Corporate Information

Press Release

East West Bancorp Reports Record Net Income for Full Year 2018 of $704 Million and Diluted Earnings Per Share of $4.81, Both up by 39% from the Prior Year

Company Release - 1/24/2019 8:00 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 fourth quarter and full year of 2018. For the fourth quarter of 2018, net income was $173.0 million or $1.18 per diluted share. For the full year 2018, net income was $703.7 million or $4.81 per diluted share.

“Total loans reached a record $32.4 billion as of December 31, 2018, growing $3.3 billion, or 11% year-over-year,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $3.2 billion, or 10% year-over-year, to a record $35.4 billion as of December 31, 2018.”

“In 2018, East West achieved record earnings for a ninth consecutive year. Our total revenue of $1.6 billion grew by 11%, and our net interest margin of 3.78% expanded by 30 basis points year-over-year,” continued Ng. “In addition, revenue growth outpaced expense increases, improving our operating efficiency. In 2018, we earned a return on average assets of 1.83% and a return on average equity of 17.0%. I would like to thank our 3,150 associates for their dedication and diligence in delivering another year of strong financial performance.”

“We look forward to the new year with confidence. With our presence in the U.S. and Greater China, we have built cross-border banking expertise that differentiates us from other banks. Our associates go beyond banking to provide clients with knowledge and understanding essential to conducting business in both markets. We believe this positioning will serve us well in 2019 and beyond,” concluded Ng.

HIGHLIGHTS OF RESULTS

  • Full Year and Fourth Quarter Earnings – Full year 2018 net income of $703.7 million and diluted earnings per share (“EPS”) of $4.81 both grew by 39% compared to full year 2017 net income of $505.6 million and diluted EPS of $3.47. Fourth quarter 2018 net income of $173.0 million and diluted EPS of $1.18 both grew by 104% from fourth quarter 2017 net earnings of $84.9 million and diluted EPS of $0.58.
  • Net Interest Income Growth and Net Interest Margin Expansion – Fourth quarter 2018 net interest income was $369.4 million, a quarterly increase of $20.7 million or 6%, and a year-over-year increase of $49.7 million or 16%. Fourth quarter 2018 net interest margin (“NIM”) of 3.79% expanded by three basis points linked quarter and 22 basis points year-over-year. Net interest income growth primarily reflected loan yield expansion and loan growth, partially offset by the increase in the cost of funds.
  • Record Loans – Total loans of $32.4 billion as of December 31, 2018 were up $1.2 billion or 15% linked quarter annualized, from $31.2 billion as of September 30, 2018. The largest increase in loans this quarter was in commercial and industrial loans, followed by single-family mortgages. Total loans grew by $3.3 billion or 11% year-over-year.
  • Record Deposits – Total deposits of $35.4 billion as of December 31, 2018 were up $1.8 billion or 21% linked quarter annualized, from $33.6 billion as of September 30, 2018. The sequential quarter growth in deposits was broad-based, including growth of $583 million, or 21% linked quarter annualized, in noninterest-bearing demand accounts. Total deposits grew by $3.2 billion or 10% year-over-year.
  • Asset Quality Metrics – The allowance for loan losses was $311.3 million, or 0.96% of loans held-for-investment (“HFI”), as of December 31, 2018, compared to $310.0 million, or 0.99% of loans HFI, as of September 30, 2018. For the fourth quarter of 2018, annualized net charge-offs were 0.20% of average loans HFI, compared to annualized net charge-offs of 0.05% of average loans HFI for the previous quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets decreased to $93.0 million, or 0.23% of total assets, as of December 31, 2018, from $114.6 million, or 0.29% of total assets, as of September 30, 2018.
  • Capital Levels – Capital levels for East West continue to be strong. As of December 31, 2018, stockholders’ equity was $4.4 billion, or $30.52 per share. Tangible equity1 per common share was $27.15 as of December 31, 2018, an increase of 5% linked quarter and 17% year-over-year. As of December 31, 2018, the tangible equity to tangible assets ratio1 was 9.71%, the common equity tier 1 (“CET1”) capital ratio was 12.2%, and the total risk-based capital ratio was 13.7%.

