Attached files
| file | filename |
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| 8-K - 8-K - EAST WEST BANCORP INC | form8k.htm |
Exhibit 99.1 | |
 | East West Bancorp, Inc. |
135 N. Los Robles Ave., 7th Fl. | |
Pasadena, CA 91101 | |
Tel. 626.768.6000 | |
Fax 626.817.8838 | |
NEWS RELEASE | |||
INVESTOR RELATIONS CONTACT:
Irene Oh
Chief Financial Officer
(626) 768-6360
EAST WEST BANCORP REPORTS NET INCOME FOR FIRST QUARTER 2016
OF $107.5 MILLION AND DILUTED EARNINGS PER SHARE OF $0.74,
BOTH UP 17% FROM PRIOR QUARTER
Pasadena, California - April 20, 2016 - East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the first quarter of 2016. For the first quarter of 2016, net income was $107.5 million or $0.74 per diluted share.
“East West is pleased to report strong earnings of $107.5 million or $0.74 per diluted share for the first quarter of 2016, an increase in diluted earnings per share of $0.11 or 17% from the fourth quarter of 2015,” stated Dominic Ng, Chairman and Chief Executive Officer of East West.
“During the quarter, we grew both loans and deposits, expanded our net interest income to $252.2 million and net interest margin to 3.32%, and improved our profitability ratios with a return on average assets of 1.33% and a return on average equity of 13.59%. Additionally, although we continue to make strong progress on the enhancements to our risk management systems and controls, concurrently, we are making good strides in our expense containment efforts,” continued Ng.
“East West is off to a great start for 2016. During the first quarter of 2016, East West remained focused on growing our balance sheet and business profitably and prudently, while ensuring that we are taking the appropriate risk management measures to sustain the Company for future growth. We will continue with this strategy for the remainder of 2016,” concluded Ng.
First Quarter Highlights
• | Strong First Quarter Earnings - Net income totaled $107.5 million or $0.74 per diluted share for the first quarter of 2016. Compared with the fourth quarter of 2015, net income increased $15.7 million and earnings per diluted share increased $0.11, both up by 17%. |
Compared with the first quarter of 2015, net income for the first quarter of 2016 increased $7.5 million and earnings per diluted share increased $0.05, both up by 7%.
• | Record Loans - Total gross loans receivable of $23.8 billion as of March 31, 2016 were up $105.0 million from $23.7 billion as of December 31, 2015. Excluding the impact of $243.7 million in loans sold and securitized, the organic loan growth was $348.7 million or 6% annualized during the first quarter of 2016. The loan growth during the first quarter of 2016 was largely driven by increases in commercial real estate, consumer and single-family real estate loans, partially offset by a decrease in commercial loans. |
• | Record Deposits - Total deposits of $28.6 billion as of March 31, 2016 were up $1.1 billion or 4% from $27.5 billion as of December 31, 2015. This growth was largely due to an increase in noninterest-bearing demand deposits of $804.8 million or 9% and money market deposits of $705.5 million or 10%, resulting in record core deposits of $22.5 billion as of March 31, 2016. |
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• | Net Interest Income and Margin Expansion - Both net interest income and net interest margin increased quarter over quarter. For the first quarter of 2016, the net interest income increased $5.3 million or 2% to $252.2 million and net interest margin increased six basis points to 3.32% compared to 3.26% for the fourth quarter of 2015. |
• | Improved Capital Ratios - East West’s Common Equity Tier 1 (“CET1”) capital ratio was 10.7% as of March 31, 2016, compared to 10.5% as of December 31, 2015. The total risk-based capital ratio was 12.4% as of March 31, 2016, compared to 12.2% as of December 31, 2015. |
• | Increased Financial Returns - Return on average assets increased to 1.33% for the first quarter of 2016, up 19 basis points from 1.14% for the fourth quarter of 2015. Return on average equity increased to 13.59% for the first quarter of 2016, up 192 basis points from 11.67% for the fourth quarter of 2015. |
Quarterly Results Summary
Quarter Ended | ||||||||||||
($ in millions, except per share data) | March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||
Net income | $ | 107.52 | $ | 91.81 | $ | 100.03 | ||||||
Earnings per share (diluted) | $ | 0.74 | $ | 0.63 | $ | 0.69 | ||||||
Tangible equity (1) per common share | $ | 18.79 | $ | 18.15 | $ | 16.87 | ||||||
Return on average assets | 1.33 | % | 1.14 | % | 1.39 | % | ||||||
Return on average equity | 13.59 | % | 11.67 | % | 13.93 | % | ||||||
Net interest income | $ | 252.20 | $ | 246.94 | $ | 235.72 | ||||||
Net interest margin | 3.32 | % | 3.26 | % | 3.51 | % | ||||||
Cost of deposits | 0.28 | % | 0.29 | % | 0.28 | % | ||||||
Adjusted efficiency ratio (1) | 44.53 | % | 43.99 | % | 42.65 | % | ||||||
(1) | See reconciliation of GAAP to non-GAAP financial measures in Table 8. |
Management Guidance
The Company is providing guidance for the second quarter and full year of 2016. Management currently estimates that fully diluted earnings per share for the full year of 2016 will range from $2.86 to $2.90, an increase of $0.20 to $0.24 or 8% to 9% from $2.66 for the full year of 2015 and an increase from the previously disclosed guidance range of $2.80 to $2.84 for the full year of 2016.
