0001069157-17-000006.txt : 20170125 0001069157-17-000006.hdr.sgml : 20170125 20170125172607 ACCESSION NUMBER: 0001069157-17-000006 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20170125 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20170125 DATE AS OF CHANGE: 20170125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAST WEST BANCORP INC CENTRAL INDEX KEY: 0001069157 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 954703316 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24939 FILM NUMBER: 17547337 BUSINESS ADDRESS: STREET 1: 135 N. LOS ROBLES AVE. 7TH FLOOR CITY: PASADENA STATE: CA ZIP: 91101 BUSINESS PHONE: 6267686000 MAIL ADDRESS: STREET 1: EAST WEST BANCORP INC STREET 2: 135 N. LOS ROBLES AVE. 7TH FLOOR CITY: PASADENA STATE: CA ZIP: 91101 8-K 1 ewbc8k12312016.htm 8-K Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
  
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported)
January 25, 2017

EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)


Delaware
 
000-24939
 
95-4703316
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
135 N Los Robles Ave., 7th Floor, Pasadena, California 91101
(Address of principal executive offices) (Zip code)
 
(626) 768-6000
(Registrant’s telephone number, including area code)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



1





East West Bancorp, Inc.
Current Report of Form 8-K


Item 2.02. Results of Operations and Financial Condition
 
On January 25, 2017, East West Bancorp, Inc. announced, via press release, its results of operations for the quarter ended December 31, 2016. A copy of the press release is included in this report as Exhibit 99.1 and furnished herewith.

Item 9.01. Financial Statements and Exhibits
 
(d) Exhibits
 
99.1           Press Release, dated January 25, 2017, issued by East West Bancorp, Inc.
 



2





SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 
 
EAST WEST BANCORP, INC.
 
 
Date: January 25, 2017
By:
/s/ Irene H. Oh
 
 
 
Irene H. Oh
 
 
Executive Vice President and Chief Financial Officer


3





EXHIBIT INDEX
 
Exhibit Number
 
Description
99.1
 
Press Release, dated January 25, 2017, issued by East West Bancorp, Inc.
    
 




















































4



 EX-99.1 2 ewbc9918k12312016.htm EXHIBIT 99.1 Exhibit


 
Exhibit 99.1
 
 
ewbclogoa03.jpg
East West Bancorp, Inc.
135 N. Los Robles Ave., 7th Fl.
Pasadena, CA 91101
Tel: 626.768.6000
NEWS RELEASE
 
 
 
 
 
 
FOR INVESTOR INQUIRIES, CONTACT:

Irene Oh
Julianna Balicka
 
Chief Financial Officer
Director of Strategy and Corporate Development
 
T: (626) 768-6360
T: (626) 768-6985
 
E: irene.oh@eastwestbank.com
E: julianna.balicka@eastwestbank.com
 

EAST WEST BANCORP REPORTS RECORD NET INCOME FOR FULL YEAR 2016
OF $431.7 MILLION AND DILUTED EARNINGS PER SHARE OF $2.97,
BOTH UP 12% FROM PRIOR YEAR

Pasadena, California - January 25, 2017 - 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 fourth quarter and full year 2016. For the fourth quarter of 2016, net income was $110.7 million or $0.76 per diluted share. For the full year 2016, net income was $431.7 million or $2.97 per diluted share.

“East West is pleased to report record earnings of $431.7 million or $2.97 per diluted share for the full year 2016, an increase in diluted earnings per share of 12% from 2015. We delivered attractive returns of 1.30% on average assets and 13.1% on average equity,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “2016 marks the seventh consecutive year that East West has achieved record earnings. Our strength in providing cross-border expertise to clients across a number of industry specializations continues to drive growth and reinforces our niche as the financial bridge between the East and the West. Further, we continue to benefit from a strong footprint in some of the most dynamic metropolitan markets in the United States.”

“For the full year 2016, East West continued a track record of impressive growth in loans and deposits. Total loans grew $1.8 billion or 8% to a record $25.5 billion from $23.7 billion as of December 31, 2015. Total deposits grew $2.4 billion or 9% to a record $29.9 billion as of December 31, 2016 from $27.5 billion a year ago. Growth in 2016 was achieved through balanced, diversified loan originations across our business lines, supported by robust growth in core deposits, which increased by 16% year-over-year,” continued Ng.

“We believe that East West’s balance sheet is well positioned to benefit from a higher interest rate environment because of our asset and funding mix, driving net interest margin expansion and net interest income growth. We are optimistic about the new year and our ability to grow profitably and prudently,” concluded Ng.

1


HIGHLIGHTS OF RESULTS

•
Solid Earnings - Net income of $110.7 million for the fourth quarter of 2016 modestly increased by $0.6 million compared to $110.1 million for the third quarter of 2016; diluted earnings per share (“EPS”) of $0.76 were unchanged linked quarter. Full year 2016 net income of $431.7 million grew by 12% year-over-year from $384.7 million; diluted full year 2016 EPS of $2.97 also grew by 12% from $2.66 in the previous year.

•
Solid Profitability - Fourth quarter 2016 return on average assets was 1.27%, return on average equity was 12.9%, and return on average tangible equity was 15.3%; full year 2016 return on average assets was 1.30%, return on average equity was 13.1%, and return on average tangible equity was 15.7%. Fourth quarter 2016 adjusted (1) pre-tax, pre-provision profitability of 2.10% expanded by seven basis points from 2.03% in the previous quarter.

•
Solid Net Interest Income and Revenue Growth - Net interest income totaled $272.7 million for the fourth quarter of 2016, up $18.6 million or 7% linked quarter. Year-over-year, net interest income grew $25.8 million or 10% from $246.9 million in the fourth quarter of 2015. Total revenue of $321.5 million grew by 6% linked quarter and 10% year-over-year.

•
Record Assets - Total assets as of December 31, 2016 reached a record $34.8 billion, an increase of $1.5 billion or 5% from $33.3 billion as of September 30, 2016. Total assets grew by 8% year-over-year.

•
Record Loans - Total gross loans of $25.5 billion as of December 31, 2016 were up $752.7 million or 12% annualized from $24.8 billion as of September 30, 2016. The sequential quarter growth in loans was primarily driven by increases in commercial loans and commercial real estate loans. Total gross loans grew by 8% year-over-year.

•
Record Deposits - Total deposits of $29.9 billion as of December 31, 2016 were up $1.3 billion or 18% annualized from $28.6 billion as of September 30, 2016. The sequential quarter growth in deposits was primarily due to increases in noninterest-bearing demand deposits and money market deposits. Total deposits grew by 9% year-over-year. Noninterest-bearing deposits comprised 34% of total deposits as of December 31, 2016.

•
Asset Quality - Asset quality was stable in the current quarter. Allowance for loan losses was essentially steady, at 1.02% of loans held-for-investment (“HFI”) as of December 31, 2016, compared to 1.03% as of September 30, 2016. Nonperforming assets decreased slightly to $129.6 million or 0.37% of total assets as of December 31, 2016, compared to $130.8 million or 0.39% of total assets as of September 30, 2016. The net charge-offs ratio dropped to 0.13% of average loans, annualized, in the current quarter, declining from 0.37% of average loans, annualized, in the previous quarter.

•
Capital Ratios - Capital levels for East West continue to be solid. Tangible equity per common share as of December 31, 2016 was $20.27, growth of 2% linked quarter and 12% year-over-year. As of December 31, 2016, the tangible equity to tangible assets ratio was 8.52%, the Common Equity Tier 1 (“CET1”) capital ratio was 10.9%, and the total risk-based capital ratio was 12.5%.

















 
 
 
 
 
(1)
Pre-tax, pre-provision income excludes the amortization of tax credit and other investments, the amortization of premiums on deposits acquired, and, in the fourth quarter of 2016, a one-time impact from the reversal of a legal accrual. See reconciliation of the GAAP to non-GAAP financial measures in Table 12.


