PASADENA, Calif.--(BUSINESS WIRE)--East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the third quarter of 2016. For the third quarter of 2016, net income was $110.1 million or $0.76 per diluted share.
“East West is pleased to report strong earnings of $110.1 million or $0.76 per diluted share for the third quarter of 2016, an increase in diluted earnings per share of $0.05 or 7% from the prior quarter and $0.11 or 17% from the third quarter of 2015,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “For the third quarter of 2016, East West achieved solid profitability, earning a return on average assets of 1.33% and a return on average equity of 13.1%.”
Ng continued, “Third quarter of 2016 results reflect East West’s continued focus on prudent growth and strong profitability. Total gross loans grew by 8% annualized on a sequential quarter basis; excluding the impact of variable accretion income, net interest margin expanded from the prior quarter. Strong core fee income growth increased total revenue to $303.5 million, an increase of 2% quarter over quarter, and ongoing expense discipline kept the efficiency ratio at a low 44.8%, supporting a steady pre-tax, pre-provision profitability ratio of 2.0%. Total gross loans grew $484.8 million from June 30, 2016 to a record $24.8 billion as of September 30, 2016. Quarter over quarter, total deposits also grew $375.2 million from June 30, 2016 to $28.6 billion as of September 30, 2016.”
“Throughout the year, the Company has made important progress in strengthening our risk management infrastructure and technology, to support our differentiated strategy as the bridge between the East and the West, in which we continue to see attractive business growth opportunities,” added Ng.
Earlier this month, East West announced the appointment of Gregory L. Guyett as President and Chief Operating Officer. “Greg is an excellent addition to our leadership team. With a 30 year career in international and corporate banking, he brings a skillset and experience that is additive to East West as we execute on our strategic priorities, grow our market share and continue our strong history of growth and performance,” concluded Ng.
Third Quarter Summary
- Solid Third Quarter Earnings – Net income totaled $110.1 million or $0.76 per diluted share for the third quarter of 2016. Compared to the second quarter of 2016, net income increased $6.9 million or $0.05 per diluted share, both up by 7%. The increase in net income in the third quarter of 2016 compared to the prior quarter was largely attributable to higher noninterest income and a lower effective tax rate. Compared to the third quarter of 2015, net income for the third quarter of 2016 increased $16.0 million and diluted earnings per share increased $0.11, both up by 17%.
- Record Loans – As of September 30, 2016, gross loans receivable totaled $24.8 billion, up $484.8 million from $24.3 billion as of June 30, 2016, equivalent to an 8% annualized growth. The largest increase in loans during the third quarter of 2016 was in commercial loans, which increased by $194.2 million or 2% linked quarter, and $738.9 million or 9% year over year. Loan portfolio distribution continues to be stable and well balanced between commercial lending, commercial real estate, and consumer loans including residential mortgage.
- Stable Deposits – As of September 30, 2016, total deposits were $28.6 billion, an increase of $375.2 million from $28.2 billion as of June 30, 2016, equivalent to 5% annualized growth. Core deposits grew to a record $23.0 billion as of September 30, 2016, up $509.2 million or 2% linked quarter and $2.9 billion or 14% year over year. Core deposits comprised 80% of total deposits at the end of the third quarter of 2016, a favorable mix shift from 75% at the end of the prior year quarter.
- Stable Net Interest Income – Net interest income totaled $254.1 million for the third quarter of 2016, a slight increase of $0.6 million from the second quarter of 2016. Adjusted interest income on loans grew by $7.1 million or 3% linked quarter, fully offsetting a $6.1 million decline in Accounting Standards Codification (“ASC”) 310-30 discount accretion income. Net interest income increased by $13.9 million or 6% from the prior year quarter, primarily driven by growth of the loan portfolio.
- Expanding Net Interest Margin – Excluding the impact of declining ASC 310-30 discount accretion income, adjusted net interest margin in the third quarter of 2016 was 3.16%, a sequential increase of three basis points from 3.13% in the second quarter of 2016, and a year over year increase of ten basis points from 3.06% in the prior year quarter. The year over year adjusted net interest margin expansion reflects improvement in adjusted loan yields and an increased contribution from noninterest-bearing deposits in the funding mix.
- Asset Quality – The provision for loan losses ratio in the current quarter was 0.19% of average loans, compared to 0.12% of average loans in the prior quarter. In the third quarter of 2016, net charge-offs increased to 0.37% of average loans, compared to 0.01% of average loans in the second quarter of 2016. Of the loans charged off in the current quarter, approximately 75% of the charge-off amounts had previously been provided for as of June 30, 2016. The increase in charge-offs for the third quarter of 2016 primarily came from three larger commercial loans, which had been placed on nonaccrual status a year ago; the loans were in unrelated industries.
- Solid Capital Ratios – Linked quarter, East West’s capital ratios increased modestly. Tangible equity per common share grew $0.56 or by 3% linked quarter to $19.92 as of September 30, 2016, and the tangible equity to tangible assets ratio increased to 8.8%, up from 8.6% as of June 30, 2016. The Common Equity Tier 1 (“CET1”) capital ratio was 10.9% as of September 30, 2016, compared to 10.7% as of June 30, 2016. The total risk-based capital ratio was 12.5% as of September 30, 2016, compared to 12.4% as of June 30, 2016. The Tier 1 leverage capital ratio was 8.9% as of September 30, 2016, compared to 8.7% as of June 30, 2016.
Quarterly Results Summary:
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Three Months Ended |
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| ($ in millions, except per share data) | September 30, 2016 | June 30, 2016 | September 30, 2015 | ||||||||||||
| Net income | $ | 110.14 | $ | 103.28 | $ | 94.10 | |||||||||
| Earnings per share (diluted) | $ | 0.76 | $ | 0.71 | $ | 0.65 | |||||||||
| Tangible equity (1) per common share | $ | 19.92 | $ | 19.36 | $ | 17.79 | |||||||||
| Return on average assets (2) | 1.33 | % | 1.27 | % | 1.22 | % | |||||||||
| Return on average equity (2) | 13.08 | % | 12.71 | % | 12.23 | % | |||||||||
|
Adjusted pre-tax, pre-provision profitability ratio (1)(2) |
2.03 | % |
2.04 |
% |
2.28 | % | |||||||||
| Net interest income | $ | 254.15 | $ | 253.58 | $ | 240.29 | |||||||||
| Adjusted net interest income (1) | $ | 246.98 | $ | 240.27 | $ | 222.29 | |||||||||
| Net interest margin (2) | 3.26 | % | 3.31 | % | 3.32 | % | |||||||||
|
Adjusted net interest margin (1)(2) |
3.16 | % |
3.13 |
% |
3.06 |
% | |||||||||
| Cost of deposits (2) | 0.30 | % | 0.29 | % | 0.28 | % | |||||||||
| Adjusted efficiency ratio (1) | 44.77 | % | 44.59 | % | 40.06 | % | |||||||||
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(1) See reconciliation of the GAAP to non-GAAP financial measures in Tables 11, 12, and 13. |
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(2) Annualized. |
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Management Guidance
The Company is providing guidance for the remainder of 2016. Management currently estimates that fully diluted earnings per share for the fourth quarter of 2016 will range from $0.70 to $0.72, resulting in fully diluted earnings per share for the full year of 2016 ranging from $2.91 to $2.93, an increase of $0.25 to $0.27 or 9% to 10% from $2.66 for the full year of 2015. This is an increase from the previous guidance range of $2.83 to $2.87. The revised guidance factors in the results of the third quarter and is a penny increase to our previous expectations for the fourth quarter of 2016.
