Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - EAST WEST BANCORP INC | ewbc9918k06302017.htm |
| 8-K - 8-K - EAST WEST BANCORP INC | ewbc8k06302017.htm |
EWBC Earnings Results
Second Quarter 2017
July 20, 2017
Forward-Looking Statements
2
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, the Consumer Financial Protection Bureau and California Department of
Business Oversight — Division of Financial Institutions; heightened regulatory and governmental oversight and scrutiny of the Company’s business
practices, including dealings with retail customers; changes in the economy of and monetary policy in the People’s Republic of China; changes in income
tax laws and regulations; 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; 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; our ability to adopt and successfully integrate new technologies into our
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, 2016, 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.
Highlights of Second Quarter 2017 Results
Strong earnings results.
Net income increased 15% Y-o-Y and EPS increased 14% Y-o-Y
Net interest income growth: 2Q17 NII of $290mm was up 7% Q-o-Q
Asset sensitivity: loan yield expansion outpaced deposit cost increase and 2Q17
NIM of 3.49% was up by 16 bps.
Excluding discount accretion, adj.* NIM of 3.41% was up by 12 bps Q-o-Q.
Excluding discount accretion, adj.* loan yield of 4.30% was up by 13 bps Q-o-Q.
Cost of deposits increased a modest 4 bps Q-o-Q.
Pre-tax, pre-provision income growth: Driven by revenue growth, adj.* pre-tax, pre-
provision income of $198mm grew by 10% Q-o-Q.
Solid balance sheet growth.
Loans grew 11% linked quarter annualized (“LQA”).
Deposits grew 8% LQA.
Steady credit quality.
Annualized net recoveries of 4 bps in 2Q17.
NPAs decreased by $12mm, or 8%, Q-o-Q to $133mm; equivalent to 0.37% of total
assets as of 06.30.17.
3
Net
income
$118.3
million
Diluted
EPS
$0.81
Tangible equity*/share
$21.93
Record loans
$27.2 billion
Record deposits
$31.2 billion
* See reconciliation of GAAP to non-GAAP financials on slides 15-18 and in the Company’s 2Q17 Earnings Press Release.
$103.3 $110.1 $110.7 $128.2
$118.3
$41.5
12.7% 13.1% 12.9%
14.9%
13.0%
15.3% 15.6% 15.3%
17.6%
15.3%
10%
13%
16%
19%
22%
25%
$0
$40
$80
$120
$160
$200
2Q16 3Q16 4Q16 1Q17* 2Q17
$
in
mi
llio
ns
Net Income & ROE* and Tangible ROE*
Net income (LH axis) 1Q17: Gain on commercial property (LH axis)
Return on Avg. Equity (RH axis) Tang. Return on Avg. Tang. Eq. (RH axis)
$103.3
$110.1 $110.7
$128.2
$118.3
$41.5
1.27%
1.33%
1.27%
1.49%
1.36%
1.0%
1.2%
1.4%
.6%
1.8%
2.0%
$0
$40
$80
$120
$160
$200
2Q16 3Q16 4Q16 1Q17* 2Q17
$
in
mi
llio
ns
Net Income & ROA*
Net income (LH axis) 1Q17: Gain on commercial property (LH axis)
Return on Avg. Assets (RH axis)
2Q17 Earnings Growth and Profitability
4
2Q17 net income of $118mm, EPS of $0.81, ROA of
1.36%, ROE of 13.0% and tangible ROE* of 15.3%.
Consistently attractive profitability:
5-quarter range of ROA*: 1.27% to 1.49%.
5-quarter range of ROE*: 12.7% to 14.9%.
5-quarter range of tangible ROE*: 15.3% to 17.6%.
* See reconciliation of GAAP to non-GAAP financials on slides 15-18 and in the Company’s 2Q17 Earnings Press Release. 1Q17 adjusted for the impact of the commercial property sale.
