East West Bancorp Reports Net Income for Third Quarter 2019 of $171 Million and Diluted Earnings Per Share of $1.17; Record Operating Revenue of $421 Million

Nachrichtenquelle: Business Wire (engl.)
17.10.2019, 14:00  |  62   |   |   

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the third quarter of 2019. For the third quarter of 2019, net income was $171.4 million or $1.17 per diluted share, both up by 14% compared to the second quarter of 2019. Third quarter 2019 return on average assets was 1.58% and return on average equity was 14.1%.

“For the third quarter of 2019, East West achieved both record total operating1 revenue of $421 million and record net interest income of $370 million,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “In a challenging environment of declining interest rates, we achieved a quarter-over-quarter increase in net interest income through balance sheet growth combined with a decrease in the cost of deposits. For the third quarter of 2019, the average cost of deposits decreased by six basis points to 1.05%, compared to 1.11% in the second quarter of 2019.”

“Total loans grew $291 million, or 3% annualized, to a record $34.0 billion as of September 30, 2019 from $33.7 billion as of June 30, 2019. Year-to-date, total loans grew 7% annualized. Total deposits grew $182 million, or 2% annualized, to a record $36.7 billion as of September 30, 2019 from $36.5 billion as of June 30, 2019. Year-to-date, total deposits grew 5% annualized.”

“We maintained strong expense discipline, resulting in a modest decline in noninterest expenses quarter-over-quarter,” continued Ng. “However, the provision for credit losses increased to $38 million for the third quarter, and our pre-tax income declined by 7.5% from the second quarter of 2019. Nevertheless, net income grew 14% quarter-over-quarter as we benefitted from a linked-quarter reduction in the income tax expense.”

“Overall, our third quarter 2019 return on assets was 1.58% and return on equity was 14.1%. We continue to deliver strong returns, in line with our long-term track record of generating attractive profitability,” concluded Ng.

 

 

1

Operating revenue consists of net interest income before provision for credit losses and noninterest income, excluding non-operating items.

HIGHLIGHTS OF RESULTS

  • Third Quarter Earnings – Third quarter 2019 net income was $171.4 million, up by 14% compared to second quarter 2019 net income of $150.4 million, but 5% lower than second quarter adjusted2 net income of $180.5 million. Third quarter 2019 diluted earnings per share (“EPS”) were $1.17, up by 14% compared to second quarter 2019 diluted EPS of $1.03, but 5% lower than second quarter adjusted2 EPS of $1.24.
  • Net Interest Income and Net Interest Margin – Third quarter 2019 net interest income (“NII”) was $369.8 million, a quarterly increase of $2.5 million or 1%, and a year-over-year increase of $21.1 million or 6%. Third quarter 2019 net interest margin (“NIM”) was 3.59%, a 14 basis point contraction from 3.73% in the previous quarter. Quarter-over-quarter, the average loan yield contracted by 17 basis points, and the average cost of deposits decreased by six basis points.
  • Record Loans – Total loans of $34.0 billion as of September 30, 2019 were up $291.0 million, or 3% linked quarter annualized, from $33.7 billion as of June 30, 2019. Total loans grew $2.8 billion, or 9% year-over-year. Average loans of $33.7 billion grew $679.9 million quarter-over-quarter, or 8% linked quarter annualized. Average loan growth during the quarter was well-diversified across commercial and consumer loan portfolios.
  • Record Deposits – Total deposits of $36.7 billion as of September 30, 2019 were up $182.0 million, or 2% linked quarter annualized, from $36.5 billion as of June 30, 2019. Total deposits grew $3.0 billion, or 9% year-over-year. Average deposits of $36.5 billion grew $1.2 billion quarter-over-quarter, or 13% linked quarter annualized. Average deposit growth during the quarter was well balanced across money market, noninterest-bearing demand and time deposits, partially offset by a decrease in interest-bearing checking accounts.
  • Asset Quality Metrics – The allowance for loan losses was $345.6 million, or 1.02% of loans held-for-investment (“HFI”) as of September 30, 2019; the comparable ratios were 0.98% as of June 30, 2019, and 0.99% as of September 30, 2018. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $134.5 million, or 0.31% of total assets as of September 30, 2019; the comparable ratios were 0.28% as of June 30, 2019, and 0.29% as of September 30, 2018. For the third quarter of 2019, the provision for credit losses was $38.3 million; net charge-offs were $22.5 million, or annualized 0.26% of average loans HFI.
  • Capital Levels – Capital levels for East West were strong. As of September 30, 2019, stockholders’ equity was $4.9 billion, or $33.54 per share. Tangible equity3 per common share was $30.22 as of September 30, 2019, an increase of 4% linked quarter and 17% year-over-year.

    As of September 30, 2019, the tangible equity to tangible assets ratio3 was 10.3%, the common equity tier 1 (“CET1”) capital ratio was 12.8%, and the total risk-based capital ratio was 14.2%.

 

 

2

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

3

See reconciliation of GAAP to non-GAAP financial measures in Table 16.

QUARTERLY RESULTS SUMMARY

 

Quarter Ended

($ in millions, except per share data and ratios)

September 30,
2019

June 30,
2019

September 30,
2018

Net income

$

171.4

 

$

150.4

 

$

171.3

 

Adjusted net income (1)

$

171.4

 

$

180.5

 

$

171.3

 

Earnings per share (diluted)

$

1.17

 

$

1.03

 

$

1.17

 

Adjusted earnings per share (diluted) (1)

$

1.17

 

$

1.24

 

$

1.17

 

Book value per common share

$

33.54

 

$

32.53

 

$

29.29

 

Tangible equity (1) per common share

$

30.22

 

$

29.20

 

$

25.91

 

Tangible equity to tangible assets ratio (1)

10.28

%

10.02

%

9.74

%

Return on average assets (2)

1.58

%

1.45

%

1.76

%

Return on average equity (2)

14.1

%

12.9

%

16.2

%

Return on average tangible equity (1)(2)

15.7

%

14.5

%

18.5

%

Adjusted return on average assets (1)(2)

1.58

%

1.74

%

1.76

%

Adjusted return on average equity (1)(2)

14.1

%

15.5

%

16.2

%

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

15.7

%

17.4

%

18.5

%

Adjusted pre-tax, pre-provision profitability ratio (1)(2)

2.42

%

2.51

%

2.44

%

Net interest income

$

369.8

 

$

367.3

 

$

348.7

 

Adjusted net interest income (1)

$

367.3

 

$

365.6

 

$

345.9

 

Net interest margin (2)

3.59

%

3.73

%

3.76

%

Adjusted net interest margin (1)(2)

3.56

%

3.71

%

3.72

%

Average loan yield (2)

5.11

%

5.28

%

5.02

%

Adjusted average loan yield (1)(2)

5.08

%

5.26

%

4.97

%

Average cost of deposits (2)

1.05

%

1.11

%

0.78

%

Efficiency ratio

41.9

%

42.3

%

45.5

%

Adjusted efficiency ratio (1)

37.7

%

38.0

%

39.9

%

(1)

See reconciliation of GAAP to non-GAAP financial measures in Tables 13, 14, 15 and 16.

(2)

Annualized.

MANAGEMENT OUTLOOK FOR 2019

The Company has updated its outlook for the expected full year 2019 results, compared to its full year 2018 results. The components are as follows:

  • End of Period Loans: increase by approximately 7% year-over-year.
  • Net Interest Income (excluding ASC 310-30 discount accretion income): increase by approximately 6% year-over-year.
  • Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): between 3.60% and 3.65%.
  • Noninterest Expense (excluding amortization of tax credit investments & core deposit intangibles): increase by approximately 3% year-over-year.
  • Provision for Credit Losses: approximately $100 million.
  • Tax Items: projecting full year effective tax rate of approximately 20%, including the impact of a $30.1 million reversal of previously claimed tax credits in the second quarter of 2019, or approximately 15% excluding the tax credit reversal.
  • Interest Rates: 25-basis point cut to the fed funds rate in October 2019.

