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East West Bancorp Reports Net Income for Second Quarter 2012 of $70.6 Million, Up 17% from Prior Year, and Earnings Per Share of $0.47, Up 21% from Prior Year

Wednesday, July 18, 2012

East West Bancorp Reports Net Income for Second Quarter 2012 of $70.6 Million, Up 17% from Prior Year, and Earnings Per Share of $0.47, Up 21% from Prior Year16:30 EDT Wednesday, July 18, 2012 PASADENA, Calif. (Business Wire) -- East West Bancorp, Inc. (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported financial results for the second quarter of 2012. For the second quarter of 2012, net income was $70.6 million or $0.47 per dilutive share. East West increased second quarter net income by $10.0 million or 17% and increased earnings per dilutive share $0.08 or 21% from the prior year period. “Net income for East West for the second quarter of 2012 totaled $70.6 million or $0.47 per share, an increase in earnings per share of 21% compared to the prior year period,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “East West's strong financial results for the second quarter are the result of our ability to drive growth and generate strong operating performance quarter after quarter. During the second quarter of 2012, we continued to focus on growing both noncovered loans and low-cost core deposits, and reducing credit costs. Since March 31, 2012, we grew our noncovered commercial and trade finance loans by $180.0 million or 6%, and increased core deposits by $476.9 million or 5% to $11.0 billion.” Ng continued, “The increase in East West's profitability is due to our success in growing key loan and deposit portfolios, combined with reduced credit costs and strong expense management. During the second quarter of 2012, the provision for loan losses decreased to $15.5 million and net charge-offs totaled $11.7 million, a decrease of 42% and 63%, respectively, from prior year. Nonperforming assets continued to decline, decreasing to $155.7 million or 0.72% of total assets as of June 30, 2012. Further, the efficiency ratio also improved during the second quarter, decreasing from 44% in the first quarter of 2012 to 42%.” “East West continues to outperform peers and the industry, despite the challenging operating environment. We believe that our strong results quarter after quarter demonstrate that our differentiating focus as the premier financial bridge between East and West, provides us with exceptional opportunities to win new customers and strengthen relationships with existing customers. We are pleased with our operating results for the second quarter of 2012 and are excited about future opportunities to grow our business, increase earnings and return strong value to our shareholders,” concluded Ng. Quarterly Results Summary       For the three months ended, Dollars in millions, except per share June 30, 2012     March 31, 2012   June 30, 2011 Net income $ 70.56 $ 68.08 $ 60.53 Net income available to common shareholders $ 68.84 $ 66.37 $ 58.81 Earnings per share (diluted) 0.47 0.45 0.39   Return on average assets 1.32 % 1.26 % 1.12 % Return on average common equity 12.46 % 12.01 % 11.06 %   Net interest margin, adjusted(1) 4.01 % 4.21 % 4.03 % Cost of deposits 0.45 % 0.47 % 0.70 % Efficiency ratio 41.54 % 44.07 % 43.95 %   Second Quarter 2012 HighlightsStrong Second Quarter Earnings – For the second quarter of 2012, net income was $70.6 million or $0.47 per dilutive share. Net income grew 4% or $2.5 million from the first quarter of 2012 and 17% or $10.0 million from the second quarter of 2011. Earnings per dilutive share grew 4% or $0.02 from the first quarter of 2012 and 21% or $0.08 from the second quarter of 2011. Repurchase of 2.2 Million Shares of Common Stock – During the second quarter of 2012, we repurchased 2.2 million shares of our common stock at a weighted average price of $21.95 per share. Strong Loan Growth – Quarter to date, noncovered loans, excluding loans held for sale, grew $296.8 million or 3%. This growth was largely due to increases in commercial and trade finance loans, and single family loans, which grew $180.0 million or 6% and $64.8 million or 3%, respectively from March 31, 2012. Strong Core Deposit Growth – Core deposits increased $476.9 million or 5% to a record $11.0 billion or 64% of total deposits. Total deposits remained unchanged at $17.3 billion, as we continued our strategy to reduce reliance on higher cost time deposits. Cost of Funds Down 4 bps from Q1 2012 and