East West Bancorp, Inc. (Nasdaq: EWBC), parent company of East
West Bank, the financial bridge between the U.S. and Asia, today
reported financial results for the third quarter of 2011. For the
third quarter of 2011, net income was $62.4 million or $0.41 per
dilutive share. East West increased third quarter net income $15.5
million or 33% and increased earnings per dilutive share $0.14 or
52% from the prior year period.
“Earnings per share for the third quarter was a solid $0.41, an
increase of 52% from the prior year period,” stated Dominic Ng,
Chairman and Chief Executive Officer of East West. “We are
committed to ensuring long-term stable growth and earnings by
thinking strategically and growing the business for the future
while maintaining a strong focus on current profitability and
navigating through the current challenges faced by all financial
institutions. These strategic actions have resulted in solid loan
growth, a stable net interest margin, and reduced credit costs,
resulting in net income for the quarter of $62.4 million, up 3%
from the second quarter of 2011 and up 33% from the third quarter
of 2010.”
Ng continued, “Total gross loans increased to a record $14.2
billion as of September 30, 2011 due to strong growth in our
noncovered loan portfolio, which surpassed $10 billion at quarter
end. During the third quarter, noncovered commercial and trade
finance loans grew 12% to $3.0 billion, and noncovered single
family loans grew 18% to $1.5 billion. At the same time, we saw
noticeable improvement in credit quality and credit costs in our
noncovered portfolio. Nonperforming assets decreased 7% during the
third quarter of 2011 to $168.9 million, or only 0.77% of total
assets, and net charge-offs were down 23% from the second quarter
of 2011.”
Ng concluded, “Although the prolonged low interest rate
environment poses challenges for all financial institutions, our
third quarter results show that East West continues to rise above
its peers. East West has continued to prove that we can demonstrate
strong financial performance in all types of economic environments
and deliver superior return to our shareholders.”
2011 Quarterly Results Summary
For
the three months ended, Dollars in millions, except per share
September 30,2011
June 30,2011
September 30,2010
Net income $ 62.4 $ 60.5 $ 47.0 Net income available to common
shareholders 60.7 58.8 40.2 Earnings per share (diluted) 0.41 0.39
0.27 Return on average assets 1.13 % 1.12 % 0.93 % Return on
average common equity 10.99 % 11.06 % 8.11 % Tier 1
risk-based capital ratio 14.6 % 15.2 % 17.9 % Total risk-based
capital ratio 16.2 %
17.0 % 19.7 %
Third Quarter 2011 Highlights
- Strong Third Quarter Earnings –
For the third quarter of 2011, net income was $62.4 million or
$0.41 per share. Earnings per dilutive share grew $0.02 or 5% from
the second quarter of 2011 and $0.14 or 52% from the third quarter
of 2010.
- Strong Loan Growth – Quarter to
date, noncovered commercial and trade finance loans grew $327.7
million or 12% to $3.0 billion, and noncovered single family loans
grew $231.7 million or 18% to $1.5 billion.
- Stable Net Interest Margin – The
adjusted net interest margin for the third quarter totaled 3.98%,
as compared to 4.03% for the second quarter of 2011 and 3.98% for
the third quarter of 2010.1
- Strong Deposit Growth – Quarter
to date, core deposits increased $469.7 million or 5% to $9.8
billion and total deposits increased $172.9 million or 1% to $17.3
billion.
- Cost of Funds Down 7 bps from Q2
2011 and 18 bps from Q3 2010 – The cost of funds declined 7
basis points from the second quarter of 2011 and 18 basis points
from the third quarter of 2010 to 0.93% for the third quarter of
2011. Our cost of deposits declined 5 basis points from the second
quarter of 2011 and 10 basis points from the third quarter of 2010
to 0.65% for the quarter ended September 30, 2011.
- Net Charge-offs Down 23% from Q2
2011, Down 46% from Q3 2010 – Net charge-offs declined to $24.4
million, a decrease of $7.2 million or 23% from the prior quarter
and a decrease of $20.7 million or 46% from the third quarter of
2010.
- Nonperforming Assets Down 7% to
0.77% of Total Assets – Nonperforming assets decreased $12.3
million or 7% during the third quarter of 2011 to $168.9 million,
or 0.77% of total assets. This is the eighth consecutive quarter
East West is reporting a nonperforming assets to total assets ratio
under 1.00%.
Management Guidance
The Company is providing updated guidance for the fourth quarter
and full year of 2011. Management currently estimates that fully
diluted earnings per share for the fourth quarter of 2011 will
range from $0.40 to $0.41 resulting in earnings per share for the
full year of $1.57 to $1.58 per dilutive share or an increase of
approximately 89% to 90% from 2010. Also, this updated guidance for
the full year of 2011 is an increase of approximately 3% from our
previously released guidance. This EPS guidance is based on the
following assumptions:
- Stable balance sheet
- A stable interest rate environment and
an adjusted net interest margin of approximately 3.90%
- Provision for loan losses of
approximately $20 million for the quarter
- Total noninterest expense of
approximately $97 million to $100 million for the quarter, net of
amounts to be reimbursed by the FDIC
- Effective tax rate of approximately
36%
Balance Sheet Summary
At September 30, 2011, total assets equaled $21.8 billion
compared to $21.9 billion at June 30, 2011. Although total assets
remained relatively unchanged, total loans receivable grew $176.4
million and investment securities grew $73.5 million quarter to
date. These increases were funded by existing cash and an increase
in deposits of $172.9 million from June 30, 2011.
Loans receivable totaled $14.2 billion at September 30, 2011, as
compared to $14.0 billion at June 30, 2011 and $13.6 billion at
September 30, 2010. During the third quarter, noncovered loan
balances increased 4% or $393.1 million, to $10.1 billion at
September 30, 2011. The increase in noncovered loans during the
third quarter was driven by growth in both commercial and trade
finance loans and single family loans, which increased $327.7
million or 12%, and $231.7 million or 18%, respectively. The loan
growth in our commercial and trade finance portfolio in the third
quarter is attributed to our expanded lending platform in the U.S.
and is well-diversified across many industries. The growth in the
single family loan portfolio is due to ongoing demand from our
retail branch network.