OPERATING RESULTS SUMMARY

Third Quarter 2019 Compared to Second Quarter 2019

Net Interest Income and Net Interest Margin
Net interest income totaled $369.8 million, a 1% increase from $367.3 million. Net interest margin of 3.59% contracted by 14 basis points from 3.73%.

  • Average loans of $33.7 billion grew $679.9 million, or 8% linked quarter annualized.
  • Average interest-earning assets of $40.9 billion grew $1.5 billion, or 15% linked quarter annualized. Growth came primarily from an increase in the average interest-bearing cash and deposits with banks of $695.6 million and the aforementioned increase in average loans.
  • Average deposits of $36.5 billion grew $1.2 billion, or 13% linked quarter annualized.
  • The average yield on loans contracted by 17 basis points to 5.11% from 5.28%, reflecting the decline in Libor rates and two 25-basis point reductions in the fed funds rate during the current quarter. The yield on average interest-earning assets contracted by 21 basis points to 4.62% from 4.83%.
  • The average cost of deposits decreased by six basis points to 1.05% from 1.11%, and the average cost of interest-bearing deposits decreased by eight basis points to 1.49% from 1.57%.

Noninterest Income
Noninterest income totaled $51.5 million, a 2% decrease from $52.8 million.

  • The $2.0 million increase in net gains on sales of loans primarily reflected an increase in the volume of SBA loans sold. Wealth management fees increased $1.0 million, reflecting an increase in customer activity.
  • The $2.0 million decrease in interest rate contracts and other derivative income primarily reflected the quarter-over-quarter change in the credit valuation adjustment, which was driven by the decline in long-term interest rates during the third quarter of 2019. Customer driven interest rate contract revenue was $11.1 million during the third quarter, compared to $11.8 million in the second quarter.

Noninterest Expense
Noninterest expense totaled $176.6 million, a 1% decrease from $177.7 million.

  • Third quarter noninterest expense consisted of $158.6 million of adjusted4 noninterest expense, $16.8 million in amortization of tax credit and other investments, and $1.1 million in amortization of core deposit intangibles.
  • Adjusted noninterest expense of $158.6 million decreased by approximately $1.2 million, or 1%, from $159.8 million. The largest linked-quarter decrease was in compensation and employee benefits expense.
  • The adjusted4 efficiency ratio was 37.7% in the third quarter, an improvement of 37 basis points compared to 38.0% in the previous quarter.

 

 

4

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

TAX RELATED ITEMS

Third quarter 2019 income tax expense was $35.0 million and the effective tax rate was 17%. This compares to a tax expense of $72.8 million and an effective tax rate of 33% in the second quarter of 2019. Included in the second quarter 2019 income tax expense was a $30.1 million reversal of certain previously claimed tax credits related to DC Solar. Adjusted, tax expense was $42.7 million5 and the effective tax rate was 19%5 in the second quarter of 2019.

  • For the full year 2019, the Company projects that its effective tax rate will be approximately 20%, including the impact of a $30.1 million tax credit reversal in the second quarter of 2019, or approximately 15% excluding the tax credit reversal.

CREDIT QUALITY

The allowance for loan losses totaled $345.6 million, or 1.02% of loans HFI, as of September 30, 2019, compared to $330.6 million, or 0.98% of loans HFI, as of June 30, 2019, and $310.0 million, or 0.99% of loans HFI, as of September 30, 2018.

  • Non-PCI nonperforming assets were $134.5 million, or 0.31% of total assets, as of September 30, 2019, compared to $119.3 million, or 0.28% of total assets, as of June 30, 2019, and $114.6 million, or 0.29% of total assets, as of September 30, 2018.
  • Net charge-offs for the third quarter of 2019 were $22.5 million, or annualized 0.26% of average loans HFI; the charge-offs in the quarter largely stemmed from three commercial loans. Year-to-date, net charge-offs were $44.5 million, or annualized 0.18% of average loans HFI. This compares to annualized quarterly and year-to-date net charge-offs to average loans HFI of 0.05% and 0.11%, respectively, for the period ended September 30, 2018.
  • The provision for credit losses recorded for the third quarter of 2019 was $38.3 million, compared to $19.2 million for the second quarter of 2019, and $10.5 million for the third quarter of 2018. Provision for credit losses was $80.1 million and $46.3 million for the nine month period ended September 30, 2019 and 2018, respectively.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital ratios for the quarters ended September 30, 2019, June 30, 2019, and September 30, 2018.

EWBC Regulatory Capital Metrics

Basel III

 

($ in millions)

September 30,
2019 (a)

June 30,

2019

September 30,
2018

Minimum
Capital
Ratio

Well
Capitalized
Ratio

Minimum
Capital Ratio +
Conservation
Buffer (b)

 

 

 

 

 

 

 

CET1 capital ratio

12.8

%

12.5

%

12.3

%

4.5

%

6.5

%

7.0

%

Tier 1 risk-based capital ratio

12.8

%

12.5

%

12.3

%

6.0

%

8.0

%

8.5

%

Total risk-based capital ratio

14.2

%

13.9

%

13.8

%

8.0

%

10.0

%

10.5

%

Tier 1 leverage capital ratio

10.3

%

10.4

%

10.0

%

4.0

%

5.0

%

4.0

%

Risk-Weighted Assets (“RWA”) (c)

$

34,424

 

$

34,154

 

$

31,210

 

N/A

N/A

N/A

 

 

 

 

 

 

 

N/A Not applicable.

(a)

The Company’s September 30, 2019 regulatory capital ratios and RWA are preliminary.

(b)

An additional 2.5% capital conservation buffer above the minimum capital ratios is required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.

(c)

Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.

 

 

5

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

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared fourth quarter 2019 dividends for the Company’s common stock. The common stock cash dividend of $0.275 per share is payable on November 15, 2019 to shareholders of record on November 1, 2019.

Conference Call

East West will host a conference call to discuss third quarter 2019 earnings with the public on Thursday, October 17, 2019 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 2019 results and operating developments.

  • The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
  • A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A replay of the conference call will be available on October 17, 2019 at 11:30 a.m. Pacific Time through November 17, 2019. The replay numbers are: within the U.S. – (877) 344-7529; within Canada – (855) 669-9658; International calls – (412) 317-0088; and the replay access code is: 10135114.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $43.3 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 130 locations worldwide, including in the United States markets of California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to our current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, and the negative thereof. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, 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; our ability to compete effectively against other financial institutions in our banking markets; success and timing of our business strategies; our ability to retain key officers and employees; impact on our funding costs, net interest income and net interest margin due to changes in key variable market interest rates, competition, regulatory requirements and our product mix; changes in our costs of operation, compliance and expansion; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; impact of adverse changes to our credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; changes in the United States (“U.S.”) economy, including inflation, deflation, employment levels, rate of growth and general business conditions; government intervention in the financial system, including changes in government interest rate policies; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate selected as the preferred alternative reference rate to the London Interbank Offered Rate; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions; impact of the Dodd-Frank Act on our business, business practices, cost of operations and executive compensation; heightened regulatory and governmental oversight and scrutiny of our business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from our interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; changes in income tax laws and regulations; impact of other potential federal tax changes and spending cuts; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; changes in our ability to receive dividends from our subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations in our stock price; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on our financial performance; and other factors set forth in our public reports including its Annual Report on Form 10-K for the year ended December 31, 2018, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied or projected by such forward-looking statements. We assume no obligation to update or revise such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

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

(unaudited)

Table 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019
% or Basis Point Change

 

September 30, 2019

June 30, 2019

September 30, 2018

Qtr-o-Qtr

 

Yr-o-Yr

 

Assets

 

 

 

 

 

 

 

Cash and due from banks

$

475,291

 

$

425,949

 

$

408,049

 

11.6

%

 

16.5

%

 

Interest-bearing cash with banks

2,566,990

 

3,195,665

 

1,810,738

 

(19.7

)

 

41.8

 

 

Cash and cash equivalents

3,042,281

 

3,621,614

 

2,218,787

 

(16.0

)

 

37.1

 

 

Interest-bearing deposits with banks

160,423

 

