287
7,660,094
4.0
15.8
Home equity lines of credit (“HELOCs”)
1,872,166
1,749,172
1,461,951
7.0
28.1
Total residential mortgage
10,741,536
10,273,459
9,122,045
4.6
17.8
Other consumer
147,659
145,376
182,461
1.6
(19.1
)
Total loans HFI (2)
40,071,499
39,588,748
37,229,412
1.2
7.6
Loans HFS
1,819
—
3,875
100.0
(53.1
)
Total loans (2)
40,073,318
39,588,748
37,233,287
1.2
7.6
Allowance for loan losses
(585,724
)
(607,506
)
(632,071
)
(3.6
)
(7.3
)
Net loans (2)
$
39,487,594
$
38,981,242
$
36,601,216
1.3
7.9
Deposits:
Noninterest-bearing demand
$
21,816,721
$
18,919,298
$
13,940,420
15.3
%
56.5
%
Interest-bearing checking
6,762,178
7,005,693
5,280,887
(3.5
)
28.1
Money market
12,853,812
12,218,957
10,002,624
5.2
28.5
Savings
2,719,106
2,604,355
2,186,199
4.4
24.4
Time deposits
8,430,758
8,798,833
9,262,548
(4.2
)
(9.0
)
Total deposits
$
52,582,575
$
49,547,136
$
40,672,678
6.1
%
29.3
%
(1)
Includes $1.43 billion, $2.07 billion and $1.75 billion of Paycheck Protection Program (“PPP”) loans as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
(2)
Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(67.0) million, $(76.9) million and $(72.1) million as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively. Net origination fees related to PPP loans were $(25.9) million, $(34.3) million and $(25.4) million as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 3
Three Months Ended
June 30, 2021 % Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Interest and dividend income (1)
$
399,333
$
381,386
$
398,776
4.7
%
0.1
%
Interest expense
22,860
27,691
55,001
(17.4
)
(58.4
)
Net interest income before provision for credit losses
376,473
353,695
343,775
6.4
9.5
(Reversal of) provision for credit losses
(15,000
)
—
102,443
(100.0
)
NM
Net interest income after provision for credit losses
391,473
353,695
241,332
10.7
62.2
Noninterest income
68,431
72,866
55,707
(2)
(6.1
)
22.8
Noninterest expense
189,523
191,077
184,766
(2)
(0.8
)
2.6
Income before income taxes
270,381
235,484
112,273
14.8
140.8
Income tax expense
45,639
30,490
12,921
49.7
253.2
Net income
$
224,742
$
204,994
$
99,352
9.6
%
126.2
%
Earnings per share (“EPS”)
- Basic
$
1.58
$
1.45
$
0.70
9.5
%
125.6
%
- Diluted
$
1.57
$
1.44
$
0.70
9.5
124.3
Weighted-average number of shares outstanding
- Basic
141,868
141,646
141,486
0.2
%
0.3
%
- Diluted
143,040
142,844
141,827
0.1
0.9
Three Months Ended
June 30, 2021 % Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Noninterest income:
Lending fees
$
21,092
$
18,357
$
21,946
14.9
%
(3.9
)%
Deposit account fees
17,342
15,383
10,872
12.7
59.5
Interest rate contracts and other derivative (loss) income
(3,172
)
16,997
6,107
NM
NM
Foreign exchange income
13,007
9,526
4,562
36.5
185.1
Wealth management fees
7,951
6,911
3,091
15.0
157.2
Net gains on sales of loans
1,491
1,781
132
(16.3
)
NM
Gains on sales of AFS debt securities
632
192
9,640
229.2
(93.4
)
Other investment income (expense)
7,596
925
(1,964
)
(2)
721.2
NM
Other income
2,492
2,794
1,321
(10.8
)
88.6
Total noninterest income
$
68,431
$
72,866
$
55,707
(2)
(6.1
)%
22.8
%
Noninterest expense:
Compensation and employee benefits
$
105,426
$
107,808
$
96,955
(2.2
)%
8.7
%
Occupancy and equipment expense
15,377
15,922
16,217
(3.4
)
(5.2
)
Deposit insurance premiums and regulatory assessments
4,274
3,876
3,700
10.3
15.5
Deposit account expense
3,817
3,892
3,353
(1.9
)
13.8
Data processing
4,035
4,478
4,480
(9.9
)
(9.9
)
Computer software expense
7,521
7,159
7,301
5.1
3.0
Consulting expense
1,868
1,475
1,413
26.6
32.2
Legal expense
1,975
1,502
1,530
31.5
29.1
Other operating expense
17,939
19,607
19,248
(8.5
)
(6.8
)
Amortization of tax credit and other investments
27,291
25,358
21,829
(2)
7.6
25.0
Repurchase agreements’ extinguishment cost
—
—
8,740
—
(100.0
)
Total noninterest expense
$
189,523
$
191,077
$
184,766
(2)
(0.8
)%
2.6
%
NM - Not meaningful.
