East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq:
EWBC), parent company of East West Bank, reported its financial
results for the second quarter of 2023. Second quarter 2023 net
income was $312.0 million, or $2.20 per diluted share, up from
$258.3 million, or $1.81 per diluted share in the prior year
period. Year-over-year, net income and earnings per share both
increased 21%.
“We are pleased with our operating performance for the second
quarter, which continues the strong trajectory from the first
quarter of 2023. For the second quarter of 2023, both deposits and
loans grew 7% linked quarter annualized, to $55.7 billion and $49.8
billion, respectively,” stated Dominic Ng, Chairman and Chief
Executive Officer of East West. “For the second quarter of 2023, we
earned industry-leading returns of 1.85% on average assets and
21.0% on average tangible common equity1. Net interest margin was
3.55%, a healthy margin in the current environment, and asset
quality continued to be outstanding with net charge-offs of 0.06%
annualized.”
“We remain focused on ensuring both the strength and stability
of our balance sheet, capital, liquidity and earnings power. Our
tangible common equity ratio1 increased to 8.80% and our common
equity tier 1 capital ratio increased to 13.17% as of June 30,
2023. We believe that through the strength of our diversified
business model and the growth opportunities we see in our markets,
we will continue to generate strong returns for shareholders, for
the remainder of 2023 and for years to come,” concluded Ng.
FINANCIAL HIGHLIGHTS
Quarter Ended
Quarter Ended
Year-over-Year Change
($ in millions, except per share data)
June 30, 2023
June 30, 2022
$
%
Total Loans
$
49,831
$
46,531
$
3,301
7
%
Total Deposits
55,659
54,343
1,315
2
Total Revenue
$
645
$
551
$
94
17
%
Adj. Pre-tax, Pre-provision Income2
440
370
70
19
Net Income
312
258
54
21
Diluted Earnings per Share
$
2.20
$
1.81
$
0.39
21
%
Return on Average Assets
1.85
%
1.66
%
+19 bps
Return on Average Common Equity
19.43
%
18.23
%
+120 bps
Return on Avg. Tang. Common Equity1
21.01
%
19.94
%
+107 bps
____________________
1
Tangible common equity ratio and return on
average tangible common equity are non-GAAP financial measures. See
reconciliation of GAAP to non-GAAP measures in Table 13.
2
Adjusted pre-tax, pre-provision income is
a non-GAAP financial measure. See reconciliation of GAAP to
non-GAAP measures in Table 12.
BALANCE SHEET
- Total Assets – Total assets reached a record $68.5
billion as of June 30, 2023, an increase of $1.3 billion, or 2%,
from $67.2 billion as of March 31, 2023. Second quarter 2023
average interest-earning assets of $64.1 billion were up $2.6
billion, or 4%, from $61.5 billion in the first quarter of 2023.
Quarter-over-quarter, average loans grew $701.9 million and average
interest-bearing cash and deposits with banks increased $1.8
billion.
- Strong Capital Levels – As of June 30, 2023,
stockholders’ equity was $6.5 billion, or $45.67 per share, both up
2% quarter-over-quarter. The stockholders’ equity to asset ratio
was 9.43% as of June 30, 2023, an increase of five basis points
quarter-over-quarter. As of June 30, 2023, tangible book value3 per
share was $42.33, up 3% quarter-over-quarter. The tangible common
equity ratio3 was 8.80%, an increase of six basis points
quarter-over-quarter. All of East West’s regulatory capital ratios
are well in excess of regulatory requirements for well-capitalized
institutions, as well as above regional and national bank averages.
The common equity tier 1 (“CET1”) capital ratio increased to
13.17%, and the total risk-based capital ratio increased to 14.60%,
as of June 30, 2023.
- Total Loans – Total loans reached a record $49.8 billion
as of June 30, 2023, an increase of $906.3 million, or 2%, from
$48.9 billion as of March 31, 2023. Year-over-year, total loans
grew $3.3 billion, or 7%, from $46.5 billion as of June 30, 2022.
Second quarter 2023 average loans of $48.9 billion grew $701.9
million, or 1.5%, from the first quarter of 2023. Growth in average
residential mortgage and commercial real estate loans was partially
offset by a decrease in average commercial and industrial
loans.
- Total Deposits – Total deposits were $55.7 billion as of
June 30, 2023, an increase of $921.4 million, or 2%, from $54.7
billion as of March 31, 2023. Noninterest-bearing deposits made up
30% of our total deposits as of June 30, 2023, compared with 33% as
of March 31, 2023. Year-over-year, deposits increased $1.3 billion,
or 2%, from $54.3 billion as of June 30, 2022. Second quarter 2023
average deposits of $54.3 billion were down $669.0 million, or 1%,
from the first quarter of 2023. During the second quarter, growth
in average interest-bearing checking and time deposits was offset
by declines in other deposit categories, which largely reflected
customers seeking higher yields in a rising interest rate
environment.
____________________
3
Tangible book value and the tangible
common equity ratio are non-GAAP financial measures. See
reconciliation of GAAP to non-GAAP measures in Table 13.
OPERATING RESULTS
Second Quarter Earnings – Second quarter 2023 net income
was $312.0 million, and diluted earnings per share (“EPS”) were
$2.20. Second quarter 2023 net income and EPS both decreased 3%
from first quarter 2023 net income of $322.4 million and diluted
EPS of $2.27. Second quarter 2023 net income and EPS both increased
21% from second quarter 2022 net income of $258.3 million and
diluted EPS of $1.81.
Net income and diluted EPS for the six months ended June 30,
2023 were $634.5 million and $4.47, an increase of 28% and 29%,
respectively, from the six months ended June 30, 2022.
Second Quarter 2023 Compared to First
Quarter 2023
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $566.7 million, a decrease
of 6% from $599.9 million. Net interest margin (“NIM”) of 3.55%
declined 41 basis points from 3.96%.
- The change in NIM was primarily driven by a higher cost of
interest-bearing deposits and changes in the deposit mix in favor
of higher-cost deposits, partially offset by higher loan volumes
and expanding interest-earning asset yields.
- The average loan yield was 6.33%, up 19 basis points from the
first quarter. The average interest-earning asset yield was 5.67%,
up 16 basis points from the first quarter.
- The average cost of funds was 2.31%, up 62 basis points from
the first quarter. The average cost of deposits was 2.12%, up 52
basis points from the first quarter.
Noninterest Income
Noninterest income totaled $78.6 million in the second quarter,
an increase of $18.7 million, or 31%, from $60.0 million in the
first quarter.
- Fee income was $69.3 million, up $3.0 million, or 5%, from
$66.3 million in the first quarter, reflecting growth across all
fee income categories.
- Interest rate contracts and other derivative income was $7.4
million in the second quarter, up from $2.6 million in the first
quarter. The change reflected both growth in customer-driven
revenue and a favorable change in mark-to-market adjustments.
- Other investment income was $4.0 million for the second
quarter, up $2.1 million from $1.9 million in the first quarter,
reflecting higher income from Community Reinvestment Act
investments during the second quarter.
Noninterest Expense
Noninterest expense totaled $261.8 million in the second
quarter, compared with $218.4 million in the first quarter. Second
quarter noninterest expense consisted of $205.4 million of adjusted
noninterest expense4, $55.9 million in amortization of tax credit
and other investments, and $0.5 million in amortization of core
deposit intangibles.
- Adjusted noninterest expense of $205.4 million increased $1.4
million, or 1%, from $204.0 million in the first quarter.
