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 full year and fourth quarter of 2020. For
the full year 2020, net income was $567.8 million, or $3.97 per
diluted share. For the fourth quarter of 2020, net income was
$164.1 million, or $1.15 per diluted share.
“Thanks to the tireless commitment of all our associates, East
West successfully navigated the challenges posed by the COVID-19
pandemic in 2020, delivering solid financial performance. For the
full year 2020, we earned a return on average assets of 1.16% and
return on average equity of 11.2%,” stated Dominic Ng, Chairman and
Chief Executive Officer of East West. “We ended 2020 on a strong
note and are raising our common stock dividend by 20%.”
“As of December 31, 2020, our total loans reached a record $38.4
billion, growing by 10% annualized from September 30, 2020, and our
total deposits reached a record $44.9 billion, growing by 30%
annualized during the same period,” continued Ng.
“Quarter-over-quarter, our revenue grew by 10%, reflecting loan
growth and higher fee income. Expenses were well-managed and our
operating efficiency improved. Importantly, we saw across-the-board
improvement in our asset quality metrics, in the form of declining
deferral and delinquency rates, lower net charge-offs and
decreasing nonperforming and criticized assets.”
“Throughout the past year, we have been inspired by our
customers’ resiliency and adaptability. It has been our privilege
to provide essential banking services and support the rebuilding of
businesses and communities. We are optimistic about an improving
macroeconomic outlook, the broader distribution of COVID-19
vaccines and expectations for increased government stimulus. We are
looking forward to a strengthening economic recovery in the second
half of the new year, and are confident that we will be able to
continue our growth and generate strong returns for our
shareholders in 2021,” concluded Ng.
BALANCE SHEET
- Record Assets – Total assets reached $52.2 billion as of
December 31, 2020, growing by $1.8 billion, or 14% annualized, from
$50.4 billion as of September 30, 2020. Year-over-year, total
assets grew by 18%. Fourth quarter 2020 average interest-earning
assets of $49.7 billion grew by $2.3 billion, or 19% linked quarter
annualized, driven by very strong deposit growth in the quarter.
Deposit growth outpaced loan growth and as a result, average
available-for-sale debt securities increased by $970.4 million in
the fourth quarter, followed by an increase of $705.6 million in
average interest-bearing cash and deposits with banks.
- Record Loans – Total loans reached $38.4 billion as of
December 31, 2020, growing by $1.0 billion, or 10% annualized, from
$37.4 billion as of September 30, 2020. Year-over-year, total loans
grew by $3.6 billion or 10%. Excluding Paycheck Protection Program
(“PPP”) loans, end-of-period loans grew by 6% year-over-year. PPP
loans were $1.6 billion as of December 31, 2020, a decrease of
$204.1 million from September 30, 2020 due to loan forgiveness by
the SBA. As of January 27, 2021, the Company funded over 2,600 new
PPP loans totaling over $380 million. Fourth quarter 2020 average
loans of $37.7 billion grew by $565.3 million, or 6% linked quarter
annualized. Fourth quarter average loan growth was led by total
residential mortgage, followed by commercial and industrial
(“C&I”) loans, excluding PPP loans, and total commercial real
estate (“CRE”) loans. The average balance of PPP loans in the
fourth quarter was $1.7 billion. Excluding PPP loans, average loans
grew by 7% annualized from the third quarter of 2020.
- Record Deposits – Total deposits reached $44.9 billion
as of December 31, 2020, growing by $3.2 billion, or 30%
annualized, from $41.7 billion as of September 30, 2020.
Year-over-year, total deposits grew by $7.5 billion or 20%.
Noninterest-bearing demand deposits reached a record $16.3 billion
as of December 31, 2020. Throughout 2020, growth in
noninterest-bearing deposit accounts outpaced total deposit growth.
Noninterest-bearing demand deposits made up 36% of total deposits
as of December 31, 2020, up from 30% as of December 31, 2019.
Fourth quarter 2020 average deposits of $44.4 billion grew by $3.2
billion, or 31% linked quarter annualized. Fourth quarter average
deposit growth was led by noninterest-bearing demand deposits,
which increased by $2.0 billion, or 56% linked quarter annualized,
followed by growth in money market, interest-bearing checking and
savings accounts.
- PPP Liquidity Facility (“PPPLF”) – In October 2020, the
Company paid off in full its PPPLF, which was $1.4 billion as of
September 30, 2020.
- Capital Levels – Capital levels for East West are
strong. As of December 31, 2020, stockholders’ equity was $5.3
billion, or $37.22 per share. Tangible equity1 per common share was
$33.85 as of December 31, 2020, an increase of 3% from $32.85 as of
September 30, 2020, and an increase of 9% from $31.15 as of
December 31, 2019. As of December 31, 2020, the tangible equity to
tangible assets ratio1 was 9.3%, the common equity tier 1 (“CET1”)
capital ratio was 12.7%, and the total risk-based capital ratio was
14.3%.
- Dividend Increase – First quarter 2021 common stock
dividend was increased by 20%, or 5.5 cents per share. The new
quarterly dividend is $0.33, up from $0.275 per share. The new
annual dividend is $1.32 per share, compared with $1.10 per share
previously. 1 See reconciliation of GAAP to non-GAAP financial
measures in Table 14.
OPERATING RESULTS
- Full Year Earnings – Full year 2020 net income was
$567.8 million, or $3.97 per diluted share, a decrease of 16% from
$674.0 million, or $4.61 per diluted share, for the full year 2019.
Full year 2020 adjusted net income2 was $565.2 million, or $3.95
per diluted share, a decrease of 20% from adjusted net income of
$707.9 million, or $4.84 per diluted share, for the full year 2019.
Non-GAAP adjustments exclude the impacts of the impairment,
recoveries and income tax items related to DC Solar tax credit
investments in 2020 and 2019, as applicable.
- Fourth Quarter Earnings – Fourth quarter 2020 net income
was $164.1 million, or $1.15 per diluted share, an increase of 3%
from $159.5 million, or $1.12 per diluted share, for the third
quarter of 2020. Fourth quarter 2020 adjusted net income2 was
$161.5 million, or $1.13 per diluted share, a quarter-over-quarter
increase of 1% from $159.5 million. Fourth quarter 2020 earnings
were adjusted for items related to DC Solar tax credit investments,
which added $2.6 million, or two cents per share to earnings. There
were no adjustments to third quarter 2020 earnings. 2 See
reconciliation of GAAP to non-GAAP financial measures in Table
12.
Fourth Quarter 2020 Compared to Third
Quarter 2020
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $346.6 million, an increase
of 7% from $324.1 million. Net interest margin (“NIM”) of 2.77%
increased by five basis points from 2.72%. The quarter-over-quarter
changes in the NII and the NIM reflect an increase in PPP-related
income, stability of core loan yields, a decrease in the cost of
deposits, loan growth, and growth in available-for-sale debt
securities.
- Adjusted NII3 totaled $332.7 million, an increase of 5% from
$317.6 million. Adjusted NIM3 of 2.76% contracted by one basis
point from 2.77%. Adjusted NII and adjusted NIM exclude PPP loan
related income and PPPLF expense.
- Average loan yield of 3.68% expanded by eight basis points from
3.60%, reflecting a higher amount of deferred fee income accreted
on PPP loans. Interest and fees earned on PPP loans contributed
$14.2 million to interest income in the fourth quarter, an increase
from $7.8 million in the third quarter. Third quarter PPP fee
income was lower because of slower than anticipated forgiveness of
PPP loans by the SBA.
- Excluding the impact of PPP loans, the adjusted average loan
yield3 of 3.69% contracted by one basis point from 3.70%,
reflecting the general stability of yields of the underlying loan
portfolio.
- The average cost of interest-bearing deposits decreased by 10
basis points to 0.40%, down from 0.50%. The average cost of
deposits decreased by eight basis points to 0.25%, down from 0.33%.
The decrease in the cost of deposits reflects growth in low-cost
deposit accounts and continued downward repricing of maturing time
deposits. 3 See reconciliation of GAAP to non-GAAP financial
measures in Table 15.
Noninterest Income
Noninterest income totaled $69.8 million, a 28% increase from
$54.5 million. The quarter-over-quarter increase was primarily
driven by a favorable change in the credit valuation adjustment of
interest rate contracts; an increase in customer-driven foreign
exchange transactions, and an increase in net gains on sale of SBA
loans.
Noninterest Expense
Noninterest expense totaled $178.7 million, an increase of 4%
from $172.6 million.
- Fourth quarter noninterest expense consisted of $165.6 million
of adjusted noninterest expense4, $12.3 million in amortization of
tax credit and other investments, and $0.8 million in amortization
of core deposit intangibles.
- Adjusted noninterest expense of $165.6 million increased by
$11.1 million, or 7%, from $154.4 million in the third quarter. The
quarter-over-quarter change was primarily driven by increased bonus
accrual in compensation and employee benefits expense, and a
write-down on other real estate owned, which was included in other
operating expense. Year-over-year, adjusted noninterest expense was
essentially flat, compared with $165.3 million in the fourth
quarter of 2019.
- Amortization of tax credit and other investments totaled $12.3
million, a decrease from $17.2 million in the third quarter. Fourth
quarter amortization of tax credit and other investments was lower
because it included $10.7 million of recoveries related to DC Solar
tax credit investments.
