East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the third quarter of 2021. Third quarter 2021 net income was $225.4 million, or $1.57 per diluted share; return on average assets was 1.46%, and return on average equity was 15.75%.

“This was another quarter of outstanding results. Our total loans reached a record $40.5 billion as of September 30, 2021. Loans grew by 11% annualized from June 30, 2021, and by 11% from September 30, 2020, excluding the impact of the Paycheck Protection Program. This growth has come from all of our major loan portfolios of commercial, residential mortgage and commercial real estate,” stated Dominic Ng, Chairman and Chief Executive Officer of East West.

“Total deposits reached a record $53.4 billion as of September 30, 2021, driven by excellent growth in demand deposits. This has transformed our deposit mix. Noninterest-bearing demand deposits now make up 43% of total balances, compared with 36% a year ago.”

“Our robust organic balance sheet growth drove a 21% annualized increase in revenue quarter-over-quarter, even as interest rates remained low. This revenue expansion was achieved while maintaining solid expense discipline, resulting in adjusted pre-tax, pre-provision income1 growth of 26% annualized from the second quarter,” continued Ng. “Overall, we earned an attractive return on average tangible equity2 of 17.25% in the third quarter of 2021.”

“We are looking forward to finishing the year on a high note, and extending the momentum and excellent performance from 2021 into continued growth and success in 2022,” concluded Ng.

FINANCIAL HIGHLIGHTS

 

 

Three Months Ended

 

Qtr-o-Qtr Change

 

Yr-o-Yr Change

($ in millions)

 

September 30, 2021

 

$

% Ann.

 

$

%

Total Loans (incl. PPP)

 

$

40,482

 

$

408

4

%

 

$

3,040

8

%

Total Loans (excl. PPP)

 

 

39,674

 

 

1,034

11

 

 

 

4,005

11

 

Total Deposits

 

 

53,356

 

 

774

6

 

 

 

11,676

28

 

Total Revenue

 

$

469

 

$

24

21

%

 

$

90

24

%

Adj. Pre-tax Pre-provision Income1

 

 

302

 

 

19

26

 

 

 

78

35

 

Net Income

 

 

225

 

 

1

1

 

 

 

66

41

 

_____________________________________________________________

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.

BALANCE SHEET

  • Record Assets – Total assets reached $61.0 billion as of September 30, 2021, up by $1.1 billion, or 7% annualized, from $59.9 billion as of June 30, 2021. Year-over-year, total assets grew 21% from $50.4 billion as of September 30, 2020. Third quarter 2021 average interest-earning assets of $58.2 billion grew by $3.3 billion, or 24% linked quarter annualized. The growth in average interest-earning assets mainly consisted of a $2.0 billion increase in average interest-bearing cash and deposits with banks, a $785.7 million increase in average available-for-sale (“AFS”) debt securities, and a $337.9 million increase in average loans. Excluding Paycheck Protection Program (“PPP”) loans, average loans grew by $1.1 billion.
  • Record Loans – Total loans reached $40.5 billion as of September 30, 2021, up by $408.4 million, or 4% annualized, from $40.1 billion as of June 30, 2021. Excluding PPP loans, total loans grew by $1.0 billion, or 11% linked quarter annualized. During the third quarter of 2021, $645.0 million of PPP loans outstanding were forgiven by the Small Business Administration (“SBA”). PPP loans totaled $807.3 million as of September 30, 2021. Year-over-year, total loans, excluding PPP, grew 11% from $35.7 billion as of September 30, 2020. Third quarter 2021 average loans of $40.0 billion grew by $337.9 million, or 3% linked quarter annualized. Excluding PPP loans, average loans grew by $1.1 billion, or 12% annualized, from the second quarter of 2021. The strongest growth was from average C&I loans excluding PPP, which increased 16% linked quarter annualized, followed by residential mortgage loans, which also increased 16% linked quarter annualized. Average total CRE loans grew by 5% linked quarter annualized.
  • Record Deposits – Total deposits reached $53.4 billion as of September 30, 2021, up by $773.6 million, or 6% annualized, from $52.6 billion as of June 30, 2021, and up 28% year-over-year from $41.7 billion as of September 30, 2020. Noninterest-bearing demand deposits reached a record $23.2 billion as of September 30, 2021, up by $1.4 billion, or 25% annualized, from $21.8 billion as of June 30, 2021, and up 55% year-over-year from $14.9 billion as of September 30, 2020. Noninterest-bearing demand deposits made up 43% of total deposits as of September 30, 2021, up from 41% as of June 30, 2021 and 36% as of September 30, 2020. Third quarter 2021 average deposits of $53.5 billion grew by $3.3 billion, or 26% linked quarter annualized. Growth in the third quarter was led by noninterest-bearing demand deposits, which increased by $3.5 billion or 69% linked quarter annualized. Time deposits decreased quarter-over-quarter, reflecting run-off of higher rate certificates of deposit.
  • Strong Capital Levels – As of September 30, 2021, stockholders’ equity was $5.7 billion, or $40.10 per common share, and tangible equity3 per common share was $36.75. Tangible equity per common share increased by 3% quarter-over-quarter and increased by 12% year-over-year. As of September 30, 2021, the tangible equity to tangible assets ratio3 was 8.62%, the common equity tier 1 (“CET1”) capital ratio was 12.8%, and the total risk-based capital ratio was 14.2%.

_____________________________________________________________

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

OPERATING RESULTS

Third Quarter Earnings – Third quarter 2021 net income was $225.4 million, or $1.57 per diluted share, compared with $224.7 million, or $1.57 per diluted share, for the second quarter of 2021.

Third Quarter 2021 Compared to Second Quarter 2021

Net Interest Income and Net Interest Margin

Net interest income (“NII”) totaled $395.7 million, an increase of 20% annualized from $376.5 million. Net interest margin (“NIM”) of 2.70% decreased by five basis points from 2.75%.

  • Excluding the impact of PPP loans, adjusted NII4 totaled $380.5 million, an increase of 21% annualized from $361.1 million. PPP loans contributed $15.2 million to NII in the third quarter, compared with $15.4 million in the second quarter.
  • NII growth reflected growth in average balances of loans, securities and other earning assets, as well as the benefit of a lower cost of funds, partially offset by lower yields on earning assets.
  • Adjusted NIM4 of 2.64% declined by nine basis points from 2.73%. The quarter-over-quarter adjusted NIM compression was largely due to the $2.0 billion growth in average interest-bearing cash and deposits with banks, which earned an average yield of 0.25% in the third quarter. Strong deposit growth in excess of loan growth drove the increase in these assets.
  • The third quarter adjusted average loan yield4 of 3.56% was two basis points lower than 3.58% for the second quarter.
  • The average cost of funds of 0.14% decreased by four basis points from 0.18%. This reflected growth in noninterest-bearing demand deposits, the payoff of higher-cost FHLB advances that matured during the second quarter, and a continued decline in the cost of interest-bearing deposits.

Noninterest Income

Noninterest income totaled $73.1 million in the third quarter, up $4.7 million, or 7%, from $68.4 million in the second quarter.

  • Quarter-over-quarter, deposit account fees grew, due to growth in treasury management services, and gains on sale of SBA loans increased, due to a higher volume of SBA 7A loans sold. This was offset by decreases in lending fees and wealth management fees.
  • Interest rate contracts (“IRC”) and other derivative income was $7.2 million in the third quarter, compared to a loss of $3.2 million in the second quarter. The quarter-over-quarter increase was due to a favorable change in credit valuation adjustment, which reflected an increase in long-term benchmark interest rates, as well as higher customer-driven IRC revenue.

_____________________________________________________________

4 See reconciliation of GAAP to non-GAAP financial measures in Table 14.

Noninterest Expense

Noninterest expense totaled $205.4 million. Third quarter noninterest expense consisted of $166.7 million of adjusted noninterest expense5, $38.0 million in amortization of tax credit and other investments, and $0.7 million in amortization of core deposit intangibles.

  • Adjusted noninterest expense of $166.7 million increased by 3% from $161.5 million in the second quarter. The largest quarter-over-quarter change was in other operating expense, which increased to $21.0 million, compared with $17.9 million in the second quarter, due to higher loan-related expenses and charitable contributions.
  • Amortization of tax credit and other investments totaled $38.0 million, compared with $27.3 million in the second quarter. The quarter-over-quarter change in the amortization of tax credits and other investments partially reflects the impact of investments that closed in the third quarter. For the fourth quarter, the Company expects the amortization of tax credit and other investments to be approximately $30 million.
  • The adjusted efficiency ratio5 was 35.6% in the third quarter, compared with 36.3% in the second quarter.