- Compensation and employee benefits was $124.9 million, a
decrease of $4.7 million or 4%, largely due to higher seasonal
costs in the first quarter.
- Amortization of tax credit and other investments totaled $55.9
million in the second quarter, compared with $10.1 million in the
first quarter. Quarter-over-quarter variability in the amortization
of tax credits and other investments primarily reflects the impact
of investments that close in a given period and are projected to
generate tax credits by the end of the year.
- The efficiency ratio was 40.6% in the second quarter, compared
with 33.1% in the first quarter and the adjusted efficiency ratio4
was 31.8% in the second quarter, compared with 30.5% in the first
quarter.
____________________
4
Adjusted noninterest expense and the
adjusted efficiency ratio are non-GAAP financial measures. See
reconciliation of GAAP to non-GAAP measures in Table 12.
TAX RELATED ITEMS
Second quarter 2023 income tax expense was $45.6 million, and
the effective tax rate was 12.7%, compared with 23.5% for the first
quarter of 2023. The lower effective tax rate was mainly due to an
additional $97 million of tax credits in renewable energy
investments that closed during the second quarter. The effective
tax rate for the first six months of 2023 was 18.6% compared with
22.4% for the first six months of 2022. We currently estimate that
the full year tax rate for 2023 will be approximately 20%.
ASSET QUALITY
The asset quality of our loan portfolio continues to be strong.
Second quarter 2023 provision for credit losses was $26.0 million,
compared with $20.0 million in the first quarter of 2023.
- The allowance for loan losses increased to $635.4 million, or
1.28% of loans held-for-investment (“HFI”), as of June 30, 2023,
compared with $619.9 million, or 1.27% of loans HFI, as of March
31, 2023.
- Second quarter 2023 net charge-offs were $7.5 million or
annualized 0.06% of average loans HFI, compared with $0.6 million
or annualized 0.01% of average loans HFI, for the first quarter of
2023.
- The criticized loans ratio improved 24 basis points
quarter-over-quarter to 1.63% of loans HFI as of June 30, 2023,
compared with 1.87% as of March 31, 2023. Criticized loans
decreased $102.3 million, or 11%, quarter-over-quarter to $811.8
million as of June 30, 2023, compared with $914.1 million as of
March 31, 2023.
- The nonperforming assets ratio was 0.17% of total assets as of
June 30, 2023, compared with 0.14% of total assets as of March 31,
2023. Nonperforming assets increased $22.1 million, or 24%,
quarter-over-quarter to $115.5 million as of June 30, 2023, from
$93.4 million as of March 31, 2023.
CAPITAL STRENGTH
Capital levels for East West are strong and all capital ratios
expanded quarter-over-quarter and year-over-year. The following
table presents the regulatory capital metrics as of June 30, 2023,
March 31, 2023 and June 30, 2022.
EWBC Capital
($ in millions)
June 30, 2023 (a)
March 31, 2023 (a)
June 30, 2022 (a)
Risk-Weighted Assets (“RWA”) (b)
$
51,689
$
50,229
$
48,499
Risk-based capital ratios:
CET1 capital ratio
13.17
%
13.06
%
11.97
%
Tier 1 capital ratio
13.17
%
13.06
%
11.97
%
Total capital ratio
14.60
%
14.50
%
13.25
%
Leverage ratio
10.03
%
10.02
%
9.31
%
Tangible common equity ratio (c)
8.80
%
8.74
%
8.29
%
(a)
The Company has elected to use the 2020
Current Expected Credit Losses (CECL) transition provision in the
calculation of its June 30, 2023, March 31, 2023 and June 30, 2022
regulatory capital ratios. The Company’s June 30, 2023 regulatory
capital ratios and RWA are preliminary.
(b)
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.
(c)
Tangible common equity ratio is a non-GAAP
financial measure. See reconciliation of GAAP to non-GAAP measures
in Table 13.
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared third quarter 2023
dividends for the Company’s common stock. The common stock cash
dividend of $0.48 per share is payable on August 15, 2023, to
stockholders of record on August 1, 2023.
On March 3, 2020, East West’s Board of Directors authorized the
repurchase of up to $500 million of East West’s common stock, of
which $254 million remains available. East West did not repurchase
any shares during the second quarter of 2023.
Conference Call
East West will host a conference call to discuss second quarter
2023 earnings with the public on Thursday, July 20, 2023, at 8:30
a.m. PT/11:30 a.m. ET. The public and investment community are
invited to listen as management discusses second quarter 2023
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 July 20,
2023, at 11:30 a.m. PT/2:30 p.m. ET through August 20, 2023. 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: 5177099.
About East West
East West provides financial services that help customers reach
further and connect to new opportunities. East West Bancorp, Inc.
is a public company (Nasdaq: “EWBC”) with total assets of $68.5
billion. The Company’s wholly-owned subsidiary, East West Bank, is
the largest independent bank headquartered in Southern California,
and operates over 120 locations in the United States and Asia. The
Bank’s markets in the United States include California, Georgia,
Illinois, Massachusetts, Nevada, New York, Texas, and Washington.
For more information on East West, visit www.eastwestbank.com.
Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto)
contain forward-looking statements that are intended to be covered
by the safe harbor for such statements provided by the Private
Securities Litigation Reform Act of 1995. In addition, the Company
may make forward-looking statements in other documents that it
files with, or furnishes to, the U.S. Securities and Exchange
Commission (“SEC”) and management may make forward-looking
statements to analysts, investors, media members and others.
Forward-looking statements are those that do not relate to
historical facts and that are based on current assumptions,
beliefs, estimates, expectations and projections, many of which, by
their nature, are inherently uncertain and beyond the Company’s
control. Forward-looking statements may relate to various matters,
including the Company’s financial condition, results of operations,
plans, objectives, future performance, business or industry, and
usually can be identified by the use of forward-looking words, such
as “anticipates,” “assumes,” “believes,” “can,” “continues,”
“could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,”
“likely,” “may,” “might,” “objective,” “plans,” “potential,”
“projects,” “remains,” “should,” “target,” “trend,” “will,”
“would,” or similar expressions or variations thereof, and the
negative thereof, but these terms are not the exclusive means of
identifying such statements. You should not place undue reliance on
forward-looking statements, as they are subject to risks and
uncertainties, including, but not limited to, those described
below. When considering these forward-looking statements, you
should keep in mind these risks and uncertainties, as well as any
cautionary statements the Company may make.
