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East West Bancorp Reports Net Income for First Quarter of 2023 of $322 Million and Diluted Earnings Per Share of $2.27, Up 37% Year-Over-Year

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, reported its financial results for the first quarter of 2023. First quarter 2023 net income was $322.4 million, or $2.27 per diluted share, up from $237.7 million, or $1.66 per diluted share in the prior year period. Year-over-year, earnings per share increased 37%. Total loans reached a record $48.9 billion as of March 31, 2023.

“East West’s ability to consistently generate industry-leading profitability while maintaining above peer capital ratios are strengths in any business cycle. East West continued to deliver in the first quarter, despite the banking industry and market disruption that occurred in mid-March,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “For the first quarter of 2023, we earned industry-leading returns of 2.0% on average assets and 22.9% on average tangible common equity1. Net interest margin was a healthy 3.96%, asset quality continued to be excellent with net charge-offs of 0.01% annualized. With our strong earnings, all capital ratios expanded, and our total capital ratio increased to 14.5%.”

“Our balance sheet positions us to excel. Our loan portfolio is granular and well-diversified without significant concentration in any industry or sector. We have a strong, granular deposit franchise with over 550,000 deposit accounts spanning consumer, small business, non-profit and corporate customers. Our capital and liquidity are strong. We are steadfast in our positive outlook for East West’s performance,” concluded Ng.

FINANCIAL HIGHLIGHTS

 

Quarter Ended

 

Quarter Ended

 

Year-over-Year Change

($ in millions, except per share data)

March 31, 2023

 

March 31, 2022

 

$

%

Total Loans

$

48,925

 

 

$

43,491

 

 

$

5,434

 

12.5

%

Total Deposits

 

54,737

 

 

 

54,938

 

 

 

(201

)

(0.4

)

Total Revenue

$

660

 

 

$

495

 

 

$

164

 

33

%

Adj. Pre-tax, Pre-provision Income2

 

466

 

 

 

320

 

 

 

145

 

45

 

Net Income

 

322

 

 

 

238

 

 

 

85

 

36

 

Adj. Net Income2

 

330

 

 

 

238

 

 

 

92

 

39

 

Diluted Earnings per Share

$

2.27

 

 

$

1.66

 

 

$

0.61

 

37

%

Adj. Diluted Earnings per Share2

$

2.32

 

 

$

1.66

 

 

$

0.66

 

40

%

Return on Average Assets

 

2.01

%

 

 

1.56

%

 

+45 bps

 

Return on Average Common Equity

 

21.15

%

 

 

16.50

%

 

+465 bps

 

Return on Avg. Tang. Common Equity1

 

22.94

%

 

 

18.00

%

 

+494 bps

 

_________________________

1 Return on average tangible common equity is a non-GAAP financial measure. See reconciliation of GAAP to non-GAAP measures in Table 11.

2 Adjusted pre-tax, pre-provision income, adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP financial measures in Tables 10 and 12.

BALANCE SHEET

  • Total Assets – Total assets reached a record $67.2 billion as of March 31, 2023, an increase of $3.1 billion, or 5%, from $64.1 billion as of December 31, 2022.



    First quarter 2023 average interest-earning assets of $61.5 billion were up $1.1 billion, or 2%, from $60.4 billion in the fourth quarter of 2022. Quarter-over-quarter, average loans grew $542.7 million and average interest-bearing cash and deposits with banks increased $465.9 million.

  • Strong Capital Levels – As of March 31, 2023, stockholders’ equity was $6.3 billion, or $44.62 per share, up 5% quarter-over-quarter. The stockholders’ equity to assets ratio was 9.38% as of March 31, 2023, an increase of five basis points quarter-over-quarter.



    As of March 31, 2023, tangible book value3 per share was $41.28, up 6% quarter-over-quarter. The tangible common equity ratio3 was 8.74%, an increase of eight basis points quarter-over-quarter.



    All of East West’s regulatory capital ratios are well in excess of regulatory requirements for well-capitalized institutions, as well as above regional and national bank averages. The common equity tier 1 (“CET1”) capital ratio increased to 13.06%, and the total risk-based capital ratio increased to 14.50%, as of March 31, 2023.

  • Total Loans – Total loans reached a record $48.9 billion as of March 31, 2023, an increase of $696.8 million, or 1%, from $48.2 billion as of December 31, 2022. Year-over-year, total loans grew $5.4 billion, or 12%, from $43.5 billion as of March 31, 2022.



    First quarter 2023 average loans of $48.1 billion grew $542.7 million, or 1%, from the fourth quarter of 2022. Average growth in residential mortgage and commercial real estate loans was partially offset by a modest decrease in average commercial & industrial loans.

  • Total Deposits – Total deposits were $54.7 billion as of March 31, 2023, a decrease of $1.2 billion, or 2%, from $56.0 billion as of December 31, 2022. Year-over-year, deposits declined $201.0 million, or 0.4%, from $54.9 billion as of March 31, 2022. Noninterest-bearing deposits made up 33% of our total deposits as of March 31, 2023.



    First quarter 2023 average deposits of $55.0 billion were essentially unchanged from the fourth quarter of 2022. During the first quarter, time deposits grew due to a successful branch-based CD campaign for the Lunar New Year. This was offset by declines in other deposit categories, which reflected customers seeking higher yields in a rising interest rate environment and the banking industry disruption in mid-March.



    As of March 31, 2023, East West Bank’s domestic deposits were $52.5 billion, of which insured or otherwise collateralized deposits were estimated at $29.6 billion. East West Bank’s domestic uninsured deposit ratio improved to 44% as of March 31, 2023, compared to 50% as of December 31, 2022. Since the industry disruption in mid-March, the Company has worked with customers to expand their FDIC insurance coverage, primarily through the utilization of fully insured sweep programs. East West’s borrowing capacity, cash and cash equivalents well exceed our uninsured deposit balances.

  • Conservative Liquidity Management Cash and cash equivalents increased 70% to $5.9 billion as of March 31, 2023, up from $3.5 billion as of December 31, 2022. This increase in on-balance sheet liquidity was in response to the recent volatility in the banking industry and reflects East West’s conservative liquidity management practices. The increase in cash and cash equivalents was primarily funded with borrowings from the Bank Term Funding Program (“BTFP”) totaling $4.5 billion at a rate of 4.37% as of March 31, 2023.



