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East West Bancorp Reports Net Income for Third Quarter 2022 of $295 Million and Diluted Earnings Per Share of $2.08; Record Net Interest Income of $552 Million

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, reported its financial results for the third quarter of 2022. Third quarter 2022 net income was $295.3 million, or $2.08 per diluted share; diluted earnings per share grew 58% linked quarter annualized and 32% year-over-year.

“This was another quarter of outstanding results. Net interest income increased to a record $552 million, up 66% linked quarter annualized, and our net interest margin expanded an impressive 45 basis points quarter-over-quarter to 3.68%,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Our efficiency improved, expanding all profitability ratios. For the third quarter of 2022, we returned 1.9% on average assets and 20.3% on average equity.”

“Total loans reached a record $47.5 billion as of September 30, 2022, up 8% linked quarter annualized, with growth across all our major loan categories. Asset quality continued to be healthy, with very low charge-offs and criticized loans decreasing 11% from June 30, 2022.”

“All our capital ratios expanded in the third quarter of 2022, driven by the strength of our earnings growth. We ended the quarter with a common equity tier 1 ratio of 12.3% and a tangible common equity ratio1 of 8.35%,” continued Ng.

“With our industry-leading operating margins and strong capital, we are well positioned to navigate the changing economic conditions, and help our customers prosper and maximize personal and business opportunities. We are looking forward to finishing 2022 on a high note and entering 2023 with strength and confidence,” concluded Ng.

FINANCIAL HIGHLIGHTS

 

Three Months Ended

 

Qtr-o-Qtr Change

 

Yr-o-Yr Change

($ in millions, except per share data)

September 30, 2022

 

$

%

 

$

%

Total Loans

$

47,457

 

$

926

 

2

%

 

$

6,975

17

%

Total Deposits

 

53,857

 

 

(486

)

(1

)

 

 

501

1

 

Total Revenue

$

627

 

$

76

 

14

%

 

$

159

34

%

Adj. Pre-tax Pre-provision Income2

 

432

 

 

62

 

17

 

 

 

130

43

 

Net Income

 

295

 

 

37

 

14

 

 

 

70

31

 

Diluted Earnings per Share

$

2.08

 

$

0.27

 

15

%

 

$

0.50

32

%

____________________

1

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

2

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

BALANCE SHEET

  • Record Assets – Total assets reached $62.6 billion as of September 30, 2022, up $181.8 million, or 0.3% (1% annualized), from $62.4 billion as of June 30, 2022. Year-over-year, total assets grew $1.6 billion, or 3%, from $61.0 billion as of September 30, 2021.



    Third quarter 2022 average interest-earning assets of $59.5 billion were up $810.0 million, or 1% (5% annualized), from $58.7 billion in the second quarter of 2022. Quarter-over-quarter, average loan growth of $2.2 billion was partially offset by declines in other, lower yielding interest-earning assets.
  • Record Loans – Total loans reached $47.5 billion as of September 30, 2022, an increase of $926.2 million, or 2% (8% annualized), from $46.5 billion as of June 30, 2022. Year-over-year, total loans grew $7.0 billion, or 17%, from $40.5 billion as of September 30, 2021.



    Third quarter 2022 average loans of $46.9 billion grew $2.2 billion, or 5% (20% linked quarter annualized), with solid growth spread across all our major loan categories, led by residential mortgage and commercial real estate loans.
  • Total Deposits – Total deposits were $53.9 billion as of September 30, 2022, a decrease of $0.5 billion, or 1% (4% annualized), from $54.3 billion as of June 30, 2022. Year-over-year, deposits grew $0.5 billion, or 1%, from $53.4 billion as of September 30, 2021.



    Third quarter 2022 average deposits of $54.1 billion decreased $78.3 million, essentially unchanged from the second quarter. Quarter-over-quarter, growth in average time deposits, interest-bearing checking and money market accounts was offset by a decrease in average noninterest-bearing demand deposits. Average noninterest-bearing deposits made up 41% of average total deposits in the third quarter of 2022, compared with 44% in the second quarter of 2022 and 43% in the third quarter of 2021.
  • Strong Capital Levels – As of September 30, 2022, stockholders’ equity was $5.7 billion, or $40.17 per common share, and tangible equity3 per common share was $36.80; each increasing 1% (4% annualized) quarter-over-quarter. As of September 30, 2022, the tangible equity to tangible assets ratio was 8.35%, an increase of six basis points quarter-over-quarter. The common equity tier 1 (“CET1”) capital ratio was 12.3%, and the total risk-based capital ratio was 13.6% as of September 30, 2022.

____________________

3

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

OPERATING RESULTS

Third Quarter Earnings – Third quarter 2022 net income was $295.3 million, an increase of 14%, or 57% annualized, from $258.3 million for the second quarter of 2022, and an increase of 31% from $225.4 million for the third quarter of 2021. Third quarter 2022 diluted earnings per share were $2.08, an increase of 15%, or 58% annualized, from $1.81 per diluted share for the second quarter 2022, and an increase of 32% from $1.57 per diluted share for the year-ago quarter.

Third Quarter 2022 Compared to Second Quarter 2022

Net Interest Income and Net Interest Margin

Record net interest income (“NII”) totaled $551.8 million, an increase of 17%, or 66% annualized, from $473.0 million. Net interest margin (“NIM”) of 3.68% expanded 45 basis points from 3.23%.

  • NII growth and NIM expansion were driven by expanding earning asset yields and loan growth, partially offset by an increase in the cost of funds.
  • The average loan yield was 4.75%, up 80 basis points from the second quarter. The average interest-earning asset yield was 4.19%, up 77 basis points from the second quarter. Average loans made up 79% of average interest-earning assets in the third quarter of 2022, compared with 76% in the second quarter of 2022.
  • The average cost of funds was 0.55%, up 35 basis points from the second quarter. The average cost of deposits was 0.51%, up 34 basis points, and the average cost of interest-bearing deposits was 0.86%, up 56 basis points from the second quarter.
  • The changes in yields and rates reflected rising benchmark interest rates.

Noninterest Income

Noninterest income totaled $75.6 million in the third quarter, a decrease of $2.9 million, or 4%, from $78.4 million in the second quarter.

  • Fee income and net gains on sales of loans were $69.0 million, an increase of $4.2 million, or 7% (26% annualized), from $64.8 million in the second quarter. Growth in wealth management fees, deposit account fees and gains on sale of SBA loans was partially offset by decreased foreign exchange income.

Noninterest Expense

Noninterest expense totaled $216.0 million in the third quarter, compared with $196.9 million in the second quarter. Third quarter noninterest expense consisted of $195.6 million of adjusted noninterest expense4, $19.9 million in amortization of tax credit and other investments, and $0.5 million in amortization of core deposit intangibles.

  • Adjusted noninterest expense of $195.6 million increased $14.2 million, or 8%, from $181.4 million in the second quarter, driven by higher compensation and employee benefits.
  • Amortization of tax credit and other investments totaled $19.9 million in the third quarter, compared with $15.0 million in the second quarter. Quarter-over-quarter variability in the amortization of tax credits and other investments partially reflects the impact of investments that close in a given period.
  • The adjusted efficiency ratio4 was 31.2% in the third quarter, compared with 32.9% in the second quarter.