There are various important factors that could cause future
results to differ materially from historical performance and any
forward-looking statements. Factors that might cause such
differences, include, but are not limited to: changes in the global
economy, including an economic slowdown, capital or financial
market disruption, supply chain disruption, level of inflation,
interest rate environment, housing prices, employment levels, rate
of growth and general business conditions, which could result in,
among other things, reduced demand for loans, reduced availability
of funding or increased funding costs, declines in asset values and
/or recognition of allowance for credit losses; changes in local,
regional and global business, economic and political conditions and
geopolitical events, such as Russia’s invasion of Ukraine; the
soundness of other financial institutions and the impacts related
to or resulting from recent bank failures and other economic and
industry volatility, including potential increased regulatory
requirements, Federal Deposit Insurance Corporation (“FDIC”)
insurance premiums, losses in the value of our investment
portfolio, deposit withdrawals, or other adverse consequences of
negative market perceptions of the banking industry or the Company;
changes in laws or the regulatory environment, including regulatory
reform initiatives and policies of the U.S. Department of the
Treasury, the Board of Governors of the Federal Reserve System
(“Federal Reserve”), the FDIC, the SEC, the Consumer Financial
Protection Bureau (“CFPB”), the California Department of Financial
Protection and Innovation — Division of Financial Institutions, the
China Banking and Insurance Regulatory Commission, the Hong Kong
Monetary Authority, the Hong Kong Securities and Futures
Commission, and the Monetary Authority of Singapore; changes and
effects thereof in trade, monetary and fiscal policies and laws,
including the ongoing trade, economic and political disputes
between the U.S. and the People’s Republic of China and the
monetary policies of the Federal Reserve; changes in the commercial
and consumer real estate markets; changes in consumer or commercial
spending, savings and borrowing habits, and patterns and behaviors;
the impact from potential changes to income tax laws and
regulations, federal spending and economic stimulus programs; the
impact of any future U.S. federal government shutdown and
uncertainty regarding the U.S. federal government’s debt limit and
credit rating; the Company’s ability to compete effectively against
financial institutions and other entities, including as a result of
emerging technologies; the success and timing of the Company’s
business strategies; the Company’s ability to retain key officers
and employees; the impact on the Company’s funding costs, net
interest income and net interest margin from changes in key
variable market interest rates, competition, regulatory
requirements and the Company’s product mix; changes in the
Company’s costs of operation, compliance and expansion; the
Company’s ability to adopt and successfully integrate new
technologies into its business in a strategic manner; the impact of
the benchmark interest rate reform in the U.S. including the
transition away from the U.S. dollar (“USD”) London Interbank
Offered Rate (“LIBOR”) to alternative reference rates; the impact
of communications or technology disruption, failure in, or breach
of, the Company’s operational or security systems or
infrastructure, or those of third party vendors with which 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; the 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; the impact of adverse
changes to the Company’s credit ratings from major credit rating
agencies; the impact of adverse judgments or settlements in
litigation; the impact on the Company’s operations due to political
developments, pandemics, wars, civil unrest, terrorism or other
hostilities that may disrupt or increase volatility in securities
or otherwise affect business and economic conditions; heightened
regulatory and governmental oversight and scrutiny of the Company’s
business practices, including dealings with consumers; the impact
of reputational risk from negative publicity, fines, penalties and
other negative consequences from regulatory violations, legal
actions and the Company’s interactions with business partners,
counterparties, service providers and other third parties; the
impact of regulatory investigations and enforcement actions;
changes in accounting standards as may be required by the Financial
Accounting Standards Board (“FASB”) or other regulatory agencies
and their impact on the Company’s critical accounting policies and
assumptions; the Company’s capital requirements and its ability to
generate capital internally or raise capital on favorable terms;
the impact on the Company’s liquidity due to changes in the
Company’s ability to receive dividends from its subsidiaries; any
strategic acquisitions or divestitures; changes in the equity and
debt securities markets; fluctuations in the Company’s stock price;
fluctuations in foreign currency exchange rates; the impact of
increased focus on social, environmental and sustainability
matters, which may affect the Company’s operations as well as those
of its customers and the economy more broadly; and the impact of
climate change, natural or man-made disasters or calamities, such
as wildfires, droughts, hurricanes, flooding and earthquakes or
other events that may directly or indirectly result in a negative
impact on the Company’s financial performance.
For a more detailed discussion of some of the factors that might
cause such differences, see the Company’s Annual Report on Form
10-K for the year ended December 31, 2022 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. You should
treat forward-looking statements as speaking only as of the date
they are made and based only on information then actually known to
the Company. The Company does not undertake, and specifically
disclaims any obligation to update or revise any forward-looking
statements to reflect the occurrence of events or circumstances
after the date of such statements except as required by law.
EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEET
($ and shares in thousands,
except per share data)
(unaudited)
Table 1
June 30, 2023 % or Basis Point
Change
June 30, 2023
March 31, 2023
June 30, 2022
Qtr-o-Qtr
Yr-o-Yr
Assets
