Corporate Information

Press Release

East West Bancorp Reports Net Income for First Quarter 2019 of $164 Million and Diluted Earnings Per Share of $1.12, Increases Quarterly Dividend by 20%

Company Release - 4/18/2019 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 first quarter of 2019. For the first quarter of 2019, net income was $164.0 million or $1.12 per diluted share. First quarter 2019 return on average assets was 1.63% and return on average equity was 14.7%.

“We started off the year with solid balance sheet growth. Our total assets reached a record $42.1 billion. Total loans grew $478 million, or 6% annualized, to a record $32.9 billion from $32.4 billion as of December 31, 2018,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $834 million, or 10% annualized, to a record $36.3 billion from $35.4 billion at the end of 2018.”

“Our first quarter 2019 net interest margin, excluding the impact of accretion, was 3.77%1, a quarter-over-quarter increase of four basis points from 3.73%, and a year-over-year increase of 10 basis points from 3.67%,” continued Ng.

“Our balance sheet growth, the profitability of our business, and our capital levels are strong. As of March 31, 2019, our tangible equity to tangible assets ratio2 was 9.9%, an increase of 16 basis points quarter-over-quarter. I am pleased to announce that East West’s Board of Directors approved a 20% increase to the quarterly common stock dividend. Our quarterly dividend will increase to $0.275 per share, up from $0.23 per share. We are optimistic about the year ahead, and look forward to delivering another year of strong returns for our shareholders,” concluded Ng.

__________________________________

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.

 

HIGHLIGHTS OF RESULTS

  • First Quarter Earnings – First quarter net income was $164.0 million and diluted earnings per share (“EPS”) were $1.12, compared to fourth quarter 2018 net income of $173.0 million and diluted EPS of $1.18. Excluding an impairment charge in the first quarter, adjusted3 first quarter net income was $168.9 million and adjusted3 diluted EPS were $1.16.

    During the first quarter, the Company recorded an impairment charge related to certain tax credit investments. Included in amortization of tax credit and other investments, this impairment charge reduced net income by $7.0 million before tax and $4.9 million after tax, impacting EPS by $0.04.
  • Dividend Increase – Second quarter 2019 common stock dividend has increased by 20%, or 4.5 cents per share. The new quarterly dividend will be $0.275, up from $0.23 per share. At the new rate, the annualized dividend will be $1.10, compared to the previous annualized rate of $0.92 per share.
  • Net Interest Income and Net Interest Margin – First quarter 2019 net interest income (“NII”) was $362.5 million, compared to $369.4 million in the fourth quarter of 2018. Excluding the impact of ASC 310-30 discount accretion income, first quarter 2019 adjusted4 NII was $360.3 million, compared to $363.6 million in the previous quarter. First quarter 2019 net interest margin (“NIM”) of 3.79% was unchanged linked quarter. Excluding the impact of ASC 310-30 discount accretion, adjusted4 NIM of 3.77% expanded by four basis points linked quarter from 3.73% in the fourth quarter of 2018.
  • Record Loans – Total loans of $32.9 billion as of March 31, 2019 were up $477.8 million, or 6% linked quarter annualized, from $32.4 billion as of December 31, 2018. Total loans grew by $3.3 billion or 11% year-over-year.
  • Record Deposits – Total deposits of $36.3 billion as of March 31, 2019 were up $834.3 million, or 10% linked quarter annualized, from $35.4 billion as of December 31, 2018. Total deposits grew by $3.7 billion or 11% year-over-year.
  • Asset Quality Metrics – The allowance for loan losses was $317.9 million, or 0.97% of loans held-for-investment (“HFI”), as of March 31, 2019, compared to 0.96% of loans HFI as of December 31, 2018, and 1.01% of loans HFI as of March 31, 2018. For the first quarter of 2019, net charge-offs were $14.4 million, or annualized 0.18% of average loans HFI, compared to annualized net charge-offs of 0.20% of average loans HFI for the previous quarter and 0.14% for the year-ago quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $138.0 million, or 0.33% of total assets, as of March 31, 2019, compared to 0.23% of total assets as of December 31, 2018, and 0.35% of total assets as of March 31, 2018.
  • Capital Levels – Capital levels for East West continue to be strong. As of March 31, 2019, stockholders’ equity was $4.6 billion, or $31.56 per share. Tangible equity5 per common share was $28.21 as of March 31, 2019, an increase of 4% linked quarter and 17% year-over-year. As of March 31, 2019, the tangible equity to tangible assets ratio was 9.9%, the common equity tier 1 (“CET1”) capital ratio was 12.4%, and the total risk-based capital ratio was 13.8%.

__________________________________

3

  See reconciliation of GAAP to non-GAAP financial measures in Table 10.

4

See reconciliation of GAAP to non-GAAP financial measures in Table 12.

