East West Bancorp, Inc. · NASDAQ:EWBC
East West Bancorp — Q4 2017 Earnings Presentation
36 slides from East West Bancorp's earnings presentation, March 2018
Slide 1: Fourth Quarter 2017 Investor Presentation
Fourth Quarter 2017 INVESTOR PRESENTATION March 2018
Slide 2: Forward-Looking Statements
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 ex
Slide 3: East West Profile
East West Profile East West Bank is the largest independent bank headquartered in Los Angeles, CA. With $37 billion in total assets, 45 years of operating history, and 3,000 associates, East West Bank is the leading bank serving the Asian community in the U.S. UNITED STATES 130 + LOCATIONS GREATER C
Slide 4: East West Bank Milestones
East West Bank Milestones The Going Size Expansion in Today Beginning Public Doubles TX and CA 1973 1999 2009 2014 2017 First EWB Branch EWBC begins Acquired $10 billion Presence expanded Net income: opens for business. to trade on United Commercial in TX and CA with $506 million First S&L bank serv
Slide 5: East West Bank's Advantage
East West Bank’s Advantage BRIDGE THE U.S. THE CHINA VALUE FOR BANKING FACTOR FACTOR CUSTOMERS EXPERTISE Largest U.S. bank serving China is the 2nd largest Knowledge and Help navigate complicated the Asian community. world economy. experience in: business transactions. Culture Among the
Slide 6: Bank Rankings by Total Assets and Market Cap
Bank Rankings by Total Assets and Market Cap Rank Total assets (12.31.17) Ticker $Billion Rank Market cap (02.26.18) Ticker $Billion 1 JPMorgan Chase & Co. JPM 2,533.6 1 JPMorgan Chase & Co. JPM 406.8 2 Bank of America Corporation BAC 2,281.2 2 Bank of America Corporation BAC 332.1 3 Wells Fargo & C
Slide 7: Strong Balance Sheet Growth
Strong Balance Sheet Growth ($ in billions) Total Assets Stockholders' Equity 37.2 3.8 $40 34.8 $4 3.4 32.4 3.1 28.7 2.9 $30 24.7 $3 22.5 2.3 2.3 2.4 2.4 20.6 20.7 22.0 2.1 $20 $2 1.6 11.9 12.4 1.2 $10 $1 $0 $0 07 08 09 10 11 12 13 14 15 16 17 07 08 09 10 11 12 13 14 15 16 17 Total Loans Total Depos
Slide 8: Strong Earnings Growth
Strong Earnings Growth Adjusted Net Earnings ($ in millions) $504 $432 $385 +17% $346 $278 $293 +12% $243 +18% +11% $165 +14% +6% $77 2009 2010 2011 2012 2013 2014 2015 2016 2017* UCBH Adjusted Diluted EPS acquisition $3.45 Nov. 2009 doubles $2.97 $2.66 +16% bank size $2.41 $2.09 +12% +11% $1.87 +15
Slide 9: Steadily Growing Equity While Maintaining Robust TCE
Steadily Growing Equity While Maintaining Robust TCE 26 24 Tangible Equity per Share $23.13 22 $20.27 20 $18.15 18 +14% $16.30 +12% 16 $13.58 $14.39 +11% 14 $12.22 12 $10.87 +13% 10 +6% $7.75 +11% 8 6 4 2 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 UCBH Tangible Equity to Tangible Assets Ratio 10
Slide 10: Outperforming Peers on Key Profitability Metrics
Outperforming Peers on Key Profitability Metrics Return on Average Assets Return on Average Equity 10% 1% 1.30% 1.35% 1.41% 13.1% 13.0% 13.7% 1.16% 9.5% 2016 4Q17 * 2017 2017 Third 2016 4Q17 * 2017 2017 Third Full-Year Full Year * Quarter Full-Year Full Year * Quarter Industry Industry Average Avera
Slide 11: Highlights of Full Year & Fourth Quarter 2017 Results
Highlights of Full Year & Fourth Quarter 2017 Results Earnings results. FY 2017 net income of $506mm and EPS of $3.47 grew by 17% Y-o-Y. 4Q17 4Q 2017 4Q17 net income of $85mm and EPS of $0.58 were reduced by $42mm, or Net Adj. Net $0.29 per share, due to the enactment of the Tax Cuts and Jobs Ac
Slide 12: Management Outlook: Full Year 2018