Balance Sheet Summary
Total assets as of September 30, 2016 were $33.3 billion, an increase of $303.1 million or 1% from $33.0 billion as of June 30, 2016. The sequential quarter increase in total assets during the third quarter of 2016 was largely due to an increase of $484.8 million or 2% in total gross loans, partially offset by a net decrease of $350.0 million in securities purchased under resale agreements.
Total Loans
Total gross loans receivable as of September 30, 2016 were $24.8 billion, an increase of $484.8 million compared to $24.3 billion as of June 30, 2016, equivalent to 8% annualized growth. The largest increase in loans during the third quarter of 2016 was in commercial loans, which increased by $194.2 million, or 2% linked quarter, and $738.9 million or 9% year over year.
During the third quarter of 2016, the average loan portfolio of $24.3 billion grew by $420.4 million or 7% annualized on a sequential quarter basis, up from $23.9 billion in the second quarter of 2016, and grew by $1.9 billion or 9% from $22.4 billion in the prior year quarter.
Total Deposits
As of September 30, 2016, total deposits were $28.6 billion, an increase of $375.2 million compared to $28.2 billion as of June 30, 2016, equivalent to 5% annualized growth.
During the third quarter of 2016, average deposit balances of $28.3 billion grew by 3% annualized on a sequential quarter basis, up from $28.1 billion in the second quarter of 2016, and grew by 8% from $26.2 billion in the prior year quarter. Average core deposits comprised 80% of average deposits in the third quarter of 2016, compared to 79% in the previous quarter and 75% in the third quarter of 2015, reflecting an improved funding mix. The largest growth in average core deposits came from noninterest-bearing demand deposits, which increased by $278.0 million linked quarter, equivalent to 12% annualized growth. Noninterest-bearing demand deposits comprised 33% of total average deposits in the current quarter, a favorable mix shift from 30% in the prior year quarter.
THIRD QUARTER 2016 OPERATING RESULTS
Net Interest Income
Net interest income totaled $254.1 million for the third quarter of 2016, a slight increase of $0.6 million from the second quarter of 2016. Adjusted interest income on loans grew by $7.1 million or 3% linked quarter, fully offsetting a $6.1 million decline in ASC 310-30 discount accretion income. Net interest income increased by $13.9 million or 6% from the prior year quarter, primarily driven by growth of the loan portfolio, which significantly exceeded year over year declines in ASC 310-30 discount accretion income.
GAAP net interest margin was 3.26% in the third quarter of 2016, 3.31% in the second quarter of 2016, and 3.32% for the third quarter of 2015, reflecting a decline in ASC 310-30 discount accretion income, which was $7.2 million, $13.3 million, and $18.0 million in those three quarters, respectively.
Excluding the impact of the ASC 310-30 discount accretion income, third quarter 2016 adjusted net interest margin was 3.16%, a sequential increase of three basis points from 3.13% in the second quarter of 2016, and a year over year increase of ten basis points from 3.06% in the prior year quarter. The year over year adjusted net interest margin expansion reflects improvement in adjusted loan yields and an increased contribution from noninterest-bearing deposits in the funding mix.
Excluding the impact of ASC 310-30 discount accretion, adjusted average loan yields were stable at 4.05% linked quarter and improved by five basis points from 4.00% in the prior year quarter.
Cost of all deposits was 0.30% for the third quarter of 2016, compared to 0.29% and 0.28% for the second quarter of 2016 and third quarter of 2015, respectively. The cost of interest-bearing deposits was 0.44% for the third quarter of 2016, compared to 0.43% and 0.40% for the second quarter of 2016 and third quarter of 2015, respectively.
Noninterest Income & Expense
Noninterest Income
Noninterest income of $49.3 million for the third quarter of 2016 increased $5.1 million or 11% from $44.3 million for the second quarter of 2016. The sequential quarter increase in noninterest income was largely due to a $3.7 million increase in other fees and other operating income, which includes a $2.0 million increase in fees from assisting customers to hedge interest rates; a $1.9 million increase in ancillary loan fees, a $1.3 million increase in wealth management fees, partially offset by a $1.8 million decrease in net gains on sales of securities and loans.
The following table presents core fees and other operating income for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, excluding net gains on the sales of loans and securities:
|
Three Months Ended |
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| ($ in thousands) | September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||
| Branch fees | $ | 10,408 | $ | 10,353 | $ | 9,982 | ||||||
| Letters of credit fees and foreign exchange income | 10,908 | 10,943 | 7,468 | |||||||||
| Ancillary loan fees | 6,135 | 4,285 | 4,839 | |||||||||
| Wealth management fees | 4,033 | 2,778 | 4,374 | |||||||||
| Other fees and operating income | 13,909 | 10,187 | 9,477 | |||||||||
| Total fees and operating income | $ | 45,393 | $ | 38,546 | $ | 36,140 | ||||||
Noninterest Expense & Effective Tax Rate
Noninterest expense for the third quarter of 2016 totaled $170.5 million, a $21.6 million or 15% increase from $148.9 million for the second quarter of 2016, reflecting an $18.6 million increase in the amortization of tax credit investments, which was $32.6 million in the current quarter compared to $14.0 million in the prior quarter. Adjusted operating expenses were $135.9 million for the current quarter, an increase of 2% from $132.8 million in the second quarter of 2016. The Company’s adjusted efficiency ratio was 44.8% in the third quarter of 2016, compared to 44.6% in the prior quarter.
The Company’s effective tax rate for the third quarter of 2016 was 10.8%, compared to 27.7% and 32.3% for the second quarter of 2016 and the third quarter of 2015, respectively, reflecting an increased level of investment in tax-advantaged credits in renewable energy projects. In addition, income tax expense benefitted from a $3.0 million favorable state tax settlement during the quarter. The Company currently estimates that the effective tax rate for the full year of 2016 will approximate 23%.
Credit Quality
The allowance for loan losses totaled $255.8 million as of September 30, 2016, compared to $266.8 million and $264.4 million as of June 30, 2016 and September 30, 2015, respectively. During the quarter, the Company recorded a provision for loan losses of $11.5 million (19 basis points of average loans, annualized), compared to $7.1 million for the second quarter of 2016 (12 basis points of average loans, annualized) and $8.4 million for the third quarter of 2015 (15 basis points of average loans, annualized). In the third quarter of 2016, net charge-offs were $22.5 million (37 basis points of average loans, annualized), compared to net charge-offs of $619 thousand (1 basis point of average loans, annualized) in the prior quarter and $5.2 million (9 basis points of average loans, annualized) in the prior year quarter. Of the loans charged off in the current quarter, approximately 75% of the charge-off amounts had previously been provided for as of June 30, 2016 as a component of the allowance for loan losses. Three larger commercial loans accounted for $21.0 million of the charge-offs in the third quarter of 2016; the loans were in unrelated industries and were placed on nonaccrual status a year ago.
The allowance for loan losses to loans held-for-investment ratio decreased to 1.03% as of September 30, 2016, from 1.10% and 1.17% as of June 30, 2016 and September 30, 2015, respectively. The decline in the allowance for loan losses as of September 30, 2016 compared to June 30, 2016 was largely a result of charging off specific reserves as discussed above.
Nonperforming assets decreased $46.0 million or 26% to $130.5 million or 0.39% of total assets as of September 30, 2016, compared to $176.5 million or 0.54% of total assets as of June 30, 2016.