5

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

 
 

QUARTERLY RESULTS SUMMARY

    Quarter Ended
($ in millions, except per share data and ratios)     March 31,

2019

    December 31,

2018

    March 31,

2018

Net income $ 164.0     $ 173.0     $ 187.0
Adjusted net income (1) $ 168.9 $ 173.0 $ 164.9
Earnings per share (diluted) $ 1.12 $ 1.18 $ 1.28
Adjusted earnings per share (diluted) (1)     $ 1.16       $ 1.18       $ 1.13  
Book value per common share $ 31.56 $ 30.52 $ 27.46
Tangible equity (1) per common share $ 28.21 $ 27.15 $ 24.07
Tangible equity to tangible assets ratio (1)     9.87 %     9.71 %     9.38 %
Return on average assets (2) 1.63 % 1.69 %

 

2.03 %
Return on average equity (2) 14.7 % 15.8 %

 

19.3 %
Return on average tangible equity (1)(2)     16.5 %     18.0 %

 

  22.3 %
Adjusted return on average assets (1)(2) 1.68 % 1.69 %

 

1.79 %
Adjusted return on average equity (1)(2) 15.1 % 15.8 %

 

17.0 %
Adjusted return on average tangible equity (1)(2) 17.0 % 18.0 % 19.7 %
Adjusted pre-tax, pre-provision profitability ratio (1)(2)     2.43 %     2.50 %     2.38 %
Net interest income $ 362.5 $ 369.4 $ 326.7
Adjusted net interest income (1) $ 360.3 $ 363.6 $ 321.5
Net interest margin (2) 3.79 % 3.79 % 3.73 %
Adjusted net interest margin (1)(2)     3.77 %     3.73 %     3.67 %
Average loan yield (2) 5.30 % 5.22 % 4.69 %
Adjusted average loan yield (1)(2) 5.27 % 5.14 % 4.61 %
Cost of deposits (2)     1.07 %     0.90 %     0.49 %
Efficiency ratio 46.2 % 45.8 % 42.2 %
Adjusted efficiency ratio (1) 39.8 % 37.9 % 40.6 %
 
(1)     See reconciliation of GAAP to non-GAAP financial measures in Tables 10, 11, 12 and 13.
(2) Annualized.
 

MANAGEMENT OUTLOOK FOR 2019

Our current outlook for the expected full year 2019 results, compared to our full year 2018 results, is unchanged relative to a quarter ago. The components are as follows:

  • End of Period Loans: increase by approximately 10%.
  • Net Interest Income (ex. ASC 310-30 discount accretion income): increase at a percentage rate in the low double-digits.
  • Net Interest Margin (ex. impact of ASC 310-30 discount accretion): between 3.75% and 3.80%.
  • Noninterest Expense (ex. amortization of tax credit investments & core deposit intangibles): 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 rate6 of approximately 15%, including the impact of tax credit investments, which reduce our tax liability from statutory rates.
  • Interest Rates: No changes to the fed funds rate in the year 2019.

__________________________________

6   The tax rate outlook does not include any ASC 740-10 uncertain tax position liabilities that the Company may potentially record related to tax credit investments related to DC Solar, as disclosed in the Company’s December 31, 2018 Form 10-K. The amount and timing of any future reserve remain uncertain at this time.
 

OPERATING RESULTS SUMMARY

First Quarter 2019 Compared to Fourth Quarter 2018

Net Interest Income and Net Interest Margin
Net interest income totaled $362.5 million, a 2% decrease from $369.4 million. Net interest margin remained unchanged at 3.79%.

  • Excluding the impact of ASC 310-30 discount accretion, adjusted NII of $360.3 million decreased by 1% and adjusted NIM of 3.77% increased by four basis points. ASC 310-30 discount accretion income was $2.2 million, a decrease from $5.8 million last quarter.
  • Average loans of $32.4 billion grew by $879.9 million, or 11% linked quarter annualized. Growth was broad-based across the major portfolios of commercial real estate, commercial, and consumer loans.
  • Average deposits of $34.9 billion declined by $61.7 million, or 1% linked quarter annualized.
  • The yield on loans expanded by eight basis points to 5.30% from 5.22%. Excluding the impact of ASC 310-30 discount accretion, the adjusted7 yield on loans expanded by 13 basis points to 5.27% from 5.14%.
  • The yield on interest-earning assets expanded by 16 basis points to 4.85% from 4.69%.
  • The cost of deposits increased by 17 basis points to 1.07% from 0.90%.
  • The cost of funds increased by 17 basis points to 1.15% from 0.98%.

Noninterest Income
Noninterest income totaled $42.1 million, a 1% increase from $41.7 million.

  • Interest rate contracts and other derivative income, net gains on sales of AFS investment securities, wealth management fees, and deposit account fees increased linked quarter.
  • Foreign exchange income, net gains on sales of loans, and lending fees decreased linked quarter.

Noninterest Expense
Noninterest expense totaled $186.9 million, a 1% decrease from $188.1 million. First quarter noninterest expense consisted of $160.8 million of adjusted8 noninterest expense, $24.9 million in amortization of tax credit and other investments, and $1.2 million in amortization of core deposit intangibles.

  • Adjusted noninterest expense of $160.8 million increased by $5.0 million, or 3%, from $155.9 million in the fourth quarter of 2018. The linked quarter change primarily reflected seasonal first quarter increase in compensation and employee benefits, partially offset by decreased other operating expense.
  • Included in the first quarter 2019 amortization of tax credit and other investments was a $7.0 million impairment charge related to certain tax credit investments.
  • The adjusted8 efficiency ratio was 39.8% in the first quarter, compared to 37.9% in the previous quarter.

__________________________________

7  

See reconciliation of GAAP to non-GAAP financial measures in Table 12.

8

See reconciliation of GAAP to non-GAAP financial measures in Table 11.