Management Outlook: Full Year 2018 Earnings drivers Initial full year 2018 outlook 2017 FY actual $29.1 billion, End of Period Loans Increase at a percentage rate of approximately 10%. +14% Y-o-Y NIM In the range of 3.65% to 3.75%. 3.42%, (excl. impact of ASC 310-30 +27bps Y-o-Y discount accreti
Slide 13: 4Q17 Earnings Growth and Profitability
4Q17 Earnings Growth and Profitability Diluted EPS & EPS Growth Net Income & ROE* and Tangible ROE* GAAP $1.16 $200 GAAP $1.20 GAAP 40% $169.7 GAAP $0.91 $0.28 $132.7 $0.02 $41.5 $ in millions $0.90 30% $118.3 $2.2 $ per share $0.81 $110.7 $0.76 $0.88 $0.89 $128.2 $130.5 $126.6 $(41.7) $0.87 $(0.29)
Slide 14: 4Q17 Record Loans of $29.1 billion
4Q17 Record Loans of $29.1 billion Q-o-Q Difference Total Loans Total end-of-period loans increased $528mm or 2% (+7% LQA). $30 $29.1 $28.5 $27.2 C&I: +1%, or +3% LQA. 2.2 7% $26.5 2.1 +7% $25.5 2.1 +19% LQA CRE (w/ land & construction): +1%, or +4% LQA. 2.1 +11% LQA 2.1 +15% LQA 4.4 4.7 16%
Slide 15: Specialized Industry Verticals: Cross-Border Growth
Specialized Industry Verticals: Cross-Border Growth Includes Includes Specialized Industry Total Loans C&I loans $29.1 bn $10.7 bn or 37% $4.5 bn or 42% Other*, 17% Private Equity, Equipment 25% Finance, Traditional C&I Specialized 7% (including Industry Technology, trade finance), Lending, 6% 58% 4
Slide 16: Diversified Commercial Real Estate Portfolio
Diversified Commercial Real Estate Portfolio CRE* Property Type Distribution (as of 12.31.17) CRE* LTV Distribution (as of 12.31.17) Over 75%: 71% to 75%: 5% 2% 66% to 70%: Other, 13% 8% Construction Retail, 32% & Land, 6% Less than 50%: $2.2 million 37% Hotel/Motel, $9.6 billion 61% to 65%: Avg. ou
Slide 17: 4Q17 Record Deposits of $32.2 billion
4Q17 Record Deposits of $32.2 billion Q-o-Q Difference Total Deposits Total end-of-period deposits increased $909mm or 3% (+12% LQA). $32.2 $31.2 $31.3 0.6 1% DDA: +1%, or +5% LQA. $30.5 $29.9 +12% $30 +8% +2% LQA IB checking & savings: +6%, or +22% LQA. +9% LQA LQA 5.8 5.6 18% 6.1 5.6 LQA 5.8
Slide 18: 4Q17 Summary Income Statement
4Q17 Summary Income Statement % Change vs. ($ in millions, except per share data) 4Q17 3Q17 4Q16 4Q17 Comments Adjusted net interest income $ 312.7 5% 20% Reflects loan growth & loan yield expansion. ASC 310-30 discount accretion income $ 7.0 55% (39)% Includes recoveries. Net interest income $3
Slide 19: 4Q17 Net Interest Income & Net Interest Margin
4Q17 Net Interest Income & Net Interest Margin 4Q17 NII of $320mm increased Q-o-Q by $16.5mm, Net Interest Income or 5%. $340 $319.7 4Q17 ASC 310-30 discount accretion income of $7mm $320 7.0 $303.2 included $3mm of recoveries, which drove the Q-o-Q $290.1 4.6 $300 increase. $ in millions $272.1
Slide 20: 4Q17 Fees & Other Operating Income
4Q17 Fees & Other Operating Income Q-o-Q Difference Total Fees and Other Operating Income Total noninterest income of $45mm decreased by $50 $4mm or 9% Q-o-Q. $47.5 7.1 $42.1 Excluding the impact of all gains on sales, fees and $40.9 other operating income of $38.5mm decreased by $40 $38.8 $38.5
Slide 21: 4Q17 Efficiency, PTPP Profitability & Tax Items
4Q17 Efficiency, PTPP Profitability & Tax Items 4Q17 total noninterest expense: $175mm. Noninterest Expense & Efficiency Ratio 4Q17 adj.* noninterest expense of $152mm, up by 43.2% 43.3% $13mm or 9% Q-o-Q. $180 41.3% 45.0% 41.6% 39.8% Compensation and employee benefits expense 40.0% increased
Slide 22: Asset Quality Metrics