(1)
Includes $15.4 million, $15.0 million and $21.3 million of interest income related to PPP loans for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
(2)
Starting fourth quarter of 2020, the Company has reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. June 30, 2020 comparative amounts have been revised to conform with the current presentation.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 4
Six Months Ended
June 30, 2021 % Change
June 30, 2021
June 30, 2020
Yr-o-Yr
Interest and dividend income (1)
$
780,719
$
847,966
(7.9)%
Interest expense
50,551
141,484
(64.3)
Net interest income before provision for credit losses
730,168
706,482
3.4
(Reversal of ) provision for credit losses
(15,000)
176,313
NM
Net interest income after provision for credit losses
745,168
530,169
40.6
Noninterest income
141,297
111,213
(2)
27.1
Noninterest expense
380,600
365,099
(2)
4.2
Income before income taxes
505,865
276,283
83.1
Income tax expense
76,129
32,107
137.1
Net income
$
429,736
$
244,176
76.0%
EPS
- Basic
$
3.03
$
1.71
77.7%
- Diluted
$
3.01
$
1.70
76.7
Weighted-average number of shares outstanding
- Basic
141,758
143,150
(1.0)%
- Diluted
142,963
143,560
(0.4)
Six Months Ended
June 30, 2021 % Change
June 30, 2021
June 30, 2020
Yr-o-Yr
Noninterest income:
Lending fees
$
39,449
$
37,719
4.6%
Deposit account fees
32,725
21,319
53.5
Interest rate contracts and other derivative income
13,825
13,180
4.9
Foreign exchange income
22,533
12,381
82.0
Wealth management fees
14,862
8,444
76.0
Net gains on sales of loans
3,272
1,082
202.4
Gains on sales of AFS debt securities
824
11,169
(92.6)
Other investment income
8,521
1,414
(2)
502.6
Other income
5,286
4,505
17.3
Total noninterest income
$
141,297
$
111,213
(2)
27.1%
Noninterest expense:
Compensation and employee benefits
$
213,234
$
198,915
7.2%
Occupancy and equipment expense
31,299
33,293
(6.0)
Deposit insurance premiums and regulatory assessments
8,150
7,127
14.4
Deposit account expense
7,709
6,916
11.5
Data processing
8,513
8,306
2.5
Computer software expense
14,680
13,467
9.0
Consulting expense
3,343
2,630
27.1
Legal expense
3,477
4,727
(26.4)
Other operating expense
37,546
40,367
(7.0)
Amortization of tax credit and other investments
52,649
40,611
(2)
29.6
Repurchase agreements’ extinguishment cost
—
8,740
(100.0)
Total noninterest expense
$
380,600
$
365,099
(2)
4.2%
NM - Not meaningful.
(1)
Includes $30.4 million and $21.3 million of interest income related to PPP loans for the six months ended June 30, 2021 and 2020, respectively.