- The adjusted efficiency ratio4 was 39.8% in the fourth quarter,
an improvement from 40.8% in the third quarter. 4 See
reconciliation of GAAP to non-GAAP financial measures in Table
13.
TAX RELATED ITEMS
Full year 2020 income tax expense was $118.0 million and the
effective tax rate was 17%, compared with income tax expense of
$169.9 million and an effective tax rate of 20% for the full year
of 2019.
- Fourth quarter 2020 income tax expense was $49.3 million and
the effective tax rate was 23%, compared with income tax expense of
$36.5 million and an effective tax rate of 19% for the third
quarter of 2020.
- Fourth quarter 2020 income tax expense and effective tax rate
were elevated by $8.1 million related to DC Solar tax credit
investments. Combined with the $10.7 million of recoveries included
as part of amortization of tax credit and other investments, as
noted above, the DC Solar-related items in the fourth quarter of
2020 added $2.6 million after tax, or two cents per share.
ASSET QUALITY
The allowance for loan losses (“ALLL”) totaled $620.0 million,
or 1.61% of loans held for investment (“HFI”), as of December 31,
2020, compared with $618.3 million, or 1.65% of loans HFI, as of
September 30, 2020.
- During the fourth quarter of 2020, we recorded a $24.3 million
provision for credit losses, compared with $10.0 million for the
third quarter of 2020.
- Quarter-over-quarter, the ALLL increased by $1.7 million,
although the ratio of ALLL to loans HFI decreased by 4 basis
points. The change in the ALLL reflects the loan growth during the
quarter, an improved macroeconomic forecast, and positive trends in
deferrals, delinquencies, criticized assets and other asset quality
metrics.
- Fourth quarter 2020 net charge-offs were $18.8 million, or
annualized 0.20% of average loans HFI, a decrease from $24.2
million, or annualized 0.26% of average loans HFI for the third
quarter of 2020. A quarter-over-quarter increase in CRE charge-offs
in the fourth quarter was more than offset by the
quarter-over-quarter decrease in C&I charge-offs. The full year
2020 net charge-off ratio was 0.17% of average loans HFI, compared
with 0.16% for full year 2019.
- Nonperforming assets were $234.9 million, or 0.45% of total
assets, as of December 31, 2020, a 10% decrease from nonperforming
assets of $259.9 million, or 0.52% of total assets, as of September
30, 2020. The quarter-over-quarter decrease in nonperforming assets
was largely due to a decrease in C&I and CRE nonaccrual
loans.
CAPITAL STRENGTH
Capital levels for East West are strong. The following table
presents the regulatory capital ratios as of December 31, 2020,
September 30, 2020, and December 31, 2019.
EWBC Regulatory Capital Metrics
Basel III
($ in millions)
December 31, 2020 (a)
September 30, 2020 (a)
December 31, 2019
Minimum
Capital
Ratio
Well Capitalized Ratio
Minimum
Capital Ratio + Conservation
Buffer (b)
Risk-Based Capital Ratios:
CET1 capital ratio
12.7
%
12.8
%
12.9
%
4.5
%
6.5
%
7.0
%
Tier 1 capital ratio
12.7
%
12.8
%
12.9
%
6.0
%
8.0
%
8.5
%
Total capital ratio
14.3
%
14.5
%
14.4
%
8.0
%
10.0
%
10.5
%
Leverage ratio
9.4
%
9.8
%
10.3
%
4.0
%
5.0
%
4.0
%
Risk-Weighted Assets (“RWA”) (c)
$
38,533
$
36,922
$
35,136
N/A
N/A
N/A
N/A Not applicable.
(a)
The Company has elected to use
the 2020 CECL transition provision in the calculation of its
December 31, 2020 and September 30, 2020 regulatory capital ratios.
The Company’s December 31, 2020 regulatory capital ratios and RWA
are preliminary.
(b)
An additional 2.5% capital
conservation buffer above the minimum capital ratios are required
in order to avoid limitations on distributions, including dividend
payments and certain discretionary bonus payments to executive
officers.
(c)
Under regulatory guidelines,
on-balance sheet assets and credit equivalent amounts of
derivatives and off-balance sheet items are assigned to one of
several broad risk categories based on the nature of the obligor,
or, if relevant, the guarantor or the nature of any collateral. The
aggregate dollar value in each risk category is then multiplied by
the risk weight associated with that category. The resulting
weighted values from each of the risk categories are aggregated for
determining total RWA.
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared first quarter 2021
dividends for the Company’s common stock. The common stock cash
dividend of $0.33 per share is payable on February 23, 2021 to
shareholders of record on February 9, 2021. This represents a 20%
increase, or 5.5 cents per share, to the quarterly common stock
dividend, up from $0.275 per share previously. The new annual
dividend is $1.32 per share, compared with $1.10 per share
previously.
On March 3, 2020, East West’s Board of Directors authorized the
repurchase of up to $500 million of East West’s common stock. In
2020, the Company repurchased $145.9 million of common stock, or
4.5 million shares, under this authorization during the first
quarter. East West did not repurchase any shares during the fourth
quarter of 2020 under this authorization.
Conference Call
East West will host a conference call to discuss fourth quarter
and full year 2020 earnings with the public on Thursday, January
28, 2021 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment
community are invited to listen as management discusses fourth
quarter and full year 2020 results and operating developments.
- The following dial-in information is provided for participation
in the conference call: calls within the U.S. – (877) 506-6399;
calls within Canada – (855) 669-9657; international calls – (412)
902-6699.
- A presentation to accompany the earnings call will be available
on the Investor Relations page of the Company’s website at
www.eastwestbank.com/investors.
- A listen-only live broadcast of the call will also be available
on the Investor Relations page of the Company’s website at
www.eastwestbank.com/investors.
- A replay of the conference call will be available on January
28, 2021 at 11:30 a.m. Pacific Time through February 28, 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: 10150890.
About East West
East West Bancorp, Inc. is a publicly owned company with total
assets of $52.2 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 Greater China. U.S. markets include California,
Georgia, Massachusetts, Nevada, New York, Texas and Washington. In
Greater China, East West’s presence includes full service branches
in Hong Kong, Shanghai, Shantou and Shenzhen, and representative
offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more
information on East West, visit the Company’s website at
www.eastwestbank.com.
Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto)
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, including
forward-looking statements relating to our current business plans
and expectations regarding future operating results.
Forward-looking statements may include, but are not limited to, the
use of forward-looking language, such as “likely result in,”
“expects,” “anticipates,” “estimates,” “forecasts,” “projects,”
“intends to,” “assumes,” or may include other similar words or
phrases, such as “believes,” “plans,” “trend,” “objective,”
“continues,” “remains,” or similar expressions, or future or
conditional verbs, such as “will,” “would,” “should,” “could,”
“may,” “might,” “can,” or similar verbs, and the negative thereof.
These forward-looking statements are subject to risks and
uncertainties that could cause actual results, performance or
achievements to differ materially from those projected.
These risks and uncertainties, some of which are beyond our
control, include, but are not limited to, the impact of disease
pandemics, such as the resurgences and subsequent waves of the
COVID-19 pandemic, on the Company, its operations and its
customers, employees and the markets in which the Company operates
and in which its loans are concentrated; and the measures that
international, federal, state and local governments, agencies, law
enforcement and/or health authorities implement to address it,
which may precipitate or exacerbate one or more of the
below-mentioned and/or other risks, and significantly disrupt or
prevent the Company from operating its business in the ordinary
course for an extended period; changes in governmental policy and
regulation, including measures taken in response to economic,
business, political and social conditions, such as the Small
Business Administration’s (“SBA”) Paycheck Protection Program, the
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
and any similar or related rules and regulations, the Board of
Governors of the Federal Reserve System (“Federal Reserve”) efforts
to provide liquidity to the United States (“U.S.”) financial
system, including changes in government interest rate policies, and
to provide credit to private commercial and municipal borrowers,
and other programs designed to address the effects of the COVID-19
pandemic, as well as the resulting effect of all such items on the
Company’s operations, liquidity and capital position, and on the
financial condition of the Company’s borrowers and other customers;
changes in the U.S. economy, including an economic slowdown or
recession, inflation, deflation, housing prices, employment levels,
rate of growth and general business conditions; 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 (“FDIC”), the
Office of the Comptroller of the Currency, the U.S. Securities and
Exchange Commission (“SEC”), the Consumer Financial Protection
Bureau (“CFPB”) and the California Department of Financial
Protection and Innovation (“DFPI”) - Division of Financial
Institutions, and SBA; the changes and effects thereof in trade,
monetary and fiscal policies and laws, including the ongoing trade
dispute between the U.S. and the People’s Republic of China;
changes in the commercial and consumer real estate markets; changes
in consumer spending and savings habits; fluctuations in the
Company’s stock price; changes in income tax laws and regulations;
the Company’s ability to compete effectively against other
financial institutions in its banking markets; 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
benchmark interest rate reform in the U.S. that resulted in the
Secured Overnight Financing Rate (“SOFR”) selected as the preferred
alternative reference rate to the London Interbank Offered Rate
(“LIBOR”); impact of a communications or technology disruption,
failure in, or breach of, the Company’s operational or security
systems or infrastructure, or those of third parties with whom the
Company does business, including as a result of cyber-attacks; and
other similar matters which could result in, among other things,
confidential and/or proprietary information being disclosed or
misused and materially impact the Company’s ability to provide
services to its clients; adequacy of the Company’s risk management
framework, disclosure controls and procedures and internal control
over financial reporting; future credit quality and performance,
including the Company’s expectations regarding future credit losses
and allowance levels; impact of adverse changes to the Company’s
credit ratings from major credit rating agencies; impact of adverse
judgments or settlements in litigation; impact on the Company’s
international operations due to political developments, disease
pandemics, wars or other hostilities that may disrupt or increase
volatility in securities or otherwise affect economic conditions;
heightened regulatory and governmental oversight and scrutiny of
the Company’s business practices, including dealings with
consumers; impact of reputational risk from negative publicity,
fines and penalties and other negative consequences from regulatory
violations and legal actions and from the Company’s interactions
with business partners, counterparties, service providers and other
third parties; impact of regulatory enforcement actions; changes in
accounting standards as may be required by the Financial Accounting
Standards Board (“FASB”) 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
receive dividends from its subsidiaries; any future strategic
acquisitions or divestitures; continuing consolidation in the
financial services industry; changes in the equity and debt
securities markets; fluctuations in foreign currency exchange
rates; a recurrence of significant turbulence or disruption in the
capital or financial markets, which could result in, among other
things, a reduction in the availability of funding or increases in
funding costs, a reduction in investor demand for mortgage loans
and declines in asset values and/or recognition of
other-than-temporary impairment (“OTTI”) on securities held in the
Company’s available-for-sale (“AFS”) debt securities portfolio; and
impact of natural or man-made disasters or calamities, such as
wildfires and earthquakes, which are particular to California, or
conflicts or other events that may directly or indirectly result in
a negative impact on the Company’s financial performance. In
addition to the risk factors enumerated above, the economic impact
of the COVID-19 pandemic could cause actual outcomes to differ,
possibly materially, from the Company’s forward-looking statements
due to factors and future developments that are uncertain,
unpredictable and in many cases beyond the Company’s control. Given
the ongoing and dynamic nature of the circumstances, it is
difficult to predict the full impact of the COVID-19 pandemic on
the Company’s business. The extent to which the COVID-19 pandemic
impacts the Company will depend on future developments that are
uncertain and unpredictable, including the scope, severity and
duration of the pandemic and its impact on the Company’s customers,
the actions taken by governmental authorities in response to the
pandemic as well as its impact on global and regional economies,
and the pace of recovery when the COVID-19 pandemic subsides, among
others.