This EPS guidance for the remainder of 2016 assumes:
• | Federal funds target rate increases 25 basis points in September of 2016. The previously disclosed guidance had assumed the federal funds target rate would increase 25 basis points each in July and December 2016. |
• | A net interest margin ranging from 3.25% to 3.35% for the remainder of 2016. |
• | Organic loan growth of approximately 8.00% for the full year 2016. |
• | Provision for loan losses of approximately $15 million for the remainder of 2016. |
• | Noninterest expense of approximately $155 million to $160 million per quarter, including the amortization of tax credit and other investments of approximately $18 million per quarter. |
• | An effective tax rate of 25.8% for the remainder of 2016. |
Management currently estimates that fully diluted earnings per share for the second quarter of 2016 will range from $0.69 to $0.71, based on the assumptions stated above.
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Balance Sheet Summary
Total assets as of March 31, 2016 reached a record $33.1 billion, an increase of $758.2 million or 2% from $32.4 billion as of December 31, 2015. The increase in total assets was largely attributable to increases of $904.4 million or 66% in cash and cash equivalents and $200.0 million or 13% in securities purchased under resale agreements (“resale agreements”), partially offset by a decrease of $407.9 million or 11% in investment securities. The balance sheet growth was fueled by deposit growth during the quarter.
Total Loans
Total gross loans receivable as of March 31, 2016 were $23.8 billion, an increase of $105.0 million compared with $23.7 billion as of December 31, 2015. During the first quarter of 2016, the Company sold or securitized $243.7 million in loans, comprised of $201.7 million of multifamily real estate loans, $15.0 million in commercial real estate loans and $27.0 million of Small Business Administration 7(a) loans. Excluding the impact of these loans sold and securitized during the first quarter, the organic loan growth during the first quarter was $348.7 million or 6% annualized. The loan growth during the first quarter of 2016 was largely driven by increases in commercial real estate, consumer and single-family real estate loans, partially offset by a decrease in commercial loans.
During the first quarter of 2016, the Company securitized $201.7 million of multifamily real estate loans and recorded $1.1 million in net gains. The Company retained $160.1 million of the senior tranche of the resulting securities and recorded $641 thousand in mortgage servicing rights.
Deposits and Other Liabilities
As of March 31, 2016, total deposits grew to a record $28.6 billion, an increase of $1.1 billion or 4% from $27.5 billion as of December 31, 2015. Core deposits increased to a record $22.5 billion, an increase of $1.7 billion or 8% from $20.9 billion as of December 31, 2015. All core deposit categories grew during the first quarter of 2016; in particular, noninterest-bearing demand deposits increased by $804.8 million or 9% and money market deposits increased by $705.5 million or 10%.
Federal Home Loan Bank (“FHLB”) advances decreased $699.5 million or 69% from $1.0 billion as of December 31, 2015 to $320.0 million as of March 31, 2016. During the fourth quarter of 2015, the Company had entered into $700 million in short-term FHLB advances to improve liquidity and available cash which matured in the first quarter of 2016.
FIRST QUARTER 2016 OPERATING RESULTS
Net Interest Income
Net interest income totaled $252.2 million for the first quarter of 2016, an increase of $5.3 million or 2% from $246.9 million for the fourth quarter of 2015 and an increase of $16.5 million or 7% from $235.7 million for the first quarter of 2015. The increase in net interest income compared with the prior quarter and prior-year quarter was primarily due to greater interest income resulting from the growth of the loan portfolio. The average loan portfolio balance for the first quarter of 2016 was $23.8 billion, compared to $23.1 billion and $21.7 billion for the fourth and first quarter of 2015, respectively. Additionally, the loan yield for the first quarter of 2016 was 4.28%, up one basis point from 4.27% for the fourth quarter of 2015 but down 23 basis points from 4.51% for the first quarter of 2015.
The net interest margin for the first quarter of 2016 was 3.32%, an increase of six basis points from 3.26% for the fourth quarter of 2015. The increase in the net interest margin compared to the fourth quarter of 2015 was largely due to a six basis point increase in the yield on interest-earning assets to 3.63% for the first quarter of 2016.
Cost of deposits improved one basis point to 0.28% for the first quarter of 2016 from 0.29% for the fourth quarter of 2015 and reflected no change compared to the first quarter of 2015. Cost of funds was 0.34% for the first quarter of 2016, compared to 0.33% and 0.43% for the fourth and first quarter of 2015, respectively.
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Noninterest Income & Expense
Noninterest Income
Noninterest income of $40.5 million for the first quarter of 2016 decreased $4.0 million or 9% from $44.5 million for the fourth quarter of 2015 and decreased $3.6 million or 8% from $44.1 million for the first quarter of 2015. The sequential quarter decrease in noninterest income was largely due to decreases of $9.5 million or 71% in net gains on sales of available-for-sale investment securities, and $4.4 million or 32% in letters of credit fees and foreign exchange income. In the fourth quarter of 2015, the Company recorded certain fees and other operating income that were not expected to be recurring in nature. Additionally, in the fourth quarter of 2015, the Company recorded a charge of $19.0 million related to changes in Federal Deposit Insurance Corporation (“FDIC”) indemnification asset and receivable/payable. The Company terminated its United Commercial Bank shared-loss agreements with the FDIC in the fourth quarter of 2015 and had no remaining shared-loss agreements with the FDIC as of December 31, 2015.
