8-K
East West Bancorp Inc (EWBC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
January 28, 2021
EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-24939
(Commission File Number)
95-4703316
(IRS Employer Identification No.)
135 N Los Robles Ave., 7th Floor, Pasadena, California 91101
(Address of principal executive offices) (Zip code)
(626) 768-6000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.001 Par Value | EWBC | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On January 28, 2021, East West Bancorp, Inc. (the “Company”) announced, via press release, its financial results for the quarter ended December 31, 2020 (the “Press Release”). The Press Release is available on the Company’s website. The Press Release is “furnished” as Exhibit 99.1 to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and the information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities under that Section. The information provided in Item 2.02 of this report, including Exhibit 99.1, shall not be deemed incorporated by reference into any filings the Company has made or may make under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as otherwise expressly stated in such filing.
Item 7.01. Regulation FD Disclosure
On January 28, 2021, the Company will hold a conference call to discuss its financial results for the quarter ended December 31, 2020, including the Press Release and other matters relating to the Company. The Company has also made available on its website presentation materials containing certain historical and forward-looking information relating to the Company (the “Presentation Materials”). The Presentation Materials are furnished as Exhibit 99.2 and are incorporated by reference in this Item 7.01. All information in Exhibit 99.2 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided. The information provided in Item 7.01 of this report, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, nor shall the information or Exhibit 99.2 be deemed incorporated by reference in any filings the Company has made or may make under the Exchange Act or the Securities Act, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| 99.1 | Press Release, dated January 28, 2021. |
|---|---|
| 99.2 | Presentation Materials, dated January 28, 2021. |
| 104 | Cover Page Interactive Data (formatted as Inline XBRL). Filed herewith. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| EAST WEST BANCORP, INC. | ||
|---|---|---|
| Date: January 28, 2021 | By: | /s/ Irene H. Oh |
| Irene H. Oh | ||
| Executive Vice President and Chief Financial Officer |
3
Document
| Exhibit 99.1 | |||
|---|---|---|---|
| East West Bancorp, Inc. | |||
| 135 N. Los Robles Ave., 7th Fl. | |||
| Pasadena, CA 91101 | |||
| Tel. 626.768.6000 | NEWS RELEASE | ||
| --- | FOR INVESTOR INQUIRIES, CONTACT: | ||
| --- | --- | ||
| Irene Oh | Julianna Balicka | ||
| Chief Financial Officer | Director of Strategy and Corporate Development | ||
| T: (626) 768-6360 | T: (626) 768-6985 | ||
| E: irene.oh@eastwestbank.com | E: julianna.balicka@eastwestbank.com |
EAST WEST BANCORP REPORTS NET INCOME FOR 2020
OF $568 MILLION AND DILUTED EARNINGS PER SHARE OF $3.97,
INCREASES DIVIDEND BY 20%
Pasadena, California — January 28, 2021 – East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the full year and fourth quarter of 2020. For the full year 2020, net income was $567.8 million, or $3.97 per diluted share. For the fourth quarter of 2020, net income was $164.1 million, or $1.15 per diluted share.
“Thanks to the tireless commitment of all our associates, East West successfully navigated the challenges posed by the COVID-19 pandemic in 2020, delivering solid financial performance. For the full year 2020, we earned a return on average assets of 1.16% and return on average equity of 11.2%,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “We ended 2020 on a strong note and are raising our common stock dividend by 20%.”
“As of December 31, 2020, our total loans reached a record $38.4 billion, growing by 10% annualized from September 30, 2020, and our total deposits reached a record $44.9 billion, growing by 30% annualized during the same period,” continued Ng. “Quarter-over-quarter, our revenue grew by 10%, reflecting loan growth and higher fee income. Expenses were well-managed and our operating efficiency improved. Importantly, we saw across-the-board improvement in our asset quality metrics, in the form of declining deferral and delinquency rates, lower net charge-offs and decreasing nonperforming and criticized assets.”
“Throughout the past year, we have been inspired by our customers’ resiliency and adaptability. It has been our privilege to provide essential banking services and support the rebuilding of businesses and communities. We are optimistic about an improving macroeconomic outlook, the broader distribution of COVID-19 vaccines and expectations for increased government stimulus. We are looking forward to a strengthening economic recovery in the second half of the new year, and are confident that we will be able to continue our growth and generate strong returns for our shareholders in 2021,” concluded Ng.
BALANCE SHEET
•Record Assets — Total assets reached $52.2 billion as of December 31, 2020, growing by $1.8 billion, or 14% annualized, from $50.4 billion as of September 30, 2020. Year-over-year, total assets grew by 18%.
Fourth quarter 2020 average interest-earning assets of $49.7 billion grew by $2.3 billion, or 19% linked quarter annualized, driven by very strong deposit growth in the quarter. Deposit growth outpaced loan growth and as a result, average available-for-sale debt securities increased by $970.4 million in the fourth quarter, followed by an increase of $705.6 million in average interest-bearing cash and deposits with banks.
•Record Loans — Total loans reached $38.4 billion as of December 31, 2020, growing by $1.0 billion, or 10% annualized, from $37.4 billion as of September 30, 2020. Year-over-year, total loans grew by $3.6 billion or 10%. Excluding Paycheck Protection Program (“PPP”) loans, end-of-period loans grew by 6% year-over-year. PPP loans were $1.6 billion as of December 31, 2020, a decrease of $204.1 million from September 30, 2020 due to loan forgiveness by the SBA. As of January 27, 2021, the Company funded over 2,600 new PPP loans totaling over $380 million.
Fourth quarter 2020 average loans of $37.7 billion grew by $565.3 million, or 6% linked quarter annualized. Fourth quarter average loan growth was led by total residential mortgage, followed by commercial and industrial (“C&I”) loans, excluding PPP loans, and total commercial real estate (“CRE”) loans. The average balance of PPP loans in the fourth quarter was $1.7 billion. Excluding PPP loans, average loans grew by 7% annualized from the third quarter of 2020.
•Record Deposits — Total deposits reached $44.9 billion as of December 31, 2020, growing by $3.2 billion, or 30% annualized, from $41.7 billion as of September 30, 2020. Year-over-year, total deposits grew by $7.5 billion or 20%. Noninterest-bearing demand deposits reached a record $16.3 billion as of December 31, 2020. Throughout 2020, growth in noninterest-bearing deposit accounts outpaced total deposit growth. Noninterest-bearing demand deposits made up 36% of total deposits as of December 31, 2020, up from 30% as of December 31, 2019.
Fourth quarter 2020 average deposits of $44.4 billion grew by $3.2 billion, or 31% linked quarter annualized. Fourth quarter average deposit growth was led by noninterest-bearing demand deposits, which increased by $2.0 billion, or 56% linked quarter annualized, followed by growth in money market, interest-bearing checking and savings accounts.
•PPP Liquidity Facility (“PPPLF”) — In October 2020, the Company paid off in full its PPPLF, which was $1.4 billion as of September 30, 2020.
•Capital Levels – Capital levels for East West are strong. As of December 31, 2020, stockholders’ equity was $5.3 billion, or $37.22 per share. Tangible equity1 per common share was $33.85 as of December 31, 2020, an increase of 3% from $32.85 as of September 30, 2020, and an increase of 9% from $31.15 as of December 31, 2019. As of December 31, 2020, the tangible equity to tangible assets ratio1 was 9.3%, the common equity tier 1 (“CET1”) capital ratio was 12.7%, and the total risk-based capital ratio was 14.3%.
•Dividend Increase – First quarter 2021 common stock dividend was increased by 20%, or 5.5 cents per share. The new quarterly dividend is $0.33, up from $0.275 per share. The new annual dividend is $1.32 per share, compared with $1.10 per share previously.
| 1 See reconciliation of GAAP to non-GAAP financial measures in Table 14. |
|---|
OPERATING RESULTS
•Full Year Earnings – Full year 2020 net income was $567.8 million, or $3.97 per diluted share, a decrease of 16% from $674.0 million, or $4.61 per diluted share, for the full year 2019.
Full year 2020 adjusted net income2 was $565.2 million, or $3.95 per diluted share, a decrease of 20% from adjusted net income of $707.9 million, or $4.84 per diluted share, for the full year 2019. Non-GAAP adjustments exclude the impacts of the impairment, recoveries and income tax items related to DC Solar tax credit investments in 2020 and 2019, as applicable.
•Fourth Quarter Earnings – Fourth quarter 2020 net income was $164.1 million, or $1.15 per diluted share, an increase of 3% from $159.5 million, or $1.12 per diluted share, for the third quarter of 2020.
Fourth quarter 2020 adjusted net income2 was $161.5 million, or $1.13 per diluted share, a quarter-over-quarter increase of 1% from $159.5 million. Fourth quarter 2020 earnings were adjusted for items related to DC Solar tax credit investments, which added $2.6 million, or two cents per share to earnings. There were no adjustments to third quarter 2020 earnings..
Fourth Quarter 2020 Compared to Third Quarter 2020
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $346.6 million, an increase of 7% from $324.1 million. Net interest margin (“NIM”) of 2.77% increased by five basis points from 2.72%. The quarter-over-quarter changes in the NII and the NIM reflect an increase in PPP-related income, stability of core loan yields, a decrease in the cost of deposits, loan growth, and growth in available-for-sale debt securities.
•Adjusted NII3 totaled $332.7 million, an increase of 5% from $317.6 million. Adjusted NIM3 of 2.76% contracted by one basis point from 2.77%. Adjusted NII and adjusted NIM exclude PPP loan related income and PPPLF expense.
•Average loan yield of 3.68% expanded by eight basis points from 3.60%, reflecting a higher amount of deferred fee income accreted on PPP loans. Interest and fees earned on PPP loans contributed $14.2 million to interest income in the fourth quarter, an increase from $7.8 million in the third quarter. Third quarter PPP fee income was lower because of slower than anticipated forgiveness of PPP loans by the SBA.
•Excluding the impact of PPP loans, the adjusted average loan yield3 of 3.69% contracted by one basis point from 3.70%, reflecting the general stability of yields of the underlying loan portfolio.
•The average cost of interest-bearing deposits decreased by 10 basis points to 0.40%, down from 0.50%. The average cost of deposits decreased by eight basis points to 0.25%, down from 0.33%. The decrease in the cost of deposits reflects growth in low-cost deposit accounts and continued downward repricing of maturing time deposits.
Noninterest Income
Noninterest income totaled $69.8 million, a 28% increase from $54.5 million. The quarter-over-quarter increase was primarily driven by a favorable change in the credit valuation adjustment of interest rate contracts; an increase in customer-driven foreign exchange transactions, and an increase in net gains on sale of SBA loans.
| 2 See reconciliation of GAAP to non-GAAP financial measures in Table 12. |
|---|
| 3 See reconciliation of GAAP to non-GAAP financial measures in Table 15. |
Noninterest Expense
Noninterest expense totaled $178.7 million, an increase of 4% from $172.6 million.
•Fourth quarter noninterest expense consisted of $165.6 million of adjusted noninterest expense4, $12.3 million in amortization of tax credit and other investments, and $0.8 million in amortization of core deposit intangibles.
•Adjusted noninterest expense of $165.6 million increased by $11.1 million, or 7%, from $154.4 million in the third quarter. The quarter-over-quarter change was primarily driven by increased bonus accrual in compensation and employee benefits expense, and a write-down on other real estate owned, which was included in other operating expense. Year-over-year, adjusted noninterest expense was essentially flat, compared with $165.3 million in the fourth quarter of 2019.
•Amortization of tax credit and other investments totaled $12.3 million, a decrease from $17.2 million in the third quarter. Fourth quarter amortization of tax credit and other investments was lower because it included $10.7 million of recoveries related to DC Solar tax credit investments.
•The adjusted efficiency ratio4 was 39.8% in the fourth quarter, an improvement from 40.8% in the third quarter.
TAX RELATED ITEMS
Full year 2020 income tax expense was $118.0 million and the effective tax rate was 17%, compared with income tax expense of $169.9 million and an effective tax rate of 20% for the full year of 2019.
•Fourth quarter 2020 income tax expense was $49.3 million and the effective tax rate was 23%, compared with income tax expense of $36.5 million and an effective tax rate of 19% for the third quarter of 2020.
•Fourth quarter 2020 income tax expense and effective tax rate were elevated by $8.1 million related to DC Solar tax credit investments. Combined with the $10.7 million of recoveries included as part of amortization of tax credit and other investments, as noted above, the DC Solar-related items in the fourth quarter of 2020 added $2.6 million after tax, or two cents per share.
ASSET QUALITY
The allowance for loan losses (“ALLL”) totaled $620.0 million, or 1.61% of loans held-for-investment (“HFI”), as of December 31, 2020, compared with $618.3 million, or 1.65% of loans HFI, as of September 30, 2020.
1
•During the fourth quarter of 2020, we recorded a $24.3 million provision for credit losses, compared with $10.0 million for the third quarter of 2020.
•Quarter-over-quarter, the ALLL increased by $1.7 million, although the ratio of ALLL to loans HFI decreased by 4 basis points. The change in the ALLL reflects the loan growth during the quarter, an improved macroeconomic forecast, and positive trends in deferrals, delinquencies, criticized assets and other asset quality metrics.
•Fourth quarter 2020 net charge-offs were $18.8 million, or annualized 0.20% of average loans HFI, a decrease from $24.2 million, or annualized 0.26% of average loans HFI for the third quarter of 2020. A quarter-over-quarter increase in CRE charge-offs in the fourth quarter was more than offset by the quarter-over-quarter decrease in C&I charge-offs. The full year 2020 net charge-off ratio was 0.17% of average loans HFI, compared with 0.16% for full year 2019.
•Nonperforming assets were $234.9 million, or 0.45% of total assets, as of December 31, 2020, a 10% decrease from nonperforming assets of $259.9 million, or 0.52% of total assets, as of September 30, 2020. The quarter-over-quarter decrease in nonperforming assets was largely due to a decrease in C&I and CRE nonaccrual loans.
| 4 See reconciliation of GAAP to non-GAAP financial measures in Table 13. |
|---|
CAPITAL STRENGTH
Capital levels for East West are strong. The following table presents the regulatory capital ratios as of December 31, 2020, September 30, 2020, and December 31, 2019.
| EWBC Regulatory Capital Metrics | Basel III | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in millions) | December 31,<br><br>2020 (a) | September 30,<br><br>2020 (a) | December 31,<br>2019 | Minimum<br>Capital<br>Ratio | Well<br>Capitalized<br>Ratio | Minimum<br><br>Capital Ratio +<br><br>Conservation Buffer (b) | |||||||||
| Risk-Based Capital Ratios: | |||||||||||||||
| CET1 capital ratio | 12.7 | % | 12.8 | % | 12.9 | % | 4.5 | % | 6.5 | % | 7.0 | % | |||
| Tier 1 capital ratio | 12.7 | % | 12.8 | % | 12.9 | % | 6.0 | % | 8.0 | % | 8.5 | % | |||
| Total capital ratio | 14.3 | % | 14.5 | % | 14.4 | % | 8.0 | % | 10.0 | % | 10.5 | % | |||
| Leverage ratio | 9.4 | % | 9.8 | % | 10.3 | % | 4.0 | % | 5.0 | % | 4.0 | % | |||
| Risk-Weighted Assets (“RWA”) (c) | $ | 38,533 | $ | 36,922 | $ | 35,136 | N/A | N/A | N/A |
N/A Not applicable.