    As of March 31, 2023, East West Bank’s borrowing capacity, plus cash and cash equivalents was $30.6 billion, equivalent to 134% of total uninsured and uncollateralized deposits of $22.8 billion. As of December 31, 2022, borrowing capacity, plus cash and cash equivalents was $26.4 billion, equivalent to 99% of total uninsured and uncollateralized deposits.

_________________________

3 Tangible book value and the tangible common equity ratio are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP measures in Table 11.

OPERATING RESULTS

First Quarter Earnings – First quarter 2023 net income was $322.4 million, a decrease of 4% from $336.8 million for the fourth quarter of 2022, and an increase of 36% from $237.7 million for the first quarter of 2022. First quarter 2023 diluted earnings per share (“EPS”) were $2.27, a decrease of 4% from $2.37 per diluted share for the fourth quarter of 2022, and an increase of 37% from $1.66 per diluted share for the year-ago quarter.

First quarter 2023 adjusted net income4 was $329.5 million, and adjusted diluted EPS4 was $2.32, a decrease of 2% quarter-over-quarter for both metrics. Noninterest income in the first quarter of 2023 included a $10.0 million (before tax) impairment loss on a subordinated debt security of a failed bank, which was $7.1 million after tax, or $0.05 per share.

First Quarter 2023 Compared to Fourth Quarter 2022

Net Interest Income and Net Interest Margin

Net interest income (“NII”) totaled $599.9 million, a decrease of 1% from $605.5 million. Net interest margin (“NIM”) of 3.96% declined two basis points from 3.98%.

  • The change in NII reflects day count in the first quarter (90 days) compared with the fourth quarter (92 days). Equalizing for day count, the 2% of quarter-over-quarter average earning asset growth more than offsets the two basis points of NIM contraction.
  • The change in NIM was primarily driven by a higher cost of interest-bearing deposits and changes in the deposit mix in favor of higher-cost deposits, partially offset by expanding earning asset yields.
  • The average loan yield was 6.14%, up 55 basis points from the fourth quarter. The average interest-earning asset yield was 5.51%, up 51 basis points from the fourth quarter.
  • The average cost of funds was 1.69%, up 58 basis points from the fourth quarter. The average cost of deposits was 1.60%, up 54 basis points.
  • The changes in yields and rates reflected rising benchmark interest rates.

Noninterest Income

Noninterest income totaled $60.0 million in the first quarter, a decrease of $4.9 million, or 8%, from $64.9 million in the fourth quarter.

  • Fee income and net gains on sales of loans were $66.3 million, up slightly from $66.0 million in the fourth quarter, reflecting higher lending and wealth management fees. The quarterly change in foreign exchange (“FX”) income reflected higher customer-driven FX fee income that was more than offset by an unfavorable change in mark-to-market adjustments on FX positions.
  • Interest rate contracts and other derivative income was $2.6 million in the first quarter, compared with a loss of $0.6 million in the fourth quarter. The change reflected both growth in customer-driven revenue and a favorable change in mark-to-market adjustments.

_________________________

4 Adjusted net income and adjusted EPS are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP measures in Table 12.

Noninterest Expense

Noninterest expense totaled $218.4 million in the first quarter, compared with $257.1 million in the fourth quarter. First quarter noninterest expense consisted of $204.0 million of adjusted noninterest expense5, $10.1 million in amortization of tax credit and other investments, $0.4 million in amortization of core deposit intangibles, and $3.9 million in repurchase agreements’ extinguishment cost.

  • Adjusted noninterest expense of $204.0 million increased $11.9 million, or 6%, from $192.1 million in the fourth quarter. The linked quarter change primarily reflected seasonal first quarter increase in compensation and employee benefits expense, and higher deposit insurance premiums and regulatory assessments.
  • In the first quarter of 2023, the Company prepaid $300 million of repurchase agreement funding, which had carried a rate of 6.74%.
  • Amortization of tax credit and other investments totaled $10.0 million in the first quarter, compared with $64.6 million in the fourth quarter. Quarter-over-quarter variability in the amortization of tax credits and other investments primarily reflects the impact of investments that close in a given period.
  • The efficiency ratio was 33.1% in the first quarter, compared with 38.3% in the fourth quarter and the adjusted efficiency ratio4 was 30.5% in the first quarter, compared with 28.7% in the fourth quarter.

TAX RELATED ITEMS

First quarter 2023 income tax expense was $99.0 million, and the effective tax rate was 23.5%. The effective tax rate for the full year 2022 was 20.1%.

ASSET QUALITY

The asset quality of our loan portfolio continues to be excellent. First quarter 2023 provision for credit losses was $20.0 million, compared with $25.0 million in fourth quarter 2022.

  • The allowance for loan losses increased to $619.9 million, or 1.27% of loans held-for-investment (“HFI”), as of March 31, 2023, compared with $595.6 million, or 1.24% of loans HFI, as of December 31, 2022.
  • First quarter 2023 net charge-offs were $0.6 million or annualized 0.01% of average loans HFI, down from net charge-offs of $10.1 million, or annualized 0.08% of average loans HFI, for the fourth quarter of 2022.
  • The nonperforming assets ratio improved to 0.14% of total assets as of March 31, 2023, down from 0.16% as of December 31, 2022. Nonperforming assets decreased $6.4 million, or 6%, quarter-over-quarter to $93.4 million as of March 31, 2023, down from $99.8 million as of December 31, 2022.
  • The criticized loans ratio increased one basis point quarter-over-quarter to 1.87% of loans HFI as of March 31, 2023, compared with 1.86% as of December 31, 2022. Criticized loans increased $18.1 million, or 2%, quarter-over-quarter to $914.1 million as of March 31, 2023, compared with $896.0 million as of December 31, 2022.

_________________________

5 Adjusted noninterest expense and the adjusted efficiency ratio are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP measures in Table 10.

CAPITAL STRENGTH

Capital levels for East West are strong and all capital ratios expanded quarter-over-quarter and year-over-year. The following table presents the regulatory capital metrics as of March 31, 2023, December 31, 2022 and March 31, 2022.