 

TAX RELATED ITEMS

First quarter 2019 tax expense was $31.1 million and the effective tax rate was 16%, compared to a tax expense of $32.0 million and an effective tax rate of 16% in the fourth quarter of 2018.

  • 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 $317.9 million, or 0.97% of loans HFI, as of March 31, 2019, compared to $311.3 million, or 0.96% of loans HFI, as of December 31, 2018, and $297.7 million, or 1.01% of loans HFI, as of March 31, 2018.

  • The provision for credit losses recorded for the current quarter was $22.6 million, compared to $18.0 million for the fourth quarter of 2018, and $20.2 million for the first quarter of 2018.
  • Net charge-offs for the current quarter were $14.4 million, or annualized 0.18% of average loans HFI. This compares to net charge-offs of $16.0 million, or annualized 0.20% of average loans HFI, for the fourth quarter of 2018, and net charge-offs of $9.8 million, or annualized 0.14% of average loans HFI, for the first quarter of 2018.
  • Non-PCI nonperforming assets were $138.0 million, or 0.33% of total assets, as of March 31, 2019, compared to $93.0 million, or 0.23% of total assets, as of December 31, 2018, and $131.0 million, or 0.35% of total assets, as of March 31, 2018. The quarter-over-quarter variance in nonperforming assets reflects an increase in commercial nonaccrual loans.

CAPITAL STRENGTH

Capital levels for East West continue to be strong. The following table presents the regulatory capital ratios for the quarters ended March 31, 2019, December 31, 2018, and March 31, 2018.

 
EWBC Regulatory Capital Metrics   Basel III    

($ in millions)

March 31,

2019 (a)

 

December 31,

2018

 

March 31,

2018

 

Minimum

Capital

Ratio

 

Well

Capitalized

Ratio

 

Minimum

Capital Ratio +

Conservation

Buffer (b)

 
CET1 capital ratio 12.4 % 12.2 % 11.9 % 4.5 % 6.5 % 7.0 %
Tier 1 risk-based capital ratio 12.4 % 12.2 % 11.9 % 6.0 % 8.0 % 8.5 %
Total risk-based capital ratio 13.8 % 13.7 % 13.4 % 8.0 % 10.0 % 10.5 %
Tier 1 leverage capital ratio 10.2 % 9.9 % 9.6 % 4.0 % 5.0 % 4.0 %
Risk-Weighted Assets (“RWA”) (c) $

33,187

$ 32,497 $ 29,891 N/A N/A

N/A

 

N/A Not applicable.

(a)     The Company’s March 31, 2019 regulatory capital ratios and RWA are preliminary.
(b)

An additional 2.5% capital conservation buffer above the minimum capital ratios is 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 second quarter 2019 dividends for the Company’s common stock. The common stock cash dividend of $0.275 per share is payable on May 15, 2019 to shareholders of record on May 1, 2019. This represents a 20% increase, or 4.5 cents per share, to the quarterly common stock dividend, up from $0.23 per share previously. At the new rate, the annualized dividend is $1.10, compared to the previous annualized rate of $0.92 per share.

Conference Call

East West will host a conference call to discuss first quarter 2019 earnings with the public on Thursday, April 18, 2019 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses first quarter 2019 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 April 18, 2019 at 11:30 a.m. Pacific Time through May 18, 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: 10129569.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $42.1 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 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 of 2017; 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 increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment 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, 2018, 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

         

March 31, 2019

% or Basis Point Change

March 31,

2019

   

December 31,

2018

   

March 31,

2018

Qtr-o-Qtr

 

Yr-o-Yr

Assets

Cash and due from banks

$

462,254

$

516,291

$

413,017

(10.5

)%

11.9

%

 

Interest-bearing cash with banks   3,323,071         2,485,086     1,901,921   33.7 74.7
Cash and cash equivalents 3,785,325 3,001,377 2,314,938 26.1 63.5
Interest-bearing deposits with banks 134,000 371,000 478,871 (63.9 ) (72.0

)

 

Securities purchased under resale agreements
(“resale agreements”) (1) 1,035,000 1,035,000 1,050,000 (1.4

)

 

Available-for-sale (“AFS”) investment securities

2,640,158

2,741,847

2,811,416

(3.7

)

(6.1

)

 

Federal Home Loan Bank (“FHLB”) and
Federal Reserve Bank (“FRB”) stock

74,736

74,069

73,787 0.9 1.3
Loans held-for-sale (“HFS”)

275

46,181 (100.0 ) (100.0

)

 

Loans held-for-investment (net of allowance for loan losses of $317,894, $311,322 and

$297,654)

32,545,392

32,073,867

29,257,594

1.5

11.2

Investments in qualified affordable housing partnerships, net

197,470

184,873

160,574

6.8

23.0

Investments in tax credit and other investments, net

217,445

231,635

246,183

(6.1

)

(11.7

)

 

Goodwill 465,697 465,547 465,547 0.0 0.0
Operating lease right-of-use assets (2) 104,289 100.0 100.0
Other assets   891,921     862,866     766,847   3.4 16.3
Total assets $ 42,091,433   $ 41,042,356   $ 37,671,938   2.6 % 11.7

%

 

 
Liabilities and Stockholders’ Equity
Deposits $ 36,273,972 $ 35,439,628 $ 32,608,777 2.4 %

11.2

%

 