The growth in noncovered commercial and trade finance loans and
single-family loans was partially offset by decreases in noncovered
land, construction, and consumer loans, including loans held for
sale, during the third quarter of 2011. Quarter to date, land and
construction loans declined by $47.9 million or 11% to $372.1
million as of September 30, 2011. The consumer loan portfolio
declined $85.4 million or 14% during the quarter, primarily as a
result of the transfer of government guaranteed student loans to
loans held for sale to reflect management’s intent to sell these
loans at a future date. As of September 30, 2011, we classified
$251.9 million of loans as held for sale, primarily comprised of
government guaranteed student loans. Further, during the third
quarter, we sold $219.8 million of government guaranteed student
loans and $10.0 million of SBA loans at gains of approximately $4.4
million, and $1.1 million, respectively.
Covered Loans
Covered loans totaled $4.1 billion as of September 30, 2011, a
decrease of $216.7 million from June 30, 2011. The decrease in the
covered loan portfolio was primarily due to payoffs and paydown
activity, as well as charge-offs.
The covered loan portfolio is comprised of loans acquired from
the FDIC-assisted acquisitions of United Commercial Bank (UCB) and
Washington First International Bank (WFIB) which are covered under
loss share agreements with the FDIC. During the third quarter, we
recorded a net decrease in the FDIC indemnification asset and
receivable included in noninterest income (loss) of $(43.5) million
which resulted largely from the improved performance of the UCB
loan portfolio as compared to our original estimate.
Deposits and Borrowings
During the third quarter, total deposits grew $172.9 million
from June 30, 2011 to a record $17.3 billion at September 30, 2011.
In the third quarter, we continued our focus on growing commercial
and low-cost core deposits and reducing our reliance on time
deposits. Core deposits increased to a record $9.8 billion at
September 30, 2011, or an increase of $469.7 million or 5% from
June 30, 2011 while time deposits decreased to $7.5 billion at
September 30, 2011, or a decrease of $296.7 million or 4% from June
30, 2011. Demand deposits grew to a record $3.4 billion, an
increase of $225.9 million or 7% quarter to date.
As of September 30, 2011, FHLB advances totaled $457.1 million,
a decrease of 14% or $75.9 million from June 30, 2011 due to both
scheduled payments and prepayments during the third quarter. During
the third quarter, we prepaid $48.8 million of FHLB advances with
an effective interest rate of 2.4%, incurring a prepayment penalty
of $3.3 million, which is included in noninterest expense.
Additionally, during the third quarter, we called $10.8 million of
10.9% junior subordinated debt securities at a premium of $526
thousand, which is also recorded in noninterest expense. These
actions were taken to reduce borrowing costs and improve the net
interest margin in the coming quarters.
Third Quarter 2011 Operating Results
Net Interest Income
The core net interest margin, excluding the net impact to
interest income of $39.3 million resulting from covered loan
activity and amortization of the FDIC indemnification asset,
remained strong at 3.98% for the third quarter of 2011, as compared
to 4.03% for the second quarter of 2011 and 3.98% for the third
quarter of 2010.1 For the third quarter, the yield on noncovered
loans was 4.87% compared to 5.10% in the prior quarter and the
yield on covered loans, excluding the net impact to interest income
from covered loan activity and amortization of the FDIC
indemnification asset, was 7.89%, compared to 7.92% in the prior
quarter.1 Additionally, the yield on investment securities improved
9 basis points to 2.99% for the quarter ended September 30,
2011.
East West continues to focus on commercial and low-cost core
deposits and successfully grew core deposits $469.7 million during
the quarter and lowered the cost of deposits by five basis points
to 0.65% for the quarter. In addition, the cost of funds was also
down quarter to date, decreasing seven basis points to 0.93%.
Management believes that East West can maintain a relatively
stable net interest margin throughout this prolonged low interest
rate environment, while ensuring prudent interest rate risk
management. In the upcoming months, the Company will continue to
evaluate opportunities to reduce the cost of deposits and
borrowings. In the fourth quarter of 2011, $2.8 billion of time
deposits with a weighted-average interest rate of 0.87% will be
maturing and the Company expects to replace these deposits at a
substantially lower cost. Additionally, management is confident in
its ability to organically grow the loan portfolio, maintaining
stable interest earning assets. As such, while the net interest
margin may decrease slightly, management still expects to maintain
a relatively stable net interest margin and believes that the
adjusted net interest margin will approximate 3.90% for the fourth
quarter of 2011.
Noninterest Income (Loss)
The Company reported a total noninterest income (loss) for the
third quarter of 2011 of ($13.5) million, compared to noninterest
income of $12.5 million in the second quarter of 2011 and
noninterest income of $29.3 million in the third quarter of
2010.
Total fees and other operating income remained stable and
totaled $21.2 million for the third quarter of 2011, compared to
$22.1 million for the second quarter of 2011 and $17.4 million for
the third quarter of 2010 as detailed below:
Quarter Ended Quarter Ended
Quarter Ended % Change ($ in thousands)
September 30,
2011 June 30, 2011
September 30, 2010 (Yr/Yr) Branch fees $ 8,872
$ 9,078 $ 7,976 11 % Letters of credit fees and foreign exchange
income 6,450 6,216 3,914 65 % Ancillary loan fees 2,076 2,055 2,367
-12 % Other operating income 3,835 4,771 3,127
23 % Total fees & other operating income $ 21,233 $ 22,120 $
17,384 22 %
Also included in noninterest income for the third quarter of
2011 were gains on sales of government guaranteed student loans and
SBA loans of $5.5 million and gains on sales of investment
securities of $3.2 million.
Noninterest Expense
Noninterest expense totaled $104.6 million for the third quarter
of 2011, compared to $117.6 million for the second quarter of 2011
and $99.9 million for the third quarter of 2010. The decrease in
noninterest expense from the second quarter of 2011 was primarily
related to decreases in other real estate owned expense of $10.1
million and deposit insurance premium expense of $4.4 million. The
decrease in the deposit insurance premium was due to a lower actual
assessment. In the third quarter, we incurred $4.4 million in net
expenses on covered loans and other real estate owned for which we
expect that 80% or $3.5 million is reimbursable by the FDIC. In
addition, included in noninterest expense for the third quarter of
2011 is a prepayment penalty on FHLB advances and junior
subordinated debt securities of $3.8 million.