2


QUARTERLY RESULTS SUMMARY
 
 
 
Quarter Ended
($ in millions, except per share data)
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
 
 
 
 
 
 
Net income
 
$
110.73

 
$
110.14

 
$
91.81

Earnings per share (diluted)
 
$
0.76

 
$
0.76

 
$
0.63

Tangible equity (1) per common share
 
$
20.27

 
$
19.92

 
$
18.15

Return on average assets (2)
 
1.27
%
 
1.33
%
 
1.14
%
Return on average equity (2)
 
12.87
%
 
13.08
%
 
11.67
%
Return on average tangible equity (1)(2)
 
15.29
%
 
15.55
%
 
14.13
%
Adjusted pre-tax, pre-provision profitability ratio (1)(2)
 
2.10
%
 
2.03
%
 
2.03
%
Net interest income
 
$
272.70

 
$
254.15

 
$
246.94

Adjusted net interest income (1)
 
$
261.10

 
$
246.98

 
$
232.08

Net interest margin (2)
 
3.31
%
 
3.26
%
 
3.26
%
Adjusted net interest margin (1)(2)
 
3.17
%
 
3.16
%
 
3.06
%
Cost of deposits (2)
 
0.31
%
 
0.30
%
 
0.29
%
Adjusted efficiency ratio (1)
 
43.16
%
 
44.77
%
 
43.99
%
 
(1)
See reconciliation of the GAAP to non-GAAP financial measures in Tables 12, 13 and 14.
(2)
Annualized.

MANAGEMENT OUTLOOK FOR 2017

Our current outlook for the expected full year 2017 results, compared to our full year 2016 results, is as follows:

•
End of Period Loan Growth: increase at a percentage rate in the high single digits.
•
Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): between 3.20% - 3.40%.
•
Noninterest Expenses (excluding tax credit amortization & deposit premium amortization): increase at a percentage rate in the low single digits.
•
Provision for Credit Losses: in the range of $40 million to $50 million.
•
Tax Items: projecting investment in tax-advantaged credits of $90 million, and associated tax credit amortization expense of $80 million.
•
Interest Rates: our outlook incorporates the current forward rate curve; as such, it currently assumes three fed funds rate increases in the year 2017: in June, September, and December.

3


OPERATING RESULTS SUMMARY

Fourth Quarter 2016 Compared to Third Quarter 2016

Net Interest Income
Net interest income totaled $272.7 million, an increase of $18.6 million or 7% from $254.1 million.
•
Interest income from loans excluding ASC 310-30 discount accretion increased by $12.4 million or 5%, ASC 310-30 discount accretion income increased by $4.4 million, and interest income on other interest-earning assets increased by $4.9 million or 20%. Interest expense increased by $3.3 million or 12%.
•
Average loans of $25.0 billion grew by $723.9 million or 12% annualized, up from $24.3 billion.
•
Average deposits of $29.8 billion grew by $1.6 billion or 22% annualized, up from $28.3 billion. The strong deposit growth in excess of loan growth increased average interest-bearing cash and deposits with banks, which grew by $671.2 million to $2.3 billion, or 7% of average interest-earning assets, up from $1.6 billion or 5% of average interest-earning assets in the previous quarter.

Net Interest Margin
The net interest margin (“NIM”) expanded by five basis points to 3.31% from 3.26%. The sequential quarter NIM expansion primarily reflects the increase in accretion income; excluding the impact of ASC 310-30 discount accretion, NIM was 3.17% versus 3.16%.
•
Interest rates moved higher in the fourth quarter of 2016, improving earning asset yields. Loan yields excluding the impact of ASC 310-30 discount accretion expanded by eight basis points to 4.13% from 4.05%. Over 75% of East West’s loan portfolio is variable rate.
•
The yield on investment securities expanded by 16 basis points to 1.79%, reflecting the repricing of floating rate investments and purchases of securities at higher yields.
•
Net interest margin expansion, however, was tempered by higher balances of interest-bearing cash and deposits with banks, the yield on which was unchanged at 0.79%.
•
Reflecting the increasing contribution of non-interest bearing demand deposits in the funding mix, the all-in cost of deposits was 0.31%, a sequential quarter increase of one basis point.

Noninterest Income
Total noninterest income of $48.8 million decreased $0.5 million or 1% from $49.3 million. Excluding net gains on sales of loans and securities and changes to the FDIC indemnification asset, total fees and operating income of $47.8 million increased by $2.4 million or 5% from $45.4 million in the third quarter of 2016, as presented in the following table for the quarters ended December 31, 2016, September 30, 2016 and December 31, 2015.

 
 
 
 
 
 
 
 
 
Quarter Ended
($ in thousands)
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
 
 
 
 
 
 
Branch fees
 
$
10,195

 
$
10,408

 
$
10,338

Letters of credit fees and foreign exchange income
 
14,356

 
10,908

 
13,986

Ancillary loan fees
 
5,355

 
6,135

 
4,722

Wealth management fees
 
3,378

 
4,033

 
3,958

Derivative fees and other income
 
7,003

 
5,790

 
4,756

Other fees and operating income
 
7,499

 
8,119

 
7,202

Total fees and operating income
 
$
47,786

 
$
45,393

 
$
44,962

 
 
 
 
 
 
 

4


Noninterest Expense & Effective Tax Rate
Noninterest expense totaled $149.9 million, comprised of $138.7 million of adjusted (2) noninterest expense, $22.7 million of tax credit amortization, $1.9 million of deposit premium amortization, and a $13.4 million reversal of a legal accrual related to the settlement of a lawsuit.
•
Adjusted (2) noninterest expense of $138.7 million increased by $2.9 million or 2% linked quarter. The adjusted (2) efficiency ratio of 43.2% improved by 161 basis points from 44.8%.
•
The Company’s effective tax rate was 31.3%, compared to an effective tax rate of 10.8% in the previous quarter. Amortization expense of tax credits and other investments was $22.7 million in the fourth quarter of 2016, a decrease of $9.9 million from $32.6 million in the third quarter of 2016. The lower effective tax rate and conversely, higher amortization of tax credits and other investments in the third quarter compared to the fourth quarter of 2016 was due to the increased level of investment in tax-advantaged credits in renewable energy projects, and also a $3.0 million favorable state tax settlement in the third quarter of 2016.
•
For the full year 2016, the effective tax rate was 24.6% compared to 33.5% for the full year 2015.

CREDIT QUALITY

Asset quality was stable in the current quarter.
•
The allowance for loan losses totaled $260.5 million as of December 31, 2016, or 1.02% of loans HFI, compared to $255.8 million or 1.03% of loans HFI, and $265.0 million or 1.12% of loans HFI as of September 30, 2016 and December 31, 2015, respectively.
•
The Company recorded a provision for credit losses of $10.5 million in the current quarter, compared to $9.5 million in the third quarter of 2016, and a reversal of provision for credit losses of $2.0 million in the fourth quarter of 2015.
•
In the fourth quarter of 2016, net charge-offs were $8.0 million or 0.13% of average loans, annualized, declining from net charge-offs of $22.5 million or 0.37% of average loans, annualized, in the previous quarter and compared to net recoveries of $3.8 million in the prior year quarter.
•
Nonperforming assets decreased by $1.3 million or 1% linked quarter to $129.6 million or 0.37% of total assets as of December 31, 2016, compared to 0.39% as of September 30, 2016 and 0.40% as of December 31, 2015.




























 
 
 
 
 
(2)
Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of premiums on deposits acquired, and, in the fourth quarter of 2016, a one-time impact from the reversal of a legal accrual. See reconciliation of the GAAP to non-GAAP financial measures in Table 12.

5


CAPITAL STRENGTH

Capital levels for East West continue to be solid. Tangible equity per common share as of December 31, 2016 was $20.27, an increase of 2% linked quarter and 12% year-over-year. The following table presents regulatory capital ratios for the quarters ended December 31, 2016, September 30, 2016 and December 31, 2015.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Capital Metrics
 
Basel III

 
($ in millions)
 
December 31, 2016 (a)
 
September 30, 2016
 
December 31, 2015
 
Minimum
Regulatory
Requirements
 
Well Capitalized Regulatory Requirements
 
Fully Phased-
in Minimum
Regulatory
Requirements
 
 
 
 
 
 
 
 
 
 
 
 
 
CET1 capital ratio
 
10.9
%
 
10.9
%
 
10.5
%
 
4.5
%
 
6.5
%
 
7.0
%
Tier 1 risk-based capital ratio
 
10.9
%
 
10.9
%
 
10.6
%
 
6.0
%
 
8.0
%
 
8.5
%
Total risk-based capital ratio
 
12.5
%
 
12.5
%
 
12.2
%
 
8.0
%
 
10.0
%
 
10.5
%
Tier 1 leverage capital ratio
 
8.7
%
 
8.9
%
 
8.5
%
 
4.0
%
 
5.0
%
 
4.0
%
Risk-Weighted Assets (“RWA”) (b)
 
$
27,228

 
$
26,480

 
$
25,233

 
N/A

 
N/A

 
N/A

 
 
 
 
 
 
 

 
 

 
 

 
 
 
 
N/A Not applicable.
(a)
The Company’s December 31, 2016 regulatory capital ratios and RWA are preliminary.
(b)
Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared first quarter 2017 dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share is payable on February 15, 2017 to shareholders of record on February 1, 2017.