Down 29 bps from Q2 2011 – The cost of funds improved 4 basis points from the first quarter of 2012 and 29 basis points from the second quarter of 2011 to 0.71% for the second quarter of 2012. Our cost of deposits improved 2 basis points from the first quarter of 2012 and 25 basis points from the second quarter of 2011 to 0.45% for the second quarter of 2012. Efficiency Ratio Improves to 41.54% – For the second quarter of 2012, the efficiency ratio improved to 41.54% from 44.07% in the first quarter of 2012 and 43.95% in the second quarter of 2011. Nonperforming Assets Down to 0.72% of Total Assets – Nonperforming assets decreased to $155.7 million, or 0.72% of total assets at June 30, 2012, an $11.5 million or 7% decrease from March 31, 2012 and a $25.5 million or 14% decrease from June 30, 2011. Management Guidance The Company is providing guidance for the third quarter and full year of 2012. Management currently estimates that fully diluted earnings per share for the full year of 2012 will range from $1.84 to $1.86, an increase of 15% to 16% from the full year of 2011. Also, this updated guidance for the full year of 2012 is an increase of approximately $0.05 per dilutive share from our previously released guidance. Management currently estimates that fully diluted earnings per share for the third quarter of 2012 will range from $0.45 to $0.47 per dilutive share. This EPS guidance for the third quarter of 2012 is based on the following assumptions: Stable balance sheet A stable interest rate environment and an adjusted net interest margin of approximately 4.00%1 Provision for loan losses of approximately $12 to $15 million for the quarter Total noninterest expense of approximately $100 million for the quarter, net of amounts to be reimbursed by the FDIC Effective tax rate of approximately 35% Balance Sheet Summary At June 30, 2012, total assets equaled $21.5 billion compared to $21.7 billion at March 31, 2012. Average earning assets decreased slightly during the second quarter of 2012, down $14.1 million compared to the prior quarter. The small decrease in total assets and average earning assets during the second quarter was primarily attributable to a decrease in investment securities of $833.0 million, due to sales, calls and maturities, offset by purchases. As of June 30, 2012, excess cash from these activities had not yet been reinvested, resulting in an increase in cash and cash equivalents of $793.8 million. Total loans receivable at June 30, 2012 equaled $14.3 billion, compared to $14.5 billion as of March 31, 2012. During the second quarter noncovered loan balances excluding loans held for sale, grew $296.8 million or 3%. This growth was largely due to increases in commercial and trade finance loans, and single family loans, which grew $180.0 million or 6% and $64.8 million or 3%, respectively. Covered Loans Covered loans totaled $3.4 billion as of June 30, 2012, a decrease of $267.1 million or 7% from March 31, 2012. The decrease in the covered loan portfolio was primarily due to payoffs and paydown activity, as well as charge-offs. The covered loan portfolio is comprised of loans acquired from the FDIC-assisted acquisitions of United Commercial Bank (UCB) and Washington First International Bank (WFIB) which are covered under loss share agreements with the FDIC. During the second quarter of 2012, we recorded a net decrease in the FDIC indemnification asset and receivable included in noninterest (loss)/income of ($40.3) million, largely due to continued improved credit performance of the UCB portfolio as compared to our original estimate. Deposits and Borrowings At June 30, 2012, total deposits equaled $17.3 billion, unchanged from March 31, 2012. In the second quarter of 2012, we continued to execute our strategy to grow low-cost, commercial deposits while reducing our reliance on higher cost time deposits. Core deposits increased to a record $11.0 billion at June 30, 2012, or an increase of $476.9 million or 5% from March 31, 2012. Time deposits decreased by $473.6 million or 7% from March 31, 2012 to $6.3 billion at June 30, 2012. During the second quarter of 2012, the Company prepaid $30.0 million of FHLB advances carrying an effective interest rate of 2.43%, incurring a prepayment penalty of $2.3 million, which is included in noninterest expense. Second Quarter 2012 Operating ResultsNet Interest Income Net interest income, adjusted for the net impact of covered loan dispositions, totaled $194.7 million for the second quarter