EWBC Capital

($ in millions)

 

March 31, 2023 (a)

 

December 31, 2022 (a)

 

March 31, 2022 (a)

Risk-Weighted Assets (“RWA”) (b)

 

$

50,227

 

 

$

50,037

 

 

$

45,432

 

Risk-based capital ratios:

 

 

 

 

 

 

CET1 capital ratio

 

 

13.06

%

 

 

12.68

%

 

 

12.55

%

Tier 1 capital ratio

 

 

13.06

%

 

 

12.68

%

 

 

12.55

%

Total capital ratio

 

 

14.50

%

 

 

14.00

%

 

 

13.88

%

Leverage ratio

 

 

10.02

%

 

 

9.80

%

 

 

9.26

%

Tangible common equity ratio (c)

 

 

8.74

%

 

 

8.66

%

 

 

8.47

%

(a)

The Company has elected to use the 2020 Current Expected Credit Losses (CECL) transition provision in the calculation of its March 31, 2023, December 31, 2022, and March 31, 2022 regulatory capital ratios. The Company’s March 31, 2023 regulatory capital ratios and RWA are preliminary.

(b)

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

(c)

Tangible common equity ratio is a non-GAAP financial measure. See reconciliation of GAAP to non-GAAP measures in Table 11.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared second quarter 2023 dividends for the Company’s common stock. The common stock cash dividend of $0.48 per share is payable on May 15, 2023, to stockholders of record on May 1, 2023.

On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock, of which $254 million remains available. East West did not repurchase any shares during the first quarter of 2023.

Conference Call

East West will host a conference call to discuss first quarter 2023 earnings with the public on Thursday, April 20, 2023, at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses first quarter 2023 results and operating developments.

  • The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
  • A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
  • A replay of the conference call will be available on April 20, 2023, at 11:30 a.m. PT/2:30 p.m. ET through May 20, 2023. The replay numbers are: within the U.S. – (877) 344-7529; within Canada – (855) 669-9658; international calls – (412) 317-0088; and the replay access code is: 6046956.

About East West

East West provides financial services that help customers reach further and connect to new opportunities. East West Bancorp, Inc. is a public company (Nasdaq: “EWBC”) with total assets of $67.2 billion. The Company’s wholly-owned subsidiary, East West Bank, is the largest independent bank headquartered in Southern California, and operates over 120 locations in the United States and Asia. The Bank’s markets in the United States include California, Georgia, Illinois, Massachusetts, Nevada, New York, Texas, and Washington. For more information on East West, visit www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make.

There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to: changes in the global economy, including an economic slowdown, capital or financial market disruption, supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions, which could result in, among other things, reduced demand for loans, reduced availability of funding or increases in funding costs, declines in asset values and /or recognition of allowance for credit losses; changes in local, regional and global business, economic and political conditions and geopolitical events, such as Russia’s invasion of Ukraine; the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions; changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“FDIC”), the SEC, the Consumer Financial Protection Bureau, the California Department of Financial Protection and Innovation Division of Financial Institutions, the China Banking and Insurance Regulatory Commission, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore; changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade, economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve; changes in the commercial and consumer real estate markets; changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors; the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs; the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating; the Company’s ability to compete effectively against financial institutions and other entities, including as a result of emerging technologies; the soundness of other financial institutions; the success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; the impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; the impact of the benchmark interest rate reform in the U.S. including the transition away from the U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) to alternative reference rates; the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused, and materially impact the Company’s ability to provide services to its clients; the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; the impact of adverse changes to the Company’s credit ratings from major credit rating agencies; the impact of adverse judgments or settlements in litigation; the impact on the Company’s operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties; the impact of regulatory investigations and enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries; any strategic acquisitions or divestitures; changes in the equity and debt securities markets; fluctuations in the Company’s stock price; fluctuations in foreign currency exchange rates; the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly; and the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts, hurricanes, flooding and earthquakes or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

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

(unaudited)

Table 1

March 31, 2023

% or Basis Point Change

 

March 31, 2023

December 31, 2022

March 31, 2022

Qtr-o-Qtr

Yr-o-Yr

Assets

Cash and due from banks

$

760,317

 

$

534,980

 

$

571,571

 

42.1

%

33.0

%

Interest-bearing cash with banks

 

5,173,877

 

 

2,946,804

 

 

3,277,129

 

75.6

 

57.9

 

Cash and cash equivalents

 

5,934,194

 

 

3,481,784

 

 

3,848,700

 

70.4

 

54.2

 

Interest-bearing deposits with banks

 

10,249

 

 

139,021

 

 

816,125

 

(92.6

)

(98.7

)

Assets purchased under resale agreements ("resale agreements")

 

654,288

 

 

792,192

 

 

1,956,822

 

(17.4

)

(66.6

)

Available-for-sale ("AFS") debt securities (amortized cost of $7,072,240, $6,879,225 and $7,091,581)

 

6,300,868

 

 

6,034,993

 

 

6,729,431

 

4.4

 

(6.4

)

Held-to-maturity ("HTM") debt securities, at amortized cost (fair value of 2,502,674, $2,455,171 and $2,815,968)

 

2,993,421

 

 

3,001,868

 

 

2,997,702

 

(0.3

)

(0.1

)

 

Loans held-for-sale ("HFS")

 

6,861

 

 

25,644

 

 

631

 

(73.2

)

NM

 

Loans held-for-investment ("HFI") (net of allowance for loan losses of $619,893,

$595,645 and $545,685)

 

48,298,155

 

 

47,606,785

 

 

42,944,997

 

1.5

 

12.5

 

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

 

741,354

 

 

763,256

 

 

607,985

 

(2.9

)

21.9

 

Goodwill

 

465,697

 

 

465,697

 

 

465,697

 

 

 —

 

Operating lease right-of-use assets

 

103,114

 

 

103,681

 

 

102,491

 

(0.5

)

0.6

 

Other assets

 

1,736,697

 

 

1,697,229

 

 

1,770,875

 

2.3

 

(1.9

)

Total assets

$

67,244,898

 

 

$

64,112,150

 

$

62,241,456

 

4.9

%

8.0

%

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Deposits

$

54,737,402

 

$

55,967,849

 

$

54,938,361

 

(2.2

)%

(0.4

)%

Short-term borrowings

 

4,500,000

 

 

 

 

 

100.0

 

100.0

 

FHLB advances

 

 

 

 

 

74,619

 

 —

 

(100.0

)

Assets sold under repurchase agreements ("repurchase agreements")

 

 

300,000

 

 

300,000

 

(100.0

)

(100.0

)

Long-term debt and finance lease liabilities

 

152,467

 

 

152,400

 

 

152,227

 

0.0

 

0.2

 

Operating lease liabilities

 