Conference Call
East West will host a conference call to discuss fourth quarter and full year 2016 earnings with the public on Thursday, January 26, 2017 at 8:30 a.m. PST/11:30 a.m. EST. The public and investment community are invited to listen as management discusses fourth quarter and full year 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 January 26, 2017 at 11:30 a.m. PST through February 26, 2017. 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: 10098676.

About East West
East West Bancorp, Inc. is a publicly owned company with total assets of $34.8 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.

6


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, 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, 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.


7


EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share data)
(unaudited)
Table 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Qtr-o-Qtr
 
Yr-o-Yr
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
460,559

 
$
344,746

 
$
340,717

 
33.6%
 
35.2%
 
Interest-bearing cash with banks
 
1,417,944

 
1,322,086

 
1,020,170

 
7.3
 
39.0
 
Cash and cash equivalents
 
1,878,503

 
1,666,832

 
1,360,887

 
12.7
 
38.0
 
Interest-bearing deposits with banks
 
323,148

 
307,473

 
299,916

 
5.1
 
7.7
 
Securities purchased under resale agreements (“resale agreements”) (1)
 
2,000,000

 
1,500,000

 
1,600,000

 
33.3
 
25.0
 
Investment securities
 
3,479,766

 
3,391,085

 
3,773,226

 
2.6
 
(7.8)
 
Loans held-for-sale
 
23,076

 
47,719

 
31,958

 
(51.6)
 
(27.8)
 
Loans held-for-investment (net of allowance for loan losses of $260,520, $255,812 and $264,959)
 
25,242,619

 
24,476,150

 
23,378,789

 
3.1
 
8.0
 
Investments in qualified affordable housing partnerships, net
 
183,917

 
173,045

 
193,978

 
6.3
 
(5.2)
 
Investments in tax credit and other investments, net
 
173,260

 
172,197

 
187,456

 
0.6
 
(7.6)
 
Goodwill
 
469,433

 
469,433

 
469,433

 
—
 
—
 
Other assets
 
1,015,118

 
1,051,341

 
1,055,279

 
(3.4)
 
(3.8)
 
Total assets
 
$
34,788,840

 
$
33,255,275

 
$
32,350,922

 
4.6%
 
7.5%
 
 
 
 
 
 
 
 
 

 

Liabilities and Stockholders’ Equity
 
 

 
 

 
 

 

 

 
Customer deposits
 
$
29,890,983

 
$
28,592,441

 
$
27,475,981

 
4.5%
 
8.8%
 
Short-term borrowings
 
60,050

 
36,992

 
—

 
62.3
 
NM
 
Federal Home Loan Bank (“FHLB”) advances
 
321,643

 
321,084

 
1,019,424

 
0.2
 
(68.4)
 
Securities sold under repurchase agreements (“repurchase agreements”) (1)
 
350,000

 
200,000

 
—

 
75.0
 
NM
 
Long-term debt
 
186,327

 
191,265

 
206,084

 
(2.6)
 
(9.6)
 
Accrued expenses and other liabilities
 
552,096

 
535,439

 
526,483

 
3.1
 
4.9
 
Total liabilities
 
31,361,099

 
29,877,221

 
29,227,972

 
5.0
 
7.3
 
Stockholders’ equity
 
3,427,741

 
3,378,054

 
3,122,950

 
1.5
 
9.8
 
Total liabilities and stockholders’ equity
 
$
34,788,840

 
$
33,255,275

 
$
32,350,922

 
4.6%
 
7.5%
 
 
 
 
 
 
 
 
 

 

 
Book value per common share
 
$
23.78

 
$
23.44

 
$
21.70

 
1.5%
 
9.6%
 
Tangible equity (2) per common share
 
$
20.27

 
$
19.92

 
$
18.15

 
1.8
 
11.7
 
Tangible equity to tangible assets ratio (2)
 
8.52
%
 
8.77
%
 
8.20
%
 
(2.9)
 
3.9
 
Number of common shares at period-end (in thousands)
 
144,167

 
144,133

 
143,909

 
—
 
0.2
 
 
 
 
 
 
NM Not Meaningful.
(1)
Resale and repurchase agreements are reported net pursuant to Accounting Standards Codification (“ASC”) 210-20-45, Balance Sheet Offsetting. As of December 31, 2016, September 30, 2016, and December 31, 2015, $100.0 million, $250.0 million and $450.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against resale agreements, respectively.
(2)
See reconciliation of the GAAP to non-GAAP financial measures in Table 14.

8


EAST WEST BANCORP, INC.
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Qtr-o-Qtr
 
Yr-o-Yr
Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate - commercial
 
$
8,021,459

 
$
7,780,775

 
$
7,478,474

 
3.1%
 
7.3%
 
Real estate - land and construction
 
678,536

 
734,304

 
632,275

 
(7.6)
 
7.3
 
Commercial
 
9,661,021

 
9,358,045

 
9,003,007

 
3.2
 
7.3
 
Real estate - single-family
 
3,480,124

 
3,351,867

 
3,066,919

 
3.8
 
13.5
 
Real estate - multifamily
 
1,585,090

 
1,420,126

 
1,522,995

 
11.6
 
4.1
 
Consumer
 
2,075,706

 
2,079,474

 
1,956,091

 
(0.2)
 
6.1
 
Total loans held-for-investment (1)
 
25,501,936

 
24,724,591

 
23,659,761

 
3.1
 
7.8
Loans held-for-sale
 
23,076

 
47,719

 
31,958

 
(51.6)
 
(27.8)
 
Total loans (1), including loans held-for-sale
 
25,525,012

 
24,772,310

 
23,691,719

 
3.0
 
7.7
Unearned fees, premiums and discounts, net
 
1,203

 
7,371

 
(16,013
)
 
(83.7)
 
NM
Allowance for loan losses
 
(260,520
)
 
(255,812
)
 
(264,959
)
 
1.8
 
(1.7)
 
Net loans (1)
 
$
25,265,695

 
$
24,523,869

 
$
23,410,747

 
3.0%
 
7.9%
 
 
 
 
 
 
 
 
 
 
 

Customer deposits:
 
 

 
 

 
 

 
 
 

 
Noninterest-bearing demand
 
$
10,183,946

 
$
9,524,021

 
$
8,656,805

 
6.9%
 
17.6%
 
Interest-bearing checking
 
3,674,417

 
3,550,101

 
3,336,293

 
3.5
 
10.1
 
Money market
 
8,174,854

 
7,684,085

 
6,932,962

 
6.4
 
17.9
 
Savings
 
2,242,497

 
2,235,847

 
1,933,026

 
0.3
 
16.0
 
Total core deposits
 
24,275,714

 
22,994,054

 
20,859,086

 
5.6
 
16.4
 
Time deposits
 
5,615,269

 
5,598,387

 
6,616,895

 
0.3
 
(15.1)
 
Total deposits
 
$
29,890,983

 
$
28,592,441


$
27,475,981

 
4.5%
 
8.8%
 
 
 
 
 
 
 
 
 
 
 
 
NM Not Meaningful.
(1)
Includes ASC 310-30 discount of $49.4 million, $56.4 million and $80.1 million as of December 31, 2016, September 30, 2016 and December 31, 2015, respectively.

















