East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq:
EWBC), parent company of East West Bank, today reported its
financial results for the third quarter of 2021. Third quarter 2021
net income was $225.4 million, or $1.57 per diluted share; return
on average assets was 1.46%, and return on average equity was
15.75%.
“This was another quarter of outstanding results. Our total
loans reached a record $40.5 billion as of September 30, 2021.
Loans grew by 11% annualized from June 30, 2021, and by 11% from
September 30, 2020, excluding the impact of the Paycheck Protection
Program. This growth has come from all of our major loan portfolios
of commercial, residential mortgage and commercial real estate,”
stated Dominic Ng, Chairman and Chief Executive Officer of East
West.
“Total deposits reached a record $53.4 billion as of September
30, 2021, driven by excellent growth in demand deposits. This has
transformed our deposit mix. Noninterest-bearing demand deposits
now make up 43% of total balances, compared with 36% a year
ago.”
“Our robust organic balance sheet growth drove a 21% annualized
increase in revenue quarter-over-quarter, even as interest rates
remained low. This revenue expansion was achieved while maintaining
solid expense discipline, resulting in adjusted pre-tax,
pre-provision income1 growth of 26% annualized from the second
quarter,” continued Ng. “Overall, we earned an attractive return on
average tangible equity2 of 17.25% in the third quarter of
2021.”
“We are looking forward to finishing the year on a high note,
and extending the momentum and excellent performance from 2021 into
continued growth and success in 2022,” concluded Ng.
FINANCIAL HIGHLIGHTS
Three Months Ended
Qtr-o-Qtr Change
Yr-o-Yr Change
($ in millions)
September 30, 2021
$
% Ann.
$
%
Total Loans (incl. PPP)
$
40,482
$
408
4
%
$
3,040
8
%
Total Loans (excl. PPP)
39,674
1,034
11
4,005
11
Total Deposits
53,356
774
6
11,676
28
Total Revenue
$
469
$
24
21
%
$
90
24
%
Adj. Pre-tax Pre-provision Income1
302
19
26
78
35
Net Income
225
1
1
66
41
_____________________________________________________________
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.
BALANCE SHEET
- Record Assets – Total assets reached $61.0 billion as of
September 30, 2021, up by $1.1 billion, or 7% annualized, from
$59.9 billion as of June 30, 2021. Year-over-year, total assets
grew 21% from $50.4 billion as of September 30, 2020. Third quarter
2021 average interest-earning assets of $58.2 billion grew by $3.3
billion, or 24% linked quarter annualized. The growth in average
interest-earning assets mainly consisted of a $2.0 billion increase
in average interest-bearing cash and deposits with banks, a $785.7
million increase in average available-for-sale (“AFS”) debt
securities, and a $337.9 million increase in average loans.
Excluding Paycheck Protection Program (“PPP”) loans, average loans
grew by $1.1 billion.
- Record Loans – Total loans reached $40.5 billion as of
September 30, 2021, up by $408.4 million, or 4% annualized, from
$40.1 billion as of June 30, 2021. Excluding PPP loans, total loans
grew by $1.0 billion, or 11% linked quarter annualized. During the
third quarter of 2021, $645.0 million of PPP loans outstanding were
forgiven by the Small Business Administration (“SBA”). PPP loans
totaled $807.3 million as of September 30, 2021. Year-over-year,
total loans, excluding PPP, grew 11% from $35.7 billion as of
September 30, 2020. Third quarter 2021 average loans of $40.0
billion grew by $337.9 million, or 3% linked quarter annualized.
Excluding PPP loans, average loans grew by $1.1 billion, or 12%
annualized, from the second quarter of 2021. The strongest growth
was from average C&I loans excluding PPP, which increased 16%
linked quarter annualized, followed by residential mortgage loans,
which also increased 16% linked quarter annualized. Average total
CRE loans grew by 5% linked quarter annualized.
- Record Deposits – Total deposits reached $53.4 billion
as of September 30, 2021, up by $773.6 million, or 6% annualized,
from $52.6 billion as of June 30, 2021, and up 28% year-over-year
from $41.7 billion as of September 30, 2020. Noninterest-bearing
demand deposits reached a record $23.2 billion as of September 30,
2021, up by $1.4 billion, or 25% annualized, from $21.8 billion as
of June 30, 2021, and up 55% year-over-year from $14.9 billion as
of September 30, 2020. Noninterest-bearing demand deposits made up
43% of total deposits as of September 30, 2021, up from 41% as of
June 30, 2021 and 36% as of September 30, 2020. Third quarter 2021
average deposits of $53.5 billion grew by $3.3 billion, or 26%
linked quarter annualized. Growth in the third quarter was led by
noninterest-bearing demand deposits, which increased by $3.5
billion or 69% linked quarter annualized. Time deposits decreased
quarter-over-quarter, reflecting run-off of higher rate
certificates of deposit.
- Strong Capital Levels – As of September 30, 2021,
stockholders’ equity was $5.7 billion, or $40.10 per common share,
and tangible equity3 per common share was $36.75. Tangible equity
per common share increased by 3% quarter-over-quarter and increased
by 12% year-over-year. As of September 30, 2021, the tangible
equity to tangible assets ratio3 was 8.62%, the common equity tier
1 (“CET1”) capital ratio was 12.8%, and the total risk-based
capital ratio was 14.2%.
_____________________________________________________________
3 See reconciliation of GAAP to non-GAAP financial measures in
Table 13.
OPERATING RESULTS
Third Quarter Earnings – Third quarter 2021 net income
was $225.4 million, or $1.57 per diluted share, compared with
$224.7 million, or $1.57 per diluted share, for the second quarter
of 2021.
Third Quarter 2021 Compared to Second
Quarter 2021
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $395.7 million, an increase
of 20% annualized from $376.5 million. Net interest margin (“NIM”)
of 2.70% decreased by five basis points from 2.75%.
- Excluding the impact of PPP loans, adjusted NII4 totaled $380.5
million, an increase of 21% annualized from $361.1 million. PPP
loans contributed $15.2 million to NII in the third quarter,
compared with $15.4 million in the second quarter.
- NII growth reflected growth in average balances of loans,
securities and other earning assets, as well as the benefit of a
lower cost of funds, partially offset by lower yields on earning
assets.
- Adjusted NIM4 of 2.64% declined by nine basis points from
2.73%. The quarter-over-quarter adjusted NIM compression was
largely due to the $2.0 billion growth in average interest-bearing
cash and deposits with banks, which earned an average yield of
0.25% in the third quarter. Strong deposit growth in excess of loan
growth drove the increase in these assets.