of 2012, a decrease of $9.5 million from $204.2 million in the prior quarter.1 The core net interest margin, excluding the net impact to interest income of $38.5 million resulting from covered loan activity and amortization of the FDIC indemnification asset, totaled 4.01% for the second quarter of 2012. This compares to a core net interest margin, excluding the net impact to interest income of $14.7 million resulting from covered loan activity and amortization of the FDIC indemnification asset, of 4.21% for the first quarter of 2012.1 The decrease in the core net interest margin in the second quarter of 2012 compared to the first quarter of 2012 is primarily due to the larger impact of covered loan dispositions and amortization activity in the second quarter and the continued downward repricing of the investment securities and loan portfolios. The extended low interest rate environment continues to be a challenge for East West and the rest of the banking industry. East West continues to look for opportunities to minimize our cost of funds and maximize our asset yields, while also ensuring prudent interest rate risk management. In the second quarter of 2012, East West prepaid $30.0 million of FHLB advances at an average effective cost of 2.43%. The cost of funds decreased 4 basis points from 0.75% in the first quarter of 2012 to 0.71% in the second quarter of 2012. The reduction in the cost of funds and interest expense is primarily due to management's ongoing actions to reduce high-cost time deposits and grow core deposits. During the second quarter, the Company reduced both the balance of time deposits by 7% and also the average cost of time deposits, which decreased from 0.88% in the first quarter of 2012 to 0.84% in the second quarter of 2012. In addition, the Company increased core deposit balances by 5%, quarter over quarter. These combined actions resulted in an overall reduction in the cost of deposits of 2 basis points to 0.45% for the second quarter of 2012 from 0.47% in the prior quarter. Management expects to maintain a relatively stable net interest margin and expects the adjusted net interest margin to be approximately 4.00% for the third quarter of 2012. Noninterest (Loss)/Income & Expense The Company reported total noninterest (loss) for the second quarter of 2012 of ($11.7) million, a decrease from noninterest income of $21.7 million in the first quarter of 2012 and $12.5 million in the second quarter of 2011. The decrease in noninterest income from the prior quarter and prior year is primarily attributable to an increase in the net reduction of the FDIC indemnification asset and FDIC receivable. Branch fees, letter of credit and foreign exchange income, ancillary loan fees and other operating income increased and totaled $22.2 million in the second quarter of 2012, as compared to $21.6 million in the first quarter of 2012 and $22.1 million in the second quarter of 2011. In addition, included in noninterest (loss) for the second quarter of 2012 were net gains on sales of loans of $6.4 million, and net gains on sales of investment securities of $71 thousand. A summary of fees and other income for the second quarter of 2012, compared to the first quarter of 2012 and second quarter of 2011, is detailed below:     Quarter Ended     % Change ($ in thousands) June 30, 2012     March 31, 2012     June 30, 2011 (Yr/Yr) Branch fees $ 8,641 $ 8,294 $ 9,078 -5 % Letters of credit fees and foreign exchange income 5,101 6,071 6,216 -18 % Ancillary loan fees 2,188 2,008 2,055 6 % Other operating income   6,277   5,186   4,771 32 % Total fees & other operating income $ 22,207 $ 21,559 $ 22,120 0 %   Noninterest expense totaled $101.6 million for the second quarter of 2012, a decrease of $13.2 million from the first quarter of 2012 and $16.0 million from the second quarter of 2011. Noninterest expense, excluding amounts to be reimbursed by the FDIC on covered assets and prepayment penalties for FHLB advances, totaled $96.6 million for the second quarter of 2012.1 A summary of noninterest expense for the second quarter 2012, compared to the first quarter of 2012 and second quarter of 2011, is detailed below:     Quarter ended ($ in thousands) June 30, 2012     March 31, 2012     June 30, 2011 Total noninterest expense: $ 101,608 $ 114,763 $ 117,597 Amounts to be reimbursed by the FDIC on covered assets (80% of actual expense amount) 2,683 12,122 13,574 Prepayment penalties for FHLB advances   2,336   1,321   4,433 Noninterest expense excluding