Corporate Information

Press Release

East West Bancorp Reports Net Income for Third Quarter 2017 of $132.7 Million and Diluted Earnings Per Share of $0.91, Both Up by 12% from the Prior Quarter

Company Release - 10/19/2017 6:00 AM ET

PASADENA, Calif.--(BUSINESS WIRE)-- East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the third quarter of 2017. For the third quarter of 2017, net income was $132.7 million or $0.91 per diluted share. Third quarter 2017 return on average assets was 1.46%, return on average equity was 14.01% and return on average tangible equity1 was 16.33%.

“Our third quarter earnings per share increased by 12% quarter-over-quarter. This outstanding result was driven by strong loan growth across our major lending categories. In the third quarter of 2017, total loans grew $1.3 billion or 19% annualized to a record $28.5 billion from $27.2 billion as of June 30, 2017,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $157 million or 2% annualized to a record $31.3 billion as of September 30, 2017 from $31.2 billion at the end of the previous quarter. Importantly, our core deposits grew by 7% annualized, reflecting growth in noninterest-bearing demand accounts.

“East West’s loan growth during the quarter supported net interest margin expansion and healthy revenue growth,” continued Ng. “Additionally, we continue to be vigilant about asset quality. Quarter-over-quarter, nonperforming assets declined by 12%, to 0.32% of total assets as of September 30, 2017 and the annualized net charge-off ratio was six basis points in the third quarter of 2017.”

“In conclusion, East West delivered high quality results in the third quarter of 2017 across key measures of loan growth, revenue and net income growth, and credit quality. We strive for sustainable, attractive profitability quarter after quarter, year after year. We are pleased that our third quarter operating results are consistent with this operating philosophy. We believe we are on track for another year of record earnings in 2017, reflecting the strong commitment and diligence of our 2,900 associates,” concluded Ng.

HIGHLIGHTS OF RESULTS

  • Strong Earnings – Net income of $132.7 million for the third quarter of 2017 increased by 12% compared to $118.3 million for the second quarter of 2017, and diluted earnings per share (“EPS”) of $0.91 increased by 12% quarter-over-quarter from $0.81. Net income and diluted EPS for the third quarter of 2017 increased by 20% compared to net income of $110.1 million and EPS of $0.76 for the third quarter of 2016.
  • Net Interest Income Growth and Net Interest Margin Expansion – Net interest income totaled $303.2 million for the third quarter of 2017, an increase of $13.1 million or 5% linked quarter. Accounting Standard Codification (“ASC”) 310-30 discount accretion income was $4.5 million this quarter, compared to $6.3 million in the prior quarter. Excluding this discount accretion income, third quarter 2017 adjusted2 net interest income of $298.6 million increased by $14.8 million or 5% sequentially, primarily due to growth in the loan portfolio. Third quarter 2017 net interest margin (“NIM”) of 3.52% expanded by three basis points linked quarter; the adjusted2 NIM of 3.46% expanded by five basis points linked quarter.
  • Revenue Growth – Third quarter 2017 revenue of $352.8 million increased by 5% compared to $337.5 million in the second quarter of 2017. During the third quarter of 2017, East West sold its insurance brokerage business, East West Insurance Services, Inc. (“EWIS”), for a pre-tax gain of $3.8 million or $0.02 per share after-tax. Excluding this sale, third quarter 2017 adjusted3 revenue of $349.0 million increased by 3% compared to $337.5 million in the second quarter of 2017. Year-over-year, adjusted revenue increased by 15% compared to $303.5 million in the third quarter of 2016.
  • Record Loans – Total loans of $28.5 billion as of September 30, 2017 were up $1.3 billion or 19% annualized from $27.2 billion as of June 30, 2017. Total loans grew by 15% year-over-year. The sequential quarter loan growth was broad-based across all of our major business lines.
  • Record Deposits – Total deposits of $31.3 billion as of September 30, 2017 were up $157 million or 2% annualized from $31.2 billion as of June 30, 2017. Total deposits grew by 10% year-over-year. Core deposits of $25.5 billion as of September 30, 2017 were up $436 million or 7% annualized from $25.1 billion as of June 30, 2017. The sequential quarter growth in deposits was primarily due to increases in noninterest-bearing demand accounts, partially offset by decreases in money market and time deposits. Noninterest-bearing demand deposits increased by $532 million to $11.0 billion as of September 30, 2017, comprising 35% of total deposits, compared to 34% as of June 30, 2017.
  • Steady Asset Quality – The allowance for loan losses increased to $285.9 million, or 1.00% of loans held-for-investment (“HFI”) as of September 30, 2017, compared to $276.3 million, or 1.02% of loans HFI as of June 30, 2017. In the third quarter of 2017, annualized net charge-offs were 0.06% of average loans HFI, compared to annualized net recoveries of 0.04% in the prior quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets decreased to $117.0 million, or 0.32% of total assets as of September 30, 2017, compared to $133.0 million, or 0.37% of total assets as of June 30, 2017.
  • Capital Ratios – Capital levels for East West continue to be solid. Tangible equity per common share as of September 30, 2017 was $22.71, an increase of 4% linked quarter and 14% year-over-year. As of September 30, 2017, the tangible equity to tangible assets ratio4 was 9.17%, the Common Equity Tier 1 (“CET1”) capital ratio was 11.2%, and the total risk-based capital ratio was 12.8%.
       
