East West Bancorp Reports Net Income for First Quarter 2021 of $205 Million and Diluted Earnings Per Share of $1.44

Rhea-AI Summary

East West Bancorp (Nasdaq: EWBC) reported a strong financial performance for Q1 2021, with net income of $205 million, or $1.44 per diluted share, marking a 25% increase from Q4 2020. Total loans reached a record $39.6 billion, growing 13% annualized, while deposits surged to $49.5 billion, up 42% annualized. The return on average assets was 1.50%, and return on average equity was 15.6%. The company did not record a provision for credit losses, reflecting an improved macroeconomic outlook. A cash dividend of $0.33 per share was declared for Q2 2021.

Positive

• Net income increased by 25% quarter-over-quarter, reaching $205 million.
• Total loans grew to a record $39.6 billion, up 13% annualized.
• Total deposits reached $49.5 billion, growing 42% annualized.
• Return on average equity stood at 15.6%, a strong indicator of profitability.
• No provision for credit losses recorded, indicating stable asset quality.

Negative

• Net interest margin decreased to 2.71%, down 6 basis points from Q4 2020.
• Average loan yield contracted by 10 basis points to 3.58%.

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the first quarter of 2021. Net income for the first quarter of 2021 was $205.0 million, or $1.44 per diluted share. First quarter 2021 return on average assets was 1.50% and return on average equity was 15.6%.

“East West had a strong start to 2021. In the first quarter, our loans and deposits grew at a robust pace, our revenue and profitability expanded, and credit quality was stable, resulting in net income growth of 25% from the fourth quarter of 2020,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “As of March 31, 2021, our total loans reached a record $39.6 billion, growing by 13% annualized from December 31, 2020, and our total deposits reached a record $49.5 billion, growing by 42% annualized during the same period.”

“Quarter-over-quarter, our revenue grew 10% annualized and our expenses were well-managed, resulting in an adjusted pre-tax, pre-provision income growth of 17% annualized,” continued Ng. “Due to an improved macroeconomic outlook and stable asset quality, we did not record a provision for credit losses in the first quarter of 2021. Our solid financial performance for the first quarter resulted in a return on average tangible equity of 17.2%.”

“Based on the loan production and deposit growth year-to-date, we are optimistic about our growth trajectory for the full year. We are sanguine about our asset quality outlook, supported by the strength and resilience of our customers and the continued economic recovery,” concluded Ng. “With our strong balance sheet, we are very well positioned to support our customers in their growth and expansion plans as the economy reopens and rebounds.”

BALANCE SHEET

• Record Assets – Total assets reached $56.9 billion as of March 31, 2021, up by $4.7 billion, or 37% annualized, from $52.2 billion as of December 31, 2020.
  
  First quarter 2021 average interest-earning assets of $52.9 billion grew by $3.1 billion, or 26% linked quarter annualized. The growth in average interest-earning assets largely consisted of a $1.4 billion increase in average available-for-sale (“AFS”) debt securities, a $1.0 billion increase in average loans, a $507.8 million increase in interest-bearing cash and deposits with banks, and a $204.1 million increase in average assets purchased under resale agreements (“resale agreements”). On an end-of-period basis, AFS debt securities increased by $2.2 billion and resale agreements increased by $700.0 million between March 31, 2021, and December 31, 2020.

• Record Loans – Total loans reached $39.6 billion as of March 31, 2021, up by $1.2 billion, or 13% annualized, from $38.4 billion as of December 31, 2020. Excluding Paycheck Protection Program (“PPP”) loans of $2.1 billion as of March 31, 2021, total loans grew by $691.3 million, or 8% linked quarter annualized. During the first quarter of 2021, the Company funded 5,075 new PPP loans totaling $828.2 million.
  
  First quarter 2021 average loans of $38.7 billion grew by $1.0 billion, or 11% linked quarter annualized. The strong loan growth during the quarter was broad-based, with the strongest growth from residential mortgage, which increased by $432.5 million, or 18% linked quarter annualized. Excluding PPP loans, average loans grew by 9% annualized from the fourth quarter of 2020.

