East West Bancorp Reports Net Income for Third Quarter 2020 of $159.5 Million and Diluted Earnings Per Share of $1.12

Nachrichtenquelle: Business Wire (engl.)
22.10.2020, 14:00  |  101   |   |   

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 2020. For the third quarter of 2020, net income was $159.5 million or $1.12 per diluted share. Third quarter 2020 return on average assets was 1.26% and return on average equity was 12.5%.

“Total deposits grew to a record $41.7 billion as of September 30, 2020, driven by 28% annualized growth in noninterest-bearing demand deposits,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “As of September 30, 2020, demand deposits reached a record $14.9 billion. We are pleased with the strength and quality of the deposit growth.”

“During the third quarter, East West’s positive loan growth was led by residential mortgage and commercial real estate loans. Total loans reached a record $37.4 billion as of September 30, 2020,” continued Ng. “We are cautiously optimistic. Although current economic indicators are weak, business activity is resuming and trending positive, reflecting the resilience of our customers and the communities we operate in.”

“We are encouraged that active COVID-19 related payment deferrals for our customers have declined by close to 50% since June 30, 2020, and full payment deferrals are down to 2.7% of total loans as of September 30, 2020. The macroeconomic outlook has improved and we modestly decreased our allowance for loan losses as of September 30, 2020. This resulted in a low provision for credit losses of $10 million in the third quarter of 2020. The reduction in the provision was the primary driver of the quarter-over-quarter increase in our net income, which was up by 61% to $159.5 million.”

“East West Bank is operating from a position of strength. We are prudently growing our balance sheet and capital so that we can continue to assist our customers with their personal and business banking needs as they rebuild from the impact of the pandemic. I am confident that our customers will deftly emerge from these unprecedented times and be positioned to take advantage of future opportunities, with East West Bank as a valued partner,” concluded Ng.

BALANCE SHEET

  • Record Total Assets – Total assets of $50.4 billion as of September 30, 2020 grew by $964 million, or 8% annualized, from $49.4 billion as of June 30, 2020.

    Third quarter 2020 average interest-earning assets of $47.4 billion grew $2.0 billion, or 18% linked quarter annualized. Growth was primarily from interest-bearing cash and deposits with banks, which grew $1.5 billion quarter-over-quarter. Interest-bearing cash and deposits with banks made up 10% of average interest-earning assets in the third quarter of 2020, up from 8% in the second quarter of 2020.
  • Record Loans – Total loans of $37.4 billion as of September 30, 2020 grew by $208 million, or 2% annualized, from $37.2 billion as of June 30, 2020. As of September 30, 2020, Paycheck Protection Program (“PPP”) loans were $1.8 billion, unchanged from June 30, 2020.

    Third quarter 2020 average loans of $37.2 billion increased by $19 million quarter-over-quarter. Growth in total commercial real estate (“CRE”) and residential mortgage was offset by decreases in commercial and industrial (“C&I”) and other consumer loans.
  • Record Deposits – Total deposits of $41.7 billion as of September 30, 2020 increased by $1.0 billion, or 10% annualized, from $40.7 billion as of June 30, 2020. Noninterest-bearing demand deposits reached a record $14.9 billion, and made up 36% of total deposits as of September 30, 2020, up from 34% as of June 30, 2020.

    Third quarter 2020 average deposits of $41.2 billion grew $1.3 billion, or 13% linked quarter annualized. Strong growth in demand and checking accounts, from both commercial and consumer customers, was partially offset by a reduction in higher-cost time deposits. Average interest-bearing deposits of $26.9 billion grew $0.5 billion, or 8% linked quarter annualized. Average noninterest-bearing deposits of $14.3 billion grew $0.8 billion, or 22% linked quarter annualized.
  • Capital Levels – Capital levels for East West are strong. As of September 30, 2020, stockholders’ equity was $5.1 billion, or $36.22 per share. Tangible equity1 per common share was $32.85 as of September 30, 2020, an increase of 3% from $31.86 as of June 30, 2020. As of September 30, 2020, the tangible equity to tangible assets ratio1 was 9.3%, the common equity tier 1 (“CET1”) capital ratio was 12.8%, and the total risk-based capital ratio was 14.5%. All of the Company’s capital ratios increased quarter-over-quarter.

OPERATING RESULTS

Third Quarter Earnings – Third quarter 2020 net income was $159.5 million and diluted earnings per share (“EPS”) were $1.12, an increase in net income of 61% and in EPS of 60%, compared to second quarter 2020 net income of $99.4 million and diluted EPS of $0.70.

Third Quarter 2020 Compared to Second Quarter 2020

Net Interest Income and Net Interest Margin

Net interest income (“NII”) totaled $324.1 million, a decrease of 6% from $343.8 million. Net interest margin (“NIM”) of 2.72% compressed by 32 basis points from 3.04%.

  • Adjusted2 NII totaled $317.6 million, a decrease of 2% from $322.9 million. Adjusted2 NIM of 2.77% contracted by 19 basis points from 2.96%. Adjusted NII and NIM excluded the impact of PPP loans and the related PPP Liquidity Facility (“PPPLF”).
  • The quarter-over-quarter changes in the NII and the NIM reflected downward repricing of earning asset yields, a decrease in PPP loan fee income, and inflow of interest-bearing cash and deposits with banks, partially offset by a lower cost of deposits.
  • The average loan yield of 3.60% contracted by 38 basis points from 3.98%, reflecting downward repricing of variable-rate loans to benchmark interest rates, as well as a lower amount of deferred fee income accreted on PPP loans. Excluding the impact of PPP loans, the adjusted2 average loan yield of 3.70% contracted by 20 basis points quarter-over-quarter.
  • Interest and fees earned on PPP loans contributed $7.8 million to interest income in the third quarter of 2020, and interest expense paid on the PPPLF was $1.3 million. Third quarter 2020 average balance of PPP loans was $1.8 billion and the average balance of the PPPLF, classified as long-term debt, was $1.4 billion.
  • The yield on average interest-earning assets of 3.07% contracted by 46 basis points from 3.53%. This primarily reflects the change in the average loan yield, downward repricing of the securities portfolio, and inflow of lower-yielding assets in the earning asset mix.
  • The average cost of interest-bearing deposits decreased by 21 basis points to 0.50%, down from 0.71%. The average cost of deposits decreased by 14 basis points to 0.33%, down from 0.47%.

Noninterest Income

Noninterest income totaled $49.6 million, a 15% decrease from $58.6 million.

  • Gains on sales of available-for-sale (“AFS”) debt securities were $0.7 million, compared to $9.6 million in the second quarter, during which the Company sold $131.6 million of municipal bonds.
  • Lending fees of $18.7 million decreased by $3.2 million. Third quarter lending fees included $3.6 million from an increase in the valuation of warrants received as part of lending relationships, which decreased from $8.1 million in the second quarter. Included in lending fees are letters of credit fees of $10.1 million for the third quarter, which increased $0.9 million quarter-over-quarter with increased customer activity.
  • Reflecting an increase in customer-driven transactions, deposit account fees of $12.6 million increased by $1.7 million, and wealth management fees of $4.6 million increased by $1.5 million.
  • Foreign exchange income of $3.3 million decreased by $1.3 million, reflecting downward revaluations of foreign currency-denominated balance sheet items, partially offset by an increase in customer-driven transactions.