1     See reconciliation of GAAP to non-GAAP financial measures in Table 15.
2 See reconciliation of GAAP to non-GAAP measures in Table 14.
3 See reconciliation of GAAP to non-GAAP measures in Table 13.
4 See reconciliation of GAAP to non-GAAP measures in Table 15.
 

QUARTERLY RESULTS SUMMARY

  Three Months Ended
($ in millions, except per share data) September 30, 2017   June 30, 2017   September 30, 2016
 
Net income $ 132.66 $ 118.33 $ 110.14
Earnings per share (diluted) $ 0.91 $ 0.81 $ 0.76
Adjusted earnings per share (diluted) (1) $ 0.89 $ 0.81 $ 0.76
Tangible equity (1) per common share $ 22.71 $ 21.93 $ 19.92
Tangible equity (1) to tangible assets     9.17 %     8.95 %     8.77 %
Return on average assets (2) 1.46 % 1.36 % 1.33 %
Return on average equity (2) 14.01 % 13.05 % 13.08 %

Return on average tangible equity (1)(2)

    16.33 %     15.30 %     15.51 %
Adjusted return on average assets (1)(2) 1.44 % 1.36 % 1.33 %
Adjusted return on average equity (1)(2) 13.78 % 13.05 % 13.08 %

Adjusted return on average tangible equity (1)(2)

16.06 % 15.30 % 15.51 %
Adjusted pre-tax, pre-provision profitability ratio (1)(2)     2.32 %     2.27 %     2.03 %
Net interest income $ 303.16 $ 290.09 $ 254.15
Adjusted net interest income (1) $ 298.62 $ 283.83 $ 246.98
Net interest margin (2) 3.52 % 3.49 % 3.26 %
Adjusted net interest margin (1)(2) 3.46 % 3.41 % 3.16 %
Cost of deposits (2)     0.40 %     0.36 %     0.30 %
Adjusted efficiency ratio (1)     39.81 %     41.33 %     44.77 %
 
(1)   See reconciliation of the GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15.
(2) Annualized.
 

MANAGEMENT OUTLOOK FOR 2017

We reaffirm our 2017 outlook provided with last quarter’s earnings release. We continue to expect end-of-period loans to increase at a percentage rate in the low double digits for the full year, and are tightening the range of our anticipated full-year net interest margin, excluding the impact of ASC 310-30 discount accretion income, to 3.40%-3.45% from 3.35%-3.45% previously, and revising the full-year effective tax rate from 26% to 25%.

OPERATING RESULTS SUMMARY

Third Quarter 2017 Compared to Second Quarter 2017

Net Interest Income

Net interest income totaled $303.2 million, a 5% increase from $290.1 million.

  • Adjusted net interest income, excluding ASC 310-30 discount accretion income, grew to $298.6 million, a 5% increase from $283.8 million.
  • Average loans of $27.5 billion grew by $831 million or 12% annualized from $26.7 billion.
  • Average deposits of $31.1 billion grew by $867 million or 11% annualized from $30.2 billion.
  • Average noninterest-bearing demand deposits of $10.7 billion grew by $460 million or 18% annualized from $10.2 billion.

Net Interest Margin

Net interest margin expanded by three basis points to 3.52% from 3.49%.

  • Excluding the impact of ASC 310-30 discount accretion income, adjusted NIM expanded by five basis points to 3.46% from 3.41%.
  • The yield on average loans expanded by two basis points to 4.42% from 4.40%; the adjusted5 loan yield expanded by five basis points to 4.35% from 4.30%.
  • The cost of deposits increased by four basis points to 0.40% from 0.36%.

Noninterest Income

Total noninterest income of $49.6 million includes the pre-tax gain on the sale of EWIS of $3.8 million; excluding this sale, adjusted6 noninterest income of $45.8 million was down by $1.6 million sequentially, or 3%, from $47.4 million in the second quarter of 2017. Excluding the impact of all gains on sales, total fees and other operating income of $40.9 million decreased by $1.2 million or 3% from $42.1 million in the second quarter of 2017.

  • The linked quarter increase in derivative fees and other income reflected a higher volume of transactions from assisting customers with interest rate swaps.
  • The decrease in letters of credit fees and foreign exchange income reflected a quarter-over-quarter decrease in customer-related foreign exchange fees, as well as mark-to-market changes associated with currency hedges.
  • The decrease in other fees and operating income reflected the decline in insurance commissions due to the sale of EWIS, and a decrease in other operating income as gains from other investments were elevated in the second quarter of 2017.