Noninterest expense, excluding amounts to be reimbursed by the
FDIC and the prepayment penalties on FHLB advances and junior
subordinated debt securities, totaled $97.2 million for the third
quarter of 2011.1
A summary of the noninterest expenses for the third quarter
2011, compared to the second quarter 2011, is detailed below:
Quarter Ended
Quarter Ended ($ in thousands)
September 30, 2011
June 30, 2011 Total noninterest
expense: $ 104,552 $ 117,597 Amounts to be reimbursed on covered
assets (80% of actual expense amount) 3,539 13,574 Prepayment
penalties for FHLB Advances and other borrowings 3,826
4,433
Noninterest expense excluding reimbursable
amounts and prepayment penalties on FHLB Advances and other
borrowings
$ 97,187 $ 99,590
Management anticipates that in the fourth quarter of 2011,
noninterest expense will be approximately $97.0 million to $100.0
million, net of amounts reimbursable from the FDIC.
The effective tax rate for the third quarter was 36.1% compared
to 36.8% in the prior quarter. The effective tax rate is reduced
from the statutory tax rate primarily due to the utilization of tax
credits related to affordable housing investments.
Credit Quality
Credit quality continued to improve during the third quarter of
2011. Nonperforming assets, excluding covered assets, decreased by
$12.3 million or 7% from the prior quarter to $168.9 million or
0.77% of total assets at September 30, 2011. The decrease in
nonperforming assets was due to a $17.0 million or 10% decrease in
nonaccrual loans during the third quarter of 2011, partially offset
by an increase in other real estate owned of $4.7 million. In
addition, for the eighth consecutive quarter, net charge-offs
declined. Total net charge-offs decreased to $24.4 million for the
third quarter of 2011, a decrease of 23% from the previous quarter
and a decrease of 46% compared to the prior year quarter.
East West continues to maintain a strong allowance for
noncovered loan losses at $211.7 million or 2.16% of noncovered
loans receivable at September 30, 2011. This compares to an
allowance for noncovered loan losses of $213.8 million or 2.29% of
noncovered loans at June 30, 2011 and $240.3 million or 2.79% of
noncovered loans at September 30, 2010. The provision for loan
losses was $22.0 million for the third quarter of 2011, a decrease
of 17% from the prior quarter, and a decrease of 43% as compared to
the third quarter of 2010. Our allowance for loan losses and
provision for loan losses have declined for several quarters as a
result of credit quality improvement, partially offset by increases
in the allowance for loan losses on commercial and trade finance
loans, commensurate with the increases in these portfolios.
Management expects that the provision for loan losses will
decrease in future quarters and total approximately $20.0 million
for the fourth quarter of 2011.
Capital Strength
(Dollars in millions) September 30, 2011
Well
CapitalizedRegulatoryRequirement
Total Excess AboveWell
CapitalizedRequirement
Tier 1 leverage capital ratio 9.3 % 5.00 % $ 932 Tier 1
risk-based capital ratio 14.6 % 6.00 % 1,186 Total risk-based
capital ratio 16.2 % 10.00 % 853
Tangible common equity to tangible assets
ratio
8.2 % N/A N/A Tangible common equity to risk weighted assets ratio
12.8 %
N/A
N/A
Our capital ratios remain very strong. As of the end of the
third quarter of 2011, our Tier 1 leverage capital ratio totaled
9.3%, our Tier 1 risk-based capital ratio totaled 14.6% and our
total risk-based capital ratio totaled 16.2%. East West exceeds
well capitalized requirements for all regulatory guidelines by over
$800 million. The Company remains focused on active capital
management and remains committed to maintaining strong capital
levels that exceed regulatory requirements while also supporting
balance sheet growth and providing a strong return to our
shareholders.
Dividend Payout
East West’s Board of Directors has declared fourth quarter
dividends on the common stock and Series A Preferred Stock. The
common stock cash dividend of $0.05 is payable on or about November
24, 2011 to shareholders of record on November 10, 2011. The
dividend on the Series A Preferred Stock of $20.00 per share is
payable on November 1, 2011 to shareholders of record on October
15, 2011.
Conference Call
East West will host a conference call to discuss third quarter
2011 earnings with the public on Thursday, October 20, 2011 at 8:30
a.m. PDT/11:30 a.m. EDT. The public and investment community are
invited to listen as management discusses third quarter results and
operating developments. The following dial-in information is
provided for participation in the conference call: Local call
within the US – (877) 317-6789; Call within Canada – (866)
605-3852; International call – (412) 317-6789. A listen-only live
broadcast of the call also will be available on the investor
relations page of the Company's website at
www.eastwestbank.com.
About East West
East West Bancorp is a publicly owned company with $21.8 billion
in assets 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 commercial banks
headquartered in California with over 130 locations worldwide,
including the U.S. markets of California, New York, Georgia,
Massachusetts, Texas and Washington. In Greater China, East West’s
presence includes a full service branch in Hong Kong and
representative offices in Beijing, Shenzhen and Taipei. Through a
wholly owned subsidiary bank, East West’s presence in Greater China
also includes full service branches in Shanghai and Shantou and a
representative office in Guangzhou. For more information on East
West Bancorp, visit the Company's website at
www.eastwestbank.com.
Forward-Looking Statements
This release may contain forward-looking statements, which are
included in accordance with the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995 and accordingly,
the cautionary statements contained in East West Bancorp’s Annual
Report on Form 10-K for the year ended Dec. 31, 2010 (See Item I --
Business, and Item 7 -- Management’s Discussion and Analysis of
Consolidated Financial Condition and Results of Operations), and
other filings with the Securities and Exchange Commission are
incorporated herein by reference. These factors include, but are
not limited to: the effect of interest rate and currency exchange
fluctuations; competition in the financial services market for both
deposits and loans; EWBC’s ability to efficiently incorporate
acquisitions into its operations; the ability of borrowers to
perform as required under the terms of their loans; effect of
additional provisions for loan losses; effect of any goodwill
impairment, the ability of EWBC and its subsidiaries to increase
its customer base; the effect of regulatory and legislative action,
including California tax legislation and an announcement by the
state’s Franchise Tax Board regarding the taxation of Registered
Investment Companies; and regional and general economic conditions.