(2)
Starting fourth quarter of 2020, the Company has reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. June 30, 2020 comparative amounts have been revised to conform with the current presentation.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
Three Months Ended
June 30, 2021 % Change
Six Months Ended
June 30, 2021 % Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
June 30, 2021
June 30, 2020
Yr-o-Yr
Loans:
Commercial:
C&I (1)
$
13,811,966
$
13,693,869
$
13,560,719
0.9
%
1.9
%
$
13,753,244
$
12,863,449
6.9
%
CRE:
CRE
11,616,916
11,325,679
10,812,399
2.6
7.4
11,472,102
10,649,041
7.7
Multifamily residential
3,125,001
3,042,079
2,987,311
2.7
4.6
3,083,769
2,938,577
4.9
Construction and land
477,860
549,337
594,965
(13.0
)
(19.7
)
513,401
618,022
(16.9
)
Total CRE
15,219,777
14,917,095
14,394,675
2.0
5.7
15,069,272
14,205,640
6.1
Consumer:
Residential mortgage:
Single-family residential
8,650,706
8,315,052
7,506,546
4.0
15.2
8,483,806
7,381,956
14.9
HELOCs
1,800,213
1,666,233
1,444,933
8.0
24.6
1,733,593
1,443,692
20.1
Total residential mortgage
10,450,919
9,981,285
8,951,479
4.7
16.8
10,217,399
8,825,648
15.8
Other consumer
139,608
137,058
234,900
1.9
(40.6
)
138,340
253,134
(45.3
)
Total loans (2)
$
39,622,270
$
38,729,307
$
37,141,773
2.3
%
6.7
%
$
39,178,255
$
36,147,871
8.4
%
Interest-earning assets
$
54,901,209
$
52,852,045
$
45,413,242
3.9
%
20.9
%
$
53,882,288
$
43,887,886
22.8
%
Total assets
$
57,771,837
$
55,594,283
$
48,228,914
3.9
%
19.8
%
$
56,689,075
$
46,492,211
21.9
%
Deposits:
Noninterest-bearing demand
$
19,717,315
$
18,093,696
$
13,534,873
9.0
%
45.7
%
$
18,909,991
$
12,326,291
53.4
%
Interest-bearing checking
6,671,358
6,393,034
4,687,178
4.4
42.3
6,532,965
4,844,425
34.9
Money market
12,596,515
11,573,847
9,893,816
8.8
27.3
12,088,006
9,453,599
27.9
Savings
2,676,865
2,674,476
2,149,965
0.1
24.5
2,675,677
2,113,118
26.6
Time deposits
8,518,936
9,112,662
9,634,696
(6.5
)
(11.6
)
8,814,159
9,949,351
(11.4
)
Total deposits
$
50,180,989
$
47,847,715
$
39,900,528
4.9
%
25.8
%
$
49,020,798
$
38,686,784
26.7
%
Interest-bearing liabilities
$
31,394,114
$
30,863,568
$
28,362,618
1.7
%
10.7
%
$
31,130,307
$
27,977,979
11.3
%
Stockholders’ equity
$
5,425,952
$
5,338,098
$
4,982,446
1.6
%
8.9
%
$
5,382,267
$
5,002,226
7.6
%
(1)
Includes average balances of PPP loans of $1.87 billion, $1.93 billion and $1.47 billion for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively, and $1.90 billion and $732.5 million for the six months ended June 30, 2021 and 2020, respectively.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
Three Months Ended
June 30, 2021
March 31, 2021
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
$
5,072,225
$
3,628
0.29
%
$
6,117,799
$
3,632
0.24
%
Resale agreements
2,129,567
8,021
1.51
%
1,461,900
6,099
1.69
%
AFS debt securities
7,997,005
34,690
1.74
%
6,459,875
29,100
1.83
%
Loans (2)
39,622,270
352,453
3.57
%
38,729,307
342,008
3.58
%
FHLB and FRB stock
80,142
541
2.71
%
83,164
547
2.67
%
Total interest-earning assets
54,901,209
399,333
2.92
%
52,852,045
381,386
2.93
%
Noninterest-earning assets:
Cash and due from banks
600,053
580,277
Allowance for loan losses
(607,523)
(618,589)
Other assets
2,878,098
2,780,550
Total assets
$
57,771,837
$
55,594,283
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits
$
6,671,358
$
3,777
0.23
%
$
6,393,034
$
4,214
0.27
%
Money market deposits
12,596,515
3,712
0.12
%
11,573,847
4,711
0.17
%
Savings deposits
2,676,865
2,078
0.31
%
2,674,476
1,741
0.26
%
Time deposits
8,518,936
8,431
0.40
%
9,112,662
11,156
0.50
%
Federal funds purchased and other short-term borrowings
336
—
—
%
4,703
42
3.62
%
FHLB advances
474,887
2,099
1.77
%
652,758
3,069
1.91
%
Repurchase agreements
303,118
1,991
2.63
%
300,000
1,978
2.67
%
Long-term debt and finance lease liabilities
152,099
772
2.04
%
152,088
780
2.08
%
Total interest-bearing liabilities
31,394,114
22,860
0.29
%
30,863,568
27,691
0.36
%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits
19,717,315
18,093,696
Accrued expenses and other liabilities
1,234,456
1,298,921
Stockholders’ equity
5,425,952
5,338,098
Total liabilities and stockholders’ equity
$
57,771,837
$
55,594,283
Interest rate spread
2.63
%
2.57
%
Net interest income and net interest margin
$
376,473
2.75
%
$
353,695
2.71
%
Adjusted net interest income and adjusted net interest margin (3)
$
361,096
2.73
%
$
338,678
2.70
%
(1)
Annualized.
(2)
Includes loans HFS.