TAX RELATED ITEMS

Third quarter 2021 income tax expense was $48.0 million and the effective tax rate was 17.5%. Year-to-date through the third quarter of 2021, the effective tax rate was 16%. For the full year, the Company expects the effective tax rate to be approximately 17%.

ASSET QUALITY

Quarter-over-quarter, nonperforming assets decreased by 24%, to 0.28% of total assets, and criticized loans were down 2%, to 2.50% of loans held-for-investment (“HFI”). The allowance for loan losses (“ALLL”) totaled $560.4 million, or 1.38% of loans HFI, as of September 30, 2021, compared with $585.7 million, or 1.46% of loans HFI, as of June 30, 2021.

  • Quarter-over-quarter, the ALLL decreased by $25.3 million, and the ALLL coverage ratio of loans HFI decreased by eight basis points. The change in the ALLL largely reflects an improved macroeconomic forecast as of September 30, 2021, compared with June 30, 2021. Consequently, the Company recorded a negative $10.0 million provision for credit losses during the third quarter of 2021.
  • Third quarter 2021 net charge-offs were $13.5 million, or annualized 0.13% of average loans HFI, essentially unchanged from $13.3 million, or annualized 0.13% of average loans HFI, for the second quarter of 2021.
  • Quarter-over-quarter, nonperforming assets decreased by $53.1 million, or 24%, and the nonperforming asset ratio improved by 10 basis points. As of September 30, 2021, nonperforming assets were $172.6 million, or 0.28% of total assets, compared with $225.7 million, or 0.38% of total assets, as of June 30, 2021.
  • Quarter-over-quarter, criticized loans decreased by $21.7 million, or 2%, and the criticized loans ratio improved by eight basis points. As of September 30, 2021, criticized loans totaled $1,010 million, or 2.50% of loans HFI, compared with $1,032 million, or 2.58% of loans HFI, as of June 30, 2021.

_____________________________________________________________

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

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital ratios as of September 30, 2021, June 30, 2021, and September 30, 2020.

EWBC Risk-Based Capital Ratios

($ in millions)

 

September 30, 2021 (a)

 

June 30, 2021 (a)

 

September 30, 2020 (a)

 

CET1 capital ratio

 

 

12.8

%

 

 

12.8

%

 

 

12.8

%

 

Tier 1 capital ratio

 

 

12.8

%

 

 

12.8

%

 

 

12.8

%

 

Total capital ratio

 

 

14.2

%

 

 

14.3

%

 

 

14.5

%

 

Leverage ratio

 

 

8.8

%

 

 

9.1

%

 

 

9.8

%

 

Risk-Weighted Assets (“RWA”) (b)

 

$

42,128

 

 

$

40,609

 

 

$

36,922

 

 

  1. The Company has elected to use the 2020 CECL transition provision in the calculation of its September 30, 2021, June 30, 2021, and September 30, 2020 regulatory capital ratios. The Company’s September 30, 2021 regulatory capital ratios and RWA are preliminary.
  2. 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 fourth quarter 2021 dividends for the Company’s common stock. The common stock cash dividend of $0.33 per share is payable on November 15, 2021, to stockholders of record on November 1, 2021.

On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock. East West did not repurchase any shares during the third quarter of 2021, and has not repurchased any shares since the first quarter of 2020, under this authorization.

Conference Call

East West will host a conference call to discuss third quarter 2021 earnings with the public on Thursday, October 21, 2021, at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses third quarter 2021 results and operating developments.

  • The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
  • A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A replay of the conference call will be available on October 21, 2021, at 11:30 a.m. PT through November 21, 2021. The replay numbers are: within the U.S. – (877) 344-7529; within Canada – (855) 669-9658; international calls – (412) 317-0088; and the replay access code is: 10160606.

About East West

East West Bancorp, Inc. is a public company with total assets of $61.0 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In China, East West’s presence includes full-service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (the “SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are statements that are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control, such as the future impacts of the COVID-19 pandemic. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to: changes in the U.S. economy, including an economic slowdown, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; changes in local, regional and global business, economic and political conditions and geopolitical events; the economic, financial, reputational and other impacts of the ongoing COVID-19 global pandemic and variants thereof and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 global pandemic; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the DFPI; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China; changes in the commercial and consumer real estate markets; changes in consumer or commercial spending, and savings and borrowing habits, patterns and behaviors; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies; the soundness of other financial institutions; success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; impact of the benchmark interest rate reform in the U.S. including the transition away from USD LIBOR to alternative reference rates; impact of a communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks, and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused and materially impact the Company’s ability to provide services to its clients; adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; impact on the Company’s operations due to political developments, disease pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; impact of other potential federal tax changes and spending cuts; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; impact on the Company’s liquidity due to changes in the Company’s ability to pay dividends and repurchase common stock and to receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly; 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, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s AFS debt securities portfolio; and impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2020 Form 10-K under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

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

(unaudited)

Table 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

% or Basis Point Change

 

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

 

Qtr-o-Qtr

 

Yr-o-Yr

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

$

594,631

$

626,716

$

503,376

 

(5.1

)%

 

18.1

%

 

Interest-bearing cash with banks

4,258,270

5,371,089

4,003,565

 

(20.7

)

 

 

6.4

 

 

 

Cash and cash equivalents

4,852,901

5,997,805

4,506,941

 

(19.1

)

 

 

7.7

 

 

 

Interest-bearing deposits with banks

855,162

830,279

699,465

 

3.0

 

 

 

22.3

 

 

 

Assets purchased under resale agreements (“resale agreements”)

2,596,142

2,299,184

1,210,000

 

12.9

 

 

 

114.6

 

 

 

Available-for-sale (“AFS”) debt securities (amortized cost of $9,783,180, $8,411,142 and $4,471,694)

9,713,006

8,399,460

4,539,160

 

15.6

 

 

 

114.0

 

 

 

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

77,200

76,931

79,172

 

0.3

 

 

 

(2.5

)

 

 

Loans held-for-sale (“HFS”)

1,819

4,148

 

(100.0

)

 

 

(100.0

)

 

 

Loans held-for-investment (''HFI'') (net of allowance for loan losses of $560,404, $585,724 and $618,252)

39,921,301

39,485,775

36,818,877

 

1.1

 

 

 

8.4

 

 

 

Investments in qualified affordable housing partnerships, net

297,367

287,432

192,913

 

3.5

 

 

 

54.1

 

 

 

Investments in tax credit and other investments, net

367,428

364,187

254,512

 

0.9

 

 

 

44.4

 

 

 

Goodwill

465,697

465,697

465,697

 

 

 

 

 

 

 

Operating lease right-of-use assets

99,785

102,609

96,092

 

(2.8

)

 

 

3.8

 

 

 

Other assets

1,713,121

1,543,698

1,504,500

 

11.0

 

 

 

13.9

 

 

 

Total assets

$

60,959,110

$

59,854,876

$

50,371,477

 

1.8

%

 

21.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Deposits

$

53,356,190

$

52,582,575

$

41,680,555

1.5

%

28.0

%

Short-term borrowings

59,613

 

 

 

 

(100.0

)

 

 

FHLB advances

248,898

248,464

657,185

 

0.2

 

 

 

(62.1

)

 

 

Assets sold under repurchase agreements (“repurchase agreements”)

300,000

300,000

348,063

 

 

 

 

(13.8

)

 

 

Long-term debt and finance lease liabilities

151,795

151,997

1,579,317

(1)

 

(0.1

)

 

 

(90.4

)

 

 

Operating lease liabilities

107,107

110,105

103,673

 

(2.7

)

 

 

3.3

 

 

 

Accrued expenses and other liabilities

1,104,919

914,187

816,965

 

20.9

 

 

 

35.2

 

 

 

Total liabilities

55,268,909

54,307,328

45,245,371

 

1.8

 

 

 

22.2

 

 

 

Stockholders’ equity

5,690,201

5,547,548

5,126,106

 

2.6

 

 

 

11.0

 

 

 

Total liabilities and stockholders’ equity

$

60,959,110

$

59,854,876

$

50,371,477

 

1.8

%

 

21.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

$

40.10

$

39.10

$

36.22

 

2.6

%

 

10.7

%

 

Tangible equity (2) per common share

$

36.75

$

35.75

$

32.85

 

2.8

 

 

11.9

 

 

 

Number of common shares at period-end

141,884

141,878

141,507

 

0.0

 

 

 

0.3

 

 

 

Tangible equity to tangible assets ratio (2)

8.62

%

8.54

%

9.32

%

8

 

bps

 

(70

)

bps

 

 

 

 

 

(1)

Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) as of September 30, 2020.