9


EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(unaudited)
Table 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Qtr-o-Qtr
 
Yr-o-Yr
Interest and dividend income
 
$
302,127

 
$
280,317

 
$
270,477

 
7.8%
 
11.7%
Interest expense
 
29,425

 
26,169

 
23,536

 
12.4
 
25.0
Net interest income before provision for (reversal of) credit losses
 
272,702

 
254,148

 
246,941

 
7.3
 
10.4
Provision for (reversal of) credit losses
 
10,461

 
9,525

 
(2,000
)
 
9.8
 
NM
Net interest income after provision for (reversal of) credit losses
 
262,241

 
244,623

 
248,941

 
7.2
 
5.3
Noninterest income
 
48,800

 
49,341

 
44,483

 
(1.1)
 
9.7
Noninterest expense
 
149,904

 
170,500

 
144,939

 
(12.1)
 
3.4
Income before income taxes
 
161,137

 
123,464

 
148,485

 
30.5
 
8.5
Income tax expense
 
50,403

 
13,321

 
56,680

 
278.4
 
(11.1)
Net income
 
$
110,734

 
$
110,143

 
$
91,805

 
0.5%
 
20.6%
Earnings per share
 
 

 
 

 
 

 

 

- Basic
 
$
0.77

 
$
0.76

 
$
0.64

 
1.3%
 
20.3%
- Diluted
 
$
0.76

 
$
0.76

 
$
0.63

 
—
 
20.6
Weighted average number of shares outstanding (in thousands)
 
 
 
 
 
 
 

 

- Basic
 
144,166

 
144,122

 
143,900

 
—%
 
0.2%
- Diluted
 
145,428

 
145,238

 
144,686

 
0.1
 
0.5
 
 
 
 
 
 
 
 
 

 

 
 
 
Quarter Ended
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Qtr-o-Qtr
 
Yr-o-Yr
Noninterest income:
 
 

 
 

 
 

 

 

 
Branch fees
 
$
10,195

 
$
10,408

 
$
10,338

 
(2.0)%
 
(1.4)%
 
Letters of credit fees and foreign exchange income
 
14,356

 
10,908

 
13,986

 
31.6
 
2.6
 
Ancillary loan fees
 
5,355

 
6,135

 
4,722

 
(12.7)
 
13.4
 
Wealth management fees
 
3,378

 
4,033

 
3,958

 
(16.2)
 
(14.7)
 
Derivative fees and other income
 
7,003

 
5,790

 
4,756

 
20.9
 
47.2
 
Net (losses) gains on sales of loans
 
(880
)
 
2,158

 
5,155

 
NM
 
NM
 
Net gains on sales of available-for-sale investment securities
 
1,894

 
1,790

 
13,373

 
5.8
 
(85.8)
 
Changes in Federal Deposit Insurance Corporation (“FDIC”) indemnification asset and receivable/payable
 
—

 
—

 
(19,007
)
 
NM
 
NM
 
Other fees and operating income
 
7,499

 
8,119

 
7,202

 
(7.6)
 
4.1
Total noninterest income
 
$
48,800

 
$
49,341

 
$
44,483

 
(1.1)%
 
9.7%
Noninterest expense:
 
 

 
 

 
 

 

 

 
Compensation and employee benefits
 
$
79,949

 
$
75,042

 
$
68,895

 
6.5%
 
16.0%
 
Occupancy and equipment expense
 
15,834

 
15,456

 
15,302

 
2.4
 
3.5
 
Deposit insurance premiums and regulatory assessments
 
5,938

 
6,450

 
5,049

 
(7.9)
 
17.6
 
Other real estate owned (“OREO”) expense (income)
 
(10
)
 
(67
)
 
(1,433
)
 
(85.1)
 
(99.3)
 
Legal expense
 
(9,873
)
 
5,361

 
3,270

 
NM
 
NM
 
Data processing
 
2,971

 
2,729

 
2,589

 
8.9
 
14.8
 
Consulting expense
 
3,715

 
4,594

 
7,638

 
(19.1)
 
(51.4)
 
Deposit related expenses
 
2,719

 
3,082

 
2,977

 
(11.8)
 
(8.7)
 
Computer software expense
 
3,647

 
3,331

 
2,256

 
9.5
 
61.7
 
Other operating expense
 
20,438

 
19,881

 
21,645

 
2.8
 
(5.6)
 
Amortization of tax credit and other investments
 
22,667

 
32,618

 
14,555

 
(30.5)
 
55.7
 
Amortization of premiums on deposits acquired
 
1,909

 
2,023

 
2,196

 
(5.6)
 
(13.1)
Total noninterest expense
 
$
149,904

 
$
170,500

 
$
144,939

 
(12.1)%
 
3.4%
 
 
 
 
 
 
 
 
 
 
 
 
NM Not Meaningful.

10


EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share data)
(unaudited)
Table 4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
December 31, 2015
 
Yr-o-Yr
Interest and dividend income
 
$
1,137,481

 
$
1,053,815

 
7.9%
Interest expense
 
104,843

 
103,376

 
1.4
Net interest income before provision for credit losses
 
1,032,638

 
950,439

 
8.6
Provision for credit losses
 
27,479

 
14,217

 
93.3
Net interest income after provision for credit losses
 
1,005,159

 
936,222

 
7.4
Noninterest income
 
182,918

 
183,383

 
(0.3)
Noninterest expense
 
615,889

 
540,884

 
13.9
Income before income taxes
 
572,188

 
578,721

 
(1.1)
Income tax expense
 
140,511

 
194,044

 
(27.6)
Net income
 
$
431,677

 
$
384,677

 
12.2%
Earnings per share
 
 

 
 

 

- Basic
 
$
3.00

 
$
2.67

 
12.4%
- Diluted
 
$
2.97

 
$
2.66

 
11.7
Weighted average number of shares outstanding (in thousands)
 
 
 
 
 

- Basic
 
144,087

 
143,818

 
0.2%
- Diluted
 
145,172

 
144,512

 
0.5
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
December 31, 2015
 
Yr-o-Yr
Noninterest income:
 
 

 
 

 
 
 
Branch fees
 
$
41,178

 
$
39,495

 
4.3%
 
Letters of credit fees and foreign exchange income
 
45,760

 
38,985

 
17.4
 
Ancillary loan fees
 
19,352

 
15,029

 
28.8
 
Wealth management fees
 
13,240

 
18,268

 
(27.5)
 
Derivative fees and other income
 
16,781

 
16,493

 
1.7
 
Net gains on sales of loans
 
6,087

 
24,874

 
(75.5)
 
Net gains on sales of available-for-sale investment securities
 
10,362

 
40,367

 
(74.3)
 
Changes in FDIC indemnification asset and receivable/payable
 
—

 
(37,980
)
 
NM
 
Other fees and operating income
 
30,158

 
27,852

 
8.3
Total noninterest income
 
$
182,918

 
$
183,383

 
(0.3)%
Noninterest expense:
 
 

 
 

 

 
Compensation and employee benefits
 
$
300,115

 
$
262,193

 
14.5%
 
Occupancy and equipment expense
 
61,453

 
61,292

 
0.3
 
Deposit insurance premiums and regulatory assessments
 
23,279

 
18,772

 
24.0
 
OREO expense (income)
 
1,474

 
(8,914
)
 
NM
 
Legal expense
 
2,841

 
16,373

 
(82.6)
 
Data processing
 
11,683

 
10,185

 
14.7
 
Consulting expense
 
22,742

 
17,234

 
32.0
 
Deposit related expenses
 
10,394

 
10,379

 
0.1
 
Computer software expense
 
12,914

 
8,660

 
49.1
 
Other operating expense
 
77,462

 
77,538

 
(0.1)
 
Amortization of tax credit and other investments
 
83,446

 
36,120

 
131.0
 
Amortization of premiums on deposits acquired
 
8,086

 
9,234

 
(12.4)
 
Repurchase agreements’ extinguishment costs
 
—

 
21,818

 
NM
Total noninterest expense
 
$
615,889

 
$
540,884

 
13.9%
 
 
 
 
 
 
 
 
NM Not Meaningful.