reimbursable amounts and prepayment penalties for FHLB advances $ 96,589 $ 101,320 $ 99,590   Total noninterest expense for the second quarter, excluding amounts to be reimbursed by the FDIC on covered assets and prepayment penalties for FHLB advances, decreased $4.7 million or 5% from the first quarter of 2012 to $96.6 million. The decrease in noninterest expense, excluding amounts to be reimbursed by the FDIC on covered assets and prepayment penalties for FHLB advances, was primarily due to a reduction in compensation and employee benefits. Compensation and employee benefits decreased $3.5 million or 8% from the first quarter of 2012 primarily due to a decrease in payroll taxes and an increase in the offset to compensation expense from deferred loan costs due to an increase in origination volume. Credit cycle costs, which include other real estate owned expense, loan related expense, and legal expense decreased $9.7 million or 43% from the first quarter 2012, totaling $12.8 million for the second quarter, as compared to $22.5 million for the first quarter 2012 and $25.7 million for the second quarter of 2011. Of the total credit cycle costs incurred in the second quarter, $3.4 million is related to covered loans and other real estate owned for which we expect that 80% or $2.7 million is reimbursable by the FDIC. Management anticipates that for the third quarter of 2012, noninterest expense will total approximately $100.0 million, net of amounts reimbursable from the FDIC. The effective tax rate for the second quarter was 32.4% as compared to 36.8% in the prior quarter. The decrease in the effective tax rate for the second quarter of 2012 compared to the first quarter of 2012 was primarily due to a $3.0 million benefit from a settlement with the California Franchise Tax Board. The effective tax rate is reduced from the statutory tax rate primarily due to the utilization of tax credits related to affordable housing investments. The expected effective tax rate for the remainder of 2012 is approximately 35%. Credit Quality During the second quarter of 2012, the provision for loan losses and nonperforming assets were lower than the previous quarter and the prior year as a result of continued credit quality improvement. The provision for loan losses was $15.5 million for the second quarter of 2012, a decrease of 14% or $2.6 million from the prior quarter, and a decrease of 42% or $11.0 million as compared to the second quarter of 2011. Additionally, nonaccrual loans excluding covered loans, decreased to $112.4 million or 0.78% of total loans as of June 30, 2012. Gross charge-offs totaled $14.8 million and recoveries totaled $3.1 million for the second quarter of 2012. Total net charge-offs increased slightly to $11.7 million for the second quarter of 2012, from $10.3 million in the first quarter of 2012 due to the high level of recoveries during the first quarter of 2012. East West continues to maintain a strong allowance for noncovered loan losses at $219.5 million or 2.03% of noncovered loans receivable at June 30, 2012. This compares to an allowance for noncovered loan losses of $214.3 million or 2.04% of noncovered loans at March 31, 2012 and $213.8 million or 2.29% of noncovered loans at June 30, 2011. The total nonperforming assets, excluding covered assets, to total assets ratio was under 1.00% for the eleventh consecutive quarter with nonperforming assets of $155.7 million or 0.72% of total assets at June 30, 2012. Capital Strength             (Dollars in millions)   June 30, 2012Well CapitalizedRegulatoryRequirementTotal Excess AboveWell CapitalizedRequirement Tier 1 leverage capital ratio 9.7% 5.00% $ 988 Tier 1 risk-based capital ratio 15.7% 6.00% 1,264 Total risk-based capital ratio 17.3% 10.00% 952 Tangible common equity to tangible assets ratio 8.6% N/A N/A Tangible common equity to risk weighted assets ratio 13.9% N/A N/A   Our capital ratios remain very strong. As of June 30, 2012, our Tier 1 leverage capital ratio totaled 9.7%, our Tier 1 risk-based capital ratio totaled 15.7% and our total risk-based capital ratio totaled 17.3%. East West exceeds well capitalized requirements for all regulatory guidelines by more than $900 million. The Company is focused on active capital management and is committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a strong return to our shareholders. During the second quarter of 2012, the Company repurchased 2.2 million shares of common stock at an average price of $21.95 per share, or $49.0 