150,273

 

400,900

 

6.8

 

 

(60.0

)

 

Securities purchased under resale agreements (“resale agreements”) (1)

860,000

 

1,010,000

 

1,035,000

 

(14.9

)

 

(16.9

)

 

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

3,284,034

 

2,592,913

 

2,676,510

 

26.7

 

 

22.7

 

 

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

78,334

 

78,093

 

73,729

 

0.3

 

 

6.2

 

 

Loans held-for-sale (“HFS”)

294

 

3,879

 

3,114

 

(92.4

)

 

(90.6

)

 

Loans held-for-investment ("HFI") (net of allowance for loan losses of $345,576, $330,625 and $310,041)

33,679,400

 

33,399,752

 

30,900,144

 

0.8

 

 

9.0

 

 

Investments in qualified affordable housing partnerships, net

190,000

 

198,466

 

148,097

 

(4.3

)

 

28.3

 

 

Investments in tax credit and other investments, net

211,603

 

210,387

 

232,194

 

0.6

 

 

(8.9

)

 

Goodwill

465,697

 

465,697

 

465,547

 

 

 

0.0

 

 

Operating lease right-of-use assets

103,894

 

109,032

 

 

(4.7

)

 

100.0

 

 

Other assets

1,198,699

 

1,052,252

 

888,691

 

13.9

 

 

34.9

 

 

Total assets

$

43,274,659

 

$

42,892,358

 

$

39,042,713

 

0.9

%

 

10.8

%

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Deposits

$

36,659,526

 

$

36,477,542

 

$

33,629,124

 

0.5

%

 

9.0

%

 

Short-term borrowings

47,689

 

19,972

 

56,411

 

138.8

 

 

(15.5

)

 

FHLB advances

745,494

 

745,074

 

325,596

 

0.1

 

 

129.0

 

 

Securities sold under repurchase agreements (“repurchase agreements”) (1)

50,000

 

50,000

 

50,000

 

 

 

 

 

Long-term debt and finance lease liabilities

152,390

 

152,506

 

156,770

 

(0.1

)

 

(2.8

)

 

Operating lease liabilities

112,142

 

117,448

 

 

(4.5

)

 

100.0

 

 

Accrued expenses and other liabilities

624,754

 

595,223

 

579,962

 

5.0

 

 

7.7

 

 

Total liabilities

38,391,995

 

38,157,765

 

34,797,863

 

0.6

 

 

10.3

 

 

Stockholders’ equity

4,882,664

 

4,734,593

 

4,244,850

 

3.1

 

 

15.0

 

 

Total liabilities and stockholders’ equity

$

43,274,659

 

$

42,892,358

 

$

39,042,713

 

0.9

%

 

10.8

%

 

 

 

 

 

 

 

 

 

Book value per common share

$

33.54

 

$

32.53

 

$

29.29

 

3.1

%

 

14.5

%

 

Tangible equity (2) per common share

$

30.22

 

$

29.20

 

$

25.91

 

3.5

 

 

16.6

 

 

Number of common shares at period-end

145,568

 

145,547

 

144,929

 

0.0

 

 

0.4

 

 

Tangible equity to tangible assets ratio (2)

10.28

%

10.02

%

9.74

%

26

 

bps

54

 

bps

 

 

 

 

 

(1)

Resale and repurchase agreements have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of each of September 30, 2019, June 30, 2019 and September 30, 2018, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.

(2)

See reconciliation of GAAP to non-GAAP financial measures in Table 16.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

 

 

 

 

September 30, 2019
% Change

 

September 30, 2019

June 30, 2019

September 30, 2018

Qtr-o-Qtr

Yr-o-Yr

Loans:

 

 

 

 

 

Commercial:

 

 

 

 

 

Commercial and industrial (“C&I”)

$

12,301,002

 

$

12,402,967

 

$

11,517,054

 

(0.8

)%

6.8

%

Commercial real estate (“CRE”)

9,749,583

 

9,663,624

 

9,078,933

 

0.9

 

7.4

 

Multifamily residential

2,589,203

 

2,577,154

 

2,273,957

 

0.5

 

13.9

 

Construction and land

719,900

 

674,798

 

605,033

 

6.7

 

19.0

 

Consumer:

 

 

 

 

 

Single-family residential

6,811,014

 

6,494,882

 

5,684,587

 

4.9

 

19.8

 

Home equity lines of credit (“HELOCs”)

1,540,121

 

1,575,150

 

1,717,440

 

(2.2

)

(10.3

)

Other consumer

314,153

 

341,802

 

333,181

 

(8.1

)

(5.7

)

Total loans HFI (1)(2)

34,024,976

 

33,730,377

 

31,210,185

 

0.9

 

9.0

 

Loans HFS

294

 

3,879

 

3,114

 

(92.4

)

(90.6

)

Total loans (1)(2)

34,025,270

 

33,734,256

 

31,213,299

 

0.9

 

9.0

 

Allowance for loan losses

(345,576

)

(330,625

)

(310,041

)

4.5

 

11.5

 

Net loans (1)(2)

$

33,679,694

 

$

33,403,631

 

$

30,903,258

 

0.8

%

9.0

%

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest-bearing demand

$

10,806,937

 

$

10,599,088

 

$

10,794,370

 

2.0

%

0.1

%

Interest-bearing checking

4,837,391

 

5,083,675

 

4,383,672

 

(4.8

)

10.4

 

Money market

8,400,353

 

8,009,325

 

7,608,191

 

4.9

 

10.4

 

Savings

2,094,638

 

2,188,738

 

2,142,105

 

(4.3

)

(2.2

)

Total core deposits

26,139,319

 

25,880,826

 

24,928,338

 

1.0

 

4.9

 

Time deposits

10,520,207

 

10,596,716

 

8,700,786

 

(0.7

)

20.9

 

Total deposits

$

36,659,526

 

$

36,477,542

 

$

33,629,124

 

0.5

%

9.0

%

 

(1)

Includes $(39.8) million, $(43.8) million and $(42.4) million as of September 30, 2019, June 30, 2019 and September 30, 2018, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.

(2)

Includes ASC 310-30 discount of $16.7 million, $18.9 million and $24.5 million as of September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

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

(unaudited)

Table 3

 

Three Months Ended

September 30, 2019
% Change

 

September 30, 2019

June 30, 2019

September 30, 2018

Qtr-o-Qtr

Yr-o-Yr

Interest and dividend income

$

476,912

$

474,844

$

422,185

0.4

%

13.0

%

Interest expense

107,105

107,518

73,465

(0.4

)

45.8

 

Net interest income before provision for credit losses

369,807

367,326

348,720

0.7

 

6.0

 

Provision for credit losses

38,284

19,245

10,542

98.9

 

263.2

 

Net interest income after provision for credit losses

331,523

348,081

338,178

(4.8

)

(2.0

)

Noninterest income

51,474

52,759

46,502

(2.4

)

10.7

 

Noninterest expense

176,630

177,663

179,815

(0.6

)

(1.8

)

Income before income taxes

206,367

223,177

204,865

(7.5

)

0.7

 

Income tax expense

34,951

72,797

33,563

(52.0

)

4.1

 

Net income

$

171,416

$

150,380

$

171,302

14.0

%

0.1

%

Earnings per share (“EPS”)

 

 

 

 

 

- Basic

$

1.18

$

1.03

$

1.18

14.0

%

(0.4

)%

- Diluted

$

1.17

$

1.03

$

1.17

13.9

 

0.1

 

Weighted average number of shares outstanding

 

 

 

 

 

- Basic

145,559

145,546

144,921

0.0

%

0.4

%

- Diluted

146,120

146,052

146,173

0.0

 

0.0

 

 

 

 

 

 

 

 

Three Months Ended

September 30, 2019
% Change

 

September 30, 2019

June 30, 2019

September 30, 2018

Qtr-o-Qtr

Yr-o-Yr

Noninterest income:

 

 

 

 

 

Lending fees

$

14,846

$

16,242

$

15,367

(8.6

)%

(3.4

)%

Deposit account fees

9,918

9,788

9,777

1.3

 