(2)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

 

 

 

 

 

 

 

 

 

 

September 30, 2021 % Change

 

 

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

Qtr-o-Qtr

 

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

Commercial and industrial (“C&I”) (1)

 

$

13,831,649

 

 

$

13,790,461

 

 

$

13,305,024

 

 

0.3

%

 

4.0

%

Commercial real estate (“CRE”):

 

 

 

 

 

 

 

 

 

 

CRE

 

11,818,065

 

 

11,711,369

 

 

11,037,987

 

 

0.9

 

 

7.1

 

Multifamily residential

 

3,340,378

 

 

3,219,796

 

 

3,057,274

 

 

3.7

 

 

9.3

 

Construction and land

 

376,921

 

 

460,678

 

 

578,407

 

 

(18.2

)

 

(34.8

)

Total CRE

 

15,535,364

 

 

15,391,843

 

 

14,673,668

 

 

0.9

 

 

5.9

 

Consumer:

 

 

 

 

 

 

 

 

 

 

Residential mortgage:

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

9,021,801

 

 

8,869,370

 

 

7,785,759

 

 

1.7

 

 

15.9

 

Home equity lines of credit (“HELOCs”)

 

1,963,622

 

 

1,872,166

 

 

1,514,388

 

 

4.9

 

 

29.7

 

Total residential mortgage

 

10,985,423

 

 

10,741,536

 

 

9,300,147

 

 

2.3

 

 

18.1

 

Other consumer

 

129,269

 

 

147,659

 

 

158,290

 

 

(12.5

)

 

(18.3

)

Total loans HFI (2)

 

40,481,705

 

 

40,071,499

 

 

37,437,129

 

 

1.0

 

 

8.1

 

Loans HFS

 

 

 

1,819

 

 

4,148

 

 

(100.0

)

 

(100.0

)

Total loans (2)

 

40,481,705

 

 

40,073,318

 

 

37,441,277

 

 

1.0

 

 

8.1

 

Allowance for loan losses

 

(560,404

)

 

(585,724

)

 

(618,252

)

 

(4.3

)

 

(9.4

)

Net loans (2)

 

$

39,921,301

 

 

$

39,487,594

 

 

$

36,823,025

 

 

1.1

 

 

8.4

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

23,175,471

 

 

$

21,816,721

 

 

$

14,924,917

 

 

6.2

%

 

55.3

%

Interest-bearing checking

 

6,530,601

 

 

6,762,178

 

 

5,731,573

 

 

(3.4

)

 

13.9

 

Money market

 

12,555,879

 

 

12,853,812

 

 

9,553,574

 

 

(2.3

)

 

31.4

 

Savings

 

2,855,597

 

 

2,719,106

 

 

2,401,318

 

 

5.0

 

 

18.9

 

Time deposits

 

8,238,642

 

 

8,430,758

 

 

9,069,173

 

 

(2.3

)

 

(9.2

)

Total deposits

 

$

53,356,190

 

 

$

52,582,575

 

 

$

41,680,555

 

 

1.5

%

 

28.0

%

 

(1)

Includes $807.3 million, $1.43 billion and $1.77 billion of Paycheck Protection Program (“PPP”) loans as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

(2)

Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(54.3) million, $(67.0) million and $(67.0) million as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively. Net origination fees related to PPP loans were $(13.5) million, $(25.9) million and $(22.6) million as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

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

(unaudited)

Table 3

 

 

Three Months Ended

 

September 30, 2021 % Change

 

September 30, 2021

June 30, 2021

September 30, 2020

 

Qtr-o-Qtr

Yr-o-Yr

Interest and dividend income (1)

$

415,307

 

$

399,333

 

$

365,728

 

4.0

%

13.6

%

Interest expense

19,601

 

22,860

 

41,598

 

(14.3

)

 

(52.9

)

 

Net interest income before provision for credit losses

395,706

 

376,473

 

324,130

 

5.1

 

 

22.1

 

 

(Reversal of) provision for credit losses

(10,000

)

(15,000

)

10,000

 

(33.3

)

 

NM

 

 

Net interest income after provision for credit losses

405,706

 

391,473

 

314,130

 

3.6

 

 

29.2

 

 

Noninterest income

73,109

 

68,431

 

54,503

(2)

6.8

 

 

34.1

 

 

Noninterest expense

205,384

 

189,523

 

172,573

(2)

8.4

 

 

19.0

 

 

Income before income taxes

273,431

 

270,381

 

196,060

 

1.1

 

 

39.5

 

 

Income tax expense

47,982

 

45,639

 

36,523

 

5.1

 

 

31.4

 

 

Net income

$

225,449

 

$

224,742

 

$

159,537

 

0.3

%

41.3

%

Earnings per share (“EPS”)

 

 

 

 

 

 

- Basic

$

1.59

 

$

1.58

 

$

1.13

 

0.3

%

40.9

%

- Diluted

$

1.57

 

$

1.57

 

$

1.12

 

0.2

 

 

40.2

 

 

Weighted-average number of shares outstanding

 

 

 

 

 

 

- Basic

141,880

 

141,868

 

141,498

 

0.0

%

0.3

%

- Diluted

143,143

 

143,040

 

142,043

 

0.1

 

 

0.8

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30, 2021 % Change

 

September 30, 2021

June 30, 2021

September 30, 2020

 

Qtr-o-Qtr

Yr-o-Yr

Noninterest income:

 

 

 

 

 

 

Lending fees

$

17,516

 

$

21,092

 

$

18,736

 

(17.0

)%

(6.5

)%

Deposit account fees

18,508

 

17,342

 

12,573

 

6.7

 

 

47.2

 

 

Interest rate contracts and other derivative income (loss)

7,156

 

(3,172

)

5,538

 

(325.6

)

 

29.2

 

 

Foreign exchange income

13,101

 

13,007

 

3,310

 

0.7

 

 

295.8

 

 

Wealth management fees

5,598

 

7,951

 

4,553

 

(29.6

)

 

23.0

 

 

Net gains on sales of loans

3,329

 

1,491

 

361

 

123.3

 

 

822.2

 

 

Gains on sales of AFS debt securities

354

 

632

 

698

 

(44.0

)

 

(49.3

)

 

Other investment income

5,349

 

7,596

 

5,239

(2)

(29.6

)

 

2.1

 

 

Other income

2,198

 

2,492

 

3,495

 

(11.8

)

 

(37.1

)

 

Total noninterest income

$

73,109

 

$

68,431

 

$

54,503

(2)

6.8

%

34.1

%

Noninterest expense:

 

 

 

 

 

 

Compensation and employee benefits

$

105,751

 

$

105,426

 

$

99,756

 

0.3

%

6.0

%

Occupancy and equipment expense

15,851

 

15,377

 

16,648

 

3.1

 

 

(4.8

)

 

Deposit insurance premiums and regulatory assessments

4,641

 

4,274

 

4,006

 

8.6

 

 

15.9

 

 

Deposit account expense

4,136

 

3,817

 

3,113

 

8.4

 

 

32.9

 

 

Data processing

3,575

 

4,035

 

3,590

 

(11.4

)

 

(0.4

)

 

Computer software expense

8,426

 

7,521

 

8,539

 

12.0

 

 

(1.3

)

 

Consulting expense

1,635

 

1,868

 

1,224

 

(12.5

)

 

33.6

 

 

Legal expense

2,363

 

1,975

 

1,366

 

19.6

 

 

73.0

 

 

Other operating expense

20,998

 

17,939

 

17,122

 

17.1

 

 

22.6

 

 

Amortization of tax credit and other investments

38,008

 

27,291

 

17,209

(2)

39.3

 

 

120.9

 

 

Total noninterest expense

$

205,384

 

$

189,523

 

$

172,573

(2)

8.4

%

19.0

%

 

NM - Not meaningful.