million in total cost. Under the repurchase program authorized by East West's Board of Directors earlier in the year, management has the authority to repurchase up to a total of $200.0 million of the Company's common stock. As of June 30, 2012, the Company had repurchased a total of 6.8 million shares of common stock under the repurchase program at a total cost of $149.9 million. Dividend Payout East West's Board of Directors has declared third quarter dividends on the common stock and Series A Preferred Stock. The common stock cash dividend of $0.10 is payable on or about August 24, 2012 to shareholders of record on August 10, 2012. The dividend on the Series A Preferred Stock of $20.00 per share is payable on August 1, 2012 to shareholders of record on July 15, 2012. Conference Call East West will host a conference call to discuss second quarter 2012 earnings with the public on Thursday, July 19, 2012 at 8:30 a.m. PDT/ 11:30 a.m. EDT. The public and investment community are invited to listen as management discusses second quarter results and operating developments. The following dial-in information is provided for participation in the conference call: Call within the US – (877) 317-6789; Call within Canada – (866) 605-3852; International call – (412) 317-6789. A listen-only live broadcast of the call also will be available on the investor relations page of the Company's website at www.eastwestbank.com. About East West East West Bancorp is a publicly owned company with $21.5 billion in assets 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 125 locations worldwide, including in the United States markets of California, New York, Georgia, Massachusetts, Texas and Washington. In Greater China, East West's presence includes a full service branch in Hong Kong and representative offices in Beijing, Shenzhen and Taipei. Through a wholly-owned subsidiary bank, East West's presence in Greater China also includes full service branches in Shanghai and Shantou and a representative office in Guangzhou. For more information on East West Bancorp, visit the Company's website at www.eastwestbank.com. Forward-Looking StatementsCertain 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. 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 include, but are not limited to, local, regional, national and international economic, political or industry conditions and events and the impact they may have on us and our customers; our ability to attract deposits and other sources of liquidity; continued deterioration in values of real estate in California and other states where our bank makes loans, both residential and commercial; our ability to manage the loan portfolios acquired from FDIC-assisted acquisitions within the limits of the loss protection provided by the FDIC; changes in the financial performance and/or condition of our borrowers; changes in the level of nonperforming assets, reserve requirements, and charge-offs; the effect of changes in laws, regulations, and accounting standards, and related costs of these changes;inflation, interest rate, securities market and monetary fluctuations; changes in the competitive environment among financial and bank holding companies and other financial service providers; changes in our organization, management; the adequacy of our enterprise risk management framework; the ability to manage our growth and the effect of acquisitions we may make and the integration of acquired businesses and branching efforts; our success at managing the risks involved in the foregoing items 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, 2011, and particularly the discussion of risk factors within that document.1 See reconciliation of the GAAP financial measure to the non-GAAP financial measure in the tables attached. EAST WEST BANCORP, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except per share amounts)(unaudited)               June 30, 2012March 31, 2012June 30, 2011 Assets Cash and cash equivalents $ 2,459,614 $ 1,665,854 $ 1,598,498 Short-term investments 254,714 177,576 85,479 Securities purchased under resale agreements 675,000 650,000 812,281 Investment securities 1,873,739 2,706,720 3,206,108 Loans receivable, excluding covered loans (net of allowance for loan losses of $219,454, $214,253 and $213,825) 10,693,466 10,545,656 9,428,015 Covered loans, net   3,416,613     3,683,698     4,356,595   Total loans receivable, net 14,110,079 14,229,354 13,784,610 Federal Home Loan Bank and Federal Reserve Bank stock 