112,676

 

 

111,931

 

 

109,656

 

0.7

 

2.8

 

Accrued expenses and other liabilities

 

1,433,022

 

 

1,595,358

 

 

963,137

 

(10.2

)

48.8

 

Total liabilities

 

60,935,567

 

 

58,127,538

 

 

56,538,000

 

4.8

 

7.8

 

Stockholders' equity

 

6,309,331

 

 

5,984,612

 

 

5,703,456

 

5.4

 

10.6

 

Total liabilities and stockholders' equity

$

67,244,898

 

$

64,112,150

 

$

62,241,456

 

4.9

%

8.0

%

 

 

 

 

Book value per share

$

44.62

 

$

42.46

 

$

40.09

 

5.1

%

11.3

%

 

Tangible book value (1) per share

$

41.28

 

$

39.10

 

$

36.76

 

5.6

 

12.3

 

 

Number of common shares at period-end

 

141,396

 

 

140,948

 

 

142,257

 

0.3

 

(0.6

)

 

Total stockholders' equity to assets ratio

 

9.38

%

 

9.33

%

 

9.16

%

5

 

bps

22

 

bps

Tangible common equity ("TCE") ratio (1)

 

8.74

%

 

8.66

%

 

8.47

%

8

 

bps

27

 

bps

 

NM - Not meaningful.

(1) Tangible book value and the TCE ratio are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP measures in Table 11.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

March 31, 2023

% Change

Loans:

March 31, 2023

December 31, 2022

March 31, 2022

Qtr-o-Qtr

Yr-o-Yr

Commercial:

 

Commercial and industrial ("C&I")

$

15,641,840

 

$

15,711,095

 

$

14,838,134

 

(0.4

)%

5.4

%

Commercial real estate ("CRE"):

 

 

 

 

 

CRE

 

14,019,136

 

 

13,857,870

 

 

12,636,787

 

1.2

 

10.9

 

Multifamily residential

 

4,682,280

 

 

4,573,068

 

 

3,894,463

 

2.4

 

20.2

 

Construction and land

 

731,394

 

 

638,420

 

 

443,836

 

14.6

 

64.8

 

Total CRE

 

19,432,810

 

 

19,069,358

 

 

16,975,086

 

1.9

 

14.5

 

Consumer:

Residential mortgage:

 

 

 

 

 

Single-family residential

 

11,786,998

 

 

11,223,027

 

 

9,283,429

 

5.0

 

27.0

 

Home equity lines of credit ("HELOCs")

 

1,988,881

 

 

2,122,655

 

 

2,266,634

 

(6.3

)

(12.3

)

Total residential mortgage

 

13,775,879

 

 

13,345,682

 

 

11,550,063

 

3.2

 

19.3

 

Other consumer

 

67,519

 

 

76,295

 

 

127,399

 

(11.5

)

(47.0

)

Total loans HFI (1)

 

48,918,048

 

 

48,202,430

 

 

43,490,682

 

1.5

 

12.5

 

Loans HFS

 

6,861

 

 

25,644

 

 

631

 

(73.2

)

NM

 

Total loans (1)

 

48,924,909

 

 

48,228,074

 

 

43,491,313

 

1.4

 

12.5

 

Allowance for loan losses

 

(619,893

)

 

(595,645

)

 

(545,685

)

4.1

 

13.6

 

Net loans (1)

$

48,305,016

 

$

47,632,429

 

$

42,945,628

 

1.4

 

12.5

 

 

Deposits:

 

Noninterest-bearing demand

$

18,327,320

 

$

21,051,090

 

$

24,927,768

 

(12.9

)%

(26.5

)%

Interest-bearing checking

 

8,742,580

 

 

6,672,165

 

 

6,774,826

 

31.0

 

29.0

 

Money market

 

9,293,114

 

 

12,265,024

 

 

12,108,432

 

(24.2

)

(23.3

)

Savings

 

2,280,562

 

 

2,649,037

 

 

2,897,248

 

(13.9

)

(21.3

)

Time deposits

 

16,093,826

 

 

13,330,533

 

 

8,230,087

 

20.7

 

95.5

 

Total deposits

$

54,737,402

 

$

55,967,849

 

$

54,938,361

 

(2.2

)%

(0.4

)%

 

NM - Not meaningful.

(1) Includes $(75.4) million, $(70.4) million and $(42.7) million of net deferred loan fees and net unamortized premiums as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

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

(unaudited)

Table 3

March 31, 2023

Three Months Ended

% Change

 

March 31, 2023

December 31, 2022

March 31, 2022

Qtr-o-Qtr

Yr-o-Yr

Interest and dividend income

$

835,506

 

$

761,212

 

$

432,029

9.8

%

93.4

%

Interest expense

 

235,645

 

 

155,705

 

 

16,416

51.3

 

NM

 

Net interest income before provision for credit losses

 

599,861

 

 

605,507

 

 

415,613

(0.9

)

44.3

 

Provision for credit losses

 

20,000

 

 

25,000

 

 

8,000

(20.0

)

150.0

 

Net interest income after provision for credit losses

 

579,861

 

 

580,507

 

 

407,613

(0.1

)

42.3

 

Noninterest income

 

59,978

 

 

64,927

 

 

79,743

(7.6

)

(24.8

)

Noninterest expense

 

218,447

 

 

257,110

 

 

189,450

(15.0

)

15.3

 

Income before income taxes

 

421,392

 

 

388,324

 

 

297,906

8.5

 

41.5

 

Income tax expense

 

98,953

 

 

51,561

 

 

60,254

91.9

 

64.2

 

Net income

$

322,439

 

$

336,763

 

$

237,652

(4.3

)%

35.7

%

Earnings per share ("EPS")

- Basic

$

2.28

 

$

2.39

 

$

1.67

(4.4

)%

36.6

%

- Diluted

$

2.27

 

$

2.37

 

$

1.66

(4.1

)

36.9

 

Weighted-average number of shares outstanding

 

 

 

 

 

- Basic

 

141,112

 

 

140,947

 

 

142,025

0.1

%

(0.6

)%

- Diluted

 

141,913

 

 

142,138

 

 

143,223

(0.2

)

(0.9

)

 

March 31, 2023

 

Three Months Ended

% Change

 

March 31, 2023

December 31, 2022

March 31, 2022

Qtr-o-Qtr

Yr-o-Yr

Noninterest income:

 

 

 

 

Lending fees

$

20,586

 

