Market Overview

East West Bancorp Reports Net Income for Second Quarter 2019 of $150 Million and Diluted Earnings Per Share of $1.03; Record Operating Revenue of $420 Million

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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 second quarter of 2019. For the second quarter of 2019, net income was $150.4 million or $1.03 per diluted share. Second quarter 2019 return on average assets was 1.45% and return on average equity was 12.9%.

"Total loans grew $871 million, or 11% annualized, to a record $33.7 billion as of June 30, 2019 from $32.9 billion as of March 31, 2019. Loan growth was well-diversified across our major lending portfolios," stated Dominic Ng, Chairman and Chief Executive Officer of East West. "Total deposits grew $204 million, or 2% annualized, to a record $36.5 billion from $36.3 billion as of March 31, 2019. A highlight was robust growth in noninterest-bearing demand deposits."

"East West achieved record total operating1 revenue of $420 million in the second quarter of 2019, an increase of 4% from $405 million in the first quarter of 2019, and an increase of 8% from $390 million in the second quarter of 2018. Quarter-over-quarter, net interest income grew by 1% and we also saw substantial noninterest income growth of 25%. Year-over-year, net interest income grew by 8% and noninterest income grew by 9%," continued Ng.

"The growth in revenue combined with strong operating expense control drove improvement in our operating efficiency and an expansion of our pre-tax, pre-provision profitability. Our pre-tax, pre-provision profitability ratio2 was 2.51% in the second quarter of 2019, expanding by 8 basis points linked quarter. Additionally, nonperforming assets, net charge-offs and the provision for credit losses all decreased."

"Despite macro-economic and geopolitical volatility, East West continues to execute, delivering attractive growth and profitability, demonstrating the strength of our differentiated strategy and the value proposition that we provide for our customers. We are pleased with the solid results of the second quarter and look forward to continued strong performance in the second half of 2019," concluded Ng.

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1

Operating revenue consists of net interest income before provision for credit losses and noninterest income, excluding non-operating items.

2

 See reconciliation of GAAP to non-GAAP financial measures in Table 14.

HIGHLIGHTS OF RESULTS

  • Second Quarter Earnings – Second quarter 2019 net income was $150.4 million and diluted earnings per share ("EPS") were $1.03, compared to first quarter 2019 net income of $164.0 million and diluted EPS of $1.12. During the second quarter, the Company recorded $30.1 million of additional income tax expense to reverse previously claimed tax credits, equivalent to $0.21 per share. Adjusted3 second quarter net income was $180.5 million and adjusted3 diluted EPS were $1.24, both up by 7% from adjusted3 first quarter net income of $168.9 million and adjusted3 first quarter diluted EPS of $1.16.
  • Net Interest Income and Net Interest Margin – Second quarter 2019 net interest income ("NII") was $367.3 million, a quarterly increase of $4.9 million or 1%, and a year-over-year increase of $25.6 million or 8%. Second quarter 2019 net interest margin ("NIM") was 3.73%, compared to 3.79% in the previous quarter. Net interest income growth in the second quarter primarily reflects loan growth, partially offset by the change in the NIM.
  • Record Loans – Total loans of $33.7 billion as of June 30, 2019 were up $871.0 million, or 11% linked quarter annualized, from $32.9 billion as of March 31, 2019. Growth was well-diversified across commercial and industrial loans, commercial real estate and single family residential mortgage portfolios. Total loans grew by $3.5 billion, or 12% year-over-year.
  • Record Deposits – Total deposits of $36.5 billion as of June 30, 2019 were up $203.6 million, or 2% linked quarter annualized, from $36.3 billion as of March 31, 2019. Growth in time, noninterest-bearing demand and savings deposits was partially offset by declines in interest-bearing checking and money market balances. Total deposits grew by $3.7 billion, or 11% year-over-year.
  • Asset Quality Metrics – The allowance for loan losses was $330.6 million, or 0.98% of loans held-for-investment ("HFI"), as of June 30, 2019, compared to 0.97% of loans HFI as of March 31, 2019, and 1.00% of loans HFI as of June 30, 2018. For the second quarter of 2019, net charge-offs were $7.6 million, or annualized 0.09% of average loans HFI, a decrease from annualized net charge-offs of 0.18% of average loans HFI for the first quarter of 2019 and 0.14% for the year-ago quarter. Non-purchased credit impaired ("Non-PCI") nonperforming assets were $119.3 million, or 0.28% of total assets, as of June 30, 2019, compared to 0.33% of total assets as of March 31, 2019, and 0.27% of total assets as of June 30, 2018.
  • Capital Levels – Capital levels for East West continue to be strong. As of June 30, 2019, stockholders' equity was $4.7 billion, or $32.53 per share. Tangible equity4 per common share was $29.20 as of June 30, 2019, an increase of 3% linked quarter and 17% year-over-year. As of June 30, 2019, the tangible equity to tangible assets ratio4 was 10.0%, the common equity tier 1 ("CET1") capital ratio was 12.5%, and the total risk-based capital ratio was 13.9%.
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3

See reconciliation of GAAP to non-GAAP financial measures in Table 13.

4

See reconciliation of GAAP to non-GAAP financial measures in Table 16.

QUARTERLY RESULTS SUMMARY

 

 

Quarter Ended

($ in millions, except per share data and ratios)

 

June 30,

2019

 

March 31,

2019

 

June 30,

2018

Net income

 

$

150.4

 

 

$

164.0

 

 

$

172.3

 

 

Adjusted net income (1)

 

$

180.5

 

 

$

168.9

 

 

$

172.3

 

 

Earnings per share (diluted)

 

$

1.03

 

 

$

1.12

 

 

$

1.18

 

 

Adjusted earnings per share (diluted) (1)

 

$

1.24

 

 

$

1.16

 

 

$

1.18

 

 

Book value per common share

 

$

32.53

 

 

$

31.56

 

 

$

28.39

 

 

Tangible equity (1) per common share

 

$

29.20

 

 

$

28.21

 

 

$

25.01

 

 

Tangible equity to tangible assets ratio (1)

 

10.02

%

 

9.87

%

 

9.65

%

 

Return on average assets (2)

 

1.45

%

 

1.63

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