171,971 178,144 197,187 FDIC indemnification asset 409,287 457,265 637,535 Other real estate owned, net 43,222 46,343 16,464 Other real estate owned covered, net 35,577 55,586 123,050 Premiums on deposits acquired, net 61,480 64,317 73,182 Goodwill 337,438 337,438 337,438 Other assets   1,093,613     1,181,185     1,000,876   Total assets $ 21,525,734   $ 21,749,782   $ 21,872,708     Liabilities and Stockholders' Equity Deposits $ 17,341,872 $ 17,338,569 $ 17,135,753 Federal Home Loan Bank advances 362,885 394,719 532,951 Securities sold under repurchase agreements 995,000 995,000 1,052,615 Long-term debt 212,178 212,178 225,261 Other borrowings - - 29,924 Accrued expenses and other liabilities   318,859     526,019     666,872   Total liabilities 19,230,794 19,466,485 19,643,376 Stockholders' equity   2,294,940     2,283,297     2,229,332   Total liabilities and stockholders' equity $ 21,525,734   $ 21,749,782   $ 21,872,708   Book value per common share $ 15.51 $ 15.19 $ 14.43 Number of common shares at period end 142,646 144,871 148,751   Ending BalancesJune 30, 2012March 31, 2012June 30, 2011 Loans receivable Real estate - single family $ 2,017,877 $ 1,953,123 $ 1,286,235 Real estate - multifamily 912,941 916,753 950,981 Real estate - commercial 3,444,957 3,454,641 3,408,560 Real estate - land and construction 299,740 322,233 420,069 Commercial 3,418,636 3,238,605 2,684,472 Consumer   700,719     612,758     588,940   Total noncovered loans receivable, excluding loans held for sale 10,794,870 10,498,113 9,339,257 Loans held for sale 137,812 280,830 326,841 Covered loans, net   3,416,613     3,683,698     4,356,595   Total loans receivable 14,349,295 14,462,641 14,022,693 Unearned fees, premiums and discounts (19,762 ) (19,034 ) (24,258 ) Allowance for loan losses on noncovered loans   (219,454 )   (214,253 )   (213,825 ) Net loans receivable $ 14,110,079 $ 14,229,354 $ 13,784,610   Deposits Noninterest-bearing demand $ 3,828,116 $ 3,690,131 $ 3,151,660 Interest-bearing checking 1,044,439 967,772 792,330 Money market 4,913,524 4,668,156 4,311,583 Savings   1,254,072     1,237,190     1,099,065   Total core deposits 11,040,151 10,563,249 9,354,638 Time deposits   6,301,721     6,775,320     7,781,115   Total deposits $ 17,341,872 $ 17,338,569 $ 17,135,753   EAST WEST BANCORP, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts)(unaudited)       Quarter EndedJune 30, 2012     March 31, 2012     June 30, 2011   Interest and dividend income $ 266,362 $ 254,050 $ 274,468 Interest expense   (33,205 )   (35,132 )   (47,132 ) Net interest income before provision for loan losses 233,157 218,918 227,336 Provision for loan losses   (15,500 )   (18,100 )   (26,500 ) Net interest income after provision for loan losses 217,657 200,818 200,836 Noninterest (loss) income (11,655 ) 21,740 12,491 Noninterest expense   (101,608 )   (114,763 )   (117,597 ) Income before provision for income taxes 104,394 107,795 95,730 Provision for income taxes   33,837     39,712     35,205   Net income 70,557 68,083 60,525 Preferred stock dividend   (1,714 )   (1,714 )   (1,714 ) Net income available to common stockholders $ 68,843 $ 66,369 $ 58,811 Net income per share, basic $ 0.48 $ 0.46 $ 0.40 Net income per share, diluted $ 0.47 $ 0.45 $ 0.39 Shares used to compute per share net income: - Basic 142,107 145,347 147,011 - Diluted 147,786 151,996 153,347     Quarter EndedJune 30, 2012March 31, 2012June 30, 2011 Noninterest (loss) income: Branch fees $ 8,641 $ 8,294 $ 9,078 Decrease in FDIC indemnification asset and FDIC receivable (40,345 ) (5,418 ) (18,806 ) Net gain on sales of loans 6,375 5,179 5,891 Letters of credit fees and foreign exchange income 5,101 6,071 6,216 Net gain on sales of investment securities 71 483 1,117 Net gain on sale of fixed assets 37 36 2,169 Impairment loss on investment securities - (99 ) - Ancillary loan fees 2,188 2,008 2,055 Other operating income   6,277     5,186     4,771   Total noninterest (loss) income: $ (11,655 ) $ 21,740 $ 12,491   Noninterest expense: Compensation and employee benefits $ 42,863 $ 46,409 $ 40,870 Occupancy and equipment expense 13,057 13,518 12,175 Loan related expenses 4,175 4,481 4,284 Other real estate owned expense 4,486 10,865 14,585 Deposit insurance premiums and regulatory assessments 3,323 3,992 6,833 Prepayment penalties for FHLB advances 2,336 1,321 4,433 Legal expense 4,150 7,173 6,791 Amortization of premiums on deposits acquired 2,838 2,873 3,151 Data processing 2,197 2,464 2,100 Consulting