The following table presents total fees and other operating income for the quarters ended March 31, 2016, December 31, 2015 and March 31, 2015:
Quarter Ended | ||||||||||||
($ in thousands) | March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||
Branch fees | $ | 10,222 | $ | 10,338 | $ | 9,384 | ||||||
Letters of credit fees and foreign exchange income | 9,553 | 13,986 | 8,706 | |||||||||
Ancillary loan fees | 3,577 | 4,722 | 2,656 | |||||||||
Wealth management fees | 3,051 | 3,958 | 5,179 | |||||||||
Other fees and other operating income | 8,341 | 11,958 | 12,668 | |||||||||
Total fees and other operating income | $ | 34,744 | $ | 44,962 | $ | 38,593 | ||||||
Noninterest Expense
Noninterest expense for the first quarter of 2016 totaled $146.6 million, $1.7 million or 1% higher than $144.9 million for the fourth quarter of 2015. The sequential quarter increase in noninterest expense was primarily due to an increase of $2.9 million in compensation and employee benefits and $2.0 million in other real estate owned (“OREO”) expense, partially offset by a $2.3 million decrease in other operating expense. In the first quarter of 2016, the Company recorded $528 thousand in OREO expense compared to $1.4 million in OREO income in the fourth quarter of 2015. Additionally, the decrease in other operating expense was largely due to a decrease in loan related expenses.
The Company’s adjusted efficiency ratio for the first quarter of 2016 was 44.53%, compared with 43.99% and 42.65% for the fourth and first quarter of 2015, respectively.
The Company’s effective tax rate for the first quarter of 2016 was 25.68%, compared with an effective tax rate of 38.17% for the fourth quarter of 2015 and 31.87% for the first quarter of 2015, reflecting a larger benefit from tax credit investments in 2016 compared to 2015.
Credit Quality
The allowance for loan losses totaled $260.2 million as of March 31, 2016, compared with $265.0 million and $257.7 million as of December 31, 2015 and March 31, 2015, respectively. During the first quarter of 2016, the Company recorded a provision for credit losses of $1.4 million, compared with a reversal of credit losses of $2.0 million for the fourth quarter of 2015 and a provision for credit losses of $5.0 million for the first quarter of 2015. In the first quarter of 2016, net charge-offs were $5.1 million, compared with net recoveries of $3.8 million in the fourth quarter of 2015 and net charge-offs of $6.0 million in the first quarter of 2015.
The allowance for loan losses to loans held-for-investment ratio decreased to 1.09% as of March 31, 2016, from 1.12% and 1.21% as of December 31, 2015 and March 31, 2015, respectively. The decrease in the allowance for loan losses to loans held-for-investment ratio reflects the credit trends in the loan portfolio. Nonperforming assets totaled $168.7 million as of March 31, 2016, an increase of $40.3 million or 31% from $128.4 million as of December 31, 2015 and an increase of $48.3 million or 40% from $120.5 million as of March 31, 2015. The increase in nonperforming assets compared to the prior year-end was largely due to a delinquent commercial real estate loan that is fully secured.
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Capital Strength
Capital levels for East West remained solid and increased compared to December 31, 2015. East West’s CET1 capital ratio was 10.7% as of March 31, 2016, compared to 10.5% and 10.6% as of December 31, 2015 and March 31, 2015, respectively. The total risk-based capital ratio was 12.4% as of March 31, 2016 compared to 12.2% and 12.4% as of December 31, 2015 and March 31, 2015, respectively.
Regulatory Capital Metrics | Basel III | ||||||||||||||||||||||
($ in thousands) | March 31, 2016 (a) | December 31, 2015 | March 31, 2015 | Minimum Regulatory Requirements | Well Capitalized Regulatory Requirements | Fully Phased- in Minimum Regulatory Requirements | |||||||||||||||||
CET1 capital ratio | 10.7 | % | 10.5 | % | 10.6 | % | 4.5 | % | 6.5 | % | 7.0 | % | |||||||||||
Tier 1 risk-based capital ratio | 10.7 | % | 10.6 | % | 10.7 | % | 6.0 | % | 8.0 | % | 8.5 | % | |||||||||||
Total risk-based capital ratio | 12.4 | % | 12.2 | % | 12.4 | % | 8.0 | % | 10.0 | % | 10.5 | % | |||||||||||
Tier 1 leverage capital ratio | 8.5 | % | 8.5 | % | 8.6 | % | 4.0 | % | 5.0 | % | 5.0 | % | |||||||||||
Risk-Weighted Assets (“RWA”) (b) | $ | 25,541,262 | $ | 25,232,575 | $ | 23,101,162 | N/A | N/A | N/A | ||||||||||||||
N/A Not applicable.
(a) | The Company’s March 31, 2016 regulatory capital ratios, capital 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 2016 dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share is payable on May 16, 2016 to stockholders of record on May 4, 2016.
Conference Call
East West will host a conference call to discuss first quarter 2016 earnings with the public on Thursday, April 21, 2016 at 8:30 a.m. PDT/11:30 a.m. EDT. The public and investment community are invited to listen as management discusses first quarter 2016 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 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 Thursday, April 21, 2016 at 10:00 a.m. PST/1:00 p.m. EST through Thursday, May 5, 2016. 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: 10083640.
About East West
East West Bancorp, Inc. is a publicly owned company with total assets of $33.1 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 130 locations worldwide, including in the United States markets of California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei 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) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; changes in the commercial and consumer real estate markets; changes in our costs of operation, compliance and expansion; changes in the U.S. economy, including inflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission and the Consumer Financial Protection Bureau; changes in the economy of and monetary policy in the People’s Republic of China; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and its impact on critical accounting policies and assumptions; changes in the equity and debt securities markets; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; fluctuations of our stock price; fluctuations in foreign currency exchange rates; success and timing of our business strategies; ability of the Company to adapt and successfully integrate new technologies into its business in a strategic manner; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions; impact of potential federal tax increases and spending cuts; impact of adverse judgments or settlements in litigation or of regulatory enforcement actions; changes in our ability to receive dividends from our subsidiaries; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; impact of natural or man-made disasters or calamities or conflicts; continuing consolidation in the financial services industry; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices and cost of operations; impact of adverse changes to our credit ratings from the major credit rating agencies; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do 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; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; the effect of the current low interest rate environment or changes in interest rates on our net interest income and net interest margin; the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/ or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; and other factors set forth in the Company’s public reports including its Annual Report on Form 10-K for the year ended December 31, 2015, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, the Company’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. The Company assumes no obligation to update such forward-looking statements.
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EAST WEST BANCORP, INC. | |||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||
($ in thousands, except per share data) | |||||||||||||
(unaudited) | |||||||||||||
Table 1 | |||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Assets | |||||||||||||
Cash and cash equivalents | $ | 2,265,297 | $ | 1,360,887 | $ | 1,886,199 | |||||||
Short-term investments | 305,548 | 299,916 | 325,350 | ||||||||||
Resale agreements (1) | 1,800,000 | 1,600,000 | 1,550,000 | ||||||||||
Investment securities | 3,365,373 | 3,773,226 | 2,841,085 | ||||||||||
Loans held for sale | 28,795 | 31,958 | 196,111 | ||||||||||
Loans held-for-investment (net of allowance for loan losses of $260,238, $264,959 and $257,738) | 23,494,126 | 23,378,789 | 21,116,931 | ||||||||||
Investment in qualified affordable housing partnerships, net | 186,999 | 193,978 | 182,719 | ||||||||||
Goodwill | 469,433 | 469,433 | 469,433 | ||||||||||
Other assets | 1,193,598 | 1,242,735 | 1,339,007 | ||||||||||
Total assets | $ | 33,109,169 | $ | 32,350,922 | $ | 29,906,835 | |||||||
Liabilities and Stockholders’ Equity | |||||||||||||
Customer deposits | $ | 28,596,247 | $ | 27,475,981 | $ | 25,162,833 | |||||||
Short-term borrowings | 10,093 | — | — | ||||||||||
FHLB advances | 319,973 | 1,019,424 | 317,777 | ||||||||||
Securities sold under repurchase agreements (“repurchase agreements”) (1) | 200,000 | — | 695,000 | ||||||||||
Long-term debt | 201,102 | 206,084 | 220,905 | ||||||||||
Accrued expenses and other liabilities | 564,973 | 526,483 | 571,557 | ||||||||||
Total liabilities | 29,892,388 | 29,227,972 | 26,968,072 | ||||||||||
Stockholders’ equity | 3,216,781 | 3,122,950 | 2,938,763 | ||||||||||
Total liabilities and stockholders’ equity | $ | 33,109,169 | $ | 32,350,922 | $ | 29,906,835 | |||||||
Book value per common share | $ | 22.33 | $ | 21.70 | $ | 20.43 | |||||||
Tangible equity (2) per common share | $ | 18.79 | $ | 18.15 | $ | 16.87 | |||||||
Tangible equity to tangible assets ratio (2) | 8.31 | % | 8.20 | % | 8.25 | % | |||||||
Number of common shares at period-end (in thousands) | 144,064 | 143,909 | 143,821 | ||||||||||
(1) | Resale and repurchase agreements are reported net pursuant to Accounting Standards Codification (“ASC”) 210-20-45, Balance Sheet Offsetting. As of March 31, 2016 and 2015, $250.0 million out of $450.0 million, and $300.0 million out of $995.0 million of repurchase agreements were eligible for netting against resale agreements, respectively. As of December 31, 2015, all $450.0 million of repurchase agreements were eligible for netting against resale agreements, resulting in no repurchase agreements’ balances reported. |
(2) | See reconciliation of GAAP to non-GAAP financial measures in Table 8. |
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EAST WEST BANCORP, INC. | |||||||||||||
TOTAL LOANS AND DEPOSITS DETAIL | |||||||||||||
($ in thousands) | |||||||||||||
(unaudited) | |||||||||||||
Table 2 | |||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Loans: | |||||||||||||
Real estate - commercial | $ | 7,816,442 | $ | 7,478,474 | $ | 6,455,177 | |||||||
Real estate - land and construction | 635,036 | 632,275 | 590,244 | ||||||||||
Commercial | 8,818,243 | 9,003,007 | 7,720,764 | ||||||||||
Real estate - single-family | 3,103,391 | 3,066,919 | 3,512,794 | ||||||||||
Real estate - multifamily | 1,348,007 | 1,522,995 | 1,484,425 | ||||||||||
Consumer | 2,046,784 | 1,956,091 | 1,612,164 | ||||||||||
Total loans held-for-investment (1) | 23,767,903 | 23,659,761 | 21,375,568 | ||||||||||
Loans held for sale | 28,795 | 31,958 | 196,111 | ||||||||||
Total loans (1), including loans held for sale | 23,796,698 | 23,691,719 | 21,571,679 | ||||||||||
Unearned fees, premiums and discounts | (13,539 | ) | (16,013 | ) | (899 | ) | |||||||
Allowance for loan losses | (260,238 | ) | (264,959 | ) | (257,738 | ) | |||||||
Net loans (1) | $ | 23,522,921 | $ | 23,410,747 | $ | 21,313,042 | |||||||
Customer deposits: | |||||||||||||
Noninterest-bearing demand | $ | 9,461,568 | $ | 8,656,805 | $ | 8,120,644 | |||||||
Interest-bearing checking | 3,434,154 | 3,336,293 | 2,602,516 | ||||||||||
Money market | 7,638,444 | 6,932,962 | 6,360,795 | ||||||||||
Savings | 1,997,365 | 1,933,026 | 1,702,507 | ||||||||||
Total core deposits | 22,531,531 | 20,859,086 | 18,786,462 | ||||||||||
Time deposits | 6,064,716 | 6,616,895 | 6,376,371 | ||||||||||
Total deposits | $ | 28,596,247 | $ | 27,475,981 | $ | 25,162,833 | |||||||
(1) | Includes ASC 310-30 discount of $68.7 million, $80.1 million and $118.2 million as of March 31, 2016, December 31, 2015 and March 31, 2015, respectively. |
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EAST WEST BANCORP, INC. | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
($ in thousands, except per share data) | |||||||||||||
(unaudited) | |||||||||||||
Table 3 | |||||||||||||
Quarter Ended | |||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Interest and dividend income | $ | 276,172 | $ | 270,477 | $ | 263,261 | |||||||
Interest expense | (23,968 | ) | (23,536 | ) | (27,544 | ) | |||||||
Net interest income before (provision for) reversal of credit losses | 252,204 | 246,941 | 235,717 | ||||||||||
(Provision for) reversal of credit losses | (1,440 | ) | 2,000 | (4,987 | ) | ||||||||
Net interest income after (provision for) reversal of credit losses | 250,764 | 248,941 | 230,730 | ||||||||||
Noninterest income | 40,513 | 44,483 | 44,126 | ||||||||||
Noninterest expense | (146,606 | ) | (144,939 | ) | (128,030 | ) | |||||||
Income before income taxes | 144,671 | 148,485 | 146,826 | ||||||||||
Income tax expense | (37,155 | ) | (56,680 | ) | (46,799 | ) | |||||||
Net income | $ | 107,516 | $ | 91,805 | $ | 100,027 | |||||||
Earnings per share | |||||||||||||
- Basic | $ | 0.75 | $ | 0.64 | $ | 0.70 | |||||||
- Diluted | $ | 0.74 | $ | 0.63 | $ | 0.69 | |||||||
Weighted average number of shares outstanding (in thousands) | |||||||||||||
- Basic | 143,958 | 143,900 | 143,655 | ||||||||||
- Diluted | 144,803 | 144,686 | 144,349 | ||||||||||
Quarter Ended | |||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Noninterest income: | |||||||||||||
Branch fees | $ | 10,222 | $ | 10,338 | $ | 9,384 | |||||||
Letters of credit fees and foreign exchange income | 9,553 | 13,986 | 8,706 | ||||||||||
Ancillary loan fees | 3,577 | 4,722 | 2,656 | ||||||||||
Wealth management fees | 3,051 | 3,958 | 5,179 | ||||||||||
Changes in FDIC indemnification asset and receivable/payable | — | (19,007 | ) | (8,422 | ) | ||||||||
Net gains on sales of loans | 1,927 | 5,155 | 9,551 | ||||||||||
Net gains on sales of available-for-sale investment securities | 3,842 | 13,373 | 4,404 | ||||||||||
Other fees and other operating income | 8,341 | 11,958 | 12,668 | ||||||||||
Total noninterest income | $ | 40,513 | $ | 44,483 | $ | 44,126 | |||||||
Noninterest expense: | |||||||||||||
Compensation and employee benefits | $ | 71,837 | $ | 68,895 | $ | 64,253 | |||||||
Occupancy and equipment expense | 14,415 | 15,302 | 15,443 | ||||||||||
Amortization of tax credit and other investments | 14,155 | 14,555 | 6,299 | ||||||||||
Amortization of premiums on deposits acquired | 2,104 | 2,196 | 2,391 | ||||||||||
Deposit insurance premiums and regulatory assessments | 5,418 | 5,049 | 5,656 | ||||||||||
OREO expense (income) | 528 | (1,433 | ) | (1,026 | ) | ||||||||
Legal expense | 3,007 | 3,270 | 6,870 | ||||||||||
Data processing | 2,688 | 2,589 | 2,617 | ||||||||||
Consulting expense | 8,452 | 7,638 | 2,431 | ||||||||||
Deposit related expenses | 2,207 | 2,800 | 2,238 | ||||||||||
Other operating expense | 21,795 | 24,078 | 20,858 | ||||||||||
Total noninterest expense | $ | 146,606 | $ | 144,939 | $ | 128,030 | |||||||
9
EAST WEST BANCORP, INC. | |||||||||||||
SELECTED FINANCIAL INFORMATION | |||||||||||||
($ in thousands) | |||||||||||||
(unaudited) | |||||||||||||
Table 4 | |||||||||||||
Average Balances | Quarter Ended | ||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Loans: | |||||||||||||
Real estate - commercial | $ | 7,706,559 | $ | 7,282,106 | $ | 6,377,884 | |||||||
Real estate - land and construction | 646,555 | 634,601 | 574,248 | ||||||||||
Commercial | 8,859,806 | 8,590,810 | 7,851,709 | ||||||||||
Real estate - single-family | 3,055,891 | 3,183,770 | 3,849,839 | ||||||||||
Real estate - multifamily | 1,522,653 | 1,502,009 | 1,472,052 | ||||||||||
Consumer | 2,027,809 | 1,932,481 | 1,607,020 | ||||||||||
Total loans | $ | 23,819,273 | $ | 23,125,777 | $ | 21,732,752 | |||||||
Investment securities | $ | 3,264,801 | $ | 3,255,976 | $ | 2,604,250 | |||||||
Interest-earning assets | $ | 30,598,462 | $ | 30,020,404 | $ | 27,253,259 | |||||||
Total assets | $ | 32,486,723 | $ | 31,944,102 | $ | 29,219,452 | |||||||
Customer deposits: | |||||||||||||
Noninterest-bearing demand | $ | 8,769,752 | $ | 8,809,031 | $ | 7,417,858 | |||||||
Interest-bearing checking | 3,359,498 | 3,178,877 | 2,526,844 | ||||||||||
Money market | 7,425,797 | 7,079,586 | 6,523,439 | ||||||||||
Savings | 1,961,413 | 1,909,838 | 1,674,012 | ||||||||||
Total core deposits | 21,516,460 | 20,977,332 | 18,142,153 | ||||||||||
Time deposits | 6,302,152 | 6,582,823 | 6,267,190 | ||||||||||
Total deposits | $ | 27,818,612 | $ | 27,560,155 | $ | 24,409,343 | |||||||
Interest-bearing liabilities | $ | 19,966,312 | $ | 19,349,119 | $ | 18,345,649 | |||||||
Stockholders’ equity | $ | 3,181,368 | $ | 3,121,332 | $ | 2,911,711 | |||||||
Selected Ratios | Quarter Ended | ||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Return on average assets | 1.33 | % | 1.14 | % | 1.39 | % | |||||||
Return on average equity | 13.59 | % | 11.67 | % | 13.93 | % | |||||||
Interest rate spread | 3.15 | % | 3.09 | % | 3.31 | % | |||||||
Net interest margin | 3.32 | % | 3.26 | % | 3.51 | % | |||||||
Yield on interest-earning assets | 3.63 | % | 3.57 | % | 3.92 | % | |||||||
Cost of deposits | 0.28 | % | 0.29 | % | 0.28 | % | |||||||
Cost of funds | 0.34 | % | 0.33 | % | 0.43 | % | |||||||
Adjusted noninterest expense (1)(2)/average assets | 1.61 | % | 1.59 | % | 1.66 | % | |||||||
Adjusted efficiency ratio (2)(3) | 44.53 | % | 43.99 | % | 42.65 | % | |||||||
(1) | Adjusted noninterest expense represents noninterest expense, excluding amortization of tax credit and other investments and amortization of premiums on deposits acquired, annualized. |
(2) | See reconciliation of GAAP to non-GAAP financial measures in Table 8. |
(3) | Represents noninterest expense, excluding amortization of tax credit and other investments and amortization of premiums on deposits acquired, divided by the aggregate of net interest income before (provision for) reversal of credit losses, and noninterest income. |
10
EAST WEST BANCORP, INC. | |||||||||||||||||||||||
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES | |||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Table 5 | |||||||||||||||||||||||
Quarter Ended | |||||||||||||||||||||||
March 31, 2016 | March 31, 2015 | ||||||||||||||||||||||
Average | Average | Average | Average | ||||||||||||||||||||
Balance | Interest | Yield/Rate(1) | Balance | Interest | Yield/Rate(1) | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||
Due from banks and short-term investments | $ | 2,052,787 | $ | 3,965 | 0.78 | % | $ | 1,562,702 | $ | 5,426 | 1.41 | % | |||||||||||
Resale agreements (2) | 1,379,121 | 6,677 | 1.95 | % | 1,268,056 | 4,849 | 1.55 | % | |||||||||||||||
Investment securities | 3,264,801 | 11,193 | 1.38 | % | 2,604,250 | 10,184 | 1.59 | % | |||||||||||||||
Loans | 23,819,273 | 253,542 | 4.28 | % | 21,732,752 | 241,566 | 4.51 | % | |||||||||||||||
FHLB and Federal Reserve Bank stock | 82,480 | 795 | 3.88 | % | 85,499 | 1,236 | 5.86 | % | |||||||||||||||
Total interest-earning assets | 30,598,462 | 276,172 | 3.63 | % | 27,253,259 | 263,261 | 3.92 | % | |||||||||||||||
Noninterest-earning assets: | |||||||||||||||||||||||
Cash and cash equivalents | 357,714 | 345,410 | |||||||||||||||||||||
Allowance for loan losses | (264,217 | ) | (261,697 | ) | |||||||||||||||||||
Other assets | 1,794,764 | 1,882,480 | |||||||||||||||||||||
Total assets | $ | 32,486,723 | $ | 29,219,452 | |||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||
Checking deposits | $ | 3,359,498 | $ | 2,826 | 0.34 | % | $ | 2,526,844 | $ | 1,761 | 0.28 | % | |||||||||||
Money market deposits | 7,425,797 | 6,303 | 0.34 | % | 6,523,439 | 4,301 | 0.27 | % | |||||||||||||||
Savings deposits | 1,961,413 | 1,009 | 0.21 | % | 1,674,012 | 803 | 0.19 | % | |||||||||||||||
Time deposits | 6,302,152 | 9,159 | 0.58 | % | 6,267,190 | 10,098 | 0.65 | % | |||||||||||||||
Federal funds purchased and other short-term borrowings | 1,730 | 9 | 2.09 | % | 149 | — | — | % | |||||||||||||||
FHLB advances | 562,489 | 1,500 | 1.07 | % | 338,759 | 1,033 | 1.24 | % | |||||||||||||||
Repurchase agreements (2) (3) | 147,253 | 1,926 | 5.26 | % | 789,444 | 8,406 | 4.32 | % | |||||||||||||||
Long-term debt | 205,980 | 1,236 | 2.41 | % | 225,812 | 1,142 | 2.05 | % | |||||||||||||||
Total interest-bearing liabilities | 19,966,312 | 23,968 | 0.48 | % | 18,345,649 | 27,544 | 0.61 | % | |||||||||||||||
Noninterest-bearing liabilities and stockholders’ equity: | |||||||||||||||||||||||
Demand deposits | 8,769,752 | 7,417,858 | |||||||||||||||||||||
Other liabilities | 569,291 | 544,234 | |||||||||||||||||||||
Stockholders’ equity | 3,181,368 | 2,911,711 | |||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 32,486,723 | $ | 29,219,452 | |||||||||||||||||||
Interest rate spread | 3.15 | % | 3.31 | % | |||||||||||||||||||
Net interest income and net interest margin | $ | 252,204 | 3.32 | % | $ | 235,717 | 3.51 | % | |||||||||||||||
(1) | Annualized. |
(2) | Average volumes of resale and repurchase agreements are reported net pursuant to ASC 210-20-45, Balance Sheet Offsetting. |
(3) | The higher cost of funds was primarily due to the lower balances of repurchase agreements reported as a result of the netting impacts pursuant to ASC 210-20-45, Balance Sheet Offsetting. |
11
EAST WEST BANCORP, INC. | |||||||||||||
ALLOWANCE FOR CREDIT LOSSES | |||||||||||||
($ in thousands) | |||||||||||||
(unaudited) | |||||||||||||
Table 6 | |||||||||||||
Quarter Ended | |||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Non-Purchased Credit Impaired (“Non-PCI”) Loans | |||||||||||||
Allowance for non-PCI loans, beginning of period | $ | 264,600 | $ | 263,889 | $ | 260,965 | |||||||
Provision for (reversal of) loan losses on non-PCI loans | 417 | (3,135 | ) | 2,138 | |||||||||
Net charge-offs (recoveries): | |||||||||||||
Commercial real estate | (41 | ) | (5,815 | ) | 190 | ||||||||
Commercial | 5,174 | 2,089 | 6,062 | ||||||||||
Residential | 40 | (111 | ) | (705 | ) | ||||||||
Consumer | (66 | ) | (9 | ) | 461 | ||||||||
Total net charge-offs (recoveries) | 5,107 | (3,846 | ) | 6,008 | |||||||||
Allowance for non-PCI loans, end of period | 259,910 | 264,600 | 257,095 | ||||||||||
Purchased Credit Impaired (“PCI”) Loans | |||||||||||||
Allowance for PCI loans, beginning of period | 359 | 541 | 714 | ||||||||||
Reversal of provision for loan losses on PCI loans | (31 | ) | (182 | ) | (71 | ) | |||||||
Allowance for PCI loans, end of period | 328 | 359 | 643 | ||||||||||
Allowance for loan losses | 260,238 | 264,959 | 257,738 | ||||||||||
Unfunded Credit Facilities | |||||||||||||
Allowance for unfunded credit reserves, beginning of period | 20,360 | 19,043 | 12,712 | ||||||||||
Provision for unfunded credit reserves | 1,054 | 1,317 | 2,920 | ||||||||||
Allowance for unfunded credit reserves, end of period | 21,414 | 20,360 | 15,632 | ||||||||||
Allowance for credit losses | $ | 281,652 | $ | 285,319 | $ | 273,370 | |||||||
12
EAST WEST BANCORP, INC. | ||||||||||||||||
CREDIT QUALITY | ||||||||||||||||
($ in thousands) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Table 7 | ||||||||||||||||
Non-PCI Nonperforming Assets | March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||||
Nonaccrual loans: | ||||||||||||||||
Real estate - commercial | $ | 52,866 | $ | 29,229 | $ | 29,750 | ||||||||||
Real estate - land and construction | 6,182 | 697 | 3,531 | |||||||||||||
Commercial | 72,739 | 64,735 | 31,461 | |||||||||||||
Real estate - single-family | 11,371 | 8,726 | 9,137 | |||||||||||||
Real estate - multifamily | 14,790 | 16,244 | 13,361 | |||||||||||||
Consumer | 4,678 | 1,738 | 540 | |||||||||||||
Total nonaccrual loans | 162,626 | 121,369 | 87,780 | |||||||||||||
OREO, net | 6,099 | 7,034 | 32,692 | |||||||||||||
Total nonperforming assets | $ | 168,725 | $ | 128,403 | $ | 120,472 | ||||||||||
Credit Quality Ratios | March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||||
Non-PCI nonperforming assets to total assets (1) | 0.51 | % | 0.40 | % | 0.40 | % | ||||||||||
Non-PCI nonaccrual loans to loans held-for-investment (1) | 0.68 | % | 0.51 | % | 0.41 | % | ||||||||||
Allowance for loan losses to loans held-for-investment (1) | 1.09 | % | 1.12 | % | 1.21 | % | ||||||||||
Allowance for credit losses to loans held-for-investment (1) | 1.19 | % | 1.21 | % | 1.28 | % | ||||||||||
Allowance for loan losses to non-PCI nonaccrual loans | 160.02 | % | 218.31 | % | 293.62 | % | ||||||||||
Net charge-offs (recoveries) (2) to average loans held-for-investment | 0.09 | % | (0.07 | )% | 0.11 | % | ||||||||||
(1) | Total assets and loans held-for-investment include PCI loans of $866.8 million, $970.8 million and $1.2 billion as of March 31, 2016, December 31, 2015, and March 31, 2015, respectively. |
(2) | Annualized. |
13
EAST WEST BANCORP, INC. | ||||||||||||
GAAP TO NON-GAAP RECONCILIATION | ||||||||||||
($ in thousands) | ||||||||||||
(unaudited) | ||||||||||||
Table 8 | ||||||||||||
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 ratios are non-GAAP disclosures. Tangible equity represents common stockholders’ equity which has been reduced by goodwill and intangible assets. Given that the use of such measures and ratios are more prevalent in the banking industry, and used by banking regulators and analysts, the Company has included them for discussion. | ||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | ||||||||||
Stockholders’ equity | $ | 3,216,781 | $ | 3,122,950 | $ | 2,938,763 | ||||||
Less: | ||||||||||||
Goodwill and other intangible assets | (509,109 | ) | (511,031 | ) | (513,166 | ) | ||||||
Tangible equity | $ | 2,707,672 | $ | 2,611,919 | $ | 2,425,597 | ||||||
Total assets | $ | 33,109,169 | $ | 32,350,922 | $ | 29,906,835 | ||||||
Less: | ||||||||||||
Goodwill and other intangible assets | (509,109 | ) | (511,031 | ) | (513,166 | ) | ||||||
Tangible assets | $ | 32,600,060 | $ | 31,839,891 | $ | 29,393,669 | ||||||
Tangible equity to tangible assets ratio | 8.31 | % | 8.20 | % | 8.25 | % | ||||||
Adjusted efficiency ratio represents noninterest expense, excluding amortization of tax credit and other investments and amortization of premiums on deposits acquired, divided by the aggregate of net interest income before (provision for) reversal of credit losses, and noninterest income. The Company believes that presenting the adjusted efficiency ratio shows the trend in recurring overhead-related noninterest expense relative to recurring net revenues. This provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. | ||||||||||||
Quarter Ended | ||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | ||||||||||
Total noninterest expense | $ | 146,606 | $ | 144,939 | $ | 128,030 | ||||||
Less: | ||||||||||||
Amortization of tax credit and other investments | (14,155 | ) | (14,555 | ) | (6,299 | ) | ||||||
Amortization of premiums on deposits acquired | (2,104 | ) | (2,196 | ) | (2,391 | ) | ||||||
Adjusted noninterest expense | $ | 130,347 | $ | 128,188 | $ | 119,340 | ||||||
Net interest income before (provision for) reversal of credit losses | $ | 252,204 | $ | 246,941 | $ | 235,717 | ||||||
Noninterest income | 40,513 | 44,483 | 44,126 | |||||||||
Net interest income and noninterest income | $ | 292,717 | $ | 291,424 | $ | 279,843 | ||||||
Adjusted efficiency ratio | 44.53 | % | 43.99 | % | 42.65 | % | ||||||
14