1 See reconciliation of GAAP to non-GAAP financial measures in Table 15

QUARTERLY RESULTS SUMMARY

  Quarter Ended
December 31,   September 30,   December 31,
($ in millions, except per share data)   2018   2018   2017
Net income $ 173.0 $ 171.3 $ 84.9
Adjusted net income (1) $ 173.0 $ 171.3 $ 126.6
Earnings per share (diluted) $ 1.18 $ 1.17 $ 0.58
Adjusted earnings per share (diluted) (1) $ 1.18 $ 1.17 $ 0.87
Book value per common share $ 30.52 $ 29.29 $ 26.58
Tangible equity (1) per common share $ 27.15 $ 25.91 $ 23.13
Tangible equity to tangible assets ratio (1)   9.71 %   9.73 %   9.12 %
Return on average assets (2) 1.69 % 1.76

%

0.90 %
Return on average equity (2) 15.8 % 16.2

%

8.7 %
Return on average tangible equity (1)(2)   18.0 %   18.5

%

  10.2 %
Adjusted return on average assets (1)(2) 1.69 % 1.76

%

1.35 %
Adjusted return on average equity (1)(2) 15.8 % 16.2

%

13.0 %
Adjusted return on average tangible equity (1)(2) 18.0 % 18.5 % 15.1 %
Adjusted pre-tax, pre-provision profitability ratio (1)(2)   2.50 %   2.44 %   2.27 %
Net interest income $ 369.4 $ 348.7 $ 319.7
Net interest margin (2) 3.79 % 3.76 % 3.57 %
Cost of deposits (2)   0.90 %   0.78 %   0.43 %
Efficiency ratio 45.8 % 45.5 % 48.0 %
Adjusted efficiency ratio (1)   37.9 %   39.9 %   41.6 %
(1)     See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13 and 15.
(2) Annualized.

MANAGEMENT OUTLOOK FOR 2019

Our current outlook for the expected full year 2019 results, compared to our full year 2018 results, is as follows:

  • End of Period Loans: increase by approximately 10%.
  • Net Interest Income (excluding the impact of ASC 310-30 discount accretion): increase at a percentage rate in the low double digits.
  • Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): between 3.75% and 3.80%.
  • Noninterest Expense (excluding tax credit amortization & deposit premium amortization): increase at a percentage rate in the mid-single digits.
  • Provision for Credit Losses: in the range of $80 million to $90 million.
  • Tax Items: projecting full year effective tax rate of approximately 15%, including the impact of tax credit investments, which reduce our tax liability from statutory rates.
  • Interest Rates: No additional fed funds rate increases in the year 2019.

OPERATING RESULTS SUMMARY

Fourth Quarter 2018 Compared to Third Quarter 2018

Net Interest Income and Net Interest Margin

Net interest income totaled $369.4 million, a 6% increase from $348.7 million. Net interest margin increased by three basis points to 3.79% from 3.76%.

  • Excluding the impact of ASC 310-30 discount accretion, adjusted2 net interest income of $363.6 million increased by 5% and adjusted2 NIM of 3.73% increased by one basis point. ASC 310-30 discount accretion income was $5.8 million, an increase from $2.9 million last quarter.
  • Average loans of $31.5 billion grew by $1.0 billion, or 13% linked quarter annualized.
  • Average deposits of $35.0 billion grew by $1.7 billion, or 21% linked quarter annualized.
  • The yield on loans expanded by 20 basis points to 5.22% from 5.02%.
  • The yield on interest-earning assets expanded by 14 basis points to 4.69% from 4.55%.
  • The cost of deposits increased by 12 basis points to 0.90% from 0.78%.
  • The cost of funds increased by 12 basis points to 0.98% from 0.86%.

Noninterest Income

Noninterest income totaled $41.7 million, a decrease of $4.8 million or 10% from $46.5 million. Excluding the impact of all gains on sales, total fees and other operating income of $38.9 million in the fourth quarter of 2018 decreased by 7% from $41.9 million.

  • Increase in letters of credit fees and foreign exchange income reflected a greater volume of customer transactions.
  • Decrease in derivative fees and other income reflected a lower volume of customer transactions.

The following table presents total fees and other operating income for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017.