____________________

4

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

TAX RELATED ITEMS

Third quarter 2022 income tax expense was $89.0 million compared with income tax expense of $82.7 million for the second quarter of 2022. The year-to-date effective tax rate for the first nine months of 2022 was 22.7%.

ASSET QUALITY

The asset quality of our loan portfolio continued to be solid and stable.

  • Criticized loans decreased $117.4 million, or 11%, quarter-over-quarter to $905.2 million as of September 30, 2022, down from $1,022.6 million as of June 30, 2022. Special mention loans decreased 20% quarter-over-quarter to $471.0 million, and classified loans were essentially unchanged at $434.2 million.
  • The criticized loans ratio decreased 29 basis points quarter-over-quarter to 1.91% of loans held-for-investment (“HFI”) as of September 30, 2022, down from 2.20% as of June 30, 2022. The special mention loans ratio decreased 28 basis points quarter-over-quarter to 0.99%, and the classified loans ratio decreased one basis point to 0.92%.
  • As of September 30, 2022, nonperforming assets were $97.0 million, or 0.16% of total assets, compared with $89.9 million, or 0.14% of total assets, as of June 30, 2022.
  • Third quarter 2022 net charge-offs were $6.6 million, or annualized 0.06% of average loans HFI, compared with net recoveries of $6.6 million, or annualized 0.06% of average loans HFI, for the second quarter of 2022.
  • The allowance for loan losses totaled $582.5 million, or 1.23% of loans HFI, as of September 30, 2022, compared with $563.3 million, or 1.21% of loans HFI, as of June 30, 2022. The quarter-over-quarter build in the allowance coverage largely reflects the current macroeconomic outlook and loan growth during the quarter.

Provision for credit losses was $27.0 million for the third quarter of 2022, compared with $13.5 million for the second quarter of 2022.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital metrics as of September 30, 2022, June 30, 2022 and September 30, 2021.

EWBC Risk-Based Capital Ratios

($ in millions)

 

September 30, 2022 (a)

 

June 30, 2022 (a)

 

September 30, 2021 (a)

 

CET1 capital ratio

 

 

12.3

%

 

 

12.0

%

 

 

12.8

%

 

Tier 1 capital ratio

 

 

12.3

%

 

 

12.0

%

 

 

12.8

%

 

Total capital ratio

 

 

13.6

%

 

 

13.2

%

 

 

14.2

%

 

Leverage ratio

 

 

9.6

%

 

 

9.3

%

 

 

8.8

%

 

Risk-Weighted Assets (“RWA”) (b)

 

$

49,254

 

 

$

48,499

 

 

$

42,128

 

 

(a)

The Company has elected to use the 2020 CECL transition provision in the calculation of its September 30, 2022, June 30, 2022 and September 30, 2021 regulatory capital ratios. The Company’s September 30, 2022 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.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared fourth quarter 2022 dividends for the Company’s common stock. The common stock cash dividend of $0.40 per share is payable on November 15, 2022, to stockholders of record on November 1, 2022.

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 third quarter of 2022.

Conference Call

East West will host a conference call to discuss third quarter 2022 earnings with the public on Thursday, October 20, 2022, 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 2022 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 20, 2022, at 11:30 a.m. PT/2:30 p.m. ET through November 20, 2022. 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: 3874614.

About East West

East West Bancorp, Inc. is a public company with total assets of $62.6 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is the largest independent bank headquartered in Southern California, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, Illinois, Massachusetts, Nevada, New York, Texas and Washington. In China, East West’s presence includes full-service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (“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 expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. These statements may relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business and usually can be identified by the use of forward-looking language, 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, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described 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. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and 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, market or supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; changes in local, regional and global business, economic and political conditions and geopolitical events; the economic, financial, reputational and other impacts of the ongoing Coronavirus Disease 2019 (“COVID-19”) pandemic, including variants thereof, and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 pandemic; 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 Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the California Department of Financial Protection and Innovation – Division of Financial Institutions; changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing 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; fluctuations in the Company’s stock price; the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs; the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies; the soundness of other financial institutions; the success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; 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; 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 or other regulatory agencies and their impact on 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 future strategic acquisitions or divestitures; changes in the equity and debt securities markets; 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; significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for loans, a reduction in the availability of funding or increases in funding costs, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s debt securities and equity securities portfolio; and the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

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

(unaudited)

Table 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2022

% or Basis Point Change

 

September 30,

2022

June 30,

2022

September 30,

2021

Qtr-o-Qtr

Yr-o-Yr

Assets

 

 

 

 

 

Cash and due from banks

$

554,260

 

$

688,936

 

$

594,631

 

(19.5

)%

(6.8

)%

Interest-bearing cash with banks

 

1,609,093

 

 

1,213,117

 

 

4,258,270

 

32.6

 

(62.2

)

Cash and cash equivalents

 

2,163,353

 

 

1,902,053

 

 

4,852,901

 

13.7

 

(55.4

)

Interest-bearing deposits with banks

 

630,543

 

 

712,709

 

 

855,162

 

(11.5

)

(26.3

)

Assets purchased under resale agreements (“resale agreements”)

 

892,986

 

 

1,422,794

 

 

2,596,142

 

(37.2

)

(65.6

)

Available-for-sale (“AFS”) debt securities (amortized cost of $6,771,354, $6,891,522 and $9,783,180)

 

5,906,090

 

 

6,255,504

 

 

9,713,006

 

(5.6

)

(39.2

)

Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,459,135 and $2,656,549 in 2022)

 

3,012,667

 

 

3,028,302

 

 

 

(0.5

)

100.0

 

Loans held-for-sale (“HFS”)

 

14,500

 

 

28,464

 

 

 

(49.1

)

100.0

 

Loans held-for-investment (''HFI'') (net of allowance for loan losses of $582,517, $563,270 and $560,404)

 

46,859,738

 

 

45,938,806

 

 

39,921,301

 

2.0

 

17.4

 

Investments in qualified affordable housing partnerships, tax credit and other investments, net

 

725,254

 

 

634,304

 

 

664,795

 

14.3

 

9.1

 

Goodwill

 

465,697

 

 

465,697

 

 

465,697

 

 

 

Operating lease right-of-use assets

 

105,411

 

 

107,588

 

 

99,785

 

(2.0

)

5.6

 

Other assets

 

1,799,822

 

 

1,898,062

 

 

1,790,321

 

(5.2

)

0.5

 

Total assets

$

62,576,061

 

$

62,394,283

 

$

60,959,110

 

0.3

%

2.7

%

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Deposits

$

53,857,362

 

$

54,343,354

 

$

53,356,190

 

(0.9

)%

0.9

%

Federal funds purchased

 

200,000

 

 

 

 

 

100.0

 

100.0

 

FHLB advances

 

324,920

 

 

174,776

 

 

248,898

 

85.9

 

30.5

 

Assets sold under repurchase agreements (“repurchase agreements”)

 

611,785

 

 

611,785

 

 

300,000

 

 

103.9

 