Capital Strength
Capital levels for East West modestly increased linked quarter, from already solid levels. East West’s CET1 capital ratio was 10.9% as of September 30, 2016, compared to 10.7% as of June 30, 2016. The total risk-based capital ratio was 12.5% as of September 30, 2016, compared to 12.4% as of June 30, 2016. The Tier 1 leverage capital ratio was 8.9% as of September 30, 2016, compared to 8.7% as of June 30, 2016.
| Regulatory Capital Metrics | Basel III | ||||||||||||||||||||||||||||
|
($ in millions) |
September 30, |
June 30, |
September 30, |
Minimum |
Well |
Fully Phased- |
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| CET1 capital ratio | 10.9 | % | 10.7 | % | 10.8 | % | 4.5 | % | 6.5 | % | 7.0 | % | |||||||||||||||||
| Tier 1 risk-based capital ratio | 10.9 | % | 10.7 | % | 10.9 | % | 6.0 | % | 8.0 | % | 8.5 | % | |||||||||||||||||
| Total risk-based capital ratio | 12.5 | % | 12.4 | % | 12.6 | % | 8.0 | % | 10.0 | % | 10.5 | % | |||||||||||||||||
| Tier 1 leverage capital ratio | 8.9 | % | 8.7 | % | 8.7 | % | 4.0 | % | 5.0 | % | 4.0 | % | |||||||||||||||||
| Risk-Weighted Assets (“RWA”) (b) | $ |
26,486 |
$ | 26,160 | $ | 23,983 | N/A | N/A | N/A | ||||||||||||||||||||
|
N/A |
Not applicable. |
|
|
(a) |
The Company’s September 30, 2016 regulatory capital ratios and RWA are preliminary. |
|
|
(b) |
Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA. |
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Dividend Payout and Capital Actions
East West’s Board of Directors has declared fourth quarter 2016 dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share is payable on November 15, 2016 to stockholders of record on November 1, 2016.
Conference Call
East West will host a conference call to discuss third quarter 2016 earnings with the public on Thursday, October 20, 2016 at 8:30 a.m. PDT/11:30 a.m. EDT. The public and investment community are invited to listen as management discusses third quarter 2016 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 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 October 20, 2016 at 10:00 a.m. PDT/1:00 p.m. EDT through November 20, 2016. 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: 10092781.
About East West
East West Bancorp, Inc. is a publicly owned company with total assets of $33.3 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, Nevada, New York, Massachusetts, 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 the Company’s 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,” 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. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; changes in the commercial and consumer real estate markets; changes in our costs of operation, compliance and expansion; changes in the U.S. economy, including inflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; 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 U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and California Department of Business Oversight — Division of Financial Institutions; changes in the economy of and monetary policy in the People’s Republic of China; changes in income tax laws and regulations; 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 the equity and debt securities markets; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; fluctuations of our stock price; fluctuations in foreign currency exchange rates; success and timing of our business strategies; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions; impact of potential federal tax increases and spending cuts; impact of adverse judgments or settlements in litigation or of regulatory enforcement actions; changes in our ability to receive dividends from our subsidiaries; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; impact of natural or man-made disasters or calamities or conflicts; continuing consolidation in the financial services industry; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices and cost of operations; impact of adverse changes to our credit ratings from the major credit rating agencies; 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; the effect of the current low interest rate environment or changes in interest rates on our net interest income and net interest margin; the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/ or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; and other factors set forth in the Company’s public reports including its Annual Report on Form 10-K for the year ended December 31, 2015, 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, the Company’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. The Company assumes no obligation to update such forward-looking statements.
| EAST WEST BANCORP, INC. | |||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||
| ($ in thousands, except per share data) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 1 | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Assets | |||||||||||||||
| Cash and cash equivalents | $ | 1,666,832 | $ | 1,592,796 | $ | 1,875,703 | |||||||||
| Short-term investments | 307,473 | 229,979 | 258,028 | ||||||||||||
| Securities purchased under resale agreements (“resale agreements”) (1) | 1,500,000 | 1,850,000 | 1,400,000 | ||||||||||||
| Investment securities | 3,391,085 | 3,399,540 | 2,952,277 | ||||||||||||
| Loans held for sale | 47,719 | 51,290 | 349,375 | ||||||||||||
| Loans held-for-investment (net of allowance for loan losses of $255,812, $266,768 and $264,430) | 24,476,150 | 23,969,599 | 22,381,302 | ||||||||||||
| Investments in qualified affordable housing partnerships, net | 173,045 | 179,657 | 170,213 | ||||||||||||
| Goodwill | 469,433 | 469,433 | 469,433 | ||||||||||||
| Other assets | 1,223,538 | 1,209,918 | 1,263,345 | ||||||||||||
| Total assets | $ | 33,255,275 | $ | 32,952,212 | $ | 31,119,676 | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||
| Customer deposits | $ | 28,592,441 | $ | 28,217,243 | $ | 26,759,050 | |||||||||
| Short-term borrowings | 36,992 | 29,499 | 3,146 | ||||||||||||
| Federal Home Loan Bank (“FHLB”) advances | 321,084 | 320,526 | 318,872 | ||||||||||||
| Securities sold under repurchase agreements (“repurchase agreements”) (1) | 200,000 | 200,000 | 150,000 | ||||||||||||
| Long-term debt | 191,265 | 196,204 | 211,024 | ||||||||||||
| Accrued expenses and other liabilities | 535,439 | 691,830 | 606,469 | ||||||||||||
| Total liabilities | 29,877,221 | 29,655,302 | 28,048,561 | ||||||||||||