For a more detailed discussion of some of the factors that might
cause such differences, see the Company’s Annual Report on Form
10-K for the year ended December 31, 2019 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
December 31, 2020 % or
Basis Point Change
December 31, 2020
September 30, 2020
December 31, 2019
Qtr-o-Qtr
Yr-o-Yr
Assets
Cash and due from banks
$
592,117
$
503,376
$
536,221
17.6
%
10.4
%
Interest-bearing cash with banks
3,425,854
4,003,565
2,724,928
(14.4
)
25.7
Cash and cash equivalents
4,017,971
4,506,941
3,261,149
(10.8
)
23.2
Interest-bearing deposits with banks
809,728
699,465
196,161
15.8
312.8
Assets purchased under resale agreements
(“resale agreements”) (1)
1,460,000
1,210,000
860,000
20.7
69.8
Available-for-sale (“AFS”) debt securities
(amortized cost of $5,470,523, $4,471,694 and $3,320,648 as of
December 31, 2020, September 30, 2020 and December 31, 2019,
respectively)
5,544,658
4,539,160
3,317,214
22.2
67.1
Federal Home Loan Bank (“FHLB”) and
Federal Reserve Bank (“FRB”) stock
83,046
79,172
78,580
4.9
5.7
Loans held-for-sale (“HFS”)
1,788
4,148
434
(56.9
)
312.0
Loans held-for-investment (''HFI'') (net
of allowance for loan losses (2) of $619,983, $618,252 and
$358,287)
37,770,972
36,818,877
34,420,252
2.6
9.7
Investments in qualified affordable
housing partnerships, net
213,555
192,913
207,037
10.7
3.1
Investments in tax credit and other
investments, net
266,525
254,512
254,140
4.7
4.9
Goodwill
465,697
465,697
465,697
—
—
Operating lease right-of-use assets
95,460
96,092
99,973
(0.7
)
(4.5
)
Other assets
1,427,513
1,504,500
1,035,459
(5.1
)
37.9
Total assets
$
52,156,913
$
50,371,477
$
44,196,096
3.5
%
18.0
%
Liabilities and Stockholders’
Equity
Deposits
$
44,862,752
$
41,680,555
$
37,324,259
7.6
%
20.2
%
Short-term borrowings
21,009
59,613
28,669
(64.8
)
(26.7
)
FHLB advances
652,612
657,185
745,915
(0.7
)
(12.5
)
Assets sold under repurchase agreements
(“repurchase agreements”) (1)
300,000
348,063
200,000
(13.8
)
50.0
Long-term debt and finance lease
liabilities
151,739
1,579,317 (3)
152,270
(90.4
)
(0.3
)
Operating lease liabilities
102,830
103,673
108,083
(0.8
)
(4.9
)
Accrued expenses and other liabilities
796,796
816,965
619,283
(2.5
)
28.7
Total liabilities
46,887,738
45,245,371
39,178,479
3.6
19.7
Stockholders’ equity (2)
5,269,175
5,126,106
5,017,617
2.8
5.0
Total liabilities and stockholders’
equity
$
52,156,913
$
50,371,477
$
44,196,096
3.5
%
18.0
%
Book value per common share
$
37.22
$
36.22
$
34.46
2.7
%
8.0
%
Tangible equity (4) per common
share
$
33.85
$
32.85
$
31.15
3.0
8.7
Number of common shares at
period-end
141,565
141,507
145,625
0.0
(2.8
)
Tangible equity to tangible assets
ratio (4)
9.27
%
9.32
%
10.38
%
(5
)
bps
(111
)
bps
(1)
Resale and repurchase agreements are
reported net when the transactions are eligible for netting under
Accounting Standards Codification (“ASC”) 210-20-45-11, Balance
Sheet Offsetting: Repurchase and Reverse Repurchase Agreements.
There was no netting of repurchase agreements against resale
agreements as of December 31, 2020 and September 30, 2020. $250.0
million of gross repurchase agreements were eligible for netting
against gross resale agreements as of December 31, 2019.
(2)
On January 1, 2020, the Company adopted
Accounting Standards Update (“ASU”) 2016-13, Financial Instruments
— Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments using the modified retrospective approach. We
recorded $125.2 million increase to allowance for loan losses and
$98.0 million after-tax decrease to opening retained earnings as of
January 1, 2020.
(3)
Includes $1.43 billion of advances from
the Federal Reserve Paycheck Protection Program Liquidity Facility
(“PPPLF”) as of September 30, 2020.
(4)
See reconciliation of GAAP to non-GAAP
financial measures in Table 14.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
TOTAL LOANS AND DEPOSITS
DETAIL
($ in thousands)
(unaudited)
Table 2
December 31, 2020 %
Change
December 31,
2020
September 30,
2020
December 31,
2019
Qtr-o-Qtr
Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”)
(1)
$
13,631,726
$
13,305,024
$
12,150,931
2.5
%
12.2
%
Commercial real estate (“CRE”):
CRE
11,174,611
11,037,987
10,278,448
1.2
8.7
Multifamily residential
3,033,998
3,057,274
2,856,374
(0.8
)
6.2
Construction and land
599,692
578,407
628,499
3.7
(4.6
)
Total CRE
14,808,301
14,673,668
13,763,321
0.9
7.6
Consumer:
Residential mortgage:
Single-family residential
8,185,953
7,785,759
7,108,590
5.1
15.2
Home equity lines of credit (“HELOCs”)
1,601,716
1,514,388
1,472,783
5.8
8.8
Total residential mortgage
9,787,669
9,300,147
8,581,373
5.2
14.1
Other consumer
163,259
158,290
282,914
3.1
(42.3
)
Total loans HFI (2)
38,390,955
37,437,129
34,778,539
2.5
10.4
Loans HFS
1,788
4,148
434
(56.9
)
312.0
Total loans (2)
38,392,743
37,441,277
34,778,973
2.5
10.4
Allowance for loan losses
(619,983
)
(618,252
)
(358,287
)
0.3
73.0
Net loans (2)
$
37,772,760
$
36,823,025
$
34,420,686
2.6
9.7
Deposits:
Noninterest-bearing demand
$
16,298,301
$
14,924,917
$
11,080,036
9.2
%
47.1
%
Interest-bearing checking
6,142,193
5,731,573
5,200,755
7.2
18.1
Money market
10,740,667
9,553,574
8,711,964
12.4
23.3
Savings
2,681,242
2,401,318
2,117,196
11.7
26.6
Time deposits
9,000,349
9,069,173
10,214,308
(0.8
)
(11.9
)
Total deposits
$
44,862,752
$
41,680,555
$
37,324,259
7.6
%
20.2
%
(1)
Includes $1.57 billion and $1.77 billion
of Paycheck Protection Program (“PPP”) loans as of December 31,
2020 and September 30, 2020, respectively.