- The third quarter adjusted average loan yield4 of 3.56% was two
basis points lower than 3.58% for the second quarter.
- The average cost of funds of 0.14% decreased by four basis
points from 0.18%. This reflected growth in noninterest-bearing
demand deposits, the payoff of higher-cost FHLB advances that
matured during the second quarter, and a continued decline in the
cost of interest-bearing deposits.
Noninterest Income
Noninterest income totaled $73.1 million in the third quarter,
up $4.7 million, or 7%, from $68.4 million in the second
quarter.
- Quarter-over-quarter, deposit account fees grew, due to growth
in treasury management services, and gains on sale of SBA loans
increased, due to a higher volume of SBA 7A loans sold. This was
offset by decreases in lending fees and wealth management
fees.
- Interest rate contracts (“IRC”) and other derivative income was
$7.2 million in the third quarter, compared to a loss of $3.2
million in the second quarter. The quarter-over-quarter increase
was due to a favorable change in credit valuation adjustment, which
reflected an increase in long-term benchmark interest rates, as
well as higher customer-driven IRC revenue.
_____________________________________________________________
4 See reconciliation of GAAP to non-GAAP financial measures in
Table 14.
Noninterest Expense
Noninterest expense totaled $205.4 million. Third quarter
noninterest expense consisted of $166.7 million of adjusted
noninterest expense5, $38.0 million in amortization of tax credit
and other investments, and $0.7 million in amortization of core
deposit intangibles.
- Adjusted noninterest expense of $166.7 million increased by 3%
from $161.5 million in the second quarter. The largest
quarter-over-quarter change was in other operating expense, which
increased to $21.0 million, compared with $17.9 million in the
second quarter, due to higher loan-related expenses and charitable
contributions.
- Amortization of tax credit and other investments totaled $38.0
million, compared with $27.3 million in the second quarter. The
quarter-over-quarter change in the amortization of tax credits and
other investments partially reflects the impact of investments that
closed in the third quarter. For the fourth quarter, the Company
expects the amortization of tax credit and other investments to be
approximately $30 million.
- The adjusted efficiency ratio5 was 35.6% in the third quarter,
compared with 36.3% in the second quarter.
TAX RELATED ITEMS
Third quarter 2021 income tax expense was $48.0 million and the
effective tax rate was 17.5%. Year-to-date through the third
quarter of 2021, the effective tax rate was 16%. For the full year,
the Company expects the effective tax rate to be approximately
17%.
ASSET QUALITY
Quarter-over-quarter, nonperforming assets decreased by 24%, to
0.28% of total assets, and criticized loans were down 2%, to 2.50%
of loans held-for-investment (“HFI”). The allowance for loan losses
(“ALLL”) totaled $560.4 million, or 1.38% of loans HFI, as of
September 30, 2021, compared with $585.7 million, or 1.46% of loans
HFI, as of June 30, 2021.
- Quarter-over-quarter, the ALLL decreased by $25.3 million, and
the ALLL coverage ratio of loans HFI decreased by eight basis
points. The change in the ALLL largely reflects an improved
macroeconomic forecast as of September 30, 2021, compared with June
30, 2021. Consequently, the Company recorded a negative $10.0
million provision for credit losses during the third quarter of
2021.
- Third quarter 2021 net charge-offs were $13.5 million, or
annualized 0.13% of average loans HFI, essentially unchanged from
$13.3 million, or annualized 0.13% of average loans HFI, for the
second quarter of 2021.
- Quarter-over-quarter, nonperforming assets decreased by $53.1
million, or 24%, and the nonperforming asset ratio improved by 10
basis points. As of September 30, 2021, nonperforming assets were
$172.6 million, or 0.28% of total assets, compared with $225.7
million, or 0.38% of total assets, as of June 30, 2021.
- Quarter-over-quarter, criticized loans decreased by $21.7
million, or 2%, and the criticized loans ratio improved by eight
basis points. As of September 30, 2021, criticized loans totaled
$1,010 million, or 2.50% of loans HFI, compared with $1,032
million, or 2.58% of loans HFI, as of June 30, 2021.
_____________________________________________________________
5 See reconciliation of GAAP to non-GAAP financial measures in
Table 12.
CAPITAL STRENGTH
Capital levels for East West are strong. The following table
presents the regulatory capital ratios as of September 30, 2021,
June 30, 2021, and September 30, 2020.
EWBC Risk-Based Capital Ratios
($ in millions)
September 30, 2021 (a)
June 30, 2021 (a)
September 30, 2020 (a)
CET1 capital ratio
12.8
%
12.8
%
12.8
%
Tier 1 capital ratio
12.8
%
12.8
%
12.8
%
Total capital ratio
14.2
%
14.3
%
14.5
%
Leverage ratio
8.8
%
9.1
%
9.8
%
Risk-Weighted Assets (“RWA”) (b)
$
42,128
$
40,609
$
36,922
- The Company has elected to use the 2020 CECL transition
provision in the calculation of its September 30, 2021, June 30,
2021, and September 30, 2020 regulatory capital ratios. The
Company’s September 30, 2021 regulatory capital ratios and RWA are
preliminary.
- 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 fourth quarter 2021
dividends for the Company’s common stock. The common stock cash
dividend of $0.33 per share is payable on November 15, 2021, to
stockholders of record on November 1, 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 third 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 third quarter
2021 earnings with the public on Thursday, October 21, 2021, at
8:30 a.m. PT/11:30 a.m. ET. The public and investment community are
invited to listen as management discusses third quarter 2021
results and operating developments.
- The following dial-in information is provided for participation
in the conference call: calls within the U.S. – (877) 506-6399;
calls within Canada – (855) 669-9657; international calls – (412)
902-6699.
- A presentation to accompany the earnings call will be available
on the Investor Relations page of the Company’s website at
www.eastwestbank.com/investors.
- A listen-only live broadcast of the call will also be available
on the Investor Relations page of the Company’s website at
www.eastwestbank.com/investors.
- A replay of the conference call will be available on October
21, 2021, at 11:30 a.m. PT through November 21, 2021. 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: 10160606.