Short-term borrowings 39,550 57,638 30,277 (31.4 )

30.6

FHLB advances

Securities sold under repurchase agreements

344,657 326,172 324,451 5.7

 

6.2

(“repurchase agreements”) (1) 50,000 50,000 50,000
Long-term debt and finance lease liabilities 152,433 146,835 166,640 3.8 (8.5

)

 

Operating lease liabilities (2) 112,843 100.0 100.0
Accrued expenses and other liabilities   526,048     598,109     513,038   (12.0 ) 2.5
Total liabilities 37,499,503 36,618,382 33,693,183 2.4 11.3
Stockholders’ equity (2)   4,591,930     4,423,974     3,978,755   3.8 15.4
Total liabilities and stockholders’ equity $ 42,091,433   $ 41,042,356   $ 37,671,938   2.6 % 11.7

%

 

 
Book value per common share $ 31.56 $ 30.52 $ 27.46 3.4 % 14.9

%

 

Tangible equity (3) per common share $ 28.21 $ 27.15 $ 24.07 3.9 17.2
Number of common shares at period-end 145,501 144,961 144,873 0.4 0.4
Tangible equity to tangible assets ratio (3) 9.87 % 9.71 % 9.38 %

16

bps

49

bps

                                               
(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 March 31, 2019, December 31, 2018 and March 31, 2018, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.

(2)

The Company’s adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of $104.3 million and $112.8 million increase in right-of-use assets and associated lease liabilities, respectively, arising from operating leases in which the Company is the lessee. We adopted this guidance using the alternative transition method, which allows the adoption of the accounting standard prospectively without adjusting comparative prior period financial information and also recognized a cumulative effect adjustment of approximately $14.7 million that increased retained earnings related to deferred gains on our prior sale-leaseback transactions.

(3) 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

               

March 31, 2019

% Change

March 31, 2019

 

December 31, 2018

 

March 31, 2018

Qtr-o-Qtr

 

Yr-o-Yr

Loans:

Commercial:

Commercial and industrial (“C&I”) $ 12,040,806 $ 12,056,970 $ 10,818,304 (0.1 )% 11.3 %
Commercial real estate (“CRE”) 9,636,338 9,449,835 9,022,746 2.0 6.8
Multifamily residential 2,270,590 2,281,032 1,954,855 (0.5 ) 16.2
Construction and land 647,380 538,794 669,340 20.2 (3.3 )

Consumer:

Single-family residential 6,309,331 6,036,454 4,930,580 4.5 28.0
Home equity lines of credit (“HELOCs”) 1,626,222 1,690,834 1,775,443 (3.8 ) (8.4 )
Other consumer   332,619     331,270     383,980   0.4 (13.4 )
Total loans held-for-investment (1)(2) 32,863,286 32,385,189 29,555,248 1.5 11.2
Loans HFS       275     46,181   (100.0 ) (100.0 )
Total loans (1)(2) 32,863,286 32,385,464 29,601,429 1.5 11.0
Allowance for loan losses   (317,894 )   (311,322 )   (297,654 ) 2.1 6.8

Net loans (1)(2)

$ 32,545,392   $ 32,074,142   $ 29,303,775   1.5 % 11.1 %

Deposits:

 

Noninterest-bearing demand

$

10,011,533

$

11,377,009

$

11,763,936

(12.0

)%

(14.9

)%

Interest-bearing checking

6,123,681

4,584,447

4,428,952

33.6

38.3

Money market

8,243,003

8,262,677

7,913,040

(0.2

)

4.2

Savings

 

2,049,086

   

2,146,429

   

2,301,780

 

(4.5

)

(11.0

)

Total core deposits

26,427,303

26,370,562

26,407,708

0.2

0.1

Time deposits

 

9,846,669

   

9,069,066

   

6,201,069

 

8.6

58.8

Total deposits

$

36,273,972

 

$

35,439,628

 

$

32,608,777

 

2.4

%

11.2

%

                                       
(1)     Includes $(46.0) million, $(48.9) million and $(36.6) million as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.
(2) Includes ASC 310-30 discount of $20.4 million, $22.2 million and $32.2 million as of March 31, 2019, December 31, 2018 and March 31, 2018, 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  

March 31, 2019
% Change

March 31, 2019   December 31, 2018   March 31, 2018

Qtr-o-Qtr

 

Yr-o-Yr

Interest and dividend income $ 463,311 $ 457,334 $ 371,873

1.3

%

24.6

%

Interest expense   100,850 87,918 45,180 14.7 123.2
Net interest income before provision for credit losses 362,461 369,416 326,693 (1.9 ) 10.9
Provision for credit losses   22,579 17,959 20,218 25.7 11.7
Net interest income after provision for credit losses 339,882 351,457 306,475 (3.3 ) 10.9
Noninterest income 42,131 41,695 74,444 1.0 (43.4 )
Noninterest expense   186,922 188,097 169,135 (0.6 ) 10.5
Income before income taxes 195,091 205,055 211,784 (4.9 ) (7.9 )
Income tax expense   31,067 32,037 24,752 (3.0 ) 25.5
Net income $ 164,024 $ 173,018 $ 187,032 (5.2 )% (12.3 )%

Earnings per share (“EPS”)