Long-term debt and finance lease liabilities

 

152,610

 

 

152,663

 

 

151,795

 

(0.0

)

0.5

 

Operating lease liabilities

 

113,477

 

 

115,387

 

 

107,107

 

(1.7

)

5.9

 

Accrued expenses and other liabilities

 

1,655,239

 

 

1,386,836

 

 

1,104,919

 

19.4

 

49.8

 

Total liabilities

 

56,915,393

 

 

56,784,801

 

 

55,268,909

 

0.2

 

3.0

 

Stockholders’ equity

 

5,660,668

 

 

5,609,482

 

 

5,690,201

 

0.9

 

(0.5

)

Total liabilities and stockholders’ equity

$

62,576,061

 

$

62,394,283

 

$

60,959,110

 

0.3

%

2.7

%

 

 

 

 

 

 

Book value per common share

$

40.17

 

$

39.81

 

$

40.10

 

0.9

%

0.2

%

Tangible equity (1) per common share

$

36.80

 

$

36.44

 

$

36.75

 

1.0

 

0.1

 

Number of common shares at period-end

 

140,918

 

 

140,917

 

 

141,884

 

0.0

 

(0.7

)

Tangible equity to tangible assets ratio (1)

 

8.35

%

 

8.29

%

 

8.62

%

6

bps

(27

) bps

 

 

 

(1)

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

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

 

 

 

 

 

 

 

 

September 30, 2022

% Change

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

Qtr-o-Qtr

 

Yr-o-Yr

Loans:

 

 

 

 

 

Commercial:

 

 

 

 

 

Commercial and industrial (“C&I”) (1)

$

15,625,072

 

$

15,377,117

 

$

13,831,649

 

1.6

%

13.0

%

Commercial real estate (“CRE”):

 

 

 

 

 

CRE

 

13,573,157

 

 

13,566,748

 

 

11,818,065

 

 

14.9

 

Multifamily residential

 

4,559,302

 

 

4,443,704

 

 

3,340,378

 

2.6

 

36.5

 

Construction and land

 

556,894

 

 

515,857

 

 

376,921

 

8.0

 

47.7

 

Total CRE

 

18,689,353

 

 

18,526,309

 

 

15,535,364

 

0.9

 

20.3

 

Consumer:

 

 

 

 

 

Residential mortgage:

 

 

 

 

 

Single-family residential

 

10,855,345

 

 

10,234,473

 

 

9,021,801

 

6.1

 

20.3

 

Home equity lines of credit (“HELOCs”)

 

2,184,924

 

 

2,280,080

 

 

1,963,622

 

(4.2

)

11.3

 

Total residential mortgage

 

13,040,269

 

 

12,514,553

 

 

10,985,423

 

4.2

 

18.7

 

Other consumer

 

87,561

 

 

84,097

 

 

129,269

 

4.1

 

(32.3

)

Total loans HFI (2)

 

47,442,255

 

 

46,502,076

 

 

40,481,705

 

2.0

 

17.2

 

Loans HFS

 

14,500

 

 

28,464

 

 

 

(49.1

)

100.0

 

Total loans (2)

 

47,456,755

 

 

46,530,540

 

 

40,481,705

 

2.0

 

17.2

 

Allowance for loan losses

 

(582,517

)

 

(563,270

)

 

(560,404

)

3.4

 

3.9

 

Net loans (2)

$

46,874,238

 

$

45,967,270

 

$

39,921,301

 

2.0

 

17.4

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest-bearing demand

$

21,645,394

 

$

23,028,831

 

$

23,175,471

 

(6.0

)%

(6.6

)%

Interest-bearing checking

 

6,822,343

 

 

7,094,726

 

 

6,530,601

 

(3.8

)

4.5

 

Money market

 

12,113,292

 

 

11,814,402

 

 

12,555,879

 

2.5

 

(3.5

)

Savings

 

2,917,770

 

 

3,027,819

 

 

2,855,597

 

(3.6

)

2.2

 

Time deposits

 

10,358,563

 

 

9,377,576

 

 

8,238,642

 

10.5

 

25.7

 

Total deposits

$

53,857,362

 

$

54,343,354

 

$

53,356,190

 

(0.9

)%

0.9

%

 

(1)

Includes $110.9 million, $153.3 million and $807.3 million of Paycheck Protection Program (“PPP”) loans as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively. Excluding PPP loans, total loans were $47.35 billion, $46.38 billion and $39.67 billion as of September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

(2)

Includes $(60.3) million, $(56.2) million and $(54.3) million of net deferred loan fees and net unamortized premiums as of September 30, 2022, June 30, 2022 and September 30, 2021, 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, 2022

% Change

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

Qtr-o-Qtr

 

Yr-o-Yr

Interest and dividend income (1)

$

628,236

 

$

499,754

$

415,307

 

25.7

%

51.3

%

Interest expense

 

76,427

 

 

26,802

 

 

19,601

 

185.2

 

289.9

 

Net interest income before provision for (reversal of) credit losses

 

551,809

 

 

472,952

 

 

395,706

 

16.7

 

39.4

 

Provision for (reversal of) credit losses

 

27,000

 

 

13,500

 

 

(10,000

)

100.0

 

NM

 

Net interest income after provision for (reversal of) credit losses

 

524,809

 

 

459,452

 

 

405,706

 

14.2

 

29.4

 

Noninterest income

 

75,552

 

 

78,444

 

 

73,109

 

(3.7

)

3.3

 

Noninterest expense

 

215,973

 

 

196,860

 

 

205,384

 

9.7

 

5.2

 

Income before income taxes

 

384,388

 

 

341,036

 

 

273,431

 

12.7

 

40.6

 

Income tax expense

 

89,049

 

 

82,707

 

 

47,982

 

7.7

 

85.6

 

Net income

$

295,339

 

$

258,329

 

$

225,449

 

14.3

%

31.0

%

Earnings per share (“EPS”)

 

 

 

 

 

- Basic

$

2.10

 

$

1.83

 

$

1.59

 

14.7

%

31.9

%

- Diluted

$

2.08

 

$

1.81

 

$

1.57

 

14.6

 

32.0

 

Weighted-average number of shares outstanding

 

 

 

 

 

- Basic

 

140,917

 

 

141,429

 

 

141,880

 

(0.4

)%

(0.7

)%

- Diluted

 

142,011

 

 

142,372

 

 

143,143

 

(0.3

)

(0.8

)

 

 

 

 

 

 

 

Three Months Ended

 

September 30, 2022

% Change

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

Qtr-o-Qtr

 

Yr-o-Yr

Noninterest income:

 

 

 

 

 

Lending fees

$

20,289

 

$

20,142

 

$

17,516

 

0.7

%

15.8

%

Deposit account fees

 

23,636

 

 

22,372

 

 

18,508

 

5.6

 

27.7

 

Interest rate contracts and other derivative income

 

8,761

 

 

9,801

 

 

7,156

 

(10.6

)

22.4

 

Foreign exchange income

 

10,083

 

 

11,361

 

 

13,101

 

(11.2

)

(23.0

)

Wealth management fees

 

8,903

 

 

6,539

 

 

5,598

 

36.2

 