     
  Quarter Ended
December 31,   September 30,   December 31,
($ in thousands) 2018 2018 2017
Branch fees $ 9,512 $ 9,777 $ 10,287
Letters of credit fees and foreign exchange income 16,358 14,649 9,974
Ancillary loan fees and other income 5,835 6,795 6,457
Wealth management fees 2,796 3,535 2,797
Derivative fees and other income 1,125 4,595 4,737
Other fees and operating income 3,318   2,569   4,144
Total fees and other operating income $ 38,944   $ 41,920   $ 38,396
                       

Noninterest Expense

Noninterest expense of $188.1 million included $155.9 million of adjusted3 noninterest expense, $31.0 million in amortization of tax credit and other investments, and $1.3 million in amortization of core deposit intangibles.

  • Noninterest expense of $188.1 million increased by $8.3 million, or 5%, linked quarter, primarily reflecting an increase in the amortization of tax credit and other investments. Adjusted noninterest expense of $155.9 million decreased by $1.8 million, or 1%, linked quarter.
  • The adjusted efficiency ratio3 was 37.9% in the fourth quarter, improving from 39.9% in the prior quarter.

2 See reconciliation of GAAP to non-GAAP financial measures in Table 14.
3 See reconciliation of GAAP to non-GAAP financial measures in Table 13.

TAX RELATED ITEMS

The Company’s full year 2018 effective tax rate was 14%, resulting in tax expense of $115.0 million, compared to an effective tax rate of 31% and tax expense of $229.5 million for the full year 2017.

  • Tax expense in the fourth quarter of 2018 was $32.0 million, compared to a tax expense of $33.6 million in the third quarter of 2018. The effective tax rate for both the third and fourth quarters of 2018 was 16%.
  • For the full year 2019, the Company expects to continue to invest in tax credits and projects an effective tax rate of approximately 15%.

CREDIT QUALITY

The allowance for loan losses totaled $311.3 million, or 0.96% of loans HFI, as of December 31, 2018, compared to $310.0 million, or 0.99% of loans HFI, as of September 30, 2018, and $287.1 million, or 0.99% of loans HFI, as of December 31, 2017.

  • The provision for credit losses recorded for the current quarter was $18.0 million, compared to $10.5 million for the third quarter of 2018, and $15.5 million for the fourth quarter of 2017.
  • Net charge-offs for the current quarter were $16.0 million, or annualized 0.20% of average loans HFI. This compares to net charge-offs of $3.7 million, or annualized 0.05% of average loans HFI, for the third quarter of 2018, and net charge-offs of $16.0 million, or annualized 0.22% of average loans HFI, for the fourth quarter of 2017.
  • For the full year of 2018, the net charge-off ratio was 0.13% of average loans HFI, compared to 0.08% of average loans HFI for the full year of 2017.
  • Non-PCI nonperforming assets of $93.0 million, or 0.23% of total assets, as of December 31, 2018, improved from $114.6 million, or 0.29% of total assets, as of September 30, 2018, and $115.1 million, or 0.31% of total assets, as of December 31, 2017.

CAPITAL STRENGTH

Capital levels for East West continue to be strong. The following table presents the regulatory capital ratios for the quarters ended December 31, 2018, September 30, 2018, and December 31, 2017.

         

EWBC Regulatory Capital Metrics

  Basel III    
         

 

Well

Fully Phased-

Minimum Capitalized in Minimum

December 31,

September 30,

December 31,

Regulatory Regulatory Regulatory
($ in millions)

2018 (a)

2018 2017 Requirements Requirements Requirements
 
CET1 capital ratio 12.2 % 12.3 % 11.4 % 4.5 % 6.5 % 7.0 %
Tier 1 risk-based capital ratio 12.2 % 12.3 % 11.4 % 6.0 % 8.0 % 8.5 %
Total risk-based capital ratio 13.7 % 13.8 % 12.9 % 8.0 % 10.0 % 10.5 %
Tier 1 leverage capital ratio 9.9 % 10.0 % 9.2 % 4.0 % 5.0 % 4.0 %
Risk-Weighted Assets (“RWA”) (b) $ 32,515 $ 31,210 $ 29,669 N/A N/A N/A
                                     

N/A Not applicable.