Noninterest Expense

Noninterest expense totaled $167.7 million, an 11% decrease from $187.7 million.

  • Third quarter noninterest expense consisted of $154.4 million of adjusted3 noninterest expense, $12.3 million in amortization of tax credit and other investments, and $0.9 million in amortization of core deposit intangibles.
  • Total noninterest expense decreased by $20.0 million, largely due to a $12.5 million decrease in amortization of tax credit and other investments, as well as an $8.7 million decrease in debt extinguishment costs. During the second quarter, the Company prepaid $150.0 million of repurchase agreements and incurred $8.7 million in debt extinguishment cost.
  • Adjusted noninterest expense of $154.4 million increased by $1.2 million, or 1%, from $153.3 million. The largest linked-quarter changes were a $2.8 million increase in compensation and employee benefits expense, a $1.2 million increase in computer software expense, and a $2.1 million decrease in other operating expenses.
  • Compensation expense of $99.8 million increased by $2.8 million, or 3%, from $97.0 million. During the second quarter, $7.4 million of compensation expense associated with the origination of $1.8 billion in PPP loans was deferred. Excluding this item, third quarter compensation expense decreased by $4.6 million, or 4%, quarter-over-quarter from $104.3 million in the second quarter.
  • The adjusted3 efficiency ratio was 41.3% in the third quarter, compared to 38.1% in the second quarter.

TAX RELATED ITEMS

Third quarter 2020 income tax expense was $36.5 million and the effective tax rate was 19%, compared to income tax expense of $12.9 million and an effective tax rate of 12% for the second quarter of 2020. As of September 30, 2020, the Company expects that the full-year effective tax rate will be 15%.

The quarter-over-quarter change in the income tax expense and effective tax rate reflects growth in income before income taxes and the updated estimate for the full-year effective tax rate. Third quarter 2020 income before income taxes was $196.1 million, a 75% increase from $112.3 million in the second quarter of 2020. The third quarter increase in the income before income taxes reset the run-rate for the full year, increasing the Company’s estimate of the full-year effective tax rate.

ASSET QUALITY

The allowance for loan losses totaled $618.3 million, or 1.65% of loans HFI, as of September 30, 2020, compared to $632.1 million, or 1.70% of loans HFI, as of June 30, 2020.

  • Quarter-over-quarter, the ALLL decreased by $13.8 million. This decrease was primarily driven by an improved macroeconomic forecast as of September 30, 2020 compared to June 30, 2020, which decreased the expected lifetime loan losses for the loan portfolio.
  • Third quarter 2020 net charge-offs were $24.2 million, or annualized 0.26% of average loans HFI, compared to $19.2 million, or annualized 0.21% of average loans HFI in the second quarter of 2020. Charge-offs of loans in the oil and gas industry totaled $22.1 million during the third quarter of 2020, and were 91% of net charge-offs.
  • Third quarter 2020 provision for credit losses was $10.0 million, compared to $102.4 million for the second quarter of 2020 and $73.9 million for the first quarter of 2020. The quarter-over-quarter decrease in the provision expense reflects the quarter-over-quarter net change in the allowance, which required less provision expense.
  • Nonperforming assets were $259.9 million, or 0.52% of total assets, as of September 30, 2020, compared to nonperforming assets of $202.2 million, or 0.41% of total assets, as of June 30, 2020. The quarter-over-quarter increase in nonperforming assets was largely due to inflows to nonaccrual status of oil and gas related loans, partially offset by charge-offs. Oil and gas related loans made up 50% of nonperforming assets as of September 30, 2020.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital ratios as of September 30, 2020, June 30, 2020, and September 30, 2019.

EWBC Regulatory Capital Metrics

 

Basel III

 

($ in millions)

 

September 30,

2020 (a)

 

June 30,

2020 (a)

 

September 30,

2019

 

Minimum

Capital

Ratio

 

Well

Capitalized

Ratio

 

Minimum

Capital Ratio +

Conservation

Buffer (b)

 

Risk-Based Capital Ratios:

 

 

   

 

   

 

   

 

 

               

CET1 capital ratio

 

 

12.8

%

 

 

12.7

%

 

 

12.8

%

 

4.5

%

 

 

6.5

%

 

 

7.0

%

Tier 1 capital ratio

 

 

12.8

%

 

 

12.7

%

 

 

12.8

%

 

6.0

%

 

 

8.0

%

 

 

8.5

%

Total capital ratio

 

 

14.5

%

 

 

14.4

%

 

 

14.2

%

 

8.0

%

 

 

10.0

%

 

 

10.5

%

Leverage ratio

 

 

9.8

%

 

 

9.7

%

 

 

10.3

%

 

4.0

%

 

 

5.0

%

 

 

4.0

%

Risk-Weighted Assets (“RWA”) (c)

 

$

36,922

 

 

$

36,199

 

 

$

34,424

 

 

N/A

 

   

N/A

     

N/A

 

 

N/A Not applicable.

(a)

The Company has elected to use the 2020 CECL transition provision in the calculation of its September 30, 2020 and June 30, 2020 regulatory capital ratios. The Company’s September 30, 2020 regulatory capital ratios and RWA are preliminary.

(b)

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

(c)

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

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared fourth quarter 2020 dividends for the Company’s common stock. The common stock cash dividend of $0.275 per share is payable on November 16, 2020 to shareholders of record on November 2, 2020.

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 2020 under this authorization.

Conference Call

East West will host a conference call to discuss third quarter 2020 earnings with the public on Thursday, October 22, 2020 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 2020 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 22, 2020 at 11:30 a.m. Pacific Time through November 22, 2020. 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: 10147892.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $50.4 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 125 locations in the United States and Greater China. U.S. markets include 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 impact of disease pandemics, such as the worldwide spread and any resurgence of COVID-19, on the Company, its operations and its customers, employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the below-mentioned and/or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period; changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the Small Business Administration’s Payment Protection Program, the CARES Act and any similar or related rules and regulations of the Federal Reserve efforts to provide liquidity to the U.S. financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers; changes in the U.S. economy, including an economic slowdown or recession, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the United States (“U.S.”) and the People’s Republic of China; changes in the commercial and consumer real estate markets; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against other financial institutions in its 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 from 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 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 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; changes in consumer spending and savings habits; impact on the Company’s international operations due to political developments, disease pandemics, 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 Federal Reserve, 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, the California Department of Business Oversight — Division of Financial Institutions, and SBA; impact of the Dodd-Frank Act on the Company’s 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 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 receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; 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 debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance. In addition to the risk factors enumerated above, the economic impact of the COVID-19 pandemic could cause actual outcome to differ, possibly materially, from the Company’s forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others. For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 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.

