EWBC 8-K
East West Bancorp Inc (EWBC)
8-K
2022-04-21
For: 2022-04-21
View Original
Added on
April 12, 2026
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)
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
(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 | ||||||||||||
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 April 21, 2022, East West Bancorp, Inc. (the “Company”) announced its financial results for the quarter ended March 31, 2022. A copy of the Company’s press release (the “Press Release”) is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference in this Item 2.02. The Press Release is “furnished” 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 of such 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 April 21, 2022, the Company will hold a conference call to discuss its financial results for the quarter ended March 31, 2022 and other matters relating to the Company. The Company has also made available on its website, www.eastwestbank.com, 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 of such Section, nor shall such information be deemed incorporated by reference into any filings the Company has made or may make under the Securities Act or the Exchange Act, except as otherwise expressly stated in such filing.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Press Release, dated April 21, 2022. | |||||
| Presentation Materials, dated April 21, 2022. | |||||
| 104 | Cover Page Interactive Data (formatted in Inline XBRL). | ||||
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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: April 21, 2022 | By: | /s/ Irene H. Oh | |||||||||
| Irene H. Oh | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
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| 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 Investor Relations and Corporate Finance | ||||
T: (626) 768-6360 | T: (626) 768-6985 | ||||
| E: [email protected] | E: [email protected] | ||||
EAST WEST BANCORP REPORTS NET INCOME FOR FIRST QUARTER 2022
OF $238 MILLION AND DILUTED EARNINGS PER SHARE OF $1.66;
RECORD LOANS AND DEPOSITS
Pasadena, California – April 21, 2022 – East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the first quarter of 2022. For the first quarter of 2022, net income was $237.7 million, or $1.66 per diluted share, up 37% linked quarter annualized and up 16% year-over-year.
“East West had an excellent start to the year. Financial results for the first quarter of 2022 were very strong, with an acceleration of loan and revenue growth, and a 14 basis point expansion in the net interest margin to 2.87%,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Quarter-over-quarter, our adjusted pre-tax, pre-provision income1 of $320.3 million grew by 28% annualized. Our first quarter 2022 return on assets of 1.56% expanded by 17 basis points, and our return on equity of 16.5% expanded by 157 basis points sequentially.”
“Total loans reached a record $43.5 billion as of March 31, 2022. Excluding the impact of the Paycheck Protection Program loans, total loans grew by $2.0 billion, or 20% linked quarter annualized, led by commercial loan growth. Total deposits grew to a record $54.9 billion as of March 31, 2022, an increase of $1.6 billion or 12% linked quarter annualized, driven by strong growth in noninterest-bearing demand deposits. Demand deposits made up 45% of our deposits as of March 31, 2022, up from 38% a year ago,” continued Ng.
“The strength of East West’s business model and our ability to execute are reflected in our financial achievements for the first quarter. Our loan portfolio is well-diversified, our pipelines are robust, our asset quality continues to be strong, and our balance sheet is well-positioned for a rising interest rate environment. We are optimistic about our outlook and expect to continue to deliver strong growth and earnings in 2022 and beyond,” concluded Ng.
1 See reconciliation of GAAP to non-GAAP financial measures in Table 10. | |||||||||||
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FINANCIAL HIGHLIGHTS
| Three Months Ended | Qtr-o-Qtr Change | Yr-oYr Change | |||||||||||||||||||||||||||||||||
| ($ in millions) | March 31, 2022 | $ | % Ann. | $ | % | ||||||||||||||||||||||||||||||
| Total Loans (incl. PPP) | $43,491 | $1,797 | 17% | $3,903 | 10% | ||||||||||||||||||||||||||||||
| Total Loans (excl. PPP) | 43,173 | 2,013 | 20 | 5,657 | 15 | ||||||||||||||||||||||||||||||
| Total Deposits | 54,938 | 1,588 | 12 | 5,391 | 11 | ||||||||||||||||||||||||||||||
| Total Revenue | $495 | $18 | 15% | $69 | 16% | ||||||||||||||||||||||||||||||
Adj. Pre-tax Pre-provision1 | 320 | 21 | 28 | 59 | 22 | ||||||||||||||||||||||||||||||
| Net Income | 328 | 20 | 37 | 33 | 16 | ||||||||||||||||||||||||||||||
1See reconciliation of GAAP to non-GAAP financial measures in Table 10.
BALANCE SHEET
•Record Assets – Total assets reached $62.2 billion as of March 31, 2022, up by $1.4 billion, or 9% annualized, from $60.9 billion as of December 31, 2021, driven by growth in loans. Year-over-year, total assets grew 9% from $56.9 billion as of March 31, 2021.
First quarter 2022 average interest-earning assets of $58.7 billion declined by $251.7 million, or 2% linked quarter annualized, from $58.9 billion in the fourth quarter of 2021. The quarter-over-quarter decrease was driven by declines in average interest-bearing cash and deposits with banks of $1.6 billion and assets purchased under resale agreements of $342.6 million, which were largely offset by an increase in average loans of $1.6 billion. During the first quarter of 2022, the Company moved $3.0 billion of debt securities from available-for-sale (“AFS”) to held-to-maturity.
•Record Loans – Total loans reached $43.5 billion as of March 31, 2022, up by $1.8 billion, or 17% annualized, from $41.7 billion as of December 31, 2021. Excluding Paycheck Protection Program (“PPP”) loans of $318.1 million, total loans grew by $2.0 billion, or 20% linked quarter annualized, with solid growth in all major loan categories. Year-over-year, total loans grew 10% from $39.6 billion as of March 31, 2021. Excluding PPP loans, total loans grew $5.7 billion or 15% year-over-year.
First quarter 2022 average loans of $42.1 billion grew by $1.6 billion, or 16% linked quarter annualized. Excluding PPP loans, average loans grew by $1.8 billion, or 19% annualized, from the fourth quarter of 2021. The strongest growth was from average commercial and industrial loans (excluding PPP), which increased 30% linked quarter annualized, followed by average total commercial real estate loans, which increased 18% linked quarter annualized. Average residential mortgage loans increased 8% linked quarter annualized.
•Record Deposits – Total deposits were $54.9 billion as of March 31, 2022, an increase of $1.6 billion, or 12% annualized, from $53.4 billion as of December 31, 2021, and up $5.4 billion or 11% from $49.5 billion as of March 31, 2021. Quarter-over-quarter, strong growth in noninterest-bearing demand deposits was partially offset by a decrease in money market accounts. Noninterest-bearing demand deposits totaled $24.9 billion as of March 31, 2022. Noninterest-bearing demand deposits made up 45% of total deposits as of March 31, 2022, up from 43% as of December 31, 2021, and from 38% as of March 31, 2021.
First quarter 2022 average deposits of $54.0 billion declined by $290.9 million, or 2% linked quarter annualized. This was primarily driven by a decrease in average noninterest-bearing demand deposits of $586.6 million, or 10% linked quarter annualized, partially offset by increases in average interest-bearing checking deposits of $185.6 million, or 12% linked quarter annualized, and in savings deposits of $89.0 million, or 13% linked quarter annualized.
•Strong Capital Levels – As of March 31, 2022, stockholders’ equity was $5.7 billion, or $40.09 per common share, and tangible equity2 per common share was $36.76. As of March 31, 2022, the tangible equity to tangible assets ratio2 was 8.47%, the common equity tier 1 (“CET1”) capital ratio was 12.6%, and the total risk-based capital ratio was 13.9%. Quarter-over-quarter, stockholders’ equity declined by 2%, or $133.8 million, primarily reflecting a negative change in accumulated other comprehensive income (“AOCI”) of $304.5 million and $57.6 million in common dividends declared, partially offset by $237.7 million in net income. The negative change in AOCI was primarily due to increased unrealized losses in AFS debt securities.
2 See reconciliation of GAAP to non-GAAP financial measures in Table 11. | |||||||||||
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OPERATING RESULTS
First Quarter Earnings – First quarter 2022 net income was $237.7 million, or $1.66 per diluted share, an increase of 9%, or 37% annualized, from $217.8 million, or $1.52 per diluted share, for the fourth quarter of 2021, and an increase of 16% from $205.0 million, or $1.44 per diluted share, for the first quarter of 2021.
First Quarter 2022 Compared to Fourth Quarter 2021
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $415.6 million, an increase of 10% annualized from $405.7 million. Net interest margin (“NIM”) of 2.87% increased by 14 basis points from 2.73%.
•NII growth and NIM expansion were primarily driven by strong loan growth and higher loan yields. Average loan growth during the first quarter drove a favorable shift in the asset mix into higher interest earning assets. Average loans made up 72% of average interest-earning assets in the first quarter of 2022, compared with 69% in the fourth quarter of 2021.
•The average loan yield was 3.63%, up four basis points from the fourth quarter.
•The average cost of funds of 0.12% and the average cost of deposits of 0.10% both remained unchanged from the fourth quarter. The average cost of interest-bearing deposits of 0.17% decreased by one basis point from the fourth quarter.
Noninterest Income
Noninterest income totaled $79.7 million in the first quarter, an increase of $8.3 million, or 12%, from $71.5 million in the fourth quarter. Customer-driven fee income and net gains on sales of loans were $65.0 million, an increase of 3% linked quarter, or 11% annualized, from $63.3 million in the fourth quarter.
Interest rate contracts (“IRC”) and other derivative income was $11.1 million in the first quarter, compared with $1.9 million in the fourth quarter. The $9.2 million quarter-over-quarter increase was largely due to a favorable change in the credit valuation adjustment, as well as higher customer-driven IRC revenue.
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Noninterest Expense
Noninterest expense totaled $189.5 million in the first quarter, compared with $210.1 million in the fourth quarter. First quarter noninterest expense consisted of $175.0 million of adjusted noninterest expense3, $13.9 million in amortization of tax credit and other investments, and $0.5 million in amortization of core deposit intangibles.
•Adjusted noninterest expense of $175.0 million decreased by 1.5%, or 6% annualized, from $177.7 million in the fourth quarter. Reductions in legal expense and overall operating expenses, including data processing, occupancy and equipment expense, and computer software expense, more than offset increased compensation and employee benefits expense, which is typically higher in the first quarter due to higher payroll taxes and related expenses.
•Amortization of tax credit and other investments totaled $13.9 million in the first quarter, compared with $31.8 million in the fourth quarter. Quarter-over-quarter variability in the amortization of tax credits and other investments partially reflects the impact of investments that close in a given period.
•The adjusted efficiency ratio3 was 35.3% in the first quarter, compared with 37.2% in the fourth quarter.