(2)
Includes net deferred loan fees, unearned
fees, unamortized premiums and unaccreted discounts of $(58.8)
million, $(67.0) million, and $(43.2) million as of December 31,
2020, September 30, 2020, and December 31, 2019, respectively. Net
origination fees related to PPP loans were $(12.7) million and
$(22.6) million as of December 31, 2020 and September 30, 2020,
respectively.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 3
Three Months Ended
December 31, 2020 %
Change
December 31, 2020
September 30, 2020
December 31, 2019
Qtr-o-Qtr
Yr-o-Yr
Interest and dividend income (1)
$
381,348
$
365,728
$
467,233
4.3
%
(18.4
)%
Interest expense
34,767
41,598
99,014
(16.4
)
(64.9
)
Net interest income before provision for
credit losses
346,581
324,130
368,219
6.9
(5.9
)
Provision for credit losses
24,340
10,000
18,577
143.4
31.0
Net interest income after provision for
credit losses
322,241
314,130
349,642
2.6
(7.8
)
Noninterest income (2)
69,832
54,503
65,797
28.1
6.1
Noninterest expense (2)
178,651
172,573
196,157
3.5
(8.9
)
Income before income taxes
213,422
196,060
219,282
8.9
(2.7
)
Income tax expense
49,338
36,523
31,067
35.1
58.8
Net income
$
164,084
$
159,537
$
188,215
2.9
%
(12.8
)%
Earnings per share (“EPS”)
- Basic
$
1.16
$
1.13
$
1.29
2.8
%
(10.3
)%
- Diluted
$
1.15
$
1.12
$
1.29
2.5
(10.5
)
Weighted-average number of shares
outstanding
- Basic
141,564
141,498
145,624
0.0
%
(2.8
)%
- Diluted
142,529
142,043
146,318
0.3
(2.6
)
Three Months Ended
December 31, 2020 %
Change
December 31, 2020
September 30, 2020
December 31, 2019
Qtr-o-Qtr
Yr-o-Yr
Noninterest income:
Lending fees
$
18,387
$
18,736
$
17,244
(1.9
)%
6.6
%
Deposit account fees
14,256
12,573
9,843
13.4
44.8
Interest rate contracts and other
derivative income
12,967
5,538
17,828
134.1
(27.3
)
Foreign exchange income
6,679
3,310
6,032
101.8
10.7
Wealth management fees
4,497
4,553
4,132
(1.2
)
8.8
Net gains on sales of loans
3,058
361
1,068
747.1
186.3
Gains on sales of AFS debt securities
432
698
864
(38.1
)
(50.0
)
Other investment income (2)
3,989
5,239
5,462
(23.9
)
(27.0
)
Other income
5,567
3,495
3,324
59.3
67.5
Total noninterest income (2)
$
69,832
$
54,503
$
65,797
28.1
%
6.1
%
Noninterest expense:
Compensation and employee benefits
$
105,400
$
99,756
$
101,051
5.7
%
4.3
%
Occupancy and equipment expense
16,548
16,648
17,138
(0.6
)
(3.4
)
Deposit insurance premiums and regulatory
assessments
3,995
4,006
3,371
(0.3
)
18.5
Deposit account expense
3,501
3,113
3,749
12.5
(6.6
)
Data processing
4,707
3,590
3,588
31.1
31.2
Computer software expense
7,027
8,539
7,626
(17.7
)
(7.9
)
Consulting expense
1,537
1,224
3,159
25.6
(51.3
)
Legal expense
1,673
1,366
2,141
22.5
(21.9
)
Other operating expense
22,000
17,122
24,512
28.5
(10.2
)
Amortization of tax credit and other
investments (2)
12,263
17,209
29,822
(28.7
)
(58.9
)
Total noninterest expense (2)
$
178,651
$
172,573
$
196,157
3.5
%
(8.9
)%
(1)
Includes $14.2 million and $7.8 million of
interest income related to PPP loans for the three months ended
December 31, 2020 and September 30, 2020, respectively.
(2)
In the fourth quarter of 2020, the Company
reclassified certain income/losses from equity method investments
from Amortization of tax credit and other investments to Other
investment income, with no effect on net income. Prior period
amounts have been revised to conform with the current presentation.
Includes $10.7 million in recoveries related to the Company’s
investment in DC Solar for the three months ended December 31,
2020.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 4
Year Ended
December 31, 2020 %
Change
December 31, 2020
December 31, 2019
Yr-o-Yr
Interest and dividend income (1)
$
1,595,042
$
1,882,300
(15.3
)%
Interest expense
217,849
414,487
(47.4
)
Net interest income before provision for
credit losses
1,377,193
1,467,813
(6.2
)
Provision for credit losses
210,653
98,685
113.5
Net interest income after provision for
credit losses
1,166,540
1,369,128
(14.8
)
Noninterest income (2)
235,547
222,245
6.0
Noninterest expense (2)
716,322
747,456
(4.2
)
Income before income taxes
685,765
843,917
(18.7
)
Income tax expense
117,968
169,882
(30.6
)
Net income
$
567,797
$
674,035
(15.8
)%
EPS
- Basic
$
3.99
$
4.63
(13.9
)%
- Diluted
$
3.97
$
4.61
(13.9
)
Weighted-average number of shares
outstanding
- Basic
142,336
145,497
(2.2
)%
- Diluted
142,991
146,179
(2.2
)
Year Ended
December 31, 2020 %
Change
December 31, 2020
December 31, 2019
Yr-o-Yr
Noninterest income:
Lending fees
$
74,842
$
63,670
17.5
%
Deposit account fees
48,148
38,648
24.6
Interest rate contracts and other
derivative income
31,685
39,865
(20.5
)
Foreign exchange income
22,370
26,398
(15.3
)
Wealth management fees
17,494
16,547
5.7
Net gains on sales of loans
4,501
4,035
11.5
Gains on sales of AFS debt securities
12,299
3,930
213.0
Other investment income (2)
10,641
18,117
(41.3
)
Other income
13,567
11,035
22.9
Total noninterest income (2)
$
235,547
$
222,245
6.0
%
Noninterest expense:
Compensation and employee benefits
$
404,071
$
401,700
0.6
%
Occupancy and equipment expense
66,489
69,730
(4.6
)
Deposit insurance premiums and regulatory
assessments
15,128
12,928
17.0
Deposit account expense
13,530
14,175
(4.6
)
Data processing
16,603
13,533
22.7
Computer software expense
29,033
26,471
9.7
Consulting expense
5,391
9,846
(45.2
)
Legal expense
7,766
8,441
(8.0
)
Other operating expense
79,489
92,249
(13.8
)
Amortization of tax credit and other
investments (2)
70,082
98,383
(28.8
)
Repurchase agreements’ extinguishment
cost
8,740
—
100.0
Total noninterest expense (2)
$
716,322
$
747,456
(4.2
)%
(1)
Includes $43.3 million of interest income
related to PPP loans for the year ended December 31, 2020.
(2)
In the fourth quarter of 2020, the Company
reclassified certain income/losses from equity method investments
from Amortization of tax credit and other investments to Other
investment income, with no effect on net income. Prior period
amounts have been revised to conform with the current presentation.