1.4

 

Foreign exchange income

8,065

7,286

6,077

10.7

 

32.7

 

Wealth management fees

4,841

3,800

3,535

27.4

 

36.9

 

Interest rate contracts and other derivative income

8,423

10,398

4,595

(19.0

)

83.3

 

Net gains on sales of loans

2,037

15

1,145

NM

77.9

 

Net gains on sales of AFS investment securities

58

1,447

35

(96.0

)

65.7

 

Net gains on sales of fixed assets

48

3,402

100.0

 

(98.6

)

Other income

3,238

3,783

2,569

(14.4

)

26.0

 

Total noninterest income

$

51,474

$

52,759

$

46,502

(2.4

)%

10.7

%

Noninterest expense:

 

 

 

 

 

Compensation and employee benefits

$

97,819

$

100,531

$

96,733

(2.7

)%

1.1

%

Occupancy and equipment expense

17,912

17,362

17,292

3.2

 

3.6

 

Deposit insurance premiums and regulatory assessments

3,550

2,919

6,013

21.6

 

(41.0

)

Legal expense

1,720

2,355

1,544

(27.0

)

11.4

 

Data processing

3,328

3,460

3,289

(3.8

)

1.2

 

Consulting expense

2,559

2,069

2,683

23.7

 

(4.6

)

Deposit related expense

3,584

3,338

2,600

7.4

 

37.8

 

Computer software expense

6,556

6,211

5,478

5.6

 

19.7

 

Other operating expense

22,769

22,679

23,394

0.4

 

(2.7

)

Amortization of tax credit and other investments

16,833

16,739

20,789

0.6

 

(19.0

)

Total noninterest expense

$

176,630

$

177,663

$

179,815

(0.6

)%

(1.8

)%

 

NM - Not meaningful.

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, 2019
% Change

 

September 30, 2019

September 30, 2018

Yr-o-Yr

Interest and dividend income

$

1,415,067

$

1,194,369

18.5

%

Interest expense

315,473

177,277

78.0

 

Net interest income before provision for credit losses

1,099,594

1,017,092

8.1

 

Provision for credit losses

80,108

46,296

73.0

 

Net interest income after provision for credit losses

1,019,486

970,796

5.0

 

Noninterest income

146,364

169,214

(13.5

)

Noninterest expense

541,215

526,369

2.8

 

Income before income taxes

624,635

613,641

1.8

 

Income tax expense

138,815

82,958

67.3

 

Net income

$

485,820

$

530,683

(8.5

)%

EPS

 

 

 

- Basic

$

3.34

$

3.66

(8.8

)%

- Diluted

$

3.33

$

3.63

(8.4

)

Weighted average number of shares outstanding

 

 

 

- Basic

145,455

144,829

0.4

%

- Diluted

146,088

146,158

0.0

 

 

 

 

 

 

Nine Months Ended

September 30, 2019
% Change

 

September 30, 2019

September 30, 2018

Yr-o-Yr

Noninterest income:

 

 

 

Lending fees

$

45,884

$

44,072

4.1

%

Deposit account fees

29,347

30,347

(3.3

)

Foreign exchange income

20,366

14,069

44.8

 

Wealth management fees

12,453

10,989

13.3

 

Interest rate contracts and other derivative income

22,037

17,855

23.4

 

Net gains on sales of loans

2,967

5,081

(41.6

)

Net gains on sales of AFS investment securities

3,066

2,374

29.1

 

Net gains on sales of fixed assets

48

5,602

(99.1

)

Net gain on sale of business

31,470

(100.0

)

Other income

10,196

7,355

38.6

 

Total noninterest income

$

146,364

$

169,214

(13.5

)%

Noninterest expense:

 

 

 

Compensation and employee benefits

$

300,649

$

285,832

5.2

%

Occupancy and equipment expense

52,592

50,879

3.4

 

Deposit insurance premiums and regulatory assessments

9,557

18,118

(47.3

)

Legal expense

6,300

6,636

(5.1

)

Data processing

9,945

10,017

(0.7

)

Consulting expense

6,687

10,155

(34.2

)

Deposit related expense

10,426

8,201

27.1

 

Computer software expense

18,845

16,081

17.2

 

Other operating expense

67,737

61,780

9.6

 

Amortization of tax credit and other investments

58,477

58,670

(0.3

)

Total noninterest expense

$

541,215

$

526,369

2.8

%

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 5

 

 

 

 

Three Months Ended

September 30, 2019
% Change

Nine Months Ended

September 30, 2019
% Change

 

September 30,
2019

June 30, 2019

September 30,
2018

Qtr-o-Qtr

Yr-o-Yr

September 30,
2019

September 30,
2018

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

C&I

$

12,203,341

$

12,003,277

$

11,127,338

1.7

%

9.7

%

$

12,018,802

$

10,863,851

10.6

%

CRE

9,685,092

9,501,566

8,952,483

1.9

 

8.2

 

9,522,238

8,880,668

7.2

 

Multifamily residential

2,561,648

2,510,271

2,238,757

2.0

 

14.4

 

2,523,962

2,170,583

16.3

 

Construction and land

694,665

675,967

622,272

2.8

 

11.6

 

652,096

649,150

0.5

 

Consumer:

 

 

 

 

 

 

 

 

Single-family residential

6,636,227

6,373,715

5,495,824

4.1

 

20.8

 

6,388,939

5,126,073

24.6

 

HELOCs

1,557,358

1,607,311

1,741,890

(3.1

)

(10.6

)

1,605,279

1,769,253

(9.3

)

Other consumer

322,951

309,267

319,473

4.4

 

1.1

 

312,397

330,703

(5.5

)

Total loans (1)(2)

$

33,661,282

$

32,981,374

$

30,498,037

2.1

%

10.4

%

$

33,023,713

$

29,790,281

10.9

%

 

 

 

 

 

 

 

 

 

Interest-earning assets

$

40,919,386

$

39,461,101

$

36,822,293

3.7

%

11.1

%

$

39,716,462

$

36,039,382

10.2

%

Total assets

$

43,136,273

$

41,545,441

$

38,659,262

3.8

%

11.6

%

$

41,815,490

$

37,874,434

10.4

%

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

$

10,712,612

$

10,237,868

$

10,639,554

4.6

%

0.7

%

$

10,342,966

$

10,968,958

(5.7

)%

Interest-bearing checking

4,947,511

5,221,110

4,515,256

(5.2

)

9.6

 

5,145,308

4,487,314

14.7

 

Money market

8,344,993

7,856,055

7,613,030

6.2

 

9.6

 

8,094,933

7,919,845

2.2

 

Savings

2,154,592

2,106,626

2,194,792

2.3

 

(1.8

)

2,117,773

2,286,402

(7.4

)

Total core deposits

26,159,708

25,421,659

24,962,632

2.9

 

4.8

 

25,700,980

25,662,519

0.1

 

Time deposits

10,337,990

9,904,726

8,277,129

4.4

 

24.9

 

9,887,274

6,976,359

41.7

 

Total deposits

$

36,497,698

$

35,326,385

$

33,239,761

3.3

%

9.8

%

$

35,588,254

$

32,638,878

9.0

%

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

$

26,773,253

$

25,860,541

$

23,190,465

3.5

%

15.4

%

$

26,033,713

$

22,233,394

17.1

%

Stockholders’ equity

$

4,838,281

$

4,684,348

$

4,197,675

3.3

%

15.3

%

$

4,687,746

$

4,061,977

15.4

%

 

(1)

Includes ASC 310-30 discount of $18.2 million, $19.9 million and $25.9 million for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, and $19.9 million and $29.9 million for the nine months ended September 30, 2019 and 2018, 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, 2019

June 30, 2019

 

Average

 

Average

Average

 

Average

 

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

3,547,626

 

$

19,772

2.21

%

$

2,852,060

 

$

16,861

2.37

%

Resale agreements (2)

981,196

 

6,881

2.78

%

999,835

 

7,343

2.95

%

AFS investment securities

2,651,069

 

15,945

2.39

%

2,551,383

 