TAX RELATED ITEMS
First quarter 2022 income tax expense was $60.3 million and the effective tax rate was 20.2%, compared with income tax expense of $59.3 million and an effective tax rate of 21.4% for the fourth quarter of 2021.
ASSET QUALITY
The asset quality of the loan portfolio continues to be strong.
•The nonperforming asset (“NPA”) ratio improved by two basis points quarter-over-quarter and NPAs decreased by 9%. As of March 31, 2022, NPAs were $94.4 million, or 0.15% of total assets, compared with $103.5 million, or 0.17% of total assets, as of December 31, 2021.
•The criticized loan ratio improved by eight basis points quarter-over-quarter. As of March 31, 2022, criticized loans totaled $833.3 million, or 1.92% of loans held-for-investment (“HFI”), compared with $833.1 million, or 2.00% of loans HFI, as of December 31, 2021.
•First quarter 2022 net charge-offs were $8.3 million, or annualized 0.08% of average loans HFI, down from $9.8 million, or annualized 0.10% of average loans HFI, for the fourth quarter of 2021.
•The allowance for loan losses (“ALLL”) totaled $545.7 million, or 1.25% of loans HFI, as of March 31, 2022 compared with $541.6 million, or 1.30% of loans HFI, as of December 31, 2021. The provision for credit losses was $8.0 million for the first quarter of 2022, compared with a reversal of $10.0 million for the fourth quarter of 2021 and no provision for the first quarter of 2021. The quarter-over-quarter increase in the ALLL largely reflects loan growth. The quarter-over-quarter decrease in the ALLL coverage ratio reflects improving asset quality metrics in the loan portfolio.
3 See reconciliation of GAAP to non-GAAP financial measures in Table 10. | |||||||||||
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CAPITAL STRENGTH
Capital levels for East West are strong. The following table presents the regulatory capital metrics as of March 31, 2022, December 31, 2021, and March 31, 2021.
| EWBC Risk-Based Capital Ratios | |||||||||||||||||||||||||||||
| ($ in millions) | March 31, 2022 (a) | December 31, 2021 (a) | March 31, 2021 (a) | ||||||||||||||||||||||||||
| CET1 capital ratio | 12.6% | 12.8% | 12.7% | ||||||||||||||||||||||||||
| Tier 1 capital ratio | 12.6% | 12.8% | 12.7% | ||||||||||||||||||||||||||
| Total capital ratio | 13.9% | 14.1% | 14.3% | ||||||||||||||||||||||||||
| Leverage ratio | 9.3% | 9.0% | 9.1% | ||||||||||||||||||||||||||
Risk-Weighted Assets (“RWA”) (b) | $45,405 | $43,585 | $39,572 | ||||||||||||||||||||||||||
(a)The Company has elected to use the 2020 CECL transition provision in the calculation of its March 31, 2022, December 31, 2021, and March 31, 2021 regulatory capital ratios. The Company’s March 31, 2022 regulatory capital ratios and RWA are preliminary.
(b)Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.
DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared second quarter 2022 dividends for the Company’s common stock. The common stock cash dividend of $0.40 per share is payable on May 16, 2022 to stockholders of record on May 2, 2022.
On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock, of which $354 million remains available. East West did not repurchase any shares during the first quarter of 2022, and has not repurchased any shares since the first quarter of 2020, under this authorization.
Conference Call
East West will host a conference call to discuss first quarter 2022 earnings with the public on Thursday, April 21, 2022, at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses first quarter 2022 results and operating developments.
•The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
•A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
•A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
•A replay of the conference call will be available on April 21, 2022, at 11:30 a.m. PT through May 21, 2022. The replay numbers are: within the U.S. – (877) 344-7529; within Canada – (855) 669-9658; international calls – (412) 317-0088; and the replay access code is: 406752.
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About East West
East West Bancorp, Inc. is a public company with total assets of $62.2 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is the largest independent bank headquartered in Southern California, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, Illinois, Massachusetts, Nevada, New York, Texas and Washington. In China, East West’s presence includes full-service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.
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Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. These statements may relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business and usually can be identified by the use of forward-looking language, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends to,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.
There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, include, but are not limited to: changes in the global economy, including an economic slowdown, or market disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; changes in local, regional and global business, economic and political conditions and geopolitical events; the economic, financial, reputational and other impacts of the ongoing COVID-19 global pandemic including variants thereof and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 global pandemic; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the California Department of Financial Protection and Innovation; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve; changes in the commercial and consumer real estate markets; changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors; fluctuations in the Company’s stock price; impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs; the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies; the soundness of other financial institutions; 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 the benchmark interest rate reform in the U.S. including the transition away from USD London Interbank Offered Rate to alternative reference rates; impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused and materially impact the Company’s ability to provide services to its clients; 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 operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; 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; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly; significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increases in funding costs, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s debt securities portfolio; and impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.
For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2021 Form 10-K 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.
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| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEET | |||||||||||||||||||||||||||||||||||||||||
| ($ and shares in thousands, except per share data) | |||||||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Table 1 | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 % or Basis Point Change | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 571,571 | $ | 527,317 | $ | 582,270 | 8.4 | % | (1.8) | % | |||||||||||||||||||||||||||||||
| Interest-bearing cash with banks | 3,277,129 | 3,385,618 | 4,036,863 | (3.2) | (18.8) | ||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 3,848,700 | 3,912,935 | 4,619,133 | (1.6) | (16.7) | ||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits with banks | 816,125 | 736,492 | 741,923 | 10.8 | 10.0 | ||||||||||||||||||||||||||||||||||||
| Assets purchased under resale agreements (“resale agreements”) | 1,956,822 | 2,353,503 | 2,160,038 | (16.9) | (9.4) | ||||||||||||||||||||||||||||||||||||
| Available-for-sale (“AFS”) debt securities (amortized cost of $7,091,581, $10,087,179 and $7,904,546) | 6,729,431 | 9,965,353 | 7,789,213 | (32.5) | (13.6) | ||||||||||||||||||||||||||||||||||||
| Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,815,968 in 2022) | 2,997,702 | — | — | 100.0 | 100.0 | ||||||||||||||||||||||||||||||||||||
| Loans held-for-sale (“HFS”) | 631 | 635 | — | (0.6) | 100.0 | ||||||||||||||||||||||||||||||||||||
| Loans held-for-investment (''HFI'') (net of allowance for loan losses of $545,685, $541,579 and $607,506) | 42,944,997 | 41,152,202 | 38,981,242 | 4.4 | 10.2 | ||||||||||||||||||||||||||||||||||||
| Investments in qualified affordable housing partnerships, tax credit and other investments, net | 607,985 | 628,263 | 646,300 | (3.2) | (5.9) | ||||||||||||||||||||||||||||||||||||
| Goodwill | 465,697 | 465,697 | 465,697 | — | — | ||||||||||||||||||||||||||||||||||||
| Operating lease right-of-use assets | 102,491 | 98,632 | 94,483 | 3.9 | 8.5 | ||||||||||||||||||||||||||||||||||||
| Other assets | 1,770,875 | 1,556,989 | 1,376,117 | 13.7 | 28.7 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 62,241,456 | $ | 60,870,701 | $ | 56,874,146 | 2.3 | % | 9.4 | % | |||||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Deposits | $ | 54,938,361 | $ | 53,350,532 | $ | 49,547,136 | 3.0 | % | 10.9 | % | |||||||||||||||||||||||||||||||
| FHLB advances | 74,619 | 249,331 | 653,035 | (70.1) | (88.6) | ||||||||||||||||||||||||||||||||||||
| Assets sold under repurchase agreements (“repurchase agreements”) | 300,000 | 300,000 | 300,000 | — | — | ||||||||||||||||||||||||||||||||||||
| Long-term debt and finance lease liabilities | 152,227 | 151,997 | 152,195 | 0.2 | 0.0 | ||||||||||||||||||||||||||||||||||||
| Operating lease liabilities | 109,656 | 105,534 | 101,828 | 3.9 | 7.7 | ||||||||||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | 963,137 | 876,089 | 834,925 | 9.9 | 15.4 | ||||||||||||||||||||||||||||||||||||
| Total liabilities | 56,538,000 | 55,033,483 | 51,589,119 | 2.7 | 9.6 | ||||||||||||||||||||||||||||||||||||
| Stockholders’ equity | 5,703,456 | 5,837,218 | 5,285,027 | (2.3) | 7.9 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 62,241,456 | $ | 60,870,701 | $ | 56,874,146 | 2.3 | % | 9.4 | % | |||||||||||||||||||||||||||||||
| Book value per common share | $ | 40.09 | $ | 41.13 | $ | 37.26 | (2.5) | % | 7.6 | % | |||||||||||||||||||||||||||||||
Tangible equity (1) per common share | $ | 36.76 | $ | 37.79 | $ | 33.90 | (2.7) | 8.4 | |||||||||||||||||||||||||||||||||
| Number of common shares at period-end | 142,257 | 141,908 | 141,843 | 0.2 | 0.3 | ||||||||||||||||||||||||||||||||||||
Tangible equity to tangible assets ratio (1) | 8.47 | % | 8.88 | % | 8.53 | % | (41) | bps | (6) | bps | |||||||||||||||||||||||||||||||
(1)See reconciliation of GAAP to non-GAAP financial measures in Table 11.