expense 1,568 1,467 2,378 Amortization of investments in affordable housing partnerships 4,425 4,466 4,598 Other operating expense   16,190     15,734     15,399   Total noninterest expense $ 101,608 $ 114,763 $ 117,597   EAST WEST BANCORP, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share amounts)(unaudited)       Year To DateJune 30, 2012     June 30, 2011   Interest and dividend income $ 520,412 $ 528,803 Interest expense   (68,337 )   (92,633 ) Net interest income before provision for loan losses 452,075 436,170 Provision for loan losses   (33,600 )   (53,006 ) Net interest income after provision for loan losses 418,475 383,164 Noninterest income 10,085 23,532 Noninterest expense   (216,371 )   (224,386 ) Income before provision for income taxes 212,189 182,310 Provision for income taxes   73,549     65,714   Net income 138,640 116,596 Preferred stock dividend   (3,428 )   (3,429 ) Net income available to common stockholders $ 135,212 $ 113,167 Net income per share, basic $ 0.93 $ 0.77 Net income per share, diluted $ 0.92 $ 0.76 Shares used to compute per share net income: - Basic 143,727 146,937 - Diluted 149,414 153,349     Year To DateJune 30, 2012June 30, 2011 Noninterest income: Branch fees $ 16,935 $ 16,832 Decrease in FDIC indemnification asset and FDIC receivable (45,763 ) (36,249 ) Net gain on sales of loans 11,554 13,301 Letters of credit fees and foreign exchange income 11,172 11,186 Net gain on sales of investment securities 554 3,632 Net gain on sale of fixed assets 73 2,206 Impairment loss on investment securities (99 ) (464 ) Ancillary loan fees 4,196 4,046 Other operating income   11,463     9,042   Total noninterest income $ 10,085 $ 23,532   Noninterest expense: Compensation and employee benefits $ 89,272 $ 79,140 Occupancy and equipment expense 26,575 24,773 Loan related expenses 8,656 7,383 Other real estate owned expense 15,351 25,249 Deposit insurance premiums and regulatory assessments 7,315 14,024 Prepayment penalties for FHLB advances 3,657 8,455 Legal expense 11,323 10,892 Amortization of premiums on deposits acquired 5,711 6,336 Data processing 4,661 4,703 Consulting expense 3,035 4,004 Amortization of investments in affordable housing partnerships 8,891 9,123 Other operating expense   31,924     30,304   Total noninterest expense $ 216,371 $ 224,386   EAST WEST BANCORP, INC.SELECTED FINANCIAL INFORMATION(In thousands)(unaudited)     Average Balances     Quarter EndedJune 30, 2012     March 31, 2012     June 30, 2011 Loans receivable Real estate - single family $ 1,991,863 $ 1,878,028 $ 1,231,774 Real estate - multifamily 914,223 931,252 950,687 Real estate - commercial 3,458,288 3,482,459 3,393,361 Real estate - land and construction 313,992 349,953 457,337 Commercial 3,278,965 3,180,433 2,450,510 Consumer   785,341     858,087     935,081   Total loans receivable, excluding covered loans 10,742,672 10,680,212 9,418,750 Covered loans   3,572,300     3,853,488     4,487,610   Total loans receivable 14,314,972 14,533,700 13,906,360 Investment securities 2,487,725 2,962,521 3,220,795 Earning assets 19,508,910 19,523,046 19,402,968 Total assets 21,527,394 21,690,453 21,574,103   Deposits Noninterest-bearing demand $ 3,724,399 $ 3,546,201 $ 2,935,704 Interest-bearing checking 978,085 962,967 793,349 Money market 4,831,665 4,665,731 4,374,404 Savings   1,232,663     1,183,325     1,034,486   Total core deposits 10,766,812 10,358,224 9,137,943 Time deposits   6,474,566     6,845,350     7,653,112   Total deposits 17,241,378 17,203,574 16,791,055 Interest-bearing liabilities 15,118,148 15,317,075 15,913,856 Stockholders' equity 2,305,942 2,305,716 2,210,603     Selected RatiosQuarter EndedJune 30, 2012March 31, 2012June 30, 2011 For The Period Return on average assets 1.32 % 1.26 % 1.12 % Return on average common equity 12.46 % 12.01 % 11.06 % Interest rate spread 4.61 % 4.31 % 4.48 % Net interest margin 4.81 % 4.51 % 4.70 % Yield on earning assets 5.49 % 5.23 % 5.67 % Cost of deposits 0.45 % 0.47 % 0.70 % Cost of funds 0.71 % 0.75 % 1.00 % Noninterest expense/average assets(1) 1.72 % 1.97 % 1.95 % Efficiency ratio(2) 41.54 % 44.07 % 43.95 %   (1)   Excludes the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances. (2) Represents noninterest expense, excluding the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances, divided by the aggregate of net interest income before provision for loan losses and noninterest income, excluding items that are non-recurring in nature.   