$1.16
$169.7
$169.7
0%
9.1 9.3 9.6 10.0 10.2
8.5 8.5 8.7
9.0 9.1
1.4 1.5 1.6
1.7 1.83.2
3.4 3.5
3.7 4.02.1
2.1 2.1
2.1 2.1
0%
20%
40%
60%
$0
$10
$20
$30
2Q16 3Q16 4Q16 1Q17 2Q17
$
in
bil
lio
ns
Total Loans*
C&I CRE MFR
SFR Consumer LQA growth rate
38% 38% 38% 38% 37%
35% 34% 34% 34% 34%
6% 6% 6% 6% 6%
13% 14% 14% 14% 15%
8% 8% 8% 8% 8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2Q16 3Q16 4Q16 1Q17 2Q17
Loan Portfolio Mix
C&I CRE MFR SFR Consumer
2Q17 Record Loans of $27.2 billion
5
$24.3 $24.8
$25.5 $26.5
* Total loans held for investment and held for sale, with HFS by category. CRE = CRE, construction and land. Consumer = predominantly HELOCs.
Q-o-Q Difference
Total loans increased $732mm or 3% (+11% LQA).
SFR: +8.1%, or +33% LQA.
C&I: +2.7%, or +11% LQA.
CRE (with land & construction): +1.5%, or +6% LQA.
MFR: +2.3%, or +9% LQA.
Consumer: flat growth.
2Q growth rate in line with full year 2017 outlook of
low double digit loan growth.
Stable loan portfolio mix, balanced between
commercial, commercial real estate, and consumer
categories.
$27.2
9.5 9.5 10.2 10.7 10.5
7.4 7.7 8.2
8.0 8.2
5.6 5.8
5.9 6.0 6.4
5.7 5.6
5.6 5.8 6.1
0%
20%
40%
60%
$0
$10
$20
$30
$40
2Q16 3Q16 4Q16 1Q17 2Q17
$
in
bil
lio
ns
Total Deposits
DDA MMDA IB checking & Savings
Time LQA growth rate
2Q17 Record Deposits of $31.2 billion
6
DDA = Noninterest-bearing checking deposits. MMDA = Money market deposits. IB checking = Interest-bearing checking deposits.
$28.2
$29.9 $30.5 $28.6
Q-o-Q Difference
Total deposits increased $611mm or 2% (+8% LQA).
IB checking & savings: +6.2%, or +25% LQA.
Time deposit: +4.0%, or +16% LQA.
MMDA: +2.5%, or +10% LQA.
DDA: -1.9%, or -7% LQA.
DDAs comprised 34% of total deposits as of
06.30.17, similar to 35% as of 03.31.17.
Over past 5 quarters, share of DDAs in total deposits
ranged from 33% to 35%.
Over past 5 quarters, share of time deposits in total
deposits ranged from 19% to 20%.
EOP loan-to-deposit ratio of 87.4%.
Room to support organic loan growth and to maintain
discipline in deposit pricing.
$31.2
34% 33 34% 35% 34%
26% 27% 27% 26% 26%
20% 20% 20% 20% 21%
0% 20% 19% 19% 19%
0%
20%
40%
60%
80%
100%
2Q16 3Q16 4Q16 1Q17 2Q17
Deposit Portfolio Mix
DDA MMDA IB checking & Savings Time
10.4 10.4 10.2 10.3 10.7
2.8 4.0 3.4
4.5 3.5
4.3
6.1
5.3
5.0 5.9
10.9
10.9 14.4 11.1
12.0
1.4
5.8
7.0
2.5
3.8
6.5
7.7
7.2
5.4
6.2
$0
$10
$20
$30
$40
$50
2Q16 3Q16 4Q16 1Q17 2Q17
$
i
n
m
il
li
o
n
s
Total Fees and Other Operating Income
Branch fees Wealth management fees
Ancillary loan fees & other income LC fees & FX income
Derivative fees & other income Other fees & operating income
Q-o-Q Difference
Excluding net gains on sale of loans,
securities, and fixed assets, fees and other
operating income of $42mm increased by
$3mm or 9%.