11


EAST WEST BANCORP, INC.
SELECTED FINANCIAL INFORMATION
($ in thousands)
(unaudited)
Table 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Balances
 
Quarter Ended
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Qtr-o-Qtr
 
Yr-o-Yr
Loans:
 
 
 
 
 
 
 
 
 
 
 
Real estate - commercial
 
$
7,869,979

 
$
7,768,534

 
$
7,282,106

 
1.3%
 
8.1%
 
Real estate - land and construction
 
734,081

 
706,406

 
634,601

 
3.9
 
15.7
 
Commercial
 
9,454,884

 
9,169,433

 
8,590,810

 
3.1
 
10.1
 
Real estate - single-family
 
3,407,615

 
3,203,603

 
3,183,770

 
6.4
 
7.0
 
Real estate - multifamily
 
1,467,978

 
1,371,871

 
1,502,009

 
7.0
 
(2.3)
 
Consumer
 
2,098,659

 
2,089,466

 
1,932,481

 
0.4
 
8.6
 
Total loans
 
$
25,033,196

 
$
24,309,313

 
$
23,125,777

 
3.0%
 
8.2%
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities
 
$
3,551,863

 
$
3,273,861

 
$
3,255,976

 
8.5%
 
9.1%
Interest-earning assets
 
$
32,736,669

 
$
31,055,354

 
$
30,020,404

 
5.4%
 
9.0%
Total assets
 
$
34,679,137

 
$
32,906,533

 
$
31,944,102

 
5.4%
 
8.6%
 
 
 
 
 
 
 
 
 
 
 
Customer deposits:
 
 

 
 

 
 

 
 
 
 
 
Noninterest-bearing demand
 
$
10,159,022

 
$
9,413,031

 
$
8,809,031

 
7.9%
 
15.3%
 
Interest-bearing checking
 
3,641,320

 
3,553,477

 
3,178,877

 
2.5
 
14.5
 
Money market
 
8,157,508

 
7,548,835

 
7,079,586

 
8.1
 
15.2
 
Savings
 
2,284,282

 
2,133,036

 
1,909,838

 
7.1
 
19.6
 
Total core deposits
 
24,242,132

 
22,648,379

 
20,977,332

 
7.0
 
15.6
 
Time deposits
 
5,584,838

 
5,627,084

 
6,582,823

 
(0.8)
 
(15.2)
 
Total deposits
 
$
29,826,970

 
$
28,275,463

 
$
27,560,155

 
5.5%
 
8.2%
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
$
20,522,442

 
$
19,611,482

 
$
19,349,119

 
4.6%
 
6.1%
Stockholders’ equity
 
$
3,423,405

 
$
3,349,241

 
$
3,121,332

 
2.2%
 
9.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selected Ratios (1)
 
Quarter Ended
 
December 31, 2016
Basis Point Change
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
Qtr-o-Qtr
 
Yr-o-Yr
 
 
 

 
 

 
 

 
 
 
 
 
Return on average assets
 
1.27
%
 
1.33
%
 
1.14
%
 
(6) bps
 
13 bps
 
Return on average equity
 
12.87
%
 
13.08
%
 
11.67
%
 
(21)
 
120
 
Return on average tangible equity (2)
 
15.29
%
 
15.55
%
 
14.13
%
 
(26)
 
116
 
Interest rate spread
 
3.10
%
 
3.06
%
 
3.09
%
 
4
 
1
 
Net interest margin
 
3.31
%
 
3.26
%
 
3.26
%
 
5
 
5
 
Adjusted net interest margin (2)
 
3.17
%
 
3.16
%
 
3.06
%
 
1
 
11
 
Yield on average interest-earning assets
 
3.67
%
 
3.59
%
 
3.57
%
 
8
 
10
 
Cost of interest-bearing deposits
 
0.48
%
 
0.44
%
 
0.42
%
 
4
 
6
 
Cost of deposits
 
0.31
%
 
0.30
%
 
0.29
%
 
1
 
2
 
Cost of funds
 
0.38
%
 
0.36
%
 
0.33
%
 
2
 
5
 
Adjusted pre-tax, pre-provision profitability ratio (2)
 
2.10
%
 
2.03
%
 
2.03
%
 
7
 
7
 
Adjusted noninterest expense/average assets (2)
 
1.59
%
 
1.64
%
 
1.59
%
 
(5)
 
—
 
Adjusted efficiency ratio (2)
 
43.16
%
 
44.77
%
 
43.99
%
 
(161) bps
 
(83) bps
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Annualized except for efficiency ratio.
(2)
See reconciliation of the GAAP to non-GAAP financial measures in Tables 12, 13 and 14.

12


EAST WEST BANCORP, INC.
SELECTED FINANCIAL INFORMATION
($ in thousands)
(unaudited)
Table 6
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Balances
 
Year Ended
 
December 31, 2016
% Change
 
 
 
December 31, 2016
 
December 31, 2015
 
Yr-o-Yr
Loans:
 
 
 
 
 
 
 
Real estate - commercial
 
$
7,795,690

 
$
6,781,671

 
15.0%
 
Real estate - land and construction
 
681,937

 
597,171

 
14.2
 
Commercial
 
9,091,532

 
8,140,624

 
11.7
 
Real estate - single-family
 
3,184,834

 
3,510,864

 
(9.3)
 
Real estate - multifamily
 
1,433,142

 
1,476,747

 
(3.0)
 
Consumer
 
2,077,760

 
1,769,512

 
17.4
 
Total loans
 
$
24,264,895

 
$
22,276,589

 
8.9%
 
 
 
 
 
 
 
 
Investment securities
 
$
3,355,086

 
$
2,847,655

 
17.8%
Interest-earning assets
 
$
31,296,775

 
$
28,390,582

 
10.2%
Total assets
 
$
33,169,373

 
$
30,328,457

 
9.4%
 
 
 
 
 
 
 
Customer deposits:
 
 

 
 

 
 
 
Noninterest-bearing demand
 
$
9,371,481

 
$
7,928,460

 
18.2%
 
Interest-bearing checking
 
3,495,094

 
2,795,379

 
25.0
 
Money market
 
7,679,695

 
6,763,979

 
13.5
 
Savings
 
2,104,060

 
1,785,085

 
17.9
 
Total core deposits
 
22,650,330

 
19,272,903

 
17.5
 
Time deposits
 
5,852,042

 
6,482,697

 
(9.7)
 
Total deposits
 
$
28,502,372

 
$
25,755,600

 
10.7%
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
$
19,947,414

 
$
18,781,466

 
6.2%
Stockholders’ equity
 
$
3,305,929

 
$
3,019,095

 
9.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selected Ratios
 
Year Ended
 
December 31, 2016
Basis Point Change
 
 
 
December 31, 2016
 
December 31, 2015
 
Yr-o-Yr
 
 
 

 
 

 
 
 
Return on average assets
 
1.30
%
 
1.27
%
 
3 bps
 
Return on average equity
 
13.06
%
 
12.74
%
 
32
 
Return on average tangible equity (1)
 
15.68
%
 
15.58
%
 
10
 
Interest rate spread
 
3.10
%
 
3.16
%
 
(6)
 
Net interest margin
 
3.30
%
 
3.35
%
 
(5)
 
Adjusted net interest margin (1)
 
3.15
%
 
3.12
%
 
3
 
Yield on average interest-earning assets
 
3.63
%
 
3.71
%
 
(8)
 
Cost of interest-bearing deposits
 
0.44
%
 
0.41
%
 
3
 
Cost of deposits
 
0.30
%
 
0.29
%
 
1
 
Cost of funds
 
0.36
%
 
0.39
%
 
(3)
 
Adjusted pre-tax, pre-provision profitability ratio (1)
 
2.04
%
 
2.18
%
 
(14)
 
Adjusted noninterest expense/average assets (1)
 
1.62
%
 
1.56
%
 
6
 
Adjusted efficiency ratio (1)
 
44.24
%
 
41.78
%
 
246 bps
 
 
 
 
 
 
 
 
(1)
See reconciliation of the GAAP to non-GAAP financial measures in Tables 12, 13 and 14.

13


EAST WEST BANCORP, INC.
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
December 31, 2016
 
September 30, 2016
 
 
 
Average
 
 
 
Average
 
Average
 
 
 
Average
 
 
 
Balance
 
Interest
 
Yield/Rate(1)
 
Balance
 
Interest
 
Yield/Rate(1)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing cash and deposits with banks
 
$
2,264,787

 
$
4,486

 
0.79
%
 
$
1,593,577

 
$
3,168

 
0.79
%
 
Resale agreements (2)
 
1,814,130

 
8,068

 
1.77
%
 
1,805,978

 
7,834

 
1.73
%
 
Investment securities
 
3,551,863

 
15,966

 
1.79
%
 
3,273,861

 
13,388

 
1.63
%
 
Loans
 
25,033,196

 
272,188

 
4.33
%
 
24,309,313

 
255,316

 
4.18
%
 
FHLB and Federal Reserve Bank stock
 
72,693

 
1,419

 
7.77
%
 
72,625

 
611

 
3.35
%
 
Total interest-earning assets
 
32,736,669

 
302,127

 
3.67
%
 
31,055,354

 
280,317

 
3.59
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets:
 
 

 
 

 
 

 
 

 
 

 
 

 
Cash and due from banks
 
410,919

 
 
 
 
 
354,053

 
 

 
 

 
Allowance for loan losses
 
(258,978
)
 
 
 
 
 
(266,763
)
 
 

 
 

 
Other assets
 
1,790,527

 
 
 
 
 
1,763,889

 
 

 
 

 
Total assets
 
$
34,679,137

 
 

 
 

 
$
32,906,533

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 

 
 

 
 

 
 

 
 

Interest-bearing liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
Checking deposits
 
$
3,641,320

 
$
3,582

 
0.39
%
 
$
3,553,477

 
$
3,253

 
0.36
%
 
Money market deposits
 
8,157,508

 
7,799

 
0.38
%
 
7,548,835

 
6,663

 
0.35
%
 
Savings deposits
 
2,284,282

 
1,512

 
0.26
%
 
2,133,036

 
1,160

 
0.22
%
 
Time deposits
 
5,584,838

 
10,623

 
0.76
%
 
5,627,084

 
9,973

 
0.71
%
 
Federal funds purchased and other short-term borrowings
 
44,079

 
323

 
2.92
%
 
32,137

 
212

 
2.62
%
 
FHLB advances
 
321,357

 
1,432

 
1.77
%
 
320,743

 
1,361

 
1.69
%
 
Repurchase agreements (2)
 
297,826

 
2,863

 
3.82
%
 
200,000

 
2,319

 
4.61
%
 
Long-term debt
 
191,232

 
1,291

 
2.69
%
 
196,170

 
1,228

 
2.49
%
 
Total interest-bearing liabilities
 
20,522,442

 
29,425

 
0.57
%
 
19,611,482

 
26,169

 
0.53
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities and stockholders’ equity:
 
 

 
 

 
 

 
 

 
 

 
 

 
Demand deposits
 
10,159,022

 
 
 
 
 
9,413,031

 
 
 
 
 
Accrued expenses and other liabilities
 
574,268

 
 
 
 
 
532,779

 
 
 
 
 
Stockholders’ equity
 
3,423,405

 
 
 
 
 
3,349,241

 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
34,679,137

 
 
 
 
 
$
32,906,533

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread
 
 

 
 
 
3.10
%
 
 
 
 
 
3.06
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income and net interest margin
 
 

 
$
272,702

 
3.31
%
 
 
 
$
254,148

 
3.26
%
Adjusted net interest income and net interest margin (3)
 
 

 
$
261,101

 
3.17
%
 
 
 
$
246,984

 
3.16
%
 
 
(1)
Annualized.
(2)
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting.
(3)
See reconciliation of the GAAP to non-GAAP financial measures in Table 13.

14


EAST WEST BANCORP, INC.
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
 
December 31, 2016
 
December 31, 2015
 
 
 
Average
 
 
 
Average
 
Average
 
 
 
Average
 
 
 
Balance
 
Interest
 
Yield/Rate(1)
 
Balance
 
Interest
 
Yield/Rate(1)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing cash and deposits with banks
 
$
2,264,787

 
$
4,486

 
0.79
%
 
$
2,085,641

 
$
3,397

 
0.65
%
 
Resale agreements (2)
 
1,814,130

 
8,068

 
1.77
%
 
1,479,891

 
5,859

 
1.57
%
 
Investment securities
 
3,551,863

 
15,966

 
1.79
%
 
3,255,976

 
11,428

 
1.39
%
 
Loans
 
25,033,196

 
272,188

 
4.33
%
 
23,125,777

 
248,638

 
4.27
%
 
FHLB and Federal Reserve Bank stock
 
72,693

 
1,419

 
7.77
%
 
73,119

 
1,155

 
6.27
%
 
Total interest-earning assets
 
32,736,669

 
302,127

 
3.67
%
 
30,020,404

 
270,477

 
3.57
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets:
 
 

 
 

 
 

 
 

 
 

 
 

 
Cash and due from banks
 
410,919

 
 
 
 
 
376,538

 
 

 
 

 
Allowance for loan losses
 
(258,978
)
 
 
 
 
 
(268,870
)
 
 

 
 

 
Other assets
 
1,790,527

 
 
 
 
 
1,816,030

 
 

 
 

 
Total assets
 
$
34,679,137

 
 

 
 

 
$
31,944,102

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 

 
 

 
 

 
 

 
 

Interest-bearing liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
Checking deposits
 
$
3,641,320

 
$
3,582

 
0.39
%
 
$
3,178,877

 
$
2,604

 
0.32
%
 
Money market deposits
 
8,157,508

 
7,799

 
0.38
%
 
7,079,586

 
5,155

 
0.29
%
 
Savings deposits
 
2,284,282

 
1,512

 
0.26
%
 
1,909,838

 
952

 
0.20
%
 
Time deposits
 
5,584,838

 
10,623

 
0.76
%
 
6,582,823

 
11,117

 
0.67
%
 
Federal funds purchased and other short-term borrowings
 
44,079

 
323

 
2.92
%
 
1,624

 
5

 
1.22
%
 
FHLB advances
 
321,357

 
1,432

 
1.77
%
 
333,207

 
1,114

 
1.33
%
 
Repurchase agreements (2)
 
297,826

 
2,863

 
3.82
%
 
52,174

 
1,413

 
10.74
%
 
Long-term debt
 
191,232

 
1,291

 
2.69
%
 
210,990

 
1,176

 
2.21
%
 
Total interest-bearing liabilities
 
20,522,442

 
29,425

 
0.57
%
 
19,349,119

 
23,536

 
0.48
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities and stockholders’ equity:
 
 

 
 

 
 

 
 

 
 

 
 

 
Demand deposits
 
10,159,022

 
 
 
 
 
8,809,031

 
 
 
 
 
Accrued expenses and other liabilities
 
574,268

 
 
 
 
 
664,620

 
 
 
 
 
Stockholders’ equity
 
3,423,405

 
 
 
 
 
3,121,332

 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
34,679,137

 
 
 
 
 
$
31,944,102

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread
 
 

 
 
 
3.10
%
 
 
 
 
 
3.09
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income and net interest margin
 
 

 
$
272,702

 
3.31
%
 
 
 
$
246,941

 
3.26
%
Adjusted net interest income and net interest margin (3)
 
 

 
$
261,101

 
3.17
%
 
 
 
$
232,075

 
3.06
%
 
 
(1)
Annualized.
(2)
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting.
(3)
See reconciliation of the GAAP to non-GAAP financial measures in Table 13.