(a)The Company has elected to use the 2020 CECL transition provision in the calculation of its December 31, 2020 and September 30, 2020 regulatory capital ratios. The Company’s December 31, 2020 regulatory capital ratios and RWA are preliminary.
(b)An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.
(c)Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared first quarter 2021 dividends for the Company’s common stock. The common stock cash dividend of $0.33 per share is payable on February 23, 2021 to shareholders of record on February 9, 2021. This represents a 20% increase, or 5.5 cents per share, to the quarterly common stock dividend, up from $0.275 per share previously. The new annual dividend is $1.32 per share, compared with $1.10 per share previously.
On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock. In 2020, the Company repurchased $145.9 million of common stock, or 4.5 million shares, under this authorization during the first quarter. East West did not repurchase any shares during the fourth quarter of 2020 under this authorization.
Conference Call
East West will host a conference call to discuss fourth quarter and full year 2020 earnings with the public on Thursday, January 28, 2021 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses fourth quarter and full year 2020 results and operating developments.
•The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
•A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
•A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
•A replay of the conference call will be available on January 28, 2021 at 11:30 a.m. Pacific Time through February 28, 2021. The replay numbers are: within the U.S. – (877) 344-7529; within Canada – (855) 669-9658; International calls – (412) 317-0088; and the replay access code is: 10150890.
About East West
East West Bancorp, Inc. is a publicly owned company with total assets of $52.2 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California, operating over 120 locations in the United States and Greater China. U.S. markets include California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.
Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to our current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, and the negative thereof. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, the impact of disease pandemics, such as the resurgences and subsequent waves of the COVID-19 pandemic, on the Company, its operations and its customers, employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the below-mentioned and/or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period; changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the Small Business Administration’s (“SBA”) Paycheck Protection Program, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and any similar or related rules and regulations, the Board of Governors of the Federal Reserve System (“Federal Reserve”) efforts to provide liquidity to the United States (“U.S.”) financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers; changes in the U.S. economy, including an economic slowdown or recession, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”), the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission (“SEC”), the Consumer Financial Protection Bureau (“CFPB”) and the California Department of Financial Protection and Innovation (“DFPI”) - Division of Financial Institutions, and SBA; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against other financial institutions in its banking markets; success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate (“SOFR”) selected as the preferred alternative reference rate to the London Interbank Offered Rate (“LIBOR”); impact of a communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused and materially impact the Company’s ability to provide services to its clients; adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; impact on the Company’s international operations due to political developments, disease pandemics, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from the Company’s interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on critical accounting policies and assumptions; impact of other potential federal tax changes and spending cuts; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment (“OTTI”) on securities held in the Company’s available-for-sale (“AFS”) debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance. In addition to the risk factors enumerated above, the economic impact of the COVID-19 pandemic could cause actual outcomes to differ, possibly materially, from the Company’s forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others. For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||||||
| ( and shares in thousands, except per share data) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Table 1 | |||||||||||||||
| December 31, 2020<br>% or Basis Point Change | |||||||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||
| Assets | |||||||||||||||
| $ | 592,117 | $ | 503,376 | $ | 536,221 | 17.6 | % | 10.4 | % | ||||||
| 3,425,854 | 4,003,565 | 2,724,928 | (14.4) | 25.7 | |||||||||||
| 4,017,971 | 4,506,941 | 3,261,149 | (10.8) | 23.2 | |||||||||||
| 809,728 | 699,465 | 196,161 | 15.8 | 312.8 | |||||||||||
| 1,460,000 | 1,210,000 | 860,000 | 20.7 | 69.8 | |||||||||||
| 5,544,658 | 4,539,160 | 3,317,214 | 22.2 | 67.1 | |||||||||||
| 83,046 | 79,172 | 78,580 | 4.9 | 5.7 | |||||||||||
| 1,788 | 4,148 | 434 | (56.9) | 312.0 | |||||||||||
| 37,770,972 | 36,818,877 | 34,420,252 | 2.6 | 9.7 | |||||||||||
| 213,555 | 192,913 | 207,037 | 10.7 | 3.1 | |||||||||||
| 266,525 | 254,512 | 254,140 | 4.7 | 4.9 | |||||||||||
| 465,697 | 465,697 | 465,697 | — | — | |||||||||||
| 95,460 | 96,092 | 99,973 | (0.7) | (4.5) | |||||||||||
| 1,427,513 | 1,504,500 | 1,035,459 | (5.1) | 37.9 | |||||||||||
| $ | 52,156,913 | $ | 50,371,477 | $ | 44,196,096 | 3.5 | % | 18.0 | % | ||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||
| $ | 44,862,752 | $ | 41,680,555 | $ | 37,324,259 | 7.6 | % | 20.2 | % | ||||||
| 21,009 | 59,613 | 28,669 | (64.8) | (26.7) | |||||||||||
| 652,612 | 657,185 | 745,915 | (0.7) | (12.5) | |||||||||||
| 300,000 | 348,063 | 200,000 | (13.8) | 50.0 | |||||||||||
| 151,739 | 1,579,317 (3) | 152,270 | (90.4) | (0.3) | |||||||||||
| 102,830 | 103,673 | 108,083 | (0.8) | (4.9) | |||||||||||
| 796,796 | 816,965 | 619,283 | (2.5) | 28.7 | |||||||||||
| 46,887,738 | 45,245,371 | 39,178,479 | 3.6 | 19.7 | |||||||||||
| 5,269,175 | 5,126,106 | 5,017,617 | 2.8 | 5.0 | |||||||||||
| $ | 52,156,913 | $ | 50,371,477 | $ | 44,196,096 | 3.5 | % | 18.0 | % | ||||||
| $ | 37.22 | $ | 36.22 | $ | 34.46 | 2.7 | % | 8.0 | % | ||||||
| $ | 33.85 | $ | 32.85 | $ | 31.15 | 3.0 | 8.7 | ||||||||
| 141,565 | 141,507 | 145,625 | 0.0 | (2.8) | |||||||||||
| 9.27 | % | 9.32 | % | 10.38 | % | (5) | bps | (111) | bps |
All values are in US Dollars.
(1)Resale and repurchase agreements are reported net when the transactions are eligible for netting under Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. There was no netting of repurchase agreements against resale agreements as of December 31, 2020 and September 30, 2020. $250.0 million of gross repurchase agreements were eligible for netting against gross resale agreements as of December 31, 2019.
(2)On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using the modified retrospective approach. We recorded $125.2 million increase to allowance for loan losses and $98.0 million after-tax decrease to opening retained earnings as of January 1, 2020.
(3)Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) as of September 30, 2020.
(4)See reconciliation of GAAP to non-GAAP financial measures in Table 14.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| TOTAL LOANS AND DEPOSITS DETAIL | ||||||||||
| ( in thousands) | ||||||||||
| (unaudited) | ||||||||||
| Table 2 | ||||||||||
| December 31, 2020<br>% Change | ||||||||||
| December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | Qtr-o-Qtr | Yr-o-Yr | ||||||
| Loans: | ||||||||||
| Commercial: | ||||||||||
| $ | 13,631,726 | $ | 13,305,024 | $ | 12,150,931 | 2.5 | % | 12.2 | % | |
| 11,174,611 | 11,037,987 | 10,278,448 | 1.2 | 8.7 | ||||||
| 3,033,998 | 3,057,274 | 2,856,374 | (0.8) | 6.2 | ||||||
| 599,692 | 578,407 | 628,499 | 3.7 | (4.6) | ||||||
| 14,808,301 | 14,673,668 | 13,763,321 | 0.9 | 7.6 | ||||||
| Consumer: | ||||||||||
| 8,185,953 | 7,785,759 | 7,108,590 | 5.1 | 15.2 | ||||||
| 1,601,716 | 1,514,388 | 1,472,783 | 5.8 | 8.8 | ||||||
| 9,787,669 | 9,300,147 | 8,581,373 | 5.2 | 14.1 | ||||||
| 163,259 | 158,290 | 282,914 | 3.1 | (42.3) | ||||||
| Total loans HFI (2) | 38,390,955 | 37,437,129 | 34,778,539 | 2.5 | 10.4 | |||||
| Loans HFS | 1,788 | 4,148 | 434 | (56.9) | 312.0 | |||||
| 38,392,743 | 37,441,277 | 34,778,973 | 2.5 | 10.4 | ||||||
| Allowance for loan losses | (619,983) | (618,252) | (358,287) | 0.3 | 73.0 | |||||
| $ | 37,772,760 | $ | 36,823,025 | $ | 34,420,686 | 2.6 | 9.7 | |||
| Deposits: | ||||||||||
| $ | 16,298,301 | $ | 14,924,917 | $ | 11,080,036 | 9.2 | % | 47.1 | % | |
| 6,142,193 | 5,731,573 | 5,200,755 | 7.2 | 18.1 | ||||||
| 10,740,667 | 9,553,574 | 8,711,964 | 12.4 | 23.3 | ||||||
| 2,681,242 | 2,401,318 | 2,117,196 | 11.7 | 26.6 | ||||||
| 9,000,349 | 9,069,173 | 10,214,308 | (0.8) | (11.9) | ||||||
| $ | 44,862,752 | $ | 41,680,555 | $ | 37,324,259 | 7.6 | % | 20.2 | % |
All values are in US Dollars.
(1)Includes $1.57 billion and $1.77 billion of Paycheck Protection Program (“PPP”) loans as of December 31, 2020 and September 30, 2020, respectively.
(2)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(58.8) million, $(67.0) million, and $(43.2) million as of December 31, 2020, September 30, 2020, and December 31, 2019, respectively. Net origination fees related to PPP loans were $(12.7) million and $(22.6) million as of December 31, 2020 and September 30, 2020, respectively.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| CONDENSED CONSOLIDATED STATEMENT OF INCOME | ||||||||||
| ( and shares in thousands, except per share data) | ||||||||||
| (unaudited) | ||||||||||
| Table 3 | ||||||||||
| Three Months Ended | December 31, 2020<br>% Change | |||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | Qtr-o-Qtr | Yr-o-Yr | ||||||
| Interest and dividend income (1) | $ | 381,348 | $ | 365,728 | $ | 467,233 | 4.3 | % | (18.4) | % |
| Interest expense | 34,767 | 41,598 | 99,014 | (16.4) | (64.9) | |||||
| Net interest income before provision for credit losses | 346,581 | 324,130 | 368,219 | 6.9 | (5.9) | |||||
| Provision for credit losses | 24,340 | 10,000 | 18,577 | 143.4 | 31.0 | |||||
| Net interest income after provision for credit losses | 322,241 | 314,130 | 349,642 | 2.6 | (7.8) | |||||
| Noninterest income (2) | 69,832 | 54,503 | 65,797 | 28.1 | 6.1 | |||||
| Noninterest expense (2) | 178,651 | 172,573 | 196,157 | 3.5 | (8.9) | |||||
| Income before income taxes | 213,422 | 196,060 | 219,282 | 8.9 | (2.7) | |||||
| Income tax expense | 49,338 | 36,523 | 31,067 | 35.1 | 58.8 | |||||
| Net income | $ | 164,084 | $ | 159,537 | $ | 188,215 | 2.9 | % | (12.8) | % |
| Earnings per share (“EPS”) | ||||||||||
| - Basic | $ | 1.16 | $ | 1.13 | $ | 1.29 | 2.8 | % | (10.3) | % |
| - Diluted | $ | 1.15 | $ | 1.12 | $ | 1.29 | 2.5 | (10.5) | ||
| Weighted-average number of shares outstanding | ||||||||||
| - Basic | 141,564 | 141,498 | 145,624 | 0.0 | % | (2.8) | % | |||
| - Diluted | 142,529 | 142,043 | 146,318 | 0.3 | (2.6) | |||||
| Three Months Ended | December 31, 2020<br>% Change | |||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | Qtr-o-Qtr | Yr-o-Yr | ||||||
| Noninterest income: | ||||||||||
| $ | 18,387 | $ | 18,736 | $ | 17,244 | (1.9) | % | 6.6 | % | |
| 14,256 | 12,573 | 9,843 | 13.4 | 44.8 | ||||||
| 12,967 | 5,538 | 17,828 | 134.1 | (27.3) | ||||||
| 6,679 | 3,310 | 6,032 | 101.8 | 10.7 | ||||||
| 4,497 | 4,553 | 4,132 | (1.2) | 8.8 | ||||||
| 3,058 | 361 | 1,068 | 747.1 | 186.3 | ||||||
| 432 | 698 | 864 | (38.1) | (50.0) | ||||||
| 3,989 | 5,239 | 5,462 | (23.9) | (27.0) | ||||||
| 5,567 | 3,495 | 3,324 | 59.3 | 67.5 | ||||||
| Total noninterest income (2) | $ | 69,832 | $ | 54,503 | $ | 65,797 | 28.1 | % | 6.1 | % |
| Noninterest expense: | ||||||||||
| $ | 105,400 | $ | 99,756 | $ | 101,051 | 5.7 | % | 4.3 | % | |
| 16,548 | 16,648 | 17,138 | (0.6) | (3.4) | ||||||
| 3,995 | 4,006 | 3,371 | (0.3) | 18.5 | ||||||
| 3,501 | 3,113 | 3,749 | 12.5 | (6.6) | ||||||
| 4,707 | 3,590 | 3,588 | 31.1 | 31.2 | ||||||
| 7,027 | 8,539 | 7,626 | (17.7) | (7.9) | ||||||
| 1,537 | 1,224 | 3,159 | 25.6 | (51.3) | ||||||
| 1,673 | 1,366 | 2,141 | 22.5 | (21.9) | ||||||
| 22,000 | 17,122 | 24,512 | 28.5 | (10.2) | ||||||
| 12,263 | 17,209 | 29,822 | (28.7) | (58.9) | ||||||
| Total noninterest expense (2) | $ | 178,651 | $ | 172,573 | $ | 196,157 | 3.5 | % | (8.9) | % |
All values are in US Dollars.