Most customer-related fee income categories
increased linked quarter.
Adjusted for interest rate valuation marks and
valuation changes associated with currency
hedges, customer-related fee income
increased by 6% linked quarter and 25% year-
over-year.
2Q17 Fees & Other Operating Income
7
$36.3
$44.9
$47.5
$38.8
$42.1
2Q17 Summary Income Statement
8
% Change vs.
($ in millions, except per share data) 2Q17 1Q17 2Q16 2Q17 Comments
Adjusted net interest income (excl. accretion) $ 283.8 5.6% 18.1% Loan growth & higher interest rates.
ASC 310-30 discount accretion income $ 6.3 NM NM Increase due to interest recoveries.
Net interest income $ 290.1 6.6% 14.4%
Fees & operating income $ 42.1 8.5% 15.9% Broad-based across categories.
Net gains on sales of fixed assets $ 1.0 NM NM
Sale of commercial property in 1Q17
resulted in $72mm pre-tax gain.
Net gains on sales of loans & securities $ 4.3 (18.4)% (25.4)%
Total Noninterest income $ 47.4 (59.1)% 7.1%
Adjusted noninterest expense $ 139.5 1.9% 5.0% Lower comp. (seasonally high in 1Q).
Tax credit and other investments amortization $ 27.9 94.1% 99.0%
Additional tax credit closed in 2Q
increased amortization expense.
Expecting $25mm/qtr. rest of year.
Amortization of core deposit intangibles $ 1.8 (3.0)% (14.1)%
Total Noninterest expense $ 169.1 10.5% 13.6%
Provision for credit losses $ 10.7 51.2% 76.5%
Income tax expense $ 39.4 (32.5)% (0.7)% Effective tax rate of 25.0% in 2Q.
Net income $118.3 (30.3)% 14.6%
Diluted EPS $ 0.81 (30.2)% 14.1%
Note: 1Q17 results include gain on commercial property sale. See reconciliation of GAAP to non-GAAP financials on slides 15-18 and in the Company’s 2Q17 Earnings Press Release.
240.3
247.0
261.1
268.9
283.8
13.3
7.1
11.6
3.2
6.3
$220
$240
$260
$280
$300
2Q16 3Q16 4Q16 1Q17 2Q17
$ in
m
illi
on
s
Net Interest Income
Adj. net interest income* Accretion income
2Q17 NIM of 3.49% expanded by 16 bps Q-o-Q, and
excluding the impact of accretion, adjusted* NIM of 3.41%
expanded by 12 bps Q-o-Q.
NIM benefitted from balance sheet asset sensitivity and rising
short-term interest rates.
2Q17 loan yield of 4.40% expanded by 17 bps Q-o-Q, and
adjusted* loan yield of 4.30% expanded by 13 bps Q-o-Q.
2Q17 cost of deposits of 0.36% increased by 4 bps Q-o-Q.
2Q17 Net Interest Income & Net Interest Margin
9
$253.6 $254.1
$272.7 $272.1
2Q17 NII of $290mm increased Q-o-Q by $18mm, or 7%.
Increase in adjusted* NII of $15mm or 6%.
ASC 310-30 discount accretion income increase of $3mm.
Remaining ASC 310-30 discount of $43mm as of 06.30.17,
of which approx. $29mm expected to accrete as income.
Adjusted NII, excluding accretion income, of $284mm
increased by 6% Q-o-Q.
Driven by loan growth & higher loan yields in 2Q17.
* See reconciliation of GAAP to non-GAAP financials on slides 15-18 and in the Company’s 2Q17 Earnings Press Release.
$290.1
3.13%
3.16% 3.17%
3.29%
3.41%
4.05% 4.05% 4.13% 4.17%
4.30%
0.29% 0.30% 0.31% 0.32% 0.36%
3.00%
3.20%
3.40%
3.60%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
2Q16 3Q16 4Q16 1Q17 2Q17
NIM (ex. accretion) (RH axis) Loans yield (ex. accretion) (LH axis)
Total cost of deposits (LH axis)
Adjusted* NIM: Adj.* Loans Yield & Cost of Deposits
2Q17 total noninterest expense: $169mm.