$

19,339

 

$

19,438

6.4

%

5.9

%

Deposit account fees

 

21,703

 

 

22,112

 

 

20,315

(1.8

)

6.8

 

Interest rate contracts and other derivative income (loss)

 

2,564

 

 

(638

)

 

11,133

NM

 

(77.0

)

Foreign exchange income

 

12,660

 

 

14,015

 

 

12,699

(9.7

)

(0.3

)

Wealth management fees

 

6,304

 

 

6,071

 

 

6,052

3.8

 

4.2

 

Net (losses) gains on sales of loans

 

(22

)

 

443

 

 

2,922

NM

 

NM

 

Net realized (losses) gains on AFS debt securities

 

(10,000

)

 

 

1,278

NM

 

NM

 

Other investment income

 

1,921

 

 

1,127

 

 

1,627

70.5

 

18.1

 

Other income

 

4,262

 

 

2,458

 

 

4,279

73.4

 

(0.4

)

Total noninterest income

$

59,978

 

$

64,927

 

$

79,743

(7.6

)%

(24.8

)%

Noninterest expense:

 

 

 

 

 

Compensation and employee benefits

$

129,654

 

$

120,422

 

$

116,269

7.7

%

11.5

%

Occupancy and equipment expense

 

15,587

 

 

15,648

 

 

15,464

(0.4

)

0.8

 

Deposit insurance premiums and regulatory assessments

 

7,910

 

 

4,930

 

 

4,717

60.4

 

67.7

 

Deposit account expense

 

9,609

 

 

8,437

 

 

4,693

13.9

 

104.8

 

Data processing

 

3,347

 

 

3,641

 

 

3,665

(8.1

)

(8.7

)

Computer software expense

 

7,360

 

 

7,504

 

 

7,294

(1.9

)

0.9

 

Other operating expense

 

30,998

 

 

31,923

 

 

23,448

(2.9

)

32.2

 

Amortization of tax credit and other investments

 

10,110

 

 

64,605

 

 

13,900

(84.4

)

(27.3

)

Repurchase agreements' extinguishment cost

 

3,872

 

 

 

 

100.0

 

100.0

 

Total noninterest expense

$

218,447

 

$

257,110

 

$

189,450

(15.0

)%

15.3

%

 

 

 

 

NM - Not meaningful.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 4

March 31, 2023

Three Months Ended

% Change

 

March 31, 2023

December 31, 2022

March 31, 2022

Qtr-o-Qtr

Yr-o-Yr

Loans:

 

 

 

 

 

Commercial:

C&I

$

15,400,996

$

15,496,386

$

14,271,902

(0.6

)%

7.9

%

CRE:

 

 

 

 

 

CRE

 

13,932,758

 

13,699,042

 

12,279,365

1.7

 

13.5

 

Multifamily residential

 

4,600,094

 

4,604,628

 

3,749,571

(0.1

)

22.7

 

Construction and land

 

675,047

 

591,962

 

392,923

14.0

 

71.8

 

Total CRE

 

19,207,899

 

18,895,632

 

16,421,859

1.7

 

17.0

 

Consumer:

Residential mortgage:

 

 

 

 

 

Single-family residential

 

11,417,477

 

10,988,102

 

9,111,188

3.9

 

25.3

 

HELOCs

 

2,050,778

 

2,145,416

 

2,183,080

(4.4

)

(6.1

)

Total residential mortgage

 

13,468,255

 

13,133,518

 

11,294,268

2.5

 

19.2

 

Other consumer

 

72,687

 

81,596

 

124,389

(10.9

)

(41.6

)

Total loans (1)

$

48,149,837

$

47,607,132

$

42,112,418

1.1

%

14.3

%

 

 

 

 

 

 

Interest-earning assets

$

61,483,533

$

60,376,151

$

58,692,366

1.8

%

4.8

%

Total assets

$

65,113,604

$

64,252,730

$

61,758,048

1.3

%

5.4

%

 

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest-bearing demand

$

19,709,980

$

21,419,290

$

23,432,746

(8.0

)%

(15.9

)%

Interest-bearing checking

 

6,493,865

 

6,543,349

 

6,648,065

(0.8

)

(2.3

)

Money market

 

11,260,715

 

12,197,782

 

12,913,336

(7.7

)

(12.8

)

Savings

 

2,436,587

 

2,747,166

 

2,930,309

(11.3

)

(16.8

)

Time deposits

 

15,052,762

 

12,076,193

 

8,100,890

24.6

 

85.8

 

Total deposits

$

54,953,909

$

54,983,780

$

54,025,346

(0.1

)%

1.7

%

 

 

 

 

 

 

Interest-bearing liabilities

$

36,814,685

$

34,372,853

$

31,218,479

7.1

%

17.9

%

Stockholders' equity

$

6,183,324

$

5,834,623

$

5,842,615

6.0

%

5.8

%

 

 

 

 

 

 

(1) Includes loans HFS.

 
EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 5

Three Months Ended

 

March 31, 2023

December 31, 2022

Average

Balance

 

Interest

Average

Yield/Rate (1)

Average

Balance

 

Interest

Average

Yield/Rate (1)

Assets

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

3,449,626

 

$

35,647

4.19

%

$

2,983,726

 

$

23,986

3.19

%

Resale agreements

 

688,778

 

 

4,503

2.65

%

 

833,170

 

 

6,062

2.89

%

AFS debt securities

 

6,108,825

 

 

53,197

3.53

%

 

5,869,336

 

 

46,224

3.12

%

HTM debt securities

 

2,995,677

 

 

12,734

1.72

%

 

3,004,412

 

 

12,747

1.68

%

Loans (2)

 

48,149,837

 

 

728,386

6.14

%

 

47,607,132

 

 

671,323

5.59

%

FHLB and FRB stock

 

90,790

 

 

1,039

4.64

%

 

78,375

 

 

870

4.40

%

Total interest-earning assets

 

61,483,533

 

 

835,506

5.51

%

 

60,376,151

 

 

761,212

5.00

%

 

Noninterest-earning assets:

 

Cash and due from banks

 

621,104

 

 

 

640,509

 

Allowance for loan losses

 

(602,754

)

 

 

(583,271

)

Other assets

 

3,611,721

 

 

 

3,819,341

 

Total assets

$

65,113,604

 

 

$

64,252,730

 

 

Liabilities and Stockholders' Equity

 