7
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| TOTAL LOANS AND DEPOSITS DETAIL | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||
| Table 2 | |||||||||||||||||||||||||||||||||||
| March 31, 2022 % Change | |||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||
Commercial: | |||||||||||||||||||||||||||||||||||
Commercial and industrial (“C&I”) (1) | $ | 14,838,134 | $ | 14,150,608 | $ | 14,081,110 | 4.9 | % | 5.4 | % | |||||||||||||||||||||||||
Commercial real estate (“CRE”): | |||||||||||||||||||||||||||||||||||
CRE | 12,636,787 | 12,155,047 | 11,563,034 | 4.0 | 9.3 | ||||||||||||||||||||||||||||||
Multifamily residential | 3,894,463 | 3,675,605 | 3,066,515 | 6.0 | 27.0 | ||||||||||||||||||||||||||||||
Construction and land | 443,836 | 346,486 | 459,254 | 28.1 | (3.4) | ||||||||||||||||||||||||||||||
Total CRE | 16,975,086 | 16,177,138 | 15,088,803 | 4.9 | 12.5 | ||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||
Single-family residential | 9,283,429 | 9,093,702 | 8,524,287 | 2.1 | 8.9 | ||||||||||||||||||||||||||||||
| Home equity lines of credit (“HELOCs”) | 2,266,634 | 2,144,821 | 1,749,172 | 5.7 | 29.6 | ||||||||||||||||||||||||||||||
Total residential mortgage | 11,550,063 | 11,238,523 | 10,273,459 | 2.8 | 12.4 | ||||||||||||||||||||||||||||||
Other consumer | 127,399 | 127,512 | 145,376 | (0.1) | (12.4) | ||||||||||||||||||||||||||||||
Total loans HFI (2) | 43,490,682 | 41,693,781 | 39,588,748 | 4.3 | 9.9 | ||||||||||||||||||||||||||||||
Loans HFS | 631 | 635 | — | (0.6) | 100.0 | ||||||||||||||||||||||||||||||
Total loans (1)(2) | 43,491,313 | 41,694,416 | 39,588,748 | 4.3 | 9.9 | ||||||||||||||||||||||||||||||
| Allowance for loan losses | (545,685) | (541,579) | (607,506) | 0.8 | (10.2) | ||||||||||||||||||||||||||||||
Net loans (2) | $ | 42,945,628 | $ | 41,152,837 | $ | 38,981,242 | 4.4 | 10.2 | |||||||||||||||||||||||||||
Deposits: | |||||||||||||||||||||||||||||||||||
Noninterest-bearing demand | $ | 24,927,768 | $ | 22,845,464 | $ | 18,919,298 | 9.1 | % | 31.8 | % | |||||||||||||||||||||||||
Interest-bearing checking | 6,774,826 | 6,524,721 | 7,005,693 | 3.8 | (3.3) | ||||||||||||||||||||||||||||||
Money market | 12,108,432 | 13,130,300 | 12,218,957 | (7.8) | (0.9) | ||||||||||||||||||||||||||||||
Savings | 2,897,248 | 2,888,065 | 2,604,355 | 0.3 | 11.2 | ||||||||||||||||||||||||||||||
Time deposits | 8,230,087 | 7,961,982 | 8,798,833 | 3.4 | (6.5) | ||||||||||||||||||||||||||||||
Total deposits | $ | 54,938,361 | $ | 53,350,532 | $ | 49,547,136 | 3.0 | % | 10.9 | % | |||||||||||||||||||||||||
(1)Includes $318.1 million, $534.2 million and $2.07 billion of Paycheck Protection Program (“PPP”) loans as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively. Excluding PPP loans, total loans were $43.17 billion, $41.16 billion and $37.52 billion as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(2)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(42.7) million, $(50.7) million and $(76.9) million as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
8
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||||||||||||||||||||||||||||||||
| ($ and shares in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||
| Table 3 | |||||||||||||||||||||||||||||||||||
| Three Months Ended | March 31, 2022 % Change | ||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||||||||||||||||||||||
Interest and dividend income (1) | $ | 432,029 | $ | 422,708 | $ | 381,386 | 2.2 | % | 13.3 | % | |||||||||||||||||||||||||
Interest expense | 16,416 | 17,011 | 27,691 | (3.5) | (40.7) | ||||||||||||||||||||||||||||||
| Net interest income before provision for (reversal of) credit losses | 415,613 | 405,697 | 353,695 | 2.4 | 17.5 | ||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | 8,000 | (10,000) | — | (180.0) | 100.0 | ||||||||||||||||||||||||||||||
| Net interest income after provision for (reversal of) credit losses | 407,613 | 415,697 | 353,695 | (1.9) | 15.2 | ||||||||||||||||||||||||||||||
| Noninterest income | 79,743 | 71,489 | 72,866 | 11.5 | 9.4 | ||||||||||||||||||||||||||||||
| Noninterest expense | 189,450 | 210,105 | 191,077 | (9.8) | (0.9) | ||||||||||||||||||||||||||||||
Income before income taxes | 297,906 | 277,081 | 235,484 | 7.5 | 26.5 | ||||||||||||||||||||||||||||||
Income tax expense | 60,254 | 59,285 | 30,490 | 1.6 | 97.6 | ||||||||||||||||||||||||||||||
Net income | $ | 237,652 | $ | 217,796 | $ | 204,994 | 9.1 | % | 15.9 | % | |||||||||||||||||||||||||
Earnings per share (“EPS”) | |||||||||||||||||||||||||||||||||||
- Basic | $ | 1.67 | $ | 1.53 | $ | 1.45 | 9.0 | % | 15.6 | % | |||||||||||||||||||||||||
- Diluted | $ | 1.66 | $ | 1.52 | $ | 1.44 | 9.2 | 15.6 | |||||||||||||||||||||||||||
Weighted-average number of shares outstanding | |||||||||||||||||||||||||||||||||||
- Basic | 142,025 | 141,907 | 141,646 | 0.1 | % | 0.3 | % | ||||||||||||||||||||||||||||
- Diluted | 143,223 | 143,323 | 142,844 | (0.1) | 0.3 | ||||||||||||||||||||||||||||||
| Three Months Ended | March 31, 2022 % Change | ||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||||||||||||||
Lending fees | $ | 19,438 | $ | 20,739 | $ | 18,357 | (6.3) | % | 5.9 | % | |||||||||||||||||||||||||
| Deposit account fees | 20,315 | 20,028 | 15,383 | 1.4 | 32.1 | ||||||||||||||||||||||||||||||
| Interest rate contracts and other derivative income | 11,133 | 1,932 | 16,997 | 476.2 | (34.5) | ||||||||||||||||||||||||||||||
Foreign exchange income | 12,699 | 13,343 | 9,526 | (4.8) | 33.3 | ||||||||||||||||||||||||||||||
Wealth management fees | 6,052 | 5,291 | 6,911 | 14.4 | (12.4) | ||||||||||||||||||||||||||||||
Net gains on sales of loans | 2,922 | 2,308 | 1,781 | 26.6 | 64.1 | ||||||||||||||||||||||||||||||
Gains on sales of AFS debt securities | 1,278 | 390 | 192 | 227.7 | 565.6 | ||||||||||||||||||||||||||||||
| Other investment income | 1,627 | 2,982 | 925 | (45.4) | 75.9 | ||||||||||||||||||||||||||||||
Other income | 4,279 | 4,476 | 2,794 | (4.4) | 53.1 | ||||||||||||||||||||||||||||||
| Total noninterest income | $ | 79,743 | $ | 71,489 | $ | 72,866 | 11.5 | % | 9.4 | % | |||||||||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||||||||||||||
Compensation and employee benefits | $ | 116,269 | $ | 114,743 | $ | 107,808 | 1.3 | % | 7.8 | % | |||||||||||||||||||||||||
Occupancy and equipment expense | 15,464 | 15,846 | 15,922 | (2.4) | (2.9) | ||||||||||||||||||||||||||||||
Deposit insurance premiums and regulatory assessments | 4,717 | 4,772 | 3,876 | (1.2) | 21.7 | ||||||||||||||||||||||||||||||
| Deposit account expense | 4,693 | 4,307 | 3,892 | 9.0 | 20.6 | ||||||||||||||||||||||||||||||
| Data processing | 3,665 | 4,175 | 4,478 | (12.2) | (18.2) | ||||||||||||||||||||||||||||||
| Computer software expense | 7,294 | 7,494 | 7,159 | (2.7) | 1.9 | ||||||||||||||||||||||||||||||
| Consulting expense | 1,833 | 1,539 | 1,475 | 19.1 | 24.3 | ||||||||||||||||||||||||||||||
Legal expense | 718 | 2,175 | 1,502 | (67.0) | (52.2) | ||||||||||||||||||||||||||||||
Other operating expense | 20,897 | 23,254 | 19,607 | (10.1) | 6.6 | ||||||||||||||||||||||||||||||
| Amortization of tax credit and other investments | 13,900 | 31,800 | 25,358 | (56.3) | (45.2) | ||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 189,450 | $ | 210,105 | $ | 191,077 | (9.8) | % | (0.9) | % | |||||||||||||||||||||||||
(1)Includes $5.2 million, $9.6 million and $15.0 million of interest income related to PPP loans for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
9
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| SELECTED AVERAGE BALANCES | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||
| Table 4 | |||||||||||||||||||||||||||||||||||
| Three Months Ended | March 31, 2022 % Change | ||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | Qtr-o-Qtr | Yr-o-Yr | |||||||||||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||||||||||
Commercial: | |||||||||||||||||||||||||||||||||||
C&I (1) | $ | 14,271,902 | $ | 13,592,203 | $ | 13,693,869 | 5.0% | 4.2% | |||||||||||||||||||||||||||
| CRE: | |||||||||||||||||||||||||||||||||||
CRE | 12,279,365 | 11,954,535 | 11,325,679 | 2.7 | 8.4 | ||||||||||||||||||||||||||||||
Multifamily residential | 3,749,571 | 3,434,274 | 3,042,079 | 9.2 | 23.3 | ||||||||||||||||||||||||||||||
Construction and land | 392,923 | 340,940 | 549,337 | 15.2 | (28.5) | ||||||||||||||||||||||||||||||
Total CRE | 16,421,859 | 15,729,749 | 14,917,095 | 4.4 | 10.1 | ||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||
Residential mortgage: | |||||||||||||||||||||||||||||||||||
Single-family residential | 9,111,188 | 9,031,677 | 8,315,052 | 0.9 | 9.6 | ||||||||||||||||||||||||||||||
HELOCs | 2,183,080 | 2,052,383 | 1,666,233 | 6.4 | 31.0 | ||||||||||||||||||||||||||||||
Total residential mortgage | 11,294,268 | 11,084,060 | 9,981,285 | 1.9 | 13.2 | ||||||||||||||||||||||||||||||
Other consumer | 124,389 | 126,557 | 137,058 | (1.7) | (9.2) | ||||||||||||||||||||||||||||||
Total loans (2) | $ | 42,112,418 | $ | 40,532,569 | $ | 38,729,307 | 3.9% | 8.7% | |||||||||||||||||||||||||||
Interest-earning assets | $ | 58,692,366 | $ | 58,944,082 | $ | 52,852,045 | (0.4)% | 11.1% | |||||||||||||||||||||||||||
Total assets | $ | 61,758,048 | $ | 62,183,137 | $ | 55,594,283 | (0.7)% | 11.1% | |||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
Noninterest-bearing demand | $ | 23,432,746 | $ | 24,019,333 | $ | 18,093,696 | (2.4)% | 29.5% | |||||||||||||||||||||||||||
Interest-bearing checking | 6,648,065 | 6,462,471 | 6,393,034 | 2.9 | 4.0 | ||||||||||||||||||||||||||||||
Money market | 12,913,336 | 12,920,174 | 11,573,847 | (0.1) | 11.6 | ||||||||||||||||||||||||||||||
Savings | 2,930,309 | 2,841,352 | 2,674,476 | 3.1 | 9.6 | ||||||||||||||||||||||||||||||
Time deposits | 8,100,890 | 8,072,917 | 9,112,662 | 0.3 | (11.1) | ||||||||||||||||||||||||||||||
Total deposits | $ | 54,025,346 | $ | 54,316,247 | $ | 47,847,715 | (0.5)% | 12.9% | |||||||||||||||||||||||||||
Interest-bearing liabilities | $ | 31,218,479 | $ | 31,011,536 | $ | 30,863,568 | 0.7% | 1.1% | |||||||||||||||||||||||||||
Stockholders’ equity | $ | 5,842,615 | $ | 5,786,237 | $ | 5,338,098 | 1.0% | 9.5% | |||||||||||||||||||||||||||
(1)Average balances of PPP loans were $410.6 million, $677.2 million and $1.93 billion for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(2)Includes loans HFS.