(3)
Net interest income and net interest margin for the three months ended June 30, 2021 and March 31, 2021 have been adjusted for the impact of PPP loans. 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
June 30, 2021
June 30, 2020
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
$
5,072,225
$
3,628
0.29%
$
3,435,920
$
4,564
0.53%
Resale agreements
2,129,567
8,021
1.51%
1,037,473
5,514
2.14%
AFS debt securities
7,997,005
34,690
1.74%
3,719,209
21,004
2.27%
Loans (2)
39,622,270
352,453
3.57%
37,141,773
367,393
3.98%
FHLB and FRB stock
80,142
541
2.71%
78,867
301
1.54%
Total interest-earning assets
54,901,209
399,333
2.92 %
45,413,242
398,776
3.53 %
Noninterest-earning assets:
Cash and due from banks
600,053
498,908
Allowance for loan losses
(607,523)
(566,473)
Other assets
2,878,098
2,883,237
Total assets
$
57,771,837
$
48,228,914
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits
$
6,671,358
$
3,777
0.23%
$
4,687,178
$
5,404
0.46%
Money market deposits
12,596,515
3,712
0.12%
9,893,816
8,093
0.33%
Savings deposits
2,676,865
2,078
0.31%
2,149,965
1,445
0.27%
Time deposits
8,518,936
8,431
0.40%
9,634,696
31,457
1.31%
Federal funds purchased and other short-term borrowings
336
—
—%
242,185
265
0.44%
FHLB advances
474,887
2,099
1.77%
653,665
3,343
2.06%
Repurchase agreements
303,118
1,991
2.63%
418,681
3,540
3.40%
Long-term debt and finance lease liabilities
152,099
772
2.04%
682,432
(3)
1,454
0.86%
Total interest-bearing liabilities
31,394,114
22,860
0.29%
28,362,618
55,001
0.78%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits
19,717,315
13,534,873
Accrued expenses and other liabilities
1,234,456
1,348,977
Stockholders’ equity
5,425,952
4,982,446
Total liabilities and stockholders’ equity
$
57,771,837
$
48,228,914
Interest rate spread
2.63%
2.75%
Net interest income and net interest margin
$
376,473
2.75%
$
343,775
3.04%
Adjusted net interest income and adjusted net interest margin (4)
$
361,096
2.73%
$
322,949
2.96%
(1)
Annualized.
(2)
Includes loans HFS.
(3)
Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.
(4)
Net interest income and net interest margin for the three months ended June 30, 2021 and June 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the three months ended June 30, 2020 has been adjusted for advances from the PPPLF. 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
Six Months Ended
June 30, 2021
June 30, 2020
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
$
5,592,124
$
7,260
0.26%
$
3,204,463
$
15,672
0.98%
Resale agreements (2)
1,797,578
14,120
1.58%
959,807
11,139
2.33%
AFS debt securities
7,232,686
63,790
1.78%
3,496,974
41,146
2.37%
Loans (3)
39,178,255
694,461
3.57%
36,147,871
779,262
4.34%
FHLB and FRB stock
81,645
1,088
2.69%
78,771
747
1.91%
Total interest-earning assets
53,882,288
780,719
2.92%
43,887,886
847,966
3.89%
Noninterest-earning assets:
Cash and due from banks
590,219
504,710
Allowance for loan losses
(613,026
)
(529,385
)
Other assets
2,829,594
2,629,000
Total assets
$
56,689,075
$
46,492,211
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits
$
6,532,965
$
7,991
0.25%
$
4,844,425
$
15,650
0.65%
Money market deposits
12,088,006
8,423
0.14%
9,453,599
30,341
0.65%
Savings deposits
2,675,677
3,819
0.29%
2,113,118
3,262
0.31%
Time deposits
8,814,159
19,587
0.45%
9,949,351
73,549
1.49%
Federal funds purchased and other short-term borrowings
2,508
42
3.38%
151,081
821
1.09%
FHLB advances
563,331
5,168
1.85%
673,511
7,509
2.24%
Repurchase agreements (2)
301,567
3,969
2.65%
375,549
7,531
4.03%
Long-term debt and finance lease liabilities
152,094
1,552
2.06%
417,345
(4)
2,821
1.36%
Total interest-bearing liabilities
31,130,307
50,551
0.33%
27,977,979
141,484
1.02%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits
18,909,991
12,326,291
Accrued expenses and other liabilities
1,266,510
1,185,715
Stockholders’ equity
5,382,267
5,002,226
Total liabilities and stockholders’ equity
$
56,689,075
$
46,492,211
Interest rate spread
2.59%
2.87%
Net interest income and net interest margin
$
730,168
2.73%
$
706,482
3.24%
Adjusted net interest income and adjusted net interest margin (5)
$
699,774
2.71%
$
685,656
3.20%
(1)
Annualized.