Excluding tax credit amortization and core deposit intangible
amortization, 2Q17 adjusted* noninterest expense of
$139.5mm increased by a modest 2% Q-o-Q.
Compensation expense lower in 2Q, after seasonally higher 1Q.
2Q17 adj. noninterest expense growth rate in line with full
year 2017 outlook of low single digit growth.
2Q17 adj.* efficiency ratio of 41.3%.
2Q17 Efficiency and PTPP Profitability
10
1
Growing adjusted* pre-tax, pre-provision (PTPP) income.
2Q17 adj. PTPP income of $198mm grew by 10% Q-o-Q
and 20% Y-o-Y.
NII growth driven by loan growth and higher interest rates.
Growth in customer-related fee income categories.
Disciplined expense management.
2Q17 adj.* PTPP profitability ratio of 2.27% increased by
18 bps Q-o-Q.
5-quarter adj.* PTPP profitability ratio range of 2.03% to
2.27%.
* See reconciliation of GAAP to non-GAAP financials on slides 15-18 and in the Company’s 2Q17 Earnings Press Release.
$165.0 $167.6 $182.8 $179.6
$198.0
2.04% 2.03%
2.10% 2.09%
2.27%
1.00%
1.32%
1.64%
1.96%
2.28%
$0
$50
$100
$150
$200
$250
2Q16 3Q16 4Q16 1Q17 2Q17
$
in
mi
llio
ns
Adj. PTPP income* (LH axis) Adj. PTPP profitability ratio* (RH axis)
Adj.* PTPP Income & PTPP Profitability Ratio
$132.8
$135.9
$138.7 $136.9
$139.5
44.6% 44.8%
43.2% 43.3%
41.3%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
$100
$120
$140
$160
2Q16 3Q16 4Q16 1Q17 2Q17
$
in
mi
llio
ns
Adj. noninterest expense* (LH axis) Adj. efficiency ratio* (RH axis)
Adj.* Noninterest Expense & Efficiency Ratio
Allowance for loan losses to loans HFI was 1.02% as of
06.30.17.
Annualized net recoveries of 4 bps in 2Q17.
Net recoveries across all loan categories.
Greatest impact from net recoveries in C&I: $1.7mm or 7 bps,
annualized.
NPAs decreased by $12mm, or 8%, Q-o-Q to $133mm;
equivalent to 0.37% of total assets as of 06.30.17.
5-quarter NPA to total assets range of 0.37% to 0.54%.
2Q17 Asset Quality Metrics
11
* Nonperforming assets and net charge-offs exclude purchased credit impaired loans. HFI represents held-for-investment.
$6.1
$9.5
$10.5
$7.1
$10.7
0.01%
0.37%
0.13%
0.08%
-0.04% -0.10%
0.00%
0.10%
0.20%
0.30%
0.40%
-$3
$0
$3
$6
$9
$12
2Q16 3Q16 4Q16 1Q17 2Q17
$ in
m
illi
on
s
Provision Expense and Net Charge-offs* Ratio
Provision expense (LH axis) Annualized NCOs (net recoveries) / Avg. loans HFI* (RH axis)
$176.7
$130.8 $129.6
$144.8
$133.0
0.54%
0.39%
0.37%
0.41%
0.37%
0.00%
0.20%
0.40%
0.60%
$100
$120
$140
$160
$180
$200
2Q16 3Q16 4Q16 1Q17 2Q17
$ i
n m
illi
on
s
Nonperforming Assets*
Nonperforming assets (LH axis) NPAs / Total assets (RH axis)
$24,236
$24,732
$25,503
$26,461
$27,211
1.10% 1.03% 1.02% 0.99% 1.02%
0.00%
1.00%
2.00%
3.00%
4.00%
$20,000
$22,000
$24,000
$26,000
$28,000
2Q16 3Q16 4Q16 1Q17 2Q17
$
in
mi
lio
ns
Allowance for Loan Losses
Gross loans HFI* (LH axis) ALLL / Gross loans HFI* (RH axis)
$20.27
$21.93
7.0%
8.5%
10.5%
4.0%
8.52%
10.9% 10.9%
12.4%
8.7%8.95%
11.3% 11.3%
12.8%
9.3%
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
$5.00
$10.00
$15.00
$20.00
$25.00
Tangible equity
per share
Tangible equity to
tangible assets ratio
CET1 risk-based
capital ratio
Tier 1 risk-based
capital ratio
Total risk-based
capital ratio
Tier 1 leverage
capital ratio
EWBC's Solid Capital Position
Basel III Fully Phased-in Minimum Regulatory Requirement EWBC 12.31.16 EWBC 06.30.17
12
2Q17 Capital Ratios
Regulatory capital ratios increased by 21 to 27 bps in 2Q17 from 1Q17, and 39 to 58 bps year-to-date.
Current capital levels are sufficient to support continued organic growth.
Updated Management Outlook: Full Year 2017
13
Earnings drivers Revised full year 2017
outlook
(after 2Q17)
Change from prior
outlook
(after 1Q17)
2016 FY actual 1H17
actual
End of Period Loans Increase at a percentage rate in
the low double digits.
Unchanged. $25.5 billion,
+8% Y-o-Y
$27.2 billion, +13%
YTD annualized
NIM
(excl. impact of ASC
310-30 discount
accretion)
In the range of 3.35% to 3.45%.
Favorable asset sensitivity
position to support NIM
expansion.
Unchanged.
3.15% 3.35%
Noninterest Expense
(excl. tax credit
investment & core
deposit intangible
amortization)
Increase at a percentage rate in
the low single digits.
Unchanged. $538 million,
+14% Y-o-Y
$276 million,
+3% YTD annualized
Provision for Credit
Losses
In the range of $40mm to
$50mm.
Unchanged. $27 million $18 million
Tax Items
(renewable energy &
historical tax credits)
Tax credit investments of
$115mm.
Associated tax credit amortization
of $95mm.
Effective tax rate of 26%.
Prior tax credit
investments: $95mm.
Prior tax credit
amortization: $75mm.
Prior tax rate range: 26%
to 29%.
Effective tax rate:
24.6%
Effective tax rate:
25.3%
Interest Rates Outlook incorporates the current
forward rate curve.
Anticipates one more Fed Funds
rate increase in Dec. 2017.
Previously, anticipated
additional Fed Funds rate
increases in Jun. & Nov.
2017.
Fed Funds increased
+25bps in Dec. 2016.
Fed Funds increased
+25bps each in Mar.
& Jun. 2017.
APPENDIX
Appendix: GAAP to Non-GAAP Reconciliation
15
As previously disclosed on the March 30, 2017 Form 8-K, the Company consummated a sale and leaseback transaction on a commercial property and recognized a pre-tax gain on sale of $71.7
million during the first quarter of 2017. The table below shows the computation of the diluted earnings per common share excluding the after-tax effect of the gain on sale of the commercial
property, return on assets excluding the after-tax effect of the gain on sale of the commercial property and return on equity excluding the after-tax effect of the gain on sale of the commercial
property. Management believes that eliminating the effects of the gain on sale of the commercial property makes it easier to analyze the results by presenting them on a more comparable basis.
(1) Applied statutory tax rate of 42.05%.
(2) Annualized.
Three Months Ended
June 30, 2017 March 31, 2017 June 30, 2016
Net income (a) $ 118,330 $ 169,736 $ 103,284
Less: Gain on sale of the commercial property, net of tax (1) (b) — (41,526 ) —
Adjusted net income (c) $ 118,330 $ 128,210 $ 103,284
Diluted weighted average number of shares outstanding (d) 145,740 145,732 145,078
Diluted EPS (a)/(d) $ 0.81 $ 1.16 $ 0.71
Diluted EPS impact of gain on sale of the commercial property, net of tax (b)/(d) — (0.28 ) —
Adjusted diluted EPS $ 0.81 $ 0.88 $ 0.71
Average total assets (e) $ 34,994,935 $ 34,928,031 $ 32,591,398
Average stockholders’ equity (f) $ 3,637,695 $ 3,493,396 $ 3,267,936
Return on average assets (2) (a)/(e) 1.36 % 1.97 % 1.27 %
Adjusted return on average assets (2) (c)/(e) 1.36 % 1.49 % 1.27 %
Return on average equity (2) (a)/(f) 13.05 % 19.71 % 12.71 %
Adjusted return on average equity (2) (c)/(f) 13.05 % 14.88 % 12.71 %
16
Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of net interest income and adjusted noninterest income less adjusted noninterest expense, divided by average total assets.
Adjusted noninterest income excludes the gain on sale of the commercial property (where applicable). Adjusted noninterest expense excludes the amortization of tax credit and other investments and
the amortization of core deposit intangibles. The ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to
prior periods.
Appendix: GAAP to Non-GAAP Reconciliation (cont’d)
(1) Annualized.
Adjusted efficiency ratio represents adjusted noninterest expense divided by the aggregate of net interest income and adjusted 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.
Three Months Ended
June 30, 2017 March 31, 2017 June 30, 2016
Net interest income before provision for credit losses (a) $ 290,091 $ 272,122 $ 253,584
Total noninterest income 47,400 116,023 44,264
Less: Gain on sale of the commercial property — (71,654 ) —
Adjusted noninterest income (b) $ 47,400 $ 44,369 $ 44,264
Net interest income and adjusted noninterest income (a)+(b) = (c) $ 337,491 $ 316,491 $ 297,848
Total noninterest expense $ 169,121 $ 153,073 $ 148,879
Less: Am rtization of tax credit and other investments (27,872 ) (14,360 ) (14,006 )
A rtization of core deposit intangibles (1,762 ) (1,817 ) (2,050 )
Adjusted noninterest expense (d) $ 139,487 $ 136,896 $ 132,823
Adjusted pre-tax, pre-provision income (c)-(d) = (e) $ 198,004 $ 179,595 $ 165,025
Average total assets (f) $ 34,994,935 $ 34,928,031 $ 32,591,398
Adjusted pre-tax, pre-provision profitability ratio (1) (e)/(f) 2.27 % 2.09 % 2.04 %
Adjusted noninterest expense (1)/average assets (d)/(f) 1.60 % 1.59 % 1.64 %
Three Months Ended
June 30, 2017 March 31, 2017 June 30, 2016
Adjusted noninterest expense (m) $ 139,487 $ 136,896 $ 132,823
Net interest income and adjusted noninterest income (n) $ 337,491 $ 316,491 $ 297,848
Adjusted efficiency ratio (m)/(n) 41.33 % 43.25 % 44.59 %
17
The Company believes that presenting the adjusted average loan yield and adjusted net interest margin that exclude the ASC 310-30 discount accretion impact provides clarity to financial statement
users regarding the change in loan contractual yields and allows comparability to prior periods.
Appendix: GAAP to Non-GAAP Reconciliation (cont’d)
(1) Annualized.