15


EAST WEST BANCORP, INC.
YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended
 
 
 
December 31, 2016
 
December 31, 2015
 
 
 
Average
 
 
 
Average
 
Average
 
 
 
Average
 
 
 
Balance
 
Interest
 
Yield/Rate
 
Balance
 
Interest
 
Yield/Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing cash and deposits with banks
 
$
1,893,064

 
$
14,731

 
0.78
%
 
$
1,851,604

 
$
17,939

 
0.97
%
 
Resale agreements (1)
 
1,708,470

 
30,547

 
1.79
%
 
1,337,274

 
19,799

 
1.48
%
 
Investment securities
 
3,355,086

 
53,399

 
1.59
%
 
2,847,655

 
41,375

 
1.45
%
 
Loans
 
24,264,895

 
1,035,377

 
4.27
%
 
22,276,589

 
968,625

 
4.35
%
 
FHLB and Federal Reserve Bank stock
 
75,260

 
3,427

 
4.55
%
 
77,460

 
6,077

 
7.85
%
 
Total interest-earning assets
 
31,296,775

 
1,137,481

 
3.63
%
 
28,390,582

 
1,053,815

 
3.71
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets:
 
 

 
 

 
 

 
 

 
 

 
 

 
Cash and due from banks
 
365,104

 
 
 
 
 
342,606

 
 

 
 

 
Allowance for loan losses
 
(262,804
)
 
 
 
 
 
(263,143
)
 
 

 
 

 
Other assets
 
1,770,298

 
 
 
 
 
1,858,412

 
 

 
 

 
Total assets
 
$
33,169,373

 
 
 
 
 
$
30,328,457

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 

 
 

 
 

 
 

 
 

Interest-bearing liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
Checking deposits
 
$
3,495,094

 
$
12,640

 
0.36
%
 
$
2,795,379

 
$
8,453

 
0.30
%
 
Money market deposits
 
7,679,695

 
27,094

 
0.35
%
 
6,763,979

 
18,988

 
0.28
%
 
Savings deposits
 
2,104,060

 
4,719

 
0.22
%
 
1,785,085

 
3,468

 
0.19
%
 
Time deposits
 
5,852,042

 
39,771

 
0.68
%
 
6,482,697

 
42,596

 
0.66
%
 
Federal funds purchased and other short-term borrowings
 
25,591

 
713

 
2.79
%
 
4,797

 
58

 
1.21
%
 
FHLB advances
 
380,868

 
5,585

 
1.47
%
 
327,080

 
4,270

 
1.31
%
 
Repurchase agreements (1)
 
211,475

 
9,304

 
4.40
%
 
404,096

 
20,907

 
5.17
%
 
Long-term debt
 
198,589

 
5,017

 
2.53
%
 
218,353

 
4,636

 
2.12
%
 
Total interest-bearing liabilities
 
19,947,414

 
104,843

 
0.53
%
 
18,781,466

 
103,376

 
0.55
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities and stockholders’ equity:
 
 

 
 

 
 

 
 

 
 

 
 

 
Demand deposits
 
9,371,481

 
 
 
 
 
7,928,460

 
 
 
 
 
Accrued expenses and other liabilities
 
544,549

 
 
 
 
 
599,436

 
 
 
 
 
Stockholders’ equity
 
3,305,929

 
 
 
 
 
3,019,095

 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
33,169,373

 
 
 
 
 
$
30,328,457

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate spread
 
 

 
 
 
3.10
%
 
 
 
 
 
3.16
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income and net interest margin
 
 

 
$
1,032,638

 
3.30
%
 
 
 
$
950,439

 
3.35
%
Adjusted net interest income and net interest margin (2)
 
 

 
$
987,214

 
3.15
%
 
 
 
$
889,185

 
3.12
%
 
 
(1)
Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting.
(2)
See reconciliation of the GAAP to non-GAAP financial measures in Table 13.


16


EAST WEST BANCORP, INC.
ALLOWANCE FOR CREDIT LOSSES
($ in thousands)
(unaudited)
Table 10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Non-Purchased Credit Impaired (“Non-PCI”) Loans
 
 
 
 
 
 
 
 
 
 
 
Allowance for non-PCI loans, beginning of period
 
$
255,656

 
$
266,511

 
$
263,889

 
$
264,600

 
$
260,965

 
Provision for (reversal of) loan losses on non-PCI loans
 
12,707

 
11,615

 
(3,135
)
 
31,959

 
6,924

 
Net charge-offs (recoveries):
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
 
(741
)
 
(325
)
 
(5,815
)
 
(1,110
)
 
(5,590
)
 
Commercial
 
9,584

 
23,531

 
2,089

 
39,286

 
11,641

 
Residential
 
(829
)
 
(625
)
 
(111
)
 
(1,711
)
 
(2,935
)
 
Consumer
 
(53
)
 
(111
)
 
(9
)
 
(308
)
 
173

 
Total net charge-offs (recoveries)
 
7,961

 
22,470

 
(3,846
)
 
36,157

 
3,289

 
Allowance for non-PCI loans, end of period
 
260,402

 
255,656

 
264,600

 
260,402

 
264,600

Purchased Credit Impaired (“PCI”) Loans
 
 

 
 

 
 

 
 
 
 
 
Allowance for PCI loans, beginning of period
 
156

 
257

 
541

 
359

 
714

 
Reversal of provision for loan losses on PCI loans
 
(38
)
 
(101
)
 
(182
)
 
(241
)
 
(355
)
 
Allowance for PCI loans, end of period
 
118

 
156

 
359

 
118

 
359

 
Allowance for loan losses
 
260,520

 
255,812

 
264,959

 
260,520

 
264,959

Unfunded Credit Facilities
 
 

 
 

 
 

 
 
 
 
 
Allowance for unfunded credit reserves, beginning of period
 
18,329

 
20,318

 
19,043

 
20,360

 
12,712

 
(Reversal of) provision for unfunded credit reserves
 
(2,208
)
 
(1,989
)
 
1,317

 
(4,239
)
 
7,648

 
Allowance for unfunded credit reserves, end of period
 
16,121

 
18,329

 
20,360

 
16,121

 
20,360

 
Allowance for credit losses
 
$
276,641

 
$
274,141

 
$
285,319

 
$
276,641

 
$
285,319

 
 
 
 
 
 
 
 
 
 
 
 

17


 
EAST WEST BANCORP, INC.
 
CREDIT QUALITY
 
($ in thousands)
 
(unaudited)
Table 11
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-PCI Nonperforming Assets
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
 
 
 
 
 
 
 
Nonaccrual loans:
 
 
 
 
 
 
 
Real estate - commercial
 
$
26,907

 
$
29,180

 
$
29,345

 
Real estate - land and construction
 
5,326

 
5,740

 
700

 
Commercial
 
81,256

 
64,435

 
64,883

 
Real estate - single-family
 
4,214

 
5,796

 
8,759

 
Real estate - multifamily
 
2,984

 
13,554

 
16,268

 
Consumer
 
2,130

 
3,514

 
1,743

 
Total nonaccrual loans
 
122,817


122,219

 
121,698

OREO, net
 
6,745

 
8,622

 
7,034

 
Total nonperforming assets
 
$
129,562

 
$
130,841

 
$
128,732

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Quality Ratios
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
 
 
 
 
 
 
Non-PCI nonperforming assets to total assets (1)
 
0.37
%
 
0.39
%
 
0.40
 %
Non-PCI nonaccrual loans to loans held-for-investment (1)
 
0.48
%
 
0.49
%
 
0.51
 %
Allowance for loan losses to loans held-for-investment (1)
 
1.02
%
 
1.03
%
 
1.12
 %
Allowance for loan losses to non-PCI nonaccrual loans
 
212.12
%
 
209.31
%
 
217.72
 %
Quarterly provision for (reversal of) loan losses (2) to average loans held-for-investment
 
0.20
%
 
0.19
%
 
(0.06
)%
Full-year provision for loan losses to average loans held-for-investment
 
0.13
%
 
NM

 
0.03
 %
Quarterly net charge-offs (recoveries) (2) to average loans held-for-investment
 
0.13
%
 
0.37
%
 
(0.07
)%
Full-year net charge-offs to average loans held-for-investment
 
0.15
%
 
NM

 
0.01
 %
 
 
 
 
 
 
 
 
NM Not Meaningful.
(1)
Total assets and loans held-for-investment include PCI loans of $642.4 million, $717.6 million and $970.4 million as of December 31, 2016, September 30, 2016, and December 31, 2015, respectively.
(2)
Annualized.

18


EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 12
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of net interest income and noninterest income less adjusted noninterest expense, divided by average assets. Adjusted noninterest expense excludes the reversal of a legal accrual, the amortization of tax credit and other investments, the amortization of premiums on deposits acquired and repurchase agreements’ extinguishment costs (where applicable). The ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.