59.0

 

Net gains on sales of loans

 

2,129

 

 

917

 

 

3,329

 

132.2

 

(36.0

)

Gains on sales of AFS debt securities

 

 

 

28

 

 

354

 

(100.0

)

(100.0

)

Other investment (loss) income

 

(580

)

 

4,863

 

 

5,349

 

(111.9

)

(110.8

)

Other income

 

2,331

 

 

2,421

 

 

2,198

 

(3.7

)

6.1

 

Total noninterest income

$

75,552

 

$

78,444

 

$

73,109

 

(3.7

)%

3.3

%

Noninterest expense:

 

 

 

 

 

Compensation and employee benefits

$

127,580

 

$

113,364

 

$

105,751

 

12.5

%

20.6

%

Occupancy and equipment expense

 

15,920

 

 

15,469

 

 

15,851

 

2.9

 

0.4

 

Deposit insurance premiums and regulatory assessments

 

4,875

 

 

4,927

 

 

4,641

 

(1.1

)

5.0

 

Deposit account expense

 

6,707

 

 

5,671

 

 

4,136

 

18.3

 

62.2

 

Data processing

 

3,725

 

 

3,486

 

 

3,575

 

6.9

 

4.2

 

Computer software expense

 

6,889

 

 

6,572

 

 

8,426

 

4.8

 

(18.2

)

Consulting expense

 

1,620

 

 

2,021

 

 

1,635

 

(19.8

)

(0.9

)

Legal expense

 

689

 

 

1,047

 

 

2,363

 

(34.2

)

(70.8

)

Other operating expense

 

28,094

 

 

29,324

 

 

20,998

 

(4.2

)

33.8

 

Amortization of tax credit and other investments

 

19,874

 

 

14,979

 

 

38,008

 

32.7

 

(47.7

)

Total noninterest expense

$

215,973

 

$

196,860

 

$

205,384

 

9.7

%

5.2

%

 

NM - Not meaningful.

(1)

Includes $524 thousand, $1.4 million and $15.2 million of interest income related to PPP loans for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, 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, 2022

% Change

 

September 30,

2022

 

September 30,

2021

 

Yr-o-Yr

Interest and dividend income (1)

$

1,560,019

$

1,196,026

 

30.4

%

Interest expense

 

119,645

 

 

70,152

 

70.6

 

Net interest income before provision for (reversal of) credit losses

 

1,440,374

 

 

1,125,874

 

27.9

 

Provision for (reversal of) credit losses

 

48,500

 

 

(25,000

)

NM

 

Net interest income after provision for (reversal of) credit losses

 

1,391,874

 

 

1,150,874

 

20.9

 

Noninterest income

 

233,739

 

 

214,406

 

9.0

 

Noninterest expense

 

602,283

 

 

585,984

 

2.8

 

Income before income taxes

 

1,023,330

 

 

779,296

 

31.3

 

Income tax expense

 

232,010

 

 

124,111

 

86.9

 

Net income

$

791,320

 

$

655,185

 

20.8

%

EPS

 

 

 

- Basic

$

5.59

 

$

4.62

 

21.1

%

- Diluted

$

5.55

 

$

4.58

 

21.2

 

Weighted-average number of shares outstanding

 

 

 

- Basic

 

141,453

 

 

141,799

 

(0.2

)%

- Diluted

 

142,601

 

 

143,051

 

(0.3

)

 

 

 

 

 

Nine Months Ended

 

September 30, 2022

% Change

 

September 30,

2022

 

September 30,

2021

 

Yr-o-Yr

Noninterest income:

 

 

 

Lending fees

$

59,869

 

$

56,965

 

5.1

%

Deposit account fees

 

66,323

 

 

51,233

 

29.5

 

Interest rate contracts and other derivative income

 

29,695

 

 

20,981

 

41.5

 

Foreign exchange income

 

34,143

 

 

35,634

 

(4.2

)

Wealth management fees

 

21,494

 

 

20,460

 

5.1

 

Net gains on sales of loans

 

5,968

 

 

6,601

 

(9.6

)

Gains on sales of AFS debt securities

 

1,306

 

 

1,178

 

10.9

 

Other investment income

 

5,910

 

 

13,870

 

(57.4

)

Other income

 

9,031

 

 

7,484

 

20.7

 

Total noninterest income

$

233,739

 

$

214,406

 

9.0

%

Noninterest expense:

 

 

 

Compensation and employee benefits

$

357,213

 

$

318,985

 

12.0

%

Occupancy and equipment expense

 

46,853

 

 

47,150

 

(0.6

)

Deposit insurance premiums and regulatory assessments

 

14,519

 

 

12,791

 

13.5

 

Deposit account expense

 

17,071

 

 

11,845

 

44.1

 

Data processing

 

10,876

 

 

12,088

 

(10.0

)

Computer software expense

 

20,755

 

 

23,106

 

(10.2

)

Consulting expense

 

5,474

 

 

4,978

 

10.0

 

Legal expense

 

2,454

 

 

5,840

 

(58.0

)

Other operating expense

 

78,315

 

 

58,544

 

33.8

 

Amortization of tax credit and other investments

 

48,753

 

 

90,657

 

(46.2

)

Total noninterest expense

$

602,283

 

$

585,984

 

2.8

%

 

NM - Not meaningful.

(1)

Includes $7.0 million and $45.6 million of interest income related to PPP loans for the nine months ended September 30, 2022 and 2021, respectively.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 5

 

 

 

 

 

 

 

 

Three Months Ended

 

September 30, 2022

% Change

 

Nine Months Ended

 

September 30, 2022

% Change

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

Qtr-o-Qtr

 

Yr-o-Yr

 

September 30,

2022

 

September 30,

2021

 

Yr-o-Yr

Loans:

 

 

 

 

 

 

 

 

Commercial:

 

 

 

 

 

 

 

 

C&I (1)

$

15,282,661

$

14,986,876

$

13,531,338

2.0

%

12.9

%

$

14,850,849

$

13,678,462

8.6

%

CRE:

 

 

 

 

 

 

 

 

CRE

 

13,533,482

 

13,049,058

 

11,747,607

3.7

 

15.2

 

 

12,958,562

 

11,564,946

12.1

 

Multifamily residential

 

4,531,351

 

4,112,411

 

3,248,281

10.2

 

39.5

 

 

4,133,975

 

3,139,209

31.7

 

Construction and land

 

532,800

 

475,933

 

415,812

11.9

 

28.1

 

 

467,731

 

480,514

(2.7

)

Total CRE

 

18,597,633

 

17,637,402

 

15,411,700

5.4

 

20.7

 

 

17,560,268

 

15,184,669

15.6

 

Consumer:

 

 

 

 

 

 

 

 

Residential mortgage:

 

 

 

 

 

 

 

 

Single-family residential

 

10,676,022

 

9,624,242

 

8,962,533

10.9

 

19.1

 

 

9,809,549

 

8,645,135

13.5

 

HELOCs

 

2,216,355

 

2,290,378

 

1,912,629

(3.2

)

15.9

 

 

2,230,060

 

1,793,928

24.3

 

Total residential mortgage

 