- Basic $ 1.13 $ 1.19 $ 1.29 (5.4 )% (12.7 )%
- Diluted $ 1.12 $ 1.18 $ 1.28 (5.1 ) (12.3 )
Weighted average number of shares outstanding
- Basic 145,256 144,960 144,664 0.2 % 0.4 %
- Diluted 145,921 146,133 145,939 (0.1 ) 0.0

 

Three Months Ended

March 31, 2019

% Change

March 31, 2019 December 31, 2018 March 31, 2018

Qtr-o-Qtr

Yr-o-Yr

Noninterest income:
Lending fees $ 14,796 $ 15,002 $ 14,012

(1.4

)%

5.6

%

Deposit account fees 9,641 9,512 10,430 1.4 (7.6 )
Foreign exchange income 5,015 7,191 1,171 (30.3 ) 328.3
Wealth management fees 3,812 2,796 2,953 36.3 29.1
Interest rate contracts and other derivative income 3,216 1,125 6,690 185.9 (51.9 )
Net gains on sales of loans 915 1,509 1,582 (39.4 ) (42.2 )
Net gains on sales of AFS investment securities 1,561 161 2,129 NM (26.7 )
Net gain on sale of business 31,470 (100.0 )
Other income   3,175 4,399 4,007 (27.8 ) (20.8 )
Total noninterest income $ 42,131 $ 41,695 $ 74,444 1.0 % (43.4 )%
Noninterest expense:
Compensation and employee benefits $ 102,299 $ 93,790 $ 95,234 9.1 % 7.4 %
Occupancy and equipment expense 17,318 18,017 16,880 (3.9 ) 2.6
Deposit insurance premiums and regulatory
assessments 3,088   3,093   6,273 (0.2 ) (50.8 )
Legal expense 2,225 2,145 2,255 3.7 (1.3 )
Data processing 3,157 3,160 3,401 (0.1 ) (7.2 )
Consulting expense 2,059 1,424 2,352 44.6 (12.5 )
Deposit related expense 3,504 3,043 2,679 15.1 30.8
Computer software expense 6,078 6,205 5,054 (2.0 ) 20.3
Other operating expense 22,289 26,262 17,607 (15.1 ) 26.6
Amortization of tax credit and other investments   24,905   30,958   17,400 (19.6 ) 43.1
Total noninterest expense $ 186,922 $ 188,097 $ 169,135 (0.6 )% 10.5 %
                                     

NM Not Meaningful

 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES

($ in thousands)
(unaudited)

Table 4

   

Three Months Ended

 

March 31, 2019

% Change

March 31, 2019

 

December 31, 2018

 

March 31, 2018

Qtr-o-Qtr

 

Yr-o-Yr

Loans:

Commercial:

C&I $ 11,845,860 $ 11,554,737 $ 10,712,583 2.5 % 10.6 %
CRE 9,568,571 9,363,625 9,006,593 2.2 6.2
Multifamily residential 2,307,374 2,162,877 1,944,516 6.7 18.7
Construction and land 584,445 582,311 657,568 0.4 (11.1 )
Consumer:
Single-family residential 6,151,550 5,854,551 4,771,427 5.1 28.9
HELOCs 1,652,211 1,709,022 1,779,242 (3.3 ) (7.1 )
Other consumer   304,774   307,752   339,977   (1.0 ) (10.4 )

Total loans (1)(2)

$

32,414,785

$

31,534,875

$

29,211,906

  2.8 % 11.0 %
 

AFS investment securities

$

2,642,299

$ 2,777,381 $ 2,854,335   (4.9 )% (7.4 )%

Interest-earning assets

$

38,745,004

$ 38,688,647 $ 35,513,663   0.1 % 9.1 %

Total assets

$

40,738,404

$ 40,525,188 $ 37,381,098   0.5 % 9.0 %
 
Deposits:
Noninterest-bearing demand $ 10,071,370 $ 11,447,345 $ 11,289,512 (12.0 )% (10.8 )%
Interest-bearing checking 5,270,855 4,449,541 4,559,695 18.5 15.6
Money market 8,080,848 8,180,426 8,273,160 (1.2 ) (2.3 )
Savings   2,091,406   2,124,697   2,452,452   (1.6 ) (14.7 )
Total core deposits 25,514,479 26,202,009 26,574,819 (2.6 ) (4.0 )
Time deposits   9,408,897   8,783,068   5,716,638   7.1 64.6
Total deposits $ 34,923,376 $ 34,985,077

$

32,291,457

(3)

(0.2 )% 8.2 %
 
Interest-bearing liabilities $ 25,452,835 $ 24,122,509 $ 21,553,595   5.5 % 18.1 %
Stockholders’ equity $ 4,537,301 $ 4,335,110 $ 3,922,926   4.7 % 15.7 %
                                   
(1)     Includes ASC 310-30 discount of $21.6 million, $23.8 million and $34.1 million for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018, 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 5

   

Three Months Ended

March 31, 2019

 

December 31, 2018

Average
Balance

 

Interest

 

Average
Yield/Rate
(1)

Average
Balance

 

Interest

 

Average
Yield/Rate
(1)

Assets

Interest-earning assets

Interest-bearing cash and deposits with banks

 

$

2,578,686

$ 15,470 2.43 % $ 3,267,484 $ 18,791 2.28 %

Resale agreements (2)

1,035,000

7,846 3.07 % 1,035,000 7,819 3.00 %

AFS investment securities

2,642,299

15,748 2.42 % 2,777,381 15,216 2.17 %

Loans (3)