Asset Quality Metrics Allowance for Loan Losses Provision Expense and Net Charge-off* Ratio $35 4.00% $29.0 1.00% $28 $25.5 3.00% $49.2 $23.6 $46.3 $21.7 $ in bilions $21 $ in millions $17.9 $40 2.00% 1.40% $27.5 0.50% $14 1.20% $22.4 1.12% 1.02% 0.99% $14.2 1.00% 0.18% $7 0.08% 0.03% 0.01% 0.15% $0
Slide 23: Strong Capital Ratios
Strong Capital Ratios Regulatory capital ratios increased by 51 to 55 bps year-over-year, positive impact from earnings partially offset by increase in risk weighted assets. One-time items: +14bps of risk-based capital from commercial building sale in 1Q17, offset by -14bps of capital decrease d
Slide 24: Providing a Healthy Dividend to Stockholders
Providing a Healthy Dividend to Stockholders 400% or $0.64 per share increase in dividends since 2011 EWBC has consistently paid an annual dividend on the common stock $0.80 $0.80 $0.80 since going public in 1999 $0.72 $0.60 $0.40 $0.40 $0.40 $0.20 $0.20 $0.20 $0.20 $0.14 $0.16 $0.06 $0.06 $0.06 $0.
Slide 25: Interest Rate Sensitivity
Interest Rate Sensitivity EWBC’s Net Interest Income Sensitivity to Selected Interest Rate Scenarios (as of December 31, 2017) Net Interest Income Volatility: 31-Dec-2017 31-Dec-2016 Change in Interest Rates : % change $ in mm in EPS % change $ in mm in EPS + 200 bps 18.9% $223.7 + $ 1.14 22.4% $231
Slide 26: Loan Portfolio: Underlying Interest Rate Detail
Loan Portfolio: Underlying Interest Rate Detail EWBC’s Loan Portfolio Breakdown: Fixed, Hybrid, & Variable Rate Loans (as of December 31, 2017) % of % of EWBC’s loan portfolio is $ in mm. total loans $ in mm. category predominantly linked to Prime True Fixed rate loans 2,320.5 8.0% Rate and short-te
Slide 27: Key Focus Areas
Key Focus Areas Deliver Focus on HIGH PROFITABILITY BRIDGE BANKING Enhance Expand RISK MARKET MANAGEMENT OPPORTUNITY LONG-TERM Grow Maintain good SHAREHOLDER CORE ASSET QUALITY VALUE DEPOSITS Control Maintain solid EXPENSES NII* & NIM* Build FEE-BASED businesses *NII = Net Interest Income. NIM = Net
Slide 28: Appendix
APPENDIX ty] EAST WEST BANK Your financial bridge”
Slide 29: Appendix: GAAP to Non-GAAP Reconciliation
Appendix: GAAP to Non-GAAP Reconciliation EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) On December 22, 2017, the Tax Cuts and Jobs Act was enacted, which resulted in additional income tax expense recorded in the fourth quarter of 2017. The tab
Slide 30: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ and shares in thousands, except for per share data) (unaudited) As disclosed in the Company’s current report on Form 8-K filed on March 30, 2017, the Company consummated a s
Slide 31: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ and shares in thousands, except for per share data) (unaudited) As disclosed in the Company’s current report on Form 8-K filed on March 30, 2017, the Company consummated a s
Slide 32: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio
Slide 33: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio
Slide 34: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) The Company believes that presenting the adjusted average loan yield and adjusted net interest margin that exclude the ASC 310-30 discount accretio
Slide 35: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Tangible equity and t
Slide 36: Appendix: GAAP to Non-GAAP Reconciliation (cont'd)
Appendix: GAAP to Non-GAAP Reconciliation (cont’d) EAST WEST BANCORP, INC. AND SUBSIDIARIES GAAP TO NON-GAAP RECONCILIATION ($ in thousands) (unaudited) Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income