About East West
East West Bancorp, Inc. is a public company with total assets of
$61.0 billion and is traded on the Nasdaq Global Select Market
under the symbol “EWBC”. The Company’s wholly owned subsidiary,
East West Bank, is one of the largest independent banks
headquartered in California, 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
economic, financial, reputational and other impacts of the ongoing
COVID-19 global pandemic and variants thereof and any other
pandemic, epidemic or health-related crisis, as well as a
deterioration of asset quality and an increase in credit losses due
to the COVID-19 global pandemic; 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 DFPI; 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 or
commercial spending, and savings and borrowing habits, patterns and
behaviors; 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 operations due
to political developments, disease pandemics, wars, civil unrest,
terrorism or other hostilities that may disrupt or increase
volatility in securities or otherwise affect business and 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, legal actions and 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 increased focus on
social, environmental and sustainability matters, which may affect
the Company’s operations as well as those of its customers and the
economy more broadly; 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, 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 climate change, natural or
man-made disasters or calamities, such as wildfires, droughts and
earthquakes, all of which are particularly common in California, 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.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
($ and shares in thousands,
except per share data)
(unaudited)
Table 1
September 30, 2021
% or Basis Point
Change
September 30, 2021
June 30, 2021
September 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Assets
Cash and due from banks
$
594,631
$
626,716
$
503,376
(5.1
)%
18.1
%
Interest-bearing cash with banks
4,258,270
5,371,089
4,003,565
(20.7
)
6.4
Cash and cash equivalents
4,852,901
5,997,805
4,506,941
(19.1
)
7.7
Interest-bearing deposits with banks
855,162
830,279
699,465
3.0
22.3
Assets purchased under resale agreements
(“resale agreements”)
2,596,142
2,299,184
1,210,000
12.9
114.6
Available-for-sale (“AFS”) debt securities
(amortized cost of $9,783,180, $8,411,142 and $4,471,694)
9,713,006
8,399,460
4,539,160
15.6
114.0
Federal Home Loan Bank (“FHLB”) and
Federal Reserve Bank (“FRB”) stock
77,200
76,931
79,172
0.3
(2.5
)
Loans held-for-sale (“HFS”)
—
1,819
4,148
(100.0
)
(100.0
)
Loans held-for-investment (''HFI'') (net
of allowance for loan losses of $560,404, $585,724 and
$618,252)
39,921,301
39,485,775
36,818,877
1.1
8.4
Investments in qualified affordable
housing partnerships, net
297,367
287,432
192,913
3.5
54.1
Investments in tax credit and other
investments, net
367,428
364,187
254,512
0.9
44.4
Goodwill
465,697
465,697
465,697
—
—
Operating lease right-of-use assets
99,785
102,609
96,092
(2.8
)
3.8
Other assets
1,713,121
1,543,698
1,504,500
11.0
13.9
Total assets
$
60,959,110
$
59,854,876
$
50,371,477
1.8
%
21.0
%
Liabilities and Stockholders’
Equity
Deposits
$
53,356,190
$
52,582,575
$
41,680,555
1.5
%
28.0
%
Short-term borrowings
—
—
59,613
—
(100.0
)
FHLB advances
248,898
248,464
657,185
0.2
(62.1
)
Assets sold under repurchase agreements
(“repurchase agreements”)
300,000
300,000
348,063
—
(13.8
)
Long-term debt and finance lease
liabilities
151,795
151,997
1,579,317
(1)
(0.1
)
(90.4
)
Operating lease liabilities
107,107
110,105
103,673
(2.7
)
3.3
Accrued expenses and other liabilities
1,104,919
914,187
816,965
20.9
35.2
Total liabilities
55,268,909
54,307,328
45,245,371
1.8
22.2
Stockholders’ equity
5,690,201
5,547,548
5,126,106
2.6
11.0
Total liabilities and stockholders’
equity
$
60,959,110
$
59,854,876
$
50,371,477
1.8
%
21.0
%
Book value per common share
$
40.10
$
39.10
$
36.22
2.6
%
10.7
%
Tangible equity (2) per common
share
$
36.75
$
35.75
$
32.85
2.8
11.9
Number of common shares at
period-end
141,884
141,878
141,507
0.0
0.3
Tangible equity to tangible assets
ratio (2)
8.62
%
8.54
%
9.32
%
8
bps
(70
)
bps
(1)
Includes $1.43 billion of advances from
the Federal Reserve Paycheck Protection Program Liquidity Facility
(“PPPLF”) as of September 30, 2020.
(2)
See reconciliation of GAAP to non-GAAP
financial measures in Table 13.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
TOTAL LOANS AND DEPOSITS
DETAIL
($ in thousands)
(unaudited)
Table 2
September 30, 2021 %
Change
September 30, 2021
June 30, 2021
September 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”)
(1)
$
13,831,649
$
13,790,461
$
13,305,024
0.3
%
4.0
%
Commercial real estate (“CRE”):
CRE
11,818,065
11,711,369
11,037,987
0.9
7.1
Multifamily residential
3,340,378
3,219,796
3,057,274
3.7
9.3
Construction and land
376,921
460,678
578,407
(18.2
)
(34.8
)
Total CRE
15,535,364
15,391,843
14,673,668
0.9
5.9
Consumer:
Residential mortgage:
Single-family residential
9,021,801
8,869,370
7,785,759
1.7
15.9
Home equity lines of credit (“HELOCs”)
1,963,622
1,872,166
1,514,388
4.9
29.7
Total residential mortgage
10,985,423
10,741,536
9,300,147
2.3
18.1
Other consumer
129,269
147,659
158,290
(12.5
)
(18.3
)
Total loans HFI (2)
40,481,705
40,071,499
37,437,129
1.0
8.1
Loans HFS
—
1,819
4,148
(100.0
)
(100.0
)
Total loans (2)
40,481,705
40,073,318
37,441,277
1.0
8.1
Allowance for loan losses
(560,404
)
(585,724
)
(618,252
)
(4.3
)
(9.4
)
Net loans (2)
$
39,921,301
$
39,487,594
$
36,823,025
1.1
8.4
Deposits:
Noninterest-bearing demand
$
23,175,471
$
21,816,721
$
14,924,917
6.2
%
55.3
%
Interest-bearing checking
6,530,601
6,762,178
5,731,573
(3.4
)
13.9
Money market
12,555,879
12,853,812
9,553,574
(2.3
)
31.4
Savings
2,855,597
2,719,106
2,401,318
5.0
18.9
Time deposits
8,238,642
8,430,758
9,069,173
(2.3
)
(9.2
)
Total deposits
$
53,356,190
$
52,582,575
$
41,680,555
1.5
%
28.0
%
(1)
Includes $807.3 million, $1.43 billion and
$1.77 billion of Paycheck Protection Program (“PPP”) loans as of
September 30, 2021, June 30, 2021 and September 30, 2020,
respectively.