(1)

Includes $15.2 million, $15.4 million and $7.8 million of interest income related to PPP loans for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

(2)

Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. September 30, 2020 comparative amounts have been revised to conform with the current presentation.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

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

(unaudited)

Table 4

 

 

Nine Months Ended

 

September 30, 2021

% Change

 

September 30, 2021

September 30, 2020

 

Yr-o-Yr

Interest and dividend income (1)

$

1,196,026

 

$

1,213,694

 

(1.5

)%

Interest expense

70,152

 

183,082

 

(61.7

)

Net interest income before provision for credit losses

1,125,874

 

1,030,612

 

9.2

 

(Reversal of ) provision for credit losses

(25,000

)

186,313

 

(113.4

)

Net interest income after provision for credit losses

1,150,874

 

844,299

 

36.3

 

Noninterest income

214,406

 

165,715

(2)

29.4

 

Noninterest expense

585,984

 

537,671

(2)

9.0

 

Income before income taxes

779,296

 

472,343

 

65.0

 

Income tax expense

124,111

 

68,630

 

80.8

 

Net income

$

655,185

 

$

403,713

 

62.3

%

EPS

 

 

 

 

- Basic

$

4.62

 

$

2.83

 

63.2

%

- Diluted

$

4.58

 

$

2.82

 

62.3

 

Weighted-average number of shares outstanding

 

 

 

 

- Basic

141,799

 

142,595

 

(0.6

)%

- Diluted

143,051

 

143,082

 

(0.0

)

 

 

 

 

 

 

Nine Months Ended

 

September 30, 2021

% Change

 

September 30, 2021

September 30, 2020

 

Yr-o-Yr

Noninterest income:

 

 

 

 

Lending fees

$

56,965

 

$

56,455

 

0.9

%

Deposit account fees

51,233

 

33,892

 

51.2

 

Interest rate contracts and other derivative income

20,981

 

18,718

 

12.1

 

Foreign exchange income

35,634

 

15,691

 

127.1

 

Wealth management fees

20,460

 

12,997

 

57.4

 

Net gains on sales of loans

6,601

 

1,443

 

357.4

 

Gains on sales of AFS debt securities

1,178

 

11,867

 

(90.1

)

Other investment income

13,870

 

6,652

(2)

108.5

 

Other income

7,484

 

8,000

 

(6.5

)

Total noninterest income

$

214,406

 

$

165,715

(2)

29.4

%

Noninterest expense:

 

 

 

 

Compensation and employee benefits

$

318,985

 

$

298,671

 

6.8

%

Occupancy and equipment expense

47,150

 

49,941

 

(5.6

)

Deposit insurance premiums and regulatory assessments

12,791

 

11,133

 

14.9

 

Deposit account expense

11,845

 

10,029

 

18.1

 

Data processing

12,088

 

11,896

 

1.6

 

Computer software expense

23,106

 

22,006

 

5.0

 

Consulting expense

4,978

 

3,854

 

29.2

 

Legal expense

5,840

 

6,093

 

(4.2

)

Other operating expense

58,544

 

57,489

 

1.8

 

Amortization of tax credit and other investments

90,657

 

57,819

(2)

56.8

 

Repurchase agreements’ extinguishment cost

 

8,740

 

(100.0

)

Total noninterest expense

$

585,984

 

$

537,671

(2)

9.0

%

 

(1)

Includes $45.6 million and $29.1 million of interest income related to PPP loans for the nine months ended September 30, 2021 and 2020, respectively.

(2)

Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. September 30, 2020 comparative amounts have been revised to conform with the current presentation.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 5

 

 

 

 

 

 

 

 

Three Months Ended

September 30, 2021

% Change

Nine Months Ended

September 30, 2021

% Change

 

September 30, 2021

June 30, 2021

September 30, 2020

Qtr-o-Qtr

Yr-o-Yr

September 30, 2021

September 30, 2020

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

C&I (1)

$

13,531,338

$

13,811,966

$

13,235,845

(2.0

)%

2.2

%

$

13,678,462

$

12,988,486

5.3

%

CRE:

 

 

 

 

 

 

 

 

CRE

11,747,607

11,616,916

10,942,780

1.1

 

7.4

 

11,564,946

10,747,669

7.6

 

Multifamily residential

3,248,281

3,125,001

3,107,294

3.9

 

4.5

 

3,139,209

2,995,227

4.8

 

Construction and land

415,812

477,860

564,219

(13.0

)

(26.3

)

480,514

599,957

(19.9

)

Total CRE

15,411,700

15,219,777

14,614,293

1.3

 

5.5

 

15,184,669

14,342,853

5.9

 

Consumer:

 

 

 

 

 

 

 

 

Residential mortgage:

 

 

 

 

 

 

 

 

Single-family residential

8,962,533

8,650,706

7,695,838

3.6

 

16.5

 

8,645,135

7,487,347

15.5

 

HELOCs

1,912,629

1,800,213

1,475,098

6.2

 

29.7

 

1,793,928

1,454,237

23.4

 

Total residential mortgage

10,875,162

10,450,919

9,170,936

4.1

 

18.6

 

10,439,063

8,941,584

16.7

 

Other consumer

141,951

139,608

139,371

1.7

 

1.9

 

139,557

214,936

(35.1

)

Total loans (2)

$

39,960,151

$

39,622,270

$

37,160,445

0.9

%

7.5

%

$

39,441,751

$

36,487,859

8.1

%

 

 

 

 

 

 

 

 

 

Interest-earning assets

$

58,239,480

$

54,901,209

$

47,428,586

6.1

%

22.8

%

$

55,350,645

$

45,076,734

22.8

%

Total assets

$

61,359,533

$

57,771,837

$

50,247,259

6.2

%

22.1

%

$

58,263,002

$

47,753,030

22.0

%

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

$

23,169,323

$

19,717,315

$

14,296,475

17.5

%

62.1

%

$

20,345,370

$

12,987,813

56.6

%

Interest-bearing checking

6,646,515

6,671,358

5,663,873

(0.4

)

17.3

 

6,571,231

5,119,568

28.4

 

Money market

12,604,827

12,596,515

9,981,704

0.1

 

26.3

 

12,262,173

9,630,918

27.3

 

Savings

2,792,702

2,676,865

2,259,788

4.3

 

23.6

 

2,715,114

2,162,365

25.6

 

Time deposits

8,283,265

8,518,936

9,008,907

(2.8

)

(8.1

)

8,635,249

9,633,582

(10.4

)

Total deposits

$

53,496,632

$

50,180,989

$

41,210,747

6.6

%

29.8

%

$

50,529,137

$

39,534,246

27.8

%

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

$

31,039,410

$

31,394,114

$

29,552,756

(1.1

)%

5.0

%

$

31,099,675

$

28,506,736

9.1

%

Stockholders’ equity

$

5,680,306

$

5,425,952

$

5,079,351

4.7

%

11.8

%

$

5,482,705

$

5,028,122

9.0

%

 

(1)

Includes average balances of PPP loans of $1.11 billion, $1.87 billion and $1.76 billion for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, and $1.63 billion and $1.08 billion for the nine months ended September 30, 2021 and 2020, respectively.

(2)

Includes loans HFS.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 6

 

 

 

Three Months Ended

 

 

September 30, 2021

 

June 30, 2021

 

 

Average

 

 

 

Average

 

Average

 

 

 

Average

 

 

Balance

 

Interest

 

Yield/Rate (1)

 

Balance

 

Interest

 

Yield/Rate (1)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

 

$

7,036,823

 

 

$

4,521

 

 

0.25

%

 

$

5,072,225

 

 

$

3,628

 

 

0.29

%

Resale agreements

 

2,382,741

 

 

8,957

 

 

1.49

%

 

2,129,567

 

 

8,021

 

 

1.51

%

AFS debt securities

 

8,782,682

 

 

37,826

 

 

1.71

%

 

7,997,005

 

 

34,690

 

 

1.74

%

Loans (2)

 

39,960,151

 

 

363,503

 

 

3.61

%

 

39,622,270

 

 

352,453

 

 

3.57

%

FHLB and FRB stock

 

77,083

 

 

500

 

 

2.57

%

 

80,142

 

 

541

 

 

2.71

%

Total interest-earning assets

 

58,239,480

 

 

415,307

 

 

2.83

%

 

54,901,209

 

 

399,333

 

 

2.92

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

627,640

 

 

 

 

 

 

600,053

 