__________________________________

1 See reconciliation of GAAP to non-GAAP financial measures in Table 14.
2 See reconciliation of GAAP to non-GAAP financial measures in Table 15.
3 See reconciliation of GAAP to non-GAAP financial measures in Table 13.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

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

(unaudited)

Table 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020
% or Basis Point Change

 

 

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

Qtr-o-Qtr

 

Yr-o-Yr

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

503,376

 

 

$

602,974

 

 

$

475,291

 

 

(16.5

)%

 

5.9

%

 

 

Interest-bearing cash with banks

 

4,003,565

 

 

3,930,528

 

 

2,566,990

 

 

1.9

 

 

56.0

 

 

 

Cash and cash equivalents

 

4,506,941

 

 

4,533,502

 

 

3,042,281

 

 

(0.6

)

 

48.1

 

 

 

Interest-bearing deposits with banks

 

699,465

 

 

531,591

 

 

160,423

 

 

31.6

 

 

336.0

 

 

 

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

 

1,210,000

 

 

1,260,000

 

 

860,000

 

 

(4.0

)

 

40.7

 

 

 

Available-for-sale (“AFS”) debt securities (amortized cost of $4,471,694, $3,823,714 and $3,259,784 as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively)

 

4,539,160

 

 

3,884,574

 

 

3,284,034

 

 

16.9

 

 

38.2

 

 

 

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

 

79,172

 

 

78,963

 

 

78,334

 

 

0.3

 

 

1.1

 

 

 

Loans held-for-sale (“HFS”)

 

4,148

 

 

3,875

 

 

294

 

 

7.0

 

 

NM

 

 

 

Loans held-for-investment (''HFI'') (net of allowance (2) for loan losses of $618,252, $632,071 and $345,576)

 

36,818,877

 

 

36,597,341

 

 

33,679,400

 

 

0.6

 

 

9.3

 

 

 

Investments in qualified affordable housing partnerships, net

 

192,913

 

 

201,888

 

 

190,000

 

 

(4.4

)

 

1.5

 

 

 

Investments in tax credit and other investments, net

 

254,512

 

 

251,318

 

 

211,603

 

 

1.3

 

 

20.3

 

 

 

Goodwill

 

465,697

 

 

465,697

 

 

465,697

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

96,092

 

 

94,898

 

 

103,894

 

 

1.3

 

 

(7.5

)

 

 

Other assets

 

1,504,500

 

 

1,503,946

 

 

1,198,699

 

 

0.0

 

 

25.5

 

 

 

Total assets

 

$

50,371,477

 

 

$

49,407,593

 

 

$

43,274,659

 

 

2.0

%

 

16.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

41,680,555

 

 

$

40,672,678

 

 

$

36,659,526

 

 

2.5

%

 

13.7

%

 

 

Short-term borrowings

 

59,613

 

 

252,851

 

 

47,689

 

 

(76.4

)

 

25.0

 

 

 

FHLB advances

 

657,185

 

 

656,759

 

 

745,494

 

 

0.1

 

 

(11.8

)

 

 

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

 

348,063

 

 

300,000

 

 

50,000

 

 

16.0

 

 

596.1

 

 

 

Long-term debt and finance lease liabilities (3)

 

1,579,317

 

 

1,580,442

 

 

152,390

 

 

(0.1

)

 

936.4

 

 

 

Operating lease liabilities

 

103,673

 

 

102,708

 

 

112,142

 

 

0.9

 

 

(7.6

)

 

 

Accrued expenses and other liabilities

 

816,965

 

 

854,912

 

 

624,754

 

 

(4.4

)

 

30.8

 

 

 

Total liabilities

 

45,245,371

 

 

44,420,350

 

 

38,391,995

 

 

1.9

 

 

17.9

 

 

 

Stockholders’ equity (2)

 

5,126,106

 

 

4,987,243

 

 

4,882,664

 

 

2.8

 

 

5.0

 

 

 

Total liabilities and stockholders’ equity

 

$

50,371,477

 

 

$

49,407,593

 

 

$

43,274,659

 

 

2.0

%

 

16.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

 

$

36.22

 

 

$

35.25

 

 

$

33.54

 

 

2.8

%

 

8.0

%

 

 

Tangible equity (4) per common share

 

$

32.85

 

 

$

31.86

 

 

$

30.22

 

 

3.1

 

 

8.7

 

 

 

Number of common shares at period-end

 

141,507

 

 

141,486

 

 

145,568

 

 

0.0

 

 

(2.8

)

 

 

Tangible equity to tangible assets ratio (4)

 

9.32

%

 

9.21

%

 

10.28

%

 

11

 

bps

(96

)

bps

 

 

 

 

 

 

 

NM - Not meaningful.

(1)

Resale and repurchase agreements are reported net when the transactions are eligible for netting under Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. There was no netting of repurchase agreements against resale agreements as of September 30, 2020 and June 30, 2020. $400 million of gross repurchase agreements were eligible for netting against gross resale agreements as of September 30, 2019.

(2)

On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using the modified retrospective approach. We recorded $125.2 million increase to allowance for loan losses and $98.0 million after-tax decrease to opening retained earnings as of January 1, 2020.

(3)

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

(4)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

 

 

 

 

 

 

 

 

 

 

September 30, 2020
% Change

 

 

 

September 30,
2020

 

June 30,
2020

 

September 30,
2019

 

Qtr-o-Qtr

 

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial (“C&I”) (1)

 

$

13,305,024

 

 

$

13,422,691

 

 

$

12,301,002

 

 

(0.9

)%

 

8.2

%

 

Commercial real estate (“CRE”):

 

 

 

 

 

 

 

 

 

 

 

CRE

 

11,037,987

 

 

10,902,114

 

 

9,749,583

 

 

1.2

 

 

13.2

 

 

Multifamily residential

 

3,057,274

 

 

3,032,385

 

 

2,589,203

 

 

0.8

 

 

18.1

 

 

Construction and land

 

578,407

 

 

567,716

 

 

719,900

 

 

1.9

 

 

(19.7

)

 

Total CRE

 

14,673,668

 

 

14,502,215

 

 

13,058,686

 

 

1.2

 

 

12.4

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage:

 

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

7,785,759

 

 

7,660,094

 

 

6,811,014

 

 

1.6

 

 

14.3

 

 

Home equity lines of credit (“HELOCs”)

 

1,514,388

 

 

1,461,951

 

 

1,540,121

 

 

3.6

 

 

(1.7

)

 

Total residential mortgage

 

9,300,147

 

 

9,122,045

 

 

8,351,135

 

 

2.0

 

 

11.4

 

 

Other consumer

 

158,290

 

 

182,461

 

 

314,153

 

 

(13.2

)

 

(49.6

)

Total loans HFI (2)

 

37,437,129

 

 

37,229,412

 

 

34,024,976

 

 

0.6

 

 

10.0

 

Loans HFS

 

4,148

 

 

3,875

 

 

294

 

 

7.0

 

 

NM

 

 

Total loans (2)

 

37,441,277

 

 

37,233,287

 

 

34,025,270

 

 

0.6

 

 

10.0

 

Allowance for loan losses

 

(618,252

)

 

(632,071

)

 

(345,576

)

 

(2.2

)

 

78.9

 

 

Net loans (2)

 

$

36,823,025

 

 

$

36,601,216

 

 

$

33,679,694

 

 

0.6

 

 

9.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

14,924,917

 

 

$

13,940,420

 

 

$

10,806,937

 

 

7.1

%

 

38.1

%

 

Interest-bearing checking

 

5,731,573

 

 

5,280,887

 

 

4,837,391

 

 

8.5

 

 

18.5

 

 

Money market

 

9,553,574

 

 

10,002,624

 

 

8,400,353

 

 

(4.5

)

 

13.7

 

 

Savings

 

2,401,318

 

 

2,186,199

 

 

2,094,638

 

 

9.8

 

 

14.6

 

 

Time deposits

 

9,069,173

 

 

9,262,548

 

 

10,520,207

 

 

(2.1

)

 

(13.8

)

 

Total deposits

 

$

41,680,555

 

 

$

40,672,678

 

 

$

36,659,526

 

 

2.5

%

 

13.7

%

 

NM - Not meaningful.