(1)Includes $14.2 million and $7.8 million of interest income related to PPP loans for the three months ended December 31, 2020 and September 30, 2020, respectively.
(2)In the fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior period amounts have been revised to conform with the current presentation. Includes $10.7 million in recoveries related to the Company’s investment in DC Solar for the three months ended December 31, 2020.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||
|---|---|---|---|---|---|
| CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||
| ( and shares in thousands, except per share data) | |||||
| (unaudited) | |||||
| Table 4 | |||||
| Year Ended | December 31, 2020<br>% Change | ||||
| December 31, 2020 | December 31, 2019 | Yr-o-Yr | |||
| Interest and dividend income (1) | $ | 1,595,042 | $ | 1,882,300 | (15.3)% |
| Interest expense | 217,849 | 414,487 | (47.4) | ||
| Net interest income before provision for credit losses | 1,377,193 | 1,467,813 | (6.2) | ||
| Provision for credit losses | 210,653 | 98,685 | 113.5 | ||
| Net interest income after provision for credit losses | 1,166,540 | 1,369,128 | (14.8) | ||
| Noninterest income (2) | 235,547 | 222,245 | 6.0 | ||
| Noninterest expense (2) | 716,322 | 747,456 | (4.2) | ||
| Income before income taxes | 685,765 | 843,917 | (18.7) | ||
| Income tax expense | 117,968 | 169,882 | (30.6) | ||
| Net income | $ | 567,797 | $ | 674,035 | (15.8)% |
| EPS | |||||
| - Basic | $ | 3.99 | $ | 4.63 | (13.9)% |
| - Diluted | $ | 3.97 | $ | 4.61 | (13.9) |
| Weighted-average number of shares outstanding | |||||
| - Basic | 142,336 | 145,497 | (2.2)% | ||
| - Diluted | 142,991 | 146,179 | (2.2) | ||
| Year Ended | December 31, 2020<br>% Change | ||||
| December 31, 2020 | December 31, 2019 | Yr-o-Yr | |||
| Noninterest income: | |||||
| $ | 74,842 | $ | 63,670 | 17.5% | |
| 48,148 | 38,648 | 24.6 | |||
| 31,685 | 39,865 | (20.5) | |||
| 22,370 | 26,398 | (15.3) | |||
| 17,494 | 16,547 | 5.7 | |||
| 4,501 | 4,035 | 11.5 | |||
| 12,299 | 3,930 | 213.0 | |||
| 10,641 | 18,117 | (41.3) | |||
| 13,567 | 11,035 | 22.9 | |||
| Total noninterest income (2) | $ | 235,547 | $ | 222,245 | 6.0% |
| Noninterest expense: | |||||
| $ | 404,071 | $ | 401,700 | 0.6% | |
| 66,489 | 69,730 | (4.6) | |||
| 15,128 | 12,928 | 17.0 | |||
| 13,530 | 14,175 | (4.6) | |||
| 16,603 | 13,533 | 22.7 | |||
| 29,033 | 26,471 | 9.7 | |||
| 5,391 | 9,846 | (45.2) | |||
| 7,766 | 8,441 | (8.0) | |||
| 79,489 | 92,249 | (13.8) | |||
| 70,082 | 98,383 | (28.8) | |||
| 8,740 | — | 100.0 | |||
| Total noninterest expense (2) | $ | 716,322 | $ | 747,456 | (4.2)% |
All values are in US Dollars.
(1)Includes $43.3 million of interest income related to PPP loans for the year ended December 31, 2020.
(2)In the fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior period amounts have been revised to conform with the current presentation. Includes $10.7 million in recoveries related to the Company’s investment in DC Solar for the twelve months ended December 31, 2020.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SELECTED AVERAGE BALANCES | |||||||||||||
| ( in thousands) | |||||||||||||
| (unaudited) | |||||||||||||
| Table 5 | |||||||||||||
| Three Months Ended | December 31, 2020 <br>% Change | Year Ended | December 31, 2020 <br>% Change | ||||||||||
| December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | Qtr-o-Qtr | Yr-o-Yr | December 31,<br>2020 | December 31,<br>2019 | Yr-o-Yr | ||||||
| Loans: | |||||||||||||
| Commercial: | |||||||||||||
| $ | 13,332,194 | $ | 13,235,845 | $ | 12,237,081 | 0.7% | 8.9% | $ | 13,074,883 | $ | 12,073,820 | 8.3% | |
| 11,067,392 | 10,942,780 | 10,006,424 | 1.1 | 10.6 | 10,828,037 | 9,642,301 | 12.3 | ||||||
| 3,051,472 | 3,107,294 | 2,771,555 | (1.8) | 10.1 | 3,009,365 | 2,588,347 | 16.3 | ||||||
| 588,665 | 564,219 | 668,147 | 4.3 | (11.9) | 597,118 | 656,142 | (9.0) | ||||||
| 14,707,529 | 14,614,293 | 13,446,126 | 0.6 | 9.4 | 14,434,520 | 12,886,790 | 12.0 | ||||||
| Consumer: | |||||||||||||
| 7,990,035 | 7,695,838 | 6,934,361 | 3.8 | 15.2 | 7,613,706 | 6,526,415 | 16.7 | ||||||
| 1,558,781 | 1,475,098 | 1,506,346 | 5.7 | 3.5 | 1,480,516 | 1,580,343 | (6.3) | ||||||
| 9,548,816 | 9,170,936 | 8,440,707 | 4.1 | 13.1 | 9,094,222 | 8,106,758 | 12.2 | ||||||
| 137,186 | 139,371 | 286,096 | (1.6) | (52.0) | 195,392 | 305,768 | (36.1) | ||||||
| $ | 37,725,725 | $ | 37,160,445 | $ | 34,410,010 | 1.5% | 9.6% | $ | 36,799,017 | $ | 33,373,136 | 10.3% | |
| Interest-earning assets | $ | 49,703,349 | $ | 47,428,586 | $ | 42,114,123 | 4.8% | 18.0% | $ | 46,239,709 | $ | 40,320,804 | 14.7% |
| Total assets | $ | 52,466,325 | $ | 50,247,259 | $ | 44,471,242 | 4.4% | 18.0% | $ | 48,937,793 | $ | 42,484,885 | 15.2% |
| Deposits: | |||||||||||||
| $ | 16,311,010 | $ | 14,296,475 | $ | 10,976,368 | 14.1% | 48.6% | $ | 13,823,152 | $ | 10,502,618 | 31.6% | |
| 6,067,849 | 5,663,873 | 5,540,300 | 7.1 | 9.5 | 5,357,934 | 5,244,867 | 2.2 | ||||||
| 10,626,940 | 9,981,704 | 8,592,058 | 6.5 | 23.7 | 9,881,284 | 8,220,236 | 20.2 | ||||||
| 2,450,980 | 2,259,788 | 2,118,911 | 8.5 | 15.7 | 2,234,913 | 2,118,060 | 5.5 | ||||||
| 8,965,337 | 9,008,907 | 10,180,922 | (0.5) | (11.9) | 9,465,608 | 9,961,289 | (5.0) | ||||||
| $ | 44,422,116 | $ | 41,210,747 | $ | 37,408,559 | 7.8% | 18.7% | $ | 40,762,891 | $ | 36,047,070 | 13.1% | |
| Interest-bearing liabilities | $ | 29,666,559 | $ | 29,552,756 | $ | 27,522,469 | 0.4% | 7.8% | $ | 28,798,277 | $ | 26,408,961 | 9.0% |
| Stockholders’ equity | $ | 5,243,203 | $ | 5,079,351 | $ | 4,977,759 | 3.2% | 5.3% | $ | 5,082,186 | $ | 4,760,845 | 6.7% |
All values are in US Dollars.
(1)Includes average balances of PPP loans of $1.70 billion and $1.76 billion for the three months ended December 31, 2020 and September 30, 2020, respectively, and $1.24 billion for the year ended December 31, 2020.
(2)Includes loans HFS.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||
| ( in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| Table 6 | ||||||||||||
| Three Months Ended | ||||||||||||
| December 31, 2020 | September 30, 2020 | |||||||||||
| Average | Average | Average | Average | |||||||||
| Balance | Interest | Yield/Rate (1) | Balance | Interest | Yield/Rate (1) | |||||||
| Assets | ||||||||||||
| Interest-earning assets: | ||||||||||||
| $ | 5,609,965 | $ | 4,458 | 0.32 | % | $ | 4,904,394 | $ | 5,045 | 0.41 | % | |
| 1,257,826 | 4,955 | 1.57 | % | 1,225,217 | 5,295 | 1.72 | % | |||||
| 5,029,820 | 22,914 | 1.81 | % | 4,059,456 | 18,493 | 1.81 | % | |||||
| 37,725,725 | 348,578 | 3.68 | % | 37,160,445 | 336,542 | 3.60 | % | |||||
| 80,013 | 443 | 2.20 | % | 79,074 | 353 | 1.78 | % | |||||
| 49,703,349 | 381,348 | 3.05 | % | 47,428,586 | 365,728 | 3.07 | % | |||||
| Noninterest-earning assets: | ||||||||||||
| 580,989 | 522,699 | |||||||||||
| (618,207) | (632,216) | |||||||||||
| 2,800,194 | 2,928,190 | |||||||||||
| $ | 52,466,325 | $ | 50,247,259 | |||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||
| Interest-bearing liabilities: | ||||||||||||
| $ | 6,067,849 | $ | 4,218 | 0.28 | % | $ | 5,663,873 | $ | 4,345 | 0.31 | % | |
| 10,626,940 | 5,542 | 0.21 | % | 9,981,704 | 6,837 | 0.27 | % | |||||
| 2,450,980 | 1,655 | 0.27 | % | 2,259,788 | 1,481 | 0.26 | % | |||||
| 8,965,337 | 16,727 | 0.74 | % | 9,008,907 | 21,135 | 0.93 | % | |||||
| 47,500 | 276 | 2.31 | % | 84,858 | 407 | 1.91 | % | |||||
| 653,748 | 3,137 | 1.91 | % | 656,906 | 3,146 | 1.91 | % | |||||
| 335,737 | 2,080 | 2.46 | % | 317,097 | 2,155 | 2.70 | % | |||||
| 518,468 | 1,132 | 0.87 | % | 1,579,623 | 2,092 | 0.53 | % | |||||
| 29,666,559 | 34,767 | 0.47 | % | 29,552,756 | 41,598 | 0.56 | % | |||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||
| 16,311,010 | 14,296,475 | |||||||||||
| 1,245,553 | 1,318,677 | |||||||||||
| 5,243,203 | 5,079,351 | |||||||||||
| $ | 52,466,325 | $ | 50,247,259 | |||||||||
| Interest rate spread | 2.58 | % | 2.51 | % | ||||||||
| Net interest income and net interest margin | $ | 346,581 | 2.77 | % | $ | 324,130 | 2.72 | % | ||||
| Adjusted net interest income and adjusted net interest margin (4) | $ | 332,701 | 2.76 | % | $ | 317,611 | 2.77 | % |
All values are in US Dollars.
(1)Annualized.
(2)There was no netting of repurchase agreements against resale agreements for the three months ended December 31, 2020 and September 30, 2020.
(3)Includes loans HFS.
(4)Net interest income and net interest margin have been adjusted for the impact of PPP loans and advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 15.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||||
| ( in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| Table 7 | ||||||||||||||
| Three Months Ended | ||||||||||||||
| December 31, 2020 | December 31, 2019 | |||||||||||||
| Average | Average | Average | Average | |||||||||||
| Balance | Interest | Yield/Rate (1) | Balance | Interest | Yield/Rate (1) | |||||||||
| Assets | ||||||||||||||
| Interest-earning assets: | ||||||||||||||
| $ | 5,609,965 | $ | 4,458 | 0.32 | % | $ | 3,213,016 | $ | 14,598 | 1.80 | % | |||
| 1,257,826 | 4,955 | 1.57 | % | 863,261 | 5,808 | 2.67 | % | |||||||
| 5,029,820 | 22,914 | 1.81 | % | 3,549,376 | 20,460 | 2.29 | % | |||||||
| 37,725,725 | 348,578 | 3.68 | % | 34,410,010 | 425,773 | 4.91 | % | |||||||
| 80,013 | 443 | 2.20 | % | 78,460 | 594 | 3.00 | % | |||||||
| 49,703,349 | 381,348 | 3.05 | % | 42,114,123 | 467,233 | 4.40 | % | |||||||
| Noninterest-earning assets: | ||||||||||||||
| 580,989 | 534,326 | |||||||||||||
| (618,207) | (355,759) | |||||||||||||
| 2,800,194 | 2,178,552 | |||||||||||||
| $ | 52,466,325 | $ | 44,471,242 | |||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||
| $ | 6,067,849 | $ | 4,218 | 0.28 | % | $ | 5,540,300 | $ | 13,589 | 0.97 | % | |||
| 10,626,940 | 5,542 | 0.21 | % | 8,592,058 | 25,223 | 1.16 | % | |||||||
| 2,450,980 | 1,655 | 0.27 | % | 2,118,911 | 2,266 | 0.42 | % | |||||||
| 8,965,337 | 16,727 | 0.74 | % | 10,180,922 | 47,935 | 1.87 | % | |||||||
| 47,500 | 276 | 2.31 | % | 43,313 | 404 | 3.70 | % | |||||||
| 653,748 | 3,137 | 1.91 | % | 745,732 | 4,686 | 2.49 | % | |||||||
| 335,737 | 2,080 | 2.46 | % | 148,892 | 3,382 | 9.01 | % | |||||||
| 518,468 | 1,132 | 0.87 | % | 152,341 | 1,529 | 3.98 | % | |||||||
| 29,666,559 | 34,767 | 0.47 | % | 27,522,469 | 99,014 | 1.43 | % | |||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||
| 16,311,010 | 10,976,368 | |||||||||||||
| 1,245,553 | 994,646 | |||||||||||||
| 5,243,203 | 4,977,759 | |||||||||||||
| $ | 52,466,325 | $ | 44,471,242 | |||||||||||
| Interest rate spread | 2.58 | % | 2.97 | % | ||||||||||
| Net interest income and net interest margin | $ | 346,581 | 2.77 | % | $ | 368,219 | 3.47 | % | ||||||
| Adjusted net interest income and adjusted net interest margin (4) | $ | 332,701 | 2.76 | % | $ | 368,219 | 3.47 | % |
All values are in US Dollars.