(2)
Average balances of resale and repurchase agreements for the six months ended June 30, 2020 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 and gross repurchase agreements for the six months ended June 30, 2020 were 2.32% and 3.76%, respectively.
(3)
Includes loans HFS.
(4)
Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.
(5)
Net interest income and net interest margin for the six months ended June 30, 2021 and June 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the six months ended June 30, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 14.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
Three Months Ended (1)
June 30, 2021 Basis Point Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Return on average assets
1.56
%
1.50
%
0.83
%
6
bps
73
bps
Return on average equity
16.61
%
15.57
%
8.02
%
104
859
Return on average tangible equity (2)
18.28
%
17.17
%
8.96
%
111
932
Interest rate spread
2.63
%
2.57
%
2.75
%
6
(12)
Net interest margin
2.75
%
2.71
%
3.04
%
4
(29)
Adjusted net interest margin (2)
2.73
%
2.70
%
2.96
%
3
(23)
Average loan yield
3.57
%
3.58
%
3.98
%
(1)
(41)
Adjusted average loan yield (2)
3.58
%
3.60
%
3.90
%
(2)
(32)
Yield on average interest-earning assets
2.92
%
2.93
%
3.53
%
(1)
(61)
Average cost of interest-bearing deposits
0.24
%
0.30
%
0.71
%
(6)
(47)
Average cost of deposits
0.14
%
0.18
%
0.47
%
(4)
(33)
Average cost of funds
0.18
%
0.23
%
0.53
%
(5)
(35)
Adjusted pre-tax, pre-provision profitability ratio (2)
1.97
%
1.91
%
2.05
%
6
(8)
Adjusted noninterest expense/average assets (2)
1.12
%
1.20
%
1.28
%
(8)
(16)
Efficiency ratio
42.60
%
44.79
%
46.25
%
(219)
(365)
Adjusted efficiency ratio (2)
36.30
%
38.68
%
38.37
%
(238)
bps
(207)
bps
Six Months Ended (1)
June 30, 2021 Basis Point Change
June 30, 2021
June 30, 2020
Yr-o-Yr
Return on average assets
1.53
%
1.06
%
47
bps
Return on average equity
16.10
%
9.82
%
628
Return on average tangible equity (2)
17.73
%
10.95
%
678
Interest rate spread
2.59
%
2.87
%
(28)
Net interest margin
2.73
%
3.24
%
(51)
Adjusted net interest margin (2)
2.71
%
3.20
%
(49)
Average loan yield
3.57
%
4.34
%
(77)
Adjusted average loan yield (2)
3.59
%
4.30
%
(71)
Yield on average interest-earning assets
2.92
%
3.89
%
(97)
Average cost of interest-bearing deposits
0.27
%
0.94
%
(67)
Average cost of deposits
0.16
%
0.64
%
(48)
Average cost of funds
0.20
%
0.71
%
(51)
Adjusted pre-tax, pre-provision profitability ratio (2)
1.94
%
2.18
%
(24)
Adjusted noninterest expense/average assets (2)
1.16
%
1.36
%
(20)
Efficiency ratio
43.67
%
44.65
%
(98)
Adjusted efficiency ratio (2)
37.47
%
38.38
%
(91)
bps
(1)
Annualized except for efficiency ratio.