(1)

Includes $1.77 billion and $1.75 billion of Paycheck Protection Program (“PPP”) loans as of September 30, 2020 and June 30, 2020, respectively.

(2)

Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(67.0) million, $(72.1) million, and $(39.8) million as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Net origination fees related to PPP loans were $(22.6) million and $(25.4) million as of September 30, 2020 and June 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, 2020
% Change

 

 

 

September 30,
2020

 

June 30,
2020

 

September 30,
2019

 

Qtr-o-Qtr

 

Yr-o-Yr

Interest and dividend income (1)

 

$

365,728

 

 

$

398,776

 

 

$

476,912

 

 

(8.3

)%

 

(23.3

)%

Interest expense

 

41,598

 

 

55,001

 

 

107,105

 

 

(24.4

)

 

(61.2

)

Net interest income before provision for credit losses

 

324,130

 

 

343,775

 

 

369,807

 

 

(5.7

)

 

(12.4

)

Provision for credit losses

 

10,000

 

 

102,443

 

 

38,284

 

 

(90.2

)

 

(73.9

)

Net interest income after provision for credit losses

 

314,130

 

 

241,332

 

 

331,523

 

 

30.2

 

 

(5.2

)

Noninterest income

 

49,580

 

 

58,637

 

 

51,474

 

 

(15.4

)

 

(3.7

)

Noninterest expense

 

167,650

 

 

187,696

 

 

176,630

 

 

(10.7

)

 

(5.1

)

Income before income taxes

 

196,060

 

 

112,273

 

 

206,367

 

 

74.6

 

 

(5.0

)

Income tax expense

 

36,523

 

 

12,921

 

 

34,951

 

 

182.7

 

 

4.5

 

Net income

 

$

159,537

 

 

$

99,352

 

 

$

171,416

 

 

60.6

%

 

(6.9

)%

Earnings per share (“EPS”)

 

 

 

 

 

 

 

 

 

 

- Basic

 

$

1.13

 

 

$

0.70

 

 

$

1.18

 

 

60.6

%

 

(4.3

)%

- Diluted

 

$

1.12

 

 

$

0.70

 

 

$

1.17

 

 

60.3

 

 

(4.3

)

Weighted-average number of shares outstanding

 

 

 

 

 

 

 

 

 

 

- Basic

 

141,498

 

 

141,486

 

 

145,559

 

 

0.0

%

 

(2.8

)%

- Diluted

 

142,043

 

 

141,827

 

 

146,120

 

 

0.2

 

 

(2.8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30, 2020
% Change

 

 

 

September 30,
2020

 

June 30,
2020

 

September 30,
2019

 

Qtr-o-Qtr

 

Yr-o-Yr

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

Lending fees

 

$

18,736

 

 

$

21,946

 

 

$

15,035

 

 

(14.6

)%

 

24.6

%

 

Deposit account fees

 

12,573

 

 

10,872

 

 

9,729

 

 

15.6

 

 

29.2

 

 

Foreign exchange income

 

3,310

 

 

4,562

 

 

8,065

 

 

(27.4

)

 

(59.0

)

 

Wealth management fees

 

4,553

 

 

3,091

 

 

4,841

 

 

47.3

 

 

(5.9

)

 

Interest rate contracts and other derivative income

 

5,538

 

 

6,107

 

 

8,423

 

 

(9.3

)

 

(34.3

)

 

Net gains on sales of loans

 

361

 

 

132

 

 

2,037

 

 

173.5

 

 

(82.3

)

 

Gains on sales of AFS debt securities

 

698

 

 

9,640

 

 

58

 

 

(92.8

)

 

NM

 

 

Other investment income

 

316

 

 

966

 

 

663

 

 

(67.3

)

 

(52.3

)

 

Other income

 

3,495

 

 

1,321

 

 

2,623

 

 

164.6

 

 

33.2

 

Total noninterest income

 

$

49,580

 

 

$

58,637

 

 

$

51,474

 

 

(15.4

)%

 

(3.7

%)

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

$

99,756

 

 

$

96,955

 

 

$

97,819

 

 

2.9

%

 

2.0

%

 

Occupancy and equipment expense

 

16,648

 

 

16,217

 

 

17,912

 

 

2.7

 

 

(7.1

)

 

Deposit insurance premiums and regulatory assessments

 

4,006

 

 

3,700

 

 

3,550

 

 

8.3

 

 

12.8

 

 

Legal expense

 

1,366

 

 

1,530

 

 

1,720

 

 

(10.7

)

 

(20.6

)

 

Data processing

 

3,590

 

 

4,480

 

 

3,328

 

 

(19.9

)

 

7.9

 

 

Consulting expense

 

1,224

 

 

1,413

 

 

2,559

 

 

(13.4

)

 

(52.2

)

 

Deposit related expense

 

3,113

 

 

3,353

 

 

3,584

 

 

(7.2

)

 

(13.1

)

 

Computer software expense

 

8,539

 

 

7,301

 

 

6,556

 

 

17.0

 

 

30.2

 

 

Other operating expense

 

17,122

 

 

19,248

 

 

22,769

 

 

(11.0

)

 

(24.8

)

 

Amortization of tax credit and other investments

 

12,286

 

 

24,759

 

 

16,833

 

 

(50.4

)

 

(27.0

)

 

Repurchase agreements’ extinguishment cost

 

 

 

8,740

 

 

 

 

(100.0

)

 

 

Total noninterest expense

 

$

167,650

 

 

$

187,696

 

 

$

176,630

 

 

(10.7

)%

 

(5.1

)%

 

NM - Not meaningful.

(1)

Includes $7.8 million and $21.3 million of interest income related to PPP loans for the three months ended September 30, 2020 and June 30, 2020, respectively.