10
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | |||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Table 5 | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||||||||||||||||||||||||
| Balance | Interest | Yield/Rate (1) | Balance | Interest | Yield/Rate (1) | ||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||||||||
Interest-bearing cash and deposits with banks | $ | 4,466,012 | $ | 3,260 | 0.30 | % | $ | 6,050,870 | $ | 3,750 | 0.25 | % | |||||||||||||||||||||||||||||
| Resale agreements | 2,097,998 | 8,383 | 1.62 | % | 2,440,636 | 9,162 | 1.49 | % | |||||||||||||||||||||||||||||||||
| AFS debt securities | 7,969,795 | 34,469 | 1.75 | % | 9,842,691 | 42,367 | 1.71 | % | |||||||||||||||||||||||||||||||||
| HTM debt securities | 1,968,568 | 8,198 | 1.69 | % | — | — | — | % | |||||||||||||||||||||||||||||||||
Loans (2) | 42,112,418 | 377,110 | 3.63 | % | 40,532,569 | 366,936 | 3.59 | % | |||||||||||||||||||||||||||||||||
FHLB and FRB stock | 77,575 | 609 | 3.18 | % | 77,316 | 493 | 2.53 | % | |||||||||||||||||||||||||||||||||
Total interest-earning assets | 58,692,366 | 432,029 | 2.99 | % | 58,944,082 | 422,708 | 2.85 | % | |||||||||||||||||||||||||||||||||
Noninterest-earning assets: | |||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 641,882 | 652,126 | |||||||||||||||||||||||||||||||||||||||
| Allowance for loan losses | (543,345) | (558,645) | |||||||||||||||||||||||||||||||||||||||
Other assets | 2,967,145 | 3,145,574 | |||||||||||||||||||||||||||||||||||||||
Total assets | $ | 61,758,048 | $ | 62,183,137 | |||||||||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||
Checking deposits | $ | 6,648,065 | $ | 1,402 | 0.09 | % | $ | 6,462,471 | $ | 1,846 | 0.11 | % | |||||||||||||||||||||||||||||
Money market deposits | 12,913,336 | 3,203 | 0.10 | % | 12,920,174 | 3,172 | 0.10 | % | |||||||||||||||||||||||||||||||||
Savings deposits | 2,930,309 | 1,704 | 0.24 | % | 2,841,352 | 1,734 | 0.24 | % | |||||||||||||||||||||||||||||||||
Time deposits | 8,100,890 | 6,680 | 0.33 | % | 8,072,917 | 6,617 | 0.33 | % | |||||||||||||||||||||||||||||||||
Federal funds purchased and other short-term borrowings | 1,866 | 9 | 1.96 | % | 730 | — | — | % | |||||||||||||||||||||||||||||||||
FHLB advances | 160,018 | 578 | 1.46 | % | 249,048 | 856 | 1.36 | % | |||||||||||||||||||||||||||||||||
| Repurchase agreements | 311,984 | 2,016 | 2.62 | % | 313,075 | 2,018 | 2.56 | % | |||||||||||||||||||||||||||||||||
Long-term debt and finance lease liabilities | 152,011 | 824 | 2.20 | % | 151,769 | 768 | 2.01 | % | |||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 31,218,479 | 16,416 | 0.21 | % | 31,011,536 | 17,011 | 0.22 | % | |||||||||||||||||||||||||||||||||
Noninterest-bearing liabilities and stockholders’ equity: | |||||||||||||||||||||||||||||||||||||||||
Demand deposits | 23,432,746 | 24,019,333 | |||||||||||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 1,264,208 | 1,366,031 | |||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | 5,842,615 | 5,786,237 | |||||||||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 61,758,048 | $ | 62,183,137 | |||||||||||||||||||||||||||||||||||||
Interest rate spread | 2.78 | % | 2.63 | % | |||||||||||||||||||||||||||||||||||||
Net interest income and net interest margin | $ | 415,613 | 2.87 | % | $ | 405,697 | 2.73 | % | |||||||||||||||||||||||||||||||||
(1)Annualized.
(2)Includes loans HFS. Average balances of PPP loans were $410.6 million and $677.2 million for the three months ended March 31, 2022 and December 31, 2021, respectively.
11
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | |||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Table 6 | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||||||||||||||||||||||||||
| Balance | Interest | Yield/Rate (1) | Balance | Interest | Yield/Rate (1) | ||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||||||||
Interest-bearing cash and deposits with banks | $ | 4,466,012 | $ | 3,260 | 0.30 | % | $ | 6,117,799 | $ | 3,632 | 0.24 | % | |||||||||||||||||||||||||||||
| Resale agreements | 2,097,998 | 8,383 | 1.62 | % | 1,461,900 | 6,099 | 1.69 | % | |||||||||||||||||||||||||||||||||
| AFS debt securities | 7,969,795 | 34,469 | 1.75 | % | 6,459,875 | 29,100 | 1.83 | % | |||||||||||||||||||||||||||||||||
| HTM debt securities | 1,968,568 | 8,198 | 1.69 | % | — | — | — | % | |||||||||||||||||||||||||||||||||
Loans (2) | 42,112,418 | 377,110 | 3.63 | % | 38,729,307 | 342,008 | 3.58 | % | |||||||||||||||||||||||||||||||||
FHLB and FRB stock | 77,575 | 609 | 3.18 | % | 83,164 | 547 | 2.67 | % | |||||||||||||||||||||||||||||||||
Total interest-earning assets | 58,692,366 | 432,029 | 2.99 | % | 52,852,045 | 381,386 | 2.93 | % | |||||||||||||||||||||||||||||||||
Noninterest-earning assets: | |||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 641,882 | 580,277 | |||||||||||||||||||||||||||||||||||||||
| Allowance for loan losses | (543,345) | (618,589) | |||||||||||||||||||||||||||||||||||||||
Other assets | 2,967,145 | 2,780,550 | |||||||||||||||||||||||||||||||||||||||
Total assets | $ | 61,758,048 | $ | 55,594,283 | |||||||||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||
Checking deposits | $ | 6,648,065 | $ | 1,402 | 0.09 | % | $ | 6,393,034 | $ | 4,214 | 0.27 | % | |||||||||||||||||||||||||||||
Money market deposits | 12,913,336 | 3,203 | 0.10 | % | 11,573,847 | 4,711 | 0.17 | % | |||||||||||||||||||||||||||||||||
Savings deposits | 2,930,309 | 1,704 | 0.24 | % | 2,674,476 | 1,741 | 0.26 | % | |||||||||||||||||||||||||||||||||
Time deposits | 8,100,890 | 6,680 | 0.33 | % | 9,112,662 | 11,156 | 0.50 | % | |||||||||||||||||||||||||||||||||
Federal funds purchased and other short-term borrowings | 1,866 | 9 | 1.96 | % | 4,703 | 42 | 3.62 | % | |||||||||||||||||||||||||||||||||
FHLB advances | 160,018 | 578 | 1.46 | % | 652,758 | 3,069 | 1.91 | % | |||||||||||||||||||||||||||||||||
| Repurchase agreements | 311,984 | 2,016 | 2.62 | % | 300,000 | 1,978 | 2.67 | % | |||||||||||||||||||||||||||||||||
Long-term debt and finance lease liabilities | 152,011 | 824 | 2.20 | % | 152,088 | 780 | 2.08 | % | |||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 31,218,479 | 16,416 | 0.21 | % | 30,863,568 | 27,691 | 0.36 | % | |||||||||||||||||||||||||||||||||
Noninterest-bearing liabilities and stockholders’ equity: | |||||||||||||||||||||||||||||||||||||||||
Demand deposits | 23,432,746 | 18,093,696 | |||||||||||||||||||||||||||||||||||||||
Accrued expenses and other liabilities | 1,264,208 | 1,298,921 | |||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | 5,842,615 | 5,338,098 | |||||||||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 61,758,048 | $ | 55,594,283 | |||||||||||||||||||||||||||||||||||||
Interest rate spread | 2.78 | % | 2.57 | % | |||||||||||||||||||||||||||||||||||||
Net interest income and net interest margin | $ | 415,613 | 2.87 | % | $ | 353,695 | 2.71 | % | |||||||||||||||||||||||||||||||||
(1)Annualized.
(2)Includes loans HFS. Average balances of PPP loans were $410.6 million and $1.93 billion for the three months ended March 31, 2022 and 2021, respectively.
12
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||||||||||||
| SELECTED RATIOS | ||||||||||||||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||||||||||||
| Table 7 | ||||||||||||||||||||||||||||||||||||||
Three Months Ended (1) | March 31, 2022 Basis Point Change | |||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | Qtr-o-Qtr | Yr-o-Yr | ||||||||||||||||||||||||||||||||||
Return on average assets | 1.56 | % | 1.39 | % | 1.50 | % | 17 | bps | 6 | bps | ||||||||||||||||||||||||||||
Return on average equity | 16.50 | % | 14.93 | % | 15.57 | % | 157 | 93 | ||||||||||||||||||||||||||||||
Return on average tangible equity (2) | 18.00 | % | 16.32 | % | 17.17 | % | 168 | 83 | ||||||||||||||||||||||||||||||
Interest rate spread | 2.78 | % | 2.63 | % | 2.57 | % | 15 | 21 | ||||||||||||||||||||||||||||||
Net interest margin | 2.87 | % | 2.73 | % | 2.71 | % | 14 | 16 | ||||||||||||||||||||||||||||||
Average loan yield | 3.63 | % | 3.59 | % | 3.58 | % | 4 | 5 | ||||||||||||||||||||||||||||||
Yield on average interest-earning assets | 2.99 | % | 2.85 | % | 2.93 | % | 14 | 6 | ||||||||||||||||||||||||||||||
Average cost of interest-bearing deposits | 0.17 | % | 0.18 | % | 0.30 | % | (1) | (13) | ||||||||||||||||||||||||||||||
Average cost of deposits | 0.10 | % | 0.10 | % | 0.18 | % | — | (8) | ||||||||||||||||||||||||||||||
Average cost of funds | 0.12 | % | 0.12 | % | 0.23 | % | — | (11) | ||||||||||||||||||||||||||||||
Adjusted pre-tax, pre-provision profitability ratio (3) | 2.10 | % | 1.91 | % | 1.91 | % | 19 | 19 | ||||||||||||||||||||||||||||||
Adjusted noninterest expense/average assets (3) | 1.15 | % | 1.13 | % | 1.20 | % | 2 | (5) | ||||||||||||||||||||||||||||||
Efficiency ratio | 38.25 | % | 44.03 | % | 44.79 | % | (578) | (654) | ||||||||||||||||||||||||||||||
Adjusted efficiency ratio (3) | 35.34 | % | 37.24 | % | 38.68 | % | (190) | bps | (334) | bps | ||||||||||||||||||||||||||||
(1)Annualized except for efficiency ratio.