Actual results and performance in future periods may be materially
different from any future results or performance suggested by the
forward-looking statements in this release. Such forward-looking
statements speak only as of the date of this release. East West
expressly disclaims any obligation to update or revise any
forward-looking statements found herein to reflect any changes in
the Bank’s expectations of results or any change in event.
1 See reconciliation of the GAAP financial measure to the
non-GAAP financial measure in the tables attached.
EAST WEST BANCORP, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands, except per share amounts)
(unaudited) September 30, 2011 June 30,
2011 September 30, 2010 Assets Cash and cash equivalents
$ 1,135,888 $ 1,598,498 $ 1,164,936 Short-term investments 66,009
85,479 151,557 Securities purchased under resale agreements 951,824
812,281 350,000 Investment securities 3,279,592 3,206,108 2,907,349
Loans receivable, excluding covered loans
(net of allowance for loan losses of $211,738, $213,825 and
$240,286)
9,830,686 9,428,015 8,323,684 Covered loans, net 4,139,902
4,356,595 4,975,502 Total loans
receivable, net 13,970,588 13,784,610 13,299,186
Federal Home Loan Bank and Federal Reserve
Bank stock
190,765 197,187 216,738 FDIC indemnification asset 569,157 637,535
874,759 Other real estate owned, net 21,178 16,464 16,936 Other
real estate owned covered, net 87,298 123,050 137,353 Premiums on
deposits acquired, net 70,115 73,182 82,755 Goodwill 337,438
337,438 337,438 Other assets 1,133,194
1,000,876 878,239 Total assets
$
21,813,046 $ 21,872,708 $ 20,417,246
Liabilities and Stockholders' Equity Deposits
$
17,308,700 $ 17,135,753 $ 15,297,971 Federal Home Loan Bank
advances 457,075 532,951 1,018,074 Securities sold under repurchase
agreements 1,024,949 1,052,615 1,045,664 Long-term debt 214,178
225,261 235,570 Other borrowings 4,955 29,924 28,328 Accrued
expenses and other liabilities 542,020 666,872
406,879 Total liabilities 19,551,877
19,643,376 18,032,486 Stockholders' equity 2,261,169
2,229,332 2,384,760 Total liabilities
and stockholders' equity $ 21,813,046 $ 21,872,708 $
20,417,246 Book value per common share $ 14.62 $ 14.43 $
13.61 Number of common shares at period end 148,962 148,751 147,982
Ending Balances September 30, 2011 June 30,
2011 September 30, 2010 Loans receivable Real estate -
single family $ 1,517,954 $ 1,286,235 $ 1,057,697 Real estate -
multifamily 942,428 950,981 971,155 Real estate - commercial
3,459,001 3,408,560 3,425,300 Real estate - land and construction
372,140 420,069 563,010 Commercial 3,012,152 2,684,472 1,696,173
Consumer 503,575 588,940 886,124
Total noncovered loans receivable,
excluding loans held for sale
9,807,250 9,339,257 8,599,459 Loans held for sale 251,920 326,841
16,902 Covered loans, net 4,139,902 4,356,595
4,975,502 Total loans receivable 14,199,072
14,022,693 13,591,863 Unearned fees, premiums and discounts (16,746
) (24,258 ) (52,391 )
Allowance for loan losses on noncovered
loans
(211,738 ) (213,825 ) (240,286 ) Net loans
receivable $ 13,970,588 $ 13,784,610 $ 13,299,186 Deposits
Noninterest-bearing demand $ 3,377,559 $ 3,151,660 $ 2,571,750
Interest-bearing checking 948,679 792,330 762,633 Money market
4,434,983 4,311,583 4,190,448 Savings 1,063,086
1,099,065 955,278 Total core deposits
9,824,307 9,354,638 8,480,109 Time deposits 7,484,393
7,781,115 6,817,862 Total deposits $
17,308,700 $ 17,135,753 $ 15,297,971
EAST WEST
BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (In thousands, except per share amounts)
(unaudited) Quarter Ended September 30,
2011 June 30, 2011 September 30, 2010
Interest and dividend income $ 282,741 $ 274,468 $ 231,400 Interest
expense (44,959 ) (47,132 ) (48,595 ) Net
interest income before provision for loan losses 237,782 227,336
182,805 Provision for loan losses (22,000 ) (26,500 )
(38,648 ) Net interest income after provision for loan
losses 215,782 200,836 144,157 Noninterest (loss) income (13,545 )
12,491 29,315 Noninterest expense (104,552 ) (117,597
) (99,945 ) Income before provision for income taxes 97,685
95,730 73,527 Provision for income taxes 35,253
35,205 26,576 Net income 62,432 60,525
46,951 Preferred stock dividend and amortization of preferred stock
discount (1,714 ) (1,714 ) (6,732 ) Net income
available to common stockholders $ 60,718 $ 58,811 $ 40,219 Net
income per share, basic $ 0.41 $ 0.40 $ 0.27 Net income per share,
diluted $ 0.41 $ 0.39 $ 0.27 Shares used to compute per share net
income: - Basic 147,162 147,011 146,454 - Diluted 153,453 153,347
147,113
Quarter Ended September 30,
2011 June 30, 2011 September 30, 2010 Noninterest
(loss) income: Branch fees $ 8,872 $ 9,078 $ 7,976 (Decrease)
increase in FDIC indemnification asset and FDIC receivable (43,451
) (18,806 ) 5,826 Net gain on sales of loans 5,452 5,891 4,177
Letters of credit fees and foreign exchange income 6,450 6,216
3,914 Net gain on sales of investments 3,191 1,117 2,791 Net gain
on sale of fixed assets 30 2,169 25 Impairment loss on investment
securities - - (888 ) Ancillary loan fees 2,076 2,055 2,367 Other
operating income 3,835 4,771
3,127 Total noninterest (loss) income $ (13,545 ) $ 12,491 $
29,315 Noninterest expense: Compensation and employee