Interest-bearing liabilities:

 

 

 

 

 

 

Checking deposits

$

6,493,865

 

$

23,174

1.45

%

$

6,543,349

 

$

16,735

1.01

%

Money market deposits

 

11,260,715

 

 

76,102

2.74

%

 

12,197,782

 

 

62,246

2.02

%

Savings deposits

 

2,436,587

 

 

3,669

0.61

%

 

2,747,166

 

 

2,714

0.39

%

Time deposits

 

15,052,762

 

 

113,849

3.07

%

 

12,076,193

 

 

65,772

2.16

%

Federal funds purchased and other short-term borrowings

 

811,551

 

 

8,825

4.41

%

 

47,142

 

 

374

3.15

%

FHLB advances

 

500,000

 

 

6,430

5.22

%

 

40,178

 

 

225

2.22

%

Repurchase agreements

 

106,785

 

 

1,052

4.00

%

 

568,520

 

 

5,507

3.84

%

Long-term debt and finance lease liabilities

 

152,420

 

 

2,544

6.77

%

 

152,523

 

 

2,132

5.55

%

Total interest-bearing liabilities

 

36,814,685

 

 

235,645

2.60

%

 

34,372,853

 

 

155,705

1.80

%

 

Noninterest-bearing liabilities and stockholders' equity:

Demand deposits

 

19,709,980

 

 

21,419,290

 

Accrued expenses and other liabilities

 

2,405,615

 

 

2,625,964

 

Stockholders' equity

 

6,183,324

 

 

5,834,623

 

Total liabilities and stockholders' equity

$

65,113,604

 

$

64,252,730

 

 

Interest rate spread

2.91

%

 

3.20

%

Net interest income and net interest margin

$

599,861

3.96

%

$

605,507

3.98

%

 

(1) Annualized.

 

(2) Includes loans HFS.

 
EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 6

Three Months Ended

 

March 31, 2023

March 31, 2022

Average

Balance

 

Interest

Average

Yield/Rate (1)

Average

Balance

 

Interest

Average

Yield/Rate (1)

Assets

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

Interest-bearing cash and deposits with banks

$

3,449,626

 

$

35,647

4.19

%

$

4,466,012

 

$

3,260

0.30

%

Resale agreements

 

688,778

 

 

4,503

2.65

%

 

2,097,998

 

 

8,383

1.62

%

AFS debt securities

 

6,108,825

 

 

53,197

3.53

%

 

7,969,795

 

 

34,469

1.75

%

HTM debt securities

 

2,995,677

 

 

12,734

1.72

%

 

1,968,568

 

 

8,198

1.69

%

Loans (2)

 

48,149,837

 

 

728,386

6.14

%

 

42,112,418

 

 

377,110

3.63

%

FHLB and FRB stock

 

90,790

 

 

1,039

4.64

%

 

77,575

 

 

609

3.18

%

Total interest-earning assets

 

61,483,533

 

 

835,506

5.51

%

 

58,692,366

 

 

432,029

2.99

%

 

Noninterest-earning assets:

 

Cash and due from banks

 

621,104

 

 

641,882

 

Allowance for loan losses

 

(602,754

)

 

(543,345

)

Other assets

 

3,611,721

 

 

2,967,145

 

Total assets

$

65,113,604

 

$

61,758,048

 

 

Liabilities and Stockholders' Equity

 

Interest-bearing liabilities:

 

 

 

 

Checking deposits

$

6,493,865

 

$

23,174

1.45

%

$

6,648,065

 

$

1,402

0.09

%

Money market deposits

 

11,260,715

 

 

76,102

2.74

%

 

12,913,336

 

 

3,203

0.10

%

Savings deposits

 

2,436,587

 

 

3,669

0.61

%

 

2,930,309

 

 

1,704

0.24

%

Time deposits

 

15,052,762

 

 

113,849

3.07

%

 

8,100,890

 

 

6,680

0.33

%

Federal funds purchased and other short-term borrowings

811,551

 

8,825

4.41

%

1,866

9

1.96

%

FHLB advances

 

500,000

 

 

6,430

5.22

%

 

160,018

 

 

578

1.46

%

Repurchase agreements

 

106,785

 

 

1,052

4.00

%

 

311,984

 

 

2,016

2.62

%

Long-term debt and finance lease liabilities

 

152,420

 

 

2,544

6.77

%

 

152,011

 

 

824

2.20

%

Total interest-bearing liabilities

 

36,814,685

 

 

235,645

2.60

%

 

31,218,479

 

 

16,416

0.21

%

 

Noninterest-bearing liabilities and stockholders' equity:

Demand deposits

 

19,709,980

 

 

 

23,432,746

 

Accrued expenses and other liabilities

 

2,405,615

 

 

 

1,264,208

 

Stockholders' equity

 

6,183,324

 

 

 

5,842,615

 

Total liabilities and stockholders' equity

$

65,113,604

 

 

$

61,758,048

 

 

 

 

 

Interest rate spread

 

 

2.91

%

 

2.78

%

Net interest income and net interest margin

 

$

599,861

3.96

%

 

$

415,613

2.87

%

 

 

 

 

(1) Annualized.

(2) Includes loans HFS.

 
EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED RATIOS

(unaudited)

Table 7

March 31, 2023

Three Months Ended (1)

Basis Point Change

 

March 31, 2023

December 31, 2022

March 31, 2022

Qtr-o-Qtr

Yr-o-Yr

Return on average assets

2.01

%

2.08

%

1.56

%

(7

)

bps

45

 

bps

Adjusted return on average assets (2)

2.05

%

2.08

%

1.56

%

(3

)

49

 

 

Return on average common equity

21.15

%

22.90

%

16.50

%

(175

)

465

 

 

Adjusted return on average common equity (2)

21.61

%

22.90

%

16.50

%

(129

)

511

 

 

Return on average TCE (3)

22.94

%

24.96

%

18.00

%

(202

)

494

 

 

Adjusted return on average TCE (3)

23.44

%

24.96

%

18.00

%

(152

)

544

 

 

Interest rate spread

2.91

%

3.20

%

2.78

%

(29

)

13

 

 

Net interest margin

3.96

%

3.98

%

2.87

%

(2

)

109

 

 

Average loan yield

6.14

%

5.59

%

3.63

%

55

 

251

 

 

Yield on average interest-earning assets

5.51

%

5.00

%

2.99

%

51

 

252

 

 

Average cost of interest-bearing deposits

2.49

%

1.74

%

0.17

%

75

 

232

 

 

Average cost of deposits

1.60

%

1.06

%

0.10

%

54

 

150

 

 

Average cost of funds

1.69

%

1.11

%

0.12

%

58

 

157

 

 

Adjusted pre-tax, pre-provision profitability ratio (4)

2.90

%

2.95

%

2.10

%

(5

)

80

 

 

Adjusted noninterest expense/average assets (4)

1.27

%

1.19

%

1.15

%

8

 

12

 

 

Efficiency ratio

33.11

%

38.35

%

38.25

%

(524

)

(514

)

 

Adjusted efficiency ratio (4)

30.46

%

28.66

%

35.34

%

180

 

bps

(488

)

bps

 

 

 

 

 

 

 

(1)

Annualized except for efficiency ratio.