(2)
See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13 and 14.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10
Three Months Ended June 30, 2021
Commercial
Consumer
Total
C&I
Total CRE
Total Residential Mortgage
Other Consumer
Total
Allowance for loan losses, March 31, 2021
$
394,084
$
192,895
$
18,509
$
2,018
$
607,506
(Reversal of) provision for credit losses on loans
(a)
(22,586
)
10,747
859
2,209
(8,771
)
Gross charge-offs
(10,572
)
(4,456
)
—
(32
)
(15,060
)
Gross recoveries
1,338
344
100
3
1,785
Total net (charge-offs) recoveries
(9,234
)
(4,112
)
100
(29
)
(13,275
)
Foreign currency translation adjustment
264
—
—
—
264
Allowance for loan losses, June 30, 2021
$
362,528
$
199,530
$
19,468
$
4,198
$
585,724
Three Months Ended March 31, 2021
Commercial
Consumer
Total
C&I
Total CRE
Total Residential Mortgage
Other Consumer
Total
Allowance for loan losses, December 31, 2020
$
398,040
$
201,603
$
18,210
$
2,130
$
619,983
Provision for (reversal of) credit losses on loans
(a)
3,839
(3,076
)
398
(113
)
1,048
Gross charge-offs
(8,436
)
(7,283
)
(179
)
(1
)
(15,899
)
Gross recoveries
760
1,651
80
2
2,493
Total net (charge-offs) recoveries
(7,676
)
(5,632
)
(99
)
1
(13,406
)
Foreign currency translation adjustment
(119
)
—
—
—
(119
)
Allowance for loan losses, March 31, 2021
$
394,084
$
192,895
$
18,509
$
2,018
$
607,506
Three Months Ended June 30, 2020
Commercial
Consumer
Total
C&I
Total CRE
Total Residential Mortgage
Other Consumer
Total
Allowance for loan losses, March 31, 2020
$
362,629
$
160,367
$
30,703
$
3,304
$
557,003
Provision for (reversal of) credit losses on loans
(a)
37,862
58,749
(1,462
)
(849
)
94,300
Gross charge-offs
(20,378
)
(320
)
(221
)
(30
)
(20,949
)
Gross recoveries
602
853
161
93
1,709
Total net (charge-offs) recoveries
(19,776
)
533
(60
)
63
(19,240
)
Foreign currency translation adjustment
8
—
—
—
8
Allowance for loan losses, June 30, 2020
$
380,723
$
219,649
$
—
$
29,181
$
2,518
$
632,071
EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
Six Months Ended June 30, 2021
Commercial
Consumer
Total
C&I
Total CRE
Total Residential Mortgage
Other Consumer
Total
Allowance for loan losses, December 31, 2020
$
398,040
$
201,603
$
18,210
$
2,130
$
619,983
(Reversal of) provision for credit losses on loans
(a)
(18,747
)
7,671
1,257
2,096
(7,723
)
Gross charge-offs
(19,008
)
(11,739
)
(179
)
(33
)
(30,959
)
Gross recoveries
2,098
1,995
180
5
4,278
Total net (charge-offs) recoveries
(16,910
)
(9,744
)
1
(28
)
(26,681
)
Foreign currency translation adjustment
145
—
—
—
145
Allowance for loan losses, June 30, 2021
$
362,528
$
199,530
$
19,468
$
4,198
$
585,724
Six Months Ended June 30, 2020
Commercial
Consumer
Total
C&I
Total CRE
Total Residential Mortgage
Other Consumer
Total
Allowance for loan losses, December 31, 2019
$
238,376
$
82,739
$
33,792
$
3,380
$
358,287
Impact of ASU 2016-13 adoption
74,237
54,168
(5,468
)
2,221
125,158
Allowance for loan losses, January 1, 2020
$
312,613
$
136,907
$
28,324
$
5,601
$
483,445
Provision for (reversal of) credit losses on loans
(a)
98,480
72,947
650
(3,121
)
168,956
Gross charge-offs
(32,355
)
(1,274
)
(221
)
(56
)
(33,906
)
Gross recoveries
2,177
11,069
428
94
13,768
Total net (charge-offs) recoveries
(30,178
)
9,795
207
38
(20,138
)
Foreign currency translation adjustment
(192
)
—
—
—
(192
)
Allowance for loan losses, June 30, 2020
$
380,723
$
219,649
$
29,181
$
2,518
$
632,071
Three Months Ended
Six Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Unfunded Credit Facilities
Allowance for unfunded credit commitments, beginning of period (1)
$
32,529
$
33,577
$
20,829
$
33,577
$
11,158
Impact of ASU 2016-13 adoption
—
—
—
—
10,457
(Reversal of) provision for credit losses on unfunded credit commitments
(b)
(6,229
)
(1,048
)
8,143
(7,277
)
7,357
Allowance for unfunded credit commitments, end of period (1)
$
26,300
$
32,529
$
28,972
$
26,300
$
28,972
Provision for credit losses
(a)+(b)
$
(15,000
)
$
—
$
102,443
$
(15,000
)
$
176,313
(1)
Included in Accrued expense and other liabilities on the Consolidated Balance Sheet.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CRITICIZED LOANS, NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS
($ in thousands)
(unaudited)
Table 11
Criticized Loans
June 30, 2021
March 31, 2021
June 30, 2020
Special mention loans
386,807
504,226
575,870
Classified loans
645,180
712,693
683,744
Total criticized loans
$
1,031,987
$
1,216,919
$
1,259,614
Nonperforming Assets
June 30, 2021
March 31, 2021
June 30, 2020
Nonaccrual loans:
Commercial:
C&I
$
83,225
$
125,536
$
84,823
Total CRE
81,573
74,727
57,351
Consumer:
Total residential mortgage
30,489
29,173
34,138
Other consumer
2,503
2,526
2,508
Total nonaccrual loans
197,790
231,962
178,820
Other real estate owned, net
14,914
15,824
19,504
Other nonperforming assets
13,025
10,360
3,890
Total nonperforming assets
$
225,729
$
258,146
$
202,214
Credit Quality Ratios
June 30, 2021
March 31, 2021
June 30, 2020
Annualized quarterly net charge-offs to average loans HFI
0.13
%
0.14
%
0.21
%
Special mention loans to loans HFI
0.97
%
1.27
%
1.55
%
Classified loans to loans HFI
1.61
%
1.80
%
1.84
%
Criticized loans to loans HFI
2.58
%
3.07
%
3.38
%
Nonperforming assets to total assets
0.38
%
0.45
%
0.41
%
Nonaccrual loans to loans HFI
0.49
%
0.59
%
0.48
%
Allowance for loan losses to loans HFI
1.46
%
1.53
%
1.70
%
EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 12
Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of core deposit intangibles and the extinguishment cost on repurchase agreement. 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, 2021
March 31, 2021
June 30, 2020
Net interest income before provision for credit losses
(a)
$
376,473
$
353,695
$
343,775
Total noninterest income (1)
68,431
72,866
55,707
Total revenue
(b)
$
444,904
$
426,561
$
399,482
Total noninterest expense (1)
(c)
$
189,523
$
191,077
$
184,766
Less: Amortization of tax credit and other investments (1)
(27,291
)
(25,358
)
(21,829
)
Amortization of core deposit intangibles
(710
)
(732
)
(931
)
Repurchase agreements’ extinguishment cost
—
—
(8,740
)
Adjusted noninterest expense
(d)
$
161,522
$
164,987
$
153,266
Efficiency ratio
(c)/(b)
42.60
%
44.79
%
46.25
%
Adjusted efficiency ratio
(d)/(b)
36.30
%
38.68
%
38.37
%
Adjusted pre-tax, pre-provision income
(b)-(d) = (e)
$
283,382
$
261,574
$
246,216
Average total assets
(f)
$
57,771,837
$
55,594,283
$
48,228,914
Adjusted pre-tax, pre-provision profitability ratio (2)
(e)/(f)
1.97
%
1.91
%
2.05
%
Adjusted noninterest expense/average assets (2)
(d)/(f)
1.12
%
1.20
%
1.28
%
Six Months Ended
June 30, 2021
June 30, 2020
Net interest income before provision for credit losses
(g)
$
730,168
$
706,482
Total noninterest income (1)
141,297
111,213
Total revenue
(h)
871,465
817,695
Total noninterest expense (1)
(i)
$
380,600
$
365,099
Less: Amortization of tax credit and other investments (1)
(52,649
)
(40,611
)
Amortization of core deposit intangibles
(1,442
)
(1,884
)
Repurchase agreements’ extinguishment cost
—
(8,740
)
Adjusted noninterest expense
(j)
$
326,509
$
313,864
Efficiency ratio
(i)/(h)
43.67
%
44.65
%
Adjusted efficiency ratio
(j)/(h)
37.47
%
38.38
%
Adjusted pre-tax, pre-provision income
(h)-(j) = (k)
$
544,956
$
503,831
Average total assets
(l)
$
56,689,075
$
46,492,211
Adjusted pre-tax, pre-provision profitability ratio (2)
(k)/(l)
1.94
%
2.18
%
Adjusted noninterest expense/average assets (2)
(j)/(l)
1.16
%
1.36
%
(1)
In the fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.
(2)
Annualized.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 13
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, 2021
March 31, 2021
June 30, 2020
Stockholders’ equity
(a)
$
5,547,548
$
5,285,027
$
4,987,243
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(10,309
)
(11,151
)
(13,490
)
Tangible equity
(b)
$
5,071,542
$
4,808,179
$
4,508,056
Total assets
(c)
$
59,854,876
$
56,874,146
$
49,407,593
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(10,309
)
(11,151
)
(13,490
)
Tangible assets
(d)
$
59,378,870
$
56,397,298
$
48,928,406
Total stockholders’ equity to total assets ratio
(a)/(c)
9.27
%
9.29
%
10.09
%
Tangible equity to tangible assets ratio
(b)/(d)
8.54
%
8.53
%
9.21
%
Return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing 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.