12,892,377

 

11,914,620

 

10,875,162

8.2

 

18.5

 

 

12,039,609

 

10,439,063

15.3

 

Other consumer

 

81,870

 

87,590

 

141,951

(6.5

)

(42.3

)

 

97,794

 

139,557

(29.9

)

Total loans (2)

$

46,854,541

$

44,626,488

$

39,960,151

5.0

%

17.3

%

$

44,548,520

$

39,441,751

12.9

%

 

 

 

 

 

 

 

 

 

Interest-earning assets

$

59,478,689

$

58,668,677

$

58,239,480

1.4

%

2.1

%

$

58,949,457

$

55,350,645

6.5

%

Total assets

$

63,079,444

$

62,232,841

$

61,359,533

1.4

%

2.8

%

$

62,361,618

$

58,263,002

7.0

%

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

$

22,423,633

$

23,887,452

$

23,169,323

(6.1

)%

(3.2

)%

$

23,244,247

$

20,345,370

14.2

%

Interest-bearing checking

 

6,879,632

 

6,712,890

 

6,646,515

2.5

 

3.5

 

 

6,747,710

 

6,571,231

2.7

 

Money market

 

12,351,571

 

12,319,930

 

12,604,827

0.3

 

(2.0

)

 

12,526,222

 

12,262,173

2.2

 

Savings

 

2,961,634

 

2,970,007

 

2,792,702

(0.3

)

6.0

 

 

2,954,098

 

2,715,114

8.8

 

Time deposits

 

9,435,063

 

8,239,571

 

8,283,265

14.5

 

13.9

 

 

8,596,728

 

8,635,249

(0.4

)

Total deposits

$

54,051,533

$

54,129,850

$

53,496,632

(0.1

)%

1.0

%

$

54,069,005

$

50,529,137

7.0

%

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

$

32,703,323

$

30,957,475

$

31,039,410

5.6

%

5.4

%

$

31,631,865

$

31,099,675

1.7

%

Stockholders’ equity

$

5,772,638

$

5,682,427

$

5,680,306

1.6

%

1.6

%

$

5,765,637

$

5,482,705

5.2

%

 

(1)

Average balances of PPP loans were $127.6 million, $223.2 million and $1.11 billion for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively, and $252.8 million and $1.63 billion for the nine months ended September 30, 2022 and 2021, respectively.

(2)

Includes loans HFS.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 6

 

 

Three Months Ended

 

September 30, 2022

 

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

$

2,287,010

 

$

9,080

1.58

%

$

2,797,711

 

$

4,787

0.69

%

Resale agreements

 

1,037,292

 

 

6,769

2.59

%

 

1,641,723

 

 

8,553

2.09

%

AFS debt securities

 

6,204,729

 

 

38,383

2.45

%

 

6,503,677

 

 

33,438

2.06

%

HTM debt securities

 

3,017,063

 

 

12,709

1.67

%

 

3,021,239

 

 

12,738

1.69

%

Loans (2)

 

46,854,541

 

 

560,452

4.75

%

 

44,626,488

 

 

439,416

3.95

%

FHLB and FRB stock

 

78,054

 

 

843

4.28

%

 

77,839

 

 

822

4.24

%

Total interest-earning assets

 

59,478,689

 

 

628,236

4.19

%

 

58,668,677

 

 

499,754

3.42

%

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

Cash and due from banks

 

615,836

 

 

 

 

712,884

 

 

 

Allowance for loan losses

 

(566,369

)

 

 

 

(545,489

)

 

 

Other assets

 

3,551,288

 

 

 

 

3,396,769

 

 

 

Total assets

$

63,079,444

 

 

 

$

62,232,841

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

6,879,632

 

$

8,493

0.49

%

$

6,712,890

 

$

3,178

0.19

%

Money market deposits

 

12,351,571

 

 

33,101

1.06

%

 

12,319,930

 

 

8,892

0.29

%

Savings deposits

 

2,961,634

 

 

2,268

0.30

%

 

2,970,007

 

 

1,864

0.25

%

Time deposits

 

9,435,063

 

 

25,032

1.05

%

 

8,239,571

 

 

8,554

0.42

%

Federal funds purchased and other short-term borrowings

 

211,794

 

 

1,177

2.20

%

 

64,145

 

 

241

1.51

%

FHLB advances

 

86,243

 

 

392

1.80

%

 

138,960

 

 

559

1.61

%

Repurchase agreements

 

624,821

 

 

4,421

2.81

%

 

359,778

 

 

2,418

2.70

%

Long-term debt and finance lease liabilities

 

152,565

 

 

1,543

4.01

%

 

152,194

 

 

1,096

2.89

%

Total interest-bearing liabilities

 

32,703,323

 

 

76,427

0.93

%

 

30,957,475

 

 

26,802

0.35

%

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

Demand deposits

 

22,423,633

 

 

 

 

23,887,452

 

 

 

Accrued expenses and other liabilities

 

2,179,850

 

 

 

 

1,705,487

 

 

 

Stockholders’ equity

 

5,772,638

 

 

 

 

5,682,427

 

 

 

Total liabilities and stockholders’ equity

$

63,079,444

 

 

 

$

62,232,841

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

3.26

%

 

 

3.07

%

Net interest income and net interest margin

 

$

551,809

3.68

%

 

$

472,952

3.23

%

 

(1)

Annualized.

(2)

Includes loans HFS. Average balances of PPP loans were $127.6 million and $223.2 million for the three months ended September 30, 2022 and June 30, 2022, respectively.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 7

 

 

Three Months Ended

September 30, 2022

 

September 30, 2021

Average

 

 

 

Average

 

Average

 

 

 

Average

Balance

 

Interest

 

Yield/Rate (1)

 

Balance

 

Interest

 

Yield/Rate (1)

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

2,287,010

 

$

9,080

1.58

%

$

7,036,823

 

$

4,521

0.25

%

Resale agreements

 

1,037,292

 

 

6,769

2.59

%

 

2,382,741

 

 

8,957

1.49

%

AFS debt securities

 

6,204,729

 

 

38,383

2.45

%

 

8,782,682

 

 

37,826

1.71

%

HTM debt securities

 

3,017,063

 

 

12,709

1.67

%

 

 

 

%

Loans (2)

 

46,854,541

 

 

560,452

4.75

%

 

39,960,151

 

 

363,503

3.61

%

FHLB and FRB stock

 

78,054

 

 

843

4.28

%

 

77,083

 

 

500

2.57

%

Total interest-earning assets

 

59,478,689

 

 

628,236

4.19

%

 

58,239,480

 

 

415,307

2.83

%

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

Cash and due from banks

 

615,836

 

 

 

 

627,640

 

 

 

Allowance for loan losses

 

(566,369

)

 

 

 

(584,827

)

 

 

Other assets

 

3,551,288

 

 

 

 

3,077,240

 

 

 

Total assets

$

63,079,444

 

 

 

$

61,359,533

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

6,879,632

 

$

8,493

0.49

%

$

6,646,515

 

$

3,186

0.19

%

Money market deposits

 

12,351,571

 

 

33,101

1.06

%

 

12,604,827

 

 