15,685

2.47

%

Loans (3)

33,661,282

 

433,658

5.11

%

32,981,374

 

434,450

5.28

%

FHLB and FRB stock

78,213

 

656

3.33

%

76,449

 

505

2.65

%

Total interest-earning assets

40,919,386

 

476,912

4.62

%

39,461,101

 

474,844

4.83

%

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

Cash and due from banks

441,898

 

 

 

439,449

 

 

 

Allowance for loan losses

(328,523

)

 

 

(321,335

)

 

 

Other assets

2,103,512

 

 

 

1,966,226

 

 

 

Total assets

$

43,136,273

 

 

 

$

41,545,441

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

4,947,511

 

$

14,488

1.16

%

$

5,221,110

 

$

15,836

1.22

%

Money market deposits

8,344,993

 

26,943

1.28

%

7,856,055

 

28,681

1.46

%

Savings deposits

2,154,592

 

2,656

0.49

%

2,106,626

 

2,477

0.47

%

Time deposits

10,337,990

 

52,733

2.02

%

9,904,726

 

50,970

2.06

%

Federal funds purchased and other short-term borrowings

40,433

 

382

3.75

%

35,575

 

361

4.07

%

FHLB advances

745,263

 

5,021

2.67

%

533,841

 

4,011

3.01

%

Repurchase agreements (2)

50,000

 

3,239

25.70

%

50,000

 

3,469

27.83

%

Long-term debt and finance lease liabilities

152,471

 

1,643

4.28

%

152,608

 

1,713

4.50

%

Total interest-bearing liabilities

26,773,253

 

107,105

1.59

%

25,860,541

 

107,518

1.67

%

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

Demand deposits

10,712,612

 

 

 

10,237,868

 

 

 

Accrued expenses and other liabilities

812,127

 

 

 

762,684

 

 

 

Stockholders’ equity

4,838,281

 

 

 

4,684,348

 

 

 

Total liabilities and stockholders’ equity

$

43,136,273

 

 

 

$

41,545,441

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

3.03

%

 

 

3.16

%

Net interest income and net interest margin

 

$

369,807

3.59

%

 

$

367,326

3.73

%

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

 

$

367,286

3.56

%

 

$

365,607

3.71

%

 

(1)

Annualized.

(2)

Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.57% and 2.70% for the three months ended September 30, 2019 and June 30, 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 4.68% and 4.93% for the three months ended September 30, 2019 and June 30, 2019, respectively.

(3)

Includes loans HFS. ASC 310-30 discount was $18.2 million and $19.9 million for the three months ended September 30, 2019 and June 30, 2019, respectively.

(4)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 7

 

Three Months Ended

September 30, 2019

September 30, 2018

Average

 

Average

Average

 

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

3,547,626

 

$

19,772

2.21

%

$

2,521,002

 

$

13,353

2.10

%

Resale agreements (2)

981,196

 

6,881

2.78

%

1,002,500

 

7,393

2.93

%

AFS investment securities

2,651,069

 

15,945

2.39

%

2,727,219

 

15,180

2.21

%

Loans (3)

33,661,282

 

433,658

5.11

%

30,498,037

 

385,538

5.02

%

FHLB and FRB stock

78,213

 

656

3.33

%

73,535

 

721

3.89

%

Total interest-earning assets

40,919,386

 

476,912

4.62

%

36,822,293

 

422,185

4.55

%

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

Cash and due from banks

441,898

 

 

 

424,350

 

 

 

Allowance for loan losses

(328,523

)

 

 

(301,557

)

 

 

Other assets

2,103,512

 

 

 

1,714,176

 

 

 

Total assets

$

43,136,273

 

 

 

$

38,659,262

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

4,947,511

 

$

14,488

1.16

%

$

4,515,256

 

$

9,551

0.84

%

Money market deposits

8,344,993

 

26,943

1.28

%

7,613,030

 

21,411

1.12

%

Savings deposits

2,154,592

 

2,656

0.49

%

2,194,792

 

2,308

0.42

%

Time deposits

10,337,990

 

52,733

2.02

%

8,277,129

 

31,762

1.52

%

Federal funds purchased and other short-term borrowings

40,433

 

382

3.75

%

58,218

 

643

4.38

%

FHLB advances

745,263

 

5,021

2.67

%

325,246

 

2,732

3.33

%

Repurchase agreements (2)

50,000

 

3,239

25.70

%

50,000

 

3,366

26.71

%

Long-term debt and finance lease liabilities

152,471

 

1,643

4.28

%

156,794

 

1,692

4.28

%

Total interest-bearing liabilities

26,773,253

 

107,105

1.59

%

23,190,465

 

73,465

1.26

%

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

Demand deposits

10,712,612

 

 

 

10,639,554

 

 

 

Accrued expenses and other liabilities

812,127

 

 

 

631,568

 

 

 

Stockholders’ equity

4,838,281

 

 

 

4,197,675

 

 

 

Total liabilities and stockholders’ equity

$

43,136,273

 

 

 

$

38,659,262

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

3.03

%

 

 

3.29

%

Net interest income and net interest margin

 

$

369,807

3.59

%

 

$

348,720

3.76

%

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

 

$

367,286

3.56

%

 

$

345,857

3.72

%

 

(1)

Annualized.

(2)

Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.57% and 2.63% for the three months ended September 30, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.68% and 4.65% for the three months ended September 30, 2019 and 2018, respectively.

(3)

Includes loans HFS. ASC 310-30 discount was $18.2 million and $25.9 million for the three months ended September 30, 2019 and 2018, respectively.

(4)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 8

 

Nine Months Ended

September 30, 2019

September 30, 2018

Average

 

Average

Average

 

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

2,996,340

 

$

52,103

2.32

%

$

2,387,712

 

$

36,013

2.02

%

Resale agreements (2)

1,005,147

 

22,070

2.94

%

1,016,044

 

21,509

2.83

%

AFS investment securities

2,614,949

 

47,378

2.42

%

2,771,727

 

45,695

2.20

%

Loans (3)

33,023,713

 

1,291,642

5.23

%

29,790,281

 

1,088,997

4.89

%

FHLB and FRB stock

76,313

 

1,874

3.28

%

73,618

 

2,155

3.91

%

Total interest-earning assets

39,716,462

 

1,415,067

4.76

%

36,039,382

 

1,194,369

4.43

%

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

Cash and due from banks

449,739

 

 

 

433,299

 

 

 

Allowance for loan losses

(321,486

)

 

 

(293,403

)

 

 

Other assets

1,970,775

 

 

 

1,695,156

 

 

 

Total assets

$

41,815,490

 

 

 

$

37,874,434

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

5,145,308

 

$

44,579

1.16

%

$

4,487,314

 

$

24,694

0.74

%

Money market deposits

8,094,933

 

85,858

1.42

%

7,919,845

 

56,056

0.95

%

Savings deposits

2,117,773

 

7,360

0.46

%

2,286,402

 

6,364

0.37

%

Time deposits

9,887,274

 

148,992

2.01

%

6,976,359

 

68,319

1.31

%

Federal funds purchased and other short-term borrowings

45,410

 

1,359

4.00

%

23,805

 

774

4.35

%

FHLB advances

540,535

 

12,011

2.97

%

327,978

 

7,544

3.08

%

Repurchase agreements (2)

50,000

 

10,200

27.27

%

50,000

 

8,714

23.30

%

Long-term debt and finance lease liabilities

152,480

 

5,114

4.48

%

161,691

 

4,812

3.98

%

Total interest-bearing liabilities

26,033,713

 

315,473

1.62

%

22,233,394

 

177,277

1.07

%

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

Demand deposits

10,342,966

 

 

 

10,968,958

 

 

 

Accrued expenses and other liabilities

751,065

 

 

 

610,105

 

 

 

Stockholders’ equity

4,687,746

 

 

 

4,061,977

 

 

 

Total liabilities and stockholders’ equity

$

41,815,490

 

 

 

$

37,874,434

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

3.14

%

 

 

3.36

%

Net interest income and net interest margin

 

$

1,099,594

3.70

%

 

$

1,017,092

3.77

%

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

 

$

1,093,176

3.68

%

 

$

1,002,730

3.72

%

 

(1)

Annualized.