(2)

Adjusted return on average assets and adjusted return on average equity are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP measures in Table 12.

(3)

Return on average TCE and adjusted return on average TCE are non-GAAP financial measure. See reconciliation of GAAP to non-GAAP measures in Table 11.

(4)

Adjusted pre-tax, pre-provision profitability ratio, adjusted noninterest expense/average assets and the adjusted efficiency ratio are non-GAAP financial measures. See reconciliation of GAAP to non-GAAP measures in Table 10.

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, 2023

Commercial

Consumer

 

C&I

 

Total CRE

Total Residential

Mortgage

Other Consumer

 

Total

Allowance for loan losses, December 31, 2022

$

371,700

 

$

182,346

 

$

40,039

 

$

1,560

 

$

595,645

 

Impact of ASU 2022-02 adoption

 

5,683

 

 

343

 

 

2

 

 

 

 

6,028

 

Allowance for loan losses, January 1, 2023

$

377,383

 

$

182,689

 

$

40,041

 

$

1,560

 

$

601,673

 

(Reversal of) provision for credit losses on loans

(a)

 

(678

)

 

6,021

 

 

13,022

 

 

155

 

 

18,520

 

Gross charge-offs

 

(1,900

)

 

(6

)

 

(91

)

 

(40

)

 

(2,037

)

Gross recoveries

 

1,211

 

 

211

 

 

6

 

 

 

 

1,428

 

Total net (charge-offs) recoveries

 

(689

)

 

205

 

 

(85

)

 

(40

)

 

(609

)

Foreign currency translation adjustment

 

309

 

 

 

 

 

 

 

 

309

 

Allowance for loan losses, March 31, 2023

$

376,325

 

$

188,915

 

$

52,978

 

$

1,675

 

$

619,893

 

 

Three Months Ended December 31, 2022

Commercial

Consumer

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

 

Total

Allowance for loan losses, September 30, 2022

$

371,749

 

$

178,487

 

$

30,587

 

$

1,694

 

$

582,517

 

(Reversal of) provision for credit losses on loans

(a)

 

(263

)

 

13,790

 

 

9,363

 

 

(118

)

 

22,772

 

Gross charge-offs

 

(416

)

 

(10,804

)

 

 

 

(16

)

 

(11,236

)

Gross recoveries

 

136

 

 

873

 

 

89

 

 

 

 

1,098

 

Total (charge-offs) net recoveries

 

(280

)

 

(9,931

)

 

89

 

 

(16

)

 

(10,138

)

Foreign currency translation adjustment

 

494

 

 

 

 

 

 

 

 

494

 

Allowance for loan losses, December 31, 2022

$

371,700

 

$

182,346

 

$

40,039

 

$

1,560

 

$

595,645

 

 

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

 

 

 

 

 

 

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, 2023

December 31, 2022

March 31, 2022

Unfunded Credit Facilities

 

 

 

 

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

 

$

26,264

 

$

24,041

 

$

27,514

 

Provision for (reversal of) credit losses on unfunded credit commitments

(b)

 

1,480

 

 

2,228

 

 

(4,252

)

Foreign currency translation adjustment

 

 

(3

)

 

(5

)

 

 

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

$

27,741

 

$

26,264

 

$

23,262

 

 

Provision for credit losses

(a)+(b)

$

20,000

 

$

25,000

 

$

8,000

 

 

(1) Included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet.

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CRITICIZED LOANS, NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS

($ in thousands)

(unaudited)

Table 9

Criticized Loans

March 31, 2023

December 31, 2022

March 31, 2022

Special mention loans

$

461,356

 

$

468,471

 

$

402,704

 

Classified loans

 

452,715

 

 

427,509

 

 

430,633

 

Total criticized loans (1)

$

914,071

 

$

895,980

 

$

833,337

 

 

Nonperforming Assets

March 31, 2023

December 31, 2022

March 31, 2022

Nonaccrual loans:

Commercial:

C&I

$

43,747

 

$

50,428

 

$

51,773

 

Total CRE

 

19,427

 

 

23,413

 

 

9,827

 

Consumer:

 

 

 

Total residential mortgage

 

29,585

 

 

25,586

 

 

23,197

 

Other consumer

 

366

 

 

99

 

 

37

 

Total nonaccrual loans

 

93,125

 

 

99,526

 

 

84,834

 

Other real estate owned, net

 

270

 

 

270

 

 

 

Other nonperforming assets

 

 

 

 

 

9,548

 

Total nonperforming assets

$

93,395

 

$

99,796

 

$

94,382

 

 
 

Credit Quality Ratios

March 31, 2023

December 31, 2022

March 31, 2022

Annualized quarterly net charge-offs to average loans HFI

 

0.01

%

 

0.08

%

 

0.08

%

Special mention loans to loans HFI

 

0.94

%

 

0.97

%

 

0.93

%

Classified loans to loans HFI

 

0.93

%

 

0.89

%

 

0.99

%

Criticized loans to loans HFI

 

1.87

%

 

1.86

%

 

1.92

%

Nonperforming assets to total assets

 

0.14

%

 

0.16

%

 

0.15

%

Nonaccrual loans to loans HFI

 

0.19

%

 

0.21

%

 

0.20

%

Allowance for loan losses to loans HFI

 

1.27

%

 

1.24

%

 

1.25

%

(1) Excludes loans HFS.