| Stockholders’ equity | 3,378,054 | 3,296,910 | 3,071,115 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 33,255,275 | $ | 32,952,212 | $ | 31,119,676 | |||||||||
| Book value per common share | $ | 23.44 | $ | 22.88 | $ | 21.35 | |||||||||
| Tangible equity (2) per common share | $ | 19.92 | $ | 19.36 | $ | 17.79 | |||||||||
| Tangible equity to tangible assets ratio (2) | 8.77 | % | 8.60 | % | 8.36 | % | |||||||||
| Number of common shares at period-end (in thousands) | 144,133 | 144,102 | 143,870 | ||||||||||||
| (1) | Resale and repurchase agreements are reported net pursuant to Accounting Standards Codification (“ASC”) 210-20-45, Balance Sheet Offsetting. As of September 30, 2016, June 30, 2016, and September 30, 2015, $250.0 million, $250.0 million and $300.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against resale agreements, respectively. | |
| (2) | See reconciliation of the GAAP to non-GAAP financial measures in Table 13. | |
| EAST WEST BANCORP, INC. | |||||||||||||||
| TOTAL LOANS AND DEPOSITS DETAIL | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 2 | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Loans: | |||||||||||||||
| Real estate - commercial | $ | 7,780,775 | $ | 7,812,733 | $ | 7,088,408 | |||||||||
| Real estate - land and construction | 734,304 | 663,949 | 621,596 | ||||||||||||
| Commercial | 9,358,045 | 9,163,804 | 8,619,156 | ||||||||||||
| Real estate - single-family | 3,351,867 | 3,186,031 | 3,002,808 | ||||||||||||
| Real estate - multifamily | 1,420,126 | 1,346,269 | 1,492,361 | ||||||||||||
| Consumer | 2,079,474 | 2,063,430 | 1,834,579 | ||||||||||||
| Total loans held-for-investment (1) | 24,724,591 | 24,236,216 | 22,658,908 | ||||||||||||
| Loans held for sale | 47,719 | 51,290 | 349,375 | ||||||||||||
| Total loans (1), including loans held for sale | 24,772,310 | 24,287,506 | 23,008,283 | ||||||||||||
| Unearned fees, premiums and discounts | 7,371 | 151 | (13,176 | ) | |||||||||||
| Allowance for loan losses | (255,812 | ) | (266,768 | ) | (264,430 | ) | |||||||||
| Net loans (1) | $ | 24,523,869 | $ | 24,020,889 | $ | 22,730,677 | |||||||||
| Customer deposits: | |||||||||||||||
| Noninterest-bearing demand | $ | 9,524,021 | $ | 9,487,180 | $ | 8,374,192 | |||||||||
| Interest-bearing checking | 3,550,101 | 3,515,065 | 3,041,085 | ||||||||||||
| Money market | 7,684,085 | 7,410,574 | 6,805,460 | ||||||||||||
| Savings | 2,235,847 | 2,072,065 | 1,884,535 | ||||||||||||
| Total core deposits | 22,994,054 | 22,484,884 | 20,105,272 | ||||||||||||
| Time deposits | 5,598,387 | 5,732,359 | 6,653,778 | ||||||||||||
| Total deposits | $ | 28,592,441 | $ | 28,217,243 | $ | 26,759,050 | |||||||||
| (1) | Includes ASC 310-30 discount of $56.4 million, $61.7 million and $90.8 million as of September 30, 2016, June 30, 2016 and September 30, 2015, respectively. | |
| EAST WEST BANCORP, INC. | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
| ($ in thousands, except per share data) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 3 | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Interest and dividend income | $ | 280,317 | $ | 278,865 | $ | 264,632 | |||||||||
| Interest expense | (26,169 | ) | (25,281 | ) | (24,343 | ) | |||||||||
| Net interest income before provision for credit losses | 254,148 | 253,584 | 240,289 | ||||||||||||
| Provision for credit losses | (9,525 | ) | (6,053 | ) | (7,736 | ) | |||||||||
| Net interest income after provision for credit losses | 244,623 | 247,531 | 232,553 | ||||||||||||
| Noninterest income | 49,341 | 44,264 | 54,181 | ||||||||||||
| Noninterest expense | (170,500 | ) | (148,879 | ) | (147,745 | ) | |||||||||
| Income before income taxes | 123,464 | 142,916 | 138,989 | ||||||||||||
| Income tax expense | (13,321 | ) | (39,632 | ) | (44,892 | ) | |||||||||
| Net income | $ | 110,143 | $ | 103,284 | $ | 94,097 | |||||||||
| Earnings per share | |||||||||||||||
| - Basic | $ | 0.76 | $ | 0.72 | $ | 0.65 | |||||||||
| - Diluted | $ | 0.76 | $ | 0.71 | $ | 0.65 | |||||||||
| Weighted average number of shares outstanding (in thousands) | |||||||||||||||
| - Basic | 144,122 | 144,101 | 143,861 | ||||||||||||
| - Diluted | 145,238 | 145,078 | 144,590 | ||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Noninterest income: | |||||||||||||||
| Branch fees | $ | 10,408 | $ | 10,353 | $ | 9,982 | |||||||||
| Letters of credit fees and foreign exchange income | 10,908 | 10,943 | 7,468 | ||||||||||||
| Ancillary loan fees | 6,135 | 4,285 | 4,839 | ||||||||||||
| Wealth management fees | 4,033 | 2,778 | 4,374 | ||||||||||||
| Net gains on sales of loans | 2,158 | 2,882 | 4,888 | ||||||||||||
| Net gains on sales of available-for-sale investment securities | 1,790 | 2,836 | 17,036 | ||||||||||||
| Changes in Federal Deposit Insurance Corporation (“FDIC”) indemnification asset and receivable/payable | — | — | (3,883 | ) | |||||||||||
| Other fees and operating income | 13,909 | 10,187 | 9,477 | ||||||||||||
| Total noninterest income | $ | 49,341 | $ | 44,264 | $ | 54,181 | |||||||||
| Noninterest expense: | |||||||||||||||
| Compensation and employee benefits | $ | 75,042 | $ | 73,287 | $ | 66,185 | |||||||||
| Occupancy and equipment expense | 15,456 | 15,748 | 15,362 | ||||||||||||
| Amortization of tax credit and other investments | 32,618 | 14,006 | 12,269 | ||||||||||||
| Amortization of premiums on deposits acquired | 2,023 | 2,050 | 2,310 | ||||||||||||
| Deposit insurance premiums and regulatory assessments | 6,450 | 5,473 | 4,726 | ||||||||||||
| Other real estate owned (“OREO”) (income) expense | (67 | ) | 1,023 | (1,374 | ) | ||||||||||
| Legal expense | 5,361 | 4,346 | 2,099 | ||||||||||||
| Data processing | 2,729 | 3,295 | 2,602 | ||||||||||||
| Consulting expense | 4,594 | 5,981 | 4,983 | ||||||||||||
| Repurchase agreements’ extinguishment costs | — | — | 15,193 | ||||||||||||
| Deposit related expenses | 3,082 | 2,273 | 2,538 | ||||||||||||
| Computer software expense | 3,331 | 3,194 | 2,355 | ||||||||||||
| Other operating expense | 19,881 | 18,203 | 18,497 | ||||||||||||
| Total noninterest expense | $ | 170,500 | $ | 148,879 | $ | 147,745 | |||||||||
| EAST WEST BANCORP, INC. | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| ($ in thousands, except per share data) | ||||||||||
| (unaudited) | ||||||||||
| Table 4 | ||||||||||
| Nine Months Ended | ||||||||||
| September 30, 2016 | September 30, 2015 | |||||||||
| Interest and dividend income | $ | 835,354 | $ | 783,338 | ||||||
| Interest expense | (75,418 | ) | (79,840 | ) | ||||||