• Record Deposits – Total deposits reached $49.5 billion as of March 31, 2021, up by $4.7 billion, or 42% annualized, from $44.9 billion as of December 31, 2020. Noninterest-bearing demand deposits reached a record $18.9 billion as of March 31, 2021, up by $2.6 billion, or 65% annualized, from $16.3 billion as of December 31, 2020. Noninterest-bearing demand deposits made up 38% of total deposits as of March 31, 2021, up from 36% as of December 31, 2020.
  
  First quarter 2021 average deposits of $47.8 billion grew by $3.4 billion, or 31% linked quarter annualized. Growth in the first quarter was across all deposit categories, led by noninterest-bearing demand deposits, which increased by $1.8 billion, or 44% linked quarter annualized.

• Capital Levels – Capital levels for East West are strong. As of March 31, 2021, stockholders’ equity was $5.3 billion, or $37.26 per common share, and tangible equity¹ per common share was $33.90. As of March 31, 2021, the tangible equity to tangible assets ratio¹ was 8.53%, the common equity tier 1 (“CET1”) capital ratio was 12.7%, and the total risk-based capital ratio was 14.3%.

OPERATING RESULTS

First Quarter Earnings – First quarter 2021 net income was $205.0 million, or $1.44 per diluted share, an increase of 25% from $164.1 million, or $1.15 per diluted share, for the fourth quarter of 2020.

Fourth quarter 2020 earnings included items related to DC Solar tax credit investments, which added $2.6 million, or two cents per diluted share to earnings. Excluding these items, first quarter 2021 net income increased 27% from fourth quarter adjusted net income² of $161.5 million, or $1.13 per diluted share².

First Quarter 2021 Compared to Fourth Quarter 2020

Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $353.7 million, an increase of 2% (or 8% annualized) from $346.6 million. Net interest margin (“NIM”) of 2.71% decreased by six basis points from 2.77%.

• Excluding the impact of PPP loans, adjusted NII³ totaled $338.7 million, an increase of 2% (or 7% annualized) from $332.7 million. Adjusted NIM³ of 2.70% compressed by six basis points from 2.76%. NII earned on PPP loans contributed $15.0 million to NII in the first quarter, compared with $13.9 million in the fourth quarter.
• NII growth reflected decreased interest expense, due to a lower average cost of deposits, and higher interest income from AFS debt securities, due to volume, partially offset by lower interest income from loans, due to a decrease in the average loan yield.
• Average loan yield of 3.58% contracted by 10 basis points from 3.68%, reflecting the impact of lower interest rates on loans, and origination activity in a low interest rate environment.
• The average cost of deposits of 0.18% decreased by seven basis points from 0.25%. The average cost of interest-bearing deposits of 0.30% decreased by 10 basis points from 0.40%. The decrease in the cost of deposits primarily reflects continued downward repricing of time deposits to market rates.

Noninterest Income
Noninterest income totaled $ 72.9 million, an increase of 4% (or 18% annualized) from $ 69.8 million. The quarter-over-quarter change reflects growth in foreign exchange income, wealth management and deposit account fees, and a favorable change in the credit valuation adjustment of interest rate contracts. This was partially offset by a decline in interest rate contract revenue, lower gains on sales of loans, lower other investment income and a decrease in other income. Fourth quarter 2020 noninterest income included $3.4 million in gains on sales of bank premises and other assets, included in other income.

Noninterest Expense
Noninterest expense totaled $191.1 million. First quarter noninterest expense consisted of $165.0 million of adjusted noninterest expense⁴, $25.4 million in amortization of tax credit and other investments, and $0.7 million in amortization of core deposit intangibles.

• Adjusted noninterest expense of $165.0 million decreased by $0.6 million from $165.6 million in the fourth quarter. Reductions in overall operating expenses more than offset increased compensation and employee benefits expense, which is typically higher in the first quarter due to payroll taxes and related expenses.
• Amortization of tax credit and other investments totaled $25.4 million, an increase from $12.3 million in the fourth quarter. Fourth quarter amortization of tax credit and other investments was lower because it included $10.7 million of recoveries related to DC Solar tax credit investments.
• The adjusted efficiency ratio⁴ was 38.7% in the first quarter, an improvement from 39.8% in the fourth quarter.

TAX RELATED ITEMS
First quarter 2021 income tax expense was $30.5 million and the effective tax rate was 13%, compared with income tax expense of $49.3 million and an effective tax rate of 23% for the fourth quarter of 2020.