 

 

 

 

Allowance for loan losses

 

(584,827

)

 

 

 

 

 

(607,523

)

 

 

 

 

Other assets

 

3,077,240

 

 

 

 

 

 

2,878,098

 

 

 

 

 

Total assets

 

$

61,359,533

 

 

 

 

 

 

$

57,771,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

6,646,515

 

 

$

3,186

 

 

0.19

%

 

$

6,671,358

 

 

$

3,777

 

 

0.23

%

Money market deposits

 

12,604,827

 

 

3,446

 

 

0.11

%

 

12,596,515

 

 

3,712

 

 

0.12

%

Savings deposits

 

2,792,702

 

 

1,943

 

 

0.28

%

 

2,676,865

 

 

2,078

 

 

0.31

%

Time deposits

 

8,283,265

 

 

7,395

 

 

0.35

%

 

8,518,936

 

 

8,431

 

 

0.40

%

Federal funds purchased and other short-term borrowings

 

620

 

 

 

 

%

 

336

 

 

 

 

%

FHLB advances

 

248,614

 

 

857

 

 

1.37

%

 

474,887

 

 

2,099

 

 

1.77

%

Repurchase agreements

 

310,997

 

 

2,012

 

 

2.57

%

 

303,118

 

 

1,991

 

 

2.63

%

Long-term debt and finance lease liabilities

 

151,870

 

 

762

 

 

1.99

%

 

152,099

 

 

772

 

 

2.04

%

Total interest-bearing liabilities

 

31,039,410

 

 

19,601

 

 

0.25

%

 

31,394,114

 

 

22,860

 

 

0.29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

23,169,323

 

 

 

 

 

 

19,717,315

 

 

 

 

 

Accrued expenses and other liabilities

 

1,470,494

 

 

 

 

 

 

1,234,456

 

 

 

 

 

Stockholders’ equity

 

5,680,306

 

 

 

 

 

 

5,425,952

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

61,359,533

 

 

 

 

 

 

$

57,771,837

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

2.58

%

 

 

 

 

 

2.63

%

Net interest income and net interest margin

 

 

 

$

395,706

 

 

2.70

%

 

 

 

$

376,473

 

 

2.75

%

Adjusted net interest income and adjusted net interest margin (3)

 

 

 

$

380,494

 

 

2.64

%

 

 

 

$

361,096

 

 

2.73

%

 

(1)

Annualized.

(2)

Includes loans HFS.

(3)

Net interest income and net interest margin for the three months ended September 30, 2021 and June 30, 2021 have been adjusted for the impact of PPP loans. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 7

 

 

Three Months Ended

September 30, 2021

September 30, 2020

Average

 

Average

Average

 

 

Average

Balance

Interest

Yield/Rate (1)

Balance

 

Interest

Yield/Rate (1)

Assets

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

7,036,823

 

$

4,521

0.25

%

$

4,904,394

 

 

$

5,045

0.41

%

Resale agreements

2,382,741

 

8,957

1.49

%

1,225,217

 

 

5,295

1.72

%

AFS debt securities

8,782,682

 

37,826

1.71

%

4,059,456

 

 

18,493

1.81

%

Loans (2)

39,960,151

 

363,503

3.61

%

37,160,445

 

 

336,542

3.60

%

FHLB and FRB stock

77,083

 

500

2.57

%

79,074

 

 

353

1.78

%

Total interest-earning assets

58,239,480

 

415,307

2.83

%

47,428,586

 

 

365,728

3.07

%

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

Cash and due from banks

627,640

 

 

 

522,699

 

 

 

 

Allowance for loan losses

(584,827

)

 

 

(632,216

)

 

 

 

Other assets

3,077,240

 

 

 

2,928,190

 

 

 

 

Total assets

$

61,359,533

 

 

 

$

50,247,259

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

Checking deposits

$

6,646,515

 

$

3,186

0.19

%

$

5,663,873

 

 

$

4,345

0.31

%

Money market deposits

12,604,827

 

3,446

0.11

%

9,981,704

 

 

6,837

0.27

%

Savings deposits

2,792,702

 

1,943

0.28

%

2,259,788

 

 

1,481

0.26

%

Time deposits

8,283,265

 

7,395

0.35

%

9,008,907

 

 

21,135

0.93

%

Federal funds purchased and other short-term borrowings

620

 

%

84,858

 

 

407

1.91

%

FHLB advances

248,614

 

857

1.37

%

656,906

 

 

3,146

1.91

%

Repurchase agreements

310,997

 

2,012

2.57

%

317,097

 

 

2,155

2.70

%

Long-term debt and finance lease liabilities

151,870

 

762

1.99

%

1,579,623

 

(3)

2,092

0.53

%

Total interest-bearing liabilities

31,039,410

 

19,601

0.25

%

29,552,756

 

 

41,598

0.56

%

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

Demand deposits

23,169,323

 

 

 

14,296,475

 

 

 

 

Accrued expenses and other liabilities

1,470,494

 

 

 

1,318,677

 

 

 

 

Stockholders’ equity

5,680,306

 

 

 

5,079,351

 

 

 

 

Total liabilities and stockholders’ equity

$

61,359,533

 

 

 

$

50,247,259

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

2.58

%

 

 

 

2.51

%

Net interest income and net interest margin

 

$

395,706

2.70

%

 

 

$

324,130

2.72

%

Adjusted net interest income and adjusted net interest margin (4)

 

$

380,494

2.64

%

 

 

$

317,611

2.77

%

 

 

 

 

 

 

 

 

(1)

Annualized.

(2)

Includes loans HFS.

(3)

Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.

(4)

Net interest income and net interest margin for the three months ended September 30, 2021 and September 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the three months ended September 30, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 8

 

 

Nine Months Ended

September 30, 2021

 

September 30, 2020

Average

 

 

 

Average

 

Average

 

 

 

Average

Balance

 

Interest

 

Yield/Rate (1)

 

Balance

 

Interest

 

Yield/Rate (1)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

 

$

6,078,982

 

 

$

11,781

 

 

0.26

%

 

$

3,775,242

 

 

$

20,717

 

 

0.73

%

Resale agreements (2)

 

1,994,776

 

 

23,077

 

 

1.55

%

 

1,048,923

 

 

16,434

 

 

2.09

%

AFS debt securities

 

7,755,029

 

 

101,616

 

 

1.75

%

 

3,685,837

 

 

59,639

 

 

2.16

%

Loans (3)

 

39,441,751

 

 

1,057,964

 

 

3.59

%

 

36,487,859

 

 

1,115,804

 

 

4.08

%

FHLB and FRB stock

 

80,107

 

 

1,588

 

 

2.65

%

 

78,873

 

 

1,100

 

 

1.86

%

Total interest-earning assets

 

55,350,645

 

 

1,196,026

 

 

2.89

%

 

45,076,734

 

 

1,213,694

 

 

3.60

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

602,830

 

 

 

 

 

 

510,750

 

 

 

 

 

Allowance for loan losses

 

(603,523)

 

 

 

 

 

 

(563,912)

 

 

 

 

 

Other assets

 

2,913,050

 

 

 

 

 

 

2,729,458

 

 

 

 

 

Total assets

 

$

58,263,002

 

 

 

 

 

 

$

47,753,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

6,571,231

 

 

$

11,177

 

 

0.23

%

 

$

5,119,568

 

 

$

19,995

 

 

0.52

%

Money market deposits

 

12,262,173

 

 

11,869

 

 

0.13

%

 

9,630,918

 

 

37,178

 

 

0.52

%

Savings deposits

 

2,715,114

 

 

5,762

 

 

0.28

%

 

2,162,365

 

 

4,743

 

 

0.29

%

Time deposits

 

8,635,250

 

 

26,982

 

 

0.42

%

 

9,633,582

 

 

94,684

 

 

1.31

%

Federal funds purchased and other short-term borrowings

 

1,871

 

 

42

 

 

3.00

%

 

128,846

 

 

1,228

 

 

1.27

%

FHLB advances

 

457,273

 

 

6,025

 

 

1.76

%

 

667,935

 

 

10,655

 

 

2.13

%

Repurchase agreements (2)

 

304,745

 

 

5,981

 

 

2.62

%

 

355,923

 

 

9,686

 

 

3.64

%

Long-term debt and finance lease liabilities

 

152,018

 

 

2,314

 

 

2.04

%

 

807,599

 

(4)

4,913

 

 

0.81

%

Total interest-bearing liabilities

 

31,099,675

 

 

70,152

 

 

0.30

%

 

28,506,736

 

 

183,082

 

 

0.86

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

20,345,370

 

 

 

 

 

 

12,987,813

 

 

 

 

 

Accrued expenses and other liabilities

 

1,335,252

 

 

 

 

 

 

1,230,359

 

 

 

 

 

Stockholders’ equity

 

5,482,705

 

 

 

 

 

 

5,028,122

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

58,263,002

 

 

 

 

 

 

$

47,753,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

2.59

%

 

 

 

 

 

2.74

%

Net interest income and net interest margin

 

 

 

$

1,125,874

 

 

2.72

%

 

 

 

$

1,030,612

 

 

3.05

%

Adjusted net interest income and adjusted net interest margin (5)

 

 

 

$

1,080,268

 

 

2.69

%

 

 

 

$

1,003,267

 

 

3.05

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

(2)

Average balances of resale and repurchase agreements for the nine months ended September 30, 2020 have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale and gross repurchase agreements for the nine months ended September 30, 2020 were 2.09% and 3.48%, respectively.