The following table presents total fees and other operating income for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016.

 
  Three Months Ended
($ in thousands) September 30, 2017   June 30, 2017   September 30, 2016
Branch fees $ 10,803 $ 10,700 $ 10,408
Letters of credit fees and foreign exchange income 10,154 11,986 10,908
Ancillary loan fees and other income 5,987 5,907 6,135
Wealth management fees 3,615 3,537 4,033
Derivative fees and other income 6,663 3,765 5,791
Other fees and operating income   3,652   6,198   7,632
Total fees and other operating income $ 40,874 $ 42,093 $ 44,907
 

Noninterest Expense & Effective Tax Rate

Noninterest expense totaled $164.5 million, comprising $138.9 million of adjusted7 noninterest expense, $23.8 million of amortization of tax credit and other investments, and $1.7 million of amortization of core deposit intangibles.

  • Adjusted noninterest expense of $138.9 million decreased by $0.6 million linked quarter. The adjusted7 efficiency ratio of 39.8% improved by 152 basis points from 41.3%, largely due to the increase in net interest income.
  • The Company’s effective tax rate was 24.3%, compared to an effective tax rate of 25.0% in the prior quarter.
  • During the third quarter of 2017, amortization of tax credit and other investments was $23.8 million. For the remainder of the year, the amortization of tax credit and other investments is projected to be approximately $23 million, and the full year 2017 effective tax rate is projected to be 25%.

CREDIT QUALITY

The allowance for loan losses totaled $285.9 million or 1.00% of loans HFI as of September 30, 2017, compared to $276.3 million or 1.02% of loans HFI, and $255.8 million or 1.03% of loans HFI as of June 30, 2017 and September 30, 2016, respectively.

  • The Company recorded a provision for credit losses of $13.0 million in the current quarter, compared to $10.7 million in the second quarter of 2017, and $9.5 million in the third quarter of 2016. The provision for credit losses of $13.0 million in the third quarter was largely a result of additional allowance for loan losses recorded for the loan originations during the quarter.
  • In the third quarter of 2017, net charge-offs were $3.8 million or 0.06% of average loans HFI, annualized, compared to net recoveries of $2.6 million or 0.04% of average loans HFI, annualized, in the second quarter of 2017, and net charge-offs of $22.5 million or 0.37% of average loans HFI, annualized, in the third quarter of 2016.
  • Non-PCI nonperforming assets decreased by $16.0 million, or 12% linked quarter, to $117.0 million, or 0.32% of total assets, as of September 30, 2017, compared to 0.37% as of June 30, 2017 and 0.39% as of September 30, 2016.

CAPITAL STRENGTH

Capital levels for East West continue to be solid. Tangible equity per common share as of September 30, 2017 was $22.71, an increase of 4% linked quarter and 14% year-over-year. The following table presents the regulatory capital ratios for the quarters ended September 30, 2017, June 30, 2017 and September 30, 2016.

 
Regulatory Capital Metrics   Basel III

($ in millions)

September 30,

2017 (a)

 

June 30,

2017

 

September 30,

2016

 

Minimum

Regulatory

Requirements

 

Well

Capitalized

Regulatory

Requirements

 

Fully Phased-in

Minimum

Regulatory

Requirements

 
CET1 capital ratio 11.2 % 11.3 % 10.9 % 4.5 % 6.5 % 7.0 %
Tier 1 risk-based capital ratio 11.2 % 11.3 % 10.9 % 6.0 % 8.0 % 8.5 %
Total risk-based capital ratio 12.8 % 12.8 % 12.5 % 8.0 % 10.0 % 10.5 %
Tier 1 leverage capital ratio 9.4 % 9.3 % 8.9 % 4.0 % 5.0 % 4.0 %
Risk-Weighted Assets (“RWA”) (b) $ 29,535 $ 28,445

$

26,480

N/A N/A N/A
 
N/A   Not applicable.
(a) The Company’s September 30, 2017 regulatory capital ratios and RWA are preliminary.
(b) Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.
       
5     See reconciliation of GAAP to non-GAAP measures in Table 14.
6 See reconciliation of GAAP to non-GAAP measures in Table 13.
7 See reconciliation of GAAP to non-GAAP measures in Table 13.
 

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared fourth quarter 2017 dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share is payable on November 15, 2017 to shareholders of record on November 1, 2017.

Conference Call

East West will host a conference call to discuss third quarter 2017 earnings with the public on Thursday, October 19, 2017 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses third quarter 2017 results and operating developments.