(2)

Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.69% and 2.59% for the nine months ended September 30, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.87% and 4.36% for the nine months ended September 30, 2019 and 2018, respectively.

(3)

Includes loans HFS. ASC 310-30 discount was $19.9 million and $29.9 million for the nine months ended September 30, 2019 and 2018, respectively.

(4)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED RATIOS

(unaudited)

Table 9

 

Three Months Ended (1)

 

September 30, 2019
Basis Point Change

 

September 30,
2019

June 30,
2019

September 30,
2018

 

Qtr-o-Qtr

 

Yr-o-Yr

 

Return on average assets

1.58

%

1.45

%

1.76

%

 

13

 

bps

(18

)

bps

Adjusted return on average assets (2)

1.58

%

1.74

%

1.76

%

 

(16

)

 

(18

)

 

Return on average equity

14.06

%

12.88

%

16.19

%

 

118

 

 

(213

)

 

Adjusted return on average equity (2)

14.06

%

15.45

%

16.19

%

 

(139

)

 

(213

)

 

Return on average tangible equity (2)

15.75

%

14.51

%

18.47

%

 

124

 

 

(272

)

 

Adjusted return on average tangible equity (2)

15.75

%

17.39

%

18.47

%

 

(164

)

 

(272

)

 

Interest rate spread

3.03

%

3.16

%

3.29

%

 

(13

)

 

(26

)

 

Net interest margin

3.59

%

3.73

%

3.76

%

 

(14

)

 

(17

)

 

Adjusted net interest margin (2)

3.56

%

3.71

%

3.72

%

 

(15

)

 

(16

)

 

Average loan yield

5.11

%

5.28

%

5.02

%

 

(17

)

 

9

 

 

Adjusted average loan yield (2)

5.08

%

5.26

%

4.97

%

 

(18

)

 

11

 

 

Yield on average interest-earning assets

4.62

%

4.83

%

4.55

%

 

(21

)

 

7

 

 

Average cost of interest-bearing deposits

1.49

%

1.57

%

1.14

%

 

(8

)

 

35

 

 

Average cost of deposits

1.05

%

1.11

%

0.78

%

 

(6

)

 

27

 

 

Average cost of funds

1.13

%

1.19

%

0.86

%

 

(6

)

 

27

 

 

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

2.42

%

2.51

%

2.44

%

 

(9

)

 

(2

)

 

Adjusted noninterest expense/average assets (2)

1.46

%

1.54

%

1.62

%

 

(8

)

 

(16

)

 

Efficiency ratio

41.93

%

42.29

%

45.50

%

 

(36

)

 

(357

)

 

Adjusted efficiency ratio (2)

37.66

%

38.03

%

39.89

%

 

(37

)

bps

(223

)

bps

 

 

 

 

 

 

 

 

 

 

Nine Months Ended (1)

September 30, 2019
Basis Point Change

 

 

 

 

 

September 30,
2019

September 30,
2018

Yr-o-Yr

 

 

 

 

Return on average assets

1.55

%

1.87

%

(32

)

bps

 

 

 

 

Adjusted return on average assets (2)

1.67

%

1.80

%

(13

)

 

 

 

 

 

Return on average equity

13.86

%

17.47

%

(361

)

 

 

 

 

 

Adjusted return on average equity (2)

14.85

%

16.74

%

(189

)

 

 

 

 

 

Return on average tangible equity (2)

15.58

%

20.03

%

(445

)

 

 

 

 

 

Adjusted return on average tangible equity (2)

16.70

%

19.20

%

(250

)

 

 

 

 

 

Interest rate spread

3.14

%

3.36

%

(22

)

 

 

 

 

 

Net interest margin

3.70

%

3.77

%

(7

)

 

 

 

 

 

Adjusted net interest margin (2)

3.68

%

3.72

%

(4

)

 

 

 

 

 

Average loan yield

5.23

%

4.89

%

34

 

 

 

 

 

 

Adjusted average loan yield (2)

5.20

%

4.82

%

38

 

 

 

 

 

 

Yield on average interest-earning assets

4.76

%

4.43

%

33

 

 

 

 

 

 

Average cost of interest-bearing deposits

1.52

%

0.96

%

56

 

 

 

 

 

 

Average cost of deposits

1.08

%

0.64

%

44

 

 

 

 

 

 

Average cost of funds

1.16

%

0.71

%

45

 

 

 

 

 

 

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

2.45

%

2.44

%

1

 

 

 

 

 

 

Adjusted noninterest expense/average assets (2)

1.53

%

1.64

%

(11

)

 

 

 

 

 

Efficiency ratio

43.44

%

44.37

%

(93

)

 

 

 

 

 

Adjusted efficiency ratio (2)

38.47

%

40.13

%

(166

)

bps

 

 

 

 

 

(1)

Annualized except for efficiency ratio.

(2)

See reconciliation of GAAP to non-GAAP financial measures in Tables 13, 14, 15 and 16.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR CREDIT LOSSES

($ in thousands)

(unaudited)

Table 10

 

 

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Non-Purchased Credit Impaired (“Non-PCI”) Loans

 

 

 

 

 

Allowance for non-PCI loans, beginning of period

$

330,620

 

$

317,880

 

$

301,511

 

$

311,300

 

$

287,070

 

Provision for loan losses on non-PCI loans

37,884

 

20,740

 

12,650

 

79,272

 

47,722

 

Net (charge-offs) recoveries:

 

 

 

 

 

Commercial:

 

 

 

 

 

C&I

(23,450

)

(10,032

)

(4,051

)

(48,475

)

(27,600

)

CRE

875

 

1,837

 

2

 

2,934

 

431

 

Multifamily residential

42

 

53

 

77

 

376

 

1,471

 

Construction and land

21

 

439

 

23

 

523

 

716

 

Consumer:

 

 

 

 

 

Single-family residential

49

 

72

 

295

 

123

 

1,107

 

HELOCs

5

 

 

 

7

 

 

Other consumer

(5

)

(7

)

(5

)

(26

)

(183

)

Total net charge-offs

(22,463

)

(7,638

)

(3,659

)

(44,538

)

(24,058

)

Foreign currency translation adjustments

(465

)

(362

)

(492

)

(458

)

(724

)

Allowance for non-PCI loans, end of period

345,576

 

330,620

 

310,010

 

345,576

 

310,010

 

Purchased Credit Impaired (“PCI”) Loans

 

 

 

 

 

Allowance for PCI loans, beginning of period

5

 

14

 

39

 

22

 

58

 

Reversal of loan losses on PCI loans

(5

)

(9

)

(8

)

(22

)

(27

)

Allowance for PCI loans, end of period

 

5

 

31

 

 

31

 

Allowance for loan losses

345,576

 

330,625

 

310,041

 

345,576

 

310,041

 

Unfunded Credit Facilities

 

 

 

 

 

Allowance for unfunded credit reserves, beginning of period

13,019

 

14,505

 

14,019

 

12,566

 

13,318

 

Provision for (reversal of) unfunded credit reserves

405

 

(1,486

)

(2,100

)

858

 

(1,399

)

Allowance for unfunded credit reserves, end of period

13,424

 

13,019

 

11,919

 

13,424

 

11,919

 

Allowance for credit losses

$

359,000

 

$

343,644

 

$

321,960

 

$

359,000

 

$

321,960

 

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CREDIT QUALITY

($ in thousands)

(unaudited)

Table 11

Non-PCI Nonperforming Assets

September 30, 2019

June 30, 2019

September 30, 2018

 

 

 

 

Nonaccrual loans:

 

 

 

Commercial:

 

 

 

C&I

$

90,830

 

$

73,150

 

$

72,797

 

CRE

18,942

 

20,914

 

24,752

 

Multifamily residential

551

 

1,027

 

1,761

 

Consumer:

 

 

 

Single-family residential

9,484

 

13,075

 

5,222

 

HELOCs

9,924

 

7,344

 