(a)     The Company’s December 31, 2018 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.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared first quarter 2019 dividends for the Company’s common stock. The common stock cash dividend of $0.23 per share is payable on February 15, 2019 to shareholders of record on February 4, 2019.

Conference Call

East West will host a conference call to discuss fourth quarter and full year 2018 earnings with the public on Thursday, January 24, 2019 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses fourth quarter and full year 2018 results and operating developments.

  • The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
  • A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A replay of the conference call will be available on January 24, 2019 at 11:30 a.m. Pacific Time through February 24, 2019. 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: 10127117.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $41.0 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. 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 our current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, and the negative thereof. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; success and timing of our business strategies; our ability to retain key officers and employees; impact on our funding costs, net interest income and net interest margin due to changes in key variable market interest rates, competition, regulatory requirements and our product mix; changes in our costs of operation, compliance and expansion; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; 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; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; impact of adverse changes to our credit ratings from the major credit rating agencies; impact of adverse judgments or settlements in litigation; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; changes in the United States (“U.S.”) economy, including inflation, deflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate selected as the preferred alternative reference rate to the London Interbank Offered Rate; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; 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 Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices, cost of operations and executive compensation; heightened regulatory and governmental oversight and scrutiny of our 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 our 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; changes in income tax laws and regulations and the impact of the Tax Cuts and Jobs Act; impact of other potential federal tax changes and spending cuts; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; changes in our ability to receive dividends from our subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations of our stock price; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or 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; changes in the economy of and monetary policy in the People’s Republic of China; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on our financial performance; and other factors set forth in our public reports including its Annual Report on Form 10-K for the year ended December 31, 2017, 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, our results could differ materially from those expressed in, implied or projected by such forward-looking statements. We assume no obligation to update or revise such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in thousands, except per share data)
(unaudited)
Table 1
        December 31, 2018
          % Change
December 31, 2018 September 30, 2018 December 31, 2017 Qtr-o-Qtr   Yr-o-Yr
Assets
Cash and due from banks $ 516,291 $ 408,049 $ 457,181 26.5 % 12.9 %
Interest-bearing cash with banks 2,485,086   1,810,738   1,717,411   37.2 44.7
Cash and cash equivalents 3,001,377 2,218,787 2,174,592 35.3 38.0
Interest-bearing deposits with banks 371,000 400,900 398,422 (7.5 ) (6.9 )
Securities purchased under resale agreements (“resale agreements”) (1) 1,035,000 1,035,000 1,050,000 (1.4 )
Investment securities 2,741,847 2,676,510 3,016,752 2.4 (9.1 )
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock 74,069 73,729 73,521 0.5 0.7
Loans held-for-sale (“HFS”) 275 3,114 85 (91.2 ) 223.5
Loans held-for-investment (net of allowance for loan losses of $311,322, $310,041 and $287,128) 32,073,867 30,900,144 28,688,590 3.8 11.8
Investments in qualified affordable housing partnerships, net 184,873 148,097 162,824 24.8 13.5
Investments in tax credit and other investments, net 231,635 232,194 224,551 (0.2 ) 3.2
Goodwill 465,547 465,547 469,433 (0.8 )
Branch assets HFS (2) 91,318 (100.0 )
Other assets 862,866   919,084   800,161   (6.1 ) 7.8
Total assets $ 41,042,356   $ 39,073,106   $ 37,150,249   5.0 % 10.5 %
 
Liabilities and Stockholders’ Equity
Deposits $ 35,439,628 $ 33,629,124 $ 31,615,063 5.4 % 12.1 %
Deposits HFS (2) 605,111 (100.0 )
Short-term borrowings 57,638 56,411 2.2 100.0
FHLB advances 326,172 325,596 323,891 0.2 0.7
Securities sold under repurchase agreements (“repurchase agreements”) (1) 50,000 50,000 50,000
Long-term debt 146,835 156,770 171,577 (6.3 ) (14.4 )
Accrued expenses and other liabilities 598,109   610,355   542,656   (2.0 ) 10.2
Total liabilities 36,618,382 34,828,256 33,308,298 5.1 9.9
Stockholders’ equity 4,423,974   4,244,850   3,841,951   4.2 15.1
Total liabilities and stockholders’ equity $ 41,042,356   $ 39,073,106   $ 37,150,249   5.0 % 10.5 %
 
Book value per common share $ 30.52 $ 29.29 $ 26.58 4.2 % 14.8 %
Tangible equity (3) per common share $ 27.15 $ 25.91 $ 23.13 4.8 17.4
Tangible equity to tangible assets ratio (3) 9.71 % 9.73 % 9.12 % (0.3 ) 6.4
Number of common shares at period-end 144,961 144,929 144,543 0.0 0.3
 
(1)    

Resale and repurchase agreements have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of each of December 31, 2018, September 30, 2018 and December 31, 2017, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.

