EAST WEST BANCORP INC [EWBC] Filings

10-Q 1 ewbc-20240630.htm 10-Q ewbc-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-24939

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

95-4703316

(I.R.S. Employer Identification No.)

135 North Los Robles Ave., 7th Floor, Pasadena, California 91101

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(626) 768-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.001 per share

EWBC

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 138,605,194 shares as of July 31, 2024.

TABLE OF CONTENTS


			Page
FORWARD-LOOKING STATEMENTS			3
PART I — FINANCIAL INFORMATION			4

	Item 1.	Consolidated Financial Statements	4
		Consolidated Balance Sheets (Unaudited)	4
		Consolidated Statement of Income (Unaudited)	5
		Consolidated Statement of Comprehensive Income (Unaudited)	6
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	7
		Consolidated Statement of Cash Flows (Unaudited)	8
		Notes to Consolidated Financial Statements (Unaudited)	10
		1 — Basis of Presentation	10
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	10
		3 — Fair Value Measurement and Fair Value of Financial Instruments	11
		4 — Securities Purchased under Resale Agreements	21
		5 — Securities	22
		6 — Derivatives	28
		7 — Loans Receivable and Allowance for Credit Losses	35
		8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net	51
		9 — Goodwill	52
		10 — Short-Term Borrowings and Long-Term Debt	53
		1 1 — Commitments and Contingencies	53


		1 2 — Stock Compensation Plans	55
		1 3 — Stockholders’ Equity and Earnings Per Share	56
		1 4 — Accumulated Other Comprehensive Income (Loss)	56
		1 5 — Business Segments	58


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	103

	Item 4.	Controls and Procedures	103


PART II — OTHER INFORMATION			104

	Item 1.	Legal Proceedings	104
	Item 1A.	Risk Factors	104
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	105


	Item 5.	Other Information	105
	Item 6.	Exhibits	106

GLOSSARY OF ACRONYMS			107

SIGNATURE			108

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (this “Form 10-Q”) contain “forward-looking statements” that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we,” “us,” “our” or “EWBC”) may make forward-looking statements in other documents that it files with, or furnishes to, the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties.

Factors that might cause future results to differ materially from historical performance and any forward-looking statements include, but are not limited to:

•changes in local, regional and global business, economic and political conditions, and natural or geopolitical events;

•the soundness of other financial institutions and the impacts related to or resulting from bank failures and other industry volatility, including potential increased regulatory requirements, Federal Deposit Insurance Corporation insurance premiums and assessments, and deposit withdrawals;

•changes in laws or the regulatory environment, including trade, monetary and fiscal policies and laws and current or potential disputes between the U.S. and the People’s Republic of China;

•changes in the commercial and consumer real estate markets;

•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;

•the Company’s ability to compete effectively against financial institutions and other entities, including as a result of emerging technologies;

•the success and timing of the Company’s business strategies;

•the Company’s ability to retain key officers and employees;

•changes in key variable market interest rates, competition, regulatory requirements and product mix;

•changes in the Company’s costs of operation, compliance and expansion;

•disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third-party vendors with which the Company does business, including as a result of cyber-attacks, and the disclosure or misuse of confidential information;

•the adequacy of the Company’s risk management framework;

•future credit quality and performance, including expectations regarding future credit losses and allowance levels;

•adverse changes to the Company’s credit ratings;

•legal proceedings, regulatory investigations and their resolution;

•the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;

•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries; and

•any strategic acquisitions or divestitures and the introduction of new or expanded products and services or other events that may directly or indirectly result in a negative impact on the financial performance of the Company and its customers.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 (the “Company’s 2023 Form 10-K”) under the heading Item 1A. Risk Factors. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. 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.

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in thousands, except shares)

(Unaudited)



	June 30, 2024		December 31, 2023

ASSETS
Cash and due from banks	$	460,611	$	444,793
Interest-bearing cash with banks	3,905,080		4,170,191
Cash and cash equivalents	4,365,691		4,614,984
Interest-bearing deposits with banks	24,530		10,498
Securities purchased under resale agreements (“resale agreements”)	485,000		785,000
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $9,644,377 and $6,916,491)	8,923,528		6,188,337
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,405,227 and $2,453,971)	2,938,250		2,956,040

Loans held-for-sale	18,909		116
Loans held-for-investment (net of allowance for loan losses of $683,794 and $668,743)	52,084,115		51,542,039
Affordable housing partnership, tax credit and Community Reinvestment Act (“CRA”) investments, net	956,428		905,036