32,414,785

423,534 5.30 % 31,534,875 414,517 5.22 %

FHLB and FRB stock

 

74,234

    713   3.90 %   73,907     991 5.32 %

Total interest-earning assets

 

38,745,004

    463,311   4.85 %   38,688,647     457,334 4.69 %
 
Noninterest-earning assets:

 

Cash and due from banks 468,159

 

482,767

Allowance for loan losses (314,446 )

 

 

(314,019

)

Other assets   1,839,687  

 

 

1,667,793

 
Total assets $ 40,738,404  

 

 

$40,525,188

 
 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits $ 5,270,855 $ 14,255 1.10 % $ 4,449,541 $ 9,963 0.89 %
Money market deposits 8,080,848 30,234 1.52 % 8,180,426 27,640 1.34 %
Savings deposits 2,091,406 2,227 0.43 % 2,124,697 2,257 0.42 %
Time deposits 9,408,897 45,289 1.95 % 8,783,068 39,459 1.78 %
Federal funds purchased and other short-term
borrowings 60,442 616 4.13 % 57,198 624 4.33 %
FHLB advances 338,027 2,979 3.57 % 325,826 2,903 3.53 %
Repurchase agreements (2) 50,000 3,492 28.32 % 50,000 3,396 26.95 %
Long-term debt and finance lease liabilities   152,360     1,758   4.68 %   151,753     1,676 4.38 %
Total interest-bearing liabilities   25,452,835     100,850   1.61 %     24,122,509     87,918 1.45 %
 
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits 10,071,370

 

11,447,345

Accrued expenses and other liabilities 676,898

 

620,224

Stockholders’ equity   4,537,301  

 

4,335,110

Total liabilities and stockholders’ equity $ 40,738,404  

 

 

$40,525,188

 
Interest rate spread 3.24 % 3.24 %
Net interest income and net interest margin $ 362,461   3.79 % $ 369,416 3.79 %
Adjusted net interest income and adjusted net
interest margin (4) $ 360,283   3.77 % $ 363,606

3.73

%
                                     
(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 2.80% and 2.72% for the three months ended March 31, 2019 and December 31, 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 5.01% and 4.77% for the three months ended March 31, 2019 and December 31, 2018, respectively.

(3) Includes loans HFS. ASC 310-30 discount was $21.6 million and $23.8 million for the three months ended March 31, 2019 and December 31, 2018, respectively.
(4) See reconciliation of GAAP to non-GAAP financial measures in Table 12.
 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 6

   

Three Months Ended

March 31, 2019

 

March 31, 2018

Average
Balance

 

Interest

   

Average
Yield/Rate
(1)

Average
Balance

 

Interest

   

Average
Yield/Rate
(1)

Assets

Interest-earning assets:

Interest-bearing cash and deposits with banks

$

2,578,686

$

15,470

2.43

%

$

2,323,771

$

10,945

1.91

%

Resale agreements (2)

1,035,000

7,846

3.07

%

1,050,000

6,934

2.68

%

AFS investment securities

2,642,299

15,748

2.42

%

2,854,335

15,456

2.20

%

Loans (3)

32,414,785

423,534

5.30

%

29,211,906

337,904

4.69

%

FHLB and FRB stock

 

74,234

   

713

3.90

%

 

73,651

   

634

3.49

%

Total interest-earning assets

 

38,745,004

   

463,311

4.85

%

 

35,513,663

   

371,873

4.25

%

 

Noninterest-earning assets:

Cash and due from banks

468,159

443,357

Allowance for loan losses

(314,446

)

(285,836

)

Other assets

 

1,839,687

   

1,709,914

 

Total assets

$

   40,738,404

 

$

37,381,098

 
 

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Checking deposits

 

$

5,270,855

$

14,255

1.10

%

$

4,559,695 (4)

$

6,727

0.60 %

Money market deposits

8,080,848

30,234

1.52

%

8,273,160 (4)

15,840

0.78 %

Savings deposits

2,091,406

2,227

0.43

%

2,452,452 (4)

2,021

0.33 %

Time deposits

9,408,897

45,289

1.95

%

5,716,638 (4)

14,548

1.03 %
Federal funds purchased and other short-term
borrowings 60,442 616 4.13 % 871 7 3.26 %
FHLB advances 338,027 2,979 3.57 % 334,121 2,260 2.74 %
Repurchase agreements (2) 50,000 3,492 28.32 % 50,000 2,306 18.70 %
Long-term debt and finance lease liabilities   152,360     1,758 4.68 %   166,658     1,471 3.58 %
Total interest-bearing liabilities   25,452,835     100,850   1.61 %   21,553,595     45,180   0.85 %
 
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits 10,071,370

 

11,289,512 (4)

 

Accrued expenses and other liabilities 676,898

 

615,065

Stockholders’ equity   4,537,301  

 

 

3,922,926

Total liabilities and stockholders’ equity $ 40,738,404  

 

$

37,381,098

 
Interest rate spread 3.24 % 3.40 %
Net interest income and net interest margin $ 362,461 3.79 % $ 326,693 3.73 %
Adjusted net interest income and adjusted net
interest margin (5) $ 360,283 3.77 % $ 321,493 3.67 %
                                     
(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 2.80% and 2.52% for the three months ended March 31, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 5.01% and 3.95% for the three months ended March 31, 2019 and 2018, respectively.