(2)See reconciliation of GAAP to non-GAAP financial measures in Table 11.
(3)See reconciliation of GAAP to non-GAAP financial measures in Table 10.
13
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||
| ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE SHEET CREDIT EXPOSURES | |||||||||||||||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||
| Table 8 | |||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
| Commercial | Consumer | ||||||||||||||||||||||||||||||||||
| C&I | Total CRE | Total Residential Mortgage | Other Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for loan losses, December 31, 2021 | $ | 338,252 | $ | 180,808 | $ | 20,595 | $ | 1,924 | $ | 541,579 | |||||||||||||||||||||||||
| Provision for credit losses on loans | (a) | 9,262 | 1,658 | 1,225 | 107 | 12,252 | |||||||||||||||||||||||||||||
| Gross charge-offs | (11,188) | (399) | — | (46) | (11,633) | ||||||||||||||||||||||||||||||
| Gross recoveries | 3,002 | 229 | 138 | — | 3,369 | ||||||||||||||||||||||||||||||
| Total net (charge-offs) recoveries | (8,186) | (170) | 138 | (46) | (8,264) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 118 | — | — | — | 118 | ||||||||||||||||||||||||||||||
| Allowance for loan losses, March 31, 2022 | $ | 339,446 | $ | 182,296 | $ | 21,958 | $ | 1,985 | $ | 545,685 | |||||||||||||||||||||||||
| Three Months Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||
| Commercial | Consumer | ||||||||||||||||||||||||||||||||||
| C&I | Total CRE | Total Residential Mortgage | Other Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for loan losses, September 30, 2021 | $ | 342,142 | $ | 192,260 | $ | 21,684 | $ | 4,318 | $ | 560,404 | |||||||||||||||||||||||||
| Provision for (reversal of) credit losses on loans | (a) | 2,397 | (9,416) | (1,519) | (940) | (9,478) | |||||||||||||||||||||||||||||
| Gross charge-offs | (12,328) | (2,872) | — | (1,454) | (16,654) | ||||||||||||||||||||||||||||||
| Gross recoveries | 5,605 | 836 | 430 | — | 6,871 | ||||||||||||||||||||||||||||||
| Total net (charge-offs) recoveries | (6,723) | (2,036) | 430 | (1,454) | (9,783) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 436 | — | — | — | 436 | ||||||||||||||||||||||||||||||
| Allowance for loan losses, December 31, 2021 | $ | 338,252 | $ | 180,808 | $ | 20,595 | $ | 1,924 | $ | 541,579 | |||||||||||||||||||||||||
| Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||
| Commercial | Consumer | ||||||||||||||||||||||||||||||||||
| C&I | Total CRE | Total Residential Mortgage | Other Consumer | Total | |||||||||||||||||||||||||||||||
| Allowance for loan losses, December 31, 2020 | $ | 398,040 | $ | 201,603 | $ | 18,210 | $ | 2,130 | $ | 619,983 | |||||||||||||||||||||||||
| Provision for (reversal of) credit losses on loans | (a) | 3,839 | (3,076) | 398 | (113) | 1,048 | |||||||||||||||||||||||||||||
| Gross charge-offs | (8,436) | (7,283) | (179) | (1) | (15,899) | ||||||||||||||||||||||||||||||
| Gross recoveries | 760 | 1,651 | 80 | 2 | 2,493 | ||||||||||||||||||||||||||||||
| Total net (charge-offs) recoveries | (7,676) | (5,632) | (99) | 1 | (13,406) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | (119) | — | — | — | (119) | ||||||||||||||||||||||||||||||
| Allowance for loan losses, March 31, 2021 | $ | 394,084 | $ | 192,895 | $ | 18,509 | $ | 2,018 | $ | 607,506 | |||||||||||||||||||||||||
14
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE SHEET CREDIT EXPOSURES | |||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Table 8 (continued) | |||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||
| Unfunded Credit Facilities | |||||||||||||||||||||||
Allowance for unfunded credit commitments, beginning of period (1) | $ | 27,514 | $ | 28,036 | $ | 33,577 | |||||||||||||||||
| Reversal of credit losses on unfunded credit commitments | (b) | (4,252) | (522) | (1,048) | |||||||||||||||||||
Allowance for unfunded credit commitments, end of period (1) | $ | 23,262 | $ | 27,514 | $ | 32,529 | |||||||||||||||||
| Provision for (reversal of) credit losses | (a)+(b) | $ | 8,000 | $ | (10,000) | $ | — | ||||||||||||||||
(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.
15
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| CRITICIZED LOANS, NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS | |||||||||||||||||||||||
| ($ in thousands) | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Table 9 | |||||||||||||||||||||||
| Criticized Loans | March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||
| Special mention loans | $ | 402,704 | $ | 384,694 | $ | 504,226 | |||||||||||||||||
| Classified loans | 430,633 | 448,362 | 712,693 | ||||||||||||||||||||
| Total criticized loans | $ | 833,337 | $ | 833,056 | $ | 1,216,919 | |||||||||||||||||
Nonperforming Assets | March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||
| Nonaccrual loans: | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||
| C&I | $ | 51,773 | $ | 59,023 | $ | 125,536 | |||||||||||||||||
| Total CRE | 9,827 | 9,942 | 74,727 | ||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||
| Total residential mortgage | 23,197 | 24,164 | 29,173 | ||||||||||||||||||||
| Other consumer | 37 | 52 | 2,526 | ||||||||||||||||||||
| Total nonaccrual loans | 84,834 | 93,181 | 231,962 | ||||||||||||||||||||
| Other real estate owned, net | — | 363 | 15,824 | ||||||||||||||||||||
| Other nonperforming assets | 9,548 | 9,938 | 10,360 | ||||||||||||||||||||
| Total nonperforming assets | $ | 94,382 | $ | 103,482 | $ | 258,146 | |||||||||||||||||
| Credit Quality Ratios | March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||
Annualized quarterly net charge-offs to average loans HFI | 0.08 | % | 0.10 | % | 0.14 | % | |||||||||||||||||
| Special mention loans to loans HFI | 0.93 | % | 0.92 | % | 1.27 | % | |||||||||||||||||
| Classified loans to loans HFI | 0.99 | % | 1.08 | % | 1.80 | % | |||||||||||||||||
| Criticized loans to loans HFI | 1.92 | % | 2.00 | % | 3.07 | % | |||||||||||||||||
| Nonperforming assets to total assets | 0.15 | % | 0.17 | % | 0.45 | % | |||||||||||||||||
| Nonaccrual loans to loans HFI | 0.20 | % | 0.22 | % | 0.59 | % | |||||||||||||||||
| Allowance for loan losses to loans HFI | 1.25 | % | 1.30 | % | 1.53 | % | |||||||||||||||||
16
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Table 10 | ||||||||||||||||||||||||||
| The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents 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 | ||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||
| Net interest income before provision for (reversal of) credit losses | (a) | $ | 415,613 | $ | 405,697 | $ | 353,695 | |||||||||||||||||||
| Total noninterest income | 79,743 | 71,489 | 72,866 | |||||||||||||||||||||||
| Total revenue | (b) | $ | 495,356 | $ | 477,186 | $ | 426,561 | |||||||||||||||||||
| Total noninterest expense | (c) | $ | 189,450 | $ | 210,105 | $ | 191,077 | |||||||||||||||||||
| Less: Amortization of tax credit and other investments | (13,900) | (31,800) | (25,358) | |||||||||||||||||||||||
| Amortization of core deposit intangibles | (511) | (602) | (732) | |||||||||||||||||||||||
| Adjusted noninterest expense | (d) | $ | 175,039 | $ | 177,703 | $ | 164,987 | |||||||||||||||||||
| Efficiency ratio | (c)/(b) | 38.25 | % | 44.03 | % | 44.79 | % | |||||||||||||||||||
| Adjusted efficiency ratio | (d)/(b) | 35.34 | % | 37.24 | % | 38.68 | % | |||||||||||||||||||
| Adjusted pre-tax, pre-provision income | (b)-(d) = (e) | $ | 320,317 | $ | 299,483 | $ | 261,574 | |||||||||||||||||||
| Average total assets | (f) | $ | 61,758,048 | $ | 62,183,137 | $ | 55,594,283 | |||||||||||||||||||
Adjusted pre-tax, pre-provision profitability ratio (1) | (e)/(f) | 2.10 | % | 1.91 | % | 1.91 | % | |||||||||||||||||||
Adjusted noninterest expense/average assets (1) | (d)/(f) | 1.15 | % | 1.13 | % | 1.20 | % | |||||||||||||||||||
(1)Annualized.