(1)Annualized.
(2)There was no netting of repurchase agreements against resale agreements for the three months ended December 31, 2020. Average balances of resale and repurchase agreements for the three months ended December 31, 2019 have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 1.57% and 2.50% for the three months ended December 31, 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 2.46% and 4.34% for the three months ended December 31, 2020 and 2019, respectively.
(3)Includes loans HFS.
(4)Net interest income and net interest margin have been adjusted for the impact of PPP loans and advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 15.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | ||||||||||||||||||
| ( in thousands) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Table 8 | ||||||||||||||||||
| Year Ended | ||||||||||||||||||
| December 31, 2019 | ||||||||||||||||||
| Average | Average | Average | ||||||||||||||||
| Interest | Yield/Rate | Balance | Interest | Yield/Rate | ||||||||||||||
| Assets | ||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||
| Interest-bearing cash and deposits with banks | $ | 4,236,430 | $ | 25,175 | 0.59 | % | $ | 3,050,954 | $ | 66,518 | 2.18 | % | ||||||
| Resale agreements (1) | 1,101,434 | 21,389 | 1.94 | % | 969,384 | 28,061 | 2.89 | % | ||||||||||
| AFS debt securities | 4,023,668 | 82,553 | 2.05 | % | 2,850,476 | 67,838 | 2.38 | % | ||||||||||
| Loans (2) | 36,799,017 | 1,464,382 | 3.98 | % | 33,373,136 | 1,717,415 | 5.15 | % | ||||||||||
| FHLB and FRB stock | 79,160 | 1,543 | 1.95 | % | 76,854 | 2,468 | 3.21 | % | ||||||||||
| Total interest-earning assets | 46,239,709 | 1,595,042 | 3.45 | % | 40,320,804 | 1,882,300 | 4.67 | % | ||||||||||
| Noninterest-earning assets: | ||||||||||||||||||
| Cash and due from banks | 528,406 | 471,060 | ||||||||||||||||
| Allowance for loan losses | (577,560) | (330,125) | ||||||||||||||||
| Other assets | 2,747,238 | 2,023,146 | ||||||||||||||||
| Total assets | $ | 48,937,793 | $ | 42,484,885 | ||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||
| Checking deposits | $ | 5,357,934 | $ | 24,213 | 0.45 | % | $ | 5,244,867 | $ | 58,168 | 1.11 | % | ||||||
| Money market deposits | 9,881,284 | 42,720 | 0.43 | % | 8,220,236 | 111,081 | 1.35 | % | ||||||||||
| Savings deposits | 2,234,913 | 6,398 | 0.29 | % | 2,118,060 | 9,626 | 0.45 | % | ||||||||||
| Time deposits | 9,465,608 | 111,411 | 1.18 | % | 9,961,289 | 196,927 | 1.98 | % | ||||||||||
| Federal funds purchased and other short-term borrowings | 108,398 | 1,504 | 1.39 | % | 44,881 | 1,763 | 3.93 | % | ||||||||||
| FHLB advances | 664,370 | 13,792 | 2.08 | % | 592,257 | 16,697 | 2.82 | % | ||||||||||
| Repurchase agreements (1) | 350,849 | 11,766 | 3.35 | % | 74,926 | 13,582 | 18.13 | % | ||||||||||
| Long-term debt and finance lease liabilities | 734,921 | 6,045 | 0.82 | % | 152,445 | 6,643 | 4.36 | % | ||||||||||
| Total interest-bearing liabilities | 28,798,277 | 217,849 | 0.76 | % | 26,408,961 | 414,487 | 1.57 | % | ||||||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||||||
| Demand deposits | 13,823,152 | 10,502,618 | ||||||||||||||||
| Accrued expenses and other liabilities | 1,234,178 | 812,461 | ||||||||||||||||
| Stockholders’ equity | 5,082,186 | 4,760,845 | ||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 48,937,793 | $ | 42,484,885 | ||||||||||||||
| Interest rate spread | 2.69 | % | 3.10 | % | ||||||||||||||
| Net interest income and net interest margin | $ | 1,377,193 | 2.98 | % | $ | 1,467,813 | 3.64 | % | ||||||||||
| Adjusted net interest income and adjusted net interest margin (3) | $ | 1,335,968 | 2.97 | % | $ | 1,467,813 | 3.64 | % |
All values are in US Dollars.
(1)Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 1.94% and 2.66% for the year ended December 31, 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 3.25% and 4.74% for the year ended December 31, 2020 and 2019, respectively.
(2)Includes loans HFS.
(3)Net interest income and net interest margin have been adjusted for the impact of PPP loans and advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 15.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SELECTED RATIOS | ||||||||||||
| (unaudited) | ||||||||||||
| Table 9 | ||||||||||||
| Three Months Ended (1) | December 31, 2020<br>Basis Point Change | |||||||||||
| December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | Qtr-o-Qtr | Yr-o-Yr | ||||||||
| Return on average assets | 1.24 | % | 1.26 | % | 1.68 | % | (2) | bps | (44) | bps | ||
| Adjusted return on average assets (2) | 1.22 | % | 1.26 | % | 1.67 | % | (4) | (45) | ||||
| Return on average equity | 12.45 | % | 12.50 | % | 15.00 | % | (5) | (255) | ||||
| Adjusted return on average equity (2) | 12.26 | % | 12.50 | % | 14.91 | % | (24) | (265) | ||||
| Return on average tangible equity (2) | 13.77 | % | 13.88 | % | 16.71 | % | (11) | (294) | ||||
| Adjusted return on average tangible equity (2) | 13.56 | % | 13.88 | % | 16.61 | % | (32) | (305) | ||||
| Interest rate spread | 2.58 | % | 2.51 | % | 2.97 | % | 7 | (39) | ||||
| Net interest margin | 2.77 | % | 2.72 | % | 3.47 | % | 5 | (70) | ||||
| Adjusted net interest margin (2) | 2.76 | % | 2.77 | % | 3.47 | % | (1) | (71) | ||||
| Average loan yield | 3.68 | % | 3.60 | % | 4.91 | % | 8 | (123) | ||||
| Adjusted average loan yield (2) | 3.69 | % | 3.70 | % | 4.91 | % | (1) | (122) | ||||
| Yield on average interest-earning assets | 3.05 | % | 3.07 | % | 4.40 | % | (2) | (135) | ||||
| Average cost of interest-bearing deposits | 0.40 | % | 0.50 | % | 1.34 | % | (10) | (94) | ||||
| Average cost of deposits | 0.25 | % | 0.33 | % | 0.94 | % | (8) | (69) | ||||
| Average cost of funds | 0.30 | % | 0.38 | % | 1.02 | % | (8) | (72) | ||||
| Adjusted pre-tax, pre-provision profitability ratio (2) | 1.90 | % | 1.78 | % | 2.40 | % | 12 | (50) | ||||
| Adjusted noninterest expense/average assets (2) | 1.26 | % | 1.22 | % | 1.47 | % | 4 | (21) | ||||
| Efficiency ratio | 42.90 | % | 45.58 | % | 45.20 | % | (268) | (230) | ||||
| Adjusted efficiency ratio (2) | 39.76 | % | 40.79 | % | 38.08 | % | (103) | bps | 168 | bps | ||
| Year Ended | December 31, 2020<br>Basis Point Change | |||||||||||
| December 31,<br>2020 | December 31,<br>2019 | Yr-o-Yr | ||||||||||
| Return on average assets | 1.16 | % | 1.59 | % | (43) | bps | ||||||
| Adjusted return on average assets (2) | 1.16 | % | 1.67 | % | (51) | |||||||
| Return on average equity | 11.17 | % | 14.16 | % | (299) | |||||||
| Adjusted return on average equity (2) | 11.12 | % | 14.87 | % | (375) | |||||||
| Return on average tangible equity (2) | 12.42 | % | 15.88 | % | (346) | |||||||
| Adjusted return on average tangible equity (2) | 12.37 | % | 16.68 | % | (431) | |||||||
| Interest rate spread | 2.69 | % | 3.10 | % | (41) | |||||||
| Net interest margin | 2.98 | % | 3.64 | % | (66) | |||||||
| Adjusted net interest margin (2) | 2.97 | % | 3.64 | % | (67) | |||||||
| Average loan yield | 3.98 | % | 5.15 | % | (117) | |||||||
| Adjusted average loan yield (2) | 4.00 | % | 5.15 | % | (115) | |||||||
| Yield on average interest-earning assets | 3.45 | % | 4.67 | % | (122) | |||||||
| Average cost of interest-bearing deposits | 0.69 | % | 1.47 | % | (78) | |||||||
| Average cost of deposits | 0.45 | % | 1.04 | % | (59) | |||||||
| Average cost of funds | 0.51 | % | 1.12 | % | (61) | |||||||
| Adjusted pre-tax, pre-provision profitability ratio (2) | 2.00 | % | 2.46 | % | (46) | |||||||
| Adjusted noninterest expense/average assets (2) | 1.30 | % | 1.52 | % | (22) | |||||||
| Efficiency ratio | 44.42 | % | 44.23 | % | 19 | |||||||
| Adjusted efficiency ratio (2) | 39.30 | % | 38.14 | % | 116 | bps |
(1)Annualized except for efficiency ratio.
(2)See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES | ||||||||||||||||
| ( in thousands) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Table 10 | ||||||||||||||||
| ASU 2016-13 replaced the incurred loss methodology used in calculating the allowance for loan losses with a current expected credit loss model (“CECL”). The Company adopted ASU 2016-13 using the modified retrospective approach on January 1, 2020. As a result, prior comparative periods have not been adjusted for the CECL model. In addition, ASU 2016-13 introduces the concept of Purchased Credit Deteriorated (“PCD”) financial assets, which replaces purchased credit-impaired (“PCI”) assets. For PCD assets, the initial allowance for loan losses is added to the purchase price and is considered to be part of the PCD loan amortized cost basis, hence, there is no income statement impact on acquisition. This contrasts with PCI loans where allowance for loan losses only reflects losses that are incurred by the Company after the acquisition. The allowance for loan losses is evaluated each quarter and adjusted as necessary by recognizing or reversing loan loss expense. There were no PCD loans during the three months and year ended December 31, 2020. | ||||||||||||||||
| Three Months Ended December 31, 2020 | ||||||||||||||||
| Commercial | Consumer | Total | ||||||||||||||
| CRE | Residential Mortgage | |||||||||||||||
| C&I | CRE | Multi-Family Residential | Construction and Land | Single-Family Residential | HELOCs | Other Consumer | ||||||||||
| Allowance for loan losses, September 30, 2020 | $ | 389,021 | $ | 166,810 | $ | 23,807 | $ | 10,401 | $ | 22,622 | $ | 3,273 | $ | 2,318 | $ | 618,252 |
| Provision for (reversal of) credit losses on loans | 15,041 | 9,415 | 3,606 | (184) | (7,263) | (585) | (184) | 19,846 | ||||||||
| Gross charge-offs | (8,759) | (12,518) | — | — | — | — | (5) | (21,282) | ||||||||
| Gross recoveries | 2,033 | 84 | 160 | 22 | 161 | 2 | 1 | 2,463 | ||||||||
| Total net (charge-offs) recoveries | (6,726) | (12,434) | 160 | 22 | 161 | 2 | (4) | (18,819) | ||||||||
| Foreign currency translation adjustment | 704 | — | — | — | — | — | — | 704 | ||||||||
| Allowance for loan losses, December 31, 2020 | $ | 398,040 | $ | 163,791 | $ | 27,573 | $ | 10,239 | $ | 15,520 | $ | 2,690 | $ | 2,130 | $ | 619,983 |
All values are in US Dollars.
| Three Months Ended September 30, 2020 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Commercial | Consumer | Total | |||||||||||||||
| CRE | Residential Mortgage | ||||||||||||||||
| C&I | CRE | Multi-Family Residential | Construction and Land | Single-Family Residential | HELOCs | Other Consumer | |||||||||||
| Allowance for loan losses, June 30, 2020 | $ | 380,723 | $ | 176,040 | $ | 25,058 | $ | 18,551 | $ | 25,314 | $ | 3,867 | $ | 2,518 | $ | 632,071 | |
| Provision for (reversal of) credit losses on loans | (a) | 31,691 | (8,301) | (1,916) | (8,180) | (2,692) | (637) | (76) | 9,889 | ||||||||
| Gross charge-offs | (25,111) | (1,414) | — | — | — | — | (124) | (26,649) | |||||||||
| Gross recoveries | 1,218 | 485 | 665 | 30 | — | 43 | — | 2,441 | |||||||||
| Total net (charge-offs) recoveries | (23,893) | (929) | 665 | 30 | — | 43 | (124) | (24,208) | |||||||||
| Foreign currency translation adjustment | 500 | — | — | — | — | — | — | 500 | |||||||||
| Allowance for loan losses, September 30, 2020 | $ | 389,021 | $ | 166,810 | $ | 23,807 | $ | 10,401 | $ | 22,622 | $ | 3,273 | $ | 2,318 | $ | 618,252 | |
| Three Months Ended December 31, 2019 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial | Consumer | Total | |||||||||||||||
| CRE | Residential Mortgage | ||||||||||||||||
| C&I | CRE | Multi-Family Residential | Construction and Land | Single-Family Residential | HELOCs | Other Consumer | |||||||||||
| Allowance for loan losses, September 30, 2019 | $ | 218,869 | $ | 37,473 | $ | 20,307 | $ | 29,171 | $ | 29,935 | $ | 5,856 | $ | 3,965 | $ | 345,576 | |
| Provision for (reversal of) credit losses on loans | (a) | 30,383 | 1,782 | 1,039 | (9,780) | (1,410) | (591) | (580) | 20,843 | ||||||||
| Gross charge-offs | (19,898) | — | — | — | — | — | (10) | (19,908) | |||||||||
| Gross recoveries | 8,889 | 1,254 | 1,480 | 13 | 2 | — | 5 | 11,643 | |||||||||
| Total net (charge-offs) recoveries | (11,009) | 1,254 | 1,480 | 13 | 2 | — | (5) | (8,265) | |||||||||
| Foreign currency translation adjustment | 133 | — | — | — | — | — | — | 133 | |||||||||
| Allowance for loan losses, December 31, 2019 | $ | 238,376 | $ | 40,509 | $ | 22,826 | $ | 19,404 | $ | 28,527 | $ | 5,265 | $ | 3,380 | $ | 358,287 | |
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES | |||||||||||||||||
| ( in thousands) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| Table 10 (continued) | |||||||||||||||||
| Year Ended December 31, 2020 | |||||||||||||||||
| Commercial | Consumer | Total | |||||||||||||||
| CRE | Residential Mortgage | ||||||||||||||||
| C&I | CRE | Multi-Family Residential | Construction and Land | Single-Family Residential | HELOCs | Other Consumer | |||||||||||
| Allowance for loan losses, December 31, 2019 | $ | 238,376 | $ | 40,509 | $ | 22,826 | $ | 19,404 | $ | 28,527 | $ | 5,265 | $ | 3,380 | $ | 358,287 | |
| Impact of ASU 2016-13 adoption | 74,237 | 72,169 | (8,112) | (9,889) | (3,670) | (1,798) | 2,221 | 125,158 | |||||||||
| Allowance for loan losses, January 1, 2020 | $ | 312,613 | $ | 112,678 | $ | 14,714 | $ | 9,515 | $ | 24,857 | $ | 3,467 | $ | 5,601 | $ | 483,445 | |
| Provision for (reversal of) credit losses on loans | 145,212 | 55,864 | 10,879 | 644 | (9,922) | (605) | (3,381) | 198,691 | |||||||||
| Gross charge-offs | (66,225) | (15,206) | — | — | — | (221) | (185) | (81,837) | |||||||||
| Gross recoveries | 5,428 | 10,455 | 1,980 | 80 | 585 | 49 | 95 | 18,672 | |||||||||
| Total net (charge-offs) recoveries | (60,797) | (4,751) | 1,980 | 80 | 585 | (172) | (90) | (63,165) | |||||||||
| Foreign currency translation adjustment | 1,012 | — | — | — | — | — | — | 1,012 | |||||||||
| Allowance for loan losses, December 31, 2020 | $ | 398,040 | $ | 163,791 | $ | 27,573 | $ | 10,239 | $ | 15,520 | $ | 2,690 | $ | 2,130 | $ | 619,983 |
All values are in US Dollars.