  • The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
  • A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A replay of the conference call will be available on October 19, 2017 at 11:30 a.m. Pacific Time through November 19, 2017. 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: 10112096.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $36.3 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 130 locations worldwide, including in the United States markets of California, Georgia, 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, Taipei and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; changes in the commercial and consumer real estate markets; changes in our costs of operation, compliance and expansion; changes in the U.S. economy, including inflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and California Department of Business Oversight — Division of Financial Institutions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with retail customers; changes in the economy of and monetary policy in the People’s Republic of China; changes in income tax laws and regulations; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; changes in the equity and debt securities markets; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; fluctuations of our stock price; fluctuations in foreign currency exchange rates; success and timing of our business strategies; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions; impact of potential federal tax changes and spending cuts; impact of adverse judgments or settlements in litigation or of regulatory enforcement actions; changes in our ability to receive dividends from our subsidiaries; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly cause unanticipated declines in the Company’s financial performance; continuing consolidation in the financial services industry; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices and cost of operations; impact of adverse changes to our credit ratings from the major credit rating agencies; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; the effect of the current low interest rate environment or changes in interest rates on our net interest income and net interest margin; the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/ or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; and other factors set forth in the Company’s public reports including its Annual Report on Form 10-K for the year ended December 31, 2016, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, the Company’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. The Company assumes no obligation to update such forward-looking statements.

 
EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ and shares in thousands, except per share data)
(unaudited)
Table 1
         
         

September 30, 2017

% Change

September 30, 2017 June 30, 2017 September 30, 2016 Qtr-o-Qtr Yr-o-Yr
Assets
Cash and due from banks $ 364,328 $ 429,121 $ 344,746 (15.1 )% 5.7 %
Interest-bearing cash with banks   1,372,421     2,323,355     1,322,086   (40.9 ) 3.8
Cash and cash equivalents 1,736,749 2,752,476 1,666,832 (36.9 ) 4.2
Interest-bearing deposits with banks 404,946 296,679 307,473 36.5 31.7
Securities purchased under resale agreements (“resale agreements”) (1) 1,250,000 1,300,000 1,500,000 (3.8 ) (16.7 )
Investment securities 2,956,776 2,943,856 3,391,085 0.4 (12.8 )
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock 73,322 73,173 72,605 0.2 1.0
Loans held-for-sale 178 11,649 47,719 (98.5 ) (99.6 )
Loans held-for-investment (net of allowance for loan losses of $285,926, $276,316 and $255,812) 28,239,431 26,934,350 24,476,150 4.8 15.4
Investments in qualified affordable housing partnerships, net 178,344 169,103 173,045 5.5 3.1
Investments in tax credit and other investments, net 203,758 189,405 172,216 7.6 18.3
Goodwill 469,433 469,433 469,433
Other assets   795,029     777,493     978,717   2.3 (18.8 )
Total assets $ 36,307,966   $ 35,917,617   $ 33,255,275   1.1 % 9.2 %
 
Liabilities and Stockholders’ Equity
Customer deposits $ 31,311,662 $ 31,154,287 $ 28,592,441 0.5 % 9.5 %
Short-term borrowings 24,813 24,426 36,992 1.6 (32.9 )
FHLB advances 323,323 322,756 321,084 0.2 0.7
Securities sold under repurchase agreements (“repurchase agreements”) (1) 50,000 50,000 200,000 (75.0 )
Long-term debt 176,513 176,450 191,265 (7.7 )
Accrued expenses and other liabilities   639,759     519,437     535,439   23.2 19.5
Total liabilities 32,526,070 32,247,356 29,877,221 0.9 8.9
Stockholders’ equity   3,781,896     3,670,261     3,378,054   3.0 12.0
Total liabilities and stockholders’ equity $ 36,307,966   $ 35,917,617   $ 33,255,275   1.1 % 9.2 %
 
Book value per common share $ 26.17 $ 25.40 $ 23.44 3.0 %

11.7

%
Tangible equity (2) per common share $ 22.71 $ 21.93 $ 19.92 3.6 14.0
Tangible equity to tangible assets ratio (2) 9.17 % 8.95 % 8.77 % 2.4 4.5
Number of common shares at period-end 144,511 144,486 144,133 0.3
 
(1)  

Resale and repurchase agreements are reported net pursuant to Accounting Standards Codification (“ASC”) 210-20-45, Balance Sheet Offsetting. As of September 30, 2017, June 30, 2017, and September 30, 2016, $400.0 million, $400.0 million and $250.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against resale agreements, respectively.

(2) See reconciliation of the GAAP to non-GAAP financial measures in Table 15.
 