3,446

0.11

%

Savings deposits

 

2,961,634

 

 

2,268

0.30

%

 

2,792,702

 

 

1,943

0.28

%

Time deposits

 

9,435,063

 

 

25,032

1.05

%

 

8,283,265

 

 

7,395

0.35

%

Federal funds purchased and other short-term borrowings

 

211,794

 

 

1,177

2.20

%

 

620

 

 

%

FHLB advances

 

86,243

 

 

392

1.80

%

 

248,614

 

 

857

1.37

%

Repurchase agreements

 

624,821

 

 

4,421

2.81

%

 

310,997

 

 

2,012

2.57

%

Long-term debt and finance lease liabilities

 

152,565

 

 

1,543

4.01

%

 

151,870

 

 

762

1.99

%

Total interest-bearing liabilities

 

32,703,323

 

 

76,427

0.93

%

 

31,039,410

 

 

19,601

0.25

%

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

Demand deposits

 

22,423,633

 

 

 

 

23,169,323

 

 

 

Accrued expenses and other liabilities

 

2,179,850

 

 

 

 

1,470,494

 

 

 

Stockholders’ equity

 

5,772,638

 

 

 

 

5,680,306

 

 

 

Total liabilities and stockholders’ equity

$

63,079,444

 

 

 

$

61,359,533

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

3.26

%

 

 

2.58

%

Net interest income and net interest margin

 

$

551,809

3.68

%

 

$

395,706

2.70

%

 

 

 

 

 

 

 

(1)

Annualized.

(2)

Includes loans HFS. Average balances of PPP loans were $127.6 million and $1.11 billion for the three months ended September 30, 2022 and September 30, 2021, respectively.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 8

 

 

Nine Months Ended

September 30, 2022

 

September 30, 2021

Average

 

 

 

Average

 

Average

 

 

 

Average

Balance

 

Interest

 

Yield/Rate (1)

 

Balance

 

Interest

 

Yield/Rate (1)

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

3,175,596

 

$

17,127

0.72

%

$

6,078,982

 

$

11,781

0.26

%

Resale agreements

 

1,588,452

 

 

23,705

2.00

%

 

1,994,776

 

 

23,077

1.55

%

AFS debt securities

 

6,886,268

 

 

106,290

2.06

%

 

7,755,029

 

 

101,616

1.75

%

HTM debt securities

 

2,672,797

 

 

33,645

1.68

%

 

 

 

%

Loans (2)

 

44,548,520

 

 

1,376,978

4.13

%

 

39,441,751

 

 

1,057,964

3.59

%

FHLB and FRB stock

 

77,824

 

 

2,274

3.91

%

 

80,107

 

 

1,588

2.65

%

Total interest-earning assets

 

58,949,457

 

 

1,560,019

3.54

%

 

55,350,645

 

 

1,196,026

2.89

%

 

 

 

 

 

 

 

Noninterest-earning assets:

 

 

 

 

 

 

Cash and due from banks

 

656,772

 

 

 

 

602,830

 

 

 

Allowance for loan losses

 

(551,818

)

 

 

 

(603,523

)

 

 

Other assets

 

3,307,207

 

 

 

 

2,913,050

 

 

 

Total assets

$

62,361,618

 

 

 

$

58,263,002

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

6,747,711

 

$

13,073

0.26

%

$

6,571,231

 

$

11,177

0.23

%

Money market deposits

 

12,526,222

 

 

45,196

0.48

%

 

12,262,173

 

 

11,869

0.13

%

Savings deposits

 

2,954,098

 

 

5,836

0.26

%

 

2,715,114

 

 

5,762

0.28

%

Time deposits

 

8,596,728

 

 

40,266

0.63

%

 

8,635,250

 

 

26,982

0.42

%

Federal funds purchased and other short-term borrowings

 

93,370

 

 

1,427

2.04

%

 

1,871

 

 

42

3.00

%

FHLB advances

 

128,137

 

 

1,529

1.60

%

 

457,273

 

 

6,025

1.76

%

Repurchase agreements

 

433,340

 

 

8,855

2.73

%

 

304,745

 

 

5,981

2.62

%

Long-term debt and finance lease liabilities

 

152,259

 

 

3,463

3.04

%

 

152,018

 

 

2,314

2.04

%

Total interest-bearing liabilities

 

31,631,865

 

 

119,645

0.51

%

 

31,099,675

 

 

70,152

0.30

%

 

 

 

 

 

 

 

Noninterest-bearing liabilities and stockholders’ equity:

 

 

 

 

 

 

Demand deposits

 

23,244,247

 

 

 

 

20,345,370

 

 

 

Accrued expenses and other liabilities

 

1,719,869

 

 

 

 

1,335,252

 

 

 

Stockholders’ equity

 

5,765,637

 

 

 

 

5,482,705

 

 

 

Total liabilities and stockholders’ equity

$

62,361,618

 

 

 

$

58,263,002

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

3.03

%

 

 

2.59

%

Net interest income and net interest margin

 

$

1,440,374

3.27

%

 

$

1,125,874

2.72

%

 

 

 

 

 

 

 

(1)

Annualized.

(2)

Includes loans HFS. Average balances of PPP loans were $252.8 million and $1.63 billion for the nine months ended September 30, 2022 and 2021, respectively.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED RATIOS

(unaudited)

Table 9

 

 

Three Months Ended (1)

 

September 30, 2022

Basis Point Change

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

Qtr-o-Qtr

 

Yr-o-Yr

Return on average assets

1.86

%

1.66

%

1.46

%

20

bps

40

bps

Return on average equity

20.30

%

18.23

%

15.75

%

207

 

455

 

Tangible return on average tangible equity (2)

22.16

%

19.94

%

17.25

%

222

 

491

 

Interest rate spread

3.26

%

3.07

%

2.58

%

19

 

68

 

Net interest margin

3.68

%

3.23

%

2.70

%

45

 

98

 

Average loan yield

4.75

%

3.95

%

3.61

%

80

 

114

 

Yield on average interest-earning assets

4.19

%

3.42

%

2.83

%

77

 

136

 

Average cost of interest-bearing deposits

0.86

%

0.30

%

0.21

%

56

 

65

 

Average cost of deposits

0.51

%

0.17

%

0.12

%

34

 

39

 

Average cost of funds

0.55

%

0.20

%

0.14

%

35

 

41

 

Adjusted pre-tax, pre-provision profitability ratio (3)

2.72

%

2.38

%

1.95

%

34

 

77

 

Adjusted noninterest expense/average assets (3)

1.23

%

1.17

%

1.08

%

6

 

15

 

Efficiency ratio

34.43

%

35.70

%

43.81

%

(127

)

(938

)

Adjusted efficiency ratio (3)

31.18

%

32.90

%

35.55

%

(172

) bps

(437

) bps

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended (1)

 

September 30, 2022

Basis Point Change

 

 

 

September 30,

2022

 

September 30,

2021

 

Yr-o-Yr

 

 

Return on average assets

1.70

%

1.50

%

20

bps

 

Return on average equity

18.35

%

15.98

%

237

 

 

 

Tangible return on average tangible equity (2)

20.04

%

17.56

%

248

 

 

 

Interest rate spread

3.03

%

2.59

%

44

 

 

 

Net interest margin

3.27

%

2.72

%

55

 

 

 

Average loan yield

4.13

%

3.59

%

54

 

 

 

Yield on average interest-earning assets

3.54

%

2.89

%

65

 

 

 

Average cost of interest-bearing deposits

0.45

%

0.25

%

20

 

 

 

Average cost of deposits

0.26

%

0.15

%

11

 

 

 

Average cost of funds

0.29

%

0.18

%

11

 

 

 

Adjusted pre-tax, pre-provision profitability ratio (3)

2.41

%

1.94

%

47

 

 

 

Adjusted noninterest expense/average assets (3)

1.18

%

1.13

%

5

 

 

 

Efficiency ratio

35.98

%

43.72

%

(774

)

 

 

Adjusted efficiency ratio (3)

32.98

%

36.80

%

(382

) bps

 

 

 

(1)

Annualized except for efficiency ratio.