17
| EAST WEST BANCORP, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Table 11 | ||||||||||||||||||||||||||
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. | ||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||
| Stockholders’ equity | (a) | $ | 5,703,456 | $ | 5,837,218 | $ | 5,285,027 | |||||||||||||||||||
| Less: Goodwill | (465,697) | (465,697) | (465,697) | |||||||||||||||||||||||
Other intangible assets (1) | (9,044) | (9,334) | (11,151) | |||||||||||||||||||||||
| Tangible equity | (b) | $ | 5,228,715 | $ | 5,362,187 | $ | 4,808,179 | |||||||||||||||||||
| Total assets | (c) | $ | 62,241,456 | $ | 60,870,701 | $ | 56,874,146 | |||||||||||||||||||
| Less: Goodwill | (465,697) | (465,697) | (465,697) | |||||||||||||||||||||||
Other intangible assets (1) | (9,044) | (9,334) | (11,151) | |||||||||||||||||||||||
| Tangible assets | (d) | $ | 61,766,715 | $ | 60,395,670 | $ | 56,397,298 | |||||||||||||||||||
| Total stockholders’ equity to total assets ratio | (a)/(c) | 9.16 | % | 9.59 | % | 9.29 | % | |||||||||||||||||||
| Tangible equity to tangible assets ratio | (b)/(d) | 8.47 | % | 8.88 | % | 8.53 | % | |||||||||||||||||||
| Adjusted return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. | ||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||
| Net income | $ | 237,652 | $ | 217,796 | $ | 204,994 | ||||||||||||||||||||
Add: Amortization of core deposit intangibles | 511 | 602 | 732 | |||||||||||||||||||||||
Amortization of mortgage servicing assets | 392 | 415 | 414 | |||||||||||||||||||||||
Tax effect of amortization adjustments (2) | (260) | (293) | (325) | |||||||||||||||||||||||
| Tangible net income | (e) | $ | 238,295 | $ | 218,520 | $ | 205,815 | |||||||||||||||||||
| Average stockholders’ equity | $ | 5,842,615 | $ | 5,786,237 | $ | 5,338,098 | ||||||||||||||||||||
| Less: Average goodwill | (465,697) | (465,697) | (465,697) | |||||||||||||||||||||||
Average other intangible assets (1) | (9,207) | (9,611) | (11,594) | |||||||||||||||||||||||
| Average tangible equity | (f) | $ | 5,367,711 | $ | 5,310,929 | $ | 4,860,807 | |||||||||||||||||||
Adjusted return on average tangible equity (3) | (e)/(f) | 18.00 | % | 16.32 | % | 17.17 | % | |||||||||||||||||||
(1)Includes core deposit intangibles and mortgage servicing assets.
(2)Applied statutory tax rate of 28.77% for the three months ended March 31, 2022 and December 31, 2021, and 28.37% for the three months ended March 31, 2021.
(3)Annualized.
18
EWBC Earnings Results First Quarter 2022 April 21, 2022
Forward-Looking Statements 2 Forward-Looking Statements This presentation contains forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of the management of East West Bancorp, Inc. (the “Company”) and are subject to significant risks and uncertainties. You should not place undue reliance on these statements. Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements include, among others, changes in the U.S. economy or local, regional and global business, economic and political conditions and geopolitical events; the impacts of the ongoing COVID-19 pandemic; changes in laws or the regulatory environment, including trade, monetary and fiscal policies and laws; and changes in the commercial and consumer real estate markets and in consumer spending and savings habits. These factors also consist of those contained in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. These statements speak only as of the date they are made and are based only on information then actually known to the Company. The Company does not undertake to update any forward-looking statements except as required by law. Non-GAAP Financial Measures Certain financial information in this presentation has not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and is presented on a non-GAAP basis. Investors should refer to the reconciliations included in this presentation and should consider the Company’s non-GAAP financial measures in addition to, not as a substitute for or superior to, measures prepared in accordance with GAAP. These measures may not be comparable to similarly titled measures used by other companies.
17.2% 16.3% 18.0% 1Q21 4Q21 1Q22 $262 $299 $320 1.91% 1.91% 2.10% $100 $180 $260 $340 1Q21 4Q21 1Q22 Highlights of First Quarter 2022 3 1Q22 Net Income $238 million 1Q22 Diluted EPS $1.66 Record Loans $43.5 billion Record Deposits $54.9 billion Record Demand Deposits $24.9 billion 1Q22 Total Revenue $495 million 1Q22 Adj. Efficiency Ratio* 35.3% 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* $ i n m ill io n s * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases. 1.50% 1.39% 1.56% 1Q21 4Q21 1Q22 15.6% 14.9% 16.5% 1Q21 4Q21 1Q22
4 03.31.22: Strong, Well-Diversified Balance Sheet Record Loans as of 03.31.22: $43.5 billion ($ in billions) C&I (ex. PPP) Resi. mortgage & other consumerTotal CREPPP IB Checking & SavingsMMDADDA Time Record Deposits as of 03.31.22: $54.9 billion ($ in billions) * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases. $14.5 33% $0.3 1% $17.0 39% $11.7 27% $24.9 45% $12.1 22% $9.7 18% $8.2 15% $ in millions, except per share data 03.31.22 12.31.21 Cash equivalents & ST investments $ 4,665 $ 4,649 $ 16 Repo assets 1,957 2,354 (397) AFS debt securities 6,729 9,965 (3,236) HTM debt securities 2,998 — 2,998 Gross loans (ex. PPP) $ 43,173 $ 41,160 $ 2,013 PPP loans 318 534 (216) Total loans $ 43,491 $ 41,694 $ 1,797 Allowance for loan losses (ALLL) (546) (542) (4) Net Loans $ 42,945 $ 41,152 $ 1,793 Other assets 2,947 2,751 196 Total Assets $ 62,241 $ 60,871 $ 1,370 Customer deposits $ 54,938 $ 53,351 $ 1,587 FHLB advances & repo funding 375 549 (174) Other ST & LT debt & finance lease liab. 152 152 - Other liabilities 1,073 981 92 Total Liabilities $ 56,538 $ 55,033 $ 1,505 Total Stockholders' Equity $ 5,703 $ 5,837 $ (134) Book value per share $ 40.09 $ 41.13 $ (1.04) Tangible equity per share* $ 36.76 $ 37.79 $ (1.03) Tang. equity to tang. assets ratio* 8.47% 8.88% (41) bp Q-o-Q Change
12.7% 12.7% 14.3% 9.1% 12.8% 12.8% 14.1% 9.0% 12.6% 12.6% 13.9% 9.3% CET1 capital ratio Tier 1 capital ratio Total capital ratio Leverage ratio EWBC 03.31.21 EWBC 12.31.21 EWBC 03.31.22** 03.31.22: Strong Capital Ratios ▪ Book value per share of $40.09 as of 03.31.22: -2.5% Q-o-Q and +8% Y-o-Y. Tangible equity* per share of $36.76 as of 03.31.22: -3% Q-o-Q and +8% Y-o-Y. ▪ Q-o-Q decline in equity: negative change in accumulated other comprehensive income (“AOCI”) of $304.5mm and dividends declared of $58mm, partially offset by net income of $238 million. ▪ Negative change in AOCI due to increased unrealized losses in AFS debt securities, which reflected the impact of rising interest rates on security valuations. To temper this, moved $3.0bn of securities out of AFS to HTM as of February 1, 2022. ▪ Tangible equity to tangible assets ratio* of 8.5% as of 03.31.22, -41bps from 12.31.21 and -6bps from 03.31.21. ▪ Dividend: 2Q22 quarterly common stock dividend of $0.40 per share, equivalent to $1.60 per share annualized. ▪ No buybacks during 1Q22. 5 **The Company has elected to use the 2020 CECL transition provision in the calculation of its March 31, 2022, December 31, 2021, and March 31, 2021 regulatory capital ratios. The Company’s March 31, 2022 regulatory capital ratios are preliminary. * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
PPP 1% Total CRE 39% Total Resi. Mortgage & Other Consumer 27% C&I 33% 6 Total Loans: C&I Loans by Industry as % of Total Loans Outstanding 03.31.22: Diversified Commercial Loan Portfolio ▪ C&I loans (ex. PPP): $14.5bn loans O/S plus $6.2bn undisbursed commitments: $20.7bn total commitments as of 03.31.22. ▪ EOP loans O/S: up $904mm, +27% Q-o-Q annualized. ▪ Total commitments: up $943mm, +19% Q-o-Q annualized. ▪ Avg. loans O/S: up $946mm, +30% Q-o-Q annualized. ▪ C&I utilization: 70% as of 03.31.22, up from 69% as of 12.31.21. ▪ PPP loans: $318mm as of 03.31.22, down from $534mm as of 12.31.21. ▪ China loans O/S (mainland + Hong Kong): $2.0bn as of 03.31.22, up from $1.8bn as of 12.31.21. Portfolio primarily consists of C&I loans, well-diversified by industry. $14.5bn 4% 12% General Manufacturing & Wholesale Private Equity Entertainment Consumer Goods: 1%; Food-related Industries: 1%; Healthcare: 1%; Oil & Gas: 1%. Real Estate related Clean Energy Technology & Life Science All Other C&I $43.5 billion Total Loans } 4% 3% 2% 2% 2%
C&I 33% PPP 1% MFR, 9% Retail, 9% Industrial, 7% Office, 7% Hotel, 5% All other CRE, 2% Total Resi. Mortgage & Other Consumer 27% Total CRE 39% SoCal 53% NorCal 21% NY 6% TX 8% WA 3% Other 9% 03.31.22: Diversified Commercial Real Estate Portfolio 7 Total Loans: Total CRE Loans by Property Type as % of Total Loans Outstanding ▪ Total CRE loans: $17.0bn as of 03.31.22: up $798mm, +20% Q-o-Q annualized. ▪ Avg. CRE loans: up $692mm, +18% Q-o-Q annualized. ▪ Owner-occupied CRE: $2.5bn as of 03.31.22, or 6% of total loans. ▪ Geographic distribution of CRE reflects EWBC’s branch footprint. ▪ Construction & land loans (in All other CRE): $444mm, or 1.0% of total loans. Total construction & land exposure of $786mm: loans O/S plus $342mm in undisbursed commitments. $17.0 billion Total CRE Loans Total CRE: Distribution by Geography $17.0bn $43.5 billion Total Loans
<=50% 41% >50% to 55% 16% >55% to 60% 15% >60% to 65% 17% >65% to 70% 6% >70% 5% Total CRE: Distribution by LTV 8 03.31.22: Low LTV Commercial Real Estate Portfolio CRE Size & LTV 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. $2.5 million Avg. size of loan outstanding 51% Avg. LTV ($ in millions) Total Portfolio Size Weighted Avg. LTV Average Loan Size Multifamily 3,894$ 52% 1.5$ Retail 3,759$ 48% 2.2$ Industrial 3,099$ 49% 2.7$ Office 2,906$ 54% 4.0$ Hotel 2,037$ 55% 8.9$ Construction & Land* 444$ 57% 11.1$ Other 836$ 50% 3.0$ Total 16,975$ 51% 2.5$
SoCal 41% NorCal 16% NY 27% WA 7% TX 2% Other 7% 03.31.22: Low LTV Residential Mortgage Portfolio 9 Resi. Mortgage: Distribution by Geography Resi. Mortgage: Distribution by LTV $11.6 billion Resi. Mortgage Loans Outstanding $414,000 Avg. loan size* 51% Avg. LTV* ▪ Residential mortgage (SFR + HELOC) loans: $11.6bn loans O/S as of 03.31.22: up $312mm, +11% Q-o-Q annualized. ▪ SFR: $9.3bn as of 03.31.22. ▪ HELOC: $2.3bn loans O/S + $2.7bn in undisbursed commitments: $5.0bn total with 45% utilization as of 03.31.22. ▪ Avg. resi. mortgage loans: up $210mm, +8% Q-o-Q annualized. ▪ Residential mortgage origination volume: residential mortgage origination volume of $1.1bn in 1Q22, up +9% Q-o-Q and unchanged Y-o-Y. ▪ Primarily originated through East West Bank branches. ▪ As of 03.31.22, 86% of HELOC commitments in first lien position. * Combined LTV for 1st and 2nd liens; based on commitment. Avg. size based on loan O/S for SFR and commitment for HELOC. <=50% 39% >50% to 55% 12% >55% to 60% 41% >60% 8%
2.1% 0.3% 0.1% 0.2% C&I: O&G (ex. PPP) All other C&I (ex. PPP) CRE Resi. mortgage & consumer 8.3% 2.4% 2.5% 0.3% C&I: O&G (ex. PPP) All other C&I (ex. PPP) CRE Resi. mortgage & consumer 0.38% 0.28% 0.17% 0.15% 06.30.21 09.30.21 12.31.21 03.31.22 1.0% 1.1% 0.9% 0.9% 1.6% 1.4% 1.1% 1.0% 2.6% 2.5% 2.0% 1.9% 06.30.21 09.30.21 12.31.21 03.31.22 Nonaccrual Ratio by Loan Portfolio (subset of Classified) (as of 03.31.22) 03.31.22: Asset Quality Metrics by Portfolio 10 Criticized Loans / Total Loans Criticized Ratio by Loan Portfolio (as of 03.31.22) NPAs / Total Assets Nonaccrual loans OREO & other NPAs Special Mention loans Classified loans Special Mention loans Classified loans Asset quality of the loan portfolio continues to be strong. ▪ Criticized loans ratio improved +8 bps Q-o-Q and balances were flat Q-o-Q: Criticized loans totaled $833mm, or 1.92% of loans HFI as of 03.31.22, compared with $833mm, or 2.00% of loans HFI as of 12.31.21. ▪ Special mention: $403mm as of 03.31.22, or 0.93% of loans. ▪ Classified: $431mm as of 03.31.22, or 0.99% of loans. ▪ Nonperforming assets down 9% Q-o-Q, NPA ratio improved +2 bps Q-o-Q: NPAs were $94mm as of 03.31.22, or 0.15% of total assets, down from $103.5mm, or 0.17% of assets, as of 12.31.21. ▪ Accruing loans 30-89 days past due: $65mm as of 03.31.22, or 0.15% of loans, vs. $45mm as of 12.31.21, or 0.11% of loans, and vs. $87mm as of 03.21.21, or 0.22% of loans.