| Net interest income before provision for credit losses | 759,936 | 703,498 | ||||||||
| Provision for credit losses | (17,018 | ) | (16,217 | ) | ||||||
| Net interest income after provision for credit losses | 742,918 | 687,281 | ||||||||
| Noninterest income | 134,118 | 138,900 | ||||||||
| Noninterest expense | (465,985 | ) | (395,945 | ) | ||||||
| Income before income taxes | 411,051 | 430,236 | ||||||||
| Income tax expense | (90,108 | ) | (137,364 | ) | ||||||
| Net income | $ | 320,943 | $ | 292,872 | ||||||
| Earnings per share | ||||||||||
| - Basic | $ | 2.23 | $ | 2.04 | ||||||
| - Diluted | $ | 2.21 | $ | 2.03 | ||||||
| Weighted average number of shares outstanding (in thousands) | ||||||||||
| - Basic | 144,061 | 143,788 | ||||||||
| - Diluted | 145,086 | 144,468 | ||||||||
| Nine Months Ended | ||||||||||
| September 30, 2016 | September 30, 2015 | |||||||||
| Noninterest income: | ||||||||||
| Branch fees | $ | 30,983 | $ | 29,157 | ||||||
| Letters of credit fees and foreign exchange income | 31,404 | 24,999 | ||||||||
| Ancillary loan fees | 13,997 | 10,307 | ||||||||
| Wealth management fees | 9,862 | 14,310 | ||||||||
| Net gains on sales of loans | 6,967 | 19,719 | ||||||||
| Net gains on sales of available-for-sale investment securities | 8,468 | 26,994 | ||||||||
| Changes in FDIC indemnification asset and receivable/payable | — | (18,973 | ) | |||||||
| Other fees and operating income | 32,437 | 32,387 | ||||||||
| Total noninterest income | $ | 134,118 | $ | 138,900 | ||||||
| Noninterest expense: | ||||||||||
| Compensation and employee benefits | $ | 220,166 | $ | 193,298 | ||||||
| Occupancy and equipment expense | 45,619 | 45,990 | ||||||||
| Amortization of tax credit and other investments | 60,779 | 21,565 | ||||||||
| Amortization of premiums on deposits acquired | 6,177 | 7,038 | ||||||||
| Deposit insurance premiums and regulatory assessments | 17,341 | 13,723 | ||||||||
| OREO expense (income) | 1,484 | (7,481 | ) | |||||||
| Legal expense | 12,714 | 13,103 | ||||||||
| Data processing | 8,712 | 7,596 | ||||||||
| Consulting expense | 19,027 | 9,596 | ||||||||
| Repurchase agreements’ extinguishment costs | — | 21,818 | ||||||||
| Deposit related expenses | 7,675 | 7,402 | ||||||||
| Computer software expense | 9,267 | 6,404 | ||||||||
| Other operating expense | 57,024 | 55,893 | ||||||||
| Total noninterest expense | $ | 465,985 | $ | 395,945 | ||||||
| EAST WEST BANCORP, INC. | |||||||||||||||
| SELECTED FINANCIAL INFORMATION | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 5 | |||||||||||||||
| Average Balances | Three Months Ended | ||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Loans: | |||||||||||||||
| Real estate - commercial | $ | 7,768,534 | $ | 7,837,172 | $ | 6,906,581 | |||||||||
| Real estate - land and construction | 706,406 | 639,865 | 591,266 | ||||||||||||
| Commercial | 9,169,433 | 8,877,155 | 8,222,777 | ||||||||||||
| Real estate - single-family | 3,203,603 | 3,069,573 | 3,364,514 | ||||||||||||
| Real estate - multifamily | 1,371,871 | 1,370,356 | 1,454,773 | ||||||||||||
| Consumer | 2,089,466 | 2,094,746 | 1,825,065 | ||||||||||||
|
Total loans |
$ | 24,309,313 | $ | 23,888,867 | $ | 22,364,976 | |||||||||
| Investment securities | $ | 3,273,861 | $ | 3,328,548 | $ | 2,830,941 | |||||||||
| Interest-earning assets | $ | 31,055,354 | $ | 30,783,445 | $ | 28,727,735 | |||||||||
| Total assets | $ | 32,906,533 | $ | 32,591,398 | $ | 30,662,930 | |||||||||
| Customer deposits: | |||||||||||||||
| Noninterest-bearing demand | $ | 9,413,031 | $ | 9,135,008 | $ | 7,970,181 | |||||||||
| Interest-bearing checking | 3,553,477 | 3,423,831 | 2,838,728 | ||||||||||||
| Money market | 7,548,835 | 7,582,827 | 6,938,009 | ||||||||||||
| Savings | 2,133,036 | 2,035,209 | 1,823,036 | ||||||||||||
| Total core deposits | 22,648,379 | 22,176,875 | 19,569,954 | ||||||||||||
| Time deposits | 5,627,084 | 5,899,503 | 6,659,322 | ||||||||||||
| Total deposits | $ | 28,275,463 | $ | 28,076,378 | $ | 26,229,276 | |||||||||
| Interest-bearing liabilities | $ | 19,611,482 | $ | 19,686,794 | $ | 19,041,840 | |||||||||
| Stockholders’ equity | $ | 3,349,241 | $ | 3,267,936 | $ | 3,051,276 | |||||||||
| Selected Ratios (1) | Three Months Ended | ||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Return on average assets | 1.33 | % | 1.27 | % | 1.22 | % | |||||||||
| Return on average equity | 13.08 | % | 12.71 | % | 12.23 | % | |||||||||
| Interest rate spread | 3.06 | % | 3.12 | % | 3.14 | % | |||||||||
| Net interest margin | 3.26 | % | 3.31 | % | 3.32 | % | |||||||||
| Yield on average interest-earning assets | 3.59 | % | 3.64 | % | 3.65 | % | |||||||||
| Cost of interest-bearing deposits | 0.44 | % | 0.43 | % | 0.40 | % | |||||||||
| Cost of deposits | 0.30 | % | 0.29 | % | 0.28 | % | |||||||||
| Cost of funds | 0.36 | % | 0.35 | % | 0.36 | % | |||||||||
| Adjusted noninterest expense (2)(3)/average assets | 1.64 | % | 1.64 | % | 1.53 | % | |||||||||
| Adjusted efficiency ratio (3)(4) | 44.77 | % | 44.59 | % | 40.06 | % | |||||||||
| (1) | Annualized. | |
| (2) | Adjusted noninterest expense represents noninterest expense, excluding amortization of tax credit and other investments, amortization of premiums on deposits acquired and repurchase agreements’ extinguishment costs. | |
| (3) | See reconciliation of the GAAP to non-GAAP financial measures in Table 11. | |
| (4) | Represents noninterest expense, excluding amortization of tax credit and other investments, amortization of premiums on deposits acquired and repurchase agreements’ extinguishment costs, divided by the aggregate of net interest income before provision for credit losses, and noninterest income. | |
| EAST WEST BANCORP, INC. | ||||||||||
| SELECTED FINANCIAL INFORMATION | ||||||||||
| ($ in thousands) | ||||||||||
| (unaudited) | ||||||||||
| Table 6 | ||||||||||
| Average Balances | Nine Months Ended | |||||||||
| September 30, 2016 | September 30, 2015 | |||||||||
| Loans: | ||||||||||
| Real estate - commercial | $ | 7,770,747 | $ | 6,613,026 | ||||||
| Real estate - land and construction | 664,429 | 584,558 | ||||||||
| Commercial | 8,969,530 | 7,988,912 | ||||||||
| Real estate - single-family | 3,110,032 | 3,621,094 | ||||||||
| Real estate - multifamily | 1,421,445 | 1,468,234 | ||||||||
| Consumer | 2,070,743 | 1,714,592 | ||||||||
| Total loans | $ | 24,006,926 | $ | 21,990,416 | ||||||
| Investment securities | $ | 3,289,014 | $ | 2,710,052 | ||||||
| Interest-earning assets | $ | 30,813,307 | $ | 27,841,338 | ||||||