(2)
Includes net deferred loan fees, unearned
fees, unamortized premiums and unaccreted discounts of $(54.3)
million, $(67.0) million and $(67.0) million as of September 30,
2021, June 30, 2021 and September 30, 2020, respectively. Net
origination fees related to PPP loans were $(13.5) million, $(25.9)
million and $(22.6) million as of September 30, 2021, June 30, 2021
and September 30, 2020, respectively.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 3
Three Months Ended
September 30, 2021 %
Change
September 30, 2021
June 30, 2021
September 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Interest and dividend income (1)
$
415,307
$
399,333
$
365,728
4.0
%
13.6
%
Interest expense
19,601
22,860
41,598
(14.3
)
(52.9
)
Net interest income before provision for
credit losses
395,706
376,473
324,130
5.1
22.1
(Reversal of) provision for credit
losses
(10,000
)
(15,000
)
10,000
(33.3
)
NM
Net interest income after provision for
credit losses
405,706
391,473
314,130
3.6
29.2
Noninterest income
73,109
68,431
54,503
(2)
6.8
34.1
Noninterest expense
205,384
189,523
172,573
(2)
8.4
19.0
Income before income taxes
273,431
270,381
196,060
1.1
39.5
Income tax expense
47,982
45,639
36,523
5.1
31.4
Net income
$
225,449
$
224,742
$
159,537
0.3
%
41.3
%
Earnings per share (“EPS”)
- Basic
$
1.59
$
1.58
$
1.13
0.3
%
40.9
%
- Diluted
$
1.57
$
1.57
$
1.12
0.2
40.2
Weighted-average number of shares
outstanding
- Basic
141,880
141,868
141,498
0.0
%
0.3
%
- Diluted
143,143
143,040
142,043
0.1
0.8
Three Months Ended
September 30, 2021 %
Change
September 30, 2021
June 30, 2021
September 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Noninterest income:
Lending fees
$
17,516
$
21,092
$
18,736
(17.0
)%
(6.5
)%
Deposit account fees
18,508
17,342
12,573
6.7
47.2
Interest rate contracts and other
derivative income (loss)
7,156
(3,172
)
5,538
(325.6
)
29.2
Foreign exchange income
13,101
13,007
3,310
0.7
295.8
Wealth management fees
5,598
7,951
4,553
(29.6
)
23.0
Net gains on sales of loans
3,329
1,491
361
123.3
822.2
Gains on sales of AFS debt securities
354
632
698
(44.0
)
(49.3
)
Other investment income
5,349
7,596
5,239
(2)
(29.6
)
2.1
Other income
2,198
2,492
3,495
(11.8
)
(37.1
)
Total noninterest income
$
73,109
$
68,431
$
54,503
(2)
6.8
%
34.1
%
Noninterest expense:
Compensation and employee benefits
$
105,751
$
105,426
$
99,756
0.3
%
6.0
%
Occupancy and equipment expense
15,851
15,377
16,648
3.1
(4.8
)
Deposit insurance premiums and regulatory
assessments
4,641
4,274
4,006
8.6
15.9
Deposit account expense
4,136
3,817
3,113
8.4
32.9
Data processing
3,575
4,035
3,590
(11.4
)
(0.4
)
Computer software expense
8,426
7,521
8,539
12.0
(1.3
)
Consulting expense
1,635
1,868
1,224
(12.5
)
33.6
Legal expense
2,363
1,975
1,366
19.6
73.0
Other operating expense
20,998
17,939
17,122
17.1
22.6
Amortization of tax credit and other
investments
38,008
27,291
17,209
(2)
39.3
120.9
Total noninterest expense
$
205,384
$
189,523
$
172,573
(2)
8.4
%
19.0
%
NM - Not meaningful.
(1)
Includes $15.2 million, $15.4 million and
$7.8 million of interest income related to PPP loans for the three
months ended September 30, 2021, June 30, 2021 and September 30,
2020, respectively.
(2)
Starting fourth quarter of 2020, the
Company reclassified certain income/losses from equity method
investments from Amortization of tax credit and other investments
to Other investment income, with no effect on net income. September
30, 2020 comparative amounts have been revised to conform with the
current presentation.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 4
Nine Months Ended
September 30, 2021
% Change
September 30, 2021
September 30, 2020
Yr-o-Yr
Interest and dividend income (1)
$
1,196,026
$
1,213,694
(1.5
)%
Interest expense
70,152
183,082
(61.7
)
Net interest income before provision for
credit losses
1,125,874
1,030,612
9.2
(Reversal of ) provision for credit
losses
(25,000
)
186,313
(113.4
)
Net interest income after provision for
credit losses
1,150,874
844,299
36.3
Noninterest income
214,406
165,715
(2)
29.4
Noninterest expense
585,984
537,671
(2)
9.0
Income before income taxes
779,296
472,343
65.0
Income tax expense
124,111
68,630
80.8
Net income
$
655,185
$
403,713
62.3
%
EPS
- Basic
$
4.62
$
2.83
63.2
%
- Diluted
$
4.58
$
2.82
62.3
Weighted-average number of shares
outstanding
- Basic
141,799
142,595
(0.6
)%
- Diluted
143,051
143,082
(0.0
)
Nine Months Ended
September 30, 2021
% Change
September 30, 2021
September 30, 2020
Yr-o-Yr
Noninterest income:
Lending fees
$
56,965
$
56,455
0.9
%
Deposit account fees
51,233
33,892
51.2
Interest rate contracts and other
derivative income
20,981
18,718
12.1
Foreign exchange income
35,634
15,691
127.1
Wealth management fees
20,460
12,997
57.4
Net gains on sales of loans
6,601
1,443
357.4
Gains on sales of AFS debt securities
1,178
11,867
(90.1
)
Other investment income
13,870
6,652
(2)
108.5
Other income
7,484
8,000
(6.5
)
Total noninterest income
$
214,406
$
165,715
(2)
29.4
%
Noninterest expense:
Compensation and employee benefits
$
318,985
$
298,671
6.8
%
Occupancy and equipment expense
47,150
49,941
(5.6
)
Deposit insurance premiums and regulatory
assessments
12,791
11,133
14.9
Deposit account expense
11,845
10,029
18.1
Data processing
12,088
11,896
1.6
Computer software expense
23,106
22,006
5.0
Consulting expense
4,978
3,854
29.2
Legal expense
5,840
6,093
(4.2
)
Other operating expense
58,544
57,489
1.8
Amortization of tax credit and other
investments
90,657
57,819
(2)
56.8
Repurchase agreements’ extinguishment
cost
—
8,740
(100.0
)
Total noninterest expense
$
585,984
$
537,671
(2)
9.0
%
(1)
Includes $45.6 million and $29.1 million
of interest income related to PPP loans for the nine months ended
September 30, 2021 and 2020, respectively.