EAST WEST BANCORP, INC.
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
         
         

September 30, 2017

% Change

September 30, 2017 June 30, 2017 September 30, 2016 Qtr-o-Qtr Yr-o-Yr
Loans:
Real estate - commercial $ 8,843,776 $ 8,465,030 $ 7,775,787 4.5 % 13.7 %
Real estate - land and construction 683,404 660,819 730,610 3.4 (6.5 )
Commercial 10,645,156 10,187,349 9,340,999 4.5 14.0
Real estate - single-family 4,356,009 4,001,488 3,383,106 8.9 28.8
Real estate - multifamily 1,876,956 1,772,741 1,421,401 5.9 32.0
Consumer   2,120,056     2,123,239     2,080,059   (0.1 ) 1.9
Total loans held-for-investment (1)(2) 28,525,357 27,210,666 24,731,962 4.8 15.3
Loans held-for-sale   178     11,649     47,719   (98.5 ) (99.6 )
Total loans (1)(2), including loans held-for-sale 28,525,535 27,222,315 24,779,681 4.8 15.1
Allowance for loan losses   (285,926 )   (276,316 )   (255,812 ) 3.5 11.8
Net loans (1)(2) $ 28,239,609   $ 26,945,999   $ 24,523,869   4.8 % 15.2 %
 
Customer deposits:
Noninterest-bearing demand $ 10,992,674 $ 10,460,230 $ 9,524,021 5.1 % 15.4 %
Interest-bearing checking 4,108,859 4,059,046 3,550,101 1.2 15.7
Money market 7,939,031 8,193,086 7,684,085 (3.1 ) 3.3
Savings   2,476,557     2,368,611     2,235,847   4.6 10.8
Total core deposits 25,517,121 25,080,973 22,994,054 1.7 11.0
Time deposits   5,794,541     6,073,314     5,598,387   (4.6 ) 3.5
Total deposits $ 31,311,662   $ 31,154,287   $ 28,592,441   0.5 % 9.5 %
 
(1)   Includes $(29.2) million, $(9.6) million and $7.4 million as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively, of net deferred loan fees, unearned income, unamortized premiums and unaccreted discounts.
(2) Includes ASC 310-30 discount of $39.1 million, $42.9 million and $56.4 million as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
 
EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 3
         
Three Months Ended

September 30, 2017

% Change

September 30, 2017 June 30, 2017 September 30, 2016 Qtr-o-Qtr Yr-o-Yr
Interest and dividend income $ 339,910 $ 322,775 $ 280,317 5.3 % 21.3 %
Interest expense   36,755   32,684   26,169 12.5 40.5
Net interest income before provision for credit losses 303,155 290,091 254,148 4.5 19.3
Provision for credit losses   12,996   10,685   9,525 21.6 36.4
Net interest income after provision for credit losses 290,159 279,406 244,623 3.8 18.6
Noninterest income 49,624 47,400 49,341 4.7 0.6
Noninterest expense   164,499   169,121   170,500 (2.7 ) (3.5 )
Income before income taxes 175,284 157,685 123,464 11.2 42.0
Income tax expense   42,624   39,355   13,321 8.3 220.0
Net income $ 132,660 $ 118,330 $ 110,143 12.1 % 20.4 %
Earnings per share (“EPS”)
- Basic $ 0.92 $ 0.82 $ 0.76 12.1 % 20.1 %
- Diluted $ 0.91 $ 0.81 $ 0.76 12.0 19.9
Weighted average number of shares outstanding
- Basic 144,498 144,485 144,122 % 0.3 %
- Diluted 145,882 145,740 145,238 0.1 0.4
 
Three Months Ended

September 30, 2017

% Change

September 30, 2017 June 30, 2017 September 30, 2016 Qtr-o-Qtr Yr-o-Yr
Noninterest income:
Branch fees $ 10,803 $ 10,700 $ 10,408 1.0 % 3.8 %
Letters of credit fees and foreign exchange income 10,154 11,986 10,908 (15.3 ) (6.9 )
Ancillary loan fees and other income 5,987 5,907 6,135 1.4 (2.4 )
Wealth management fees 3,615 3,537 4,033 2.2 (10.4 )
Derivative fees and other income 6,663 3,765 5,791 77.0 15.1
Net gains on sales of loans 2,361 1,545 2,158 52.8 9.4
Net gains on sales of available-for-sale investment securities 1,539 2,720 1,790 (43.4 ) (14.0 )
Net gains on sales of fixed assets 1,043 1,042 486 0.1 114.6
Net gain on sale of business 3,807

NM

NM

Other fees and operating income   3,652   6,198   7,632 (41.1 ) (52.1 )
Total noninterest income $ 49,624 $ 47,400 $ 49,341 4.7 % 0.6 %
Noninterest expense:
Compensation and employee benefits $ 79,583 $ 80,744 $ 75,042 (1.4 )% 6.1 %
Occupancy and equipment expense 16,635 15,554 15,456 6.9 7.6
Deposit insurance premiums and regulatory assessments 5,676 5,779 6,450 (1.8 ) (12.0 )
Legal expense 3,316 2,552 5,361 29.9 (38.1 )
Data processing 3,004 3,058 2,729 (1.8 ) 10.1
Consulting expense 4,087 4,769 4,594 (14.3 ) (11.0 )
Deposit related expense 2,413 2,505 3,082 (3.7 ) (21.7 )
Computer software expense 4,393 5,462 3,331 (19.6 ) 31.9
Other operating expense 19,830 19,064 19,814 4.0 0.1
Amortization of tax credit and other investments 23,827 27,872 32,618 (14.5 ) (27.0 )
Amortization of core deposit intangibles   1,735   1,762   2,023 (1.5 ) (14.2 )
Total noninterest expense $ 164,499 $ 169,121 $ 170,500 (2.7 )% (3.5 )%
 