• First quarter 2021 income tax expense and effective tax rate reflect the benefit of a higher amount of tax credit investments, compared with the fourth quarter of 2020.
• Fourth quarter 2020 income tax expense and effective tax rate were elevated by $8.1 million related to DC Solar tax credit investments.

ASSET QUALITY
The allowance for loan losses (“ALLL”) totaled $607.5 million, or 1.53% of loans held-for-investment (“HFI”), as of March 31, 2021, compared with $620.0 million, or 1.61% of loans HFI, as of December 31, 2020.

• During the first quarter of 2021, we recorded no provision for credit losses, compared with a provision of $24.3 million for the fourth quarter of 2020.
• Quarter-over-quarter, the ALLL decreased by $12.5 million, and the ALLL coverage ratio of loans HFI decreased by 8 basis points. The change in the ALLL largely reflects an improved macroeconomic forecast.
• First quarter 2021 net charge-offs were $13.4 million, or annualized 0.14% of average loans HFI, a decrease from $18.8 million, or annualized 0.20% of average loans HFI for the fourth quarter of 2020. The quarter-over-quarter improvement primarily reflects a decrease in commercial real estate charge-offs.
• As of March 31, 2021, criticized loans totaled $1,216.9 million, or 3.07% of loans HFI, compared with $1,217.4 million, or 3.17% of loans HFI, as of December 31, 2020. Quarter-over-quarter, special mention loans decreased to $504.2 million as of March 31, 2021, from $564.6 million as of December 31, 2020. Classified loans increased to $712.7 million as of March 31, 2021, from $652.9 million as of December 31, 2020.
• Nonperforming assets were $258.1 million, or 0.45% of total assets, as of March 31, 2021, compared with $234.9 million, or 0.45% of total assets, as of December 31, 2020.

____________________
1		See reconciliation of GAAP to non-GAAP financial measures in Table 12.
2		See reconciliation of GAAP to non-GAAP financial measures in Table 10.
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 11.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital ratios as of March 31, 2021, December 31, 2020, and March 31, 2020.

EWBC Regulatory Capital Metrics				Basel III
($ in millions)				March 31, 2021 (a)				December 31, 2020 (a)				March 31, 2020 (a)				Minimum Capital Ratio			Well Capitalized Ratio			Minimum Capital Ratio + Conservation Buffer (b)
Risk-Based Capital Ratios:
CET1 capital ratio				12.7		%		12.7		%		12.4		%		4.5	%		6.5	%		7.0	%
Tier 1 capital ratio				12.7		%		12.7		%		12.4		%		6.0	%		8.0	%		8.5	%
Total capital ratio				14.3		%		14.3		%		13.9		%		8.0	%		10.0	%		10.5	%
Leverage ratio				9.1		%		9.4		%		10.2		%		4.0	%		5.0	%		4.0	%
Risk-Weighted Assets (“RWA”) (c)				$	39,572			$	38,406			$	36,548			N/A			N/A			N/A

N/A Not applicable.
(a)		The Company has elected to use the 2020 CECL transition provision in the calculation of its March 31, 2021, December 31, 2020 and March 31, 2020 regulatory capital ratios. The Company’s March 31, 2021 regulatory capital ratios and RWA are preliminary.
(b)		An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.
(c)		Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared second quarter 2021 dividends for the Company’s common stock. The common stock cash dividend of $0.33 per share is payable on May 17, 2021, to shareholders of record on May 3, 2021.

On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock. In 2020, the Company repurchased $145.9 million, or 4.5 million shares, of common stock under this authorization during the first quarter. East West did not repurchase any shares during the first quarter of 2021 under this authorization.

Conference Call

East West will host a conference call to discuss first quarter 2021 earnings with the public on Thursday, April 22, 2021 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses first quarter 2021 results and operating developments.

• The following dial-in information is provided for participation in the conference call: calls within the U.S. – (877) 506-6399; calls within Canada – (855) 669-9657; international calls – (412) 902-6699.
• A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
• A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
• A replay of the conference call will be available on April 22, 2021 at 11:30 a.m. Pacific Time through May 22, 2021. 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: 10153738.