(2)

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

(3)

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

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE SHEET CREDIT EXPOSURES

($ in thousands)

(unaudited)

Table 10

 

 

 

Three Months Ended September 30, 2022

 

 

Commercial

 

Consumer

 

 

 

 

C&I

 

Total CRE

 

Total Residential

Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, June 30, 2022

 

$

363,282

 

$

173,479

 

$

25,060

 

$

1,449

 

$

563,270

 

Provision for credit losses on loans

(a)

 

9,575

 

 

11,163

 

 

6,281

 

 

255

 

 

27,274

 

Gross charge-offs

 

 

(6,894

)

 

(6,226

)

 

(775

)

 

(10

)

 

(13,905

)

Gross recoveries

 

 

7,172

 

 

71

 

 

21

 

 

 

 

7,264

 

Total net recoveries (charge-offs)

 

 

278

 

 

(6,155

)

 

(754

)

 

(10

)

 

(6,641

)

Foreign currency translation adjustment

 

 

(1,386

)

 

 

 

 

 

 

 

(1,386

)

Allowance for loan losses, September 30, 2022

 

$

371,749

 

$

178,487

 

$

30,587

 

$

1,694

 

$

582,517

 

 

 

 

 

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

 

 

 

 

 

Three Months Ended September 30, 2021

 

 

Commercial

 

Consumer

 

 

 

 

C&I

 

Total CRE

 

Total Residential

Mortgage

 

Other Consumer

 

Total

Allowance for loan losses, June 30, 2021

 

$

362,528

 

$

199,530

 

$

19,468

 

$

4,198

 

$

585,724

 

(Reversal of) provision for credit losses on loans

(a)

 

(23,364

)

 

8,527

 

 

2,972

 

 

130

 

 

(11,735

)

Gross charge-offs

 

 

(1,154

)

 

(16,903

)

 

(912

)

 

(10

)

 

(18,979

)

Gross recoveries

 

 

4,203

 

 

1,106

 

 

156

 

 

 

 

5,465

 

Total net recoveries (charge-offs)

 

 

3,049

 

 

(15,797

)

 

(756

)

 

(10

)

 

(13,514

)

Foreign currency translation adjustment

 

 

(71

)

 

 

 

 

 

 

 

(71

)

Allowance for loan losses, September 30, 2021

 

$

342,142

 

$

192,260

 

$

21,684

 

$

4,318

 

$

560,404

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

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

($ in thousands)

(unaudited)

Table 10 (continued)

 

 

 

Nine Months Ended September 30, 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)

 

37,867

 

 

3,640

 

 

10,628

 

 

(140

)

 

51,995

 

Gross charge-offs

 

 

(18,322

)

 

(7,304

)

 

(968

)

 

(90

)

 

(26,684

)

Gross recoveries

 

 

16,688

 

 

1,343

 

 

332

 

 

 

 

18,363

 

Total net charge-offs

 

 

(1,634

)

 

(5,961

)

 

(636

)

 

(90

)

 

(8,321

)

Foreign currency translation adjustment

 

 

(2,736

)

 

 

 

 

 

 

 

(2,736

)

Allowance for loan losses, September 30, 2022

 

$

371,749

 

$

178,487

 

$

30,587

 

$

1,694

 

$

582,517

 

 

 

 

 

Nine Months Ended September 30, 2021

 

 

Commercial

Consumer

 

 

 

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

Total

Allowance for loan losses, December 31, 2020

 

$

398,040

 

$

201,603

 

$

18,210

 

$

2,130

 

$

619,983

 

(Reversal of) provision for credit losses on loans

(a)

 

(42,127

)

 

16,198

 

 

4,229

 

 

2,226

 

 

(19,474

)

Gross charge-offs

 

 

(20,162

)

 

(28,642

)

 

(1,091

)

 

(43

)

 

(49,938

)

Gross recoveries

 

 

6,301

 

 

3,101

 

 

336

 

 

5

 

 

9,743

 

Total net charge-offs

 

 

(13,861

)

 

(25,541

)

 

(755

)

 

(38

)

 

(40,195

)

Foreign currency translation adjustment

 

 

90

 

 

 

 

 

 

 

 

90

 

Allowance for loan losses, September 30, 2021

 

$

342,142

 

$

192,260

 

$

21,684

 

$

4,318

 

$

560,404

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Nine Months Ended

 

 

September 30,

2022

June 30,

2022

September 30,

2021

September 30,

2022

September 30,

2021

Unfunded Credit Facilities

 

 

 

 

 

 

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

 

$

24,304

 

$

23,262

 

$

26,300

 

$

27,514

 

$

33,577

 

(Reversal of) provision for credit losses on unfunded credit commitments

(b)

 

(274

)

 

1,031

 

 

1,735

 

 

(3,495

)

 

(5,526

)

Foreign currency translation adjustment

 

 

11

 

 

11

 

 

1

 

 

22

 

 

(15

)

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

 

$

24,041

 

$

24,304

 

$

28,036

 

$

24,041

 

$

28,036

 

 

 

 

 

 

 

 

Provision for (reversal of) credit losses

(a)+(b)

$

27,000

 

$

13,500

 

$

(10,000

)

$

48,500

 

$

(25,000

)

 

 

 

 

 

 

 

(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

September 30,

2022

June 30,

2022

September 30,

2021

Special mention loans

$

470,964

 

$

590,227

 

$

448,497

 

Classified loans

 

434,242

 

 

432,414

 

 

561,787

 

Total criticized loans (1)

$

905,206

 

$

1,022,641

 

$

1,010,284

 

 

 

 

Nonperforming Assets

September 30,

2022

June 30,

2022

September 30,

2021

Nonaccrual loans:

 

 

 

Commercial:

 

 

 

C&I

$

47,988

 

$

40,053

 

$

97,157

 

Total CRE

 

11,209

 

 

12,742

 

 

15,359

 

Consumer:

 

 

 

Total residential mortgage

 

23,309

 

 

37,129

 

 

18,153

 

Other consumer

 

37

 

 

11

 

 

2,491

 

Total nonaccrual loans

 

82,543

 

 

89,935

 

 

133,160

 

Other real estate owned, net

 

 