NM Not Meaningful

 
EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 4
     
Nine Months Ended

September 30, 2017

% Change

September 30, 2017 September 30, 2016 Yr-o-Yr
Interest and dividend income $ 965,354 $ 835,354 15.6 %
Interest expense   99,986   75,418 32.6
Net interest income before provision for credit losses 865,368 759,936 13.9
Provision for credit losses   30,749   17,018 80.7
Net interest income after provision for credit losses 834,619 742,918 12.3
Noninterest income 213,047 134,118 58.9
Noninterest expense   486,693   465,985 4.4
Income before income taxes 560,973 411,051 36.5
Income tax expense   140,247   90,108 55.6
Net income $ 420,726 $ 320,943 31.1 %
EPS
- Basic $ 2.91 $ 2.23 30.8 %
- Diluted $ 2.88 $ 2.21 30.4
Weighted average number of shares outstanding
- Basic 144,412 144,061 0.2 %
- Diluted 145,849 145,086 0.5
 
 
Nine Months Ended

September 30, 2017

% Change

September 30, 2017 September 30, 2016 Yr-o-Yr
Noninterest income:
Branch fees $ 31,799 $ 30,983 2.6 %
Letters of credit fees and foreign exchange income 33,209 31,404 5.7
Ancillary loan fees and other income 16,876 13,997 20.6
Wealth management fees 11,682 9,862 18.5
Derivative fees and other income 12,934 9,778 32.3
Net gains on sales of loans 6,660 6,965 (4.4 )
Net gains on sales of available-for-sale investment securities 6,733 8,468 (20.5 )
Net gains on sales of fixed assets 74,092 2,916 NM
Net gain on sale of business 3,807 NM
Other fees and operating income   15,255   19,745 (22.7 )
Total noninterest income $ 213,047 $ 134,118 58.9 %
Noninterest expense:
Compensation and employee benefits $ 244,930 $ 220,166 11.2 %
Occupancy and equipment expense 47,829 45,619 4.8
Deposit insurance premiums and regulatory assessments 17,384 17,341 0.2
Legal expense 8,930 12,714 (29.8 )
Data processing 9,009 8,712 3.4
Consulting expense 10,775 19,027 (43.4 )
Deposit related expense 7,283 7,675 (5.1 )
Computer software expense 13,823 9,267 49.2
Other operating expense 55,357 58,508 (5.4 )
Amortization of tax credit and other investments 66,059 60,779 8.7
Amortization of core deposit intangibles   5,314   6,177 (14.0 )
Total noninterest expense $ 486,693 $ 465,985 4.4 %
 

NM Not Meaningful

 
EAST WEST BANCORP, INC.
SELECTED FINANCIAL INFORMATION
($ in thousands)
(unaudited)
Table 5
         
Average Balances Three Months Ended

September 30, 2017

% Change

September 30, 2017 June 30, 2017 September 30, 2016 Qtr-o-Qtr Yr-o-Yr
Loans:
Real estate - commercial $ 8,518,461 $ 8,351,403 $ 7,768,534 2.0 % 9.7 %
Real estate - land and construction 672,875 655,588 706,406 2.6 (4.7 )
Commercial 10,259,807 9,975,216 9,169,433 2.9 11.9
Real estate - single-family 4,163,900 3,816,572 3,203,603 9.1 30.0
Real estate - multifamily 1,808,236 1,764,720 1,371,871 2.5 31.8
Consumer   2,106,500     2,135,288     2,089,466   (1.3 ) 0.8
Total loans (1) $ 27,529,779   $ 26,698,787   $ 24,309,313   3.1 % 13.2 %
 
Investment securities $ 2,963,122   $ 2,962,201   $ 3,273,861   % (9.5 )%
Interest-earning assets $ 34,208,533   $ 33,295,012   $ 31,055,354   2.7 % 10.2 %
Total assets $ 35,937,567   $ 34,994,935   $ 32,906,533   2.7 % 9.2 %
 