| Year Ended December 31, 2019 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Commercial | Consumer | Total | |||||||||||||||
| CRE | Residential Mortgage | ||||||||||||||||
| C&I | CRE | Multi-Family Residential | Construction and Land | Single-Family Residential | HELOCs | Other Consumer | |||||||||||
| Allowance for loan losses, December 31. 2018 | $ | 189,117 | $ | 40,666 | $ | 19,885 | $ | 20,290 | $ | 31,340 | $ | 5,774 | $ | 4,250 | $ | 311,322 | |
| Provision for (reversal of) credit losses on loans | (a) | 109,068 | (4,345) | 1,085 | (1,422) | (2,938) | (516) | (839) | 100,093 | ||||||||
| Gross charge-offs | (73,985) | (1,021) | — | — | (11) | — | (50) | (75,067) | |||||||||
| Gross recoveries | 14,501 | 5,209 | 1,856 | 536 | 136 | 7 | 19 | 22,264 | |||||||||
| Total net (charge-offs) recoveries | (59,484) | 4,188 | 1,856 | 536 | 125 | 7 | (31) | (52,803) | |||||||||
| Foreign currency translation adjustment | (325) | — | — | — | — | — | — | (325) | |||||||||
| Allowance for loan losses, December 31, 2019 | $ | 238,376 | $ | 40,509 | $ | 22,826 | $ | 19,404 | $ | 28,527 | $ | 5,265 | $ | 3,380 | $ | 358,287 | |
| Three Months Ended | Year Ended | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | December 31,<br>2020 | December 31,<br>2019 | |||||||||||||
| Unfunded Credit Facilities | |||||||||||||||||
| Allowance for unfunded credit commitments, beginning of period (1) | $ | 29,083 | $ | 28,972 | $ | 13,424 | $ | 11,158 | $ | 12,566 | |||||||
| Impact of ASU 2016-13 adoption | — | — | — | 10,457 | — | ||||||||||||
| Provision for (reversal of) credit losses on unfunded credit commitments | (b) | 4,494 | 111 | (2,266) | 11,962 | (1,408) | |||||||||||
| Allowance for unfunded credit commitments, end of period (1) | $ | 33,577 | $ | 29,083 | $ | 11,158 | $ | 33,577 | $ | 11,158 | |||||||
| Provision for credit losses | (a)+(b) | $ | 24,340 | $ | 10,000 | $ | 18,577 | $ | 210,653 | $ | 98,685 |
(1)Included in Accrued expense and other liabilities on the Consolidated Balance Sheet.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| CREDIT QUALITY | |||||||||
| ( in thousands) | |||||||||
| (unaudited) | |||||||||
| Table 11 | |||||||||
| The Company adopted ASU 2016-13 using the modified retrospective approach on January 1, 2020. As a result, prior comparative periods have not been adjusted. PCI loans prior to the adoption of ASU 2016-13 were classified as PCD loans as of January 1, 2020. Nonaccrual loans as of December 31, 2020 and September 30, 2020 include all loans that are 90 or more days past due, unless the loan is well-collateralized and in the process of collection. Nonaccrual loans presented as of December 31, 2019 include only non-PCI nonaccrual loans. | |||||||||
| Nonperforming Assets | September 30, 2020 | December 31, 2019 | |||||||
| Total <br>Nonaccrual loans | Non-PCI <br>Nonaccrual Loans | ||||||||
| Commercial: | |||||||||
| C&I | 133,939 | $ | 145,986 | $ | 74,835 | ||||
| CRE: | |||||||||
| CRE | 55,996 | 16,441 | |||||||
| Multifamily residential | 3,728 | 819 | |||||||
| Total CRE | 59,724 | 17,260 | |||||||
| Consumer: | |||||||||
| Residential mortgage: | |||||||||
| Single-family residential | 15,894 | 14,865 | |||||||
| HELOCs | 12,395 | 10,742 | |||||||
| Total residential mortgage | 28,289 | 25,607 | |||||||
| Other consumer | 2,495 | 2,517 | |||||||
| Total nonaccrual loans | 236,494 | 120,219 | |||||||
| Other real estate owned, net | 19,504 | 125 | |||||||
| Other nonperforming assets | 3,890 | 1,167 | |||||||
| Total nonperforming assets | 234,868 | $ | 259,888 | $ | 121,511 | ||||
| Credit Quality Ratios | September 30, 2020 | December 31, 2019 | |||||||
| Nonperforming assets to total assets | % | 0.52 | % | 0.27 | % | ||||
| Nonaccrual loans to loans HFI | % | 0.63 | % | 0.35 | % | ||||
| Allowance for loan losses to loans HFI | % | 1.65 | % | 1.03 | % | ||||
| Allowance for loan losses to nonaccrual loans | % | 261.42 | % | 298.03 | % | ||||
| Annualized quarterly net charge-offs to average loans HFI | % | 0.26 | % | 0.10 | % | ||||
| Annual net charge-offs to average loans HFI | % | N/A | 0.16 | % |
All values are in US Dollars.
N/A - Not applicable
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||
| ( and shares in thousands, except for per share data) | ||||||||||||
| (unaudited) | ||||||||||||
| Table 12 | ||||||||||||
| During the fourth quarter of 2020, the Company recorded 10.7 million in pre-tax recovery and 5.1 million in uncertain tax position related to the Company’s investment in DC Solar. In addition, the Company recorded a 7.0 million pre-tax impairment charge, reversed 30.1 million of certain previously claimed tax credits and recorded a 1.6 million in pre-tax recovery related to DC Solar during the first, second and fourth quarters of 2019, respectively. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that adjust for the above discussed non-recurring items provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. | ||||||||||||
| Three Months Ended | ||||||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | ||||||||||
| Net income | $ | 164,084 | $ | 159,537 | $ | 188,215 | ||||||
| Adjustments related to DC Solar | ||||||||||||
| Less: Recoveries (2) | (10,739) | — | (1,583) | |||||||||
| Tax effect of recoveries (3) | 3,047 | — | 468 | |||||||||
| Add: Uncertain tax position recorded in income tax expense | 5,127 | — | — | |||||||||
| Adjusted net income | $ | 161,519 | $ | 159,537 | $ | 187,100 | ||||||
| Diluted weighted-average number of shares outstanding | 142,529 | 142,043 | 146,318 | |||||||||
| Diluted EPS | $ | 1.15 | $ | 1.12 | $ | 1.29 | ||||||
| Adjustments related to DC Solar | ||||||||||||
| Recoveries, net of tax | (0.06) | — | (0.01) | |||||||||
| Uncertain tax position recorded in income tax expense | 0.04 | — | — | |||||||||
| Adjusted diluted EPS | $ | 1.13 | $ | 1.12 | $ | 1.28 | ||||||
| Average total assets | $ | 52,466,325 | $ | 50,247,259 | $ | 44,471,242 | ||||||
| Average stockholders’ equity | $ | 5,243,203 | $ | 5,079,351 | $ | 4,977,759 | ||||||
| Return on average assets (1) | 1.24 | % | 1.26 | % | 1.68 | % | ||||||
| Adjusted return on average assets (1) | 1.22 | % | 1.26 | % | 1.67 | % | ||||||
| Return on average equity (1) | 12.45 | % | 12.50 | % | 15.00 | % | ||||||
| Adjusted return on average equity (1) | 12.26 | % | 12.50 | % | 14.91 | % | ||||||
| Year Ended | ||||||||||||
| December 31, 2020 | December 31, 2019 | |||||||||||
| Net income | $ | 567,797 | $ | 674,035 | ||||||||
| Adjustments related to DC Solar | ||||||||||||
| Add: Impairment charge (2) | — | 6,978 | ||||||||||
| Less: Recoveries (2) | (10,739) | (1,583) | ||||||||||
| Tax effect of adjustments (3) | 3,047 | (1,595) | ||||||||||
| Add: Reversal of certain previously claimed tax credits | — | 30,104 | ||||||||||
| Add: Uncertain tax position recorded in income tax expense | 5,127 | — | ||||||||||
| Adjusted net income | $ | 565,232 | $ | 707,939 | ||||||||
| Diluted weighted-average number of shares outstanding | 142,991 | 146,179 | ||||||||||
| Diluted EPS | $ | 3.97 | $ | 4.61 | ||||||||
| Adjustments related to DC Solar | ||||||||||||
| Impairment charge, net of tax | — | 0.03 | ||||||||||
| Recoveries, net of tax | (0.06) | (0.01) | ||||||||||
| Reversal of certain previously claimed tax credits | — | 0.21 | ||||||||||
| Uncertain tax position recorded in income tax expense | 0.04 | — | ||||||||||
| Adjusted diluted EPS | $ | 3.95 | $ | 4.84 | ||||||||
| Average total assets | $ | 48,937,793 | $ | 42,484,885 | ||||||||
| Average stockholders’ equity | $ | 5,082,186 | $ | 4,760,845 | ||||||||
| Return on average assets | 1.16 | % | 1.59 | % | ||||||||
| Adjusted return on average assets | 1.16 | % | 1.67 | % | ||||||||
| Return on average equity | 11.17 | % | 14.16 | % | ||||||||
| Adjusted return on average equity | 11.12 | % | 14.87 | % |
All values are in US Dollars.
(1)Annualized.
(2)Included in Amortization of tax credit and other investments on the Consolidated Statement of Income.
(3)Applied statutory tax rates of 28.37% and 29.56% for both the three and twelve months ended December 31, 2020 and 2019, respectively.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| GAAP TO NON-GAAP RECONCILIATION | |||||||||
| ( in thousands) | |||||||||
| (unaudited) | |||||||||
| Table 13 | |||||||||
| Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of core deposit intangibles, and the extinguishment cost on repurchase agreements. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods. | |||||||||
| Three Months Ended | |||||||||
| December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||
| Net interest income before provision for credit losses | $ | 346,581 | $ | 324,130 | $ | 368,219 | |||
| Total noninterest income (1) | 69,832 | 54,503 | 65,797 | ||||||
| Total revenue | $ | 416,413 | $ | 378,633 | $ | 434,016 | |||
| Total noninterest expense (1) | $ | 178,651 | $ | 172,573 | $ | 196,157 | |||
| Less: Amortization of tax credit and other investments (1) | (12,263) | (17,209) | (29,822) | ||||||
| Amortization of core deposit intangibles | (823) | (927) | (1,044) | ||||||
| Adjusted noninterest expense | $ | 165,565 | $ | 154,437 | $ | 165,291 | |||
| Efficiency ratio | 42.90 | % | 45.58 | % | 45.20 | % | |||
| Adjusted efficiency ratio | 39.76 | % | 40.79 | % | 38.08 | % | |||
| Adjusted pre-tax, pre-provision income | $ | 250,848 | $ | 224,196 | $ | 268,725 | |||
| Average total assets | $ | 52,466,325 | $ | 50,247,259 | $ | 44,471,242 | |||
| Adjusted pre-tax, pre-provision profitability ratio (2) | 1.90 | % | 1.78 | % | 2.40 | % | |||
| Adjusted noninterest expense/average assets (2) | 1.26 | % | 1.22 | % | 1.47 | % | |||
| Year Ended | |||||||||
| December 31, 2020 | December 31, 2019 | ||||||||
| Net interest income before provision for credit losses | $ | 1,377,193 | $ | 1,467,813 | |||||
| Total noninterest income (1) | 235,547 | 222,245 | |||||||
| Total revenue | 1,612,740 | 1,690,058 | |||||||
| Total noninterest expense (1) | $ | 716,322 | $ | 747,456 | |||||
| Less: Amortization of tax credit and other investments (1) | (70,082) | (98,383) | |||||||
| Amortization of core deposit intangibles | (3,634) | (4,518) | |||||||
| Repurchase agreements’ extinguishment cost | (8,740) | — | |||||||
| Adjusted noninterest expense | $ | 633,866 | $ | 644,555 | |||||
| Efficiency ratio | 44.42 | % | 44.23 | % | |||||
| Adjusted efficiency ratio | 39.30 | % | 38.14 | % | |||||
| Adjusted pre-tax, pre-provision income | $ | 978,874 | $ | 1,045,503 | |||||
| Average total assets | $ | 48,937,793 | $ | 42,484,885 | |||||
| Adjusted pre-tax, pre-provision profitability ratio | 2.00 | % | 2.46 | % | |||||
| Adjusted noninterest expense/average assets | 1.30 | % | 1.52 | % |
All values are in US Dollars.
(1)In the fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.