Includes $10.7 million in recoveries related to the Company’s
investment in DC Solar for the twelve months ended December 31,
2020.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED AVERAGE
BALANCES
($ in thousands)
(unaudited)
Table 5
Three Months Ended
December 31, 2020 %
Change
Year Ended
December 31, 2020 %
Change
December 31,
2020
September 30,
2020
December 31,
2019
Qtr-o-Qtr
Yr-o-Yr
December 31,
2020
December 31,
2019
Yr-o-Yr
Loans:
Commercial:
C&I (1)
$
13,332,194
$
13,235,845
$
12,237,081
0.7
%
8.9
%
$
13,074,883
$
12,073,820
8.3
%
CRE:
CRE
11,067,392
10,942,780
10,006,424
1.1
10.6
10,828,037
9,642,301
12.3
Multifamily residential
3,051,472
3,107,294
2,771,555
(1.8
)
10.1
3,009,365
2,588,347
16.3
Construction and land
588,665
564,219
668,147
4.3
(11.9
)
597,118
656,142
(9.0
)
Total CRE
14,707,529
14,614,293
13,446,126
0.6
9.4
14,434,520
12,886,790
12.0
Consumer:
Residential mortgage:
Single-family residential
7,990,035
7,695,838
6,934,361
3.8
15.2
7,613,706
6,526,415
16.7
HELOCs
1,558,781
1,475,098
1,506,346
5.7
3.5
1,480,516
1,580,343
(6.3
)
Total residential mortgage
9,548,816
9,170,936
8,440,707
4.1
13.1
9,094,222
8,106,758
12.2
Other consumer
137,186
139,371
286,096
(1.6
)
(52.0
)
195,392
305,768
(36.1
)
Total loans (2)
$
37,725,725
$
37,160,445
$
34,410,010
1.5
%
9.6
%
$
36,799,017
$
33,373,136
10.3
%
Interest-earning assets
$
49,703,349
$
47,428,586
$
42,114,123
4.8
%
18.0
%
$
46,239,709
$
40,320,804
14.7
%
Total assets
$
52,466,325
$
50,247,259
$
44,471,242
4.4
%
18.0
%
$
48,937,793
$
42,484,885
15.2
%
Deposits:
Noninterest-bearing demand
$
16,311,010
$
14,296,475
$
10,976,368
14.1
%
48.6
%
$
13,823,152
$
10,502,618
31.6
%
Interest-bearing checking
6,067,849
5,663,873
5,540,300
7.1
9.5
5,357,934
5,244,867
2.2
Money market
10,626,940
9,981,704
8,592,058
6.5
23.7
9,881,284
8,220,236
20.2
Savings
2,450,980
2,259,788
2,118,911
8.5
15.7
2,234,913
2,118,060
5.5
Time deposits
8,965,337
9,008,907
10,180,922
(0.5
)
(11.9
)
9,465,608
9,961,289
(5.0
)
Total deposits
$
44,422,116
$
41,210,747
$
37,408,559
7.8
%
18.7
%
$
40,762,891
$
36,047,070
13.1
%
Interest-bearing liabilities
$
29,666,559
$
29,552,756
$
27,522,469
0.4
%
7.8
%
$
28,798,277
$
26,408,961
9.0
%
Stockholders’ equity
$
5,243,203
$
5,079,351
$
4,977,759
3.2
%
5.3
%
$
5,082,186
$
4,760,845
6.7
%
(1)
Includes average balances of PPP loans of
$1.70 billion and $1.76 billion for the three months ended December
31, 2020 and September 30, 2020, respectively, and $1.24 billion
for the year ended December 31, 2020.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
QUARTER-TO-DATE AVERAGE
BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
Three Months Ended
December 31, 2020
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
$
5,609,965
$
4,458
0.32
%
$
4,904,394
$
5,045
0.41
%
Resale agreements (2)
1,257,826
4,955
1.57
%
1,225,217
5,295
1.72
%
AFS debt securities
5,029,820
22,914
1.81
%
4,059,456
18,493
1.81
%
Loans (3)
37,725,725
348,578
3.68
%
37,160,445
336,542
3.60
%
FHLB and FRB stock
80,013
443
2.20
%
79,074
353
1.78
%
Total interest-earning assets
49,703,349
381,348
3.05
%
47,428,586
365,728
3.07
%
Noninterest-earning assets:
Cash and due from banks
580,989
522,699
Allowance for loan losses
(618,207
)
(632,216
)
Other assets
2,800,194
2,928,190
Total assets
$
52,466,325
$
50,247,259
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,067,849
$
4,218
0.28
%
$
5,663,873
$
4,345
0.31
%
Money market deposits
10,626,940
5,542
0.21
%
9,981,704
6,837
0.27
%
Savings deposits
2,450,980
1,655
0.27
%
2,259,788
1,481
0.26
%
Time deposits
8,965,337
16,727
0.74
%
9,008,907
21,135
0.93
%
Federal funds purchased and other
short-term borrowings
47,500
276
2.31
%
84,858
407
1.91
%
FHLB advances
653,748
3,137
1.91
%
656,906
3,146
1.91
%
Repurchase agreements (2)
335,737
2,080
2.46
%
317,097
2,155
2.70
%
Long-term debt and finance lease
liabilities
518,468
1,132
0.87
%
1,579,623
2,092
0.53
%
Total interest-bearing
liabilities
29,666,559
34,767
0.47
%
29,552,756
41,598
0.56
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
16,311,010
14,296,475
Accrued expenses and other liabilities
1,245,553
1,318,677
Stockholders’ equity
5,243,203
5,079,351
Total liabilities and stockholders’
equity
$
52,466,325
$
50,247,259
Interest rate spread
2.58
%
2.51
%
Net interest income and net interest
margin
$
346,581
2.77
%
$
324,130
2.72
%
Adjusted net interest income and
adjusted net interest margin (4)
$
332,701
2.76
%
$
317,611
2.77
%
(1)
Annualized.
(2)
There was no netting of repurchase
agreements against resale agreements for the three months ended
December 31, 2020 and September 30, 2020.
(3)
Includes loans HFS.
(4)
Net interest income and net interest
margin have been adjusted for the impact of PPP loans and advances
from the PPPLF. See reconciliation of GAAP to non-GAAP financial
measures in Table 15.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
QUARTER-TO-DATE AVERAGE
BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
Three Months Ended
December 31, 2020
December 31, 2019
Average
Average
Average
Average
Balance
Interest
Yield/Rate (1)
Balance
Interest
Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with
banks
$
5,609,965
$
4,458
0.32
%
$
3,213,016
$
14,598
1.80
%
Resale agreements (2)
1,257,826
4,955
1.57
%
863,261
5,808
2.67
%
AFS debt securities
5,029,820
22,914
1.81
%
3,549,376
20,460
2.29
%
Loans (3)
37,725,725
348,578
3.68
%
34,410,010
425,773
4.91
%
FHLB and FRB stock
80,013
443
2.20
%
78,460
594
3.00
%
Total interest-earning assets
49,703,349
381,348
3.05
%
42,114,123
467,233
4.40
%
Noninterest-earning assets:
Cash and due from banks
580,989
534,326
Allowance for loan losses
(618,207
)
(355,759
)
Other assets
2,800,194
2,178,552
Total assets
$
52,466,325
$
44,471,242
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,067,849
$
4,218
0.28
%
$
5,540,300
$
13,589
0.97
%
Money market deposits
10,626,940
5,542
0.21
%
8,592,058
25,223
1.16
%
Savings deposits
2,450,980
1,655
0.27
%
2,118,911
2,266
0.42
%
Time deposits
8,965,337
16,727
0.74
%
10,180,922
47,935
1.87
%
Federal funds purchased and other
short-term borrowings
47,500
276
2.31
%
43,313
404
3.70
%
FHLB advances
653,748
3,137
1.91
%
745,732
4,686
2.49
%
Repurchase agreements (2)
335,737
2,080
2.46
%
148,892
3,382
9.01
%
Long-term debt and finance lease
liabilities
518,468
1,132
0.87
%
152,341
1,529
3.98
%
Total interest-bearing
liabilities
29,666,559
34,767
0.47
%
27,522,469
99,014
1.43
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
16,311,010
10,976,368
Accrued expenses and other liabilities
1,245,553
994,646
Stockholders’ equity
5,243,203
4,977,759
Total liabilities and stockholders’
equity
$
52,466,325
$
44,471,242
Interest rate spread
2.58
%
2.97
%
Net interest income and net interest
margin
$
346,581
2.77
%
$
368,219
3.47
%
Adjusted net interest income and
adjusted net interest margin (4)
$
332,701
2.76
%
$
368,219
3.47
%
(1)
Annualized.
(2)
There was no netting of repurchase
agreements against resale agreements for the three months ended
December 31, 2020. Average balances of resale and repurchase
agreements for the three months ended December 31, 2019 have been
reported net, pursuant to ASC 210-20-45-11, Balance Sheet
Offsetting: Repurchase and Reverse Repurchase Agreements. The
weighted-average yields of gross resale agreements were 1.57% and
2.50% for the three months ended December 31, 2020 and 2019,
respectively. The weighted-average interest rates of gross
repurchase agreements were 2.46% and 4.34% for the three months
ended December 31, 2020 and 2019, respectively.
(3)
Includes loans HFS.
(4)
Net interest income and net interest
margin have been adjusted for the impact of PPP loans and advances
from the PPPLF. See reconciliation of GAAP to non-GAAP financial
measures in Table 15.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES,
YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
Year Ended
December 31, 2020
December 31, 2019
Average
Average
Average
Average
Balance
Interest
Yield/Rate
Balance
Interest
Yield/Rate
Assets
Interest-earning assets:
Interest-bearing cash and deposits with
banks
$
4,236,430
$
25,175
0.59
%
$
3,050,954
$
66,518
2.18
%
Resale agreements (1)
1,101,434
21,389
1.94
%
969,384
28,061
2.89
%
AFS debt securities
4,023,668
82,553
2.05
%
2,850,476
67,838
2.38
%
Loans (2)
36,799,017
1,464,382
3.98
%
33,373,136
1,717,415
5.15
%
FHLB and FRB stock
79,160
1,543
1.95
%
76,854
2,468
3.21
%
Total interest-earning assets
46,239,709
1,595,042
3.45
%
40,320,804
1,882,300
4.67
%
Noninterest-earning assets:
Cash and due from banks
528,406
471,060
Allowance for loan losses
(577,560
)
(330,125
)
Other assets
2,747,238
2,023,146
Total assets
$
48,937,793
$
42,484,885
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
5,357,934
$
24,213
0.45
%
$
5,244,867
$
58,168
1.11
%
Money market deposits
9,881,284
42,720
0.43
%
8,220,236
111,081
1.35
%
Savings deposits
2,234,913
6,398
0.29
%
2,118,060
9,626
0.45
%
Time deposits
9,465,608
111,411
1.18
%
9,961,289
196,927
1.98
%
Federal funds purchased and other
short-term borrowings
108,398
1,504
1.39
%
44,881
1,763
3.93
%
FHLB advances
664,370
13,792
2.08
%
592,257
16,697
2.82
%
Repurchase agreements (1)
350,849
11,766
3.35
%
74,926
13,582
18.13
%
Long-term debt and finance lease
liabilities
734,921
6,045
0.82
%
152,445
6,643
4.36
%
Total interest-bearing
liabilities
28,798,277
217,849
0.76
%
26,408,961
414,487
1.57
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
13,823,152
10,502,618
Accrued expenses and other liabilities
1,234,178
812,461
Stockholders’ equity
5,082,186
4,760,845
Total liabilities and stockholders’
equity
$
48,937,793
$
42,484,885
Interest rate spread
2.69
%
3.10
%
Net interest income and net interest
margin
$
1,377,193
2.98
%
$
1,467,813
3.64
%
Adjusted net interest income and
adjusted net interest margin (3)
$
1,335,968
2.97
%
$
1,467,813
3.64
%
(1)
Average balances of resale and repurchase
agreements have been reported net, pursuant to ASC 210-20-45-11,
Balance Sheet Offsetting: Repurchase and Reverse Repurchase
Agreements. The weighted-average yields of gross resale agreements
were 1.94% and 2.66% for the year ended December 31, 2020 and 2019,
respectively. The weighted-average interest rates of gross
repurchase agreements were 3.25% and 4.74% for the year ended
December 31, 2020 and 2019, respectively.