benefits $ 39,885 $ 40,870 $ 38,693 Occupancy and equipment expense
12,580 12,175 13,963 Loan related expenses 5,208 4,284 6,316 Other
real estate owned expense 4,489 14,585 5,694 Deposit insurance
premiums and regulatory assessments 2,430 6,833 5,676 Prepayment
penalties for FHLB advances and other borrowings 3,826 4,433 -
Legal expense 6,028 6,791 5,301 Amortization of premiums on
deposits acquired 3,067 3,151 3,352 Data processing 1,827 2,100
2,646 Consulting expense 2,094 2,378 1,612 Amortization of
investments in affordable housing partnerships 5,287 4,598 1,442
Other operating expense 17,831 15,399
15,250 Total noninterest expense $ 104,552 $ 117,597
$ 99,945
EAST WEST BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS
OF INCOME (In thousands, except per share amounts)
(unaudited) Year To Date September 30,
2011 September 30, 2010 Interest and dividend
income $ 811,544 $ 803,636 Interest expense (137,592 )
(155,484 ) Net interest income before provision for loan
losses 673,952 648,152 Provision for loan losses (75,006 )
(170,325 ) Net interest income after provision for loan
losses 598,946 477,827 Noninterest income 9,987 56,549 Noninterest
expense (328,938 ) (364,173 ) Income before provision
for income taxes 279,995 170,203 Provision for income taxes
100,967 61,988 Net income 179,028 108,215
Preferred stock dividend and amortization of preferred stock
discount (5,143 ) (19,017 ) Net income available to
common stockholders $ 173,885 $ 89,198 Net income per share, basic
$ 1.18 $ 0.66 Net income per share, diluted $ 1.17 $ 0.61 Shares
used to compute per share net income: - Basic 147,013 134,396 -
Diluted 153,372 146,993
Year To Date
September 30, 2011 September 30, 2010 Noninterest
income: Branch fees $ 25,704 $ 24,953 Decrease in FDIC
indemnification asset and FDIC receivable (79,700 ) (47,170 ) Net
gain on sales of loans 18,753 12,250 Letters of credit fees and
foreign exchange income 17,636 11,023 Net gain on sales of
investments 6,823 24,749 Net gain on sale of fixed assets 2,236 77
Impairment loss on investment securities (464 ) (10,329 ) Ancillary
loan fees 6,122 6,425 Gain on acquisition - 27,571 Other operating
income 12,877 7,000 Total noninterest
income $ 9,987 $ 56,549 Noninterest expense: Compensation
and employee benefits $ 119,025 $ 131,051 Occupancy and equipment
expense 37,353 39,022 Loan related expenses 12,591 14,567 Other
real estate owned expense 29,738 44,689 Deposit insurance premiums
and regulatory assessments 16,454 21,785 Prepayment penalties for
FHLB advances and other borrowings 12,281 13,832 Legal expense
16,920 14,391 Amortization of premiums on deposits acquired 9,403
10,046 Data processing 6,530 8,174 Consulting expense 6,098 5,672
Amortization of investments in affordable housing partnerships
14,410 7,117 Other operating expense 48,135
53,827 Total noninterest expense $ 328,938 $ 364,173
EAST WEST BANCORP, INC. SELECTED FINANCIAL
INFORMATION (In thousands) (unaudited)
Average Balances Quarter Ended September 30,
2011 June 30, 2011 September 30, 2010 Loans
receivable Real estate - single family $ 1,382,715 $ 1,231,774 $
1,051,914 Real estate - multifamily 945,007 950,687 984,589 Real
estate - commercial 3,447,983 3,393,361 3,452,114 Real estate -
land and construction 416,640 457,337 615,959 Commercial 2,859,985
2,450,510 1,591,042 Consumer 773,229 935,081
803,430 Total loans receivable, excluding
covered loans 9,825,559 9,418,750 8,499,048 Covered loans
4,253,687 4,487,610 5,105,793
Total loans receivable 14,079,246 13,906,360 13,604,841 Investment
securities 3,255,701 3,220,795 2,482,951 Earning assets 19,810,633
19,402,968 17,692,002 Total assets 21,978,123 21,574,103 20,097,142
Deposits Noninterest-bearing demand $ 3,236,683 $ 2,935,704
$ 2,436,031 Interest-bearing checking 895,223 793,349 731,267 Money
market 4,453,224 4,374,404 4,162,847 Savings 1,048,004
1,034,486 960,927 Total core
deposits 9,633,134 9,137,943 8,291,072 Time deposits
7,665,429 7,653,112 6,719,637
Total deposits 17,298,563 16,791,055 15,010,709 Interest-bearing
liabilities 15,842,752 15,913,856 14,910,922 Stockholders' equity
2,275,803 2,210,603 2,360,025
Selected Ratios
Quarter Ended September 30, 2011 June 30, 2011
September 30, 2010 For The Period Return on average assets
1.13 % 1.12 % 0.93 % Return on average common equity 10.99 % 11.06
% 8.11 % Interest rate spread 4.53 % 4.48 % 3.90 % Net interest
margin 4.76 % 4.70 % 4.10 % Yield on earning assets 5.66 % 5.67 %
5.19 % Cost of deposits 0.65 % 0.70 % 0.75 % Cost of funds 0.93 %
1.00 % 1.11 % Noninterest expense/average assets (1) 1.67 % 1.95 %
1.89 % Efficiency ratio (2) 41.19 % 43.95 % 44.67 % (1)
Excludes the amortization of intangibles, amortization and
impairment loss of premiums on deposits acquired, amortization of
investments in affordable housing partnerships and prepayment
penalties for FHLB advances and other borrowings. (2)
Represents noninterest expense, excluding the amortization of
intangibles, amortization and impairment loss of premiums on
deposits acquired, amortization of investments in affordable
housing partnerships and prepayment penalties for FHLB advances and
other borrowings, divided by the aggregate of net interest income
before provision for loan losses and noninterest income, excluding
items that are non-recurring in nature.