$0 $(15) $(10) $(10) $8 $13 $13 $13.5 $10 $8 0.14% 0.13% 0.13% 0.10% 0.08% -0.05% $(20) 1Q21 2Q21 3Q21 4Q21 1Q22 Provision for credit losses Net charge-offs NCO ratio (ann.) 50 43 8.4% 7.3% 288 297 2.2% 2.1% 181 182 1.1% 1.1% 23 24 0.2% 0.2% 12.31.21 03.31.22 12.31.21 03.31.22 $608 $586 $560 $542 $546 1.53% 1.46% 1.38% 1.30% 1.25% 1.62% 1.52% 1.41% 1.32% 1.26% 0.50% $200 $700 03.31.21 06.30.21 09.30.21 12.31.21 03.31.22 ALLL ALLL/Loans HFI ALLL/Loans HFI (ex. PPP) ALLL by Loan Type: ▪ ALLL coverage of loans: 1.25% as of 03.31.22, equivalent to 1.26% ex. PPP loans. ▪ Q-o-Q, ALLL coverage ratio (ex. PPP) declined 6 bps. ▪ O&G ALLL coverage decreased to 7.3% in 1Q22 from 8.4% in 4Q21. All other C&I ALLL coverage of 2.1% down from 2.2%. CRE ALLL coverage unchanged at 1.1%. ▪ Q-o-Q decrease in ALLL coverage ratios largely reflects improving asset quality of the loan portfolio. Q-o-Q growth in the ALLL largely reflects loan growth. ▪ Provision for credit losses in 1Q22: $8mm, compared with $(10)mm in 4Q21 and no provision in 1Q21. ▪ Net charge-offs: $8mm in 1Q22, vs. $10mm in 4Q21 and $13mm in 1Q21. NCO ratio of 0.08% (ann.), down from 0.10% (ann.) in 4Q21 and 0.14% (ann.) in 1Q21. 1Q22: Allowance for Loan Losses & Credit Costs 11 Composition of ALLL by Portfolio: Allowance for Loan Losses Coverage Ratio $ i n m ill io n s Provision for Credit Losses & Net Charge-offs $ i n m ill io n s $ i n m ill io n s ; ra ti o i s a llo w a n c e c o v e ra g e b y p o rt fo lio Oil & gas C&I Total CREAll other C&I (ex. PPP) Resi. mortgage & consumer Total: $542 Total:1.30%Total: $546 Total:1.25%
1Q22: Summary Income Statement 12 * See slide 17 for noninterest income detail by category. Comments ▪ Noninterest income: Mark-to- market (“MTM”) adjustments in interest rate contracts (“IRC”) & other derivative income amounted to $7.6mm in 1Q22, vs. $0.3mm in 4Q21. This reflects a favorable change in the credit valuation adjustment, compared with the previous quarter. ▪ Amortization of tax credit & other investments in 1Q22 totaled $14mm, vs. $32mm in 4Q21: Q-o-Q variability in amortization of tax credits and other investments reflects the impact of investments that close in a given period. 2Q22 amortization of tax credit investments is expected to be approx. $37mm. ▪ Tax rate: 1Q22 effective tax rate was 20% vs. 4Q21 effective tax rate of 21%. The full-year 2022 effective tax rate is expected to be in the range of 18% to 19%. ** See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases. 1Q22 vs. 4Q21 $ in millions, except per share data & ratios 1Q22 4Q21 $ Change % Change Net interest income (ex. PPP) $ 410.4 $ 396.1 14.3 4% PPP income 5.2 9.6 (4.4) -46% Total net interest income $ 415.6 $ 405.7 $ 9.9 2.4% Fee income & net GOS of loans* 65.0 63.3 1.7 3% GOS of AFS debt securities 1.3 0.4 0.9 228% Other 13.4 7.8 5.6 72% Total noninterest income $ 79.7 $ 71.5 $ 8.2 12% Total revenue $ 495.4 $ 477.2 $ 18.2 4% Adjusted noninterest expense** $ 175.0 $ 177.7 $ (2.7) -1% Amortization of tax credit & other investments + core deposit intangibles 14.4 32.4 (18.0) -56% Total noninterest expense $ 189.4 $ 210.1 $ (20.7) -10% Provision for credit losses $ 8.0 $ (10.0) $ 18.0 180% Income tax expense 60.3 59.3 1.0 2% Effective tax rate 20% 21% -1% Net Income (GAAP) $ 237.7 $ 217.8 $ 19.9 9% Diluted EPS $ 1.66 $ 1.52 $ 0.14 9% Weigh. avg. diluted shares (in mm) 143.2 143.3 (0.1) -0.1%
18.1 19.7 23.2 24.0 23.4 11.6 12.6 12.6 12.9 12.9 9.0 9.4 9.4 9.3 9.69.1 8.5 8.3 8.1 8.1$47.8 $50.2 $53.5 $54.3 $54.0 1Q21 2Q21 3Q21 4Q21 1Q22 11.8 11.9 12.4 12.9 13.9 14.9 15.2 15.4 15.7 16.4 10.1 10.6 11.1 11.2 11.41.9 1.9 1.1 0.7 0.4$38.7 $39.6 $40.0 $40.5 $42.1 1Q21 2Q21 3Q21 4Q21 1Q22 1Q22: Average Balance Sheet: Growth & Mix 13 ▪ 1Q22 avg. loan growth: +16% LQA (+$1.6bn Q-o-Q) or +19% LQA ex. PPP (+$1.8bn). Growth in all major loan portfolios, with strongest growth from C&I ex. PPP (+30% LQA), followed by total CRE (+18% LQA). ▪ Strong avg. loan growth drove favorable shift in AEA mix into higher yielding assets. Loans up to 72% of AEA in 1Q22 vs. 69% in 4Q21. ▪ 1Q22 avg. deposit change: -2% LQA (-$291mm Q-o-Q). Decrease in non-IB DDA: -10% LQA (-$587mm), partially offset by increases in IB checking (+12% LQA) and savings (+13% LQA). ▪ Avg. DDA made up 43% of avg. deposits in 1Q22, vs. 44% in 4Q21 and up from 38% in 1Q21. $ i n b ill io n s Average Loans & Growth +16% +9% +6% LQA avg. total loan growth C&I (ex. PPP) Total CRE Residential mortgage & other consumerPPP Average Deposits & Growth Avg. Earning Asset (“AEA”) Mix & Loan-to-Deposit Ratio LQA avg. total deposit growthDDA MMDA IB Checking & Savings Time $ i n b ill io n s +26% -2% +20% +6% +3% 15% 19% 19% 21% 20% 12% 9% 12% 10% 8% L/D: 81% L/D: 79% L/D: 75% L/D: 75% L/D: 78% 1Q21 2Q21 3Q21 4Q21 1Q22 Loans / AEA Securities & other / AEA IB Cash & equivalent / AEA Avg. Loan / Deposit Ratio
1Q22: Net Interest Income & Net Interest Margin 14 ▪ 1Q22 NII: $416mm, +2% Q-o-Q (+10% ann.) from $406mm in 4Q21. ▪ 1Q22 NII (ex. PPP): $410mm, +4% Q-o-Q (+15% ann.) from $396mm in 4Q21. PPP income: $5mm in 1Q22 vs. $10mm in 4Q21. ▪ 1Q22 NIM: 2.87%, +14 bps Q-o-Q. PPP impact not material. ▪ Q-o-Q increase in NIM: favorable average earning asset mix shift (+9 bps) and higher yields (+5 bps) on loans and other earning assets. Avg. cost of deposits of 0.10% in 1Q22 was unchanged Q-o-Q. Impact to NIM from Q-o-Q Change in Yields, Rates, & Balance Sheet Mix $ i n m ill io n s 4Q21 NIM 1Q22 NIM Avg. earning asset mix shift +9 bps +4 bps 4Q21 NIM: 2.73% Net Interest Income & Net Interest Margin Higher loan yields 1Q22 NIM: 2.87% +1 bp Higher other AEA yields $354 $376 $396 $406 $416 2.71% 2.75% 2.70% 2.73% 2.87% 1Q21 2Q21 3Q21 4Q21 1Q22 NII NIM
326 327 342 Total CRE 316 322 336 C&I* 411 407 403 SFR 411 411 422 HELOC 358 357 361 359 363 3.25% 3.25% 3.25% 3.25% 3.29% 0.12% 0.10% 0.09% 0.09% 0.22% 0 400 1Q21 2Q21 3Q21 4Q21 1Q22 Avg. loan yield Avg. Prime Rate Avg. 1M LIBOR Rate 1Q22: Loan Yields: Average & Spot 15 Loan Coupon Spot Rate (in bps) by Portfolio * C&I spot rate excludes PPP, credit cards, deposit overdraft & micro-finance loans. Avg. Loan Yield (in bps) Relative to Prime Rate & LIBOR 09.30.21 12.31.21 03.31.22 C&I: 84% variable rate Total CRE: 70% variable rate SFR: 45% hybrid in fixed-rate period & 38% fixed rate HELOC: Prime- based, variable rate portfolio. Avg. Loan Yield: Avg. yield in 1Q22: 3.63%, comprising 3.48% in avg. coupon rate plus 0.15% in other yield adjustments. Coupon spot rate was 3.55% as of 03.31.22. Total fixed and hybrid in fixed period 35%. Variable: LIBOR or SOFR rates Hybrid in fixed rate period Fixed rate Variable: Prime rate Variable: all other rates PPP Loan Portfolio by Index Rate (03.31.22) 19% 15% 27% 33% 5% 1%