| Total assets | $ | 32,662,445 | $ | 29,783,991 | ||||||
| Customer deposits: | ||||||||||
| Noninterest-bearing demand | $ | 9,107,051 | $ | 7,631,711 | ||||||
| Interest-bearing checking | 3,445,996 | 2,666,141 | ||||||||
| Money market | 7,519,261 | 6,657,620 | ||||||||
| Savings | 2,043,547 | 1,743,044 | ||||||||
| Total core deposits | 22,115,855 | 18,698,516 | ||||||||
| Time deposits | 5,941,760 | 6,448,955 | ||||||||
| Total deposits | $ | 28,057,615 | $ | 25,147,471 | ||||||
| Interest-bearing liabilities | $ | 19,754,340 | $ | 18,590,169 | ||||||
| Stockholders’ equity | $ | 3,266,485 | $ | 2,984,642 | ||||||
| Selected Ratios (1) | Nine Months Ended | |||||||||
| September 30, 2016 | September 30, 2015 | |||||||||
| Return on average assets | 1.31 | % | 1.31 | % | ||||||
| Return on average equity | 13.12 | % | 13.12 | % | ||||||
| Interest rate spread | 3.11 | % | 3.19 | % | ||||||
| Net interest margin | 3.29 | % | 3.38 | % | ||||||
| Yield on average interest-earning assets | 3.62 | % | 3.76 | % | ||||||
| Cost of interest-bearing deposits | 0.43 | % | 0.41 | % | ||||||
| Cost of deposits | 0.29 | % | 0.29 | % | ||||||
| Cost of funds | 0.35 | % | 0.41 | % | ||||||
| Adjusted noninterest expense (2)(3)/average assets | 1.63 | % | 1.55 | % | ||||||
| Adjusted efficiency ratio (3)(4) | 44.63 | % | 41.02 | % | ||||||
| (1) | Annualized. | |
| (2) | Adjusted noninterest expense represents noninterest expense, excluding amortization of tax credit and other investments, amortization of premiums on deposits acquired and repurchase agreements’ extinguishment costs. | |
| (3) | See reconciliation of the GAAP to non-GAAP financial measures in Table 11. | |
| (4) | Represents noninterest expense, excluding amortization of tax credit and other investments, amortization of premiums on deposits acquired and repurchase agreements’ extinguishment costs, divided by the aggregate of net interest income before provision for credit losses, and noninterest income. | |
| EAST WEST BANCORP, INC. | ||||||||||||||||||||||||||||
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| Table 7 | ||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||||
| September 30, 2016 | September 30, 2015 | |||||||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||||||
| Balance | Interest | Yield/Rate(1) | Balance | Interest | Yield/Rate(1) | |||||||||||||||||||||||
|
Assets |
||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||
| Due from banks and short-term investments | $ | 1,593,577 | $ | 3,168 | 0.79 | % | $ | 2,215,472 | $ | 4,190 | 0.75 | % | ||||||||||||||||
| Resale agreements (2) | 1,805,978 | 7,834 | 1.73 | % | 1,243,478 | 4,411 | 1.41 | % | ||||||||||||||||||||
| Investment securities | 3,273,861 | 13,388 | 1.63 | % | 2,830,941 | 10,279 | 1.44 | % | ||||||||||||||||||||
| Loans | 24,309,313 | 255,316 | 4.18 | % | 22,364,976 | 244,372 | 4.33 | % | ||||||||||||||||||||
| FHLB and Federal Reserve Bank stock | 72,625 | 611 | 3.35 | % | 72,868 | 1,380 | 7.51 | % | ||||||||||||||||||||
| Total interest-earning assets | 31,055,354 | 280,317 | 3.59 | % | 28,727,735 | 264,632 | 3.65 | % | ||||||||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||||||||
| Cash and cash equivalents | 354,053 | 333,193 | ||||||||||||||||||||||||||
| Allowance for loan losses | (266,763 | ) | (261,479 | ) | ||||||||||||||||||||||||
| Other assets | 1,763,889 | 1,863,481 | ||||||||||||||||||||||||||
| Total assets | $ | 32,906,533 | $ | 30,662,930 | ||||||||||||||||||||||||
|
Liabilities and Stockholders’ Equity |
||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||
| Checking deposits | $ | 3,553,477 | $ | 3,253 | 0.36 | % | $ | 2,838,728 | $ | 2,155 | 0.30 | % | ||||||||||||||||
| Money market deposits | 7,548,835 | 6,663 | 0.35 | % | 6,938,009 | 4,992 | 0.29 | % | ||||||||||||||||||||
| Savings deposits | 2,133,036 | 1,160 | 0.22 | % | 1,823,036 | 918 | 0.20 | % | ||||||||||||||||||||
| Time deposits | 5,627,084 | 9,973 | 0.71 | % | 6,659,322 | 10,454 | 0.62 | % | ||||||||||||||||||||
| Federal funds purchased and other short-term borrowings | 32,137 | 212 | 2.62 | % | 9,651 | 35 | 1.44 | % | ||||||||||||||||||||
| FHLB advances | 320,743 | 1,361 | 1.69 | % | 318,523 | 1,074 | 1.34 | % | ||||||||||||||||||||
| Repurchase agreements (2) | 200,000 | 2,319 | 4.61 | % | 238,641 | 3,555 | 5.91 | % | ||||||||||||||||||||
| Long-term debt | 196,170 | 1,228 | 2.49 | % | 215,930 | 1,160 | 2.13 | % | ||||||||||||||||||||
| Total interest-bearing liabilities | 19,611,482 | 26,169 | 0.53 | % | 19,041,840 | 24,343 | 0.51 | % | ||||||||||||||||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||||||||||||||||
| Demand deposits | 9,413,031 | 7,970,181 | ||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 532,779 | 599,633 | ||||||||||||||||||||||||||
| Stockholders’ equity | 3,349,241 | 3,051,276 | ||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 32,906,533 | $ | 30,662,930 | ||||||||||||||||||||||||
| Interest rate spread | 3.06 | % | 3.14 | % | ||||||||||||||||||||||||
| Net interest income and net interest margin | $ | 254,148 | 3.26 | % | $ | 240,289 | 3.32 | % | ||||||||||||||||||||
| Adjusted net interest income and net interest margin (3) | $ | 246,984 | 3.16 | % | $ | 222,286 | 3.06 | % | ||||||||||||||||||||
| (1) | Annualized. | |
| (2) |
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting. |
|
| (3) | See reconciliation of the GAAP to non-GAAP financial measures in Table 12. | |
| EAST WEST BANCORP, INC. | ||||||||||||||||||||||||||||
| YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
| Table 8 | ||||||||||||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, 2016 | September 30, 2015 | |||||||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||||||
| Balance | Interest | Yield/Rate(1) | Balance | Interest | Yield/Rate(1) | |||||||||||||||||||||||
|
Assets |
||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||
| Due from banks and short-term investments | $ | 1,768,252 | $ | 10,245 | 0.77 | % | $ | 1,772,734 | $ | 14,542 | 1.10 | % | ||||||||||||||||
| Resale agreements (2) | 1,672,993 | 22,479 | 1.79 | % | 1,289,212 | 13,940 | 1.45 | % | ||||||||||||||||||||
| Investment securities | 3,289,014 | 37,433 | 1.52 | % | 2,710,052 | 29,947 | 1.48 | % | ||||||||||||||||||||
| Loans | 24,006,926 | 763,189 | 4.25 | % | 21,990,416 | 719,987 | 4.38 | % | ||||||||||||||||||||
| FHLB and Federal Reserve Bank stock | 76,122 | 2,008 | 3.52 | % | 78,924 | 4,922 | 8.34 | % | ||||||||||||||||||||