Customer deposits:
Noninterest-bearing demand $ 10,655,860 $ 10,195,755 $ 9,413,031 4.5 % 13.2 %
Interest-bearing checking 4,014,290 3,872,347 3,553,477 3.7 13.0
Money market 7,997,648 7,964,286 7,548,835 0.4 5.9
Savings   2,423,312     2,295,299     2,133,036   5.6 13.6
Total core deposits 25,091,110 24,327,687 22,648,379 3.1 10.8
Time deposits   5,974,793     5,871,236     5,627,084   1.8 6.2
Total deposits $ 31,065,903   $ 30,198,923   $ 28,275,463   2.9 % 9.9 %
 
Interest-bearing liabilities $ 20,989,149   $ 20,662,124   $ 19,611,482   1.6 % 7.0 %
Stockholders’ equity $ 3,756,207   $ 3,637,695   $ 3,349,241   3.3 % 12.2 %
 
 
Selected Ratios (2) Three Months Ended

September 30, 2017

Basis Point Change

September 30, 2017 June 30, 2017 September 30, 2016 Qtr-o-Qtr Yr-o-Yr
Return on average assets 1.46 % 1.36 % 1.33 %

10

bps

13

bps

Adjusted return on average assets (3) 1.44 % 1.36 % 1.33 % 8 11
Return on average equity 14.01 % 13.05 % 13.08 % 96 93
Adjusted return on average equity (3) 13.78 % 13.05 % 13.08 % 73 70

Return on average tangible equity (3)

16.33 % 15.30 % 15.51 % 103 82

Adjusted return on average tangible equity (3)

16.06 % 15.30 % 15.51 % 76 55
Interest rate spread 3.25 % 3.26 % 3.06 % (1 ) 19
Net interest margin 3.52 % 3.49 % 3.26 % 3 26
Adjusted net interest margin (3) 3.46 % 3.41 % 3.16 % 5 30
Average loan yield 4.42 % 4.40 % 4.18 % 2 24
Adjusted average loan yield (3) 4.35 % 4.30 % 4.05 % 5 30
Yield on average interest-earning assets 3.94 % 3.89 % 3.59 % 5 35
Cost of interest-bearing deposits 0.60 % 0.54 % 0.44 % 6 16
Cost of deposits 0.40 % 0.36 % 0.30 % 4 10
Cost of funds 0.46 % 0.42 % 0.36 % 4 10
Adjusted pre-tax, pre-provision profitability ratio (3) 2.32 % 2.27 % 2.03 % 5 29
Adjusted noninterest expense/average assets (3) 1.53 % 1.60 % 1.64 % (7 ) (11 )
Adjusted efficiency ratio (3) 39.81 % 41.33 % 44.77 %

(152

)bps

(496

)bps

 
(1)   Includes average balances of ASC 310-30 discount of $41.9 million, $45.4 million and $60.1 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2) Annualized except for efficiency ratio.
(3) See reconciliation of the GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15.
 
EAST WEST BANCORP, INC.
SELECTED FINANCIAL INFORMATION
($ in thousands)
(unaudited)
Table 6
     
Average Balances Nine Months Ended

September 30, 2017

% Change

September 30, 2017 September 30, 2016 Yr-o-Yr
Loans:
Real estate - commercial $ 8,339,620 $ 7,770,747 7.3 %
Real estate - land and construction 667,299 664,429 0.4
Commercial 10,066,832 8,969,530 12.2
Real estate - single-family 3,850,221 3,110,032 23.8
Real estate - multifamily 1,743,179 1,421,445 22.6
Consumer   2,115,931     2,070,743   2.2
Total loans (1) $ 26,783,082   $ 24,006,926   11.6 %
 
Investment securities $ 3,060,688   $ 3,289,014   (6.9 )%
Interest-earning assets $ 33,542,941   $ 30,813,307   8.9 %
Total assets $ 35,290,542   $ 32,662,445   8.0 %
 
Customer deposits:
Noninterest-bearing demand $ 10,323,254 $ 9,107,051 13.4 %
Interest-bearing checking 3,830,004 3,445,996 11.1
Money market 7,968,457 7,519,261 6.0
Savings   2,334,752     2,043,547   14.2
Total core deposits 24,456,467 22,115,855 10.6
Time deposits   5,873,217     5,941,760   (1.2 )
Total deposits $ 30,329,684   $ 28,057,615   8.1 %
 
Interest-bearing liabilities $ 20,813,224   $ 19,754,340   5.4 %
Stockholders’ equity $ 3,630,062   $ 3,266,485   11.1 %
 
 
Selected Ratios (2) Nine Months Ended

September 30, 2017

Basis Point Change

September 30, 2017 September 30, 2016 Yr-o-Yr
Return on average assets 1.59 % 1.31 %

28

bps

Adjusted return on average assets (3) 1.43 % 1.31 % 12
Return on average equity 15.50 % 13.12 % 238
Adjusted return on average equity (3) 13.89 % 13.12 % 77

Return on average tangible equity (3)

18.15 % 15.75 % 240

Adjusted return on average tangible equity (3)