(2)
Includes loans HFS.
(3)
Net interest income and net interest
margin have been adjusted for the impact of PPP loans and advances
from the PPPLF. See reconciliation of GAAP to non-GAAP financial
measures in Table 15.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
Three Months Ended (1)
December 31, 2020 Basis
Point Change
December 31,
2020
September 30,
2020
December 31,
2019
Qtr-o-Qtr
Yr-o-Yr
Return on average assets
1.24
%
1.26
%
1.68
%
(2
)
bps
(44
)
bps
Adjusted return on average assets (2)
1.22
%
1.26
%
1.67
%
(4
)
(45
)
Return on average equity
12.45
%
12.50
%
15.00
%
(5
)
(255
)
Adjusted return on average equity (2)
12.26
%
12.50
%
14.91
%
(24
)
(265
)
Return on average tangible equity (2)
13.77
%
13.88
%
16.71
%
(11
)
(294
)
Adjusted return on average tangible equity
(2)
13.56
%
13.88
%
16.61
%
(32
)
(305
)
Interest rate spread
2.58
%
2.51
%
2.97
%
7
(39
)
Net interest margin
2.77
%
2.72
%
3.47
%
5
(70
)
Adjusted net interest margin (2)
2.76
%
2.77
%
3.47
%
(1
)
(71
)
Average loan yield
3.68
%
3.60
%
4.91
%
8
(123
)
Adjusted average loan yield (2)
3.69
%
3.70
%
4.91
%
(1
)
(122
)
Yield on average interest-earning
assets
3.05
%
3.07
%
4.40
%
(2
)
(135
)
Average cost of interest-bearing
deposits
0.40
%
0.50
%
1.34
%
(10
)
(94
)
Average cost of deposits
0.25
%
0.33
%
0.94
%
(8
)
(69
)
Average cost of funds
0.30
%
0.38
%
1.02
%
(8
)
(72
)
Adjusted pre-tax, pre-provision
profitability ratio (2)
1.90
%
1.78
%
2.40
%
12
(50
)
Adjusted noninterest expense/average
assets (2)
1.26
%
1.22
%
1.47
%
4
(21
)
Efficiency ratio
42.90
%
45.58
%
45.20
%
(268
)
(230
)
Adjusted efficiency ratio (2)
39.76
%
40.79
%
38.08
%
(103
)
bps
168
bps
Year Ended
December 31, 2020 Basis
Point Change
December 31,
2020
December 31,
2019
Yr-o-Yr
Return on average assets
1.16
%
1.59
%
(43
)
bps
Adjusted return on average assets (2)
1.16
%
1.67
%
(51
)
Return on average equity
11.17
%
14.16
%
(299
)
Adjusted return on average equity (2)
11.12
%
14.87
%
(375
)
Return on average tangible equity (2)
12.42
%
15.88
%
(346
)
Adjusted return on average tangible equity
(2)
12.37
%
16.68
%
(431
)
Interest rate spread
2.69
%
3.10
%
(41
)
Net interest margin
2.98
%
3.64
%
(66
)
Adjusted net interest margin (2)
2.97
%
3.64
%
(67
)
Average loan yield
3.98
%
5.15
%
(117
)
Adjusted average loan yield (2)
4.00
%
5.15
%
(115
)
Yield on average interest-earning
assets
3.45
%
4.67
%
(122
)
Average cost of interest-bearing
deposits
0.69
%
1.47
%
(78
)
Average cost of deposits
0.45
%
1.04
%
(59
)
Average cost of funds
0.51
%
1.12
%
(61
)
Adjusted pre-tax, pre-provision
profitability ratio (2)
2.00
%
2.46
%
(46
)
Adjusted noninterest expense/average
assets (2)
1.30
%
1.52
%
(22
)
Efficiency ratio
44.42
%
44.23
%
19
Adjusted efficiency ratio (2)
39.30
%
38.14
%
116
bps
(1)
Annualized except for efficiency
ratio.
(2)
See reconciliation of GAAP to non-GAAP
financial measures in Tables 12, 13, 14 and 15.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10
ASU 2016-13 replaced the incurred loss
methodology used in calculating the allowance for loan losses with
a current expected credit loss model (“CECL”). The Company adopted
ASU 2016-13 using the modified retrospective approach on January 1,
2020. As a result, prior comparative periods have not been adjusted
for the CECL model. In addition, ASU 2016-13 introduces the concept
of Purchased Credit Deteriorated (“PCD”) financial assets, which
replaces purchased credit-impaired (“PCI”) assets. For PCD assets,
the initial allowance for loan losses is added to the purchase
price and is considered to be part of the PCD loan amortized cost
basis, hence, there is no income statement impact on acquisition.
This contrasts with PCI loans where allowance for loan losses only
reflects losses that are incurred by the Company after the
acquisition. The allowance for loan losses is evaluated each
quarter and adjusted as necessary by recognizing or reversing loan
loss expense. There were no PCD loans during the three months and
year ended December 31, 2020.
Three Months Ended December
31, 2020
Commercial
Consumer
Total
CRE
Residential Mortgage
C&I
CRE
Multi- Family
Residential
Construction and Land
Single- Family
Residential
HELOCs
Other Consumer
Allowance for loan losses, September
30, 2020
$
389,021
$
166,810
$
23,807
$
10,401
$
22,622
$
3,273
$
2,318
$
618,252
Provision for (reversal of) credit losses
on loans
(a)
15,041
9,415
3,606
(184
)
(7,263
)
(585
)
(184
)
19,846
Gross charge-offs
(8,759
)
(12,518
)
—
—
—
—
(5
)
(21,282
)
Gross recoveries
2,033
84
160
22
161
2
1
2,463
Total net (charge-offs) recoveries
(6,726
)
(12,434
)
160
22
161
2
(4
)
(18,819
)
Foreign currency translation
adjustment
704
—
—
—
—
—
—
704
Allowance for loan losses, December 31,
2020
$
398,040
$
163,791
$
27,573
$
10,239
$
15,520
$
2,690
$
2,130
$
619,983
Three Months Ended September
30, 2020
Commercial
Consumer
Total
CRE
Residential Mortgage
C&I
CRE
Multi- Family
Residential
Construction and Land
Single- Family
Residential
HELOCs
Other Consumer
Allowance for loan losses, June 30,
2020
$
380,723
$
176,040
$
25,058
$
18,551
$
25,314
$
3,867
$
2,518
$
632,071
Provision for (reversal of) credit losses
on loans
(a)
31,691
(8,301
)
(1,916
)
(8,180
)
(2,692
)
(637
)
(76
)
9,889
Gross charge-offs
(25,111
)
(1,414
)
—
—
—
—
(124
)
(26,649
)
Gross recoveries
1,218
485
665
30
—
43
—
2,441
Total net (charge-offs) recoveries
(23,893
)
(929
)
665
30
—
43
(124
)
(24,208
)
Foreign currency translation
adjustment
500
—
—
—
—
—
—
500
Allowance for loan losses, September
30, 2020
$
389,021
$
166,810
$
23,807
$
10,401
$
22,622
$
3,273
$
2,318
$
618,252
Three Months Ended December
31, 2019
Commercial
Consumer
Total
CRE
Residential Mortgage
C&I
CRE
Multi- Family
Residential
Construction and Land
Single- Family
Residential
HELOCs
Other Consumer
Allowance for loan losses, September
30, 2019
$
218,869
$
37,473
$
20,307
$
29,171
$
29,935
$
5,856
$
3,965
$
345,576
Provision for (reversal of) credit losses
on loans
(a)
30,383
1,782
1,039
(9,780
)
(1,410
)
(591
)
(580
)
20,843
Gross charge-offs
(19,898
)
—
—
—
—
—
(10
)
(19,908
)
Gross recoveries
8,889
1,254
1,480
13
2
—
5
11,643
Total net (charge-offs) recoveries
(11,009
)
1,254
1,480
13
2
—
(5
)
(8,265
)
Foreign currency translation
adjustment
133
—
—
—
—
—
—
133
Allowance for loan losses, December 31,
2019
$
238,376
$
40,509
$
22,826
$
19,404
$
28,527
$
5,265
$
3,380
$
358,287
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
Year Ended December 31,
2020
Commercial
Consumer
Total
CRE
Residential Mortgage
C&I
CRE
Multi- Family
Residential
Construction and Land
Single- Family
Residential
HELOCs
Other Consumer
Allowance for loan losses, December 31,
2019
$
238,376
$
40,509
$
22,826
$
19,404
$
28,527
$
5,265
$
3,380
$
358,287
Impact of ASU 2016-13 adoption
74,237
72,169
(8,112
)
(9,889
)
(3,670
)
(1,798
)
2,221
125,158
Allowance for loan losses, January 1,
2020
$
312,613
$
112,678
$
14,714
$
9,515
$
24,857
$
3,467
$
5,601
$
483,445
Provision for (reversal of) credit losses
on loans
(a)
145,212
55,864
10,879
644
(9,922
)
(605
)
(3,381
)
198,691
Gross charge-offs
(66,225
)
(15,206
)
—
—
—
(221
)
(185
)
(81,837
)
Gross recoveries
5,428
10,455
1,980
80
585
49
95
18,672
Total net (charge-offs) recoveries
(60,797
)
(4,751
)
1,980
80
585
(172
)
(90
)
(63,165
)
Foreign currency translation
adjustment
1,012
—
—
—
—
—
—
1,012
Allowance for loan losses, December 31,
2020
$
398,040
$
163,791
$
27,573
$
10,239
$
15,520
$
2,690
$
2,130
$
619,983
Year Ended December 31,
2019
Commercial
Consumer
Total
CRE
Residential Mortgage
C&I
CRE
Multi- Family
Residential
Construction and Land
Single- Family
Residential
HELOCs
Other Consumer
Allowance for loan losses, December 31.
2018
$
189,117
$
40,666
$
19,885
$
20,290
$
31,340
$
5,774
$
4,250
$
311,322
Provision for (reversal of) credit losses
on loans
(a)
109,068
(4,345
)
1,085
(1,422
)
(2,938
)
(516
)
(839
)
100,093
Gross charge-offs
(73,985
)
(1,021
)
—
—
(11
)
—
(50
)
(75,067
)
Gross recoveries
14,501
5,209
1,856
536
136
7
19
22,264
Total net (charge-offs) recoveries
(59,484
)
4,188
1,856
536
125
7
(31
)
(52,803
)
Foreign currency translation
adjustment
(325
)
—
—
—
—
—
—
(325
)
Allowance for loan losses, December 31,
2019
$
238,376
$
40,509
$
22,826
$
19,404
$
28,527
$
5,265
$
3,380
$
358,287
Three Months Ended
Year Ended
December 31,
2020
September 30,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Unfunded Credit Facilities
Allowance for unfunded credit
commitments, beginning of period (1)
$
29,083
$
28,972
$
13,424
$
11,158
$
12,566
Impact of ASU 2016-13 adoption
—
—
—
10,457
—
Provision for (reversal of) credit losses
on unfunded credit commitments
(b)
4,494
111
(2,266
)
11,962
(1,408
)
Allowance for unfunded credit
commitments, end of period (1)
$
33,577
$
29,083
$
11,158
$
33,577
$
11,158
Provision for credit losses
(a)+(b)
$
24,340
$
10,000
$
18,577
$
210,653
$
98,685
(1)
Included in Accrued expense and other
liabilities on the Consolidated Balance Sheet.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CREDIT QUALITY
($ in thousands)
(unaudited)
Table 11
The Company adopted ASU 2016-13 using the
modified retrospective approach on January 1, 2020. As a result,
prior comparative periods have not been adjusted. PCI loans prior
to the adoption of ASU 2016-13 were classified as PCD loans as of
January 1, 2020. Nonaccrual loans as of December 31, 2020 and
September 30, 2020 include all loans that are 90 or more days past
due, unless the loan is well-collateralized and in the process of
collection. Nonaccrual loans presented as of December 31, 2019
include only non-PCI nonaccrual loans.
Nonperforming Assets
December 31, 2020
September 30, 2020
December 31, 2019
Total Nonaccrual
loans
Total Nonaccrual
loans
Non-PCI Nonaccrual
Loans
Commercial:
C&I
$
133,939
$
145,986
$
74,835
CRE:
CRE
46,546
55,996
16,441
Multifamily residential
3,668
3,728
819
Total CRE
50,214
59,724
17,260
Consumer:
Residential mortgage:
Single-family residential
16,814
15,894
14,865
HELOCs
11,696
12,395
10,742
Total residential mortgage
28,510
28,289
25,607
Other consumer
2,491
2,495
2,517
Total nonaccrual loans
215,154
236,494
120,219
Other real estate owned, net
15,824
19,504
125
Other nonperforming assets
3,890
3,890
1,167
Total nonperforming assets
$
234,868
$
259,888
$
121,511
Credit Quality Ratios
December 31, 2020
September 30, 2020
December 31, 2019
Nonperforming assets to total assets
0.45
%
0.52
%
0.27
%
Nonaccrual loans to loans HFI
0.56
%
0.63
%
0.35
%
Allowance for loan losses to loans HFI
1.61
%
1.65
%
1.03
%
Allowance for loan losses to nonaccrual
loans
288.16
%
261.42
%
298.03
%
Annualized quarterly net charge-offs to
average loans HFI
0.20
%
0.26
%
0.10
%
Annual net charge-offs to average loans
HFI
0.17
%
N/A
0.16
%
N/A - Not applicable
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ and shares in thousands,
except for per share data)
(unaudited)
Table 12
During the fourth quarter of 2020, the
Company recorded $10.7 million in pre-tax recovery and $5.1 million
in uncertain tax position related to the Company’s investment in DC
Solar. In addition, the Company recorded a $7.0 million pre-tax
impairment charge, reversed $30.1 million of certain previously
claimed tax credits and recorded a $1.6 million in pre-tax recovery
related to DC Solar during the first, second and fourth quarters of
2019, respectively. Management believes that presenting the
computations of the adjusted net income, adjusted diluted earnings
per common share, adjusted return on average assets and adjusted
return on average equity that adjust for the above discussed
non-recurring items provide clarity to financial statement users
regarding the ongoing performance of the Company and allows
comparability to prior periods.
Three Months Ended
December 31, 2020
September 30, 2020
December 31, 2019
Net income
(a)
$
164,084
$
159,537
$
188,215
Adjustments related to DC Solar
Less: Recoveries (2)
(10,739
)
—
(1,583
)
Tax effect of recoveries (3)
3,047
—
468
Add: Uncertain tax position recorded in
income tax expense
5,127
—
—
Adjusted net income
(b)
$
161,519
$
159,537
$
187,100
Diluted weighted-average number of
shares outstanding
142,529
142,043
146,318
Diluted EPS
$
1.15
$
1.12
$
1.29
Adjustments related to DC Solar
Recoveries, net of tax
(0.06
)
—
(0.01
)
Uncertain tax position recorded in income
tax expense
0.04
—
—
Adjusted diluted EPS
$
1.13
$
1.12
$
1.28
Average total assets
(c)
$
52,466,325
$
50,247,259
$
44,471,242
Average stockholders’ equity
(d)
$
5,243,203
$
5,079,351
$
4,977,759
Return on average assets (1)
(a)/(c)
1.24
%
1.26
%
1.68
%
Adjusted return on average assets
(1)
(b)/(c)
1.22
%
1.26
%
1.67
%
Return on average equity (1)
(a)/(d)
12.45
%
12.50
%
15.00
%
Adjusted return on average equity
(1)
(b)/(d)
12.26
%
12.50
%
14.91
%
Year Ended
December 31, 2020
December 31, 2019
Net income
(e)
$
567,797
$
674,035
Adjustments related to DC Solar
Add: Impairment charge (2)
—
6,978
Less: Recoveries (2)
(10,739
)
(1,583
)
Tax effect of adjustments (3)
3,047
(1,595
)
Add: Reversal of certain previously
claimed tax credits
—
30,104
Add: Uncertain tax position recorded in
income tax expense
5,127
—
Adjusted net income
(f)
$
565,232
$
707,939
Diluted weighted-average number of
shares outstanding
142,991
146,179
Diluted EPS
$
3.97
$
4.61
Adjustments related to DC Solar
Impairment charge, net of tax
—
0.03
Recoveries, net of tax
(0.06
)
(0.01
)
Reversal of certain previously claimed tax
credits
—
0.21
Uncertain tax position recorded in income
tax expense
0.04
—
Adjusted diluted EPS
$
3.95
$
4.84
Average total assets
(g)
$
48,937,793
$
42,484,885
Average stockholders’ equity
(h)
$
5,082,186
$
4,760,845
Return on average assets
(e)/(g)
1.16
%
1.59
%
Adjusted return on average
assets
(f)/(g)
1.16
%
1.67
%
Return on average equity
(e)/(h)
11.17
%
14.16
%
Adjusted return on average
equity
(f)/(h)
11.12
%
14.87
%
(1)
Annualized.
(2)
Included in Amortization of tax credit and
other investments on the Consolidated Statement of Income.
(3)
Applied statutory tax rates of 28.37% and
29.56% for both the three and twelve months ended December 31, 2020
and 2019, respectively.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 13
Adjusted efficiency ratio represents
adjusted noninterest expense divided by 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
December 31, 2020
September 30, 2020
December 31, 2019
Net interest income before provision for
credit losses
(a)
$
346,581
$
324,130
$
368,219
Total noninterest income (1)
69,832
54,503
65,797
Total revenue
(b)
$
416,413
$
378,633
$
434,016
Total noninterest expense (1)
(c)
$
178,651
$
172,573
$
196,157
Less: Amortization of tax credit and other
investments (1)
(12,263
)
(17,209
)
(29,822
)
Amortization of core deposit
intangibles
(823
)
(927
)
(1,044
)
Adjusted noninterest expense
(d)
$
165,565
$
154,437
$
165,291
Efficiency ratio
(c)/(b)
42.90
%
45.58
%
45.20
%
Adjusted efficiency ratio
(d)/(b)
39.76
%
40.79
%
38.08
%
Adjusted pre-tax, pre-provision
income
(b)-(d) = (e)
$
250,848
$
224,196
$
268,725
Average total assets
(f)
$
52,466,325
$
50,247,259
$
44,471,242
Adjusted pre-tax, pre-provision
profitability ratio (2)
(e)/(f)
1.90
%
1.78
%
2.40
%
Adjusted noninterest expense/average
assets (2)
(d)/(f)
1.26
%
1.22
%
1.47
%
Year Ended
December 31, 2020
December 31, 2019
Net interest income before provision for
credit losses
(g)
$
1,377,193
$
1,467,813
Total noninterest income (1)
235,547
222,245
Total revenue
(h)
1,612,740
1,690,058
Total noninterest expense (1)
(i)
$
716,322
$
747,456
Less: Amortization of tax credit and other
investments (1)
(70,082
)
(98,383
)
Amortization of core deposit
intangibles
(3,634
)
(4,518
)
Repurchase agreements’ extinguishment
cost
(8,740
)
—
Adjusted noninterest expense
(j)
$
633,866
$
644,555
Efficiency ratio
(i)/(h)
44.42
%
44.23
%
Adjusted efficiency ratio
(j)/(h)
39.30
%
38.14
%
Adjusted pre-tax, pre-provision
income
(h)-(j) = (k)
$
978,874
$
1,045,503
Average total assets
(l)
$
48,937,793
$
42,484,885
Adjusted pre-tax, pre-provision
profitability ratio
(k)/(l)
2.00
%
2.46
%
Adjusted noninterest expense/average
assets
(j)/(l)
1.30
%
1.52
%
(1)
In the fourth quarter of 2020, the Company
reclassified certain income/losses from equity-method investments
from Amortization of tax credit and other investments to Other
investment income, with no effect on net income. Prior-period
amounts have been revised to conform with the current
presentation.
(2)
Annualized.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 14
The Company uses certain non-GAAP
financial measures to provide supplemental information regarding
the Company’s performance. Tangible equity and tangible equity to
tangible assets ratio are non-GAAP financial measures. Tangible
equity and tangible assets represent stockholders’ equity and total
assets, respectively, which have been reduced by goodwill and other
intangible assets. Given that the use of such measures and ratios
is more prevalent in the banking industry, and such measures and
ratios are used by banking regulators and analysts, the Company has
included them below for discussion.
December 31,
2020
September 30,
2020
December 31,
2019
Stockholders’ equity
(a)
$
5,269,175
$
5,126,106
$
5,017,617
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(11,899
)
(12,369
)
(16,079
)
Tangible equity
(b)
$
4,791,579
$
4,648,040
$
4,535,841
Total assets
(c)
$
52,156,913
$
50,371,477
$
44,196,096
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(11,899
)
(12,369
)
(16,079
)
Tangible assets
(d)
$
51,679,317
$
49,893,411
$
43,714,320
Total stockholders’ equity to total
assets ratio
(a)/(c)
10.10
%
10.18
%
11.35
%
Tangible equity to tangible assets
ratio
(b)/(d)
9.27
%
9.32
%
10.38
%
Adjusted return on average tangible equity
represents adjusted tangible net income divided by average tangible
equity. Adjusted tangible net income excludes the after-tax impacts
of the amortization of core deposit intangibles and mortgage
servicing assets, impairment charge, recoveries, uncertain tax
position and the reversal of certain previously claimed tax credits
related to DC Solar (where applicable). Given that the use of such
measures and ratios is more prevalent in the banking industry, and
such measures and ratios are used by banking regulators and
analysts, the Company has included them below for discussion.
Three Months Ended
Year Ended
December 31,
2020
September 30,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Net Income
$
164,084
$
159,537
$
188,215
$
567,797
$
674,035
Add: Amortization of core deposit
intangibles
823
927
1,044
3,634
4,518
Amortization of mortgage servicing
assets
428
450
567
1,920
2,738
Tax effect of amortization adjustments
(2)
(355
)
(390
)
(476
)
(1,575
)
(2,145
)
Tangible net income
(e)
$
164,980
$
160,524
$
189,350
$
571,776
$
679,146
Adjustments related to DC Solar
Add: Impairment charge (3)
—
—
—
—
6,978
Less: Recoveries (3)
(10,739
)
—
(1,583
)
(10,739
)
(1,583
)
Tax effects of adjustments (2)
3,047
—
468
3,047
(1,595
)
Add: Reversal of certain previously
claimed tax credits
—
—
—
—
30,104
Add: Uncertain tax position recorded in
income tax expense
5,127
—
—
5,127
—
Adjusted tangible net income
(f)
$
162,415
$
160,524
$
188,235
$
569,211
$
713,050
Average stockholders’ equity
$
5,243,203
$
5,079,351
$
4,977,759
$
5,082,186
$
4,760,845
Less: Average goodwill
(465,697
)
(465,697
)
(465,697
)
(465,697
)
(465,663
)
Average other intangible assets (1)
(12,182
)
(13,083
)
(16,793
)
(13,769
)
(19,340
)
Average tangible equity
(g)
$
4,765,324
$
4,600,571
$
4,495,269
$
4,602,720
$
4,275,842
Return on average tangible
equity
(e)/(g)
13.77
%
(4)
13.88
%
(4)
16.71
%
(4)
12.42
%
15.88
%
Adjusted return on average tangible
equity
(f)/(g)
13.56
%
(4)
13.88
%
(4)
16.61
%
(4)
12.37
%
16.68
%
(1)
Includes core deposit intangibles and
mortgage servicing assets.
(2)
Applied statutory tax rates of 28.37% and
29.56% for both the three and twelve months ended December 31, 2020
and 2019, respectively, and 28.35% for the three months ended
September 30, 2020.
(3)
Included in Amortization of tax credit and
other investments on the Consolidated Statement of Income.
(4)
Annualized.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 15
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. 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. As of December 31, 2020, the majority of the
Company’s PPP loans have a contractual term of two years. The SBA
pays the Company fees for processing PPP loans in the following
amounts: (i) five percent for loans of not more than $350,000; (ii)
three percent for loans of more than $350,000 and less than
$2,000,000; and (iii) one percent for loans of at least $2,000,000.
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 for the three months
ended December 31, 2020 and September 30, 2020, and twelve months
ended December 31, 2020 excludes the impact of PPP loans. Adjusted
net interest margin for the three months ended December 31, 2020
and September 30, 2020, and twelve months ended December 31, 2020
excludes the impact of PPP loans and advances from the PPPLF.
Management believes that presenting the adjusted average loan yield
and adjusted net interest margin provides comparability to prior
periods and these non-GAAP financial measures provide supplemental
information regarding the Company’s performance.
Three Months Ended
Year Ended
Yield on Average Loans
December 31,
2020
September 30,
2020
December 31,
2019
December 31,
2020
December 31,
2019
Interest income on loans
(a)
$
348,578
$
336,542
$
425,773
$
1,464,382
$
1,717,415
Less: Interest income on PPP loans
(14,204
)
(7,778
)
—
(43,271
)
—
Adjusted interest income on
loans
(b)
$
334,374
$
328,764
$
425,773
$
1,421,111
$
1,717,415
Average loans
(c)
$
37,725,725
$
37,160,445
$
34,410,010
$
36,799,017
$
33,373,136
Less: Average PPP loans
(1,704,608
)
(1,764,411
)
—
(1,236,246
)
—
Adjusted average loans
(d)
$
36,021,117
$
35,396,034
$
34,410,010
$
35,562,771
$
33,373,136
Average loan yield
(a)/(c)
3.68
%
(1)
3.60
%
(1)
4.91
%
(1)
3.98
%
5.15
%
Adjusted average loan yield
(b)/(d)
3.69
%
(1)
3.70
%
(1)
4.91
%
(1)
4.00
%
5.15
%
Net Interest Margin
Net interest income
(e)
$
346,581
$
324,130
$
368,219
$
1,377,193
$
1,467,813
Less: Interest income on PPP loans
(14,204
)
(7,778
)
—
(43,271
)
—
Add: Interest expense on advances from the
PPPLF
324
1,259
—
2,046
—
Adjusted net interest income
(f)
$
332,701
$
317,611
$
368,219
$
1,335,968
$
1,467,813
Average interest-earning assets
(g)
$
49,703,349
$
47,428,586
$
42,114,123
$
46,239,709
$
40,320,804
Less: Average PPP loans
(1,704,608
)
(1,764,411
)
—
(1,236,246
)
—
Adjusted average interest-earning
assets
(h)
$
47,998,741
$
45,664,175
$
42,114,123
$
45,003,463
$
40,320,804
Net interest margin
(e)/(g)
2.77
%
(1)
2.72
%
(1)
3.47
%
(1)
2.98
%
3.64
%
Adjusted net interest margin
(f)/(h)
2.76
%
(1)
2.77
%
(1)
3.47
%
(1)
2.97
%
3.64
%
(1)
Annualized.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210128005400/en/
FOR INVESTOR INQUIRIES, CONTACT: Irene Oh Chief Financial
Officer T: (626) 768-6360 E: irene.oh@eastwestbank.com
Julianna Balicka Director of Strategy and Corporate Development
T: (626) 768-6985 E: julianna.balicka@eastwestbank.com
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