| Total interest-earning assets | 30,813,307 | 835,354 | 3.62 | % | 27,841,338 | 783,338 | 3.76 | % | ||||||||||||||||||||
| Noninterest-earning assets: | ||||||||||||||||||||||||||||
| Cash and cash equivalents | 349,721 | 331,171 | ||||||||||||||||||||||||||
| Allowance for loan losses | (264,088 | ) | (261,213 | ) | ||||||||||||||||||||||||
| Other assets | 1,763,505 | 1,872,695 | ||||||||||||||||||||||||||
| Total assets | $ | 32,662,445 | $ | 29,783,991 | ||||||||||||||||||||||||
|
Liabilities and Stockholders’ Equity |
||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||
| Checking deposits | $ | 3,445,996 | $ | 9,058 | 0.35 | % | $ | 2,666,141 | $ | 5,849 | 0.29 | % | ||||||||||||||||
| Money market deposits | 7,519,261 | 19,295 | 0.34 | % | 6,657,620 | 13,833 | 0.28 | % | ||||||||||||||||||||
| Savings deposits | 2,043,547 | 3,207 | 0.21 | % | 1,743,044 | 2,516 | 0.19 | % | ||||||||||||||||||||
| Time deposits | 5,941,760 | 29,148 | 0.66 | % | 6,448,955 | 31,479 | 0.65 | % | ||||||||||||||||||||
| Federal funds purchased and other short-term borrowings | 19,384 | 390 | 2.69 | % | 5,866 | 53 | 1.21 | % | ||||||||||||||||||||
| FHLB advances | 400,850 | 4,153 | 1.38 | % | 325,015 | 3,156 | 1.30 | % | ||||||||||||||||||||
| Repurchase agreements (2) | 182,482 | 6,441 | 4.71 | % | 522,693 | 19,494 | 4.99 | % | ||||||||||||||||||||
| Long-term debt | 201,060 | 3,726 | 2.48 | % | 220,835 | 3,460 | 2.09 | % | ||||||||||||||||||||
| Total interest-bearing liabilities | 19,754,340 | 75,418 | 0.51 | % | 18,590,169 | 79,840 | 0.57 | % | ||||||||||||||||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||||||||||||||||
| Demand deposits | 9,107,051 | 7,631,711 | ||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 534,569 | 577,469 | ||||||||||||||||||||||||||
| Stockholders’ equity | 3,266,485 | 2,984,642 | ||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 32,662,445 | $ | 29,783,991 | ||||||||||||||||||||||||
| Interest rate spread | 3.11 | % | 3.19 | % | ||||||||||||||||||||||||
| Net interest income and net interest margin | $ | 759,936 | 3.29 | % | $ | 703,498 | 3.38 | % | ||||||||||||||||||||
| Adjusted net interest income and net interest margin (3) | $ | 726,113 | 3.14 | % | $ | 657,110 | 3.14 | % | ||||||||||||||||||||
| (1) | Annualized. | |
| (2) |
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting. |
|
| (3) | See reconciliation of the GAAP to non-GAAP financial measures in Table 12. | |
| EAST WEST BANCORP, INC. | |||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 9 | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Non-Purchased Credit Impaired (“Non-PCI”) Loans | |||||||||||||||
| Allowance for non-PCI loans, beginning of period | $ | 266,511 | $ | 259,910 | $ | 260,617 | |||||||||
| Provision for loan losses on non-PCI loans | 11,615 | 7,220 | 8,505 | ||||||||||||
| Net charge-offs (recoveries): | |||||||||||||||
| Commercial real estate | (325 | ) | (3 | ) | 52 | ||||||||||
| Commercial | 23,531 | 997 | 6,254 | ||||||||||||
| Residential | (625 | ) | (297 | ) | (1,123 | ) | |||||||||
| Consumer | (111 | ) | (78 | ) | 50 | ||||||||||
| Total net charge-offs | 22,470 | 619 | 5,233 | ||||||||||||
| Allowance for non-PCI loans, end of period | 255,656 | 266,511 | 263,889 | ||||||||||||
| Purchased Credit Impaired (“PCI”) Loans | |||||||||||||||
| Allowance for PCI loans, beginning of period | 257 | 328 | 612 | ||||||||||||
| Reversal of provision for loan losses on PCI loans | (101 | ) | (71 | ) | (71 | ) | |||||||||
| Allowance for PCI loans, end of period | 156 | 257 | 541 | ||||||||||||
| Allowance for loan losses | 255,812 | 266,768 | 264,430 | ||||||||||||
| Unfunded Credit Facilities | |||||||||||||||
| Allowance for unfunded credit reserves, beginning of period | 20,318 | 21,414 | 19,741 | ||||||||||||
| Reversal of unfunded credit reserves | (1,989 | ) | (1,096 | ) | (698 | ) | |||||||||
| Allowance for unfunded credit reserves, end of period | 18,329 | 20,318 | 19,043 | ||||||||||||
| Allowance for credit losses | $ | 274,141 | $ | 287,086 | $ | 283,473 | |||||||||
| EAST WEST BANCORP, INC. | |||||||||||||||
| CREDIT QUALITY | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 10 | |||||||||||||||
| Non-PCI Nonperforming Assets | September 30, 2016 | June 30, 2016 | September 30, 2015 | ||||||||||||
| Nonaccrual loans: | |||||||||||||||
| Real estate - commercial | $ | 29,084 | $ | 59,250 | $ | 29,639 | |||||||||
| Real estate - land and construction | 5,716 | 5,789 | 2,455 | ||||||||||||
| Commercial | 64,233 | 82,366 | 60,703 | ||||||||||||
| Real estate - single-family | 5,785 | 5,117 | 11,067 | ||||||||||||
| Real estate - multifamily | 13,547 | 17,319 | 13,127 | ||||||||||||
| Consumer | 3,511 | 1,739 | 528 | ||||||||||||
| Total nonaccrual loans | 121,876 | 171,580 | 117,519 | ||||||||||||
| OREO, net | 8,622 | 4,877 | 12,251 | ||||||||||||
| Total nonperforming assets | $ | 130,498 | $ | 176,457 | $ | 129,770 | |||||||||
| Credit Quality Ratios | September 30, 2016 | June 30, 2016 | September 30, 2015 | ||||||||||||
| Non-PCI nonperforming assets to total assets (1) | 0.39 | % | 0.54 | % | 0.42 | % | |||||||||
| Non-PCI nonaccrual loans to loans held-for-investment (1) | 0.49 | % | 0.71 | % | 0.52 | % | |||||||||
| Allowance for loan losses to loans held-for-investment (1) | 1.03 | % | 1.10 | % | 1.17 | % | |||||||||
| Allowance for loan losses to non-PCI nonaccrual loans | 209.90 | % | 155.48 | % | 225.01 | % | |||||||||
| Provision for loan losses (2) to average loans held-for-investment | 0.19 | % | 0.12 | % | 0.15 | % | |||||||||
| Net charge-offs (2) to average loans held-for-investment | 0.37 | % | 0.01 | % | 0.09 | % | |||||||||
| (1) | Total assets and loans held-for-investment include PCI loans of $717.6 million, $794.0 million and $1.1 billion as of September 30, 2016, June 30, 2016, and September 30, 2015, respectively. | |
| (2) | Annualized. | |
| EAST WEST BANCORP, INC. | |||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | |||||||||||||||
| ($ in thousands) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 11 | |||||||||||||||
| Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of net interest income and noninterest income less adjusted noninterest expense, divided by average assets. Adjusted noninterest expense excludes amortization of tax credit and other investments, amortization of premiums on deposits acquired and repurchase agreements’ extinguishment costs. This ratio provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Net interest income before provision for credit losses | $ | 254,148 | $ | 253,584 | $ | 240,289 | |||||||||