Cash and due from banks
$
614,053
$
760,317
$
688,936
(19.2
)%
(10.9
)%
Interest-bearing cash with banks
5,763,834
5,173,877
1,213,117
11.4
375.1
Cash and cash equivalents
6,377,887
5,934,194
1,902,053
7.5
235.3
Interest-bearing deposits with banks
17,169
10,249
712,709
67.5
(97.6
)
Assets purchased under resale agreements
(“resale agreements”)
635,000
654,288
1,422,794
(2.9
)
(55.4
)
Available-for-sale (“AFS”) debt securities
(amortized cost of $6,820,569, $7,072,240 and $6,891,522)
5,987,258
6,300,868
6,255,504
(5.0
)
(4.3
)
Held-to-maturity (“HTM”) debt securities,
at amortized cost (fair value of $2,440,484, $2,502,674 and
$2,656,549)
2,975,933
2,993,421
3,028,302
(0.6
)
(1.7
)
Loans held-for-sale (“HFS”)
2,830
6,861
28,464
(58.8
)
(90.1
)
Loans held-for-investment (“HFI”) (net of
allowance for loan losses of $635,400, $619,893 and $563,270)
49,192,964
48,298,155
45,938,806
1.9
7.1
Investments in qualified affordable
housing partnerships, tax credit and other investments, net
815,471
741,354
634,304
10.0
28.6
Goodwill
465,697
465,697
465,697
—
—
Operating lease right-of-use assets
100,500
103,114
107,588
(2.5
)
(6.6
)
Other assets
1,961,972
1,736,697
1,898,062
13.0
3.4
Total assets
$
68,532,681
$
67,244,898
$
62,394,283
1.9
%
9.8
%
Liabilities and Stockholders’
Equity
Deposits
$
55,658,786
$
54,737,402
$
54,343,354
1.7
%
2.4
%
Short-term borrowings
4,500,000
4,500,000
—
—
100.0
FHLB advances
—
—
174,776
—
(100.0
)
Assets sold under repurchase agreements
(“repurchase agreements”)
—
—
611,785
—
(100.0
)
Long-term debt and finance lease
liabilities
152,951
152,467
152,663
0.3
0.2
Operating lease liabilities
110,383
112,676
115,387
(2.0
)
(4.3
)
Accrued expenses and other liabilities
1,648,864
1,433,022
1,386,836
15.1
18.9
Total liabilities
62,070,984
60,935,567
56,784,801
1.9
9.3
Stockholders’ equity
6,461,697
6,309,331
5,609,482
2.4
15.2
Total liabilities and stockholders’
equity
$
68,532,681
$
67,244,898
$
62,394,283
1.9
%
9.8
%
Book value per share
$
45.67
$
44.62
$
39.81
2.4
%
14.7
%
Tangible book value (1) per
share
$
42.33
$
41.28
$
36.44
2.6
16.2
Number of common shares at
period-end
141,484
141,396
140,917
0.1
0.4
Total stockholders’ equity to assets
ratio
9.43
%
9.38
%
8.99
%
5
bps
44
bps
Tangible common equity (“TCE”) ratio
(1)
8.80
%
8.74
%
8.29
%
6
bps
51
bps
(1)
Tangible book value and the TCE ratio are
non-GAAP financial measures. See reconciliation of GAAP to non-GAAP
measures in Table 13.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
TOTAL LOANS AND DEPOSITS
DETAIL
($ in thousands)
(unaudited)
Table 2
June 30, 2023 %
Change
June 30, 2023
March 31, 2023
June 30, 2022
Qtr-o-Qtr
Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”)
$
15,670,084
$
15,641,840
$
15,377,117
0.2
%
1.9
%
Commercial real estate (“CRE”):
CRE
14,373,385
14,019,136
13,566,748
2.5
5.9
Multifamily residential
4,764,180
4,682,280
4,443,704
1.7
7.2
Construction and land
781,068
731,394
515,857
6.8
51.4
Total CRE
19,918,633
19,432,810
18,526,309
2.5
7.5
Consumer:
Residential mortgage:
Single-family residential
12,308,613
11,786,998
10,234,473
4.4
20.3
Home equity lines of credit (“HELOCs”)
1,862,928
1,988,881
2,280,080
(6.3
)
(18.3
)
Total residential mortgage
14,171,541
13,775,879
12,514,553
2.9
13.2
Other consumer
68,106
67,519
84,097
0.9
(19.0
)
Total loans HFI (1)
49,828,364
48,918,048
46,502,076
1.9
7.2
Loans HFS
2,830
6,861
28,464
(58.8
)
(90.1
)
Total loans (1)
49,831,194
48,924,909
46,530,540
1.9
7.1
Allowance for loan losses
(635,400
)
(619,893
)
(563,270
)
2.5
12.8
Net loans (1)
$
49,195,794
$
48,305,016
$
45,967,270
1.8
7.0
Deposits:
Noninterest-bearing demand
$
16,741,099
$
18,327,320
$
23,028,831
(8.7
)%
(27.3
)%
Interest-bearing checking
8,348,587
8,742,580
7,094,726
(4.5
)
17.7
Money market
11,486,473
9,293,114
11,814,402
23.6
(2.8
)
Savings
2,102,850
2,280,562
3,027,819
(7.8
)
(30.5
)
Time deposits
16,979,777
16,093,826
9,377,576
5.5
81.1
Total deposits
$
55,658,786
$
54,737,402
$
54,343,354
1.7
%
2.4
%
(1)
Includes $(74.0) million, $(75.4) million
and $(56.2) million of net deferred loan fees and net unamortized
premiums as of June 30, 2023, March 31, 2023 and June 30, 2022,
respectively.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 3
Three Months Ended
June 30, 2023 %
Change
June 30, 2023
March 31, 2023
June 30, 2022
Qtr-o-Qtr
Yr-o-Yr
Interest and dividend income
$
906,134
$
835,506
$
499,754
8.5
%
81.3
%
Interest expense
339,388
235,645
26,802
44.0
NM
Net interest income before provision for
credit losses
566,746
599,861
472,952
(5.5
)
19.8
Provision for credit losses
26,000
20,000
13,500
30.0
92.6
Net interest income after provision for
credit losses
540,746
579,861
459,452
(6.7
)
17.7
Noninterest income
78,631
59,978
78,444
31.1
0.2
Noninterest expense
261,789
218,447
196,860
19.8
33.0
Income before income taxes
357,588
421,392
341,036
(15.1
)
4.9
Income tax expense
45,557
98,953
82,707
(54.0
)
(44.9
)
Net income
$
312,031
$
322,439
$
258,329
(3.2
)%
20.8
%
Earnings per share (“EPS”)
- Basic
$
2.21
$
2.28
$
1.83
(3.5
)%
20.8
%
- Diluted
$
2.20
$
2.27
$
1.81
(3.2
)
21.2
Weighted-average number of shares
outstanding
- Basic
141,468
141,112
141,429
0.3
%
0.0
%
- Diluted
141,876
141,913
142,372
0.0
(0.3
)
Three Months Ended
June 30, 2023 %
Change
June 30, 2023
March 31, 2023
June 30, 2022
Qtr-o-Qtr
Yr-o-Yr
Noninterest income:
Lending fees
$
20,901
$
20,586
$
20,142
1.5
%
3.8
%
Deposit account fees
22,285
21,703
22,372
2.7
(0.4
)
Interest rate contracts and other
derivative income
7,373
2,564
9,801
187.6
(24.8
)
Foreign exchange income
13,251
12,660
11,361
4.7
16.6
Wealth management fees
6,889
6,304
6,539
9.3
5.4
Net (losses) gains on sales of loans
(7
)
(22
)
917
NM
NM
Net realized (losses) gains on AFS debt
securities
—
(10,000
)
28
NM
(100.0
)
Other investment income
4,003
1,921
4,863
108.4
(17.7
)
Other income
3,936
4,262
2,421
(7.6
)
62.6
Total noninterest income
$
78,631
$
59,978
$
78,444
31.1
%
0.2
%
Noninterest expense:
Compensation and employee benefits
$
124,937
$
129,654
$
113,364
(3.6
)%
10.2
%
Occupancy and equipment expense
16,088
15,587
15,469
3.2
4.0
Deposit insurance premiums and regulatory
assessments
8,262
7,910
4,927
4.5
67.7
Deposit account expense
10,559
9,609
5,671
9.9
86.2
Data processing
3,213
3,347
3,486
(4.0
)
(7.8
)
Computer software expense
7,479
7,360
6,572
1.6
13.8
Other operating expense (1)
35,337
34,870
32,392
1.3
9.1
Amortization of tax credit and other
investments
55,914
10,110
14,979
453.1
273.3
Total noninterest expense
$
261,789
$
218,447
$
196,860
19.8
%
33.0
%
NM - Not meaningful.
(1)
Includes $3.9 million of repurchase
agreements’ extinguishment cost for the three months ended March
31, 2023.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENT OF INCOME
($ and shares in thousands,
except per share data)
(unaudited)
Table 4
Six Months Ended
June 30, 2023 %
Change
June 30, 2023
June 30, 2022
Yr-o-Yr
Interest and dividend income
$
1,741,640
$
931,783
86.9%
Interest expense
575,033
43,218
NM
Net interest income before provision for
credit losses
1,166,607
888,565
31.3
Provision for credit losses
46,000
21,500
114.0
Net interest income after provision for
credit losses
1,120,607
867,065
29.2
Noninterest income
138,609
158,187
(12.4)
Noninterest expense
480,236
386,310
24.3
Income before income taxes
778,980
638,942
21.9
Income tax expense
144,510
142,961
1.1
Net income
$
634,470
$
495,981
27.9%
EPS
- Basic
$
4.49
$
3.50
28.3%
- Diluted
$
4.47
$
3.47
28.8
Weighted-average number of shares
outstanding
- Basic
141,291
141,725
(0.3)%
- Diluted
141,910
142,838
(0.6)
Six Months Ended
June 30, 2023 %
Change
June 30, 2023
June 30, 2022
Yr-o-Yr
Noninterest income:
Lending fees
$
41,487
$
39,580
4.8%
Deposit account fees
43,988
42,687
3.0
Interest rate contracts and other
derivative income
9,937
20,934
(52.5)
Foreign exchange income
25,911
24,060
7.7
Wealth management fees
13,193
12,591
4.8
Net (losses) gains on sales of loans
(29
)
3,839
NM
Net realized (losses) gains on AFS debt
securities
(10,000
)
1,306
NM
Other investment income
5,924
6,490
(8.7)
Other income
8,198
6,700
22.4
Total noninterest income
$
138,609
$
158,187
(12.4)%
Noninterest expense:
Compensation and employee benefits
$
254,591
$
229,633
10.9%
Occupancy and equipment expense
31,675
30,933
2.4
Deposit insurance premiums and regulatory
assessments
16,172
9,644
67.7
Deposit account expense
20,168
10,364
94.6
Data processing
6,560
7,151
(8.3)
Computer software expense
14,839
13,866
7.0
Other operating expense (1)
70,207
55,840
25.7
Amortization of tax credit and other
investments
66,024
28,879
128.6
Total noninterest expense
$
480,236
$
386,310
24.3%
(1)
Includes $3.9 million of repurchase
agreements’ extinguishment cost for the six months ended June 30,
2023.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED AVERAGE
BALANCES
($ in thousands)
(unaudited)
Table 5
Three Months Ended
June 30, 2023 %
Change
Six Months Ended
June 30, 2023 %
Change
June 30, 2023
March 31, 2023
June 30, 2022
Qtr-o-Qtr
Yr-o-Yr
June 30, 2023
June 30, 2022
Yr-o-Yr
Loans:
Commercial:
C&I
$
15,244,826
$
15,400,996
$
14,986,876
(1.0)%
1.7%
$
15,322,480
$
14,631,365
4.7%
CRE:
CRE
14,130,811
13,932,758
13,049,058
1.4
8.3
14,032,331
12,666,338
10.8
Multifamily residential
4,685,786
4,600,094
4,112,411
1.9
13.9
4,643,177
3,931,993
18.1
Construction and land
782,541
675,047
475,933
15.9
64.4
729,091
434,657
67.7
Total CRE
19,599,138
19,207,899
17,637,402
2.0
11.1
19,404,599
17,032,988
13.9
Consumer:
Residential mortgage:
Single-family residential
12,014,513
11,417,477
9,624,242
5.2
24.8
11,717,644
9,369,132
25.1
HELOCs
1,928,208
2,050,778
2,290,378
(6.0)
(15.8)
1,989,154
2,237,025
(11.1)
Total residential mortgage
13,942,721
13,468,255
11,914,620
3.5
17.0
13,706,798
11,606,157
18.1
Other consumer
65,035
72,687
87,590
(10.5)
(25.8)
68,840
105,888
(35.0)
Total loans (1)
$
48,851,720
$
48,149,837
$
44,626,488
1.5%
9.5%
$
48,502,717
$
43,376,398
11.8%
Interest-earning assets
$
64,061,569
$
61,483,533
$
58,668,677
4.2%
9.2%
$
62,779,673
$
58,680,456
7.0%
Total assets
$
67,497,367
$
65,113,604
$
62,232,841
3.7%
8.5%
$
66,312,070
$
61,996,756
7.0%
Deposits:
Noninterest-bearing demand
$
16,926,937
$
19,709,980
$
23,887,452
(14.1)%
(29.1)%
$
18,310,770
$
23,661,355
(22.6)%
Interest-bearing checking
8,434,655
6,493,865
6,712,890
29.9
25.6
7,469,621
6,680,657
11.8
Money market
10,433,839
11,260,715
12,319,930
(7.3)
(15.3)
10,844,993
12,614,994
(14.0)
Savings
2,200,124
2,436,587
2,970,007
(9.7)
(25.9)
2,317,702
2,950,268
(21.4)
Time deposits
16,289,320
15,052,762
8,239,571
8.2
97.7
15,674,457
8,170,613
91.8
Total deposits
$
54,284,875
$
54,953,909
$
54,129,850
(1.2)%
0.3%
$
54,617,543
$
54,077,887
1.0%
Interest-bearing liabilities
$
42,026,844
$
36,814,685
$
30,957,475
14.2%
35.8%
$
39,435,162
$
31,087,256
26.9%
Stockholders’ equity
$
6,440,996
$
6,183,324
$
5,682,427
4.2%
13.3%
$
6,312,872
$
5,762,078
9.6%
(1)
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
June 30, 2023
March 31, 2023
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
$
5,247,755
$
60,995
4.66
%
$
3,449,626
$
35,647
4.19
%
Resale agreements
641,939
3,969
2.48
%
688,778
4,503
2.65
%
AFS debt securities
6,257,397
56,292
3.61
%
6,108,825
53,197
3.53
%
HTM debt securities
2,983,780
12,678
1.70
%
2,995,677
12,734
1.72
%
Loans (2)
48,851,720
771,264
6.33
%
48,149,837
728,386
6.14
%
FHLB and FRB stock
78,978
936
4.75
%
90,790
1,039
4.64
%
Total interest-earning assets
$
64,061,569
$
906,134
5.67
%
$
61,483,533
$
835,506
5.51
%
Noninterest-earning assets:
Cash and due from banks
569,227
621,104
Allowance for loan losses
(619,868
)
(602,754
)
Other assets
3,486,439
3,611,721
Total assets
$
67,497,367
$
65,113,604
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
8,434,655
$
49,571
2.36
%
$
6,493,865
$
23,174
1.45
%
Money market deposits
10,433,839
86,419
3.32
%
11,260,715
76,102
2.74
%
Savings deposits
2,200,124
3,963
0.72
%
2,436,587
3,669
0.61
%
Time deposits
16,289,320
147,524
3.63
%
15,052,762
113,849
3.07
%
Federal funds purchased and other
short-term borrowings
4,500,566
49,032
4.37
%
811,551
8,825
4.41
%
FHLB advances
1
—
—
%
500,000
6,430
5.22
%
Repurchase agreements
15,579
211
5.43
%
106,785
1,052
4.00
%
Long-term debt and finance lease
liabilities
152,760
2,668
7.01
%
152,420
2,544
6.77
%
Total interest-bearing
liabilities
$
42,026,844
$
339,388
3.24
%
$
36,814,685
$
235,645
2.60
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
16,926,937
19,709,980
Accrued expenses and other liabilities
2,102,590
2,405,615
Stockholders’ equity
6,440,996
6,183,324
Total liabilities and stockholders’
equity
$
67,497,367
$
65,113,604
Interest rate spread
2.43
%
2.91
%
Net interest income and net interest
margin
$
566,746
3.55
%
$
599,861
3.96
%
(1)
Annualized.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
QUARTER-TO-DATE AVERAGE
BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
Three Months Ended
June 30, 2023
June 30, 2022
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
$
5,247,755
$
60,995
4.66
%
$
2,797,711
$
4,787
0.69
%
Resale agreements
641,939
3,969
2.48
%
1,641,723
8,553
2.09
%
AFS debt securities
6,257,397
56,292
3.61
%
6,503,677
33,438
2.06
%
HTM debt securities
2,983,780
12,678
1.70
%
3,021,239
12,738
1.69
%
Loans (2)
48,851,720
771,264
6.33
%
44,626,488
439,416
3.95
%
FHLB and FRB stock
78,978
936
4.75
%
77,839
822
4.24
%
Total interest-earning assets
$
64,061,569
$
906,134
5.67
%
$
58,668,677
$
499,754
3.42
%
Noninterest-earning assets:
Cash and due from banks
569,227
712,884
Allowance for loan losses
(619,868
)
(545,489
)
Other assets
3,486,439
3,396,769
Total assets
$
67,497,367
$
62,232,841
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
8,434,655
$
49,571
2.36
%
$
6,712,890
$
3,178
0.19
%
Money market deposits
10,433,839
86,419
3.32
%
12,319,930
8,892
0.29
%
Savings deposits
2,200,124
3,963
0.72
%
2,970,007
1,864
0.25
%
Time deposits
16,289,320
147,524
3.63
%
8,239,571
8,554
0.42
%
Federal funds purchased and other
short-term borrowings
4,500,566
49,032
4.37
%
64,145
241
1.51
%
FHLB advances
1
—
—
%
138,960
559
1.61
%
Repurchase agreements
15,579
211
5.43
%
359,778
2,418
2.70
%
Long-term debt and finance lease
liabilities
152,760
2,668
7.01
%
152,194
1,096
2.89
%
Total interest-bearing
liabilities
$
42,026,844
$
339,388
3.24
%
$
30,957,475
$
26,802
0.35
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
16,926,937
23,887,452
Accrued expenses and other liabilities
2,102,590
1,705,487
Stockholders’ equity
6,440,996
5,682,427
Total liabilities and stockholders’
equity
$
67,497,367
$
62,232,841
Interest rate spread
2.43
%
3.07
%
Net interest income and net interest
margin
$
566,746
3.55
%
$
472,952
3.23
%
(1)
Annualized.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES,
YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
Six Months Ended
June 30, 2023
June 30, 2022
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
$
4,353,658
$
96,642
4.48
%
$
3,627,253
$
8,047
0.45
%
Resale agreements
665,229
8,472
2.57
%
1,868,600
16,936
1.83
%
AFS debt securities
6,183,522
109,489
3.57
%
7,232,686
67,907
1.89
%
HTM debt securities
2,989,695
25,412
1.71
%
2,497,811
20,936
1.69
%
Loans (2)
48,502,717
1,499,650
6.24
%
43,376,398
816,526
3.80
%
FHLB and FRB stock
84,852
1,975
4.69
%
77,708
1,431
3.71
%
Total interest-earning assets
$
62,779,673
$
1,741,640
5.59
%
$
58,680,456
$
931,783
3.20
%
Noninterest-earning assets:
Cash and due from banks
595,022
677,579
Allowance for loan losses
(611,358
)
(544,423
)
Other assets
3,548,733
3,183,144
Total assets
$
66,312,070
$
61,996,756
Liabilities and Stockholders’
Equity
Interest-bearing liabilities:
Checking deposits
$
7,469,621
$
72,745
1.96
%
$
6,680,657
$
4,580
0.14
%
Money market deposits
10,844,992
162,521
3.02
%
12,614,994
12,095
0.19
%
Savings deposits
2,317,702
7,632
0.66
%
2,950,268
3,568
0.24
%
Time deposits
15,674,457
261,373
3.36
%
8,170,613
15,234
0.38
%
Federal funds purchased and other
short-term borrowings
2,666,249
57,857
4.38
%
33,177
250
1.52
%
FHLB advances
248,619
6,430
5.22
%
149,431
1,137
1.53
%
Repurchase agreements
60,931
1,263
4.18
%
336,013
4,434
2.66
%
Long-term debt and finance lease
liabilities
152,591
5,212
6.89
%
152,103
1,920
2.55
%
Total interest-bearing
liabilities
$
39,435,162
$
575,033
2.94
%
$
31,087,256
$
43,218
0.28
%
Noninterest-bearing liabilities and
stockholders’ equity:
Demand deposits
18,310,770
23,661,355
Accrued expenses and other liabilities
2,253,266
1,486,067
Stockholders’ equity
6,312,872
5,762,078
Total liabilities and stockholders’
equity
$
66,312,070
$
61,996,756
Interest rate spread
2.65
%
2.92
%
Net interest income and net interest
margin
$
1,166,607
3.75
%
$
888,565
3.05
%
(1)
Annualized.
(2)
Includes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
Three Months Ended (1)
June 30, 2023 Basis
Point Change
June 30, 2023
March 31, 2023
June 30, 2022
Qtr-o-Qtr
Yr-o-Yr
Return on average assets
1.85
%
2.01
%
1.66
%
(16
)
bps
19
bps
Adjusted return on average assets (2)
1.85
%
2.05
%
1.66
%
(20
)
19
Return on average common equity
19.43
%
21.15
%
18.23
%
(172
)
120
Adjusted return on average common equity
(2)
19.43
%
21.61
%
18.23
%
(218
)
120
Return on average TCE (3)
21.01
%
22.94
%
19.94
%
(193
)
107
Adjusted return on average TCE (3)
21.01
%
23.44
%
19.94
%
(243
)
107
Interest rate spread
2.43
%
2.91
%
3.07
%
(48
)
(64
)
Net interest margin
3.55
%
3.96
%
3.23
%
(41
)
32
Average loan yield
6.33
%
6.14
%
3.95
%
19
238
Yield on average interest-earning
assets
5.67
%
5.51
%
3.42
%
16
225
Average cost of interest-bearing
deposits
3.09
%
2.49
%
0.30
%
60
279
Average cost of deposits
2.12
%
1.60
%
0.17
%
52
195
Average cost of funds
2.31
%
1.69
%
0.20
%
62
211
Adjusted pre-tax, pre-provision
profitability ratio (4)
2.61
%
2.90
%
2.38
%
(29
)
23
Adjusted noninterest expense/average
assets (4)
1.22
%
1.27
%
1.17
%
(5
)
5
Efficiency ratio
40.56
%
33.11
%
35.70
%
745
486
Adjusted efficiency ratio (4)
31.83
%
30.46
%
32.90
%
137
bps
(107
)
bps
Six Months Ended (1)
June 30, 2023 Basis
Point Change
June 30, 2023
June 30, 2022
Yr-o-Yr
Return on average assets
1.93
%
1.61
%
32
bps
Adjusted return on average assets (2)
1.95
%
1.61
%
34
Return on average common equity
20.27
%
17.36
%
291
Adjusted return on average common equity
(2)
20.49
%
17.36
%
313
Return on average TCE (3)
21.95
%
18.96
%
299
Adjusted return on average TCE (3)
22.19
%
18.96
%
323
Interest rate spread
2.65
%
2.92
%
(27
)
Net interest margin
3.75
%
3.05
%
70
Average loan yield
6.24
%
3.80
%
244
Yield on average interest-earning
assets
5.59
%
3.20
%
239
Average cost of interest-bearing
deposits
2.80
%
0.24
%
256
Average cost of deposits
1.86
%
0.13
%
173
Average cost of funds
2.01
%
0.16
%
185
Adjusted pre-tax, pre-provision
profitability ratio (4)
2.75
%
2.25
%
50
Adjusted noninterest expense/average
assets (4)
1.25
%
1.16
%
9
Efficiency ratio
36.79
%
36.91
%
(12
)
Adjusted efficiency ratio (4)
31.13
%
34.05
%
(292
)
bps
(1)
Annualized except for efficiency
ratio.
(2)
Adjusted return on average assets and
adjusted return on average common equity are non-GAAP financial
measures. See reconciliation of GAAP to non-GAAP measures in Table
14.
(3)
Return on average TCE and adjusted return
on average TCE are non-GAAP financial measures. See reconciliation
of GAAP to non-GAAP measures in Table 13.
(4)
Adjusted pre-tax, pre-provision
profitability ratio, adjusted noninterest expense/average assets
and the adjusted efficiency ratio are non-GAAP financial measures.
See reconciliation of GAAP to non-GAAP measures in Table 12.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10
Three Months Ended June 30,
2023
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, March 31,
2023
$
376,325
$
188,915
$
52,978
$
1,675
$
619,893
Provision for (reversal of) credit losses
on loans
(a)
5,259
16,076
3,057
(367
)
24,025
Gross charge-offs
(7,335
)
(2,366
)
(6
)
(48
)
(9,755
)
Gross recoveries
2,065
143
10
—
2,218
Total net (charge-offs) recoveries
(5,270
)
(2,223
)
4
(48
)
(7,537
)
Foreign currency translation
adjustment
(981
)
—
—
—
(981
)
Allowance for loan losses, June 30,
2023
$
375,333
$
202,768
$
56,039
$
1,260
$
635,400
Three Months Ended March 31,
2023
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, December 31,
2022
$
371,700
$
182,346
$
40,039
$
1,560
$
595,645
Impact of ASU 2022-02 adoption
5,683
343
2
—
6,028
Allowance for loan losses, January 1,
2023
$
377,383
$
182,689
$
40,041
$
1,560
$
601,673
(Reversal of) provision for credit losses
on loans
(a)
(678
)
6,021
13,022
155
18,520
Gross charge-offs
(1,900
)
(6
)
(91
)
(40
)
(2,037
)
Gross recoveries
1,211
211
6
—
1,428
Total net (charge-offs) recoveries
(689
)
205
(85
)
(40
)
(609
)
Foreign currency translation
adjustment
309
—
—
—
309
Allowance for loan losses, March 31,
2023
$
376,325
$
188,915
$
52,978
$
1,675
$
619,893
Three Months Ended June 30,
2022
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, March 31,
2022
$
339,446
$
182,296
$
21,958
$
1,985
$
545,685
Provision for (reversal of) credit losses
on loans
(a)
19,030
(9,181
)
3,122
(502
)
12,469
Gross charge-offs
(240
)
(679
)
(193
)
(34
)
(1,146
)
Gross recoveries
6,514
1,043
173
—
7,730
Total net recoveries (charge-offs)
6,274
364
(20
)
(34
)
6,584
Foreign currency translation
adjustment
(1,468
)
—
—
—
(1,468
)
Allowance for loan losses, June 30,
2022
$
363,282
$
173,479
$
25,060
$
1,449
$
563,270
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES
& OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
Six Months Ended June 30,
2023
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, December 31,
2022
$
371,700
$
182,346
$
40,039
$
1,560
$
595,645
Impact of ASU 2022-02 adoption
5,683
343
2
—
6,028
Allowance for loan losses, January 1,
2023
$
377,383
$
182,689
$
40,041
$
1,560
$
601,673
Provision for (reversal of) credit losses
on loans
(a)
4,581
22,097
16,079
(212
)
42,545
Gross charge-offs
(9,235
)
(2,372
)
(97
)
(88
)
(11,792
)
Gross recoveries
3,276
354
16
—
3,646
Total net charge-offs
(5,959
)
(2,018
)
(81
)
(88
)
(8,146
)
Foreign currency translation
adjustment
(672
)
—
—
—
(672
)
Allowance for loan losses, June 30,
2023
$
375,333
$
202,768
$
56,039
$
1,260
$
635,400
Six Months Ended June 30,
2022
Commercial
Consumer
C&I
Total CRE
Total Residential
Mortgage
Other Consumer
Total
Allowance for loan losses, December 31,
2021
$
338,252
$
180,808
$
20,595
$
1,924
$
541,579
Provision for (reversal of) credit losses
on loans
(a)
28,292
(7,523
)
4,347
(395
)
24,721
Gross charge-offs
(11,428
)
(1,078
)
(193
)
(80
)
(12,779
)
Gross recoveries
9,516
1,272
311
—
11,099
Total net (charge-offs) recoveries
(1,912
)
194
118
(80
)
(1,680
)
Foreign currency translation
adjustment
(1,350
)
—
—
—
(1,350
)
Allowance for loan losses, June 30,
2022
$
363,282
$
173,479
$
25,060
$
1,449
$
563,270
Three Months Ended
Six Months Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Unfunded Credit Facilities
Allowance for unfunded credit
commitments, beginning of period (1)
$
27,741
$
26,264
$
23,262
$
26,264
$
27,514
Provision for (reversal of) credit losses
on unfunded credit commitments
(b)
1,975
1,480
1,031
3,455
(3,221
)
Foreign currency translation
adjustment
12
(3
)
11
9
11
Allowance for unfunded credit
commitments, end of period (1)
$
29,728
$
27,741
$
24,304
$
29,728
$
24,304
Provision for credit losses
(a)+(b)
$
26,000
$
20,000
$
13,500
$
46,000
$
21,500
(1)
Included in Accrued expenses and other
liabilities on the Condensed Consolidated Balance Sheet.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
CRITICIZED LOANS,
NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS
($ in thousands)
(unaudited)
Table 11
Criticized Loans
June 30, 2023
March 31, 2023
June 30, 2022
Special mention loans
$
330,741
$
461,356
$
590,227
Classified loans
481,051
452,715
432,414
Total criticized loans (1)
$
811,792
$
914,071
$
1,022,641
Nonperforming Assets
June 30, 2023
March 31, 2023
June 30, 2022
Nonaccrual loans:
Commercial:
C&I
$
61,879
$
43,747
$
40,053
Total CRE
20,598
19,427
12,742
Consumer:
Total residential mortgage
33,032
29,585
37,129
Other consumer
24
366
11
Total nonaccrual loans
115,533
93,125
89,935
Other real estate owned, net
—
270
—
Total nonperforming assets
$
115,533
$
93,395
$
89,935
Credit Quality Ratios
June 30, 2023
March 31, 2023
June 30, 2022
Annualized quarterly net charge-offs
(recoveries) to average loans HFI
0.06
%
0.01
%
(0.06
)%
Special mention loans to loans HFI
0.66
%
0.94
%
1.27
%
Classified loans to loans HFI
0.97
%
0.93
%
0.93
%
Criticized loans to loans HFI
1.63
%
1.87
%
2.20
%
Nonperforming assets to total assets
0.17
%
0.14
%
0.14
%
Nonaccrual loans to loans HFI
0.23
%
0.19
%
0.19
%
Allowance for loan losses to loans HFI
1.28
%
1.27
%
1.21
%
(1)
Excludes loans HFS.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 12
The Company uses certain non-GAAP
financial measures to provide supplemental information regarding
the Company’s performance. Adjusted efficiency ratio represents
adjusted noninterest expense divided by adjusted revenue. Adjusted
pre-tax, pre-provision profitability ratio represents total
adjusted revenue less adjusted noninterest expense, divided by
average total assets. Adjusted revenue excludes the write-off of an
AFS debt security (where applicable). Adjusted noninterest expense
excludes the amortization of tax credit and other investments, the
amortization of core deposit intangibles and the repurchase
agreements’ extinguishment cost (where applicable). 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
Six Months Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net interest income before provision for
credit losses
(a)
$
566,746
$
599,861
$
472,952
$
1,166,607
$
888,565
Total noninterest income
78,631
59,978
78,444
138,609
158,187
Total revenue
(b)
$
645,377
$
659,839
$
551,396
$
1,305,216
$
1,046,752
Noninterest income
78,631
59,978
78,444
138,609
158,187
Add: Write-off of AFS debt security
—
10,000
—
10,000
—
Adjusted noninterest income
(c)
78,631
69,978
78,444
148,609
158,187
Adjusted revenue
(a)+(c) = (d)
$
645,377
$
669,839
$
551,396
$
1,315,216
$
1,046,752
Total noninterest expense
(e)
$
261,789
$
218,447
$
196,860
$
480,236
$
386,310
Less: Amortization of tax credit and other
investments
(55,914
)
(10,110
)
(14,979
)
(66,024
)
(28,879
)
Amortization of core deposit
intangibles
(440
)
(441
)
(488
)
(881
)
(999
)
Repurchase agreements’ extinguishment
cost
—
(3,872
)
—
(3,872
)
—
Adjusted noninterest expense
(f)
$
205,435
$
204,024
$
181,393
$
409,459
$
356,432
Efficiency ratio
(e)/(b)
40.56
%
33.11
%
35.70
%
36.79
%
36.91
%
Adjusted efficiency ratio
(f)/(d)
31.83
%
30.46
%
32.90
%
31.13
%
34.05
%
Adjusted pre-tax, pre-provision
income
(d)-(f) = (g)
$
439,942
$
465,815
$
370,003
$
905,757
$
690,320
Average total assets
(h)
$
67,497,367
$
65,113,604
$
62,232,841
$
66,312,070
$
61,996,756
Adjusted pre-tax, pre-provision
profitability ratio (1)
(g)/(h)
2.61
%
2.90
%
2.38
%
2.75
%
2.25
%
Adjusted noninterest expense/average
assets (1)
(f)/(h)
1.22
%
1.27
%
1.17
%
1.25
%
1.16
%
(1)
Annualized.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ in thousands)
(unaudited)
Table 13
The Company uses certain non-GAAP
financial measures to provide supplemental information regarding
the Company’s performance. Tangible book value, tangible book value
per share and TCE ratio are non-GAAP financial measures. Tangible
book value 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.