(2)
Starting fourth quarter of 2020, the
Company reclassified certain income/losses from equity method
investments from Amortization of tax credit and other investments
to Other investment income, with no effect on net income. September
30, 2020 comparative amounts have been revised to conform with the
current presentation.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED AVERAGE
BALANCES
($ in thousands)
(unaudited)
Table 5
Three Months Ended
September 30, 2021
% Change
Nine Months Ended
September 30, 2021
% Change
September 30, 2021
June 30, 2021
September 30, 2020
Qtr-o-Qtr
Yr-o-Yr
September 30, 2021
September 30, 2020
Yr-o-Yr
Loans:
Commercial:
C&I (1)
$
13,531,338
$
13,811,966
$
13,235,845
(2.0
)%
2.2
%
$
13,678,462
$
12,988,486
5.3
%
CRE:
CRE
11,747,607
11,616,916
10,942,780
1.1
7.4
11,564,946
10,747,669
7.6
Multifamily residential
3,248,281
3,125,001
3,107,294
3.9
4.5
3,139,209
2,995,227
4.8
Construction and land
415,812
477,860
564,219
(13.0
)
(26.3
)
480,514
599,957
(19.9
)
Total CRE
15,411,700
15,219,777
14,614,293
1.3
5.5
15,184,669
14,342,853
5.9
Consumer:
Residential mortgage:
Single-family residential
8,962,533
8,650,706
7,695,838
3.6
16.5
8,645,135
7,487,347
15.5
HELOCs
1,912,629
1,800,213
1,475,098
6.2
29.7
1,793,928
1,454,237
23.4
Total residential mortgage
10,875,162
10,450,919
9,170,936
4.1
18.6
10,439,063
8,941,584
16.7
Other consumer
141,951
139,608
139,371
1.7
1.9
139,557
214,936
(35.1
)
Total loans (2)
$
39,960,151
$
39,622,270
$
37,160,445
0.9
%
7.5
%
$
39,441,751
$
36,487,859
8.1
%
Interest-earning assets
$
58,239,480
$
54,901,209
$
47,428,586
6.1
%
22.8
%
$
55,350,645
$
45,076,734
22.8
%
Total assets
$
61,359,533
$
57,771,837
$
50,247,259
6.2
%
22.1
%
$
58,263,002
$
47,753,030
22.0
%
Deposits:
Noninterest-bearing demand
$
23,169,323
$
19,717,315
$
14,296,475
17.5
%
62.1
%
$
20,345,370
$
12,987,813
56.6
%
Interest-bearing checking
6,646,515
6,671,358
5,663,873
(0.4
)
17.3
6,571,231
5,119,568
28.4
Money market
12,604,827
12,596,515
9,981,704
0.1
26.3
12,262,173
9,630,918
27.3
Savings
2,792,702
2,676,865
2,259,788
4.3
23.6
2,715,114
2,162,365
25.6
Time deposits
8,283,265
8,518,936
9,008,907
(2.8
)
(8.1
)
8,635,249
9,633,582
(10.4
)
Total deposits
$
53,496,632
$
50,180,989
$
41,210,747
6.6
%
29.8
%
$
50,529,137
$
39,534,246
27.8
%
Interest-bearing liabilities
$
31,039,410
$
31,394,114
$
29,552,756
(1.1
)%
5.0
%
$
31,099,675
$
28,506,736
9.1
%
Stockholders’ equity
$
5,680,306
$
5,425,952
$
5,079,351
4.7
%
11.8
%
$
5,482,705
$
5,028,122
9.0
%
(1)
Includes average balances of PPP loans of
$1.11 billion, $1.87 billion and $1.76 billion for the three months
ended September 30, 2021, June 30, 2021 and September 30, 2020,
respectively, and $1.63 billion and $1.08 billion for the nine
months ended September 30, 2021 and 2020, respectively.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
QUARTER-TO-DATE AVERAGE
BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
Three Months Ended
September 30, 2021
June 30, 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
$
7,036,823
$
4,521
0.25
%
$
5,072,225
$
3,628
0.29
%
Resale agreements
2,382,741
8,957
1.49
%
2,129,567
8,021
1.51
%
AFS debt securities
8,782,682
37,826
1.71
%
7,997,005
34,690
1.74
%
Loans (2)
39,960,151
363,503
3.61
%
39,622,270
352,453
3.57
%
FHLB and FRB stock
77,083
500
2.57
%
80,142
541
2.71
%
Total interest-earning assets
58,239,480
415,307
2.83
%
54,901,209
399,333
2.92
%
Noninterest-earning assets:
Cash and due from banks
627,640
600,053
Allowance for loan losses
(584,827
)
(607,523
)
Other assets
3,077,240
2,878,098
Total assets
$
61,359,533
$
57,771,837
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,646,515
$
3,186
0.19
%
$
6,671,358
$
3,777
0.23
%
Money market deposits
12,604,827
3,446
0.11
%
12,596,515
3,712
0.12
%
Savings deposits
2,792,702
1,943
0.28
%
2,676,865
2,078
0.31
%
Time deposits
8,283,265
7,395
0.35
%
8,518,936
8,431
0.40
%
Federal funds purchased and other
short-term borrowings
620
—
—
%
336
—
—
%
FHLB advances
248,614
857
1.37
%
474,887
2,099
1.77
%
Repurchase agreements
310,997
2,012
2.57
%
303,118
1,991
2.63
%
Long-term debt and finance lease
liabilities
151,870
762
1.99
%
152,099
772
2.04
%
Total interest-bearing
liabilities
31,039,410
19,601
0.25
%
31,394,114
22,860
0.29
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
23,169,323
19,717,315
Accrued expenses and other liabilities
1,470,494
1,234,456
Stockholders’ equity
5,680,306
5,425,952
Total liabilities and stockholders’
equity
$
61,359,533
$
57,771,837
Interest rate spread
2.58
%
2.63
%
Net interest income and net interest
margin
$
395,706
2.70
%
$
376,473
2.75
%
Adjusted net interest income and
adjusted net interest margin (3)
$
380,494
2.64
%
$
361,096
2.73
%
(1)
Annualized.
(2)
Includes loans HFS.