EAST WEST BANCORP, INC. QUARTER TO DATE AVERAGE
BALANCES, YIELDS AND RATES PAID (In thousands) (unaudited)
Quarter Ended September 30, 2011
September 30, 2010 Average Average
Volume Interest
Yield(1)
Volume Interest
Yield(1)
ASSETS
Interest-earning assets: Due from banks and short-term
investments $ 1,164,302 $ 7,866 2.68 %
$
736,658
$
2,362 1.27 % Securities purchased under resale agreements 1,117,493
5,064 1.80 % 648,136 2,410 1.46 % Investment securities
available-for-sale 3,255,701 24,503 2.99 % 2,482,951 15,725 2.51 %
Loans receivable 9,825,559 120,596 4.87 % 8,499,048 116,029 5.42 %
Loans receivable - covered 4,253,687 123,927 11.56 % 5,105,793
94,057 7.31 % Federal Home Loan Bank and Federal Reserve Bank stock
193,891 785 1.61 %
219,416 817
1.49 % Total interest-earning assets 19,810,633
282,741 5.66 %
17,692,002 231,400
5.19 %
Noninterest-earning assets: Cash and
cash equivalents 254,918 668,277 Allowance for loan losses (225,395
) (253,078 ) Other assets 2,137,967 1,989,941
Total assets $ 21,978,123 $ 20,097,142
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities: Checking accounts 895,223 936
0.41 % 731,267 550 0.30 % Money market accounts 4,453,224 4,798
0.43 % 4,162,847 7,103 0.68 % Savings deposits 1,048,004 756 0.29 %
960,927 818 0.34 % Time deposits 7,665,429 21,726 1.12 % 6,719,637
20,028 1.18 % Federal Home Loan Bank advances 508,913 3,013 2.35 %
1,020,640 5,725 2.23 % Securities sold under repurchase agreements
1,035,466 12,218 4.68 % 1,047,697 12,189 4.55 % Long-term debt
222,490 1,424 2.54 % 235,570 1,685 2.80 % Other borrowings
14,003 88 2.49 %
32,337 497
6.01 % Total interest-bearing liabilities 15,842,752
44,959 1.13 %
14,910,922 48,595
1.29 %
Noninterest-bearing liabilities: Demand
deposits 3,236,683 2,436,031 Other liabilities 622,885 390,164
Stockholders' equity 2,275,803 2,360,025
Total liabilities and stockholders'
equity
$ 21,978,123 $ 20,097,142 Interest rate spread
4.53 % 3.90 % Net interest income and net interest margin $
237,782 4.76 % $ 182,805 4.10 % Net interest income and net
interest margin, adjusted (2) $ 198,489 3.98 % $ 177,294 3.98 %
(1) Annualized. (2) Amounts exclude the net impact of
covered loan dispositions of $39.3 million and $5.5 million for the
three months ended September 30, 2011 and 2010, respectively.
EAST
WEST BANCORP, INC. SELECTED FINANCIAL INFORMATION (In
thousands) (unaudited) Average Balances
Year To Date September 30, 2011 September 30,
2010 Loans receivable Real estate - single family $ 1,259,419 $
990,806 Real estate - multifamily 952,426 1,017,883 Real estate -
commercial 3,407,097 3,519,178 Real estate - land and construction
460,512 707,062 Commercial 2,458,701 1,496,885 Consumer
920,248 793,670 Total loans receivable,
excluding covered loans 9,458,403 8,525,484 Covered loans
4,477,467 5,175,251 Total loans receivable
13,935,870 13,700,735 Investment securities 3,100,000 2,291,588
Earning assets 19,318,212 17,584,474 Total assets 21,484,046
20,049,938 Deposits Noninterest-bearing demand $ 2,966,343 $
2,323,950 Interest-bearing checking 820,518 672,817 Money market
4,400,912 3,868,588 Savings 1,018,215 971,381
Total core deposits 9,205,988 7,836,736 Time deposits
7,487,935 6,914,615 Total deposits 16,693,923
14,751,351 Interest-bearing liabilities 15,785,667 15,191,062
Stockholders' equity 2,211,373 2,321,690
Selected
Ratios Year To Date September 30, 2011
September 30, 2010 For The Period Return on average assets
1.11 % 0.72 % Return on average common equity 10.92 % 6.47 %
Interest rate spread 4.45 % 4.74 % Net interest margin 4.66 % 4.93
% Yield on earning assets 5.62 % 6.11 % Cost of deposits 0.67 %
0.83 % Cost of funds 0.98 % 1.19 % Noninterest expense/average
assets (1) 1.82 % 2.22 % Efficiency ratio (2) 42.79 % 48.47 %
(1) Excludes the amortization of intangibles,
amortization and impairment loss of premiums on deposits acquired,
amortization of investments in affordable housing partnerships and
prepayment penalties for FHLB advances and other borrowings.
(2) Represents noninterest expense, excluding the amortization of
intangibles, amortization and impairment loss of premiums on
deposits acquired, amortization of investments in affordable
housing partnerships and prepayment penalties for FHLB advances and
other borrowings, divided by the aggregate of net interest income
before provision for loan losses and noninterest income, excluding
items that are non-recurring in nature.