Premises and equipment (net of accumulated depreciation of $162,030 and $157,622)	81,675		86,370
Goodwill	465,697		465,697
Operating lease right-of-use assets	81,941		94,024
Other assets	2,042,508		1,964,743
TOTAL	$	72,468,272	$	69,612,884
LIABILITIES
Deposits:
Noninterest-bearing	$	14,922,741	$	15,539,872
Interest-bearing	45,077,044		40,552,566
Total deposits	59,999,785		56,092,438

Bank Term Funding Program (“BTFP”) borrowings	—		4,500,000

Federal Home Loan Bank (“FHLB”) advances	3,500,000		—

Long-term debt and finance lease liabilities	36,141		153,011
Operating lease liabilities	89,644		102,353
Accrued expenses and other liabilities	1,627,588		1,814,248
Total liabilities	65,253,158		62,662,050
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,882,407 and 169,372,230 shares issued	170		169
Additional paid-in capital	2,007,388		1,980,818
Retained earnings	6,873,653		6,465,230
Treasury stock, at cost 31,277,970 and 29,344,863 shares	(1,011,924)		(874,787)
Accumulated other comprehensive loss (“AOCI”), net of tax	(654,173)		(620,596)
Total stockholders’ equity	7,215,114		6,950,834
TOTAL	$	72,468,272	$	69,612,884

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

($ and shares in thousands, except per share data)

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	868,441	$	771,264	$	1,734,830	$	1,499,650
Debt securities	111,732		68,970		187,124		134,901

Resale agreements	1,885		3,969		8,000		8,472
Restricted equity securities	2,950		936		4,289		1,975
Interest-bearing cash and deposits with banks	49,406		60,995		123,788		96,642
Total interest and dividend income	1,034,414		906,134		2,058,031		1,741,640
INTEREST EXPENSE
Deposits	431,482		287,477		837,681		504,271
Federal funds purchased and other short-term borrowings	32		49,032		42,138		57,857
FHLB advances	48,840		—		56,579		6,430
Securities sold under repurchase agreements (“repurchase agreements”)	58		211		93		1,263
Long-term debt and finance lease liabilities	773		2,668		3,172		5,212
Total interest expense	481,185		339,388		939,663		575,033
Net interest income before provision for credit losses	553,229		566,746		1,118,368		1,166,607
Provision for credit losses	37,000		26,000		62,000		46,000
Net interest income after provision for credit losses	516,229		540,746		1,056,368		1,120,607
NONINTEREST INCOME
Deposit account fees	25,649		23,369		50,597		46,423
Lending fees	24,340		20,901		47,265		41,487
Foreign exchange income	12,924		12,167		24,393		23,476
Wealth management fees	9,478		6,944		18,115		13,291
Customer derivative income	5,764		7,373		9,514		9,937


Net gains (losses) on sales of loans	56		(7)		15		(29)
Net gains (losses) on AFS debt securities	1,785		—		1,834		(10,000)



Other investment income	586		4,003		3,401		5,924
Other income	4,091		3,881		8,527		8,100
Total noninterest income	84,673		78,631		163,661		138,609
NONINTEREST EXPENSE
Compensation and employee benefits	133,588		124,937		275,400		254,591
Occupancy and equipment expense	15,031		16,088		30,261		31,675
Deposit insurance premiums and regulatory assessments	10,708		8,262		30,357		16,172
Deposit account expense	12,050		10,559		24,238		20,168
Computer software and data processing expenses	11,392		10,692		22,736		21,399


Other operating expense	37,613		35,337		71,058		70,207
Amortization of tax credit and CRA investments	16,052		55,914		29,259		66,024

Total noninterest expense	236,434		261,789		483,309		480,236
INCOME BEFORE INCOME TAXES	364,468		357,588		736,720		778,980
INCOME TAX EXPENSE	76,238		45,557		163,415		144,510
NET INCOME	$	288,230	$	312,031	$	573,305	$	634,470
EARNINGS PER SHARE (“EPS”)
BASIC	$	2.07	$	2.21	$	4.12	$	4.49
DILUTED	$	2.06	$	2.20	$	4.09	$	4.47
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	138,980		141,468		139,195		141,291
DILUTED	139,801		141,876		140,047		141,910

See accompanying Notes to Consolidated Financial Statements.