(3) Includes loans HFS. ASC 310-30 discount was $21.6 million and $34.1 million for the three months ended March 31, 2019 and 2018, respectively.
(4) Includes average balances of deposits HFS related to the Desert Community Bank (“DCB”) sale.
(5) See reconciliation of GAAP to non-GAAP financial measures in Table 12.
 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)

Table 7

   

Three Months Ended (1)

 

March 31, 2019
Basis Point Change

March 31,

2019

 

December 31,

2018

 

March 31,

2018

Qtr-o-Qtr   Yr-o-Yr
Return on average assets 1.63 % 1.69 % 2.03 %

(6) bps

(40) bps
Adjusted return on average assets (2) 1.68 % 1.69 % 1.79 % (1 ) (11 )
Return on average equity 14.66 % 15.83 % 19.34 % (117 ) (468 )
Adjusted return on average equity (2) 15.10 % 15.83 % 17.04 % (73 ) (194 )
Return on average tangible equity (2) 16.53 % 17.97 % 22.30 % (144 ) (577 )
Adjusted return on average tangible equity (2)     17.02 % 17.97 % 19.68 % (95 ) (266 )
Interest rate spread 3.24 % 3.24 % 3.40 % (16 )
Net interest margin 3.79 % 3.79 % 3.73 % 6
Adjusted net interest margin (2)     3.77 % 3.73 % 3.67 % 4   10  
Average loan yield 5.30 % 5.22 % 4.69 % 8 61
Adjusted average loan yield (2) 5.27 % 5.14 % 4.61 % 13 66
Yield on average interest-earning assets     4.85 % 4.69 % 4.25 % 16   60  
Cost of interest-bearing deposits 1.50 % 1.34 % 0.76 % 16 74
Cost of deposits 1.07 % 0.90 % 0.49 % 17 58
Cost of funds     1.15 % 0.98 % 0.56 % 17   59  
Adjusted pre-tax, pre-provision profitability ratio (2) 2.43 % 2.50 % 2.38 % (7 ) 5
Adjusted noninterest expense/average assets (2) 1.60 % 1.53 % 1.63 % 7 (3 )
Efficiency ratio 46.20 % 45.75 % 42.16 % 45 404
Adjusted efficiency ratio (2) 39.75 % 37.92 % 40.64 % 183 bps (89) bps
                             
(1)     Annualized except for efficiency ratio.
(2) See reconciliation of GAAP to non-GAAP financial measures in Tables 10, 11, 12 and 13.
 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR CREDIT LOSSES

($ in thousands)

(unaudited)

Table 8

    Three Months Ended
March 31, 2019   December 31, 2018   March 31, 2018
Non-Purchased Credit Impaired (“Non-PCI”) Loans
Allowance for non-PCI loans, beginning of period $ 311,300 $ 310,010 $ 287,070
Provision for loan losses on non-PCI loans 20,648 17,321 19,933
Net (charge-offs) recoveries:
Commercial:
C&I (14,993 ) (21,227 ) (11,166 )
CRE 222 4,763 427
Multifamily residential 281 286 333
Construction and land 63 24 435
Consumer:
Single-family residential 2 106 183
HELOCs 2 38
Other consumer   (14 )   (2 )   (16 )
Total net charge-offs   (14,437 )   (16,012 )   (9,804 )
Foreign currency translation adjustments   369     (19 )   408  
Allowance for non-PCI loans, end of period   317,880     311,300     297,607  
Purchased Credit Impaired (“PCI”) Loans
Allowance for PCI loans, beginning of period 22 31 58
Reversal of loan losses on PCI loans   (8 )   (9 )   (11 )
Allowance for PCI loans, end of period   14     22     47  
Allowance for loan losses   317,894     311,322     297,654  
Unfunded Credit Facilities
Allowance for unfunded credit reserves, beginning of period 12,566 11,919 13,318
Provision for unfunded credit reserves   1,939     647     296  
Allowance for unfunded credit reserves, end of period   14,505     12,566     13,614  
Allowance for credit losses $

332,399

  $ 323,888   $ 311,268  
                           
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CREDIT QUALITY

($ in thousands)

(unaudited)

 

Table 9

Non-PCI Nonperforming Assets     March 31, 2019   December 31, 2018   March 31, 2018
Nonaccrual loans:

Commercial:

C&I $ 86,466 $ 43,840 $ 80,807
CRE 25,209 24,218 26,496
Multifamily residential 1,620 1,260 2,050
Construction and land 3,973
Consumer:
Single-family residential 10,467 5,259 7,465
HELOCs 10,473 8,614 6,935
Other consumer   2,506     2,502     2,491  
Total nonaccrual loans 136,741 85,693 130,217
Other real estate owned, net 133 133 734
Other nonperforming assets   1,167     7,167      
Total nonperforming assets

$

138,041

  $ 92,993   $ 130,951  
               
Credit Quality Ratios   March 31, 2019 December 31, 2018 March 31, 2018
 
Non-PCI nonperforming assets to total assets (1) 0.33 % 0.23 % 0.35 %
Non-PCI nonaccrual loans to loans held-for-investment (1) 0.42 % 0.26 % 0.44 %
Allowance for loan losses to loans held-for-investment (1) 0.97 % 0.96 % 1.01 %
Allowance for loan losses to non-PCI nonaccrual loans 232.48 % 363.30 % 228.58 %
Annualized quarterly net charge-offs to average loans held-for-investment 0.18 % 0.20 % 0.14 %
 