(3)

Includes loans HFS.

(4)

Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.

(5)

Net interest income and net interest margin for the nine months ended September 30, 2021 and September 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the nine months ended September 30, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED RATIOS

(unaudited)

Table 9

 

 

Three Months Ended (1)

 

September 30, 2021

Basis Point Change

 

September 30, 2021

June 30, 2021

September 30, 2020

 

Qtr-o-Qtr

 

Yr-o-Yr

 

Return on average assets

1.46

%

1.56

%

1.26

%

 

(10

)

bps

20

 

bps

Return on average equity

15.75

%

16.61

%

12.50

%

 

(86

)

 

325

 

 

Return on average tangible equity (2)

17.25

%

18.28

%

13.88

%

 

(103

)

 

337

 

 

Interest rate spread

2.58

%

2.63

%

2.51

%

 

(5

)

 

7

 

 

Net interest margin

2.70

%

2.75

%

2.72

%

 

(5

)

 

(2

)

 

Adjusted net interest margin (2)

2.64

%

2.73

%

2.77

%

 

(9

)

 

(13

)

 

Average loan yield

3.61

%

3.57

%

3.60

%

 

4

 

 

1

 

 

Adjusted average loan yield (2)

3.56

%

3.58

%

3.70

%

 

(2

)

 

(14

)

 

Yield on average interest-earning assets

2.83

%

2.92

%

3.07

%

 

(9

)

 

(24

)

 

Average cost of interest-bearing deposits

0.21

%

0.24

%

0.50

%

 

(3

)

 

(29

)

 

Average cost of deposits

0.12

%

0.14

%

0.33

%

 

(2

)

 

(21

)

 

Average cost of funds

0.14

%

0.18

%

0.38

%

 

(4

)

 

(24

)

 

Adjusted pre-tax, pre-provision profitability ratio (2)

1.95

%

1.97

%

1.78

%

 

(2

)

 

17

 

 

Adjusted noninterest expense/average assets (2)

1.08

%

1.12

%

1.22

%

 

(4

)

 

(14

)

 

Efficiency ratio

43.81

%

42.60

%

45.58

%

 

121

 

 

(177

)

 

Adjusted efficiency ratio (2)

35.55

%

36.30

%

40.79

%

 

(75

)

bps

(524

)

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended (1)

September 30, 2021

Basis Point Change

 

 

 

 

 

September 30, 2021

September 30, 2020

Yr-o-Yr

 

 

 

 

Return on average assets

1.50

%

1.13

%

37

 

bps

 

 

 

 

Return on average equity

15.98

%

10.73

%

525

 

 

 

 

 

 

 

Return on average tangible equity (2)

17.56

%

11.95

%

561

 

 

 

 

 

 

 

Interest rate spread

2.59

%

2.74

%

(15

)

 

 

 

 

 

 

Net interest margin

2.72

%

3.05

%

(33

)

 

 

 

 

 

 

Adjusted net interest margin (2)

2.69

%

3.05

%

(36

)

 

 

 

 

 

 

Average loan yield

3.59

%

4.08

%

(49

)

 

 

 

 

 

 

Adjusted average loan yield (2)

3.58

%

4.10

%

(52

)

 

 

 

 

 

 

Yield on average interest-earning assets

2.89

%

3.60

%

(71

)

 

 

 

 

 

 

Average cost of interest-bearing deposits

0.25

%

0.79

%

(54

)

 

 

 

 

 

 

Average cost of deposits

0.15

%

0.53

%

(38

)

 

 

 

 

 

 

Average cost of funds

0.18

%

0.59

%

(41

)

 

 

 

 

 

 

Adjusted pre-tax, pre-provision profitability ratio (2)

1.94

%

2.04

%

(10

)

 

 

 

 

 

 

Adjusted noninterest expense/average assets (2)

1.13

%

1.31

%

(18

)

 

 

 

 

 

 

Efficiency ratio

43.72

%

44.94

%

(122

)

 

 

 

 

 

 

Adjusted efficiency ratio (2)

36.80

%

39.14

%

(234

)

bps

 

 

 

 

 

 

(1)

Annualized except for efficiency ratio.

(2)

See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13 and 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES

($ in thousands)

(unaudited)

Table 10

 

 

 

 

Three Months Ended September 30, 2021

 

 

 

Commercial

 

Consumer

 

 

 

 

 

C&I

 

Total CRE

 

Total Residential Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, June 30, 2021

 

 

$

362,528

 

 

$

199,530

 

 

$

19,468

 

 

$

4,198

 

 

$

585,724

 

(Reversal of) provision for credit losses on loans

(a)

 

(23,365

)

 

8,527

 

 

2,972

 

 

130

 

 

(11,736

)

Gross charge-offs

 

 

(1,154

)

 

(16,903

)

 

(912

)

 

(10

)

 

(18,979

)

Gross recoveries

 

 

4,203

 

 

1,106

 

 

156

 

 

 

 

5,465

 

Total net recoveries (charge-offs)

 

 

3,049

 

 

(15,797

)

 

(756

)

 

(10

)

 

(13,514

)

Foreign currency translation adjustment

 

 

(70

)

 

 

 

 

 

 

 

(70

)

Allowance for loan losses, September 30, 2021

 

 

$

342,142

 

 

$

192,260

 

 

$

21,684

 

 

$

4,318

 

 

$

560,404

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

Commercial

 

Consumer

 

 

 

 

 

C&I

 

Total CRE

 

Total Residential Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, March 31, 2021

 

 

$

394,084

 

 

$

192,895

 

 

$

18,509

 

 

$

2,018

 

 

$

607,506

 

(Reversal of) provision for credit losses on loans

(a)

(22,586

)

 

10,747

 

859

 

 

2,209

 

 

(8,771

)

Gross charge-offs

 

 

(10,572

)

 

(4,456

)

 

 

(32

)

 

(15,060

)

Gross recoveries

 

 

1,338

 

 

344

 

 

100

 

 

3

 

 

1,785

 

Total net (charge-offs) recoveries

 

 

(9,234

)

 

(4,112

)

 

100

 

 

(29

)

 

(13,275

)

Foreign currency translation adjustment

 

 

264

 

 

 

 

 

 

 

 

264

 

Allowance for loan losses, June 30, 2021

 

 

$

362,528

 

 

$

199,530

 

 

$

19,468

 

 

$

4,198

 

 

$

585,724

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

Commercial

 

Consumer

 

 

 

 

 

C&I

 

Total CRE

 

Total Residential Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, June 30, 2020

 

 

$

380,723

 

 

$

219,649

 

 

$

29,181

 

 

$

2,518

 

 

$

632,071

 

Provision for (reversal of) credit losses on loans

(a)

 

31,691

 

 

(18,397

)

 

(3,329

)

 

(76

)

 

9,889

 

Gross charge-offs

 

 

(25,111

)

 

(1,414

)

 

 

 

(124

)

 

(26,649

)

Gross recoveries

 

 

1,218

 

 

1,180

 

 

43

 

 

 

 

2,441

 

Total net (charge-offs) recoveries

 

 

(23,893

)

 

(234

)

 

43

 

 

(124

)

 

(24,208

)

Foreign currency translation adjustment

 

 

500

 

 

 

 

 

 

 

 

500

 

Allowance for loan losses, September 30, 2020

 

 

$

389,021

 

 

$

201,018

 

 

$

25,895

 

 

$

2,318

 

 

$

618,252

 

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES

($ in thousands)

(unaudited)

Table 10 (continued)

 

 

 

 

Nine Months Ended September 30, 2021

 

 

 

Commercial

 

Consumer

 

 

 

 

 

C&I

 

Total CRE

 

Total Residential Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, December 31, 2020

 

 

$

398,040

 

 

$

201,603

 

 

$

18,210

 

 

$

2,130

 

 

$

619,983

 

(Reversal of) provision for credit losses on loans

(a)

 

(42,112

)

 

16,198

 

 

4,229

 

 

2,226

 

 

(19,459

)

Gross charge-offs

 

 

(20,162

)

 

(28,642

)

 

(1,091

)

 

(43

)

 

(49,938

)

Gross recoveries

 

 

6,301

 

 

3,101

 

 

336

 

 

5

 

 

9,743

 

Total net charge-offs

 

 

(13,861

)

 

(25,541

)

 

(755

)

 

(38

)

 

(40,195

)

Foreign currency translation adjustment

 

 

75

 

 

 

 

 

 

 

 

75

 

Allowance for loan losses, September 30, 2021

 

 

$

342,142

 

 

$

192,260

 

 

$

21,684

 

 

$

4,318

 

 

$

560,404

 

 

 

 

 

Nine Months Ended September 30, 2020

 

 

 

Commercial

 

Consumer

 

 

 

 

 

C&I

 

Total CRE

 

Total Residential Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, December 31, 2019

 

 

$

238,376

 

 

$

82,739

 

 

$

33,792

 

 

$

3,380

 

 

$

358,287

 

Impact of ASU 2016-13 adoption

 

 

74,237

 

 

54,168

 

 

(5,468

)

 

2,221

 

 

125,158

 

Allowance for loan losses, January 1, 2020

 

 

$

312,613

 

 

$

136,907

 

 

$

28,324

 

 

$

5,601

 

 

$

483,445

 

Provision for (reversal of) credit losses on loans

(a)

 

130,171

 

 

54,550

 

 

(2,679

)

 

(3,197

)

 

178,845

 

Gross charge-offs

 

 

(57,466

)

 

(2,688

)

 

(221

)

 

(180

)

 

(60,555

)

Gross recoveries

 

 

3,395

 

 

12,249

 

 

471

 

 

94

 

 

16,209

 

Total net (charge-offs) recoveries

 

 

(54,071

)

 

9,561

 

 

250

 

 

(86

)

 

(44,346

)

Foreign currency translation adjustment

 

 

308

 

 

 

 

 

 

 

 

308

 

Allowance for loan losses, September 30, 2020

 

 

$

389,021

 

 

$

201,018

 

 

$

25,895

 

 

$

2,318

 

 

$

618,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

September 30, 2021

 

September 30, 2020

Unfunded Credit Facilities

 

 

 

 

 

 

 

 

 

 

 

Allowance for unfunded credit commitments, beginning of period (1)

 

 

$

26,300

 

 

$

32,529

 

 

$

28,972

 

 

$

33,577

 

 

$

11,158

 

Impact of ASU 2016-13 adoption

 

 

 

 

 

 

 

 

 

 

10,457

 

Provision for (reversal of) credit losses on unfunded credit commitments

(b)

 

1,736

 

 

(6,229

)

 

111

 

 

(5,541

)

 

7,468

 

Allowance for unfunded credit commitments, end of period (1)

 

 

$

28,036

 

 

$

26,300

 

 

$

29,083

 

 

$

28,036

 

 

$

29,083

 

 

 

 

 

 

 

 

 

 

 

 

 

(Reversal of) provision for credit losses

(a)+(b)

 

$

(10,000

)

 

$

(15,000

)

 

$

10,000

 

 

$

(25,000

)

 

$

186,313

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Included in Accrued expense and other liabilities on the Consolidated Balance Sheet.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CRITICIZED LOANS, NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS

($ in thousands)

(unaudited)

Table 11

 

Criticized Loans

September 30, 2021

June 30, 2021

September 30, 2020

Special mention loans

$

448,497

 

$

386,807

 

$

722,920

 

Classified loans

561,787

 

645,180

 

758,496

 

Total criticized loans

$

1,010,284

 

$

1,031,987

 

$

1,481,416

 

 

 

 

Nonperforming Assets

September 30, 2021

June 30, 2021

September 30, 2020

Nonaccrual loans:

 

 

 

Commercial:

 

 

 

C&I

$

97,157

 

$

83,225

 

$

145,986

 

Total CRE

15,359

 

81,573

 

59,724

 

Consumer:

 

 

 

Total residential mortgage

18,153

 

30,489

 

28,289

 

Other consumer

2,491

 

2,503

 

2,495

 

Total nonaccrual loans

133,160

 

197,790

 

236,494

 

Other real estate owned, net

28,800

 

14,914

 

19,504

 

Other nonperforming assets

10,681

 

13,025

 

3,890

 

Total nonperforming assets

$

172,641

 

$

225,729

 

$

259,888

 

 

 

 

Credit Quality Ratios

September 30, 2021

June 30, 2021

September 30, 2020

Annualized quarterly net charge-offs to average loans HFI

0.13

%

0.13

%

0.26

%

Special mention loans to loans HFI

1.11

%

0.97

%

1.93

%

Classified loans to loans HFI

1.39

%

1.61

%

2.03

%

Criticized loans to loans HFI

2.50

%

2.58

%

3.96

%

Nonperforming assets to total assets

0.28

%

0.38

%

0.52

%

Nonaccrual loans to loans HFI

0.33

%

0.49

%

0.63

%

Allowance for loan losses to loans HFI

1.38

%

1.46

%

1.65

%

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 12

Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of core deposit intangibles and the extinguishment cost on repurchase agreements. 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

 

 

 

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

Net interest income before provision for credit losses

 

(a)

 

$

395,706

 

 

$

376,473

 

 

$

324,130

 

Total noninterest income (1)

 

 

 

73,109

 

 

68,431

 

 

54,503

 

Total revenue

 

(b)

 

$

468,815

 

 

$

444,904

 

 

$

378,633

 

 

 

 

 

 

 

 

 

 

Total noninterest expense (1)

 

(c)

 

$

205,384

 

 

$

189,523

 

 

$

172,573

 

Less: Amortization of tax credit and other investments (1)

 

 

 

(38,008

)

 

(27,291

)

 

(17,209

)

Amortization of core deposit intangibles

 

 

 

(705

)

 

(710

)

 

(927

)

Adjusted noninterest expense

 

(d)

 

$

166,671

 

 

$

161,522

 

 

$

154,437

 

Efficiency ratio

 

(c)/(b)

 

43.81

%

 

42.60

%

 

45.58

%

Adjusted efficiency ratio

 

(d)/(b)

 

35.55

%

 

36.30

%

 

40.79

%

Adjusted pre-tax, pre-provision income

 

(b)-(d) = (e)

 

$

302,144

 

 

$

283,382

 

 

$

224,196

 

Average total assets

 

(f)

 

$

61,359,533

 

 

$

57,771,837

 

 

$

50,247,259

 

Adjusted pre-tax, pre-provision profitability ratio (2)

 

(e)/(f)

 

1.95

%

 

1.97

%

 

1.78

%

Adjusted noninterest expense/average assets (2)

 

(d)/(f)

 

1.08

%

 

1.12

%

 

1.22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

 

September 30, 2021

 

September 30, 2020

 

 

Net interest income before provision for credit losses

 

(g)

 

$

1,125,874

 

 

$

1,030,612

 

 

 

Total noninterest income (1)

 

 

 

214,406

 

 

165,715

 

 

 

Total revenue

 

(h)

 

$

1,340,280

 

 

$

1,196,327

 

 

 

 

 

 

 

 

 

 

 

 

Total noninterest expense (1)

 

(i)

 

$

585,984

 

 

$

537,671

 

 

 

Less: Amortization of tax credit and other investments (1)

 

 

 

(90,657

)

 

(57,819

)

 

 

Amortization of core deposit intangibles

 

 

 

(2,147

)

 

(2,811

)

 

 

Repurchase agreements’ extinguishment cost

 

 

 

 

 

(8,740

)

 

 

Adjusted noninterest expense

 

(j)

 

$

493,180

 

 

$

468,301

 

 

 

Efficiency ratio

 

(i)/(h)

 

43.72

%

 

44.94

%

 

 

Adjusted efficiency ratio

 

(j)/(h)

 

36.80

%

 

39.14

%

 

 

Adjusted pre-tax, pre-provision income

 

(h)-(j) = (k)

 

$

847,100

 

 

$

728,026

 

 

 

Average total assets

 

(l)

 

$

58,263,002

 

 

$

47,753,030

 

 

 

Adjusted pre-tax, pre-provision profitability ratio (2)

 

(k)/(l)

 

1.94

%

 

2.04

%

 

 

Adjusted noninterest expense/average assets (2)

 

(j)/(l)

 

1.13

%

 

1.31

%

 

 

 

(1)

Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.