EAST WEST BANCORP, INC. YEAR TO DATE AVERAGE
BALANCES, YIELDS AND RATES PAID (In thousands) (unaudited)
Year To Date September 30, 2011
September 30, 2010 Average Average
Volume Interest
Yield(1)
Volume Interest
Yield(1)
ASSETS
Interest-earning assets: Due from banks and short-term
investments $ 1,052,091 $ 15,106 1.92 % $ 914,471 $ 7,405 1.08 %
Securities purchased under resale agreements 1,029,000 14,443 1.88
% 455,824 11,303 3.27 % Investment securities available-for-sale
3,100,000 66,613 2.87 % 2,291,588 50,656 2.96 % Loans receivable
9,458,403 355,246 5.02 % 8,525,484 354,973 5.57 % Loans receivable
- covered 4,477,467 357,576 10.68 % 5,175,251 376,840 9.74 %
Federal Home Loan Bank and Federal Reserve Bank stock
201,251 2,560 1.70 %
221,856 2,473
1.49 % Total interest-earning assets
19,318,212 811,544 5.62 %
17,584,474 803,650
6.11 %
Noninterest-earning assets: Cash
and cash equivalents 269,700 547,403 Allowance for loan losses
(230,020 ) (254,153 ) Other assets 2,126,154
2,172,214
Total assets
$ 21,484,046 $ 20,049,938
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities: Checking accounts 820,518
2,283 0.37 % 672,817 1,691 0.34 % Money market accounts 4,400,912
16,621 0.50 % 3,868,588 23,405 0.81 % Savings deposits 1,018,215
2,421 0.32 % 971,381 3,234 0.45 % Time deposits 7,487,935 62,003
1.11 % 6,914,615 62,749 1.21 % Federal Home Loan Bank advances
751,822 12,746 2.27 % 1,427,903 20,905 1.96 % Securities sold under
repurchase agreements 1,059,770 36,351 4.59 % 1,039,636 36,775 4.66
% Long-term debt 231,087 4,783 2.77 % 235,570 4,823 2.70 % Other
borrowings 15,408 384
3.33 % 60,552
1,902 4.19 % Total interest-bearing
liabilities 15,785,667 137,592
1.17 % 15,191,062
155,484 1.37 %
Noninterest-bearing liabilities: Demand deposits 2,966,343
2,323,950 Other liabilities 520,663 213,236 Stockholders' equity
2,211,373 2,321,690 Total liabilities
and stockholders' equity $ 21,484,046 $ 20,049,938
Interest rate spread 4.45 % 4.74 % Net interest
income and net interest margin $ 673,952 4.66 % $ 648,166 4.93 %
Net interest income and net interest margin, adjusted (2) $
575,353 3.98 % $ 548,544 4.17 % (1) Annualized. (2)
Amounts exclude the net impact of covered loan dispositions of
$98.6 million and $97.1 million for the nine months ended September
30, 2011 and 2010, respectively, and repurchase agreement
termination gain of $2.5 million for the nine months ended
September 30, 2010.
EAST WEST BANCORP, INC. QUARTERLY ALLOWANCE
FOR LOAN LOSSES RECAP (In thousands) (unaudited)
Quarter Ended 9/30/2011
6/30/2011 9/30/2010 LOANS
Allowance balance, beginning of period $ 220,556 $ 226,161 $
249,462 Allowance for unfunded loan commitments and letters of
credit - (487 ) 1,133 Provision for loan losses 22,000 26,500
38,648 Net Charge-offs: Real estate - single family 1,563
1,120 14,620 Real estate - multifamily 2,069 1,081 7,526 Real
estate - commercial 1,157 2,164 11,779 Real estate - land and
construction 12,855 18,143 8,300 Commercial 6,487 8,844 2,539
Consumer 253 266
293
Total net charge-offs
24,384 31,618
45,057 Allowance balance, end of period (3) $
218,172 $ 220,556 $
244,186
UNFUNDED LOAN COMMITMENTS AND LETTERS OF
CREDIT: Allowance balance, beginning of period $ 11,197 $
10,710 $ 10,042 Provision for unfunded loan commitments and letters
of credit - 487
(1,133 ) Allowance balance, end of period $ 11,197
$ 11,197 $ 8,909
GRAND TOTAL, END OF PERIOD $ 229,369 $ 231,753
$ 253,095 Nonperforming assets
to total assets (1)
0.77
%
0.83 % 0.96 %
Allowance for loan losses on noncovered
loans to total gross noncovered loans held for investment at end of
period
2.16
%
2.29 % 2.79 %
Allowance for loan losses on noncovered
loans and unfunded loan commitments to total gross noncovered loans
held for investment at end of period
2.27
%
2.41 % 2.90 %
Allowance on noncovered loans to
noncovered nonaccrual loans at end of period
143.35
%
129.80 % 133.95 % Nonaccrual loans to total loans (2) 1.04 % 1.17 %
1.32 %
(1)
Nonperforming assets excludes covered
loans and covered REOs. Total assets includes covered assets.
(2)
Nonaccrual loans excludes covered loans.
Total loans includes covered loans.
(3)
Included in the allowance is $6.4 million,
$6.7 million and $3.9 million related to covered loans as of
September 30, 2011, June 30, 2011 and September 30, 2010,
respectively. This allowance is related to drawdowns on commitments
that were in existence as of the acquisition dates and therefore,
are covered under the loss share agreements with the FDIC.
Allowance on these subsequent drawdowns is accounted for as part of
the general allowance.
EAST
WEST BANCORP, INC. TOTAL NON-PERFORMING ASSETS, EXCLUDING
COVERED ASSETS (In thousands) (unaudited)
AS OF SEPTEMBER 30, 2011 Total Nonaccrual
Loans
90+ DaysDelinquent
Under
90+DaysDelinquent
TotalNonaccrualLoans
REO Assets
TotalNon-PerformingAssets
Loan Type Real estate - single family $ 7,173 $ 99 $ 7,272 $
4,118 $ 11,390 Real estate - multifamily 12,906 5,468 18,374 -
18,374 Real estate - commercial 40,063 17,544 57,607 6,188 63,795
Real estate - land and construction 43,593 3,532 47,125 10,654
57,779 Commercial 11,121 3,275 14,396 142 14,538 Consumer
2,935 - 2,935 76 3,011
Total
$ 117,791 $ 29,918 $
147,709 $ 21,178 $ 168,887
AS OF JUNE 30, 2011 Total Nonaccrual Loans
90+ DaysDelinquent
Under
90+DaysDelinquent
TotalNonaccrualLoans
REO Assets
TotalNon-PerformingAssets
Loan Type Real estate - single family $ 13,326 $ - $ 13,326
$ 1,384 $ 14,710 Real estate - multifamily 11,174 3,708 14,882 833
15,715 Real estate - commercial 38,677 3,432 42,109 4,789 46,898
Real estate - land and construction 48,157 21,013 69,170 9,007
78,177 Commercial 19,078 5,091 24,169 358 24,527 Consumer
1,077 - 1,077 93 1,170
Total
$ 131,489 $ 33,244 $
164,733 $ 16,464 $ 181,197
AS OF SEPTEMBER 30, 2010 Total Nonaccrual
Loans
90+ DaysDelinquent
Under
90+DaysDelinquent
TotalNonaccrualLoans
REO Assets
TotalNon-PerformingAssets
Loan Type Real estate - single family $ 5,359 $ - $ 5,359 $
947 $ 6,306 Real estate - multifamily 10,386 6,263 16,649 3,088
19,737 Real estate - commercial 28,786 30,799 59,585 6,730 66,315
Real estate - land and construction 51,699 18,837 70,536 5,602
76,138 Commercial 6,653 20,084 26,737 223 26,960 Consumer
427 91 518 346 864
Total
$ 103,310 $ 76,074 $
179,384 $ 16,936 $ 196,320
EAST WEST BANCORP, INC. GAAP TO
NON-GAAP RECONCILIATION (In thousands)
(unaudited)
The tangible common equity to risk
weighted assets and tangible common equity to tangible assets
ratios are non-GAAP disclosures. The Company uses certain non-GAAP
financial measures to provide supplemental information regarding
the Company's performance to provide additional disclosure. As the
use of tangible common equity to tangible assets is more prevalent
in the banking industry and with banking regulators and analysts,
we have included the tangible common equity to risk-weighted assets
and tangible common equity to tangible assets ratios.