About East West

East West Bancorp, Inc. is a public company with total assets of $56.9 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, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto) contain certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the SEC and management may make forward-looking statements to analysts, investors, representatives of media and others. Forward-looking statements are statements that are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control, particularly with regard to developments related to the COVID-19 pandemic. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” “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, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to: the impact of disease pandemics, such as the resurgences and subsequent waves of the COVID-19 pandemic, on the Company, its operations, customers, and employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address such a pandemic, which may precipitate or exacerbate one or more of the below-mentioned or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period; changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the Small Business Administration’s (“SBA”) Paycheck Protection Program, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and any similar or related rules and regulations, efforts of the Federal Reserve to provide liquidity to the United States (“U.S.”) financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers; changes in the U.S. economy, including an economic slowdown or recession, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”), the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission (“SEC”), the Consumer Financial Protection Bureau (“CFPB”) and the California Department of Financial Protection and Innovation (“DFPI”) - Division of Financial Institutions, and SBA; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against other financial institutions in its banking markets; the soundness of other financial institutions; success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate (“SOFR”) being selected as the preferred alternative reference rate to the London Interbank Offered Rate (“LIBOR”); impact of a communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused and materially impact the Company’s ability to provide services to its clients; adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; impact on the Company’s international operations due to political developments, disease pandemics, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from the Company’s interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on critical accounting policies and assumptions; impact of other potential federal tax changes and spending cuts; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; impact on the Company’s liquidity due to changes in the Company’s ability to pay dividends and repurchase common stock and to receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; impact of climate change, social and sustainability concerns; 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 increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s AFS debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts, terrorism or other events that may directly or indirectly result in a negative impact on the Company’s financial performance. Given the ongoing and dynamic nature of the COVID-19 pandemic, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2020 Form 10-K under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in thousands, except per share data)
(unaudited)
Table 1
														March 31, 2021 % or Basis Point Change
		March 31, 2021				December 31, 2020				March 31, 2020				Qtr-o-Qtr			Yr-o-Yr
Assets
Cash and due from banks		$	582,270			$	592,117			$	427,415			(1.7	)%		36.2	%
Interest-bearing cash with banks		4,036,863				3,425,854				2,652,627				17.8			52.2
Cash and cash equivalents		4,619,133				4,017,971				3,080,042				15.0			50.0
Interest-bearing deposits with banks		741,923				809,728				293,509				(8.4	)		152.8
Assets purchased under resale agreements (“resale agreements”)		2,160,038				1,460,000				860,000				47.9			151.2
Available-for-sale (“AFS”) debt securities (amortized cost of $7,904,546, $5,470,523 and $3,660,413)		7,789,213				5,544,658				3,695,943				40.5			110.8
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock		83,250				83,046				78,745				0.2			5.7
Loans held-for-sale (“HFS”)		—				1,788				1,594				(100.0	)		(100.0	)
Loans held-for-investment (''HFI'') (net of allowance for loan losses of $607,506, $619,983 and $557,003)		38,981,242				37,770,972				35,336,390				3.2			10.3
Investments in qualified affordable housing partnerships, net		284,862				213,555				198,653				33.4			43.4
Investments in tax credit and other investments, net		361,438				266,525				268,330				35.6			34.7
Goodwill		465,697				465,697				465,697				—			—
Operating lease right-of-use assets		94,483				95,460				101,381				(1.0	)		(6.8	)
Other assets		1,292,867				1,427,513				1,568,261				(9.4	)		(17.6	)
Total assets		$	56,874,146			$	52,156,913			$	45,948,545			9.0	%		23.8	%
Liabilities and Stockholders’ Equity
Deposits		$	49,547,136			$

FAQ

What were East West Bancorp's earnings for Q1 2021?

East West Bancorp reported net income of $205 million, or $1.44 per diluted share, for Q1 2021.

How much did East West Bancorp grow its loans in Q1 2021?

Total loans grew to a record $39.6 billion, which is an increase of 13% annualized from the previous quarter.

What is the dividend declared by East West Bancorp for Q2 2021?

East West Bancorp declared a cash dividend of $0.33 per share for the second quarter of 2021.

What was the return on average assets for East West Bancorp in Q1 2021?

The return on average assets for Q1 2021 was 1.50%.

Did East West Bancorp record any provision for credit losses in Q1 2021?

No, East West Bancorp did not record a provision for credit losses in Q1 2021.