(1)     Total assets and loans held-for-investment include PCI loans of $290.3 million, $308.0 million and $452.4 million as of March 31, 2019, December 31, 2018 and March 31, 2018, respectively.
 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ and shares in thousands, except for per share data)

(unaudited)

Table 10

During the first quarter of 2019, the Company recorded a pre-tax impairment charge related to certain tax credit investments of $7.0 million. During the first quarter of 2018, the Company sold its DCB branches and recognized a pre-tax gain on sale of $31.5 million. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that exclude the after-tax impacts of the impairment charge related to certain tax credit investments and the gain on the sale of the DCB branches (where applicable) provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.
  Three Months Ended
March 31, 2019   December 31, 2018   March 31, 2018
Net income     (a) $ 164,024 $ 173,018 $ 187,032
Add: Impairment charge related to certain tax credit investments (1) 6,978
Less: Gain on sale of business (31,470 )
Tax effect of adjustment (2)   (2,063 )   9,303  
Adjusted net income (b) $ 168,939   $ 173,018   $ 164,865  
 
Diluted weighted average number of shares outstanding   145,921   146,133   145,939  
 
Diluted EPS $ 1.12 $ 1.18 $ 1.28

Diluted EPS impact of impairment charge related to certain tax credit investments, net of tax

0.04    
Diluted EPS impact of gain on sale of business, net of tax           (0.15 )
Adjusted diluted EPS $ 1.16   $ 1.18   $ 1.13  
 
Average total assets (c) $ 40,738,404   $ 40,525,188   $ 37,381,098  
Average stockholders’ equity (d) $ 4,537,301   $ 4,335,110   $ 3,922,926  
Return on average assets (3) (a)/(c)   1.63 %   1.69 %   2.03 %
Adjusted return on average assets (3) (b)/(c)   1.68 %   1.69 %   1.79 %
Return on average equity (3) (a)/(d)   14.66 %   15.83 %   19.34 %
Adjusted return on average equity (3) (b)/(d)   15.10 %   15.83 %   17.04 %
                       

 

 

 

(1)

   

Included in Amortization of tax credit and other investments.

(2)

Applied statutory rate of 29.56%.

(3)

Annualized.

 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 11

Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of adjusted revenue less adjusted noninterest expense, divided by average total assets. Adjusted revenue represents the aggregate of net interest income and adjusted noninterest income, where adjusted noninterest income excludes the gain on the sale of the DCB branches that were sold in the first quarter of 2018 (where applicable). Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. 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

March 31, 2019   December 31, 2018   March 31, 2018
Net interest income before provision for credit losses     (a) $ 362,461 $ 369,416 $ 326,693
Total noninterest income   42,131     41,695     74,444  
Total revenue (b) $ 404,592   $ 411,111   $ 401,137  
Noninterest income 42,131 41,695 74,444
Less: Gain on sale of business           (31,470 )
Adjusted noninterest income (c)   42,131     41,695     42,974  
Adjusted revenue (a)+(c) = (d) $ 404,592   $ 411,111   $ 369,667  
 
Total noninterest expense (e) $ 186,922 $ 188,097 $ 169,135
Less: Amortization of tax credit and other investments (24,905 ) (30,958 ) (17,400 )
Amortization of core deposit intangibles   (1,174 )   (1,265 )   (1,485 )
Adjusted noninterest expense (f) $ 160,843   $ 155,874   $ 150,250  
Efficiency ratio (e)/(b)   46.20 %   45.75 %   42.16 %
Adjusted efficiency ratio (f)/(d)   39.75 %   37.92 %   40.64 %
Adjusted pre-tax, pre-provision income (d)-(f) = (g) $ 243,749   $ 255,237   $ 219,417  
Average total assets (h) $ 40,738,404   $ 40,525,188   $ 37,381,098  
Adjusted pre-tax, pre-provision profitability ratio (1) (g)/(h)   2.43 %   2.50 %   2.38 %
Adjusted noninterest expense (1)/average assets (f)/(h)   1.60 %   1.53 %   1.63 %
                   

(1) Annualized.

 
 

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 12

Management believes that presenting the adjusted average loan yield and adjusted net interest margin that exclude the ASC 310-30 discount accretion impact provides clarity to financial statement users regarding the change in loan contractual yields and allows comparability to prior periods.
      Three Months Ended

Yield on Average Loans

     

March 31, 2019

  December 31, 2018   March 31, 2018
Interest income on loans (a)

$

423,534

 

$

414,517

 

$

337,904

Less: ASC 310-30 discount accretion income   (2,178 )   (5,810 )   (5,200 )
Adjusted interest income on loans (b) $ 421,356   $ 408,707   $ 332,704  
 
Average loans (c) $ 32,414,785 $ 31,534,875 $ 29,211,906
Add: ASC 310-30 discount   21,639     23,833     34,059  
Adjusted average loans (d) $ 32,436,424   $ 31,558,708   $ 29,245,965  
 
Average loan yield (1) (a)/(c)   5.30 %   5.22 %   4.69 %
Adjusted average loan yield (1) (b)/(d)   5.27 %   5.14 %   4.61 %