(2) Represents the DCB branch assets and deposits that were classified as HFS as of December 31, 2017. Branch assets HFS were primarily comprised of loans.
(3) See reconciliation of GAAP to non-GAAP financial measures in Table 15.
 
EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
        December 31, 2018
          % Change
December 31, 2018 September 30, 2018 December 31, 2017 Qtr-o-Qtr   Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”) $ 12,056,970 $ 11,517,054 $ 10,697,231 4.7 % 12.7 %
Commercial real estate (“CRE”) 9,449,835 9,262,327 8,936,897 2.0 5.7
Multifamily residential 2,281,032 2,090,563 1,916,176 9.1 19.0
Construction and land 538,794 605,033 659,697 (10.9 ) (18.3 )
Consumer:
Single-family residential 6,036,454 5,684,587 4,646,289 6.2 29.9
Home equity lines of credit (“HELOCs”) 1,690,834 1,717,440 1,782,924 (1.5 ) (5.2 )
Other consumer 331,270   333,181   336,504   (0.6 ) (1.6 )
Total loans held-for-investment (1)(2) 32,385,189 31,210,185 28,975,718 3.8 11.8
Loans HFS (3) 275   3,114   78,217   (91.2 ) (99.6 )
Total loans (1)(2) 32,385,464 31,213,299 29,053,935 3.8 11.5
Allowance for loan losses (311,322 ) (310,041 ) (287,128 ) 0.4 8.4
Net loans (1)(2) $ 32,074,142   $ 30,903,258   $ 28,766,807   3.8 % 11.5 %
 
Deposits:
Noninterest-bearing demand $ 11,377,009 $ 10,794,370 $ 10,887,306 5.4 % 4.5 %
Interest-bearing checking 4,584,447 4,383,672 4,419,089 4.6 3.7
Money market 8,262,677 7,608,191 8,359,425 8.6 (1.2 )
Savings 2,146,429   2,142,105   2,308,494   0.2 (7.0 )
Total core deposits 26,370,562 24,928,338 25,974,314 5.8 1.5
Time deposits 9,069,066 8,700,786 5,640,749 4.2 60.8
Deposits HFS     605,111   (100.0 )
Total deposits $ 35,439,628   $ 33,629,124   $ 32,220,174   5.4 % 10.0 %
 
(1)     Includes $(48.9) million, $(42.4) million and $(34.0) million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.
(2) Includes ASC 310-30 discount of $22.2 million, $24.5 million and $35.3 million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively.
(3) Includes $78.1 million of loans HFS in branch assets as of December 31, 2017
 
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 3
 
    December 31, 2018
Three Months Ended % Change
December 31, 2018   September 30, 2018   December 31, 2017 Qtr-o-Qtr   Yr-o-Yr
Interest and dividend income $ 457,334 $ 422,185 $ 359,765 8.3 % 27.1 %
Interest expense 87,918   73,465   40,064   19.7 119.4
Net interest income before provision for credit losses 369,416 348,720 319,701 5.9 15.6
Provision for credit losses 17,959   10,542   15,517   70.4 15.7
Net interest income after provision for credit losses 351,457 338,178 304,184 3.9 15.5
Noninterest income 41,695 46,502 45,206

(10.3

)

(7.8 )
Noninterest expense 188,097   179,815   175,263   4.6 7.3
Income before income taxes 205,055 204,865 174,127 0.1 17.8
Income tax expense 32,037   33,563   89,229   (4.5 ) (64.1 )
Net income $ 173,018   $ 171,302   $ 84,898   1.0 % 103.8 %
Earnings per share (“EPS”)
- Basic $ 1.19 $ 1.18 $ 0.59 1.0 % 103.2 %
- Diluted $ 1.18 $ 1.17 $ 0.58 1.0 103.7
Weighted average number of shares outstanding
- Basic 144,960 144,921 144,542 0.0 % 0.3 %
- Diluted 146,133 146,173 146,030 0.0 0.1
 