 

 

 

28,800

 

Other nonperforming assets

 

 

 

 

 

10,681

 

Nonperforming loans HFS

 

14,500

 

 

 

 

 

Total nonperforming assets

$

97,043

 

$

89,935

 

$

172,641

 

 

 

 

Credit Quality Ratios

September 30,

2022

June 30,

2022

September 30,

2021

Annualized quarterly net charge-offs (recoveries) to average loans HFI

 

0.06

%

 

(0.06

)%

 

0.13

%

Special mention loans to loans HFI

 

0.99

%

 

1.27

%

 

1.11

%

Classified loans to loans HFI

 

0.92

%

 

0.93

%

 

1.39

%

Criticized loans to loans HFI

 

1.91

%

 

2.20

%

 

2.50

%

Nonperforming assets to total assets

 

0.16

%

 

0.14

%

 

0.28

%

Nonaccrual loans to loans HFI

 

0.17

%

 

0.19

%

 

0.33

%

Allowance for loan losses to loans HFI

 

1.23

%

 

1.21

%

 

1.38

%

 

(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 revenue. Adjusted pre-tax, pre-provision profitability ratio represents total revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods.

 

 

 

Three Months Ended

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

Net interest income before provision for (reversal of) credit losses

 

$

551,809

 

$

472,952

 

$

395,706

 

Total noninterest income

 

 

75,552

 

 

78,444

 

 

73,109

 

Total revenue

(a)

$

627,361

 

$

551,396

 

$

468,815

 

 

 

 

 

 

Total noninterest expense

(b)

$

215,973

 

$

196,860

 

$

205,384

 

Less: Amortization of tax credit and other investments

 

 

(19,874

)

 

(14,979

)

 

(38,008

)

Amortization of core deposit intangibles

 

 

(485

)

 

(488

)

 

(705

)

Adjusted noninterest expense

(c)

$

195,614

 

$

181,393

 

$

166,671

 

Efficiency ratio

(b)/(a)

 

34.43

%

 

35.70

%

 

43.81

%

Adjusted efficiency ratio

(c)/(a)

 

31.18

%

 

32.90

%

 

35.55

%

Adjusted pre-tax, pre-provision income

(a)-(c) = (d)

$

431,747

 

$

370,003

 

$

302,144

 

Average total assets

(e)

$

63,079,444

 

$

62,232,841

 

$

61,359,533

 

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

(d)/(e)

 

2.72

%

 

2.38

%

 

1.95

%

Adjusted noninterest expense/average assets (1)

(c)/(e)

 

1.23

%

 

1.17

%

 

1.08

%

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

2022

 

September 30,

2021

 

Net interest income before provision for (reversal of) credit losses

 

$

1,440,374

 

$

1,125,874

 

 

Total noninterest income

 

 

233,739

 

 

214,406

 

 

Total revenue

(f)

$

1,674,113

 

$

1,340,280

 

 

 

 

 

 

 

Total noninterest expense

(g)

$

602,283

 

$

585,984

 

 

Less: Amortization of tax credit and other investments

 

 

(48,753

)

 

(90,657

)

 

Amortization of core deposit intangibles

 

 

(1,484

)

 

(2,147

)

 

Adjusted noninterest expense

(h)

$

552,046

 

$

493,180

 

 

Efficiency ratio

(g)/(f)

 

35.98

%

 

43.72

%

 

Adjusted efficiency ratio

(h)/(f)

 

32.98

%

 

36.80

%

 

Adjusted pre-tax, pre-provision income

(f)-(h) = (i)

$

1,122,067

 

$

847,100

 

 

Average total assets

(j)

$

62,361,618

 

$

58,263,002

 

 

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

(i)/(j)

 

2.41

%

 

1.94

%

 

Adjusted noninterest expense/average assets (1)

(h)/(j)

 

1.18

%

 

1.13

%

 

 

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

 

 

 

 

 

 

 

September 30,

2022

June 30,

2022

September 30,

2021

Stockholders’ equity

(a)

$

5,660,668

 

$

5,609,482

 

$

5,690,201

 

Less: Goodwill

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Other intangible assets (1)

 

 

(8,667

)

 

(8,537

)

 

(9,849

)

Tangible equity

(b)

$

5,186,304

 

$

5,135,248

 

$

5,214,655

 

 

 

 

 

 

Total assets

(c)

$

62,576,061

 

$

62,394,283

 

$

60,959,110

 

Less: Goodwill

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Other intangible assets (1)

 

 

(8,667

)

 

(8,537

)

 

(9,849

)

Tangible assets

(d)

$

62,101,697

 

$

61,920,049

 

$

60,483,564

 

Total stockholders’ equity to total assets ratio

(a)/(c)

 

9.05

%

 

8.99

%

 

9.33

%

Tangible equity to tangible assets ratio

(b)/(d)

 

8.35

%

 

8.29

%

 

8.62

%

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

September 30,

2022

 

June 30,

2022

 

September 30,

2021

 

September 30,

2022

 

September 30,

2021

Net income

 

(e)

 

$

295,339

 

 

$

258,329

 

 

$

225,449

 

 

$

791,320

 

 

$

655,185

 

Add: Amortization of core deposit intangibles

 

 

 

 

485

 

 

 

488

 

 

 

705

 

 

 

1,484

 

 

 

2,147

 

Amortization of mortgage servicing assets

 

 

 

 

340

 

 

 

364

 

 

 

430

 

 

 

1,096

 

 

 

1,264

 

Tax effect of amortization adjustments (2)

 

 

 

 

(237

)

 

 

(245

)

 

 

(322

)

 

 

(742

)

 

 

(968

)

Tangible net income

 

(f)

 

$

295,927

 

 

$

258,936

 

 

$

226,262

 

 

$

793,158

 

 

$

657,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average stockholders’ equity

 

(g)

 

$

5,772,638

 

 

$

5,682,427

 

 

$

5,680,306

 

 

$

5,765,637

 

 

$

5,482,705

 

Less: Average goodwill

 

 

 

 

(465,697

)

 

 

(465,697

)

 

 

(465,697

)

 

 

(465,697

)

 

 

(465,697

)

Average other intangible assets (1)

 

 

 

 

(8,379

)

 

 

(8,827

)

 

 

(10,135

)

 

 

(8,801

)

 

 

(10,847

)

Average tangible equity

 

(h)

 

$

5,298,562

 

 

$

5,207,903

 

 

$

5,204,474

 

 

$

5,291,139

 

 

$

5,006,161

 

Return on average equity (3)

 

(e)/(g)

 

 

20.30

%

 

 

18.23

%

 

 

15.75

%

 

 

18.35

%

 

 

15.98

%

Tangible return on average tangible equity (3)

 

(f)/(h)

 

 

22.16

%

 

 

19.94

%

 

 

17.25

%

 

 

20.04

%

 

 

17.56

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes core deposit intangibles and mortgage servicing assets.

(2)

Applied statutory tax rate of 28.77% for the three and nine months ended September 30, 2022, and the three months ended June 30, 2022. Applied statutory tax rate of 28.37% for the three and nine months ended September 30, 2021.

(3)

Annualized.

 

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