(3)
Net interest income and net interest
margin for the three months ended September 30, 2021 and June 30,
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
September 30, 2021
September 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
$
7,036,823
$
4,521
0.25
%
$
4,904,394
$
5,045
0.41
%
Resale agreements
2,382,741
8,957
1.49
%
1,225,217
5,295
1.72
%
AFS debt securities
8,782,682
37,826
1.71
%
4,059,456
18,493
1.81
%
Loans (2)
39,960,151
363,503
3.61
%
37,160,445
336,542
3.60
%
FHLB and FRB stock
77,083
500
2.57
%
79,074
353
1.78
%
Total interest-earning assets
58,239,480
415,307
2.83
%
47,428,586
365,728
3.07
%
Noninterest-earning assets:
Cash and due from banks
627,640
522,699
Allowance for loan losses
(584,827
)
(632,216
)
Other assets
3,077,240
2,928,190
Total assets
$
61,359,533
$
50,247,259
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,646,515
$
3,186
0.19
%
$
5,663,873
$
4,345
0.31
%
Money market deposits
12,604,827
3,446
0.11
%
9,981,704
6,837
0.27
%
Savings deposits
2,792,702
1,943
0.28
%
2,259,788
1,481
0.26
%
Time deposits
8,283,265
7,395
0.35
%
9,008,907
21,135
0.93
%
Federal funds purchased and other
short-term borrowings
620
—
—
%
84,858
407
1.91
%
FHLB advances
248,614
857
1.37
%
656,906
3,146
1.91
%
Repurchase agreements
310,997
2,012
2.57
%
317,097
2,155
2.70
%
Long-term debt and finance lease
liabilities
151,870
762
1.99
%
1,579,623
(3)
2,092
0.53
%
Total interest-bearing
liabilities
31,039,410
19,601
0.25
%
29,552,756
41,598
0.56
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
23,169,323
14,296,475
Accrued expenses and other liabilities
1,470,494
1,318,677
Stockholders’ equity
5,680,306
5,079,351
Total liabilities and stockholders’
equity
$
61,359,533
$
50,247,259
Interest rate spread
2.58
%
2.51
%
Net interest income and net interest
margin
$
395,706
2.70
%
$
324,130
2.72
%
Adjusted net interest income and
adjusted net interest margin (4)
$
380,494
2.64
%
$
317,611
2.77
%
(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 September 30, 2021 and September
30, 2020 have been adjusted for the impact of PPP loans. Net
interest margin for the three months ended September 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
Nine Months Ended
September 30, 2021
September 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
$
6,078,982
$
11,781
0.26
%
$
3,775,242
$
20,717
0.73
%
Resale agreements (2)
1,994,776
23,077
1.55
%
1,048,923
16,434
2.09
%
AFS debt securities
7,755,029
101,616
1.75
%
3,685,837
59,639
2.16
%
Loans (3)
39,441,751
1,057,964
3.59
%
36,487,859
1,115,804
4.08
%
FHLB and FRB stock
80,107
1,588
2.65
%
78,873
1,100
1.86
%
Total interest-earning assets
55,350,645
1,196,026
2.89
%
45,076,734
1,213,694
3.60
%
Noninterest-earning assets:
Cash and due from banks
602,830
510,750
Allowance for loan losses
(603,523)
(563,912)
Other assets
2,913,050
2,729,458
Total assets
$
58,263,002
$
47,753,030
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,571,231
$
11,177
0.23
%
$
5,119,568
$
19,995
0.52
%
Money market deposits
12,262,173
11,869
0.13
%
9,630,918
37,178
0.52
%
Savings deposits
2,715,114
5,762
0.28
%
2,162,365
4,743
0.29
%
Time deposits
8,635,250
26,982
0.42
%
9,633,582
94,684
1.31
%
Federal funds purchased and other
short-term borrowings
1,871
42
3.00
%
128,846
1,228
1.27
%
FHLB advances
457,273
6,025
1.76
%
667,935
10,655
2.13
%
Repurchase agreements (2)
304,745
5,981
2.62
%
355,923
9,686
3.64
%
Long-term debt and finance lease
liabilities
152,018
2,314
2.04
%
807,599
(4)
4,913
0.81
%
Total interest-bearing
liabilities
31,099,675
70,152
0.30
%
28,506,736
183,082
0.86
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
20,345,370
12,987,813
Accrued expenses and other liabilities
1,335,252
1,230,359
Stockholders’ equity
5,482,705
5,028,122
Total liabilities and stockholders’
equity
$
58,263,002
$
47,753,030
Interest rate spread
2.59
%
2.74
%
Net interest income and net interest
margin
$
1,125,874
2.72
%
$
1,030,612
3.05
%
Adjusted net interest income and
adjusted net interest margin (5)
$
1,080,268
2.69
%
$
1,003,267
3.05
%
(1)
Annualized.
(2)
Average balances of resale and repurchase
agreements for the nine months ended September 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 nine months ended September 30, 2020 were 2.09%
and 3.48%, 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 nine months ended September 30, 2021 and September
30, 2020 have been adjusted for the impact of PPP loans. Net
interest margin for the nine months ended September 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)
September 30, 2021
Basis Point Change
September 30, 2021
June 30, 2021
September 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Return on average assets
1.46
%
1.56
%
1.26
%
(10
)
bps
20
bps
Return on average equity
15.75
%
16.61
%
12.50
%
(86
)
325
Return on average tangible equity (2)
17.25
%
18.28
%
13.88
%
(103
)
337
Interest rate spread
2.58
%
2.63
%
2.51
%
(5
)
7
Net interest margin
2.70
%
2.75
%
2.72
%
(5
)
(2
)
Adjusted net interest margin (2)
2.64
%
2.73
%
2.77
%
(9
)
(13
)
Average loan yield
3.61
%
3.57
%
3.60
%
4
1
Adjusted average loan yield (2)
3.56
%
3.58
%
3.70
%
(2
)
(14
)
Yield on average interest-earning
assets
2.83
%
2.92
%
3.07
%
(9
)
(24
)
Average cost of interest-bearing
deposits
0.21
%
0.24
%
0.50
%
(3
)
(29
)
Average cost of deposits
0.12
%
0.14
%
0.33
%
(2
)
(21
)
Average cost of funds
0.14
%
0.18
%
0.38
%
(4
)
(24
)
Adjusted pre-tax, pre-provision
profitability ratio (2)
1.95
%
1.97
%
1.78
%
(2
)
17
Adjusted noninterest expense/average
assets (2)
1.08
%
1.12
%
1.22
%
(4
)
(14
)
Efficiency ratio
43.81
%
42.60
%
45.58
%
121
(177
)
Adjusted efficiency ratio (2)
35.55
%
36.30
%
40.79
%
(75
)
bps
(524
)
bps
Nine Months Ended (1)
September 30, 2021
Basis Point Change
September 30, 2021
September 30, 2020
Yr-o-Yr
Return on average assets
1.50
%
1.13
%
37
bps
Return on average equity
15.98
%
10.73
%
525
Return on average tangible equity (2)
17.56
%
11.95
%
561
Interest rate spread
2.59
%
2.74
%
(15
)
Net interest margin
2.72
%
3.05
%
(33
)
Adjusted net interest margin (2)
2.69
%
3.05
%
(36
)
Average loan yield
3.59
%
4.08
%
(49
)
Adjusted average loan yield (2)
3.58
%
4.10
%
(52
)
Yield on average interest-earning
assets
2.89
%
3.60
%
(71
)
Average cost of interest-bearing
deposits
0.25
%
0.79
%
(54
)
Average cost of deposits
0.15
%
0.53
%
(38
)