(2)Annualized.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| GAAP TO NON-GAAP RECONCILIATION | |||||||||
| ( in thousands) | |||||||||
| (unaudited) | |||||||||
| Table 14 | |||||||||
| 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. | |||||||||
| December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | |||||||
| Stockholders’ equity | $ | 5,269,175 | $ | 5,126,106 | $ | 5,017,617 | |||
| Less: Goodwill | (465,697) | (465,697) | (465,697) | ||||||
| Other intangible assets (1) | (11,899) | (12,369) | (16,079) | ||||||
| Tangible equity | $ | 4,791,579 | $ | 4,648,040 | $ | 4,535,841 | |||
| Total assets | $ | 52,156,913 | $ | 50,371,477 | $ | 44,196,096 | |||
| Less: Goodwill | (465,697) | (465,697) | (465,697) | ||||||
| Other intangible assets (1) | (11,899) | (12,369) | (16,079) | ||||||
| Tangible assets | $ | 51,679,317 | $ | 49,893,411 | $ | 43,714,320 | |||
| Total stockholders’ equity to total assets ratio | 10.10 | % | 10.18 | % | 11.35 | % | |||
| Tangible equity to tangible assets ratio | 9.27 | % | 9.32 | % | 10.38 | % |
All values are in US Dollars.
| Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets, impairment charge, recoveries, uncertain tax position and the reversal of certain previously claimed tax credits related to DC Solar (where applicable). Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Year Ended | ||||||||||||||||||
| December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | December 31,<br>2020 | December 31,<br>2019 | |||||||||||||||
| Net Income | $ | 164,084 | $ | 159,537 | $ | 188,215 | $ | 567,797 | $ | 674,035 | |||||||||
| Add: Amortization of core deposit intangibles | 823 | 927 | 1,044 | 3,634 | 4,518 | ||||||||||||||
| Amortization of mortgage servicing assets | 428 | 450 | 567 | 1,920 | 2,738 | ||||||||||||||
| Tax effect of amortization adjustments (2) | (355) | (390) | (476) | (1,575) | (2,145) | ||||||||||||||
| Tangible net income | (e) | $ | 164,980 | $ | 160,524 | $ | 189,350 | $ | 571,776 | $ | 679,146 | ||||||||
| Adjustments related to DC Solar | |||||||||||||||||||
| Add: Impairment charge (3) | — | — | — | — | 6,978 | ||||||||||||||
| Less: Recoveries (3) | (10,739) | — | (1,583) | (10,739) | (1,583) | ||||||||||||||
| Tax effects of adjustments (2) | 3,047 | — | 468 | 3,047 | (1,595) | ||||||||||||||
| Add: Reversal of certain previously claimed tax credits | — | — | — | — | 30,104 | ||||||||||||||
| Add: Uncertain tax position recorded in income tax expense | 5,127 | — | — | 5,127 | — | ||||||||||||||
| Adjusted tangible net income | (f) | $ | 162,415 | $ | 160,524 | $ | 188,235 | $ | 569,211 | $ | 713,050 | ||||||||
| Average stockholders’ equity | $ | 5,243,203 | $ | 5,079,351 | $ | 4,977,759 | $ | 5,082,186 | $ | 4,760,845 | |||||||||
| Less: Average goodwill | (465,697) | (465,697) | (465,697) | (465,697) | (465,663) | ||||||||||||||
| Average other intangible assets (1) | (12,182) | (13,083) | (16,793) | (13,769) | (19,340) | ||||||||||||||
| Average tangible equity | (g) | $ | 4,765,324 | $ | 4,600,571 | $ | 4,495,269 | $ | 4,602,720 | $ | 4,275,842 | ||||||||
| Return on average tangible equity | (e)/(g) | 13.77 | % | (4) | 13.88 | % | (4) | 16.71 | % | (4) | 12.42 | % | 15.88 | % | |||||
| Adjusted return on average tangible equity | (f)/(g) | 13.56 | % | (4) | 13.88 | % | (4) | 16.61 | % | (4) | 12.37 | % | 16.68 | % |
(1)Includes core deposit intangibles and mortgage servicing assets.
(2)Applied statutory tax rates of 28.37% and 29.56% for both the three and twelve months ended December 31, 2020 and 2019, respectively, and 28.35% for the three months ended September 30, 2020.
(3)Included in Amortization of tax credit and other investments on the Consolidated Statement of Income.
(4)Annualized.
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP TO NON-GAAP RECONCILIATION | |||||||||||||||||||
| ( in thousands) | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Table 15 | |||||||||||||||||||
| In April 2020, the Company started accepting applications under the PPP administered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act and began to originate loans to qualified small businesses. These loans are included in the Company’s C&I portfolio, have an interest rate of one percent, and are 100% guaranteed by the SBA. As of December 31, 2020, the majority of the Company’s PPP loans have a contractual term of two years. The SBA pays the Company fees for processing PPP loans in the following amounts: (i) five percent for loans of not more than 350,000; (ii) three percent for loans of more than 350,000 and less than 2,000,000; and (iii) one percent for loans of at least 2,000,000. Loan processing fees paid to the Company from the SBA are accounted for as loan origination fees, where net deferred fees are recognized on a straight line basis over the estimated life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period. The Company drew down 1.44 billion from the PPPLF during the second quarter of 2020. The remaining balance of 1.43 billion as of September 2020 was repaid in full during the fourth quarter of 2020.Adjusted loan yield for the three months ended December 31, 2020 and September 30, 2020, and twelve months ended December 31, 2020 excludes the impact of PPP loans. Adjusted net interest margin for the three months ended December 31, 2020 and September 30, 2020, and twelve months ended December 31, 2020 excludes the impact of PPP loans and advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provides comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance. | |||||||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||||||
| Yield on Average Loans | December 31,<br>2020 | September 30,<br>2020 | December 31,<br>2019 | December 31,<br>2020 | December 31,<br>2019 | ||||||||||||||
| Interest income on loans | $ | 348,578 | $ | 336,542 | $ | 425,773 | $ | 1,464,382 | $ | 1,717,415 | |||||||||
| Less: Interest income on PPP loans | (14,204) | (7,778) | — | (43,271) | — | ||||||||||||||
| Adjusted interest income on loans | $ | 334,374 | $ | 328,764 | $ | 425,773 | $ | 1,421,111 | $ | 1,717,415 | |||||||||
| Average loans | $ | 37,725,725 | $ | 37,160,445 | $ | 34,410,010 | $ | 36,799,017 | $ | 33,373,136 | |||||||||
| Less: Average PPP loans | (1,704,608) | (1,764,411) | — | (1,236,246) | — | ||||||||||||||
| Adjusted average loans | $ | 36,021,117 | $ | 35,396,034 | $ | 34,410,010 | $ | 35,562,771 | $ | 33,373,136 | |||||||||
| Average loan yield | 3.68 | % | (1) | 3.60 | % | (1) | 4.91 | % | (1) | 3.98 | % | 5.15 | % | ||||||
| Adjusted average loan yield | 3.69 | % | (1) | 3.70 | % | (1) | 4.91 | % | (1) | 4.00 | % | 5.15 | % | ||||||
| Net Interest Margin | |||||||||||||||||||
| Net interest income | $ | 346,581 | $ | 324,130 | $ | 368,219 | $ | 1,377,193 | $ | 1,467,813 | |||||||||
| Less: Interest income on PPP loans | (14,204) | (7,778) | — | (43,271) | — | ||||||||||||||
| Add: Interest expense on advances from the PPPLF | 324 | 1,259 | — | 2,046 | — | ||||||||||||||
| Adjusted net interest income | $ | 332,701 | $ | 317,611 | $ | 368,219 | $ | 1,335,968 | $ | 1,467,813 | |||||||||
| Average interest-earning assets | $ | 49,703,349 | $ | 47,428,586 | $ | 42,114,123 | $ | 46,239,709 | $ | 40,320,804 | |||||||||
| Less: Average PPP loans | (1,704,608) | (1,764,411) | — | (1,236,246) | — | ||||||||||||||
| Adjusted average interest-earning assets | $ | 47,998,741 | $ | 45,664,175 | $ | 42,114,123 | $ | 45,003,463 | $ | 40,320,804 | |||||||||
| Net interest margin | 2.77 | % | (1) | 2.72 | % | (1) | 3.47 | % | (1) | 2.98 | % | 3.64 | % | ||||||
| Adjusted net interest margin | 2.76 | % | (1) | 2.77 | % | (1) | 3.47 | % | (1) | 2.97 | % | 3.64 | % |
All values are in US Dollars.
(1)Annualized.
23
ewbc4q20earningsprese
EWBC Earnings Results Fourth Quarter 2020 January 28, 2021
Forward-Looking Statements 2 Forward-Looking Statements Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward- looking statements relating to our current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, and the negative thereof. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, the impact of disease pandemics, such as the resurgences and subsequent waves of the COVID-19 pandemic, on the Company, its operations and its customers, employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the below-mentioned and/or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period; changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the Small Business Administration’s (“SBA”) Paycheck Protection Program, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and any similar or related rules and regulations, the Board of Governors of the Federal Reserve System (“Federal Reserve”) efforts to provide liquidity to the United States (“U.S.”) financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers; changes in the U.S. economy, including an economic slowdown or recession, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”), the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission (“SEC”), the Consumer Financial Protection Bureau (“CFPB”) and the California Department of Financial Protection and Innovation (“DFPI”) - Division of Financial Institutions, and SBA; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against other financial institutions in its banking markets; success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate (“SOFR”) selected as the preferred alternative reference rate to the London Interbank Offered Rate (“LIBOR”); impact of a communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused and materially impact the Company’s ability to provide services to its clients; adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; impact on the Company’s international operations due to political developments, disease pandemics, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from the Company’s interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on critical accounting policies and assumptions; impact of other potential federal tax changes and spending cuts; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment (“OTTI”) on securities held in the Company’s available-for-sale (“AFS”) debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance. In addition to the risk factors enumerated above, the economic impact of the COVID-19 pandemic could cause actual outcomes to differ, possibly materially, from the Company’s forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others. For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
Highlights of Fourth Quarter 2020 3 4Q20 Net Income $164 million 4Q20 Diluted EPS $1.15 Record Loans $38.4 billion Record Deposits $44.9 billion Record Demand Deposits $16.3 billion 4Q20 Total Revenue $416 million 4Q20 Adj.* Efficiency Ratio 39.8% 16.7% 13.9% 13.8% 4Q19 3Q20 4Q20 1.68% 1.26% 1.24% 4Q19 3Q20 4Q20 Return on Average Assets Adjusted* Pre-Tax, Pre-Provision Income & Profitability Ratio Return on Average Tangible Equity*Return on Average Equity Adj.* PTPP income Adj.* PTPP profitability ratio Avg. Fed Funds rate 15.0% 12.5% 12.4% 4Q19 3Q20 4Q20 $269 $224 $251 2.40% 1.78% 1.90% 1.83% 0.25% 0.25% $- $50 $100 $150 $200 $250 4Q19 3Q20 4Q20 Adj.* PTPP income Adj.* PTPP profitability ratio Avg. Fed Funds rate $ i n m ill ion s * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
$12.1 31% $1.6 4% $14.8 39% $9.9 26% $16.3 36% $10.7 24% $8.9 20% $9.0 20% 4 12.31.20: Strong, Well-Diversified Balance Sheet Record Loans as of 12.31.20: $38.4 billion ($ in billions) C&I (ex. PPP) Resi. mortgage & other consumerTotal CREPPP IB Checking & SavingsMMDADDA Time Record Deposits of 12.31.20: $44.9 billion ($ in billions) * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases. $ in millions, except per share data 12.31.20 09.30.20 $ Change Cash equivalents & ST investments $ 4,828 $ 5,206 $ (378) AFS debt securities & repo assets 7,005 5,749 1,256 Gross loans (ex. PPP) $ 36,825 $ 35,669 $ 1,156 PPP loans 1,568 1,772 (204) Total loans, net of discounts $ 38,393 $ 37,441 $ 952 Allowance for loan losses (ALLL) (620) (618) (2) Net Loans $ 37,773 $ 36,823 $ 950 Other assets 2,552 2,593 (41) Total Assets $ 52,157 $ 50,371 $ 1,786 Customer deposits $ 44,863 $ 41,681 $ 3,182 Short-term borrowings 21 60 (39) FHLB advances & repo funding 953 1,005 (52) PPP Liquidity Facility (PPPLF) - 1,427 (1,427) Other LT debt & finance lease liab. 152 152 - Other liabilities 899 920 (21) Total Liabilities $ 46,888 $ 45,245 $ 1,643 Total Stockholders' Equity $ 5,269 $ 5,126 $ 143 Book value per share $ 37.22 $ 36.22 $ 1.00 Tangible equity per share* $ 33.85 $ 32.85 $ 1.00 Tang. equity to tang. assets ratio* 9.27% 9.32% $ (5) bp Gross loans / deposits 85.6% 89.8% (425) bp ALLL / gross loans 1.61% 1.65% (4) bp
7.0% 8.5% 10.5% 5.0% 12.7% 12.7% 14.3% 9.4% CET1 capital ratio Tier 1 capital ratio Total capital ratio Leverage ratio 12.31.20: Strong Capital Ratios ▪ Growing Equity: Book value per share of $37.22 as of 12.31.20: +3% Q-o-Q and +8% Y-o-Y. ▪ Tangible equity* per share of $33.85 as of 12.31.20: +3% Q-o-Q and +9% Y-o-Y. ▪ Tangible equity* to tangible assets ratio of 9.3% as of 12.31.20, essentially unchanged from 9.3% as of 09.30.20. ▪ Capital return to shareholders: ▪ Dividend increase: 1Q21 quarterly common stock dividend of 33c/share, an increase of 20% or 5.5 cents from 27.5c/share in 4Q20. Increased annual dividend equivalent to $1.32 per share. ▪ No buybacks during 4Q20. 5 Higher of the Regulatory requirement for the Minimum Capital Ratio + 2.5% Conservation Buffer, or the Well Capitalized Ratio EWBC as of 12.31.20 (preliminary) * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
Food-related Industries General Manufacturing & Wholesale Private Equity Oil & Gas Entertainment Real Estate Related Technology & Life Science Consumer Goods Clean Energy Healthcare All Other C&I Total CRE 39% $12.1 billion C&I 31% Total Residential Mortgage & Other Consumer 26% 1% 1% 2% 3% 3% 2% 2% 10% 1% 2% 4% $38.4 billion Total Loans PPP 4% 6 Total Loans: C&I Loans by Industry as % of Total Loans Outstanding 12.31.20: Diversified Commercial Loan Portfolio ▪ C&I loans (ex. PPP): $12.1bn loans O/S plus $5.0bn undisbursed commitments = $17.1bn total commitments as of 12.31.20. ▪ Growth in C&I loans outstanding: $12.1bn as of 12.31.20, up by 5% Q-o-Q (+18% ann.) from $11.5bn as of 09.30.20. ▪ Growth in C&I total commitments: $17.1bn as of 12.31.20, up by 5% Q-o-Q (+20% ann.) from $16.3bn as of 09.30.20. ▪ Stable C&I loan line utilization: 70.5% as of 12.31.20, vs. 71% as of 09.30.20, vs. 71% as of 12.31.19. ▪ PPP loans: $1.6bn as of 12.31.20, down by $204mm Q-o-Q due to forgiveness of loans by the SBA. ▪ As of Jan. 27, 2021: >$380mm of new PPP loans funded. ▪ Oil & Gas loans: $1.0bn loans O/S and $1.3bn total commitments as of 12.31.20. Q-o-Q, total commitments down $158mm, or -11% (-42% ann.), from $1.5bn as of 09.30.20. Y-o-Y, total commitments down $475mm, or -26%, from $1.8bn as of 12.31.19.