December 31, 2018
Three Months Ended % Change
December 31, 2018 September 30, 2018 December 31, 2017 Qtr-o-Qtr Yr-o-Yr
Noninterest income:
Branch fees $ 9,512 $ 9,777 $ 10,287 (2.7 )% (7.5 )%
Letters of credit fees and foreign exchange income 16,358 14,649 9,974 11.7 64.0
Ancillary loan fees and other income 5,835 6,795 6,457 (14.1 ) (9.6 )
Wealth management fees 2,796 3,535 2,797 (20.9 ) 0.0
Derivative fees and other income 1,125 4,595 4,737 (75.5 ) (76.3 )
Net gains on sales of loans 1,509 1,145 2,210 31.8 (31.7 )
Net gains on sales of available-for-sale investment securities 161 35 1,304 360.0 (87.7 )
Net gains on sales of fixed assets 1,081 3,402 3,296 (68.2 ) (67.2 )
Other fees and operating income 3,318   2,569   4,144   29.2 (19.9 )
Total noninterest income $ 41,695   $ 46,502   $ 45,206   (10.3 )% (7.8 )%
Noninterest expense:
Compensation and employee benefits $ 93,790 $ 96,733 $ 90,361 (3.0 )% 3.8 %
Occupancy and equipment expense 18,017 17,292 17,092 4.2 5.4
Deposit insurance premiums and regulatory assessments 3,093 6,013 6,351 (48.6 ) (51.3 )
Legal expense 2,145 1,544 2,514 38.9 (14.7 )
Data processing 3,160 3,289 3,084 (3.9 ) 2.5
Consulting expense 1,424 2,683 4,147 (46.9 ) (65.7 )
Deposit related expense 3,043 2,600 2,655 17.0 14.6
Computer software expense 6,205 5,478 4,360 13.3 42.3
Other operating expense 26,262 23,394 22,808 12.3 15.1
Amortization of tax credit and other investments 30,958   20,789   21,891   48.9 41.4
Total noninterest expense $ 188,097   $ 179,815   $ 175,263   4.6 % 7.3 %
 
 
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 4
     
December 31, 2018
Year Ended % Change
December 31, 2018 December 31, 2017 Yr-o-Yr
Interest and dividend income $ 1,651,703 $ 1,325,119 24.6 %
Interest expense 265,195   140,050   89.4
Net interest income before provision for credit losses 1,386,508 1,185,069 17.0
Provision for credit losses 64,255   46,266   38.9
Net interest income after provision for credit losses 1,322,253 1,138,803 16.1
Noninterest income 210,909 257,748 (18.2 )
Noninterest expense 714,466   661,451   8.0
Income before income taxes 818,696 735,100 11.4
Income tax expense 114,995   229,476   (49.9 )
Net income $ 703,701   $ 505,624   39.2 %
EPS
- Basic $ 4.86 $ 3.50 38.8 %
- Diluted $ 4.81 $ 3.47 38.9
Weighted average number of shares outstanding
- Basic 144,862 144,444 0.3 %
- Diluted 146,169 145,913 0.2
 
December 31, 2018
Year Ended % Change
December 31, 2018 December 31, 2017 Yr-o-Yr
Noninterest income:
Branch fees $ 39,859 $ 40,925 (2.6 )%
Letters of credit fees and foreign exchange income 56,282 44,344 26.9
Ancillary loan fees and other income 24,052 23,333 3.1
Wealth management fees 13,785 13,974 (1.4 )
Derivative fees and other income 18,980 17,671 7.4
Net gains on sales of loans 6,590 8,870 (25.7 )
Net gains on sales of available-for-sale investment securities 2,535 8,037 (68.5 )
Net gains on sales of fixed assets 6,683 77,388 (91.4 )
Net gain on sale of business 31,470 3,807 NM
Other fees and operating income 10,673   19,399   (45.0 )
Total noninterest income $ 210,909   $ 257,748   (18.2 )%
Noninterest expense:
Compensation and employee benefits $ 379,622 $ 335,291 13.2 %
Occupancy and equipment expense 68,896 64,921 6.1
Deposit insurance premiums and regulatory assessments 21,211 23,735 (10.6 )
Legal expense 8,781 11,444 (23.3 )
Data processing 13,177 12,093 9.0
Consulting expense 11,579 14,922 (22.4 )
Deposit related expense 11,244 9,938 13.1
Computer software expense 22,286 18,183 22.6
Other operating expense 88,042 82,974 6.1
Amortization of tax credit and other investments 89,628   87,950   1.9
Total noninterest expense $ 714,466   $ 661,451   8.0 %
 