16.28 % 15.75 % 53
Interest rate spread 3.21 % 3.11 % 10
Net interest margin 3.45 % 3.29 % 16
Adjusted net interest margin (3) 3.39 % 3.14 % 25
Average loan yield 4.35 % 4.25 % 10
Adjusted average loan yield (3) 4.28 % 4.05 % 23
Yield on average interest-earning assets 3.85 % 3.62 % 23
Cost of interest-bearing deposits 0.55 % 0.43 % 12
Cost of deposits 0.36 % 0.29 % 7
Cost of funds 0.43 % 0.35 % 8
Adjusted pre-tax, pre-provision profitability ratio (3) 2.23 % 2.02 % 21
Adjusted noninterest expense/average assets (3) 1.57 % 1.63 % (6 )
Adjusted efficiency ratio (3) 41.41 % 44.63 %

(322

)bps

 
(1)   Includes average balances of ASC 310-30 discount of $45.3 million and $67.6 million for the nine months ended September 30, 2017 and 2016, respectively.
(2) Annualized except for efficiency ratio.
(3) See reconciliation of the GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15.
 
EAST WEST BANCORP, INC.
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
           
Three Months Ended
September 30, 2017 June 30, 2017
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 $ 2,344,561 $ 9,630 1.63 % $ 2,191,730 $ 7,552 1.38 %
Resale agreements (2) 1,297,826 7,901 2.42 % 1,369,231 7,853 2.30 %
Investment securities 2,963,122 14,828 1.99 % 2,962,201 13,861 1.88 %
Loans (3) 27,529,779 306,939 4.42 % 26,698,787 293,039 4.40 %
FHLB and FRB stock   73,245     612 3.31 %   73,063     470 2.58 %
Total interest-earning assets   34,208,533     339,910 3.94 %   33,295,012     322,775 3.89 %
 
Noninterest-earning assets:
Cash and due from banks 387,705 386,213
Allowance for loan losses (276,467 ) (264,869 )
Other assets   1,617,796     1,578,579  
Total assets $ 35,937,567   $ 34,994,935  
 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits $ 4,014,290 $ 4,768 0.47 % $ 3,872,347 $ 4,183 0.43 %
Money market deposits 7,997,648 11,828 0.59 % 7,964,286 10,145 0.51 %
Savings deposits 2,423,312 1,810 0.30 % 2,295,299 1,386 0.24 %
Time deposits 5,974,793 12,680 0.84 % 5,871,236 11,331 0.77 %
Federal funds purchased and other short-term borrowings 29,661 212 2.84 % 37,609 252 2.69 %
FHLB advances 322,973 1,947 2.39 % 322,410 1,761 2.19 %
Repurchase agreements (2) 50,000 2,122 16.84 % 117,582 2,273 7.75 %
Long-term debt   176,472     1,388 3.12 %   181,355     1,353 2.99 %
Total interest-bearing liabilities   20,989,149     36,755 0.69 %   20,662,124     32,684 0.63 %
 
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits 10,655,860 10,195,755
Accrued expenses and other liabilities 536,351 499,361
Stockholders’ equity   3,756,207     3,637,695  
Total liabilities and stockholders’ equity $ 35,937,567   $ 34,994,935  
 
Interest rate spread 3.25 % 3.26 %
Net interest income and net interest margin $ 303,155 3.52 % $ 290,091 3.49 %
Adjusted net interest income and net interest margin (4) $ 298,621 3.46 % $ 283,830 3.41 %
 
(1)   Annualized.
(2)

Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting.

(3) Includes average balances of ASC 310-30 discount of $41.9 million and $45.4 million for the three months ended September 30, 2017 and June 30, 2017, respectively.
(4) See reconciliation of the GAAP to non-GAAP financial measures in Table 14.
 
EAST WEST BANCORP, INC.
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
           
Three Months Ended
September 30, 2017 September 30, 2016
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 $ 2,344,561 $ 9,630 1.63 % $ 1,593,577 $ 3,168 0.79 %
Resale agreements (2) 1,297,826 7,901 2.42 % 1,805,978 7,834 1.73 %
Investment securities 2,963,122 14,828 1.99 % 3,273,861 13,388 1.63 %
Loans (3) 27,529,779 306,939 4.42 % 24,309,313 255,316 4.18 %
FHLB and FRB stock   73,245     612 3.31 %   72,625     611 3.35 %
Total interest-earning assets   34,208,533     339,910 3.94 %   31,055,354     280,317 3.59 %
 
Noninterest-earning assets:
Cash and due from banks 387,705 354,053
Allowance for loan losses (276,467 ) (266,763 )
Other assets   1,617,796     1,763,889  
Total assets $ 35,937,567   $ 32,906,533  
 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits $ 4,014,290 $ 4,768 0.47 % $ 3,553,477 $ 3,253 0.36 %
Money market deposits 7,997,648 11,828 0.59