| Noninterest income | 49,341 | 44,264 | 54,181 | ||||||||||||
| Net interest income and noninterest income | $ | 303,489 | $ | 297,848 | $ | 294,470 | |||||||||
| Total noninterest expense | $ | 170,500 | $ | 148,879 | $ | 147,745 | |||||||||
| Less: Amortization of tax credit and other investments | (32,618 | ) | (14,006 | ) | (12,269 | ) | |||||||||
| Amortization of premiums on deposits acquired | (2,023 | ) | (2,050 | ) | (2,310 | ) | |||||||||
|
Repurchase agreements’ extinguishment costs |
— | — | (15,193 | ) | |||||||||||
| Adjusted noninterest expense | $ | 135,859 | $ | 132,823 | $ | 117,973 | |||||||||
| Adjusted pre-tax, pre-provision income | $ | 167,630 | $ | 165,025 | $ | 176,497 | |||||||||
| Average assets | $ | 32,906,533 | $ | 32,591,398 | $ | 30,662,930 | |||||||||
| Adjusted pre-tax, pre-provision profitability ratio (1) | 2.03 | % | 2.04 | % | 2.28 | % | |||||||||
| Nine Months Ended | |||||||||||||||
| September 30, 2016 | September 30, 2015 | ||||||||||||||
| Net interest income before provision for credit losses | $ | 759,936 | $ | 703,498 | |||||||||||
| Noninterest income |
|
134,118 |
|
138,900 | |||||||||||
| Net interest income and noninterest income | $ | 894,054 | $ | 842,398 | |||||||||||
| Total noninterest expense | $ | 465,985 | $ | 395,945 | |||||||||||
| Less: Amortization of tax credit and other investments | (60,779 | ) | (21,565 | ) | |||||||||||
| Amortization of premiums on deposits acquired | (6,177 | ) | (7,038 | ) | |||||||||||
| Repurchase agreements’ extinguishment costs | — | (21,818 | ) | ||||||||||||
| Adjusted noninterest expense | $ | 399,029 | $ | 345,524 | |||||||||||
| Adjusted pre-tax, pre-provision income | $ | 495,025 | $ | 496,874 | |||||||||||
| Average assets | $ | 32,662,445 | $ | 29,783,991 | |||||||||||
| Adjusted pre-tax, pre-provision profitability ratio (1) | 2.02 | % | 2.23 | % | |||||||||||
| Adjusted efficiency ratio represents adjusted noninterest expense divided by the aggregate of net interest income and noninterest income. The Company believes that presenting the adjusted efficiency ratio shows the trend in recurring overhead-related noninterest expense relative to recurring net revenues. This provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Adjusted noninterest expense | $ | 135,859 | $ | 132,823 | $ | 117,973 | |||||||||
| Net interest income and noninterest income | $ | 303,489 | $ | 297,848 | $ | 294,470 | |||||||||
| Adjusted efficiency ratio | 44.77 | % | 44.59 | % | 40.06 | % | |||||||||
| Nine Months Ended | |||||||||||||||
| September 30, 2016 | September 30, 2015 | ||||||||||||||
| Adjusted noninterest expense | $ | 399,029 | $ | 345,524 | |||||||||||
| Net interest income and noninterest income | $ | 894,054 | $ | 842,398 | |||||||||||
| Adjusted efficiency ratio | 44.63 | % | 41.02 | % | |||||||||||
|
(1) Annualized. |
|||||||||||||||
| EAST WEST BANCORP, INC. | |||||||||||||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | |||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||
| Table 12 | |||||||||||||||||||||||||
| The Company believes that presenting the adjusted average loan yields and adjusted net interest margin that excludes the ASC 310-30 impacts provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| Yield on Average Loans |
September 30, 2016 |
June 30, 2016 |
September 30, 2015 |
September 30, 2016 |
September 30, 2015 |
||||||||||||||||||||
| Interest income on loans | $ | 255,316 | $ | 254,331 | $ | 244,372 | $ | 763,189 | $ | 719,987 | |||||||||||||||
| Less: ASC 310-30 discount accretion income | (7,164 | ) | (13,312 | ) | (18,003 | ) | (33,823 | ) | (46,388 | ) | |||||||||||||||
| Adjusted interest income on loans | $ | 248,152 | $ | 241,019 | $ | 226,369 | $ | 729,366 | $ | 673,599 | |||||||||||||||
| Average loans | $ | 24,309,313 | $ | 23,888,867 | $ | 22,364,976 | $ | 24,006,926 | $ | 21,990,416 | |||||||||||||||
| Add: ASC 310-30 discount | 60,091 | 65,957 | 101,794 | 67,567 | 115,086 | ||||||||||||||||||||
| Adjusted average loans | $ | 24,369,404 | $ | 23,954,824 | $ | 22,466,770 | $ | 24,074,493 | $ | 22,105,502 | |||||||||||||||
| Average loan yields (1) | 4.18 | % | 4.28 | % | 4.33 | % | 4.25 | % | 4.38 | % | |||||||||||||||
| Adjusted average loan yields (1) | 4.05 | % | 4.05 | % | 4.00 | % | 4.05 | % | 4.07 | % | |||||||||||||||
| Net Interest Margin | |||||||||||||||||||||||||
| Net interest income | $ | 254,148 | $ | 253,584 | $ | 240,289 | $ | 759,936 | $ | 703,498 | |||||||||||||||
| Less: ASC 310-30 discount accretion income | (7,164 | ) | (13,312 | ) | (18,003 | ) | (33,823 | ) | (46,388 | ) | |||||||||||||||
| Adjusted net interest income | $ | 246,984 | $ | 240,272 | $ | 222,286 | $ | 726,113 | $ | 657,110 | |||||||||||||||
| Average interest-earning assets | $ | 31,055,354 | $ | 30,783,445 | $ | 28,727,735 | $ | 30,813,307 | $ | 27,841,338 | |||||||||||||||
| Add: ASC 310-30 discount | 60,091 | 65,957 | 101,794 | 67,567 | 115,086 | ||||||||||||||||||||
| Adjusted average interest-earning assets | $ | 31,115,445 | $ | 30,849,402 | $ | 28,829,529 | $ | 30,880,874 | $ | 27,956,424 | |||||||||||||||
| Net interest margin (1) | 3.26 | % | 3.31 | % | 3.32 | % | 3.29 | % | 3.38 | % | |||||||||||||||
| Adjusted net interest margin (1) | 3.16 | % | 3.13 | % | 3.06 | % | 3.14 | % | 3.14 | % | |||||||||||||||
|
(1) Annualized. |
|||||||||||||||||||||||||
| EAST WEST BANCORP, INC. | |||||||||||||||
| 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 ratios are non-GAAP disclosures. Tangible equity represents stockholders’ equity which has been reduced by goodwill and intangible assets. Given that the use of such measures and ratios are more prevalent in the banking industry, and used by banking regulators and analysts, the Company has included them for discussion. | |||||||||||||||
| September 30, 2016 | June 30, 2016 | September 30, 2015 | |||||||||||||
| Stockholders’ equity | $ | 3,378,054 | $ | 3,296,910 | $ | 3,071,115 | |||||||||
| Less: Goodwill and other intangible assets | (506,628 | ) | (507,129 | ) | (511,584 | ) | |||||||||
| Tangible equity | $ | 2,871,426 | $ | 2,789,781 | $ | 2,559,531 | |||||||||
| Total assets | $ | 33,255,275 | $ | 32,952,212 | $ | 31,119,676 | |||||||||
| Less: Goodwill and other intangible assets | (506,628 | ) | (507,129 | ) | (511,584 | ) | |||||||||
| Tangible assets | $ | 32,748,647 | $ | 32,445,083 | $ | 30,608,092 | |||||||||
| Tangible equity to tangible assets ratio | 8.77 | % | 8.60 | % | 8.36 | % | |||||||||