Average cost of funds
0.18
%
0.59
%
(41
)
Adjusted pre-tax, pre-provision
profitability ratio (2)
1.94
%
2.04
%
(10
)
Adjusted noninterest expense/average
assets (2)
1.13
%
1.31
%
(18
)
Efficiency ratio
43.72
%
44.94
%
(122
)
Adjusted efficiency ratio (2)
36.80
%
39.14
%
(234
)
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 September
30, 2021
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, June 30,
2021
$
362,528
$
199,530
$
19,468
$
4,198
$
585,724
(Reversal of) provision for credit losses
on loans
(a)
(23,365
)
8,527
2,972
130
(11,736
)
Gross charge-offs
(1,154
)
(16,903
)
(912
)
(10
)
(18,979
)
Gross recoveries
4,203
1,106
156
—
5,465
Total net recoveries (charge-offs)
3,049
(15,797
)
(756
)
(10
)
(13,514
)
Foreign currency translation
adjustment
(70
)
—
—
—
(70
)
Allowance for loan losses, September
30, 2021
$
342,142
$
192,260
$
21,684
$
4,318
$
560,404
Three Months Ended June 30,
2021
Commercial
Consumer
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 September
30, 2020
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, June 30,
2020
$
380,723
$
219,649
$
29,181
$
2,518
$
632,071
Provision for (reversal of) credit losses
on loans
(a)
31,691
(18,397
)
(3,329
)
(76
)
9,889
Gross charge-offs
(25,111
)
(1,414
)
—
(124
)
(26,649
)
Gross recoveries
1,218
1,180
43
—
2,441
Total net (charge-offs) recoveries
(23,893
)
(234
)
43
(124
)
(24,208
)
Foreign currency translation
adjustment
500
—
—
—
500
Allowance for loan losses, September
30, 2020
$
389,021
$
201,018
$
25,895
$
2,318
$
618,252
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
Nine Months Ended September
30, 2021
Commercial
Consumer
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)
(42,112
)
16,198
4,229
2,226
(19,459
)
Gross charge-offs
(20,162
)
(28,642
)
(1,091
)
(43
)
(49,938
)
Gross recoveries
6,301
3,101
336
5
9,743
Total net charge-offs
(13,861
)
(25,541
)
(755
)
(38
)
(40,195
)
Foreign currency translation
adjustment
75
—
—
—
75
Allowance for loan losses, September
30, 2021
$
342,142
$
192,260
$
21,684
$
4,318
$
560,404
Nine Months Ended September
30, 2020
Commercial
Consumer
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)
130,171
54,550
(2,679
)
(3,197
)
178,845
Gross charge-offs
(57,466
)
(2,688
)
(221
)
(180
)
(60,555
)
Gross recoveries
3,395
12,249
471
94
16,209
Total net (charge-offs) recoveries
(54,071
)
9,561
250
(86
)
(44,346
)
Foreign currency translation
adjustment
308
—
—
—
308
Allowance for loan losses, September
30, 2020
$
389,021
$
201,018
$
25,895
$
2,318
$
618,252
Three Months Ended
Nine Months Ended
September 30, 2021
June 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Unfunded Credit Facilities
Allowance for unfunded credit
commitments, beginning of period (1)
$
26,300
$
32,529
$
28,972
$
33,577
$
11,158
Impact of ASU 2016-13 adoption
—
—
—
—
10,457
Provision for (reversal of) credit losses
on unfunded credit commitments
(b)
1,736
(6,229
)
111
(5,541
)
7,468
Allowance for unfunded credit
commitments, end of period (1)
$
28,036
$
26,300
$
29,083
$
28,036
$
29,083
(Reversal of) provision for credit
losses
(a)+(b)
$
(10,000
)
$
(15,000
)
$
10,000
$
(25,000
)
$
186,313
(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
September 30, 2021
June 30, 2021
September 30, 2020
Special mention loans
$
448,497
$
386,807
$
722,920
Classified loans
561,787
645,180
758,496
Total criticized loans
$
1,010,284
$
1,031,987
$
1,481,416
Nonperforming Assets
September 30, 2021
June 30, 2021
September 30, 2020
Nonaccrual loans:
Commercial:
C&I
$
97,157
$
83,225
$
145,986
Total CRE
15,359
81,573
59,724
Consumer:
Total residential mortgage
18,153
30,489
28,289
Other consumer
2,491
2,503
2,495
Total nonaccrual loans
133,160
197,790
236,494
Other real estate owned, net
28,800
14,914
19,504
Other nonperforming assets
10,681
13,025
3,890
Total nonperforming assets
$
172,641
$
225,729
$
259,888
Credit Quality Ratios
September 30, 2021
June 30, 2021
September 30, 2020
Annualized quarterly net charge-offs to
average loans HFI
0.13
%
0.13
%
0.26
%
Special mention loans to loans HFI
1.11
%
0.97
%
1.93
%
Classified loans to loans HFI
1.39
%
1.61
%
2.03
%
Criticized loans to loans HFI
2.50
%
2.58
%
3.96
%
Nonperforming assets to total assets
0.28
%
0.38
%
0.52
%
Nonaccrual loans to loans HFI
0.33
%
0.49
%
0.63
%
Allowance for loan losses to loans HFI
1.38
%
1.46
%
1.65
%
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 agreements. 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
September 30, 2021
June 30, 2021
September 30, 2020
Net interest income before provision for
credit losses
(a)
$
395,706
$
376,473
$
324,130
Total noninterest income (1)
73,109
68,431
54,503
Total revenue
(b)
$
468,815
$
444,904
$
378,633
Total noninterest expense (1)
(c)
$
205,384
$
189,523
$
172,573
Less: Amortization of tax credit and other
investments (1)
(38,008
)
(27,291
)
(17,209
)
Amortization of core deposit
intangibles
(705
)
(710
)
(927
)
Adjusted noninterest expense
(d)
$
166,671
$
161,522
$
154,437
Efficiency ratio
(c)/(b)
43.81
%
42.60
%
45.58
%
Adjusted efficiency ratio
(d)/(b)
35.55
%
36.30
%
40.79
%
Adjusted pre-tax, pre-provision
income
(b)-(d) = (e)
$
302,144
$
283,382
$
224,196
Average total assets
(f)
$
61,359,533
$
57,771,837
$
50,247,259
Adjusted pre-tax, pre-provision
profitability ratio (2)
(e)/(f)
1.95
%
1.97
%
1.78
%
Adjusted noninterest expense/average
assets (2)
(d)/(f)
1.08
%
1.12
%
1.22
%
Nine Months Ended
September 30, 2021
September 30, 2020
Net interest income before provision for
credit losses
(g)
$
1,125,874
$
1,030,612
Total noninterest income (1)
214,406
165,715
Total revenue
(h)
$
1,340,280
$
1,196,327
Total noninterest expense (1)
(i)
$
585,984
$
537,671
Less: Amortization of tax credit and other
investments (1)
(90,657
)
(57,819
)
Amortization of core deposit
intangibles
(2,147
)
(2,811
)
Repurchase agreements’ extinguishment
cost
—
(8,740
)
Adjusted noninterest expense
(j)
$
493,180
$
468,301
Efficiency ratio
(i)/(h)
43.72
%
44.94
%
Adjusted efficiency ratio
(j)/(h)
36.80
%
39.14
%
Adjusted pre-tax, pre-provision
income
(h)-(j) = (k)
$
847,100
$
728,026
Average total assets
(l)
$
58,263,002
$
47,753,030
Adjusted pre-tax, pre-provision
profitability ratio (2)
(k)/(l)
1.94
%
2.04
%
Adjusted noninterest expense/average
assets (2)
(j)/(l)
1.13
%
1.31
%
(1)
Starting 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.