SoCal 54% NorCal 23% NY 6% TX 7% WA 3% Other 7% 12.31.20: Diversified Commercial Real Estate Portfolio 7 Total Loans: Total CRE Loans by Property Type as % of Total Loans Outstanding ▪ Total CRE loans: $14.8bn as of 12.31.20, up by 1% Q-o-Q (+4% ann.) from $14.7bn as of 09.30.20. ▪ Construction & land loans (in All Other CRE): $600mm, or 1.6% of total loans. Total construction & land exposure of $888mm: loans O/S plus $288mm in undisbursed commitments. ▪ Geographic distribution reflects EWBC’s branch footprint. ▪ Owner-occupied CRE of $2.2bn as of 12.31.20, equivalent to 6% of total loans. $14.8 billion Total CRE loans Total CRE: Distribution by Geography Total Residential Mortgage & Other Consumer 26% C&I 31% $14.8 billion Total CRE 39% Retail, 9% Office, 7% Industrial, 6% Hotel, 5% All Other CRE, 4% MFR, 8%PPP 4% $38.4 billion Total Loans
<=50% 53% >50% to 55% 14% >55% to 60% 16% >60% to 65% 9% >65% to 70% 5% >70% 3% Total CRE: Distribution by LTV 8 12.31.20: Low LTV Commercial Real Estate Portfolio ($ in mm) Average Loan Size Weight. Avg. LTV Retail $ 2.2 mm 49% Multifamily 1.3 mm 51% Office 4.0 mm 53% Industrial 2.4 mm 50% Hotel 8.3 mm 53% Construction & Land 10.5 mm* 52% Other 2.3 mm 48% Total CRE $ 2.4 mm 51% CRE LTV & Size by Property Type * Construction & Land avg. size based on total commitment. ▪ High percentage of CRE loans have full recourse & personal guarantees from individuals or guarantors with substantial net worth. ▪ Many of our customers have long-term relationships with East West Bank. $2.4 million Avg. size of loan outstanding 51% Avg. LTV
<=50% 35% >50% to 55% 12% >55% to 60% 42% >60% 11% SoCal 42% NorCal 13% NY 28% WA 7% TX 3% Other 7% 12.31.20: Low LTV Single Family Residential Mortgages 9 SFR: Distribution by Geography SFR: Distribution by LTV $8.2 billion SFR loans outstanding $388,000 Avg. size of loan outstanding 53% Avg. LTV ▪ Single-family residential (SFR) loans of $8.2bn as of 12.31.20, up by 5% Q-o-Q (+20% ann.) from $7.8bn as of 09.30.20. ▪ Primarily originated through East West Bank branches. ▪ Residential mortgage origination volume: record residential mortgage (SFR + HELOC) origination volume of $1.1bn in 4Q20, up 38% Q-o-Q and up 47% Y-o-Y.
SoCal 47% NorCal 25% NY 12% WA 11% Other 5% <=50% 51% >50% to 55% 6% >55% to 60% 41% >60%: 2% 12.31.20: Low LTV Home Equity Lines of Credit 10 HELOC: Distribution by Geography HELOC: Distribution by LTV* ▪ HELOC: $1.6bn loans O/S plus $1.8bn in undisbursed commitments = $3.4bn total commitments as of 12.31.20. ▪ 4Q20 growth: loans O/S up 6% Q-o-Q (+23% ann.). Total commitments up 7% Q-o-Q (+26% ann.). ▪ Utilization rate of 48% as of 12.31.20, unchanged Q-o-Q. ▪ As of 12.31.20, 86% of HELOC commitments were in first lien position. HELOCs primarily originated through East West Bank branches. * Combined LTV for 1st and 2nd liens. Based on commitment. $378,000 Avg. size of commitment 48% Avg. LTV* $1.6 billion HELOC loans outstanding
0.2%0.3% 1.0% 0.1% 0.2% 0.3%0.3% 1.2% 12.31.2009.30.2006.30.20 4Q20: COVID-19 Loan Deferral Statistics 11 Total Loans Total CRE Loans C&I Loans (ex. PPP) Loans on Deferral: Full vs. Partial Payment Full payment deferral Partial payment deferral ▪ As of 12.31.20, $1.0bn loans on COVID-19 related deferral, or 2.6% of total loans, down from 4.2% as of 09.30.20. ▪ Only 1.2% of total loans are on full payment deferral as of 12.31.20. ▪ Partial payment deferrals are generally loans that modified principal & interest payments to interest-only payments. ▪ Q-o-Q decrease in deferrals: total loans on deferral decreased by 36% since 09.30.20. ▪ Largest improvement in CRE loans on deferral: down by 39% since 09.30.20. CRE loans on deferral: 4.8% as of 12.31.20. ▪ Residential mortgage loans on deferral decreased 35% since 09.30.20. Residential mortgage loans on deferral: 2.5% as of 12.31.20. ▪ Continued very low rate of C&I loans on deferral. 1.2% 2.7% 6.1% 1.4% 1.5% 1.9% 2.6% 4.2% 8.0% 12.31.2009.30.2006.30.20 1.2% 4.1% 6.0% 3.6% 3.9% 4.7% 4.8% 8.0% 10.7% 12.31.2009.30.2006.30.20 Deferrals 06.30.20 Deferrals 09.30.20 9.30 vs. 6.30 Deferrals 12.31.20 12.31 vs. 9.30 $ in mm, except ratios $ Deferral Balance % of Loan Portfolio $ Deferral Balance % of Loan Portfolio $ % $ Deferral Balance % of Loan Portfolio $ % CRE - Hotel $ 731 37.6% $ 661 33.6% $ (70) -10% $ 356 18.8% $ (306) -46% CRE - Retail 441 12.8% 252 7.4% (189) -43% 152 4.4% (100) -40% CRE - All Other 374 4.1% 255 2.7% (119) -32% 210 2.2% (45) -18% Total CRE $ 1,546 10.7% $ 1,168 8.0% $ (378) -24% $ 718 4.8% $ (451) -39% Resi. Mortgage 1,298 14.3% 382 4.1% (916) -71% 248 2.5% (134) -35% C&I (ex. PPP) 135 1.2% 33 0.3% (103) -76% 40 0.3% 7 22% Total Loans $ 2,979 8.0% $ 1,582 4.2% $ (1,396) -47% $ 1,005 2.6% $ (577) -36%
NPAs / Total Assets Nonaccrual loans OREO & other NPAs Nonaccrual Ratio by Loan Portfolio (subset of Classified) 12.31.20 Asset Quality Metrics by Portfolio 12 Classified Loans / Total Loans Special Mention Loans / Total Loans Special Mention Ratio by Loan Portfolio Classified Ratio by Loan Portfolio ▪ Nonperforming Assets: $235mm as of 12.31.20, -10% Q-o-Q. ▪ Accruing loans 30-89 days past due: 0.13% of total loans as of 12.31.20, or $51mm, -40% Q-o-Q. ▪ Criticized loans: $1,217mm as of 12.31.20, -18% Q-o-Q. ▪ Special Mention: $565mm as of 12.31.20, -22% Q-o-Q. ▪ Classified: $653mm as of 12.31.20, -14% Q-o-Q. ▪ Oil & Gas Loan Portfolio as of 12.31.20: ▪ Total oil & gas loan exposure reduced through exits, pay downs and workouts. ▪ O&G special mention loans: $84mm as of 12.31.20, -32% Q-o-Q. ▪ O&G classified loans: $240mm as of 12.31.20, -13% Q-o-Q. ▪ 4Q20 O&G loan charge-offs <$1mm. ▪ Portfolio: 59% E&P; 34% midstream & downstream; 7% oilfield services & other. C&I: oil & gas CREAll other C&I (ex. PPP) Resi. mortgage & consumerNonacc./Class./SM ratio by loan type: 8.2% 2.1% 1.6% 0.1% 12.31.20 23.4% 1.6% 1.4% 0.3% 12.31.20 11.2% 0.2% 0.3% 0.3% 12.31.20 0.52% 0.45% 09.30.20 12.31.20 2.0% 1.7% 09.30.20 12.31.20 1.9% 1.5% 09.30.20 12.31.20
118 111 10.0% 10.8% 271 287 2.6% 2.6% 201 202 1.4% 1.4% 28 20 0.30% 0.20% 09.30.20 12.31.20 09.30.20 12.31.20 Residential mortgage & other consumer Total CRE C&I: all other C&I (ex. PPP) C&I: oil & gas $19 $74 $102 $10 $24 $8 $1 $19 $24 $19 0.10% 0.01% 0.21% 0.26% 0.20% 4Q19 1Q20 2Q20 3Q20 4Q20 Provision for credit losses Net charge-offs NCO ratio (ann.) ALLL by Loan Type: ▪ Allowance coverage of loans HFI: 1.61% as of 12.31.20, or 1.68% excluding PPP loans. Q-o-Q, the ALLL increased by $2mm. ▪ Q-o-Q ALLL ratio decreased by 5 bps ex. PPP. ▪ Change reflects 4Q loan growth of $1.16bn (ex. PPP), an improved macroeconomic forecast, and positive trends in deferrals, delinquencies, criticized assets & other asset quality metrics. ▪ 4Q20 provision for credit losses: $24mm, compared with $10mm in 3Q20 or $19mm in 4Q19. ▪ 4Q20 net charge-offs: $19mm or 0.20% (annualized), a decrease from $24mm or 0.26% (annualized) in 3Q20. ▪ Q-o-Q increase in CRE charge-offs more than offset by Q-o-Q decrease in C&I charge-offs. ▪ 4Q20 oil & gas loan charge-offs <$1mm, decrease from $20mm in 3Q20. 4Q20: Allowance for Loan Losses & Credit Costs 13 Composition of ALLL by Portfolio: Allowance for Loan Losses Coverage Ratio $ i n m ill ion s Provision for Credit Losses & Net Charge-offs $ i n m ill ion s Total: $618 $ i n m ill ion s ; ratio i s a llowan c e c o v erage b y portfol io Total:1.65%Total: $620 Total:1.61% C&I: oil & gas Total CREAll other C&I (ex. PPP) Resi. mortgage & consumer $358 $483 $557 $632 $618 $620 1.70% 1.65% 1.61% 1.03% 1.39% 1.55% 1.78% 1.73% 1.68% 12.31.19 01.01.20 (CECL) 03.31.20 06.30.20 09.30.20 12.31 20 Allowance for loan losses ALLL/Loans HFI ALLL/Loans HFI (ex. PPP)
4Q20: Summary Income Statement 14 * See slide 19 for noninterest income detail by category. Comments ▪ Amortization of tax credit & other investments: 4Q20 was lower because it included $11mm of recoveries related to DC Solar tax credit investments. ▪ Income tax expense & effective tax rate: 4Q20 elevated by $8mm of income tax expense related to DC Solar tax credit investments. ▪ The combined financial impact of items related to DC Solar tax credit investments in 4Q20 earnings: +$3mm, or +2c per share. ▪ FY20 effective tax rate: 17%, down from 20% in FY19. ** See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases. 4Q20 vs. 3Q20 $ in millions, except per share data 4Q20 3Q20 $ Change % Change Net Interest Income $ 346.6 $ 324.1 $ 22.5 7% Fee income & net gains on sales of loans* 53.1 48.0 5.1 10% Gains on sales of AFS debt securities 0.4 0.7 (0.3) -38% Other 16.3 5.8 10.5 181% Total Noninterest Income* $ 69.8 $ 54.5 $ 15.3 28% Adjusted** noninterest expense $ 165.6 $ 154.4 $ 11.2 7% Amortization of tax credit & other investments + core deposit intangibles 13.1 18.2 (5.1) -28% Total Noninterest Expense $ 178.7 $ 172.6 $ 6.1 4% Provision for credit losses on loans 19.8 $ 9.9 9.9 101% Provision for credit losses on unfunded commitments 4.5 0.1 4.4 NM Provision for credit losses $ 24.3 $ 10.0 $ 14.3 143% Income tax expense 49.3 36.5 12.8 35% Effective tax rate 23% 19% 4% Net Income $ 164.1 $ 159.5 $ 4.6 3% Adj.** Net Income $ 161.5 $ 159.5 $ 2.0 1% Diluted EPS $ 1.15 $ 1.12 $ 0.03 2% Adj.** diluted EPS $ 1.13 $ 1.12 $ 0.01 1% Weigh. avg. diluted shares (in mm) 142.5 142.0 0.5 0%
12.2 12.2 12.1 11.5 11.6 13.4 14.0 14.4 14.6 14.7 8.8 9.0 9.1 9.3 9.7 1.5 1.8 1.7 $34.4 $35.2 $37.1 $37.2 $37.7 4Q19 1Q20 2Q20 3Q20 4Q20 11.0 11.1 13.5 14.3 16.3 8.6 9.0 9.9 10.0 10.67.6 7.1 6.9 7.9 8.50 0 3 9.6 9.0 9.0 $37.4 $37.5 $39.9 $41.2 $44.4 4Q19 1Q20 2Q20 3Q20 4Q20 DDA MMDA IB Checking & Savings Time 11% 10% 11% 11% 13% 8% 7% 8% 10% 11% L/D: 92% L/D: 94% L/D: 93% L/D: 90% L/D: 85% 4Q19 1Q20 2Q20 3Q20 4Q20 Loans / AEA Securities & other / AEA IB Cash & equivalent / AEA Avg. Loan / Deposit Ratio 4Q20: Average Balance Sheet: Growth & Mix 15 ▪ 4Q20 avg. loan growth: +6% LQA (+$565mm Q-o-Q). Total residential mortgage: +16% LQA; C&I (ex. PPP): +5% LQA; total CRE: +3% LQA. ▪ 4Q20 avg. deposit growth: +31% LQA (+$3.2bn Q-o-Q). Led by strong growth in non-IB DDA: +56% LQA (+$2.0bn). All deposit segments grew except time, which decreased by $44mm: higher rate CDs did not renew. ▪ Deposit growth in excess of loan growth: redeployed into lower yielding assets: AFS securities (+970mm Q-o-Q), and IB cash & deposits with banks (+$706mm Q-o-Q). ▪ Avg. loan-to-deposit ratio: 85% in 4Q20, down from 90% in 3Q20. ▪ Flat yield curve and near-zero interest rates limit attractive redeployment opportunities. ▪ FHLB Advances: $400mm at rate of 2.25% maturing in 2Q21. $ i n b ill ion s Average Loans & Growth 0.2% +9% +23% +6% LQA avg. total loan growth C&I (ex. PPP) Total CRE Residential mortgage & other consumerPPP Average Deposits & Growth $ i n b ill ion s LQA avg. total deposit growth +1% +26% +13% +31% Avg. Earning Asset (AEA) Mix & Loan-to-Deposit Ratio