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, 2020
% Change

 

 

 

September 30, 2020

 

September 30, 2019

 

Yr-o-Yr

Interest and dividend income (1)

 

$

1,213,694

 

 

$

1,415,067

 

 

(14.2

)%

Interest expense

 

183,082

 

 

315,473

 

 

(42.0

)

Net interest income before provision for credit losses

 

1,030,612

 

 

1,099,594

 

 

(6.3

)

Provision for credit losses

 

186,313

 

 

80,108

 

 

132.6

 

Net interest income after provision for credit losses

 

844,299

 

 

1,019,486

 

 

(17.2

)

Noninterest income

 

162,266

 

 

146,364

 

 

10.9

 

Noninterest expense

 

534,222

 

 

541,215

 

 

(1.3

)

Income before income taxes

 

472,343

 

 

624,635

 

 

(24.4

)

Income tax expense

 

68,630

 

 

138,815

 

 

(50.6

)

Net income

 

$

403,713

 

 

$

485,820

 

 

(16.9

)%

EPS

 

 

 

 

 

 

- Basic

 

$

2.83

 

 

$

3.34

 

 

(15.2

)%

- Diluted

 

$

2.82

 

 

$

3.33

 

 

(15.2

)

Weighted-average number of shares outstanding

 

 

 

 

 

 

- Basic

 

142,595

 

 

145,455

 

 

(2.0

)%

- Diluted

 

143,082

 

 

146,088

 

 

(2.1

)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

September 30, 2020
% Change

 

 

 

September 30, 2020

 

September 30, 2019

 

Yr-o-Yr

Noninterest income:

 

 

 

 

 

 

 

Lending fees

 

$

56,455

 

 

$

46,427

 

 

21.6

%

 

Deposit account fees

 

33,892

 

 

28,804

 

 

17.7

 

 

Foreign exchange income

 

15,691

 

 

20,366

 

 

(23.0

)

 

Wealth management fees

 

12,997

 

 

12,415

 

 

4.7

 

 

Interest rate contracts and other derivative income

 

18,718

 

 

22,037

 

 

(15.1

)

 

Net gains on sales of loans

 

1,443

 

 

2,967

 

 

(51.4

)

 

Gains on sales of AFS debt securities

 

11,867

 

 

3,066

 

 

287.1

 

 

Other investment income

 

3,203

 

 

2,571

 

 

24.6

 

 

Other income

 

8,000

 

 

7,711

 

 

3.7

 

Total noninterest income

 

$

162,266

 

 

$

146,364

 

 

10.9

%

Noninterest expense:

 

 

 

 

 

 

 

Compensation and employee benefits

 

$

298,671

 

 

$

300,649

 

 

(0.7

)%

 

Occupancy and equipment expense

 

49,941

 

 

52,592

 

 

(5.0

)

 

Deposit insurance premiums and regulatory assessments

 

11,133

 

 

9,557

 

 

16.5

 

 

Legal expense

 

6,093

 

 

6,300

 

 

(3.3

)

 

Data processing

 

11,896

 

 

9,945

 

 

19.6

 

 

Consulting expense

 

3,854

 

 

6,687

 

 

(42.4

)

 

Deposit related expense

 

10,029

 

 

10,426

 

 

(3.8

)

 

Computer software expense

 

22,006

 

 

18,845

 

 

16.8

 

 

Other operating expense

 

57,489

 

 

67,737

 

 

(15.1

)

 

Amortization of tax credit and other investments

 

54,370

 

 

58,477

 

 

(7.0

)

 

Repurchase agreements’ extinguishment cost

 

8,740

 

 

 

 

100.0

 

Total noninterest expense

 

$

534,222

 

 

$

541,215

 

 

(1.3

)%

 

(1)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30, 2020
% Change

 

Nine Months Ended

 

September 30, 2020
% Change

 

 

 

September 30,
2020

 

June 30,
2020

 

September 30,
2019

 

Qtr-o-Qtr

 

Yr-o-Yr

 

September 30,
2020

 

September 30,
2019

 

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C&I (1)

 

$

13,235,845

 

 

$

13,560,719

 

 

$

12,203,341

 

 

(2.4

)%

 

8.5

%

 

$

12,988,486

 

 

$

12,018,802

 

 

8.1

%

 

CRE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRE

 

10,942,780

 

 

10,812,399

 

 

9,685,092

 

 

1.2

 

 

13.0

 

 

10,747,669

 

 

9,522,238

 

 

12.9

 

 

Multifamily residential

 

3,107,294

 

 

2,987,311

 

 

2,561,648

 

 

4.0

 

 

21.3

 

 

2,995,227

 

 

2,523,962

 

 

18.7

 

 

Construction and land

 

564,219

 

 

594,965

 

 

694,665

 

 

(5.2

)

 

(18.8

)

 

599,957

 

 

652,096

 

 

(8.0

)

 

Total CRE

 

14,614,293

 

 

14,394,675

 

 

12,941,405

 

 

1.5

 

 

12.9

 

 

14,342,853

 

 

12,698,296

 

 

13.0

 

Consumer:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Single-family residential

 

7,695,838

 

 

7,506,546

 

 

6,636,227

 

 

2.5

 

 

16.0

 

 

7,487,347

 

 

6,388,939

 

 

17.2

 

 

HELOCs

 

1,475,098

 

 

1,444,933

 

 

1,557,358

 

 

2.1

 

 

(5.3

)

 

1,454,237

 

 

1,605,279

 

 

(9.4

)

 

Total residential mortgage

 

9,170,936

 

 

8,951,479

 

 

8,193,585

 

 

2.5

 

 

11.9

 

 

8,941,584

 

 

7,994,218

 

 

11.9

 

 

Other consumer

 

139,371

 

 

234,900

 

 

322,951

 

 

(40.7

)

 

(56.8

)

 

214,936

 

 

312,397

 

 

(31.2

)

 

Total loans (2)

 

$

37,160,445

 

 

$

37,141,773

 

 

$

33,661,282

 

 

0.1

%

 

10.4

%

 

$

36,487,859

 

 

$

33,023,713

 

 

10.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets

 

$

47,428,586

 

 

$

45,413,242

 

 

$

40,919,386

 

 

4.4

%

 

15.9

%

 

$

45,076,734

 

 

$

39,716,462

 

 

13.5

%

Total assets

 

$

50,247,259

 

 

$

48,228,914

 

 

$

43,136,273

 

 

4.2

%

 

16.5

%

 

$

47,753,030

 

 

$

41,815,490

 

 

14.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

14,296,475

 

 

$

13,534,873

 

 

$

10,712,612

 

 

5.6

%

 

33.5

%

 

$

12,987,813

 

 

$

10,342,966

 

 

25.6

%

 

Interest-bearing checking

 

5,663,873

 

 

4,687,178

 

 

4,947,511

 

 

20.8

 

 

14.5

 

 

5,119,568

 

 

5,145,308

 

 

(0.5

)

 

Money market

 

9,981,704

 

 

9,893,816

 

 

8,344,993

 

 

0.9

 

 

19.6

 

 

9,630,918

 

 

8,094,933

 

 

19.0

 

 

Savings

 

2,259,788

 

 

2,149,965

 

 

2,154,592

 

 

5.1

 

 

4.9

 

 

2,162,365

 

 

2,117,773

 

 

2.1

 

 

Time deposits

 

9,008,907

 

 

9,634,696

 

 

10,337,990

 

 

(6.5

)

 

(12.9

)

 

9,633,582

 

 

9,887,274

 

 

(2.6

)

 

Total deposits

 

$

41,210,747

 

 

$

39,900,528

 

 

$

36,497,698

 

 

3.3

%

 

12.9

%

 

$

39,534,246

 

 

$

35,588,254

 

 

11.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

$

29,552,756

 

 

$

28,362,618

 

 

$

26,773,253

 

 

4.2

%

 

10.4

%

 

$

28,506,736

 

 

$

26,033,713

 

 

9.5

%

Stockholders’ equity

 

$

5,079,351

 

 

$

4,982,446

 

 

$

4,838,281

 

 

1.9

%

 

5.0

%

 

$

5,028,122

 

 

$

4,687,746

 

 

7.3

%

 

(1)

Includes average balance of PPP loans of $1.76 billion and $1.47 billion for the three months ended September 30, 2020 and June 30, 2020, respectively, and $1.08 billion for the nine months ended September 30, 2020.