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 adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio represents total adjusted revenue less adjusted noninterest expense, divided by average total assets. Adjusted revenue excludes the write-off of an AFS debt security. Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of core deposit intangibles and the repurchase agreements' extinguishment cost. 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, 2023

December 31, 2022

March 31, 2022

Net interest income before provision for credit losses

(a)

$

599,861

 

$

605,507

 

$

415,613

 

Total noninterest income

 

 

59,978

 

 

64,927

 

 

79,743

 

Total revenue

(b)

$

659,839

 

$

670,434

 

$

495,356

 

Noninterest income

 

 

59,978

 

 

64,927

 

 

79,743

 

Add: Write-off of AFS debt security

 

 

10,000

 

 

 

Adjusted noninterest income

(c)

 

69,978

 

 

64,927

 

 

79,743

 

Adjusted revenue

(a)+(c) = (d)

$

669,839

 

$

670,434

 

$

495,356

 

 

 

 

 

 

Total noninterest expense

(e)

$

218,447

 

$

257,110

 

$

189,450

 

Less: Amortization of tax credit and other investments

 

 

(10,110

)

 

(64,605

)

 

(13,900

)

Amortization of core deposit intangibles

 

 

(441

)

 

(381

)

 

(511

)

Repurchase agreements' extinguishment cost

 

 

(3,872

)

 

 

Adjusted noninterest expense

(f)

$

204,024

 

$

192,124

 

$

175,039

 

Efficiency ratio

(e)/(b)

 

33.11

%

 

38.35

%

 

38.25

%

Adjusted efficiency ratio

(f)/(d)

 

30.46

%

 

28.66

%

 

35.34

%

Adjusted pre-tax, pre-provision income

(d)-(f) = (g)

$

465,815

 

$

478,310

 

$

320,317

 

Average total assets

(h)

$

65,113,604

 

$

64,252,730

 

$

61,758,048

 

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

(g)/(h)

 

2.90

%

 

2.95

%

 

2.10

%

Adjusted noninterest expense/average assets (1)

(f)/(h)

 

1.27

%

 

1.19

%

 

1.15

%

 

 

 

 

 

(1) Annualized.

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. TCE and TCE ratio are non-GAAP financial measures. TCE 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, 2023

December 31, 2022

March 31, 2022

Stockholders' equity

(a)

$

6,309,331

 

$

5,984,612

 

$

5,703,456

 

Less: Goodwill

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Other intangible assets (1)

 

 

(7,201

)

 

(7,998

)

 

(9,044

)

TCE

(b)

$

5,836,433

 

$

5,510,917

 

$

5,228,715

 

 

 

 

 

 

Total assets

(c)

$

67,244,898

 

$

64,112,150

 

$

62,241,456

 

Less: Goodwill

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Other intangible assets (1)

 

 

(7,201

)

 

(7,998

)

 

(9,044

)

Tangible assets

(d)

$

66,772,000

 

$

63,638,455

 

$

61,766,715

 

Total stockholders' equity to assets ratio

(a)/(c)

 

9.38

%

 

9.33

%

 

9.16

%

TCE ratio

(b)/(d)

 

8.74

%

 

8.66

%

 

8.47

%

 

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

 

 

Three Months Ended

March 31, 2023

December 31, 2022

March 31, 2022

Net income

(e)

$

322,439

 

$

336,763

 

$

237,652

 

Add: Amortization of core deposit intangibles

 

 

441

 

 

381

 

 

511

 

Amortization of mortgage servicing assets

 

 

356

 

 

329

 

 

392

 

Tax effect of amortization adjustments (2)

 

 

(233

)

 

(209

)

 

(260

)

Tangible net income

(f)

$

323,003

 

$

337,264

 

$

238,295

 

Add: Write-off of AFS debt security

 

 

10,000

 

 

 

Tax effect of write-off (2)

 

 

(2,929

)

 

 

Adjusted tangible net income

(g)

$

330,074

 

$

337,264

 

$

238,295

 

 

 

 

 

 

Average stockholders' equity

(h)

$

6,183,324

 

$

5,834,623

 

$

5,842,615

 

Less: Average goodwill

 

 

(465,697

)

 

(465,697

)

 

(465,697

)

Average other intangible assets (1)

 

 

(7,696

)

 

(8,378

)

 

(9,207

)

Average TCE

(i)

$

5,709,931

 

$

5,360,548

 

$

5,367,711

 

Return on average common equity (3)

(e)/(h)

 

21.15

%

 

22.90

%

 

16.50

%

Return on average TCE (3)

(f)/(i)

 

22.94

%

 

24.96

%

 

18.00

%

Adjusted return on average TCE (3)

(g)/(i)

 

23.44

%

 

24.96

%

 

18.00

%

 

(1)

Includes core deposit intangibles and mortgage servicing assets.

(2)

Applied statutory tax rate of 29.29%, 29.37% and 28.77% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

(3)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

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

(unaudited)

Table 12

During the first quarter of 2023, the Company recorded a $10.0 million pre-tax impairment write-off of an AFS debt security. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average common equity that adjust for the above discussed non-recurring items provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.

Three Months Ended

March 31, 2023

December 31, 2022

March 31, 2022

Net income

(a)

$

322,439

 

$

336,763

 

$

237,652

 

Add: Write-off of AFS debt security

 

10,000

 

 

 

 

 

Tax effect of write-off (1)

 

(2,929

)

 

 

 

 

Adjusted net income

(b)

$

329,510

 

$

336,763

 

$

237,652

 

 

Diluted weighted-average number of shares outstanding

 

141,913

 

 

142,138

 

 

143,223

 

Diluted EPS

$

2.27

 

$

2.37

 

$

1.66

 

Add: Write-off of AFS debt security

 

0.05

 

 

 

 

 

Adjusted diluted EPS

$

2.32

 

$

2.37

 

$

1.66

 

 

Average total assets

(c)

$

65,113,604

 

$

64,252,730

 

$

61,758,048

 

Average stockholders' equity

(d)

$

6,183,324

 

$

5,834,623

 

$

5,842,615

 

Return on average assets (2)

(a)/(c)

 

2.01

%

 

2.08

%

 

1.56

%

Adjusted return on average assets (2)

(b)/(c)

 

2.05

%

 

2.08

%

 

1.56

%

Return on average common equity (2)

(a)/(d)

 

21.15

%

 

22.90

%

 

16.50

%

Adjusted return on average common equity (2)

(b)/(d)

 

21.61

%

 

22.90

%

 

16.50

%

 
 

(1)

Applied statutory tax rate of 29.29% for the three months ended March 31, 2023.

(2)

Annualized.

 

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