September 30, 2021
June 30, 2021
September 30, 2020
Stockholders’ equity
(a)
$
5,690,201
$
5,547,548
$
5,126,106
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(9,849
)
(10,309
)
(12,369
)
Tangible equity
(b)
$
5,214,655
$
5,071,542
$
4,648,040
Total assets
(c)
$
60,959,110
$
59,854,876
$
50,371,477
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(9,849
)
(10,309
)
(12,369
)
Tangible assets
(d)
$
60,483,564
$
59,378,870
$
49,893,411
Total stockholders’ equity to total
assets ratio
(a)/(c)
9.33
%
9.27
%
10.18
%
Tangible equity to tangible assets
ratio
(b)/(d)
8.62
%
8.54
%
9.32
%
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
Nine Months Ended
September 30, 2021
June 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Net Income
$
225,449
$
224,742
$
159,537
$
655,185
$
403,713
Add: Amortization of core deposit
intangibles
705
710
927
2,147
2,811
Amortization of mortgage servicing
assets
430
420
450
1,264
1,492
Tax effect of amortization adjustments
(2)
(322
)
(321
)
(390
)
(968
)
(1,220
)
Tangible net income
(e)
$
226,262
$
225,551
$
160,524
$
657,628
$
406,796
Average stockholders’ equity
$
5,680,306
$
5,425,952
$
5,079,351
$
5,482,705
$
5,028,122
Less: Average goodwill
(465,697
)
(465,697
)
(465,697
)
(465,697
)
(465,697
)
Average other intangible assets (1)
(10,135
)
(10,827
)
(13,083
)
(10,847
)
(14,302
)
Average tangible equity
(f)
$
5,204,474
$
4,949,428
$
4,600,571
$
5,006,161
$
4,548,123
Return on average tangible equity
(3)
(e)/(f)
17.25
%
18.28
%
13.88
%
17.56
%
11.95
%
(1)
Includes core deposit intangibles and
mortgage servicing assets.
(2)
Applied statutory tax rate of 28.37% for
the three and nine months ended September 30, 2021, and the three
months ended June 30, 2021. Applied statutory tax rate of 28.35%
for the three and nine months ended September 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 and nine months ended September 30,
2021 and 2020, and three months ended June 30, 2020 exclude the
impact of PPP loans. Net interest margin for the three and nine
months ended September 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
Nine Months Ended
Yield on Average Loans
September 30, 2021
June 30, 2021
September 30, 2020
September 30, 2021
September 30, 2020
Interest income on loans
(a)
$
363,503
$
352,453
$
336,542
$
1,057,964
$
1,115,804
Less: Interest income on PPP loans
(15,212
)
(15,377
)
(7,778
)
(45,606
)
(29,067
)
Adjusted interest income on
loans
(b)
$
348,291
$
337,076
$
328,764
$
1,012,358
$
1,086,737
Average loans
(c)
$
39,960,151
$
39,622,270
$
37,160,445
$
39,441,751
$
36,487,859
Less: Average PPP loans
(1,111,404
)
(1,870,385
)
(1,764,411
)
(1,634,617
)
(1,078,985
)
Adjusted average loans
(d)
$
38,848,747
$
37,751,885
$
35,396,034
$
37,807,134
$
35,408,874
Average loan yield (1)
(a)/(c)
3.61
%
3.57
%
3.60
%
(1)
3.59
%
4.08
%
Adjusted average loan yield (1)
(b)/(d)
3.56
%
3.58
%
3.70
%
(1)
3.58
%
4.10
%
Net Interest Margin
Net interest income before provision for
credit losses
(e)
$
395,706
$
376,473
$
324,130
$
1,125,874
$
1,030,612
Less: Interest income on PPP loans
(15,212
)
(15,377
)
(7,778
)
(45,606
)
(29,067
)
Add: Interest expense on advances from the
PPPLF
—
—
1,259
—
1,722
Adjusted net interest income
(f)
$
380,494
$
361,096
$
317,611
$
1,080,268
$
1,003,267
Average interest-earning assets
(g)
$
58,239,480
$
54,901,209
$
47,428,586
$
55,350,645
$
45,076,734
Less: Average PPP loans
(1,111,404
)
(1,870,385
)
(1,764,411
)
(1,634,617
)
(1,078,985
)
Adjusted average interest-earning
assets
(h)
$
57,128,076
$
53,030,824
$
45,664,175
$
53,716,028
$
43,997,749
Net interest margin (1)
(e)/(g)
2.70
%
2.75
%
2.72
%
(1)
2.72
%
3.05
%
Adjusted net interest margin
(1)
(f)/(h)
2.64
%
2.73
%
2.77
%
(1)
2.69
%
3.05
%
(1)
Annualized.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211021005319/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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