(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, 2020

 

June 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

 

$

4,904,394

 

 

$

5,045

 

 

0.41

%

 

$

3,435,920

 

 

$

4,564

 

 

0.53

%

Resale agreements (2)

 

1,225,217

 

 

5,295

 

 

1.72

%

 

1,037,473

 

 

5,514

 

 

2.14

%

AFS debt securities

 

4,059,456

 

 

18,493

 

 

1.81

%

 

3,719,209

 

 

21,004

 

 

2.27

%

Loans (3)

 

37,160,445

 

 

336,542

 

 

3.60

%

 

37,141,773

 

 

367,393

 

 

3.98

%

FHLB and FRB stock

 

79,074

 

 

353

 

 

1.78

%

 

78,867

 

 

301

 

 

1.54

%

Total interest-earning assets

 

47,428,586

 

 

365,728

 

 

3.07

%

 

45,413,242

 

 

398,776

 

 

3.53

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

522,699

 

 

 

 

 

 

498,908

 

 

 

 

 

Allowance for loan losses

 

(632,216

)

 

 

 

 

 

(566,473

)

 

 

 

 

Other assets

 

2,928,190

 

 

 

 

 

 

2,883,237

 

 

 

 

 

Total assets

 

$

50,247,259

 

 

 

 

 

 

$

48,228,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

5,663,873

 

 

$

4,345

 

 

0.31

%

 

$

4,687,178

 

 

$

5,404

 

 

0.46

%

Money market deposits

 

9,981,704

 

 

6,837

 

 

0.27

%

 

9,893,816

 

 

8,093

 

 

0.33

%

Savings deposits

 

2,259,788

 

 

1,481

 

 

0.26

%

 

2,149,965

 

 

1,445

 

 

0.27

%

Time deposits

 

9,008,907

 

 

21,135

 

 

0.93

%

 

9,634,696

 

 

31,457

 

 

1.31

%

Federal funds purchased and other short-term borrowings

 

84,858

 

 

407

 

 

1.91

%

 

242,185

 

 

265

 

 

0.44

%

FHLB advances

 

656,906

 

 

3,146

 

 

1.91

%

 

653,665

 

 

3,343

 

 

2.06

%

Repurchase agreements (2)

 

317,097

 

 

2,155

 

 

2.70

%

 

418,681

 

 

3,540

 

 

3.40

%

Long-term debt and finance lease liabilities

 

1,579,623

 

 

2,092

 

 

0.53

%

 

682,432

 

 

1,454

 

 

0.86

%

Total interest-bearing liabilities

 

29,552,756

 

 

41,598

 

 

0.56

%

 

28,362,618

 

 

55,001

 

 

0.78

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

14,296,475

 

 

 

 

 

 

13,534,873

 

 

 

 

 

Accrued expenses and other liabilities

 

1,318,677

 

 

 

 

 

 

1,348,977

 

 

 

 

 

Stockholders’ equity

 

5,079,351

 

 

 

 

 

 

4,982,446

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

50,247,259

 

 

 

 

 

 

$

48,228,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

2.51

%

 

 

 

 

 

2.75

%

Net interest income and net interest margin

 

 

 

$

324,130

 

 

2.72

%

 

 

 

$

343,775

 

 

3.04

%

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

 

 

 

$

317,611

 

 

2.77

%

 

 

 

$

322,949

 

 

2.96

%

 

(1)

Annualized.

(2)

There was no netting of repurchase agreements against resale agreements for the three months ended September 30, 2020 and June 30, 2020.

(3)

Includes loans HFS.

(4)

Net interest income and net interest margin have been adjusted for the impacts of PPP loans and advances from the PPPLF. 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, 2020

 

September 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

 

$

4,904,394

 

 

$

5,045

 

 

0.41

%

 

$

3,547,626

 

 

$

19,710

 

 

2.20

%

Resale agreements (2)

 

1,225,217

 

 

5,295

 

 

1.72

%

 

981,196

 

 

6,943

 

 

2.81

%

AFS debt securities

 

4,059,456

 

 

18,493

 

 

1.81

%

 

2,651,069

 

 

15,945

 

 

2.39

%

Loans (3)

 

37,160,445

 

 

336,542

 

 

3.60

%

 

33,661,282

 

 

433,658

 

 

5.11

%

FHLB and FRB stock

 

79,074

 

 

353

 

 

1.78

%

 

78,213

 

 

656

 

 

3.33

%

Total interest-earning assets

 

47,428,586

 

 

365,728

 

 

3.07

%

 

40,919,386

 

 

476,912

 

 

4.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

522,699

 

 

 

 

 

 

441,898

 

 

 

 

 

Allowance for loan losses

 

(632,216

)

 

 

 

 

 

(328,523

)

 

 

 

 

Other assets

 

2,928,190

 

 

 

 

 

 

2,103,512

 

 

 

 

 

Total assets

 

$

50,247,259

 

 

 

 

 

 

$

43,136,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

5,663,873

 

 

$

4,345

 

 

0.31

%

 

$

4,947,511

 

 

$

14,488

 

 

1.16

%

Money market deposits

 

9,981,704

 

 

6,837

 

 

0.27

%

 

8,344,993

 

 

26,943

 

 

1.28

%

Savings deposits

 

2,259,788

 

 

1,481

 

 

0.26

%

 

2,154,592

 

 

2,656

 

 

0.49

%

Time deposits

 

9,008,907

 

 

21,135

 

 

0.93

%

 

10,337,990

 

 

52,733

 

 

2.02

%

Federal funds purchased and other short-term borrowings

 

84,858

 

 

407

 

 

1.91

%

 

40,433

 

 

382

 

 

3.75

%

FHLB advances

 

656,906

 

 

3,146

 

 

1.91

%

 

745,263

 

 

5,021

 

 

2.67

%

Repurchase agreements (2)

 

317,097

 

 

2,155

 

 

2.70

%

 

50,000

 

 

3,239

 

 

25.70

%

Long-term debt and finance lease liabilities

 

1,579,623

 

 

2,092

 

 

0.53

%

 

152,471

 

 

1,643

 

 

4.28

%

Total interest-bearing liabilities

 

29,552,756

 

 

41,598

 

 

0.56

%

 

26,773,253

 

 

107,105

 

 

1.59

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

14,296,475

 

 

 

 

 

 

10,712,612

 

 

 

 

 

Accrued expenses and other liabilities

 

1,318,677

 

 

 

 

 

 

812,127

 

 

 

 

 

Stockholders’ equity

 

5,079,351

 

 

 

 

 

 

4,838,281

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

50,247,259

 

 

 

 

 

 

$

43,136,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

2.51

%

 

 

 

 

 

3.03

%

Net interest income and net interest margin

 

 

 

$

324,130

 

 

2.72

%

 

 

 

$

369,807

 

 

3.59

%

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

 

 

 

$

317,611

 

 

2.77

%

 

 

 

$

369,807

 

 

3.59

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized.

(2)

There was no netting of repurchase agreements against resale agreements for the three months ended September 30, 2020. Average balances of resale and repurchase agreements for the three months ended September 30, 2019 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 1.72% and 2.59% for the three months ended September 30, 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 2.70% and 4.68% for the three months ended September 30, 2020 and 2019, respectively.

(3)

Includes loans HFS.

(4)

Net interest income and net interest margin have been adjusted for the impacts of PPP loans and advances from the PPPLF. 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, 2020

 

September 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

 

$

3,775,242

 

 

$

20,717

 

 

0.73

%

 

$

2,996,340

 

 

$

51,920

 

 

2.32

%

Resale agreements (2)

 

1,048,923

 

 

16,434

 

 

2.09

%

 

1,005,147

 

 

22,253

 

 

2.96

%

AFS debt securities

 

3,685,837

 

 

59,639

 

 

2.16

%

 

2,614,949

 

 

47,378

 

 

2.42

%

Loans (3)

 

36,487,859

 

 

1,115,804

 

 

4.08

%

 

33,023,713

 

 

1,291,642

 

 

5.23

%

FHLB and FRB stock

 

78,873

 

 

1,100

 

 

1.86

%

 

76,313

 

 

1,874

 

 

3.28

%

Total interest-earning assets

 

45,076,734

 

 

1,213,694

 

 

3.60

%

 

39,716,462

 

 

1,415,067

 

 

4.76

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

510,750

 

 

 

 

 

 

449,739

 

 

 

 

 

Allowance for loan losses

 

(563,912

)

 

 

 

 

 

(321,486

)

 

 

 

 

Other assets

 

2,729,458

 

 

 

 

 

 

1,970,775

 

 

 

 

 

Total assets

 

$

47,753,030

 

 

 

 

 

 

$

41,815,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Checking deposits

 

$

5,119,568

 

 

$

19,995

 

 

0.52

%

 

$

5,145,308

 

 

$

44,579

 

 

1.16

%

Money market deposits

 

9,630,918

 

 

37,178

 

 

0.52

%

 

8,094,933

 

 

85,858

 

 

1.42

%

Savings deposits

 

2,162,365

 

 

4,743

 

 

0.29

%

 

2,117,773

 

 

7,360

 

 

0.46

%

Time deposits

 

9,633,582

 

 

94,684

 

 

1.31

%

 

9,887,274

 

 

148,992

 

 

2.01

%

Federal funds purchased and other short-term borrowings

 

128,846

 

 

1,228

 

 

1.27

%

 

45,410

 

 

1,359

 

 

4.00

%

FHLB advances

 

667,935

 

 

10,655

 

 

2.13

%

 

540,535

 

 

12,011

 

 

2.97

%

Repurchase agreements (2)

 

355,923

 

 

9,686

 

 

3.64

%

 

50,000

 

 

10,200

 

 

27.27

%

Long-term debt and finance lease liabilities

 

807,599

 

 

4,913

 

 

0.81

%

 

152,480

 

 

5,114

 

 

4.48

%

Total interest-bearing liabilities

 

28,506,736

 

 

183,082

 

 

0.86

%

 

26,033,713

 

 

315,473

 

 

1.62

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

12,987,813

 

 

 

 

 

 

10,342,966

 

 

 

 

 

Accrued expenses and other liabilities

 

1,230,359

 

 

 

 

 

 

751,065

 

 

 

 

 

Stockholders’ equity

 

5,028,122

 

 

 

 

 

 

4,687,746

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

47,753,030

 

 

 

 

 

 

$

41,815,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

2.74

%

 

 

 

 

 

3.14

%

Net interest income and net interest margin

 

 

 

$

1,030,612

 

 

3.05

%

 

 

 

$

1,099,594

 

 

3.70

%

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

 

 

 

$

1,003,267

 

 

3.05

%

 

 

 

$

1,099,594

 

 

3.70

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 2.09% and 2.71% for the nine months ended September 30, 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 3.48% and 4.87% for the nine months ended September 30, 2020 and 2019, respectively.

(3)

Includes loans HFS.

(4)

Net interest income and net interest margin have been adjusted for the impact of PPP loans and advances from the PPPLF. 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, 2020
Basis Point Change

 

 

 

September 30,
2020

 

June 30,
2020

 

September 30,
2019

 

Qtr-o-Qtr

 

Yr-o-Yr

 

 

Return on average assets

 

1.26

%

 

0.83

%

 

1.58

%

 

43

 

bps

(32)

 

bps

 

Return on average equity

 

12.50

%

 

8.02

%

 

14.06

%

 

448

 

 

(156)

 

 

 

Return on average tangible equity (2)

 

13.88

%

 

8.96

%

 

15.75

%

 

492

 

 

(187)

 

 

 

Interest rate spread

 

2.51

%

 

2.75

%

 

3.03

%

 

(24)

 

 

(52)

 

 

 

Net interest margin

 

2.72

%

 

3.04

%

 

3.59

%

 

(32)

 

 

(87)

 

 

 

Adjusted net interest margin (2)

 

2.77

%

 

2.96

%

 

3.59

%

 

(19)

 

 

(82)

 

 

 

Average loan yield

 

3.60

%

 

3.98

%

 

5.11

%

 

(38)

 

 

(151)

 

 

 

Adjusted average loan yield (2)

 

3.70

%

 

3.90

%

 

5.11

%

 

(20)

 

 

(141)

 

 

 

Yield on average interest-earning assets

 

3.07

%

 

3.53

%

 

4.62

%

 

(46)

 

 

(155)

 

 

 

Average cost of interest-bearing deposits

 

0.50

%

 

0.71

%

 

1.49

%

 

(21)

 

 

(99)

 

 

 

Average cost of deposits

 

0.33

%

 

0.47

%

 

1.05

%

 

(14)

 

 

(72)

 

 

 

Average cost of funds

 

0.38

%

 

0.53

%

 

1.13

%

 

(15)

 

 

(75)

 

 

 

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

 

1.74

%

 

2.08

%

 

2.42

%

 

(34)

 

 

(68)

 

 

 

Adjusted noninterest expense/average assets (2)

 

1.22

%

 

1.28

%

 

1.46

%

 

(6)

 

 

(24)

 

 

 

Efficiency ratio

 

44.86

%

 

46.64

%

 

41.93

%

 

(178)

 

 

293

 

 

 

Adjusted efficiency ratio (2)

 

41.33

%

 

38.09

%

 

37.66

%

 

324

 

bps

367

 

bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended (1)

 

September 30, 2020
Basis Point Change

 

 

 

 

 

 

 

September 30,
2020

 

September 30,
2019

 

Yr-o-Yr

 

 

 

 

 

Return on average assets

 

1.13

%

 

1.55

%

 

(42)

 

bps

 

 

 

 

 

Adjusted return on average assets (2)

 

1.13

%

 

1.67

%

 

(54)

 

 

 

 

 

 

 

Return on average equity

 

10.73

%

 

13.86

%

 

(313)

 

 

 

 

 

 

 

Adjusted return on average equity (2)

 

10.73

%

 

14.85

%

 

(412)

 

 

 

 

 

 

 

Return on average tangible equity (2)

 

11.95

%

 

15.58

%

 

(363)

 

 

 

 

 

 

 

Adjusted return on average tangible equity (2)

 

11.95

%

 

16.70

%

 

(475)

 

 

 

 

 

 

 

Interest rate spread

 

2.74

%

 

3.14

%

 

(40)

 

 

 

 

 

 

 

Net interest margin

 

3.05

%

 

3.70

%

 

(65)

 

 

 

 

 

 

 

Adjusted net interest margin (2)

 

3.05

%

 

3.70

%

 

(65)

 

 

 

 

 

 

 

Average loan yield

 

4.08

%

 

5.23

%

 

(115)

 

 

 

 

 

 

 

Adjusted average loan yield (2)

 

4.10

%

 

5.23

%

 

(113)

 

 

 

 

 

 

 

Yield on average interest-earning assets

 

3.60

%

 

4.76

%

 

(116)

 

 

 

 

 

 

 

Average cost of interest-bearing deposits

 

0.79

%

 

1.52

%

 

(73)

 

 

 

 

 

 

 

Average cost of deposits

 

0.53

%

 

1.08

%

 

(55)

 

 

 

 

 

 

 

Average cost of funds

 

0.59

%

 

1.16

%

 

(57)

 

 

 

 

 

 

 

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

 

2.03

%

 

2.45

%

 

(42)

 

 

 

 

 

 

 

Adjusted noninterest expense/average assets (2)

 

1.31

%

 

1.53

%

 

(22)

 

 

 

 

 

 

 

Efficiency ratio

 

44.78

%

 

43.44

%

 

134

 

 

 

 

 

 

 

Adjusted efficiency ratio (2)

 

39.26

%

 

38.47

%

 

79

 

bps

 

 

 

 

 

 

 

(1)

Annualized except for efficiency ratio.

(2)

See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15. Note that there were no non-recurring adjustments during 2020.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

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

($ in thousands)

(unaudited)

Table 10

ASU 2016-13 replaced the incurred loss methodology used in calculating the allowance for loan losses with a current expected credit loss model (“CECL”). The Company adopted ASU 2016-13 using the modified retrospective approach on January 1, 2020. As a result, prior comparative periods have not been adjusted for the CECL model. In addition, ASU 2016-13 introduces the concept of Purchased Credit Deteriorated (“PCD”) financial assets, which replaces purchased credit-impaired (“PCI”) assets. For PCD assets, the initial allowance for loan losses is added to the purchase price and is considered to be part of the PCD loan amortized cost basis, hence, there is no income statement impact on acquisition. This contrasts with PCI loans where allowance for loan losses only reflects losses that are incurred by the Company after the acquisition. The allowance for loan losses is evaluated each quarter and adjusted as necessary by recognizing or reversing loan loss expense. There were no PCD loans during the three and nine months ended September 30, 2020.

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

Commercial

 

Consumer

 

Total

 

 

 

 

 

CRE

 

Residential Mortgage

 

 

 

 

 

 

C&I

 

CRE

 

Multi-
Family
Residential

 

Construction
and Land

 

Single-
Family
Residential

 

HELOCs

 

Other
Consumer

 

Allowance for loan losses, June 30, 2020

 

 

$

380,723

 

 

$

176,040

 

 

$

25,058

 

 

$

18,551

 

 

$

25,314

 

 

$

3,867

 

 

$

2,518

 

 

$

632,071

 

Provision for (reversal of) credit losses on loans

(a)

 

31,691

 

 

(8,301

)

 

(1,916

)

 

(8,180

)

 

(2,692

)

 

(637

)

 

(76

)

 

9,889

 

Gross charge-offs

 

 

(25,111

)

 

(1,414

)

 

 

 

 

 

 

 

 

 

(32

)

 

(26,557

)

Gross recoveries

 

 

1,218

 

 

485

 

 

665

 

 

30

 

 

 

 

43

 

 

(92

)

 

2,349

 

Total net (charge-offs) recoveries

 

 

(23,893

)

 

(929

)

 

665

 

 

30

 

 

 

 

43

 

 

(124

)

 

(24,208

)

Foreign currency translation adjustment

 

 

500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

500

 

Allowance for loan losses, September 30, 2020

 

 

$

389,021

 

 

$

166,810

 

 

$

23,807

 

 

$

10,401

 

 

$

22,622

 

 

$

3,273

 

 

$

2,318

 

 

$

618,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

Commercial

 

Consumer

 

Total

 

 

 

 

 

CRE

 

Residential Mortgage

 

 

 

 

 

 

C&I

 

CRE

 

Multi-
Family
Residential

 

Construction
and Land

 

Single-
Family
Residential

 

HELOCs

 

Other
Consumer

 

Allowance for loan losses, March 31, 2020

 

 

$

362,629

 

 

$

132,819

 

 

$

16,530

 

 

$

11,018

 

 

$

26,822

 

 

$

3,881

 

 

$

3,304

 

 

$

557,003

 

Provision for (reversal of) credit losses on loans

(a)

 

37,862

 

 

43,315

 

 

7,908

 

 

7,526

 

 

(1,667

)

 

205

 

 

(849

)

 

94,300

 

Gross charge-offs

 

 

(20,378

)

 

(320

)

 

 

 

 

 

 

 

(221

)

 

(30

)

 

(20,949

)

Gross recoveries

 

 

602

 

 

226

 

 

620

 

 

7

 

 

159

 

 

2

 

 

93

 

 

1,709

 

Total net (charge-offs) recoveries

 

 

(19,776

)

 

(94

)

 

620

 

 

7

 

 

159

 

 

(219

)

 

63

 

 

(19,240

)

Foreign currency translation adjustment

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

Allowance for loan losses, June 30, 2020

 

 

$

380,723

 

 

$

176,040

 

 

$

25,058

 

 

$

18,551

 

 

$

25,314

 

 

$

3,867

 

 

$

2,518

 

 

$

632,071

 

 

 

 

 

Three Months Ended September 30, 2019

 

 

 

Commercial

 

Consumer

 

Total

 

 

 

 

 

CRE

 

Residential Mortgage

 

 

 

 

 

 

C&I

 

CRE