(2)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 13

 

 

 

 

 

 

 

 

The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Tangible equity and tangible equity to tangible assets ratio are non-GAAP financial measures. Tangible equity and tangible assets represent stockholders’ equity and total assets, respectively, which have been reduced by goodwill and other intangible assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

Stockholders’ equity

 

(a)

 

$

5,690,201

 

 

$

5,547,548

 

 

$

5,126,106

 

Less: Goodwill

 

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Other intangible assets (1)

 

 

 

(9,849

)

 

(10,309

)

 

(12,369

)

Tangible equity

 

(b)

 

$

5,214,655

 

 

$

5,071,542

 

 

$

4,648,040

 

 

 

 

 

 

 

 

 

 

Total assets

 

(c)

 

$

60,959,110

 

 

$

59,854,876

 

 

$

50,371,477

 

Less: Goodwill

 

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Other intangible assets (1)

 

 

 

(9,849

)

 

(10,309

)

 

(12,369

)

Tangible assets

 

(d)

 

$

60,483,564

 

 

$

59,378,870

 

 

$

49,893,411

 

Total stockholders’ equity to total assets ratio

 

(a)/(c)

 

9.33

%

 

9.27

%

 

10.18

%

Tangible equity to tangible assets ratio

 

(b)/(d)

 

8.62

%

 

8.54

%

 

9.32

%

 

 

 

 

 

 

 

 

 

Return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

September 30, 2021

 

September 30, 2020

Net Income

 

 

 

$

225,449

 

 

$

224,742

 

 

$

159,537

 

 

$

655,185

 

 

$

403,713

 

Add: Amortization of core deposit intangibles

 

 

 

705

 

 

710

 

 

927

 

 

2,147

 

 

2,811

 

Amortization of mortgage servicing assets

 

 

 

430

 

 

420

 

 

450

 

 

1,264

 

 

1,492

 

Tax effect of amortization adjustments (2)

 

 

 

(322

)

 

(321

)

 

(390

)

 

(968

)

 

(1,220

)

Tangible net income

 

(e)

 

$

226,262

 

 

$

225,551

 

 

$

160,524

 

 

$

657,628

 

 

$

406,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average stockholders’ equity

 

 

 

$

5,680,306

 

 

$

5,425,952

 

 

$

5,079,351

 

 

$

5,482,705

 

 

$

5,028,122

 

Less: Average goodwill

 

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

 

(465,697

)

 

(465,697

)

Average other intangible assets (1)

 

 

 

(10,135

)

 

(10,827

)

 

(13,083

)

 

(10,847

)

 

(14,302

)

Average tangible equity

 

(f)

 

$

5,204,474

 

 

$

4,949,428

 

 

$

4,600,571

 

 

$

5,006,161

 

 

$

4,548,123

 

Return on average tangible equity (3)

 

(e)/(f)

 

17.25

%

 

18.28

%

 

13.88

%

 

17.56

%

 

11.95

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes core deposit intangibles and mortgage servicing assets.

(2)

Applied statutory tax rate of 28.37% for the three and nine months ended September 30, 2021, and the three months ended June 30, 2021. Applied statutory tax rate of 28.35% for the three and nine months ended September 30, 2020.

(3)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 14

In April 2020, the Company started accepting applications under the PPP administered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act and began to originate loans to qualified small businesses. In January 2021, the Company began processing applications under the second round of the SBA’s PPP in response to the Consolidated Appropriations Act, 2021 signed by the President on December 27, 2020. The PPP ended on May 31, 2021.

 

These loans are included in the Company’s C&I portfolio, have an interest rate of one percent and are 100% guaranteed by the SBA. Loan processing fees paid to the Company from the SBA are accounted for as loan origination fees, where net deferred fees are recognized on a straight line basis over the estimated life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period. The Company drew down $1.44 billion from the PPPLF during the second quarter of 2020. The remaining balance of $1.43 billion as of September 2020 was repaid in full during the fourth quarter of 2020.

 

Adjusted loan yield and adjusted net interest margin for the three and nine months ended September 30, 2021 and 2020, and three months ended June 30, 2020 exclude the impact of PPP loans. Net interest margin for the three and nine months ended September 30, 2020 has also been adjusted for advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provide comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance.

 

 

 

 

Three Months Ended

 

Nine Months Ended

Yield on Average Loans

 

September 30, 2021

 

June 30, 2021

 

September 30, 2020

 

September 30, 2021

 

September 30, 2020

Interest income on loans

 

(a)

 

$

363,503

 

 

$

352,453

 

 

$

336,542

 

 

$

1,057,964

 

 

$

1,115,804

 

Less: Interest income on PPP loans

 

 

 

(15,212

)

 

(15,377

)

 

(7,778

)

 

(45,606

)

 

(29,067

)

Adjusted interest income on loans

 

(b)

 

$

348,291

 

 

$

337,076

 

 

$

328,764

 

 

$

1,012,358

 

 

$

1,086,737

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loans

 

(c)

 

$

39,960,151

 

 

$

39,622,270

 

 

$

37,160,445

 

 

$

39,441,751

 

 

$

36,487,859

 

Less: Average PPP loans

 

 

 

(1,111,404

)

 

(1,870,385

)

 

(1,764,411

)

 

(1,634,617

)

 

(1,078,985

)

Adjusted average loans

 

(d)

 

$

38,848,747

 

 

$

37,751,885

 

 

$

35,396,034

 

 

$

37,807,134

 

 

$

35,408,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average loan yield (1)

 

(a)/(c)

 

3.61

%

 

3.57

%

 

3.60

%

(1)

3.59

%

 

4.08

%

Adjusted average loan yield (1)

 

(b)/(d)

 

3.56

%

 

3.58

%

 

3.70

%

(1)

3.58

%

 

4.10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Margin

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income before provision for credit losses

 

(e)

 

$

395,706

 

 

$

376,473

 

 

$

324,130

 

 

$

1,125,874

 

 

$

1,030,612

 

Less: Interest income on PPP loans

 

 

 

(15,212

)

 

(15,377

)

 

(7,778

)

 

(45,606

)

 

(29,067

)

Add: Interest expense on advances from the PPPLF

 

 

 

 

 

 

 

1,259

 

 

 

 

1,722

 

Adjusted net interest income

 

(f)

 

$

380,494

 

 

$

361,096

 

 

$

317,611

 

 

$

1,080,268

 

 

$

1,003,267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average interest-earning assets

 

(g)

 

$

58,239,480

 

 

$

54,901,209

 

 

$

47,428,586

 

 

$

55,350,645

 

 

$

45,076,734

 

Less: Average PPP loans

 

 

 

(1,111,404

)

 

(1,870,385

)

 

(1,764,411

)

 

(1,634,617

)

 

(1,078,985

)

Adjusted average interest-earning assets

 

(h)

 

$

57,128,076

 

 

$

53,030,824

 

 

$

45,664,175

 

 

$

53,716,028

 

 

$

43,997,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest margin (1)

 

(e)/(g)

 

2.70

%

 

2.75

%

 

2.72

%

(1)

2.72

%

 

3.05

%

Adjusted net interest margin (1)

 

(f)/(h)

 

2.64

%

 

2.73

%

 

2.77

%

(1)

2.69

%

 

3.05

%

 

(1)

Annualized.

 

FOR INVESTOR INQUIRIES, CONTACT: Irene Oh Chief Financial Officer T: (626) 768-6360 E: irene.oh@eastwestbank.com Julianna Balicka Director of Investor Relations and Corporate Finance T: (626) 768-6985 E: julianna.balicka@eastwestbank.com

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