 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
Net interest income before provision for (reversal of) credit losses
 
$
272,702

 
$
254,148

 
$
246,941

Noninterest income
 
48,800

 
49,341

 
44,483

Net interest income and noninterest income
 
$
321,502

 
$
303,489

 
$
291,424

Total noninterest expense
 
$
149,904

 
$
170,500

 
$
144,939

Less: Legal accrual reversal
 
13,417

 
—

 
—

Amortization of tax credit and other investments
 
(22,667
)
 
(32,618
)
 
(14,555
)
Amortization of premiums on deposits acquired
 
(1,909
)
 
(2,023
)
 
(2,196
)
Adjusted noninterest expense
 
$
138,745

 
$
135,859

 
$
128,188

Adjusted pre-tax, pre-provision income
 
$
182,757


$
167,630


$
163,236

Average assets
 
$
34,679,137

 
$
32,906,533

 
$
31,944,102

Adjusted pre-tax, pre-provision profitability ratio (1)
 
2.10
%
 
2.03
%
 
2.03
%
Adjusted noninterest expense (1)/average assets
 
1.59
%
 
1.64
%
 
1.59
%
 
 
 
 
 
 
 
 
 
Year Ended
 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Net interest income before provision for credit losses
 
$
1,032,638

 
$
950,439

 
 
Noninterest income
 
182,918

 
183,383

 
 
Net interest income and noninterest income
 
$
1,215,556


$
1,133,822

 
 
Total noninterest expense
 
$
615,889

 
$
540,884

 
 
Less: Legal accrual reversal
 
13,417

 
—

 
 
Amortization of tax credit and other investments
 
(83,446
)
 
(36,120
)
 
 
Amortization of premiums on deposits acquired
 
(8,086
)
 
(9,234
)
 
 
Repurchase agreements’ extinguishment costs
 
—

 
(21,818
)
 
 
Adjusted noninterest expense
 
$
537,774

 
$
473,712

 
 
Adjusted pre-tax, pre-provision income
 
$
677,782


$
660,110

 
 
Average assets
 
$
33,169,373

 
$
30,328,457

 
 
Adjusted pre-tax, pre-provision profitability ratio
 
2.04
%
 
2.18
%
 
 
Adjusted noninterest expense/average assets
 
1.62
%
 
1.56
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted efficiency ratio represents adjusted noninterest expense divided by the aggregate of net interest income 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
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
Adjusted noninterest expense
 
$
138,745

 
$
135,859

 
$
128,188

Net interest income and noninterest income
 
$
321,502

 
$
303,489

 
$
291,424

Adjusted efficiency ratio
 
43.16
%
 
44.77
%
 
43.99
%
 
 
 
 
 
 
 
 
 
Year Ended
 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Adjusted noninterest expense
 
$
537,774

 
$
473,712

 
 
Net interest income and noninterest income
 
$
1,215,556

 
$
1,133,822

 
 
Adjusted efficiency ratio
 
44.24
%
 
41.78
%
 
 
 
 
 
 
 
 
 
(1)
Annualized.


19


EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 13
 
 
 
 
 
 
 
 
 
 
 
The Company believes that presenting the adjusted average loan yields and adjusted net interest margin that exclude the ASC 310-30 impacts provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
Year Ended
Yield on Average Loans
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
 
December 31, 2016
 
December 31, 2015
Interest income on loans
 
$
272,188

 
$
255,316

 
$
248,638

 
$
1,035,377

 
$
968,625

Less: ASC 310-30 discount accretion income
 
(11,601
)
 
(7,164
)
 
(14,866
)
 
(45,424
)
 
(61,254
)
Adjusted interest income on loans
 
$
260,587

 
$
248,152

 
$
233,772

 
$
989,953

 
$
907,371

 
 
 
 
 
 
 
 
 
 
 
Average loans
 
$
25,033,196

 
$
24,309,313

 
$
23,125,777

 
$
24,264,895

 
$
22,276,589

Add: ASC 310-30 discount
 
54,664

 
60,091

 
88,362

 
64,324

 
108,350

Adjusted average loans
 
$
25,087,860


$
24,369,404


$
23,214,139


$
24,329,219


$
22,384,939

 
 
 
 
 
 
 
 
 
 
 
Average loan yields
 
4.33
%
(1) 
4.18
%
(1) 
4.27
%
(1) 
4.27
%
 
4.35
%
Adjusted average loan yields
 
4.13
%
(1) 
4.05
%
(1) 
4.00
%
(1) 
4.07
%
 
4.05
%
 
 
 
 
 
 
 
 
 
 
 
Net Interest Margin
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
272,702

 
$
254,148

 
$
246,941

 
$
1,032,638

 
$
950,439

Less: ASC 310-30 discount accretion income
 
(11,601
)
 
(7,164
)
 
(14,866
)
 
(45,424
)
 
(61,254
)
Adjusted net interest income
 
$
261,101

 
$
246,984

 
$
232,075

 
$
987,214

 
$
889,185

 
 
 
 
 
 
 
 
 
 
 
Average interest-earning assets
 
$
32,736,669

 
$
31,055,354

 
$
30,020,404

 
$
31,296,775

 
$
28,390,582

Add: ASC 310-30 discount
 
54,664

 
60,091

 
88,362

 
64,324

 
108,350

Adjusted average interest-earning assets
 
$
32,791,333


$
31,115,445


$
30,108,766


$
31,361,099


$
28,498,932

 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
3.31
%
(1) 
3.26
%
(1) 
3.26
%
(1) 
3.30
%
 
3.35
%
Adjusted net interest margin
 
3.17
%
(1) 
3.16
%
(1) 
3.06
%
(1) 
3.15
%
 
3.12
%
 
 
 
 
 
 
 
 
 
 
 
(1)
Annualized.


20


EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 14
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Tangible equity and tangible equity to tangible assets 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.
 
 
 
 
 
 
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
Stockholders’ equity
 
$
3,427,741

 
$
3,378,054

 
$
3,122,950

Less: Goodwill
 
(469,433
)
 
(469,433
)
 
(469,433
)
Other intangible assets (1)
 
(35,670
)
 
(37,195
)
 
(41,598
)
Tangible equity
 
$
2,922,638

 
$
2,871,426

 
$
2,611,919

 
 
 
 
 
 
 
Total assets
 
$
34,788,840

 
$
33,255,275

 
$
32,350,922

Less: Goodwill
 
(469,433
)
 
(469,433
)
 
(469,433
)
Other intangible assets (1)
 
(35,670
)
 
(37,195
)
 
(41,598
)
Tangible assets
 
$
34,283,737

 
$
32,748,647

 
$
31,839,891

Tangible equity to tangible assets ratio
 
8.52
%
 
8.77
%
 
8.20
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the amortization of premiums on deposits acquired, net of tax, and the amortization (accretion) of mortgage servicing assets, net of tax. The ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
Net Income
 
$
110,734

 
$
110,143

 
$
91,805

Add: Amortization of premium on deposit acquired, net of tax
 
1,312

 
1,805

 
1,358

         Amortization (accretion) of mortgage servicing assets, net of tax
 
126

 
(813
)
 
(210
)
Tangible net income
 
$
112,172

 
$
111,135

 
$
92,953

 
 
 
 
 
 
 
Average stockholders’ equity
 
$
3,423,405

 
$
3,349,241

 
$
3,121,332

Less: Average goodwill
 
(469,433
)
 
(469,433
)
 
(469,433
)
          Average other intangible assets (1)
 
(36,354
)
 
(37,412
)
 
(41,813
)
Average tangible equity
 
$
2,917,618

 
$
2,842,396

 
$
2,610,086

Return on average tangible equity (2)
 
15.29
%
 
15.55
%
 
14.13
%
 
 
 
 
 
 
 
 
 
Year Ended
 
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Net Income
 
$
431,677

 
$
384,677

 
 
Add: Amortization of premium on deposit acquired, net of tax
 
6,100

 
6,138

 
 
         Amortization (accretion) of mortgage servicing assets, net of tax
 
935

 
(215
)
 
 
Tangible net income
 
$
438,712

 
$
390,600

 


 
 
 
 
 
 
 
Average stockholders’ equity
 
$
3,305,929

 
$
3,019,095

 
 
Less: Average goodwill
 
(469,433
)
 
(469,433
)
 
 
          Average other intangible assets (1)
 
(38,386
)
 
(42,976
)
 
 
Average tangible equity
 
$
2,798,110

 
$
2,506,686

 


Return on average tangible equity
 
15.68
%
 
15.58
%
 
 
 
 
 
 
 
 
 
(1)
Includes premiums on deposits acquired and mortgage servicing assets.
(2)
Annualized.


21
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