1Q22 Average Deposits: $54.0 billion ($ in billions) 18 14 12 10 10 30 24 21 18 17 1Q21 2Q21 3Q21 4Q21 1Q22 Cost of total deposits Cost of IB deposits Avg. Fed Funds rate 1Q22: Cost of Deposits: Average & Spot 16 Average Cost of Deposits (in bps) Relative to Avg. Fed Funds Rate ▪ Spot rate of total deposits: 0.11% as of 03.31.22 (vs. 0.09% as of 12.31.21). ▪ Spot rate of IB deposits: 0.20% as of 03.31.22 (vs. 0.16% as of 12.31.21). Average Cost of Deposits (in bps) by Type DDA MMDA IB Checking & Savings Time 0.25% 0.29% $23.4 43% $12.9 24% $9.6 18% $8.1 15% 14 24 23 12 31 40 12 21 19 11 28 35 10 18 11 10 24 33 10 17 9 10 24 33 Cost of total deposits Cost of IB deposits IB Checking MMDA Savings Time 2Q21 3Q21 4Q21 1Q22
15 20 20 18 21 19 10 13 137 5 6 3 2 4 2 2 3 $55 $63 $65 1Q21 4Q21 1Q22 Gain on Loans IRC Revenue Wealth Management Fees Foreign Exchange Income Lending Fees Deposit Account Fees 1Q22: Noninterest Income Detail Total noninterest income: $80mm in 1Q22, compared with $71.5mm in 4Q21. ▪ Fee income and net gains on sales of loans: $65mm in 1Q22, up 3% Q-o-Q (+11% ann.), and up 18% Y-o-Y. ▪ Interest rate contracts and other derivative income: customer-driven revenue increased Q-o-Q to $3.5mm, reflecting improving customer demand as interest rates rise. ▪ Q-o-Q: Wealth management, net gains on sales of loans and deposit account fees increased; lending fees and foreign exchange income decreased. 17 Interest Rate Contracts and Other Derivative Income Detail ($ in millions) 1Q21 4Q21 1Q22 Revenue $ 2.9 $ 1.6 $ 3.5 MTM 14.1 0.3 7.6 Total $ 17.0 $ 1.9 $ 11.1 * Fee income excludes MTM adjustments related to IRC and other derivatives; net gains on sales of securities; other investment income and other income. Fee Income* & Net Gains on Sales of Loans $ i n m ill io n s
108 115 116 16 16 15 12 12 118 9 9 21 26 24 $165 $178 $175 1Q21 4Q21 1Q22 All other Deposit related expenses Computer software & Data processing Occupancy & Equipment Comp and employee benefits 1Q22: Operating Expense & Efficiency 18 Adjusted Noninterest Expense* $ i n m ill io n s Adjusted Efficiency Ratio* ▪ 1Q22 noninterest expense: $189mm. ▪ 1Q22 adj. noninterest expense*: $175mm, a decrease of 1.5% Q-o-Q (-6% ann.) from $178mm in 4Q21. ▪ Q-o-Q decreases in legal expense and overall operating expenses more than offset increased compensation and employee benefits expense, which is typically higher in 1Q due to higher payroll taxes and related expenses. ▪ Adj. efficiency ratio* was 35% in 1Q22, vs. 37% in 4Q21 and 39% in 1Q21. ▪ Consistently achieving industry-leading operating efficiency. * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases. 38.7% 37.2% 35.3% 1Q21 4Q21 1Q22
Management Outlook: Full Year 2022 19 Earnings drivers FY 2022 expectations compared with FY 2021 results Prior outlook 2021 actual End of Period Loans (ex. PPP) ▪ Increase at a percentage rate of approximately 13% to 15% Y-o-Y. ▪ Increase at a percentage rate of approx. 12% Y-o-Y. $41.2 billion (ex. PPP) +12% Y-o-Y (ex. PPP) Net Interest Income (ex. PPP) ▪ Increase at a percentage rate of approximately 22% to 24% Y-o-Y. ▪ Increase at a percentage rate of approx. 17% to 19% Y-o-Y. $1.5 billion (ex. PPP) +10.5% Y-o-Y Adj. Noninterest Expense* (ex. tax credit investment & core deposit intangible amortization) ▪ Increase at a percentage rate of approximately 8% Y-o-Y. ▪ Increase at a percentage rate of approx. 7% to 8% Y-o-Y. $671 million +6% Y-o-Y Credit Items ▪ Provision for credit losses in the range of $50 million to $60 million. ▪ Provision for credit losses below $50 million. $(35) million in 2021 & $211 million in 2020 Tax Items ▪ Full-year 2022 effective tax rate of approximately 18% to 19%, including the impact of tax credit investments. ▪ Amortization of tax credit investments is expected to be approx. $37mm in 2Q22, and to range from $110mm to $125mm for the full year. ▪ Full-year 2022 effective tax rate of approx. 17% to 18%, including the impact of tax credit investments. FY effective tax rate: 17% Interest Rates ▪ Fed Funds rate of 2.50% by Dec. 31, 2022, up from 0.50% as of Mar. 31, 2022, and 0.25% as of Dec. 31, 2021. ▪ Forward interest rate curve as of 03.31.22. ▪ Fed Funds rate of 1.25% as of Dec. 31, 2022, up from 0.25% as of Dec. 31, 2021. ▪ Forward interest rate curve as of 01.26.22. No change to Fed Funds rate in 2021 * See reconciliation of GAAP to non-GAAP financial measures in the appendix and in the Company’s Earnings Press Releases.
APPENDIX
Appendix: GAAP to Non-GAAP Reconciliation 21 EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. 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) Annualized Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 Net interest income before provision for (reversal of) credit losses (a) $ 415,613 $ 405,697 $ 353,695 Total noninterest income 79,743 71,489 72,866 Total revenue (b) $ 495,356 $ 477,186 $ 426,561 Total noninterest expense (c) $ 189,450 $ 210,105 $ 191,077 Less: Amortization of tax credit and other investments (13,900) (31,800) (25,358) Amortization of core deposit intangibles (511) (602) (732) Adjusted noninterest expense (d) $ 175,039 $ 177,703 $ 164,987 Efficiency ratio (c)/(b) 38.25% 44.03% 44.79% Adjusted efficiency ratio (d)/(b) 35.34% 37.24% 38.68% Adjusted pre-tax, pre-provision income (b)-(d) = (e) $ 320,317 $ 299,483 $ 261,574 Average total assets (f) $ 61,758,048 $ 62,183,137 $ 55,594,283 Adjusted pre-tax, pre-provision profitability ratio (1) (e)/(f) 2.10% 1.91% 1.91% Adjusted noninterest expense/average assets (1) (d)/(f) 1.15% 1.13% 1.20%
Appendix: GAAP to Non-GAAP Reconciliation 22 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. March 31, 2022 December 31, 2021 March 31, 2021 Stockholders’ equity (a) $ 5,703,456 $ 5,837,218 $ 5,285,027 Less: Goodwill (465,697) (465,697) (465,697) Other intangible assets (1) (9,044) (9,334) (11,151) Tangible equity (b) $ 5,228,715 $ 5,362,187 $ 4,808,179 Total assets (c) $ 62,241,456 $ 60,870,701 $ 56,874,146 Less: Goodwill (465,697) (465,697) (465,697) Other intangible assets (1) (9,044) (9,334) (11,151) Tangible assets (d) $ 61,766,715 $ 60,395,670 $ 56,397,298 Total stockholders’ equity to total assets ratio (a)/(c) 9.16% 9.59% 9.29% Tangible equity to tangible assets ratio (b)/(d) 8.47% 8.88% 8.53%
Appendix: GAAP to Non-GAAP Reconciliation 23 EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) Adjusted return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. (1) Includes core deposit intangibles and mortgage servicing assets. (2) Applied statutory tax rate of 28.77% for the three months ended March 31, 2022 and December 31, 2021, and 28.37% for the three months ended March 31, 2021. (3) Annualized. Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 Net income $ 237,652 $ 217,796 $ 204,994 Add: Amortization of core deposit intangibles 511 602 732 Amortization of mortgage servicing assets 392 415 414 Tax effect of amortization adjustments (2) (260) (293) (325) Tangible net income (e) $ 238,295 $ 218,520 $ 205,815 Average stockholders’ equity $ 5,842,615 $ 5,786,237 $ 5,338,098 Less: Average goodwill (465,697) (465,697) (465,697) Average other intangible assets (1) (9,207) (9,611) (11,594) Average tangible equity (f) $ 5,367,711 $ 5,310,929 $ 4,860,807 Adjusted return on average tangible equity (3) (e)/(f) 18.00% 16.32% 17.17%