June 30, 2023
March 31, 2023
June 30, 2022
Stockholders’ equity
(a)
$
6,461,697
$
6,309,331
$
5,609,482
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(6,418
)
(7,201
)
(8,537
)
Tangible book value
(b)
$
5,989,582
$
5,836,433
$
5,135,248
Number of common shares at
period-end
(c)
141,484
141,396
140,917
Book value per share
(a)/(c)
$
45.67
$
44.62
$
39.81
Tangible book value per share
(b)/(c)
$
42.33
$
41.28
$
36.44
Total assets
(d)
$
68,532,681
$
67,244,898
$
62,394,283
Less: Goodwill
(465,697
)
(465,697
)
(465,697
)
Other intangible assets (1)
(6,418
)
(7,201
)
(8,537
)
Tangible assets
(e)
$
68,060,566
$
66,772,000
$
61,920,049
Total stockholders’ equity to assets
ratio
(a)/(d)
9.43
%
9.38
%
8.99
%
TCE ratio
(b)/(e)
8.80
%
8.74
%
8.29
%
Return on average TCE represents tangible
net income divided by average tangible book value. Adjusted return
on average TCE represents adjusted tangible net income divided by
average tangible book value. Tangible net income excludes the
after-tax impacts of the amortization of core deposit intangibles
and mortgage servicing assets. Adjusted tangible net income
excludes the after-tax impacts of the tangible net income
adjustments and the write-off of an AFS debt security. 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
Six Months Ended
June 30, 2023
March 31, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
(e)
$
312,031
$
322,439
$
258,329
$
634,470
$
495,981
Add: Amortization of core deposit
intangibles
440
441
488
881
999
Amortization of mortgage servicing
assets
342
356
364
698
756
Tax effect of amortization adjustments
(2)
(230
)
(233
)
(245
)
(463
)
(505
)
Tangible net income
(f)
$
312,583
$
323,003
$
258,936
$
635,586
$
497,231
Add: Write-off of AFS debt security
—
10,000
—
10,000
—
Tax effect of write-off (2)
—
(2,929
)
—
(2,929
)
—
Adjusted tangible net income
(g)
$
312,583
$
330,074
$
258,936
$
642,657
$
497,231
Average stockholders’ equity
(h)
$
6,440,996
$
6,183,324
$
5,682,427
$
6,312,872
$
5,762,078
Less: Average goodwill
(465,697
)
(465,697
)
(465,697
)
(465,697
)
(465,697
)
Average other intangible assets (1)
(6,921
)
(7,696
)
(8,827
)
(7,306
)
(9,016
)
Average tangible book value
(i)
$
5,968,378
$
5,709,931
$
5,207,903
$
5,839,869
$
5,287,365
Return on average common equity
(3)
(e)/(h)
19.43
%
21.15
%
18.23
%
20.27
%
17.36
%
Return on average TCE (3)
(f)/(i)
21.01
%
22.94
%
19.94
%
21.95
%
18.96
%
Adjusted return on average TCE
(3)
(g)/(i)
21.01
%
23.44
%
19.94
%
22.19
%
18.96
%
(1)
Includes core deposit intangibles and
mortgage servicing assets.
(2)
Applied statutory tax rate of 29.29% for
the three and six months ended June 30, 2023, and the three months
ended March 31, 2023. Applied statutory tax rate of 28.77% for the
three and six months ended June 30, 2022.
(3)
Annualized.
EAST WEST BANCORP, INC. AND
SUBSIDIARIES
GAAP TO NON-GAAP
RECONCILIATION
($ and shares in thousands,
except for per share data)
(unaudited)
Table 14
During the first quarter of 2023, the
Company recorded a $10.0 million pre-tax impairment write-off of an
AFS debt security. 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 common equity that adjust for the above discussed
non-recurring item provide clarity to financial statement users
regarding the ongoing performance of the Company and allows
comparability to prior periods.
Three Months Ended
June 30, 2023
March 31, 2023
June 30, 2022
Net income
(a)
$
312,031
$
322,439
$
258,329
Add: Write-off of AFS debt security
—
10,000
—
Tax effect of write-off (1)
—
(2,929
)
—
Adjusted net income
(b)
$
312,031
$
329,510
$
258,329
Diluted weighted-average number of
shares outstanding
141,876
141,913
142,372
Diluted EPS
$
2.20
$
2.27
$
1.81
Add: Write-off of AFS debt security
—
0.05
—
Adjusted diluted EPS
$
2.20
$
2.32
$
1.81
Average total assets
(c)
$
67,497,367
$
65,113,604
$
62,232,841
Average stockholders’ equity
(d)
$
6,440,996
$
6,183,324
$
5,682,427
Return on average assets (2)
(a)/(c)
1.85
%
2.01
%
1.66
%
Adjusted return on average assets
(2)
(b)/(c)
1.85
%
2.05
%
1.66
%
Return on average common equity
(2)
(a)/(d)
19.43
%
21.15
%
18.23
%
Adjusted return on average common
equity (2)
(b)/(d)
19.43
%
21.61
%
18.23
%
Six Months Ended
June 30, 2023
June 30, 2022
Net income
(e)
634,470
$
495,981
Add: Write-off of AFS debt security
10,000
—
Tax effect of write-off (1)
(2,929
)
—
Adjusted net income
(f)
$
641,541
$
495,981
Diluted weighted-average number of
shares outstanding
141,910
142,838
Diluted EPS
$
4.47
$
3.47
Add: Write-off of AFS debt security
0.05
—
Adjusted diluted EPS
$
4.52
$
3.47
Average total assets
(g)
$
66,312,070
$
61,996,756
Average stockholders’ equity
(h)
$
6,312,872
$
5,762,078
Return on average assets (2)
(e)/(g)
1.93
%
1.61
%
Adjusted return on average assets
(2)
(f)/(g)
1.95
%
1.61
%
Return on average common equity
(2)
(e)/(h)
20.27
%
17.36
%
Adjusted return on average common
equity (2)
(f)/(h)
20.49
%
17.36
%
(1)
Applied statutory tax rate of 29.29% for
the three months ended March 31, 2023 and the six months ended June
30, 2023.
(2)
Annualized.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230720462409/en/
FOR INVESTOR INQUIRIES, CONTACT: Irene Oh Chief Financial
Officer T: (626) 768-6360 E: irene.oh@eastwestbank.com
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