Three Months Ended Six Months Ended
Yield on Average Loans June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Interest income on loans (a) $ 293,039 $ 272,061 $ 254,331 $ 565,100 $ 507,873
Less: ASC 310-30 discount accretion
income
(6,261 ) (3,233 ) (13,312 ) (9,494 ) (26,659 )
Adjusted interest income on loans (b) $ 286,778 $ 268,828 $ 241,019 $ 555,606 $ 481,214
Average loans (c) $ 26,698,787 $ 26,087,178 $ 23,888,867 $ 26,403,545 $ 23,854,070
Add: ASC 310-30 discount 45,398 48,566 65,957 46,973 71,347
Adjusted average loans (d) $ 26,744,185 $ 26,135,744 $ 23,954,824 $ 26,450,518 $ 23,925,417
Average loan yield (1) (a)/(c) 4.40 % 4.23 % 4.28 % 4.32 % 4.28 %
Adjusted average loan yield (1) (b)/(d) 4.30 % 4.17 % 4.05 % 4.24 % 4.04 %
Net Interest Margin
Net interest income (e) $ 290,091 $ 272,122 $ 253,584 $ 562,213 $ 505,788
Less: ASC 310-30 discount accretion
income
(6,261 ) (3,233 ) (13,312 ) (9,494 ) (26,659 )
Adjusted net interest income (f) $ 283,830 $ 268,889 $ 240,272 $ 552,719 $ 479,129
Average interest-earning assets (g) $ 33,295,012 $ 33,095,396 $ 30,783,445 $ 33,204,629 $ 30,690,954
Add: ASC 310-3 discoun 45,398 48,566 65,957 46,973 71,347
Adjusted average interest-earning assets (h) $ 33,340,410 $ 33,143,962 $ 30,849,402 $ 33,251,602 $ 30,762,301
Net interest margin (1) (e)/(g) 3.49 % 3.33 % 3.31 % 3.41 % 3.31 %
Adjusted net interest margin (1) (f)/(h) 3.41 % 3.29 % 3.13 % 3.35 % 3.13 %
18
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 stockholders’ equity which has been reduced by goodwill and other 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.
Appendix: GAAP to Non-GAAP Reconciliation (cont’d)
Adjusted tangible return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax effect of the
amortization of core deposit intangibles, the after-tax effect of the amortization of mortgage servicing assets and the after-tax effect of the gain on sale of the commercial property.
(1) Includes core deposit intangibles and mortgage servicing assets.
(2) Applied statutory tax rate of 42.05%.
(3) Annualized.
June 30, 2017 March 31, 2017 June 30, 2016
Stockholders’ equity $ 3,670,261 $ 3,565,954 $ 3,296,910
Less: Goodwill (469,433 ) (469,433 ) (469,433 )
Other intangible assets (1) (32,012 ) (33,843 ) (37,696 )
Tangible equity (a) $ 3,168,816 $ 3,062,678 $ 2,789,781
Total as ets $ 35,917,617 $ 35,342,126 $ 32,952,212
Less: Goodwill (469,433 ) (469,433 ) (469,433 )
Other intangible assets (1) (32,012 ) (33,843 ) (37,696 )
Tangible assets (b) $ 35,416,172 $ 34,838,850 $ 32,445,083
Tangible equity to tangible assets ratio (a)/(b) 8.95 % 8.79 % 8.60 %
Three Months Ended
June 30, 2017 arch 31, 2017 June 30, 2016
Net Income 118,330 1 9,736 103,284
Add: Am rtization of core deposit intangibles, net of tax (2) 1,021 1,05 1,188
Amortization of mortgage servicing assets, net of tax (2) 241 266 377
Tangible net i co (c) $ 119,592 $ 171,055 $ 104,849
Less: Gain o sale of the commercial property, net of tax(2) — (41,5 ) —
Adjusted tangible net income (d) $ 119,592 $ 129,529 $ 104,849
Average stockholders’ equity $ 3,637,69 $ 3,493,396 $ 3,267,936
Less: Average goo will (469,433 ) (469,433 ) (469,433 )
Average other intangible assets (1) (33,101 ) (34,987 ) (38,867 )
Average tangible equity (e) $ 3,135,161 $ 2,988,976 $ 2,759,636
Tangible return on average tangible equity (3) (c)/(e) 15.30 % 23.21 % 15.28 %
Adjusted tangible return on average tangible equity (3) (d)/(e) 15.30 % 17.57 % 15.28 %