Three Months Ended
Six Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Net Income
$
224,742
$
204,994
$
99,352
$
429,736
$
244,176
Add: Amortization of core deposit intangibles
710
732
931
1,442
1,884
Amortization of mortgage servicing assets
420
414
458
834
1,042
Tax effect of amortization adjustments (2)
(321
)
(325
)
(394
)
(646
)
(830
)
Tangible net income
(e)
$
225,551
$
205,815
$
100,347
$
431,366
$
246,272
Average stockholders’ equity
$
5,425,952
$
5,338,098
$
4,982,446
$
5,382,267
$
5,002,226
Less: Average goodwill
(465,697
)
(465,697
)
(465,697
)
(465,697
)
(465,697
)
Average other intangible assets (1)
(10,827
)
(11,594
)
(14,247
)
(11,209
)
(14,918
)
Average tangible equity
(f)
$
4,949,428
$
4,860,807
$
4,502,502
$
4,905,361
$
4,521,611
Return on average tangible equity (3)
(e)/(f)
18.28
%
17.17
%
8.96
%
17.73
%
10.95
%
(1)
Includes core deposit intangibles and mortgage servicing assets.
(2)
Applied statutory tax rate of 28.37% for the three and six months ended June 30, 2021, and the three months ended March 31, 2021. Applied statutory tax rate of 28.35% for the three and six months ended June 30, 2020.
(3)
Annualized.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 14
In April 2020, the Company started accepting applications under the PPP administered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act and began to originate loans to qualified small businesses. In January 2021, the Company began processing applications under the second round of the SBA’s PPP in response to the Consolidated Appropriations Act, 2021 signed by the President on December 27, 2020. The PPP ended on May 31, 2021.
These loans are included in the Company’s C&I portfolio, have an interest rate of one percent and are 100% guaranteed by the SBA. Loan processing fees paid to the Company from the SBA are accounted for as loan origination fees, where net deferred fees are recognized on a straight line basis over the estimated life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period. The Company drew down $1.44 billion from the PPPLF during the second quarter of 2020. The remaining balance of $1.43 billion as of September 2020 was repaid in full during the fourth quarter of 2020.
Adjusted loan yield and adjusted net interest margin for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, and six months ended June 30, 2021 and 2020 exclude the impact of PPP loans. Net interest margin for the three and six months ended June 30, 2020 has also been adjusted for advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provide comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance.
Three Months Ended
Six Months Ended
Yield on Average Loans
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Interest income on loans
(a)
$
352,453
$
342,008
$
367,393
$
694,461
$
779,262
Less: Interest income on PPP loans
(15,377
)
(15,017
)
(21,289
)
(30,394
)
(21,289
)
Adjusted interest income on loans
(b)
$
337,076
$
326,991
$
346,104
$
664,067
$
757,973
Average loans
(c)
$
39,622,270
$
38,729,307
$
37,141,773
$
39,178,255
$
36,147,871
Less: Average PPP loans
(1,870,385
)
(1,931,071
)
(1,465,013
)
(1,900,560
)
(732,506
)
Adjusted average loans
(d)
$
37,751,885
$
36,798,236
$
35,676,760
$
37,277,695
$
35,415,365
Average loan yield (1)
(a)/(c)
3.57
%
3.58
%
3.98
%
(1
)
3.57
%
4.34
%
Adjusted average loan yield (1)
(b)/(d)
3.58
%
3.60
%
3.90
%
(1
)
3.59
%
4.30
%
Net Interest Margin
Net interest income
(e)
$
376,473
$
353,695
$
343,775
$
730,168
$
706,482
Less: Interest income on PPP loans
(15,377
)
(15,017
)
(21,289
)
(30,394
)
(21,289
)
Add: Interest expense on advances from the PPPLF
—
—
463
—
463
Adjusted net interest income
(f)
$
361,096
$
338,678
$
322,949
$
699,774
$
685,656
Average interest-earning assets
(g)
$
54,901,209
$
52,852,045
$
45,413,242
$
53,882,288
$
43,887,886
Less: Average PPP loans
(1,870,385
)
(1,931,071
)
(1,465,013
)
(1,900,560
)
(732,506
)
Adjusted average interest-earning assets
(h)
$
53,030,824
$
50,920,974
$
43,948,229
$
51,981,728
$
43,155,380
Net interest margin (1)
(e)/(g)
2.75
%
2.71
%
3.04
%
(1
)
2.73
%
3.24
%
Adjusted net interest margin (1)
(f)/(h)
2.73
%
2.70
%
2.96
%
(1
)
2.71
%
3.20
%
(1)
Annualized.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210722005257/en/
FOR INVESTOR INQUIRIES, CONTACT: Irene Oh Chief Financial Officer T: (626) 768-6360 E: irene.oh@eastwestbank.com
Julianna Balicka Director of Investor Relations and Corporate Finance T: (626) 768-6985 E: julianna.balicka@eastwestbank.com
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