$362 $363 $323 $318 $333 3.41% 3.44% 2.96% 2.77% 2.76% 3.47% 3.44% 3.04% 2.72% 2.77% 1.83% 1.42% 0.25% 0.25% 0.25% 1.79% 1.41% 0.36% 0.16% 0.15% 4Q19 1Q20 2Q20 3Q20 4Q20 Adj.* NII Adj.* NIM NIM Avg. Fed Funds rate Avg. 1M LIBOR rate 4Q20: Net Interest Income & Net Interest Margin 16 ▪ 4Q20 NII: $347mm, +7% Q-o-Q from $324mm in 3Q20. ▪ 4Q20 NIM: 2.77%, +5 bps Q-o-Q. ▪ 4Q20 adj.* NII: $333mm, +5% Q-o-Q from $318mm in 3Q20. ▪ 4Q20 adj.* NIM: 2.76%, down 1 bps Q-o-Q. ▪ Adjusted NII & NIM exclude impact of PPP loan income & PPPLF cost. ▪ Excess liquidity a drag on NIM but a benefit to NII growth. ▪ PPP loan interest & deferred fee income: $14mm in 4Q20, up from $8mm in 3Q20. ▪ 3Q20 PPP fee income was lower because of slower than anticipated forgiveness of PPP loans by the SBA. ▪ As of 12.31.20, $13mm of PPP-1 deferred fees left to accrete in 2021. ▪ 4Q20 PPPLF interest expense was $0.3mm (vs. $1.3mm in 3Q20). PPPLF repaid in full in Oct. 2020. Impact to NIM from Q-o-Q Change in Yields, Rates, PPP & AEA Mix Adj.* Net Interest Income & Adj.* Net Interest Margin $ i n m ill ion s * Adj. NII & adj. NIM: ex. PPP in 4Q20, 3Q20 & 2Q20; ex SOP-03 in 4Q19. 3Q20 NIM 4Q20 NIM Lower cost of deposits Adj.* NIM ex PPP: 2.77% +6 bps +5 bps +1 bp -6 bps -1 bp 3Q20 NIM: 2.72% 4Q20 NIM: 2.77% Adj.* NIM ex PPP: 2.76% More PPP income Repayment of PPPLF Excess liquidity Lower loan & earning asset yields * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
15% 16% 7%28% 30% 4% 453 468 476 576 377 356 463 435 343 343 447 430 347 346 433 431 C&I (ex. PPP) Total CRE SFR HELOC 1Q20 2Q20 3Q20 4Q20 4.71% 3.90% 3.70% 3.69% 4.42% 3.25% 3.25% 3.25% 1.41% 0.36% 0.16% 0.15% 1Q20 2Q20 3Q20 4Q20 4Q20: Average Loan Yields 17 Adj.* Avg. Loan Yield vs. Prime & LIBOR Adj.* avg. loan yield Avg. 1M LIBOR Rate Avg. Prime Rate Loan Portfolio by Index Rate (12.31.20) Average Loan Yield (in bps) by Portfolio in 2020 ▪ 4Q20 avg. loan yield: 3.68% (vs. 3.60% in 3Q20). Ex. PPP, adj.* avg. loan yield down 1 bp 3.69% in 4Q20 (vs. 3.70% in 3Q20). ▪ Variable-rate portfolio already repriced earlier in 2020: nearly 90% of variable rate loans linked to benchmark interest rates with duration of 3M or less, primarily Prime or 1-month LIBOR. ▪ Q-o-Q, stable yield on C&I, CRE and HELOC loan portfolios between 4Q20 and 3Q20. ▪ Relatively stable SFR yield: lower rate sensitivity for EWBC’s core SFR product. Between 1Q20 and 4Q20, the SFR yield declined by only 43 bps, compared to benchmark interest rate decreases of 100+ basis points. Total fixed and hybrid in fixed period 31% (ex PPP). Variable: LIBOR rates Hybrid in fixed rate period Fixed rate Variable: Prime rate Variable: all other rates PPP C&I: 71% LIBOR or Prime w/ weigh. avg. reset: 1 mo. (80% of C&I ex PPP). CRE: 75% LIBOR or Prime w/ weigh. avg. reset: 1 mo. SFR: 51% Hybrid in fixed-rate period. 32% Fixed rate. HELOC: Prime- based w/ weigh. avg. reset: 1 mo. GAAP Yield: 3.98% GAAP Yield: 3.60% GAAP Yield: 3.68% * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
94 82 47 33 25 134 117 71 50 40 1.83% 1.42% 0.25% 0.25% 0.25% 4Q19 1Q20 2Q20 3Q20 4Q20 Avg. cost of deposits Avg. cost of IB deposits Avg. Fed Funds Rate 4Q20: Average Cost of Deposits 18 Avg. Cost of Deposits (in bps) Relative to Fed Funds Rate ▪ Spot rate of total deposits: 0.22% as of 12.31.20 (vs. 0.25% avg. in 4Q20). ▪ Spot rate of IB deposits: 0.35% as of 12.31.20 (vs. 0.40% avg. in 4Q20). ▪ Continued decrease in deposit costs: repricing of maturing CDs to lower rates. ▪ Domestic CD spot rate as of 12.31.20: 0.54% (down from 0.81% as of 09.30.20). ▪ Originations & renewals of CDs in 4Q20: $5.2bn @ blended rate of 0.25%, down from a blended rate of 0.43% in 3Q20. Similar volume of originations & renewals in 4Q as in 3Q20. ▪ $1.3bn of CDs maturing in 1Q21 with a rate >1.0%, @ a blended rate of 1.22%. Average Cost of Deposits (in bps) by Type in 2020 82 117 82 99 35 165 47 71 46 33 27 131 33 50 31 27 26 93 25 40 28 21 27 74 Cost of deposits Cost of IB deposits IB Checking MMDA Savings Time 1Q20 2Q20 3Q20 4Q20
4Q20: Noninterest Income Detail 17.2 15.8 21.9 18.7 18.4 35% 9.8 10.4 10.9 12.6 14.3 27% 6.0 7.8 4.6 3.3 6.7 13%4.2 5.4 3.1 4.6 4.5 8% 14.1 14.1 11.6 8.5 6.2 12% 3.0 5% $52.5 $54.4 $52.2 $48.0 $53.1 0.0 10.0 20.0 30.0 40.0 50.0 60.0 4Q19 1Q20 2Q20 3Q20 4Q20 4Q20 Mix Lending fees Deposit account fees Foreign exchange income Wealth management fees IRC revenue Net gains on sales of loans Total noninterest income: $70mm in 4Q20, up by $15.5mm from $54.5mm in 3Q20 (+28% Q-o-Q). ▪ Fee income and net gains on sales of loans: $53mm in 4Q20, up $5mm from $48mm (+10% Q-o-Q). ▪ FX fees: $7mm in 4Q20, up $3mm Q-o-Q due to increase in customer-driven transactions. ▪ Net gains on sales of loans: $3mm in 4Q20, up from $0.4mm in 3Q20 due to higher volume of SBA loans sold. ▪ Total interest rate contracts and other derivative income: $13mm in 4Q20, up $7.5mm Q-o-Q, due to favorable change in credit valuation adjustment. Customer driven revenue decreased Q-o-Q reflecting lower volume of CRE transactions and flat interest rates. 19 Interest Rate Contracts and Other Derivative Income Detail ($ in millions) 4Q19 1Q20 2Q20 3Q20 4Q20 Revenue $ 14.1 $ 14.1 $ 11.6 $ 8.5 $ 6.2 CVA 3.7 (7.0) (5.5) (3.0) 6.8 Total $ 17.8 $ 7.1 $ 6.1 $ 5.5 $ 13.0 * Fee income excludes: credit valuation adjustment (“CVA”) related to interest rate contracts (“IRC”) and other derivatives; net gains on sales of securities; gains on sale of fixed assets, and other income. ▪ Revenue – interest rate contracts and other derivatives transaction fees. ▪ CVA – related to interest rate contracts and other derivatives. Fee Income* & Net Gains on Sales of Loans $ i n m ill ion s
101.1 102.0 97.0 99.8 105.4 64% 17.1 17.1 16.2 16.6 16.5 10% 11.2 10.0 11.8 12.1 11.7 7% 9.4 9.5 9.1 8.4 8.5 5% 26.5 22.0 19.2 17.5 23.5 14% $165.3 $160.6 $153.3 $154.4 $165.6 4Q19 1Q20 2Q20 3Q20 4Q20 4Q20 Mix Comp and employee benefits Occupancy & Equipment Computer software & Data processing Deposit & loan related All other 4Q20: Operating Expense & Efficiency 20 Adjusted* Noninterest Expense $ i n m ill ion s Adj.* Noninterest Expense & Adj.* Efficiency Ratio ▪ 4Q20 total noninterest expense: $179mm, +4% Q-o-Q. ▪ 4Q20 adj.* noninterest expense: $166mm, +7% Q-o-Q and essentially flat Y-o-Y. ▪ 4Q20 compensation & employee benefits expense: $105mm, +$6mm or 6% Q-o-Q on increased bonus accrual. ▪ 4Q20 other expense: $23.5mm, +$6mm or 34% on increased OREO expense and other operating expenses. ▪ Maintained operating efficiency in narrow range in each of the past 5 quarters, despite operating headwinds from the COVID-19 pandemic, related economic slowdown and near-zero interest rates. $ i n m ill ion s $165 $161 $153 $154 $166 38.1% 38.4% 38.4% 40.8% 39.8% 0.0% 70.0% $- $170 4Q19 1Q20 2 20 3Q20 4Q20 Adj.* noninterest expense Adj.* efficiency ratio * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
Management Outlook: Full Year 2021 21 Earnings drivers FY 2021 expectations compared to FY 2020 results 2020 actual End of Period Loans (ex. PPP) ▪ Increase at a percentage rate of 6% to 8% Y-o-Y. $36.8 billion (ex. PPP) +6% Y-o-Y (ex. PPP) Adj.* Net Interest Income (ex. PPP) ▪ Adj. NII growth expected to be generally in line with loan growth on a full year basis. $1.3 billion -8% Y-o-Y Adj.* Noninterest Expense (ex. tax credit investment & core deposit intangible amortization) ▪ Increase at a percentage rate of 3% to 5% Y-o-Y. $634 million (ex. debt extinguishment cost) -1% Y-o-Y Provision for Credit Losses ▪ $70 million to $80 million. $211 million +113% Y-o-Y Tax Items ▪ Full year 2021 effective tax rate of approx. 15%, including the impact of tax credit investments. Expect quarterly variability due to timing of tax credit investments placed into service. FY effective tax rate: 17% Interest Rates ▪ No change to the Fed Funds rate in the year 2021. Fed Funds rate decreased: -150 bps * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
APPENDIX
Appendix: GAAP to Non-GAAP Reconciliation 23 EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) During the fourth quarter of 2020, the Company recorded $10.7 million in pre-tax recovery and $5.1 million in uncertain tax position related to the Company’s investment in DC Solar. In addition, the Company recorded a $7.0 million pre-tax impairment charge, reversed $30.1 million of certain previously claimed tax credits and recorded a $1.6 million in pre-tax recovery related to DC Solar during the first, second and fourth quarters of 2019, respectively. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that adjust for the above discussed non-recurring items provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. (1) Annualized.
Appendix: GAAP to Non-GAAP Reconciliation 24 EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of core deposit intangibles, and the extinguishment cost on repurchase agreements. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods. (1) In the fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation. (2) Annualized.
Appendix: GAAP to Non-GAAP Reconciliation 25 EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) 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. (1) Includes core deposit intangibles and mortgage servicing assets.
Appendix: GAAP to Non-GAAP Reconciliation 26 EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets, impairment charge, recoveries, uncertain tax position and the reversal of certain previously claimed tax credits related to DC Solar (where applicable). Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. (1) Includes core deposit intangibles and mortgage servicing assets. (2) Applied statutory tax rates of 28.37% and 29.56% for both the three and twelve months ended December 31, 2020 and 2019, respectively, and 28.35% for the three months ended September 30, 2020. (3) Included in Amortization of tax credit and other investments on the Consolidated Statement of Income. (4) Annualized.
27 Appendix: GAAP to Non-GAAP Reconciliation EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) In April 2020, the Company started accepting applications under the PPP administered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act and began to originate loans to qualified small businesses. These loans are included in the Company’s C&I portfolio, have an interest rate of one percent, and are 100% guaranteed by the SBA. As of December 31, 2020, the majority of the Company’s PPP loans have a contractual term of two years. The SBA pays the Company fees for processing PPP loans in the following amounts: (i) five percent for loans of not more than $350,000; (ii) three percent for loans of more than $350,000 and less than $2,000,000; and (iii) one percent for loans of at least $2,000,000. Loan processing fees paid to the Company from the SBA are accounted for as loan origination fees, where net deferred fees are recognized on a straight line basis over the estimated life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period. The Company drew down $1.44 billion from the PPPLF during the second quarter of 2020. The remaining balance of $1.43 billion as of September 2020 was repaid in full during the fourth quarter of 2020. Adjusted loan yield for the three months ended December 31, 2020 and September 30, 2020, and twelve months ended December 31, 2020 excludes the impact of PPP loans. Adjusted net interest margin for the three months ended December 31, 2020 and September 30, 2020, and twelve months ended December 31, 2020 excludes the impact of PPP loans and advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provides comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance.