East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq:
EWBC), parent company of East West Bank, today reported its
financial results for the second quarter of 2021. Net income for
the second quarter of 2021 was $224.7 million, or $1.57 per diluted
share. Second quarter 2021 return on average assets was 1.56% and
return on average equity was 16.6%.
“East West had a very strong quarter of robust growth, expanding
profitability and improving asset quality,” stated Dominic Ng,
Chairman and Chief Executive Officer of East West. “As of June 30,
2021, our total loans reached a record $40.1 billion and our total
deposits reached a record $52.6 billion.”
“Excluding the impact of the Paycheck Protection Program, loans
grew by 12% annualized in the second quarter, with solid growth
across our residential mortgage, commercial, and commercial real
estate loan portfolios. Total deposits grew by 25% annualized, and
noninterest-bearing demand deposits reached 41% of total deposits
as of June 30, 2021. Our diversified growth reflects the strength
of our business model, our commercial and consumer customer mix,
and our geographic footprint in dynamic metropolitan areas of the
United States.”
“Quarter-over-quarter, our revenue grew by 17% annualized and
operating expenses decreased, driving adjusted pre-tax,
pre-provision income growth of 33% annualized and expanding
profitability,” continued Ng. “Our solid financial performance for
the second quarter resulted in adjusted pre-tax, pre-provision
profitability1 of 2.0% and a return on average tangible equity2 of
18.3%.”
“Asset quality continues to be healthy. Criticized loans fell by
15% quarter-over-quarter; net charge-offs were 0.13% of average
loans, annualized, and the nonperforming assets ratio declined by
seven basis points to 0.38% of total assets. Accordingly, we
recorded a negative $15.0 million provision for credit losses in
the second quarter.”
“We are pleased with our results this quarter and are positive
about our outlook for the rest of the year,” concluded Ng. “The
hard work and outstanding execution by all our associates builds a
strong foundation for East West’s continued growth and success in
the years to come. We are well poised to help our communities and
customers thrive as the economy expands.”
BALANCE SHEET
- Record Assets – Total assets reached $59.9 billion as of
June 30, 2021, up by $3.0 billion, or 21% annualized, from $56.9
billion as of March 31, 2021. Second quarter 2021 average
interest-earning assets of $54.9 billion grew by $2.0 billion, or
16% linked quarter annualized. The growth in average
interest-earning assets consisted of a $1.5 billion increase in
average available-for-sale (“AFS”) debt securities, an $893.0
million increase in average loans, and a $667.7 million increase in
average assets purchased under resale agreements (“resale
agreements”), partially offset by a $1.0 billion decrease in
average interest-bearing cash and deposits with banks. The increase
in average AFS debt securities and resale agreements largely
reflected activity during the first quarter of 2021; on an
end-of-period basis, AFS debt securities increased by $610.2
million and resale agreements increased by $139.1 million between
June 30, 2021, and March 31, 2021.
- Record Loans – Total loans reached $40.1 billion as of
June 30, 2021, up by $484.6 million, or 5% annualized, from $39.6
billion as of March 31, 2021. Excluding Paycheck Protection Program
(“PPP”) loans of $1.4 billion as of June 30, 2021, total loans grew
by $1.1 billion, or 12% linked quarter annualized. During the
second quarter of 2021, $695.5 million of PPP loans outstanding
were forgiven by the Small Business Administration. The Company
funded 5,523 new PPP loans totaling $896.5 million in the first
half of 2021. Second quarter 2021 average loans of $39.6 billion
grew by $893.0 million, or 9% linked quarter annualized. Excluding
PPP loans, average loans grew by $953.6 million, or 10% annualized,
from the first quarter of 2021. The strong loan growth during the
quarter was broad-based, with the strongest growth from average
residential mortgage loans, which increased by 19% linked quarter
annualized. Average total CRE loans grew by 8% linked quarter
annualized, and average C&I loans, excluding PPP, grew by 6%
linked quarter annualized.
- Record Deposits – Total deposits reached $52.6 billion
as of June 30, 2021, up by $3.0 billion, or 25% annualized, from
$49.5 billion as of March 31, 2021. Noninterest-bearing demand
deposits reached a record $21.8 billion as of June 30, 2021, up by
$2.9 billion, or 61% annualized, from $18.9 billion as of March 31,
2021. Noninterest-bearing demand deposits made up 41% of total
deposits as of June 30, 2021, up from 38% as of March 31, 2021, or
34% as of June 30, 2020. Second quarter 2021 average deposits of
$50.2 billion grew by $2.3 billion, or 20% linked quarter
annualized. Growth in the second quarter was led by
noninterest-bearing demand deposits, which increased by 36% linked
quarter annualized. Time deposits decreased quarter-over-quarter,
reflecting run-off of higher rate certificates of deposit.
- Capital Levels – Capital levels for East West are
strong. As of June 30, 2021, stockholders’ equity was $5.5 billion,
or $39.10 per common share, and tangible equity3 per common share
was $35.75. As of June 30, 2021, the tangible equity to tangible
assets ratio3 was 8.54%, the common equity tier 1 (“CET1”) capital
ratio was 12.8%, and the total risk-based capital ratio was
14.3%.
OPERATING RESULTS
Second Quarter Earnings – Second quarter 2021 net income
was $224.7 million, or $1.57 per diluted share, an increase of 10%
from $205.0 million, or $1.44 per diluted share, for the first
quarter of 2021.
Second Quarter 2021 Compared to First
Quarter 2021
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $376.5 million, an increase
of 26% annualized from $353.7 million. Net interest margin (“NIM”)
of 2.75% increased by four basis points from 2.71%.
- Excluding the impact of PPP loans, adjusted NII4 totaled $361.1
million, an increase of 27% annualized from $338.7 million.
Adjusted NIM4 of 2.73% expanded by three basis points from 2.70%.
PPP loans contributed $15.4 million to NII in the second quarter,
compared with $15.0 million in the first quarter.
- NII growth reflected higher interest income, due to average
loan, AFS debt securities and resale agreement volume growth, and
decreased interest expense, due to a lower cost of deposits, a
reduction of time deposit balances and pay off of FHLB advances.
During the second quarter, $400.0 million of FHLB advances with an
average rate of 2.25% matured.
- The yield on average earning assets of 2.92% was relatively
stable quarter-over-quarter, contracting by one basis point from
2.93%. The average loan yield of 3.57% was likewise relatively
stable, contracting by one basis point from 3.58%.
Quarter-over-quarter, yields on AFS debt securities and resale
agreements were lower, but the overall mix of earning assets was
higher yielding due to a reduction of average interest-bearing cash
and deposits with banks.
- The average cost of deposits of 0.14% decreased by four basis
points from 0.18%. The average cost of interest-bearing deposits of
0.24% decreased by six basis points from 0.30%. The decrease in the
cost of deposits primarily reflects continued downward repricing of
time deposits to market rates, and a reduction in rates paid on
money market accounts.
Noninterest Income
Noninterest income totaled $68.4 million in the second quarter,
down from $72.9 million in the first quarter. Quarter-over-quarter
growth in foreign exchange income, lending fees, deposit account
fees, and wealth management fees drove a 15% increase in
customer-driven fee income. However, the growth in customer-driven
fee income was offset by an unfavorable change in the credit
valuation adjustment of interest rate contracts and other
derivatives.
- Included in interest rate contracts and other derivative income
are fair value changes primarily due to the quarter-over-quarter
change in the credit valuation adjustment. These fair value changes
amounted to a $5.4 million loss in the second quarter, reflecting a
quarter-over-quarter decline in long-term benchmark interest rates.
In the first quarter, the comparable amount was a $14.1 million
gain, reflecting an increase in long-term benchmark interest rates
during the period.
- Other investment income totaled $7.6 million in the second
quarter, up from $0.9 million in the first quarter, reflecting
increased valuations of Community Reinvestment Act-related
investments.
Noninterest Expense
Noninterest expense totaled $189.5 million. Second quarter
noninterest expense consisted of $161.5 million of adjusted
noninterest expense5, $27.3 million in amortization of tax credit
and other investments, and $0.7 million in amortization of core
deposit intangibles.
- Adjusted noninterest expense of $161.5 million decreased by 2%
from $165.0 million in the first quarter. Compensation and employee
benefits expense decreased from a seasonally higher first
quarter.
- Amortization of tax credit and other investments totaled $27.3
million, an increase from $25.4 million in the first quarter.
Second quarter amortization of tax credit and other investments
included $0.9 million of recoveries related to DC Solar tax credit
investments. These recoveries amounted to $0.6 million after
tax.
- The adjusted efficiency ratio5 was 36.3% in the second quarter,
an improvement from 38.7% in the first quarter.
TAX RELATED ITEMS
Second quarter 2021 income tax expense was $45.6 million and the
effective tax rate was 17%. Year-to-date for the first six months
of 2021, the effective tax rate was 15%. For the full year, the
Company expects the effective tax rate to be approximately 15%.
ASSET QUALITY
- Quarter-over-quarter, criticized loans fell by $184.9 million,
or 15%, with decreases of 23% in special mention and 9% in
classified loans. The allowance for loan losses (“ALLL”) totaled
$585.7 million, or 1.46% of loans held-for-investment (“HFI”), as
of June 30, 2021, compared with $607.5 million, or 1.53% of loans
HFI, as of March 31, 2021.
- Quarter-over-quarter, the ALLL decreased by $21.8 million, and
the ALLL coverage ratio of loans HFI decreased by seven basis
points. The change in the ALLL reflects an improved macroeconomic
forecast, improved loan risk ratings, and lower expected losses
over the expected life of the loans.
- As a result of the improvements noted above, during the second
quarter of 2021, the Company recorded a negative $15.0 million
provision for credit losses.
- Second quarter 2021 net charge-offs were $13.3 million, or
annualized 0.13% of average loans HFI, down by $131 thousand, or
one basis point, from $13.4 million, or annualized 0.14% of average
loans HFI, for the first quarter of 2021.
- As of June 30, 2021, criticized loans totaled $1,032.0 million,
or 2.58% of loans HFI, an improvement of 49 basis points from
$1,216.9 million, or 3.07% of loans HFI, as of March 31, 2021.
Special mention loans decreased by 23% to $386.8 million as of June
30, 2021, down from $504.2 million as of March 31, 2021. Classified
loans decreased by 9% to $645.2 million as of June 30, 2021, down
from $712.7 million as of March 31, 2021.
- Nonperforming assets were $225.7 million, or 0.38% of total
assets, as of June 30, 2021, compared with $258.1 million, or 0.45%
of total assets, as of March 31, 2021.
CAPITAL STRENGTH
Capital levels for East West are strong. The following table
presents the regulatory capital ratios as of June 30, 2021, March
31, 2021, and June 30, 2020.
EWBC Regulatory Capital Metrics
Basel III
($ in millions)
June 30,
2021 (a)
March 31,
2021 (a)
June 30,
2020 (a)
Minimum
Capital
Ratio
Well
Capitalized
Ratio
Minimum
Capital Ratio +
Conservation
Buffer (b)
Risk-Based Capital Ratios:
CET1 capital ratio
12.8
%
12.7
%
12.7
%
4.5
%
6.5
%
7.0
%
Tier 1 capital ratio
12.8
%
12.7
%
12.7
%
6.0
%
8.0
%
8.5
%
Total capital ratio
14.3
%
14.3
%
14.4
%
8.0
%
10.0
%
10.5
%
Leverage ratio
9.1
%
9.1
%
9.7
%
4.0
%
5.0
%
4.0
%
Risk-Weighted Assets (“RWA”) (c)
$
40,609
$
39,572
$
36,199
N/A
N/A
N/A
N/A Not applicable.
(a)
The Company has elected to use the 2020
CECL transition provision in the calculation of its June 30, 2021,
March 31, 2020, and June 30, 2020 regulatory capital ratios. The
Company’s June 30, 2021 regulatory capital ratios and RWA are
preliminary.
(b)
An additional 2.5% capital conservation
buffer above the minimum capital ratios are required in order to
avoid limitations on distributions, including dividend payments and
certain discretionary bonus payments to executive officers.
(c)
Under regulatory guidelines, on-balance
sheet assets and credit equivalent amounts of derivatives and
off-balance sheet items are assigned to one of several broad risk
categories based on the nature of the obligor, or, if relevant, the
guarantor or the nature of any collateral. The aggregate dollar
value in each risk category is then multiplied by the risk weight
associated with that category. The resulting weighted values from
each of the risk categories are aggregated for determining total
RWA.
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared third quarter 2021
dividends for the Company’s common stock. The common stock cash
dividend of $0.33 per share is payable on August 16, 2021, to
stockholders of record on August 2, 2021.
On March 3, 2020, East West’s Board of Directors authorized the
repurchase of up to $500 million of East West’s common stock. East
West did not repurchase any shares during the second quarter of
2021, and has not repurchased any shares since the first quarter of
2020, under this authorization.
Conference Call
East West will host a conference call to discuss second quarter
2021 earnings with the public on Thursday, July 22, 2021, at 8:30
a.m. PT/11:30 a.m. ET. The public and investment community are
invited to listen as management discusses second quarter 2021
results and operating developments.
- The following dial-in information is provided for participation
in the conference call: calls within the U.S. – (877) 506-6399;
calls within Canada – (855) 669-9657; international calls – (412)
902-6699.
- A presentation to accompany the earnings call will be available
on the Investor Relations page of the Company’s website at
www.eastwestbank.com/investors.
- A listen-only live broadcast of the call will also be available
on the Investor Relations page of the Company’s website at
www.eastwestbank.com/investors.
- A replay of the conference call will be available on July 22,
2021, at 11:30 a.m. PT through August 22, 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: 10157563.
About East West
East West Bancorp, Inc. is a public company with total assets of
$59.9 billion and is traded on the Nasdaq Global Select Market
under the symbol “EWBC”. The Company’s wholly owned subsidiary,
East West Bank, is one of the largest independent banks
headquartered in California, operating over 120 locations in the
United States and in China. The Company’s markets in the United
States include California, Georgia, Massachusetts, Nevada, New
York, Texas and Washington. In China, East West’s presence includes
full service branches in Hong Kong, Shanghai, Shantou and Shenzhen,
and representative offices in Beijing, Chongqing, Guangzhou, and
Xiamen. For more information on East West, visit the Company’s
website at www.eastwestbank.com.
Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto)
contain forward-looking statements that are intended to be covered
by the safe harbor for such statements provided by the Private
Securities Litigation Reform Act of 1995. In addition, the Company
may make forward-looking statements in other documents that it
files with, or furnishes to, the U.S. Securities and Exchange
Commission (the “SEC”) and management may make forward-looking
statements to analysts, investors, media members and others.
Forward-looking statements are statements that are not historical
facts, and are based on current expectations, estimates and
projections about the Company’s industry, management’s beliefs and
certain assumptions made by management, many of which, by their
nature, are inherently uncertain and beyond the Company’s control,
such as the future impacts of the COVID-19 pandemic. These
statements relate to the Company’s financial condition, results of
operations, plans, objectives, future performance and/or business.
They usually can be identified by the use of forward-looking
language, such as “likely result in,” “expects,” “anticipates,”
“estimates,” “forecasts,” “projects,” “intends to,” “assumes,”
“believes,” “plans,” “trend,” “objective,” “continues,” “remains,”
“will,” “would,” “should,” “could,” “may,” “might,” “can,” or
similar expressions, and the negative thereof. You should not place
undue reliance on these statements, as they are subject to risks
and uncertainties, including, but not limited to, those described
in the documents incorporated by reference. When considering these
forward-looking statements, you should keep in mind these risks and
uncertainties, as well as any cautionary statements the Company may
make. Moreover, you should treat these statements as speaking only
as of the date they are made and based only on information then
actually known to the Company.
There are a number of important factors that could cause future
results to differ materially from historical performance and these
forward-looking statements. Factors that might cause such
differences, some of which are beyond the Company’s control,
include, but are not limited to: changes in the U.S. economy,
including an economic slowdown, inflation, deflation, housing
prices, employment levels, rate of growth and general business
conditions; changes in local, regional and global business,
economic and political conditions and geopolitical events; the
impacts of the ongoing COVID-19 pandemic and any other pandemic,
epidemic or health-related crisis; changes in laws or the
regulatory environment including regulatory reform initiatives and
policies of the U.S. Department of Treasury, the Federal Reserve,
the Federal Deposit Insurance Corporation, the Office of the
Comptroller of the Currency, the SEC, the Consumer Financial
Protection Bureau and the California Department of Financial
Protection and Innovation - Division of Financial Institutions, and
the SBA; the changes and effects thereof in trade, monetary and
fiscal policies and laws, including the ongoing trade dispute
between the U.S. and the People’s Republic of China; changes in the
commercial and consumer real estate markets; changes in consumer
spending and savings habits; fluctuations in the Company’s stock
price; changes in income tax laws and regulations; the Company’s
ability to compete effectively against financial institutions in
its banking markets and other entities, including as a result of
emerging technologies; the soundness of other financial
institutions; success and timing of the Company’s business
strategies; the Company’s ability to retain key officers and
employees; impact on the Company’s funding costs, net interest
income and net interest margin from changes in key variable market
interest rates, competition, regulatory requirements and the
Company’s product mix; changes in the Company’s costs of operation,
compliance and expansion; the Company’s ability to adopt and
successfully integrate new technologies into its business in a
strategic manner; impact of the benchmark interest rate reform in
the U.S. including the transition away from USD LIBOR to
alternative reference rates; impact of a communications or
technology disruption, failure in, or breach of, the Company’s
operational or security systems or infrastructure, or those of
third parties with whom the Company does business, including as a
result of cyber-attacks, and other similar matters which could
result in, among other things, confidential and/or proprietary
information being disclosed or misused and materially impact the
Company’s ability to provide services to its clients; adequacy of
the Company’s risk management framework, disclosure controls and
procedures and internal control over financial reporting; future
credit quality and performance, including the Company’s
expectations regarding future credit losses and allowance levels;
impact of adverse changes to the Company’s credit ratings from
major credit rating agencies; impact of adverse judgments or
settlements in litigation; impact on the Company’s international
operations due to political developments, disease pandemics, wars
or other hostilities that may disrupt or increase volatility in
securities or otherwise affect economic conditions; heightened
regulatory and governmental oversight and scrutiny of the Company’s
business practices, including dealings with consumers; impact of
reputational risk from negative publicity, fines and penalties and
other negative consequences from regulatory violations and legal
actions and from the Company’s interactions with business partners,
counterparties, service providers and other third parties; impact
of regulatory enforcement actions; changes in accounting standards
as may be required by the Financial Accounting Standards Board or
other regulatory agencies and their impact on critical accounting
policies and assumptions; impact of other potential federal tax
changes and spending cuts; the Company’s capital requirements and
its ability to generate capital internally or raise capital on
favorable terms; impact on the Company’s liquidity due to changes
in the Company’s ability to pay dividends and repurchase common
stock and to receive dividends from its subsidiaries; any future
strategic acquisitions or divestitures; changes in the equity and
debt securities markets; fluctuations in foreign currency exchange
rates; impact of climate change, social and sustainability
concerns; significant turbulence or disruption in the capital or
financial markets, which could result in, among other things, a
reduction in the availability of funding or increases in funding
costs, a reduction in investor demand for mortgage loans and
declines in asset values and/or recognition of allowance for credit
losses on securities held in the Company’s AFS debt securities
portfolio; and impact of natural or man-made disasters or
calamities, such as wildfires and earthquakes, which are particular
to California, or conflicts, terrorism or other events that may
directly or indirectly result in a negative impact on the Company’s
financial performance.
For a more detailed discussion of some of the factors that might
cause such differences, see the Company’s 2020 Form 10-K under the
heading Item 1A. Risk Factors and the information set forth under
Item 1A. Risk Factors in the Company’s Quarterly Reports on Form
10-Q. The Company does not undertake, and specifically disclaims
any obligation to update or revise any forward-looking statements
to reflect the occurrence of events or circumstances after the date
of such statements except as required by law.
__________________________________________________________
1 See reconciliation of GAAP to non-GAAP financial measures in
Table 12. 2 See reconciliation of GAAP to non-GAAP financial
measures in Table 13. 3 See reconciliation of GAAP to non-GAAP
financial measures in Table 13. 4 See reconciliation of GAAP to
non-GAAP financial measures in Table 14. 5 See reconciliation of
GAAP to non-GAAP financial measures in Table 12.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
($ and shares in thousands,
except per share data)
(unaudited)
Table 1
June 30, 2021 % or Basis Point
Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Assets
Cash and due from banks
$
626,716
$
582,270
$
602,974
7.6
%
3.9
%
Interest-bearing cash with banks
5,371,089
4,036,863
3,930,528
33.1
36.7
Cash and cash equivalents
5,997,805
4,619,133
4,533,502
29.8
32.3
Interest-bearing deposits with banks
830,279
741,923
531,591
11.9
56.2
Assets purchased under resale agreements
(“resale agreements”)
2,299,184
2,160,038
1,260,000
6.4
82.5
Available-for-sale (“AFS”) debt securities
(amortized cost of $8,411,142, $7,904,546 and $3,823,714)
8,399,460
7,789,213
3,884,574
7.8
116.2
Federal Home Loan Bank (“FHLB”) and
Federal Reserve Bank (“FRB”) stock
76,931
83,250
78,963
(7.6
)
(2.6
)
Loans held-for-sale (“HFS”)
1,819
—
3,875
100.0
(53.1
)
Loans held-for-investment (''HFI'') (net
of allowance for loan losses of $585,724, $607,506 and
$632,071)
39,485,775
38,981,242
36,597,341
1.3
7.9
Investments in qualified affordable
housing partnerships, net
287,432
284,862
201,888
0.9
42.4
Investments in tax credit and other
investments, net
364,187
361,438
251,318
0.8
44.9
Goodwill
465,697
465,697
465,697
—
—
Operating lease right-of-use assets
102,609
94,483
94,898
8.6
8.1
Other assets
1,543,698
1,292,867
1,503,946
19.4
2.6
Total assets
$
59,854,876
$
56,874,146
$
49,407,593
5.2
%
21.1
%
Liabilities and Stockholders’
Equity
Deposits
$
52,582,575
$
49,547,136
$
40,672,678
6.1
%
29.3
%
Short-term borrowings
—
—
252,851
—
(100.0
)
FHLB advances
248,464
653,035
656,759
(62.0
)
(62.2
)
Assets sold under repurchase agreements
(“repurchase agreements”)
300,000
300,000
300,000
—
—
Long-term debt and finance lease
liabilities
151,997
152,195
1,580,442
(1)
(0.1
)
(90.4
)
Operating lease liabilities
110,105
101,828
102,708
8.1
7.2
Accrued expenses and other liabilities
914,187
834,925
854,912
9.5
6.9
Total liabilities
54,307,328
51,589,119
44,420,350
5.3
22.3
Stockholders’ equity
5,547,548
5,285,027
4,987,243
5.0
11.2
Total liabilities and stockholders’
equity
$
59,854,876
$
56,874,146
$
49,407,593
5.2
%
21.1
%
Book value per common share
$
39.10
$
37.26
$
35.25
4.9
%
10.9
%
Tangible equity (2) per common
share
$
35.75
$
33.90
$
31.86
5.5
12.2
Number of common shares at
period-end
141,878
141,843
141,486
0.0
0.3
Tangible equity to tangible assets
ratio (2)
8.54
%
8.53
%
9.21
%
1
bp
(67
)
bps
(1)
Includes $1.43 billion of advances from
the Federal Reserve Paycheck Protection Program Liquidity Facility
(“PPPLF”) as of June 30, 2020.
(2)
See reconciliation of GAAP to non-GAAP
financial measures in Table 13.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
TOTAL LOANS AND DEPOSITS
DETAIL
($ in thousands)
(unaudited)
Table 2
June 30, 2021 %
Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”)
(1)
$
13,790,461
$
14,081,110
$
13,422,691
(2.1
)%
2.7
%
Commercial real estate (“CRE”):
CRE
11,711,369
11,563,034
10,902,114
1.3
7.4
Multifamily residential
3,219,796
3,066,515
3,032,385
5.0
6.2
Construction and land
460,678
459,254
567,716
0.3
(18.9
)
Total CRE
15,391,843
15,088,803
14,502,215
2.0
6.1
Consumer:
Residential mortgage:
Single-family residential
8,869,370
8,524,287
7,660,094
4.0
15.8
Home equity lines of credit (“HELOCs”)
1,872,166
1,749,172
1,461,951
7.0
28.1
Total residential mortgage
10,741,536
10,273,459
9,122,045
4.6
17.8
Other consumer
147,659
145,376
182,461
1.6
(19.1
)
Total loans HFI (2)
40,071,499
39,588,748
37,229,412
1.2
7.6
Loans HFS
1,819
—
3,875
100.0
(53.1
)
Total loans (2)
40,073,318
39,588,748
37,233,287
1.2
7.6
Allowance for loan losses
(585,724
)
(607,506
)
(632,071
)
(3.6
)
(7.3
)
Net loans (2)
$
39,487,594
$
38,981,242
$
36,601,216
1.3
7.9
Deposits:
Noninterest-bearing demand
$
21,816,721
$
18,919,298
$
13,940,420
15.3
%
56.5
%
Interest-bearing checking
6,762,178
7,005,693
5,280,887
(3.5
)
28.1
Money market
12,853,812
12,218,957
10,002,624
5.2
28.5
Savings
2,719,106
2,604,355
2,186,199
4.4
24.4
Time deposits
8,430,758
8,798,833
9,262,548
(4.2
)
(9.0
)
Total deposits
$
52,582,575
$
49,547,136
$
40,672,678
6.1
%
29.3
%
(1)
Includes $1.43 billion, $2.07 billion and
$1.75 billion of Paycheck Protection Program (“PPP”) loans as of
June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
(2)
Includes net deferred loan fees, unearned
fees, unamortized premiums and unaccreted discounts of $(67.0)
million, $(76.9) million and $(72.1) million as of June 30, 2021,
March 31, 2021 and June 30, 2020, respectively. Net origination
fees related to PPP loans were $(25.9) million, $(34.3) million and
$(25.4) million as of June 30, 2021, March 31, 2021 and June 30,
2020, respectively.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 3
Three Months Ended
June 30, 2021 %
Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Interest and dividend income (1)
$
399,333
$
381,386
$
398,776
4.7
%
0.1
%
Interest expense
22,860
27,691
55,001
(17.4
)
(58.4
)
Net interest income before provision for
credit losses
376,473
353,695
343,775
6.4
9.5
(Reversal of) provision for credit
losses
(15,000
)
—
102,443
(100.0
)
NM
Net interest income after provision for
credit losses
391,473
353,695
241,332
10.7
62.2
Noninterest income
68,431
72,866
55,707
(2)
(6.1
)
22.8
Noninterest expense
189,523
191,077
184,766
(2)
(0.8
)
2.6
Income before income taxes
270,381
235,484
112,273
14.8
140.8
Income tax expense
45,639
30,490
12,921
49.7
253.2
Net income
$
224,742
$
204,994
$
99,352
9.6
%
126.2
%
Earnings per share (“EPS”)
- Basic
$
1.58
$
1.45
$
0.70
9.5
%
125.6
%
- Diluted
$
1.57
$
1.44
$
0.70
9.5
124.3
Weighted-average number of shares
outstanding
- Basic
141,868
141,646
141,486
0.2
%
0.3
%
- Diluted
143,040
142,844
141,827
0.1
0.9
Three Months Ended
June 30, 2021 %
Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Noninterest income:
Lending fees
$
21,092
$
18,357
$
21,946
14.9
%
(3.9
)%
Deposit account fees
17,342
15,383
10,872
12.7
59.5
Interest rate contracts and other
derivative (loss) income
(3,172
)
16,997
6,107
NM
NM
Foreign exchange income
13,007
9,526
4,562
36.5
185.1
Wealth management fees
7,951
6,911
3,091
15.0
157.2
Net gains on sales of loans
1,491
1,781
132
(16.3
)
NM
Gains on sales of AFS debt securities
632
192
9,640
229.2
(93.4
)
Other investment income (expense)
7,596
925
(1,964
)
(2)
721.2
NM
Other income
2,492
2,794
1,321
(10.8
)
88.6
Total noninterest income
$
68,431
$
72,866
$
55,707
(2)
(6.1
)%
22.8
%
Noninterest expense:
Compensation and employee benefits
$
105,426
$
107,808
$
96,955
(2.2
)%
8.7
%
Occupancy and equipment expense
15,377
15,922
16,217
(3.4
)
(5.2
)
Deposit insurance premiums and regulatory
assessments
4,274
3,876
3,700
10.3
15.5
Deposit account expense
3,817
3,892
3,353
(1.9
)
13.8
Data processing
4,035
4,478
4,480
(9.9
)
(9.9
)
Computer software expense
7,521
7,159
7,301
5.1
3.0
Consulting expense
1,868
1,475
1,413
26.6
32.2
Legal expense
1,975
1,502
1,530
31.5
29.1
Other operating expense
17,939
19,607
19,248
(8.5
)
(6.8
)
Amortization of tax credit and other
investments
27,291
25,358
21,829
(2)
7.6
25.0
Repurchase agreements’ extinguishment
cost
—
—
8,740
—
(100.0
)
Total noninterest expense
$
189,523
$
191,077
$
184,766
(2)
(0.8
)%
2.6
%
NM - Not meaningful.
(1)
Includes $15.4 million, $15.0 million and
$21.3 million of interest income related to PPP loans for the three
months ended June 30, 2021, March 31, 2021 and June 30, 2020,
respectively.
(2)
Starting fourth quarter of 2020, the
Company has reclassified certain income/losses from equity method
investments from Amortization of tax credit and other investments
to Other investment income, with no effect on net income. June 30,
2020 comparative amounts have been revised to conform with the
current presentation.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 4
Six Months Ended
June 30, 2021 % Change
June 30, 2021
June 30, 2020
Yr-o-Yr
Interest and dividend income (1)
$
780,719
$
847,966
(7.9)%
Interest expense
50,551
141,484
(64.3)
Net interest income before provision for
credit losses
730,168
706,482
3.4
(Reversal of ) provision for credit
losses
(15,000)
176,313
NM
Net interest income after provision for
credit losses
745,168
530,169
40.6
Noninterest income
141,297
111,213
(2)
27.1
Noninterest expense
380,600
365,099
(2)
4.2
Income before income taxes
505,865
276,283
83.1
Income tax expense
76,129
32,107
137.1
Net income
$
429,736
$
244,176
76.0%
EPS
- Basic
$
3.03
$
1.71
77.7%
- Diluted
$
3.01
$
1.70
76.7
Weighted-average number of shares
outstanding
- Basic
141,758
143,150
(1.0)%
- Diluted
142,963
143,560
(0.4)
Six Months Ended
June 30, 2021 % Change
June 30, 2021
June 30, 2020
Yr-o-Yr
Noninterest income:
Lending fees
$
39,449
$
37,719
4.6%
Deposit account fees
32,725
21,319
53.5
Interest rate contracts and other
derivative income
13,825
13,180
4.9
Foreign exchange income
22,533
12,381
82.0
Wealth management fees
14,862
8,444
76.0
Net gains on sales of loans
3,272
1,082
202.4
Gains on sales of AFS debt securities
824
11,169
(92.6)
Other investment income
8,521
1,414
(2)
502.6
Other income
5,286
4,505
17.3
Total noninterest income
$
141,297
$
111,213
(2)
27.1%
Noninterest expense:
Compensation and employee benefits
$
213,234
$
198,915
7.2%
Occupancy and equipment expense
31,299
33,293
(6.0)
Deposit insurance premiums and regulatory
assessments
8,150
7,127
14.4
Deposit account expense
7,709
6,916
11.5
Data processing
8,513
8,306
2.5
Computer software expense
14,680
13,467
9.0
Consulting expense
3,343
2,630
27.1
Legal expense
3,477
4,727
(26.4)
Other operating expense
37,546
40,367
(7.0)
Amortization of tax credit and other
investments
52,649
40,611
(2)
29.6
Repurchase agreements’ extinguishment
cost
—
8,740
(100.0)
Total noninterest expense
$
380,600
$
365,099
(2)
4.2%
NM - Not meaningful.
(1)
Includes $30.4 million and $21.3 million
of interest income related to PPP loans for the six months ended
June 30, 2021 and 2020, respectively.
(2)
Starting fourth quarter of 2020, the
Company has reclassified certain income/losses from equity method
investments from Amortization of tax credit and other investments
to Other investment income, with no effect on net income. June 30,
2020 comparative amounts have been revised to conform with the
current presentation.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED AVERAGE
BALANCES
($ in thousands)
(unaudited)
Table 5
Three Months Ended
June 30, 2021 % Change
Six Months Ended
June 30, 2021 % Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
June 30, 2021
June 30, 2020
Yr-o-Yr
Loans:
Commercial:
C&I (1)
$
13,811,966
$
13,693,869
$
13,560,719
0.9
%
1.9
%
$
13,753,244
$
12,863,449
6.9
%
CRE:
CRE
11,616,916
11,325,679
10,812,399
2.6
7.4
11,472,102
10,649,041
7.7
Multifamily residential
3,125,001
3,042,079
2,987,311
2.7
4.6
3,083,769
2,938,577
4.9
Construction and land
477,860
549,337
594,965
(13.0
)
(19.7
)
513,401
618,022
(16.9
)
Total CRE
15,219,777
14,917,095
14,394,675
2.0
5.7
15,069,272
14,205,640
6.1
Consumer:
Residential mortgage:
Single-family residential
8,650,706
8,315,052
7,506,546
4.0
15.2
8,483,806
7,381,956
14.9
HELOCs
1,800,213
1,666,233
1,444,933
8.0
24.6
1,733,593
1,443,692
20.1
Total residential mortgage
10,450,919
9,981,285
8,951,479
4.7
16.8
10,217,399
8,825,648
15.8
Other consumer
139,608
137,058
234,900
1.9
(40.6
)
138,340
253,134
(45.3
)
Total loans (2)
$
39,622,270
$
38,729,307
$
37,141,773
2.3
%
6.7
%
$
39,178,255
$
36,147,871
8.4
%
Interest-earning assets
$
54,901,209
$
52,852,045
$
45,413,242
3.9
%
20.9
%
$
53,882,288
$
43,887,886
22.8
%
Total assets
$
57,771,837
$
55,594,283
$
48,228,914
3.9
%
19.8
%
$
56,689,075
$
46,492,211
21.9
%
Deposits:
Noninterest-bearing demand
$
19,717,315
$
18,093,696
$
13,534,873
9.0
%
45.7
%
$
18,909,991
$
12,326,291
53.4
%
Interest-bearing checking
6,671,358
6,393,034
4,687,178
4.4
42.3
6,532,965
4,844,425
34.9
Money market
12,596,515
11,573,847
9,893,816
8.8
27.3
12,088,006
9,453,599
27.9
Savings
2,676,865
2,674,476
2,149,965
0.1
24.5
2,675,677
2,113,118
26.6
Time deposits
8,518,936
9,112,662
9,634,696
(6.5
)
(11.6
)
8,814,159
9,949,351
(11.4
)
Total deposits
$
50,180,989
$
47,847,715
$
39,900,528
4.9
%
25.8
%
$
49,020,798
$
38,686,784
26.7
%
Interest-bearing liabilities
$
31,394,114
$
30,863,568
$
28,362,618
1.7
%
10.7
%
$
31,130,307
$
27,977,979
11.3
%
Stockholders’ equity
$
5,425,952
$
5,338,098
$
4,982,446
1.6
%
8.9
%
$
5,382,267
$
5,002,226
7.6
%
(1)
Includes average balances of PPP loans of
$1.87 billion, $1.93 billion and $1.47 billion for the three months
ended June 30, 2021, March 31, 2021 and June 30, 2020,
respectively, and $1.90 billion and $732.5 million for the six
months ended June 30, 2021 and 2020, respectively.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
QUARTER-TO-DATE AVERAGE
BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
Three Months Ended
June 30, 2021
March 31, 2021
Average
Average
Average
Average
Balance
Interest
Yield/Rate (1)
Balance
Interest
Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with
banks
$
5,072,225
$
3,628
0.29
%
$
6,117,799
$
3,632
0.24
%
Resale agreements
2,129,567
8,021
1.51
%
1,461,900
6,099
1.69
%
AFS debt securities
7,997,005
34,690
1.74
%
6,459,875
29,100
1.83
%
Loans (2)
39,622,270
352,453
3.57
%
38,729,307
342,008
3.58
%
FHLB and FRB stock
80,142
541
2.71
%
83,164
547
2.67
%
Total interest-earning assets
54,901,209
399,333
2.92
%
52,852,045
381,386
2.93
%
Noninterest-earning assets:
Cash and due from banks
600,053
580,277
Allowance for loan losses
(607,523)
(618,589)
Other assets
2,878,098
2,780,550
Total assets
$
57,771,837
$
55,594,283
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,671,358
$
3,777
0.23
%
$
6,393,034
$
4,214
0.27
%
Money market deposits
12,596,515
3,712
0.12
%
11,573,847
4,711
0.17
%
Savings deposits
2,676,865
2,078
0.31
%
2,674,476
1,741
0.26
%
Time deposits
8,518,936
8,431
0.40
%
9,112,662
11,156
0.50
%
Federal funds purchased and other
short-term borrowings
336
—
—
%
4,703
42
3.62
%
FHLB advances
474,887
2,099
1.77
%
652,758
3,069
1.91
%
Repurchase agreements
303,118
1,991
2.63
%
300,000
1,978
2.67
%
Long-term debt and finance lease
liabilities
152,099
772
2.04
%
152,088
780
2.08
%
Total interest-bearing
liabilities
31,394,114
22,860
0.29
%
30,863,568
27,691
0.36
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
19,717,315
18,093,696
Accrued expenses and other liabilities
1,234,456
1,298,921
Stockholders’ equity
5,425,952
5,338,098
Total liabilities and stockholders’
equity
$
57,771,837
$
55,594,283
Interest rate spread
2.63
%
2.57
%
Net interest income and net interest
margin
$
376,473
2.75
%
$
353,695
2.71
%
Adjusted net interest income and
adjusted net interest margin (3)
$
361,096
2.73
%
$
338,678
2.70
%
(1)
Annualized.
(2)
Includes loans HFS.
(3)
Net interest income and net interest
margin for the three months ended June 30, 2021 and March 31, 2021
have been adjusted for the impact of PPP loans. See reconciliation
of GAAP to non-GAAP financial measures in Table 14.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
QUARTER-TO-DATE AVERAGE
BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
Three Months Ended
June 30, 2021
June 30, 2020
Average
Average
Average
Average
Balance
Interest
Yield/Rate (1)
Balance
Interest
Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with
banks
$
5,072,225
$
3,628
0.29%
$
3,435,920
$
4,564
0.53%
Resale agreements
2,129,567
8,021
1.51%
1,037,473
5,514
2.14%
AFS debt securities
7,997,005
34,690
1.74%
3,719,209
21,004
2.27%
Loans (2)
39,622,270
352,453
3.57%
37,141,773
367,393
3.98%
FHLB and FRB stock
80,142
541
2.71%
78,867
301
1.54%
Total interest-earning assets
54,901,209
399,333
2.92 %
45,413,242
398,776
3.53 %
Noninterest-earning assets:
Cash and due from banks
600,053
498,908
Allowance for loan losses
(607,523)
(566,473)
Other assets
2,878,098
2,883,237
Total assets
$
57,771,837
$
48,228,914
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,671,358
$
3,777
0.23%
$
4,687,178
$
5,404
0.46%
Money market deposits
12,596,515
3,712
0.12%
9,893,816
8,093
0.33%
Savings deposits
2,676,865
2,078
0.31%
2,149,965
1,445
0.27%
Time deposits
8,518,936
8,431
0.40%
9,634,696
31,457
1.31%
Federal funds purchased and other
short-term borrowings
336
—
—%
242,185
265
0.44%
FHLB advances
474,887
2,099
1.77%
653,665
3,343
2.06%
Repurchase agreements
303,118
1,991
2.63%
418,681
3,540
3.40%
Long-term debt and finance lease
liabilities
152,099
772
2.04%
682,432
(3)
1,454
0.86%
Total interest-bearing
liabilities
31,394,114
22,860
0.29%
28,362,618
55,001
0.78%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
19,717,315
13,534,873
Accrued expenses and other liabilities
1,234,456
1,348,977
Stockholders’ equity
5,425,952
4,982,446
Total liabilities and stockholders’
equity
$
57,771,837
$
48,228,914
Interest rate spread
2.63%
2.75%
Net interest income and net interest
margin
$
376,473
2.75%
$
343,775
3.04%
Adjusted net interest income and
adjusted net interest margin (4)
$
361,096
2.73%
$
322,949
2.96%
(1)
Annualized.
(2)
Includes loans HFS.
(3)
Primarily includes average balances of
PPPLF, which was repaid in full during the fourth quarter of
2020.
(4)
Net interest income and net interest
margin for the three months ended June 30, 2021 and June 30, 2020
have been adjusted for the impact of PPP loans. Net interest margin
for the three months ended June 30, 2020 has been adjusted for
advances from the PPPLF. See reconciliation of GAAP to non-GAAP
financial measures in Table 14.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES,
YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
Six Months Ended
June 30, 2021
June 30, 2020
Average
Average
Average
Average
Balance
Interest
Yield/Rate (1)
Balance
Interest
Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with
banks
$
5,592,124
$
7,260
0.26%
$
3,204,463
$
15,672
0.98%
Resale agreements (2)
1,797,578
14,120
1.58%
959,807
11,139
2.33%
AFS debt securities
7,232,686
63,790
1.78%
3,496,974
41,146
2.37%
Loans (3)
39,178,255
694,461
3.57%
36,147,871
779,262
4.34%
FHLB and FRB stock
81,645
1,088
2.69%
78,771
747
1.91%
Total interest-earning assets
53,882,288
780,719
2.92%
43,887,886
847,966
3.89%
Noninterest-earning assets:
Cash and due from banks
590,219
504,710
Allowance for loan losses
(613,026
)
(529,385
)
Other assets
2,829,594
2,629,000
Total assets
$
56,689,075
$
46,492,211
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
6,532,965
$
7,991
0.25%
$
4,844,425
$
15,650
0.65%
Money market deposits
12,088,006
8,423
0.14%
9,453,599
30,341
0.65%
Savings deposits
2,675,677
3,819
0.29%
2,113,118
3,262
0.31%
Time deposits
8,814,159
19,587
0.45%
9,949,351
73,549
1.49%
Federal funds purchased and other
short-term borrowings
2,508
42
3.38%
151,081
821
1.09%
FHLB advances
563,331
5,168
1.85%
673,511
7,509
2.24%
Repurchase agreements (2)
301,567
3,969
2.65%
375,549
7,531
4.03%
Long-term debt and finance lease
liabilities
152,094
1,552
2.06%
417,345
(4)
2,821
1.36%
Total interest-bearing
liabilities
31,130,307
50,551
0.33%
27,977,979
141,484
1.02%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
18,909,991
12,326,291
Accrued expenses and other liabilities
1,266,510
1,185,715
Stockholders’ equity
5,382,267
5,002,226
Total liabilities and stockholders’
equity
$
56,689,075
$
46,492,211
Interest rate spread
2.59%
2.87%
Net interest income and net interest
margin
$
730,168
2.73%
$
706,482
3.24%
Adjusted net interest income and
adjusted net interest margin (5)
$
699,774
2.71%
$
685,656
3.20%
(1)
Annualized.
(2)
Average balances of resale and repurchase
agreements for the six months ended June 30, 2020 have been
reported net, pursuant to ASC 210-20-45-11, Balance Sheet
Offsetting: Repurchase and Reverse Repurchase Agreements. The
weighted-average yields of gross resale and gross repurchase
agreements for the six months ended June 30, 2020 were 2.32% and
3.76%, respectively.
(3)
Includes loans HFS.
(4)
Primarily includes average balances of
PPPLF, which was repaid in full during the fourth quarter of
2020.
(5)
Net interest income and net interest
margin for the six months ended June 30, 2021 and June 30, 2020
have been adjusted for the impact of PPP loans. Net interest margin
for the six months ended June 30, 2020 has been adjusted for
advances from the PPPLF. See reconciliation of GAAP to non-GAAP
financial measures in Table 14.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
Three Months Ended (1)
June 30, 2021 Basis Point
Change
June 30, 2021
March 31, 2021
June 30, 2020
Qtr-o-Qtr
Yr-o-Yr
Return on average assets
1.56
%
1.50
%
0.83
%
6
bps
73
bps
Return on average equity
16.61
%
15.57
%
8.02
%
104
859
Return on average tangible equity (2)
18.28
%
17.17
%
8.96
%
111
932
Interest rate spread
2.63
%
2.57
%
2.75
%
6
(12)
Net interest margin
2.75
%
2.71
%
3.04
%
4
(29)
Adjusted net interest margin (2)
2.73
%
2.70
%
2.96
%
3
(23)
Average loan yield
3.57
%
3.58
%
3.98
%
(1)
(41)
Adjusted average loan yield (2)
3.58
%
3.60
%
3.90
%
(2)
(32)
Yield on average interest-earning
assets
2.92
%
2.93
%
3.53
%
(1)
(61)
Average cost of interest-bearing
deposits
0.24
%
0.30
%
0.71
%
(6)
(47)
Average cost of deposits
0.14
%
0.18
%
0.47
%
(4)
(33)
Average cost of funds
0.18
%
0.23
%
0.53
%
(5)
(35)
Adjusted pre-tax, pre-provision
profitability ratio (2)
1.97
%
1.91
%
2.05
%
6
(8)
Adjusted noninterest expense/average
assets (2)
1.12
%
1.20
%
1.28
%
(8)
(16)
Efficiency ratio
42.60
%
44.79
%
46.25
%
(219)
(365)
Adjusted efficiency ratio (2)
36.30
%
38.68
%
38.37
%
(238)
bps
(207)
bps
Six Months Ended (1)
June 30, 2021 Basis Point
Change
June 30, 2021
June 30, 2020
Yr-o-Yr
Return on average assets
1.53
%
1.06
%
47
bps
Return on average equity
16.10
%
9.82
%
628
Return on average tangible equity (2)
17.73
%
10.95
%
678
Interest rate spread
2.59
%
2.87
%
(28)
Net interest margin
2.73
%
3.24
%
(51)
Adjusted net interest margin (2)
2.71
%
3.20
%
(49)
Average loan yield
3.57
%
4.34
%
(77)
Adjusted average loan yield (2)
3.59
%
4.30
%
(71)
Yield on average interest-earning
assets
2.92
%
3.89
%
(97)
Average cost of interest-bearing
deposits
0.27
%
0.94
%
(67)
Average cost of deposits
0.16
%
0.64
%
(48)
Average cost of funds
0.20
%
0.71
%
(51)
Adjusted pre-tax, pre-provision
profitability ratio (2)
1.94
%
2.18
%
(24)
Adjusted noninterest expense/average
assets (2)
1.16
%
1.36
%
(20)
Efficiency ratio
43.67
%
44.65
%
(98)
Adjusted efficiency ratio (2)
37.47
%
38.38
%
(91)
bps
(1)
Annualized except for efficiency
ratio.