As
of September 30, 2011 Stockholders' Equity $ 2,261,169
Less: Preferred Equity (83,027 ) Goodwill and other intangible
assets (415,275 ) Tangible common equity $ 1,762,867
Risk-weighted assets 13,756,976
Tangible Common Equity to risk-weighted
assets ratio
12.8 %
As of September 30, 2011 Total
assets $ 21,813,046 Less: Goodwill and other intangible assets
(415,275 ) Tangible assets $ 21,397,771
Tangible common equity to tangible assets
ratio
8.2 %
EAST WEST BANCORP, INC. GAAP
TO NON-GAAP RECONCILIATION (In thousands)
(unaudited)
Operating noninterest expense is a
non-GAAP disclosure. The Company uses certain non-GAAP financial
measures to provide supplemental information regarding the
Company's performance to provide additional disclosure. These are
noninterest expense line items that are non-core in nature.
Operating noninterest expense excludes such non-core noninterest
expense line items. The Company believes that presenting operating
noninterest expense provides more clarity to the users of financial
statements regarding the core noninterest expense amounts.
Quarter Ended September 30, 2011 Total noninterest
expense: $ 104,552 Amounts to be reimbursed on covered assets (80%
of actual expense amount) 3,539 Prepayment penalties for FHLB
advances and other borrowings 3,826
Noninterest expense excluding reimbursable
amounts and prepayment penalties for FHLB advances and other
borrowings
$ 97,187
Quarter Ended June 30, 2011 Total
noninterest expense: $ 117,597 Amounts to be reimbursed on covered
assets (80% of actual expense amount) 13,574 Prepayment penalties
for FHLB advances and other borrowings 4,433
Noninterest expense excluding reimbursable
amounts and prepayment penalties for FHLB advances and other
borrowings
$ 99,590
EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION (In thousands)
(unaudited) The Company uses certain non-GAAP
financial measures to provide supplemental information regarding
the Company's performance to provide additional disclosure. The net
interest margin includes amounts that are non-core in nature. As
such, the Company believes that presenting the net interest income
and net interest margin excluding such non-core items provides
additional clarity to the users of financial statements regarding
the core net interest income and net interest margin, comparability
to prior periods and the ongoing performance of the Company.
Quarter
Ended September 30, 2011 Average Volume
Interest
Yield(1)
Total interest-earning assets $ 19,810,633 $ 282,741 5.66 % Net
interest income and net interest margin $ 237,782 4.76 %
Less net impact of covered loan
dispositions and amortization of the FDIC indemnification asset
(39,293 )
Net interest income and net interest
margin, excluding net impact of covered loan dispositions and
amortization of the FDIC indemnification asset
$ 198,489 3.98 %
Quarter Ended June 30,
2011 Average Volume Interest
Yield(1)
Total interest-earning assets $ 19,402,969 $ 274,468 5.67 % Net
interest income and net interest margin $ 227,336 4.70 %
Less net impact of covered loan
dispositions and amortization of the FDIC indemnification asset
(32,381 )
Net interest income and net interest
margin, excluding net impact of covered loan dispositions and
amortization of the FDIC indemnification asset
$ 194,955 4.03 %
Quarter Ended September
30, 2010 Average Volume Interest
Yield(1)
Total interest-earning assets $ 17,692,002 $ 231,400 5.19 % Net
interest income and net interest margin $ 182,805 4.10 % Less net
impact of covered loan dispositions (5,511 )
Net interest income and net interest
margin, excluding net impact of covered loan dispositions
$ 177,294 3.98 % (1) Annualized.
EAST WEST BANCORP, INC. GAAP TO NON-GAAP
RECONCILIATION (In thousands) (unaudited)
The Company uses certain non-GAAP financial measures to provide
supplemental information regarding the Company's performance to
provide additional disclosure. The net interest income on covered
loans includes amounts that are non-core in nature. As such, the
Company believes that presenting the net interest income on covered
loans excluding such non-core items provides additional clarity to
the users of financial statements regarding the covered loan yield,
comparability to prior periods and the ongoing performance of the
Company.
Quarter Ended September 30, 2011 Average Volume
Interest
Yield(1)
Loans receivable - covered $ 4,253,687 $ 123,927 11.56 %
Less net impact of covered loan
dispositions and amortization of the FDIC indemnification asset
(39,293 )
Covered loans excluding net impact of
covered loan dispositions and amortization of the FDIC
indemnification asset
$ 84,634 7.89 %
Quarter Ended June 30, 2011
Average Volume Interest
Yield(1)
Loans receivable - covered $ 4,487,610 $ 121,034 10.82 %
Less net impact of covered loan
dispositions and amortization of the FDIC indemnification asset
(32,381 )
Covered loans excluding net impact of
covered loan dispositions and amortization of the FDIC
indemnification asset
$ 88,653 7.92 %
(1) Annualized.
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