6,872

 

Other consumer

2,495

 

2,504

 

2,491

 

Total nonaccrual loans

132,226

 

118,014

 

113,895

 

Other real estate owned, net

1,122

 

130

 

748

 

Other nonperforming assets

1,167

 

1,167

 

 

Total nonperforming assets

$

134,515

 

$

119,311

 

$

114,643

 

 

Credit Quality Ratios

September 30, 2019

June 30, 2019

September 30, 2018

 

 

 

 

Non-PCI nonperforming assets to total assets (1)

0.31

%

0.28

%

0.29

%

Non-PCI nonaccrual loans to loans HFI (1)

0.39

%

0.35

%

0.36

%

Allowance for loan losses to loans HFI (1)

1.02

%

0.98

%

0.99

%

Allowance for loan losses to non-PCI nonaccrual loans

261.35

%

280.16

%

272.22

%

Annualized quarterly net charge-offs to average loans HFI

0.26

%

0.09

%

0.05

%

Annualized year-to-date net charge-offs to average loans HFI

0.18

%

0.14

%

0.11

%

 

(1)

Total assets and loans HFI include PCI loans of $240.7 million, $270.9 million and $345.0 million as of September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 12

 

 

 

 

During the second quarter of 2019, the Company reversed $30.1 million of certain previously claimed tax credits related to the DC Solar tax credit investments (“DC Solar”). The table below shows the computation of the Company’s effective tax rate excluding the impact of the DC Solar tax credits reversal. Management believes that excluding the impact of the DC Solar tax credits reversal from the effective tax rate computation allows comparability to prior periods.

 

 

 

 

 

 

 

Three Months Ended

 

 

September 30, 2019

June 30, 2019

September 30, 2018

Income tax expense

(a)

$

34,951

 

$

72,797

 

$

33,563

 

Less: Reversal of certain previously claimed tax credits related to DC Solar

(b)

 

(30,104

)

 

Adjusted income tax expense

(c)

$

34,951

 

$

42,693

 

$

33,563

 

 

 

 

 

 

Income before income taxes

(d)

206,367

 

223,177

 

204,865

 

 

 

 

 

 

Effective tax rate

(a)/(d)

16.9

%

32.6

%

16.4

%

Less: Reversal of certain previously claimed tax credits related to DC Solar

(b)/(d)

%

(13.5

)%

%

Adjusted effective tax rate

(c)/(d)

16.9

%

19.1

%

16.4

%

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2019

September 30, 2018

 

Income tax expense

(e)

$

138,815

 

$

82,958

 

 

Less: Reversal of certain previously claimed tax credits related to DC Solar

(f)

(30,104

)

 

 

Adjusted income tax expense

(g)

$

108,711

 

$

82,958

 

 

 

 

 

 

 

Income before income taxes

(h)

624,635

 

613,641

 

 

 

 

 

 

 

Effective tax rate

(e)/(h)

22.2

%

13.5

%

 

Less: Reversal of certain previously claimed tax credits related to DC Solar

(f)/(h)

(4.8

)%

%

 

Adjusted effective tax rate

(g)/(h)

17.4

%

13.5

%

 

 

 

 

 

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

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

(unaudited)

Table 13

During the first quarter of 2019, the Company recorded a $7.0 million pre-tax impairment charge related to DC Solar. During the second quarter of 2019, the Company reversed $30.1 million of certain previously claimed tax credits related to DC Solar. During the first quarter of 2018, the Company sold its Desert Community Bank (“DCB”) branches and recognized a pre-tax gain on sale of $31.5 million. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that exclude the after-tax impact of the impairment charge related to DC Solar, the reversal of certain previously claimed tax credits related to DC Solar and the after-tax impact of the gain on the sale of the DCB branches (where applicable) provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.

 

 

 

Three Months Ended

 

September 30, 2019

June 30, 2019

September 30, 2018

Net income

(a)

$

171,416

 

$

150,380

 

$

171,302

 

Add: Reversal of certain previously claimed tax credits related to DC Solar

 

 

30,104

 

 

Adjusted net income

(b)

$

171,416

 

$

180,484

 

$

171,302

 

 

 

 

 

 

Diluted weighted average number of shares outstanding

 

146,120

 

146,052

 

146,173

 

Diluted EPS

 

$

1.17

 

$

1.03

 

$

1.17

 

Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar

 

 

0.21

 

 

Adjusted diluted EPS

 

$

1.17

 

$

1.24

 

$

1.17

 

 

 

 

 

 

Average total assets

(c)

$

43,136,273

 

$

41,545,441

 

$

38,659,262

 

Average stockholders’ equity

(d)

$

4,838,281

 

$

4,684,348

 

$

4,197,675

 

Return on average assets (1)

(a)/(c)

1.58

%

1.45

%

1.76

%

Adjusted return on average assets (1)

(b)/(c)

1.58

%

1.74

%

1.76

%

Return on average equity (1)

(a)/(d)

14.06

%

12.88

%

16.19

%

Adjusted return on average equity (1)

(b)/(d)

14.06

%

15.45

%

16.19

%

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2019

September 30, 2018

 

Net income

(e)

$

485,820

 

$

530,683

 

 

Add: Impairment charge related to DC Solar (2)

 

6,978

 

 

 

Less: Gain on sale of business

 

 

(31,470

)

 

Tax effect of adjustments (3)

 

(2,063

)

9,303

 

 

Add: Reversal of certain previously claimed tax credits related to DC Solar

 

30,104

 

 

 

Adjusted net income

(f)

$

520,839

 

$

508,516

 

 

 

 

 

 

 

Diluted weighted average number of shares outstanding

 

146,088

 

146,158

 

 

Diluted EPS

 

$

3.33

 

$

3.63

 

 

Diluted EPS impact of impairment charge related to DC Solar, net of tax

 

0.03

 

 

 

Diluted EPS impact of gain on sale of business, net of tax

 

 

(0.15

)

 

Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar

 

0.21

 

 

 

Adjusted diluted EPS

 

$

3.57

 

$

3.48

 

 

 

 

 

 

 

Average total assets

(g)

$

41,815,490

 

$

37,874,434

 

 

Average stockholders’ equity

(h)

$

4,687,746

 

$

4,061,977

 

 

Return on average assets (1)

(e)/(g)

1.55

%

1.87

%

 

Adjusted return on average assets (1)

(f)/(g)

1.67

%

1.80

%

 

Return on average equity (1)

(e)/(h)

13.86

%

17.47

%

 

Adjusted return on average equity (1)

(f)/(h)

14.85

%

16.74

%

 

 

(1)

Annualized.

(2)

Included in Amortization of tax credit and other investments.

(3)

Applied statutory rate of 29.56%.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 14

Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of adjusted revenue less adjusted noninterest expense, divided by average total assets. Adjusted revenue represents the aggregate of net interest income and adjusted noninterest income, where adjusted noninterest income excludes the gain on the sale of the DCB branches that were sold in the first quarter of 2018 (where applicable). Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods.

 

 

 

Three Months Ended

 

 

September 30, 2019

June 30, 2019

September 30, 2018

Net interest income before provision for credit losses

(a)

$

369,807

 

$

367,326

 

$

348,720

 

Total noninterest income

 

51,474

 

52,759

 

46,502

 

Total revenue

(b)

$

421,281

 

$

420,085

 

$

395,222

 

 

 

 

 

 

Total noninterest expense

(c)

$

176,630

 

$

177,663

 

$

179,815

 

Less: Amortization of tax credit and other investments

 

(16,833

)

(16,739

)

(20,789

)

Amortization of core deposit intangibles

 

(1,148

)

(1,152

)

(1,369

)

Adjusted noninterest expense

(d)

$

158,649

 

$

159,772

 

$

157,657

 

Efficiency ratio

(c)/(b)

41.93

%

42.29

%

45.50

%

Adjusted efficiency ratio

(d)/(b)

37.66

%

38.03

%

39.89

%

Adjusted pre-tax, pre-provision income

(b)-(d) = (e)

$

262,632

 

$

260,313

 

$

237,565

 

Average total assets

(f)

$

43,136,273

 

$

41,545,441

 

$

38,659,262

 

Adjusted pre-tax, pre-provision profitability ratio (1)

(e)/(f)

2.42

%

2.51

%

2.44

%

Adjusted noninterest expense (1)/average assets

(d)/(f)

1.46

%

1.54

%

1.62

%

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2019

September 30, 2018

 

Net interest income before provision for credit losses

(g)

$

1,099,594

 

$

1,017,092

 

 

Total noninterest income

 

146,364

 

169,214

 

 

Total revenue

(h)

1,245,958

 

1,186,306

 

 

Noninterest income

 

146,364

 

169,214

 

 

Less: Gain on sale of business

 

 

(31,470

)

 

Adjusted noninterest income

(i)

$

146,364

 

$

137,744

 

 

Adjusted revenue

(g)+(i) = (j)

$

1,245,958

 

$

1,154,836

 

 

 

 

 

 

 

Total noninterest expense

(k)

$

541,215

 

$

526,369

 

 

Less: Amortization of tax credit and other investments

 

(58,477

)

(58,670

)

 

Amortization of core deposit intangibles

 

(3,474

)

(4,227

)

 

Adjusted noninterest expense

(l)

$

479,264

 

$

463,472

 

 

Efficiency ratio

(k)/(h)

43.44

%

44.37

%

 

Adjusted efficiency ratio

(l)/(j)

38.47

%

40.13

%

 

Adjusted pre-tax, pre-provision income

(j)-(l) = (m)

$

766,694

 

$

691,364

 

 

Average total assets

(n)

$

41,815,490

 

$

37,874,434

 

 

Adjusted pre-tax, pre-provision profitability ratio (1)

(m)/(n)

2.45

%

2.44

%

 

Adjusted noninterest expense (1)/average assets

(l)/(n)

1.53

%

1.64

%

 

 

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 15

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

 

Yield on Average Loans

 

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Interest income on loans

(a)

$

433,658

 

$

434,450

 

$

385,538

 

$

1,291,642

 

$

1,088,997

 

Less: ASC 310-30 discount accretion income

 

(2,521

)

(1,719

)

(2,863

)

(6,418

)

(14,362

)

Adjusted interest income on loans

(b)

$

431,137

 

$

432,731

 

$

382,675

 

$

1,285,224

 

$

1,074,635

 

 

 

 

 

 

 

 

Average loans

(c)

$

33,661,282

 

$

32,981,374

 

$

30,498,037

 

$

33,023,713

 

$

29,790,281

 

Add: ASC 310-30 discount

 

18,172

 

19,909

 

25,852

 

19,894

 

29,939

 

Adjusted average loans

(d)

$

33,679,454

 

$

33,001,283

 

$

30,523,889

 

$

33,043,607

 

$

29,820,220

 

 

 

 

 

 

 

 

Average loan yield (1)

(a)/(c)

5.11

%

5.28

%

5.02

%

5.23

%

4.89

%

Adjusted average loan yield (1)

(b)/(d)

5.08

%

5.26

%

4.97

%

5.20

%

4.82

%

 

 

 

 

 

 

 

Net Interest Margin

 

 

 

 

 

 

Net interest income

(e)

$

369,807

 

$

367,326

 

$

348,720

 

$

1,099,594

 

$

1,017,092

 

Less: ASC 310-30 discount accretion income

 

(2,521

)

(1,719

)

(2,863

)

(6,418

)

(14,362

)

Adjusted net interest income

(f)

$

367,286

 

$

365,607

 

$

345,857

 

$

1,093,176

 

$

1,002,730

 

 

 

 

 

 

 

 

Average interest-earning assets

(g)

$

40,919,386

 

$

39,461,101

 

$

36,822,293

 

$

39,716,462

 

$

36,039,382

 

Add: ASC 310-30 discount

 

18,172

 

19,909

 

25,852

 

19,894

 

29,939

 

Adjusted average interest-earning assets

(h)

$

40,937,558

 

$

39,481,010

 

$

36,848,145

 

$

39,736,356

 

$

36,069,321

 

 

 

 

 

 

 

 

Net interest margin (1)

(e)/(g)

3.59

%

3.73

%

3.76

%

3.70

%

3.77

%

Adjusted net interest margin (1)

(f)/(h)

3.56

%

3.71

%

3.72

%

3.68

%

3.72

%

 

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 16

 

 

 

 

 

 

 

 

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, 2019

 

June 30, 2019

 

September 30, 2018

Stockholders’ equity

 

(a)

 

$

4,882,664

 

 

$

4,734,593

 

 

$

4,244,850

 

Less: Goodwill

 

 

 

(465,697

)

 

(465,697

)

 

(465,547

)

Other intangible assets (1)

 

 

 

(17,435

)

 

(18,952

)

 

(23,656

)

Tangible equity

 

(b)

 

$

4,399,532

 

 

$

4,249,944

 

 

$

3,755,647

 

 

 

 

 

 

 

 

 

 

Total assets

 

(c)

 

$

43,274,659

 

 

$

42,892,358

 

 

$

39,042,713

 

Less: Goodwill

 

 

 

(465,697

)

 

(465,697

)

 

(465,547

)

Other intangible assets (1)

 

 

 

(17,435

)

 

(18,952

)

 

(23,656

)

Tangible assets

 

(d)

 

$

42,791,527

 

 

$

42,407,709

 

 

$

38,553,510

 

Total stockholders’ equity to total assets ratio

 

(a)/(c)

 

11.28

%

 

11.04

%

 

10.87

%

Tangible equity to tangible assets ratio

 

(b)/(d)

 

10.28

%

 

10.02

%

 

9.74

%

 

 

 

 

 

 

 

 

 

Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets, impairment charge related to DC Solar and the gain on the sale of the DCB branches; and the reversal of certain previously claimed tax credits related to DC Solar (where applicable). 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, 2019

June 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018

Net Income

 

$

171,416

 

$

150,380

 

$

171,302

 

$

485,820

 

$

530,683

 

Add: Amortization of core deposit intangibles

 

1,148

 

1,152

 

1,369

 

3,474

 

4,227

 

Amortization of mortgage servicing assets

 

834

 

1,013

 

460

 

2,171

 

1,366

 

Tax effect of adjustments (2)

 

(586

)

(640

)

(541

)

(1,669

)

(1,654

)

Tangible net income

(e)

$

172,812

 

$

151,905

 

$

172,590

 

$

489,796

 

$

534,622

 

Add: Impairment charge related to DC Solar (3)

 

 

 

 

6,978

 

 

Less: Gain on sale of business

 

 

 

 

 

(31,470

)

Tax effect of adjustment (2)

 

 

 

 

(2,063

)

9,303

 

Add: Reversal of certain previously claimed tax credits related to DC Solar

 

 

30,104

 

 

30,104

 

 

Adjusted tangible net income

(f)

$

172,812

 

$

182,009

 

$

172,590

 

$

524,815

 

$

512,455

 

 

 

 

 

 

 

 

Average stockholders’ equity

 

$

4,838,281

 

$

4,684,348

 

$

4,197,675

 

$

4,687,746

 

$

4,061,977

 

Less: Average goodwill

 

(465,697

)

(465,697

)

(465,547

)

(465,652

)

(466,615

)

Average other intangible assets (1)

 

(18,391

)

(20,380

)

(24,530

)

(20,198

)

(26,080

)

Average tangible equity

(g)

$

4,354,193

 

$

4,198,271

 

$

3,707,598

 

$

4,201,896

 

$

3,569,282

 

Return on average tangible equity (4)

(e)/(g)

15.75

%

14.51

%

18.47

%

15.58

%

20.03

%

Adjusted return on average tangible equity (4)

(f)/(g)

15.75

%

17.39

%

18.47

%

16.70

%

19.20

%

 

 

 

 

 

 

 

(1)

Includes core deposit intangibles and mortgage servicing assets.

(2)

Applied statutory rate of 29.56%.

(3)

Included in Amortization of tax credit and other investments.

(4)

Annualized.

 

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