(2)
See reconciliation of GAAP to
non-GAAP financial measures in Tables 12, 13 and 14.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10
Three Months Ended June 30,
2021
Commercial
Consumer
Total
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, March 31,
2021
$
394,084
$
192,895
$
18,509
$
2,018
$
607,506
(Reversal of) provision for credit losses
on loans
(a)
(22,586
)
10,747
859
2,209
(8,771
)
Gross charge-offs
(10,572
)
(4,456
)
—
(32
)
(15,060
)
Gross recoveries
1,338
344
100
3
1,785
Total net (charge-offs) recoveries
(9,234
)
(4,112
)
100
(29
)
(13,275
)
Foreign currency translation
adjustment
264
—
—
—
264
Allowance for loan losses, June 30,
2021
$
362,528
$
199,530
$
19,468
$
4,198
$
585,724
Three Months Ended March 31,
2021
Commercial
Consumer
Total
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, December 31,
2020
$
398,040
$
201,603
$
18,210
$
2,130
$
619,983
Provision for (reversal of) credit losses
on loans
(a)
3,839
(3,076
)
398
(113
)
1,048
Gross charge-offs
(8,436
)
(7,283
)
(179
)
(1
)
(15,899
)
Gross recoveries
760
1,651
80
2
2,493
Total net (charge-offs) recoveries
(7,676
)
(5,632
)
(99
)
1
(13,406
)
Foreign currency translation
adjustment
(119
)
—
—
—
(119
)
Allowance for loan losses, March 31,
2021
$
394,084
$
192,895
$
18,509
$
2,018
$
607,506
Three Months Ended June 30,
2020
Commercial
Consumer
Total
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, March 31,
2020
$
362,629
$
160,367
$
30,703
$
3,304
$
557,003
Provision for (reversal of) credit losses
on loans
(a)
37,862
58,749
(1,462
)
(849
)
94,300
Gross charge-offs
(20,378
)
(320
)
(221
)
(30
)
(20,949
)
Gross recoveries
602
853
161
93
1,709
Total net (charge-offs) recoveries
(19,776
)
533
(60
)
63
(19,240
)
Foreign currency translation
adjustment
8
—
—
—
8
Allowance for loan losses, June 30,
2020
$
380,723
$
219,649
$
—
$
29,181
$
2,518
$
632,071
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
Six Months Ended June 30,
2021
Commercial
Consumer
Total
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, December 31,
2020
$
398,040
$
201,603
$
18,210
$
2,130
$
619,983
(Reversal of) provision for credit losses
on loans
(a)
(18,747
)
7,671
1,257
2,096
(7,723
)
Gross charge-offs
(19,008
)
(11,739
)
(179
)
(33
)
(30,959
)
Gross recoveries
2,098
1,995
180
5
4,278
Total net (charge-offs) recoveries
(16,910
)
(9,744
)
1
(28
)
(26,681
)
Foreign currency translation
adjustment
145
—
—
—
145
Allowance for loan losses, June 30,
2021
$
362,528
$
199,530
$
19,468
$
4,198
$
585,724
Six Months Ended June 30,
2020
Commercial
Consumer
Total
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, December 31,
2019
$
238,376
$
82,739
$
33,792
$
3,380
$
358,287
Impact of ASU 2016-13 adoption
74,237
54,168
(5,468
)
2,221
125,158
Allowance for loan losses, January 1,
2020
$
312,613
$
136,907
$
28,324
$
5,601
$
483,445
Provision for (reversal of) credit losses
on loans
(a)
98,480
72,947
650
(3,121
)
168,956
Gross charge-offs
(32,355
)
(1,274
)
(221
)
(56
)
(33,906
)
Gross recoveries
2,177
11,069
428
94
13,768
Total net (charge-offs) recoveries
(30,178
)
9,795
207
38
(20,138
)
Foreign currency translation
adjustment
(192
)
—
—
—
(192
)
Allowance for loan losses, June 30,
2020
$
380,723
$
219,649
$
29,181
$
2,518
$
632,071
Three Months Ended
Six Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Unfunded Credit Facilities
Allowance for unfunded credit
commitments, beginning of period (1)
$
32,529
$
33,577
$
20,829
$
33,577
$
11,158
Impact of ASU 2016-13 adoption
—
—
—
—
10,457
(Reversal of) provision for credit losses
on unfunded credit commitments
(b)
(6,229
)
(1,048
)
8,143
(7,277
)
7,357
Allowance for unfunded credit
commitments, end of period (1)
$
26,300
$
32,529
$
28,972
$
26,300
$
28,972
Provision for credit losses
(a)+(b)
$
(15,000
)
$
—
$
102,443
$
(15,000
)
$
176,313
(1)
Included in Accrued expense and other
liabilities on the Consolidated Balance Sheet.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CRITICIZED LOANS,
NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS
($ in thousands)
(unaudited)
Table 11
Criticized Loans
June 30, 2021
March 31, 2021
June 30, 2020
Special mention loans
386,807
504,226
575,870
Classified loans
645,180
712,693
683,744
Total criticized loans
$
1,031,987
$
1,216,919
$
1,259,614
Nonperforming Assets
June 30, 2021
March 31, 2021
June 30, 2020
Nonaccrual loans:
Commercial:
C&I
$
83,225
$
125,536
$
84,823
Total CRE
81,573
74,727
57,351
Consumer:
Total residential mortgage
30,489
29,173
34,138
Other consumer
2,503
2,526
2,508
Total nonaccrual loans
197,790
231,962
178,820
Other real estate owned, net
14,914
15,824
19,504
Other nonperforming assets
13,025
10,360
3,890
Total nonperforming assets
$
225,729
$
258,146
$
202,214
Credit Quality Ratios
June 30, 2021
March 31, 2021
June 30, 2020
Annualized quarterly net charge-offs to
average loans HFI
0.13
%
0.14
%
0.21
%
Special mention loans to loans HFI
0.97
%
1.27
%
1.55
%
Classified loans to loans HFI
1.61
%
1.80
%
1.84
%
Criticized loans to loans HFI
2.58
%
3.07
%
3.38
%
Nonperforming assets to total assets
0.38
%
0.45
%
0.41
%
Nonaccrual loans to loans HFI
0.49
%
0.59
%
0.48
%
Allowance for loan losses to loans HFI
1.46
%
1.53
%
1.70
%
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 12
Adjusted efficiency ratio represents
adjusted noninterest expense divided by revenue. Adjusted pre-tax,
pre-provision profitability ratio represents revenue less adjusted
noninterest expense, divided by average total assets. Adjusted
noninterest expense excludes the amortization of tax credit and
other investments, the amortization of core deposit intangibles and
the extinguishment cost on repurchase agreement. Management
believes that the measures and ratios presented below provide
clarity to financial statement users regarding the ongoing
performance of the Company and allow comparability to prior
periods.
Three Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
Net interest income before provision for
credit losses
(a)
$
376,473
$
353,695
$
343,775
Total noninterest income (1)
68,431
72,866
55,707
Total revenue
(b)
$
444,904
$
426,561
$
399,482
Total noninterest expense (1)
(c)
$
189,523
$
191,077
$
184,766
Less: Amortization of tax credit and other
investments (1)
(27,291
)
(25,358
)
(21,829
)
Amortization of core deposit
intangibles
(710
)
(732
)
(931
)
Repurchase agreements’ extinguishment
cost
—
—
(8,740
)
Adjusted noninterest expense
(d)
$
161,522
$
164,987
$
153,266
Efficiency ratio
(c)/(b)
42.60
%
44.79
%
46.25
%
Adjusted efficiency ratio
(d)/(b)
36.30
%
38.68
%
38.37
%
Adjusted pre-tax, pre-provision
income
(b)-(d) = (e)
$
283,382
$
261,574
$
246,216
Average total assets
(f)
$
57,771,837
$
55,594,283
$
48,228,914
Adjusted pre-tax, pre-provision
profitability ratio (2)
(e)/(f)
1.97
%
1.91
%
2.05
%
Adjusted noninterest expense/average
assets (2)
(d)/(f)
1.12
%
1.20
%
1.28
%
Six Months Ended
June 30, 2021
June 30, 2020
Net interest income before provision for
credit losses
(g)
$
730,168
$
706,482
Total noninterest income (1)
141,297
111,213
Total revenue
(h)
871,465
817,695
Total noninterest expense (1)
(i)
$
380,600
$
365,099
Less: Amortization of tax credit and other
investments (1)
(52,649
)
(40,611
)
Amortization of core deposit
intangibles
(1,442
)
(1,884
)
Repurchase agreements’ extinguishment
cost
—
(8,740
)
Adjusted noninterest expense
(j)
$
326,509
$
313,864
Efficiency ratio
(i)/(h)
43.67
%
44.65
%
Adjusted efficiency ratio
(j)/(h)
37.47
%
38.38
%
Adjusted pre-tax, pre-provision
income
(h)-(j) = (k)
$
544,956
$
503,831
Average total assets
(l)
$
56,689,075
$
46,492,211
Adjusted pre-tax, pre-provision
profitability ratio (2)
(k)/(l)
1.94
%
2.18
%
Adjusted noninterest expense/average
assets (2)
(j)/(l)
1.16
%
1.36
%
(1)
In the fourth quarter of 2020, the Company
reclassified certain income/losses from equity-method investments
from Amortization of tax credit and other investments to Other
investment income, with no effect on net income. Prior-period
amounts have been revised to conform with the current
presentation.