NM Not Meaningful

 
EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
 
    December 31, 2018     December 31, 2018
Three Months Ended % Change Year Ended % Change
December 31,   September 30,   December 31, Qtr-o-   December 31,   December 31,
2018 2018 2017 Qtr Yr-o-Yr 2018 2017 Yr-o-Yr
Loans:
Commercial:
C&I $ 11,554,737 $ 11,127,338 $ 10,518,121 3.8 % 9.9 % $ 11,037,992 $ 10,180,582 8.4 %
CRE 9,363,625 9,134,784 8,917,681 2.5 5.0 9,136,783 8,485,323 7.7
Multifamily residential 2,162,877 2,056,456 1,909,933 5.2 13.2 2,034,258 1,785,210 14.0
Construction and land 582,311 622,272 674,337 (6.4 ) (13.6 ) 632,303 669,073 (5.5 )
Consumer:
Single-family residential 5,854,551 5,495,824 4,498,180 6.5 30.2 5,309,689 4,013,542 32.3
HELOCs 1,709,022 1,741,890 1,783,762 (1.9 ) (4.2 ) 1,754,071 1,780,377 (1.5 )
Other consumer 307,752   319,473   344,447   (3.7 ) (10.7 ) 324,918   338,649   (4.1 )
Total loans (1)(2) $ 31,534,875   $ 30,498,037   $ 28,646,461   3.4 % 10.1 % $ 30,230,014   $ 27,252,756   10.9 %
 
Investment securities $ 2,777,381   $ 2,727,219   $ 2,925,817   1.8 % (5.1 )% $ 2,773,152   $ 3,026,693   (8.4 )%
Interest-earning assets $ 38,688,647   $ 36,822,293   $ 35,491,424   5.1 % 9.0 % $ 36,707,142   $ 34,034,065   7.9 %
Total assets $ 40,525,188   $ 38,659,262   $ 37,262,618   4.8 % 8.8 % $ 38,542,569   $ 35,787,613   7.7 %
 
Deposits:
Noninterest-bearing demand $ 11,447,345 $ 10,639,554 $ 11,531,181 7.6 % (0.7 )% $ 11,089,537 $ 10,627,718 4.3 %
Interest-bearing checking 4,449,541 4,515,256 4,313,732 (1.5 ) 3.1 4,477,793 3,951,930 13.3
Money market 8,180,426 7,613,030 8,198,133 7.5 (0.2 ) 7,985,526 8,026,347 (0.5 )
Savings 2,124,697   2,194,792   2,472,207   (3.2 ) (14.1 ) 2,245,644   2,369,398   (5.2 )
Total core deposits 26,202,009 24,962,632 26,515,253 5.0 (1.2 ) 25,798,500 24,975,393 3.3
Time deposits 8,783,068   8,277,129   5,735,014   6.1 53.1 7,431,749   5,838,382   27.3
Total deposits $ 34,985,077   $ 33,239,761   $ 32,250,267   (3) 5.3 % 8.5 % $ 33,230,249   (3) $ 30,813,775   (3) 7.8 %
 
Interest-bearing liabilities $ 24,122,509   $ 23,190,465   $ 21,280,348   4.0 % 13.4 % $ 22,709,554   $ 20,930,965   8.5 %
Stockholders’ equity $ 4,335,110   $ 4,197,675   $ 3,856,802   3.3 % 12.4 % $ 4,130,822   $ 3,687,213   12.0 %
 
(1)     Includes ASC 310-30 discount of $23.8 million, $25.9 million and $37.7 million for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively, and $28.4 million and $43.3 million for the years ended December 31, 2018 and 2017, respectively.
(2) Includes loans HFS.
(3) Includes deposits HFS.
 
EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
 
  Three Months Ended
December 31, 2018   September 30, 2018
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 $ 3,267,484 $ 18,791 2.28 % $ 2,521,002 $ 13,353 2.10 %
Resale agreements (2) 1,035,000 7,819 3.00 % 1,002,500 7,393 2.93 %
Investment securities 2,777,381 15,216 2.17 % 2,727,219 15,180 2.21 %
Loans (3) 31,534,875 414,517 5.22 % 30,498,037 385,538 5.02 %
FHLB and FRB stock 73,907   991   5.32 % 73,535   721   3.89 %
Total interest-earning assets 38,688,647   457,334   4.69 % 36,822,293   422,185   4.55 %
 
Noninterest-earning assets:
Cash and due from banks 482,767 424,350
Allowance for loan losses (314,019 ) (301,557 )
Other assets 1,667,793   1,714,176  
Total assets $ 40,525,188   $ 38,659,262  
 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits $ 4,449,541 $ 9,963 0.89 % $ 4,515,256 $ 9,551 0.84 %
Money market deposits 8,180,426 27,640 1.34 % 7,613,030 21,411 1.12 %
Savings deposits 2,124,697 2,257 0.42 % 2,194,792 2,308 0.42 %
Time deposits 8,783,068 39,459 1.78 % 8,277,129 31,762 1.52 %
Federal funds purchased and other short-term borrowings 57,198 624 4.33 % 58,218 643 4.38 %
FHLB advances 325,826 2,903 3.53 % 325,246 2,732 3.33 %
Repurchase agreements (2) 50,000 3,396 26.95 % 50,000 3,366 26.71 %
Long-term debt 151,753   1,676   4.38 % 156,794   1,692   4.28 %
Total interest-bearing liabilities 24,122,509   87,918   1.45 % 23,190,465   73,465   1.26 %
 
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits 11,447,345 10,639,554
Accrued expenses and other liabilities 620,224 631,568
Stockholders’ equity 4,335,110   4,197,675  
Total liabilities and stockholders’ equity $ 40,525,188   $ 38,659,262  
 
Interest rate spread 3.24 % 3.29 %
Net interest income and net interest margin $ 369,416   3.79 % $ 348,720   3.76 %
Adjusted net interest income and adjusted net interest margin (4) $ 363,606   3.73 % $ 345,857   3.72 %
 
(1)     Annualized.
(2)

Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.72% and 2.63% for the three months ended December 31, 2018 and September 30, 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.77% and 4.65% for the three months ended December 31, 2018 and September 30, 2018, respectively.

(3) Includes loans HFS and ASC 310-30 discount of $23.8 million and $25.9 million for the three months ended December 31, 2018 and September 30, 2018, respectively.
(4) 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
December 31, 2018   December 31, 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 $ 3,267,484 $ 18,791 2.28 % $ 2,743,548 $ 11,092 1.60 %
Resale agreements (2) 1,035,000 7,819 3.00 % 1,102,174 6,873 2.47 %
Investment securities 2,777,381 15,216 2.17 % 2,925,817 14,734 2.00 %
Loans (3) 31,534,875 414,517 5.22 % 28,646,461 326,401 4.52 %
FHLB and FRB stock 73,907   991   5.32 % 73,424   665   3.59 %
Total interest-earning assets 38,688,647   457,334   4.69 % 35,491,424   359,765   4.02 %
 
Noninterest-earning assets:
Cash and due from banks 482,767 417,798
Allowance for loan losses (314,019 ) (285,490 )
Other assets 1,667,793   1,638,886  
Total assets $ 40,525,188   $ 37,262,618  
 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits $ 4,449,541 $ 9,963 0.89 % $ 4,313,732 (4) $ 5,767 0.53 %
Money market deposits 8,180,426 27,640 1.34 % 8,198,133 (4) 13,772 0.67 %
Savings deposits 2,124,697 2,257 0.42 % 2,472,207 (4) 1,906 0.31 %
Time deposits 8,783,068 39,459 1.78 % 5,735,014 (4) 13,143 0.91 %
Federal funds purchased and other short-term borrowings 57,198