(2)
Annualized.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 13
The Company uses certain non-GAAP
financial measures to provide supplemental information regarding
the Company’s performance. Tangible equity and tangible equity to
tangible assets ratio are non-GAAP financial measures. Tangible
equity and tangible assets represent stockholders’ equity and total
assets, respectively, which have been reduced by goodwill and other
intangible assets. Given that the use of such measures and ratios
is more prevalent in the banking industry, and such measures and
ratios are used by banking regulators and analysts, the Company has
included them below for discussion.
June 30, 2021
March 31, 2021
June 30, 2020
Stockholders’ equity
(a)
$
5,547,548
$
5,285,027
$
4,987,243
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(10,309
)
(11,151
)
(13,490
)
Tangible equity
(b)
$
5,071,542
$
4,808,179
$
4,508,056
Total assets
(c)
$
59,854,876
$
56,874,146
$
49,407,593
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(10,309
)
(11,151
)
(13,490
)
Tangible assets
(d)
$
59,378,870
$
56,397,298
$
48,928,406
Total stockholders’ equity to total
assets ratio
(a)/(c)
9.27
%
9.29
%
10.09
%
Tangible equity to tangible assets
ratio
(b)/(d)
8.54
%
8.53
%
9.21
%
Return on average tangible equity
represents tangible net income divided by average tangible equity.
Tangible net income excludes the after-tax impacts of the
amortization of core deposit intangibles and mortgage servicing
assets. Given that the use of such measures and ratios is more
prevalent in the banking industry, and such measures and ratios are
used by banking regulators and analysts, the Company has included
them below for discussion.
Three Months Ended
Six Months Ended
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Net Income
$
224,742
$
204,994
$
99,352
$
429,736
$
244,176
Add: Amortization of core deposit
intangibles
710
732
931
1,442
1,884
Amortization of mortgage servicing
assets
420
414
458
834
1,042
Tax effect of amortization adjustments
(2)
(321
)
(325
)
(394
)
(646
)
(830
)
Tangible net income
(e)
$
225,551
$
205,815
$
100,347
$
431,366
$
246,272
Average stockholders’ equity
$
5,425,952
$
5,338,098
$
4,982,446
$
5,382,267
$
5,002,226
Less: Average goodwill
(465,697
)
(465,697
)
(465,697
)
(465,697
)
(465,697
)
Average other intangible assets (1)
(10,827
)
(11,594
)
(14,247
)
(11,209
)
(14,918
)
Average tangible equity
(f)
$
4,949,428
$
4,860,807
$
4,502,502
$
4,905,361
$
4,521,611
Return on average tangible equity
(3)
(e)/(f)
18.28
%
17.17
%
8.96
%
17.73
%
10.95
%
(1)
Includes core deposit intangibles and
mortgage servicing assets.
(2)
Applied statutory tax rate of 28.37% for
the three and six months ended June 30, 2021, and the three months
ended March 31, 2021. Applied statutory tax rate of 28.35% for the
three and six months ended June 30, 2020.
(3)
Annualized.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 14
In April 2020, the Company started
accepting applications under the PPP administered by the Small
Business Administration (“SBA”) under the Coronavirus Aid, Relief,
and Economic Security Act and began to originate loans to qualified
small businesses. In January 2021, the Company began processing
applications under the second round of the SBA’s PPP in response to
the Consolidated Appropriations Act, 2021 signed by the President
on December 27, 2020. The PPP ended on May 31, 2021.
These loans are included in the Company’s
C&I portfolio, have an interest rate of one percent and are
100% guaranteed by the SBA. Loan processing fees paid to the
Company from the SBA are accounted for as loan origination fees,
where net deferred fees are recognized on a straight line basis
over the estimated life of the loan as a yield adjustment on the
loans. If a loan is paid off or forgiven by the SBA prior to its
projected estimated life, the remaining unamortized deferred fees
will be recognized as interest income in that period. The Company
drew down $1.44 billion from the PPPLF during the second quarter of
2020. The remaining balance of $1.43 billion as of September 2020
was repaid in full during the fourth quarter of 2020.
Adjusted loan yield and adjusted net
interest margin for the three months ended June 30, 2021, March 31,
2021 and June 30, 2020, and six months ended June 30, 2021 and 2020
exclude the impact of PPP loans. Net interest margin for the three
and six months ended June 30, 2020 has also been adjusted for
advances from the PPPLF. Management believes that presenting the
adjusted average loan yield and adjusted net interest margin
provide comparability to prior periods and these non-GAAP financial
measures provide supplemental information regarding the Company’s
performance.
Three Months Ended
Six Months Ended
Yield on Average Loans
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Interest income on loans
(a)
$
352,453
$
342,008
$
367,393
$
694,461
$
779,262
Less: Interest income on PPP loans
(15,377
)
(15,017
)
(21,289
)
(30,394
)
(21,289
)
Adjusted interest income on
loans
(b)
$
337,076
$
326,991
$
346,104
$
664,067
$
757,973
Average loans
(c)
$
39,622,270
$
38,729,307
$
37,141,773
$
39,178,255
$
36,147,871
Less: Average PPP loans
(1,870,385
)
(1,931,071
)
(1,465,013
)
(1,900,560
)
(732,506
)
Adjusted average loans
(d)
$
37,751,885
$
36,798,236
$
35,676,760
$
37,277,695
$
35,415,365
Average loan yield (1)
(a)/(c)
3.57
%
3.58
%
3.98
%
(1
)
3.57
%
4.34
%
Adjusted average loan yield (1)
(b)/(d)
3.58
%
3.60
%
3.90
%
(1
)
3.59
%
4.30
%
Net Interest Margin
Net interest income
(e)
$
376,473
$
353,695
$
343,775
$
730,168
$
706,482
Less: Interest income on PPP loans
(15,377
)
(15,017
)
(21,289
)
(30,394
)
(21,289
)
Add: Interest expense on advances from the
PPPLF
—
—
463
—
463
Adjusted net interest income
(f)
$
361,096
$
338,678
$
322,949
$
699,774
$
685,656
Average interest-earning assets
(g)
$
54,901,209
$
52,852,045
$
45,413,242
$
53,882,288
$
43,887,886
Less: Average PPP loans
(1,870,385
)
(1,931,071
)
(1,465,013
)
(1,900,560
)
(732,506
)
Adjusted average interest-earning
assets
(h)
$
53,030,824
$
50,920,974
$
43,948,229
$
51,981,728
$
43,155,380
Net interest margin (1)
(e)/(g)
2.75
%
2.71
%
3.04
%
(1
)
2.73
%
3.24
%
Adjusted net interest margin
(1)
(f)/(h)
2.73
%
2.70
%
2.96
%
(1
)
2.71
%
3.20
%
(1)
Annualized.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210722005257/en/
FOR INVESTOR INQUIRIES, CONTACT: Irene Oh Chief Financial
Officer T: (626) 768-6360 E: irene.oh@eastwestbank.com
Julianna Balicka Director of Investor Relations and Corporate
Finance T: (626) 768-6985 E: julianna.balicka@eastwestbank.com
East West Bancorp (NASDAQ:EWBC)
Historical Stock Chart
From Mar 2024 to Apr 2024
East West Bancorp (NASDAQ:EWBC)
Historical Stock Chart
From Apr 2023 to Apr 2024