EAST WEST BANCORP, INC.SELECTED FINANCIAL INFORMATION(In thousands)(unaudited)     Average Balances     Year To DateJune 30, 2012     June 30, 2011 Loans receivable Real estate - single family $ 1,934,946 $ 1,196,749 Real estate - multifamily 922,737 956,198 Real estate - commercial 3,470,374 3,386,315 Real estate - land and construction 331,972 482,812 Commercial 3,229,699 2,254,733 Consumer   821,714     994,975   Total loans receivable, excluding covered loans 10,711,442 9,271,782 Covered loans   3,712,894     4,591,211   Total loans receivable 14,424,336 13,862,993 Investment securities 2,725,123 3,020,860 Earning assets 19,515,978 19,067,921 Total assets 21,608,923 21,232,913   Deposits Noninterest-bearing demand $ 3,635,300 $ 2,828,933 Interest-bearing checking 970,526 782,547 Money market 4,748,698 4,374,322 Savings   1,207,994     1,003,074   Total core deposits 10,562,518 8,988,876 Time deposits   6,659,958     7,397,717   Total deposits 17,222,476 16,386,593 Interest-bearing liabilities 15,217,611 15,756,652 Stockholders' equity 2,305,829 2,178,624     Selected RatiosYear To DateJune 30, 2012June 30, 2011 For The Period Return on average assets 1.29 % 1.10 % Return on average common equity 12.23 % 10.80 % Interest rate spread 4.46 % 4.40 % Net interest margin 4.66 % 4.61 % Yield on earning assets 5.36 % 5.59 % Cost of deposits 0.46 % 0.68 % Cost of funds 0.73 % 1.01 % Noninterest expense/average assets(1) 1.84 % 1.89 % Efficiency ratio(2) 42.86 % 43.57 %   (1)   Excludes the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances. (2) Represents noninterest expense, excluding the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances, divided by the aggregate of net interest income before provision for loan losses and noninterest income, excluding items that are non-recurring in nature.   EAST WEST BANCORP, INC.QUARTER TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID (In thousands) (unaudited)     Quarter EndedJune 30, 2012   June 30, 2011Average     Average     VolumeInterestYield(1)VolumeInterestYield(1)ASSETSInterest-earning assets:   Due from banks and short-term investments $ 1,504,325 $ 5,774 1.54 % $ 1,006,402 $ 4,500 1.79 % Securities purchased under resale agreements 1,026,923 4,758 1.86 % 1,068,975 5,109 1.92 % Investment securities available-for-sale 2,487,725 16,913 2.73 % 3,220,795 23,253 2.90 % Loans receivable 10,742,672 125,526 4.70 % 9,418,750 119,739 5.10 % Loans receivable - covered 3,572,300 112,510 12.67 % 4,487,610 121,034 10.82 % Federal Home Loan Bank and Federal Reserve Bank stock   174,965     881 2.02 %   200,437     833 1.67 % Total interest-earning assets   19,508,910     266,362 5.49 %   19,402,969     274,468 5.67 %   Noninterest-earning assets: Cash and cash equivalents 234,918 270,259 Allowance for loan losses (226,112 ) (228,587 ) Other assets   2,009,678     2,129,462   Total assets $ 21,527,394   $ 21,574,103     LIABILITIES AND STOCKHOLDERS' EQUITYInterest-bearing liabilities: Checking accounts 978,085 725 0.30 % 793,349 699 0.35 % Money market accounts 4,831,665 4,243 0.35 % 4,374,404 5,848 0.54 % Savings deposits 1,232,663 647 0.21 % 1,034,486 933 0.36 % Time deposits 6,474,566 13,562 0.84 % 7,653,112 21,650 1.13 % Federal funds purchased 9 - - - - - Federal Home Loan Bank advances 393,982 1,353 1.38 % 738,094 3,956 2.15 % Securities sold under repurchase agreements 995,000 11,591 4.69 % 1,064,096 12,116 4.57 % Long-term debt 212,178 1,084 2.05 % 235,343 1,787 3.05 % Other borrowings   -     - -     20,972     143 2.73 % Total interest-bearing liabilities   15,118,148     33,205 0.88 %   15,913,856     47,132 1.19 %   Noninterest-bearing liabilities: Demand deposits 3,724,399 2,935,704 Other liabilities 378,905 513,940 Stockholders' equity   2,305,942     2,210,603   Total liabilities and stockholders' equity $ 21,527,394   $ 21,574,103     Interest rate spread 4.61 % 4.48 %   Net interest income and net interest margin $ 233,157 4.81 % $ 227,336 4.70 %   Net interest income and net interest margin, adjusted(2) $ 194,653 4.01 % $ 194,955 4.03 %   (1)   Annualized. (2) Amounts exclude the net impact of covered loan dispositions and amortization of the FDIC indemnification asset of $38.5 million and $32.4 million for the three months ended June 30, 2012 and 2011, respectively.   EAST WEST BANCORP, INC.YEAR TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID (In thousands) (unaudited)     Year To DateJune 30, 2012   June 30, 2011Average     Average     VolumeInterestYield(1)VolumeInterestYield(1)ASSETSInterest-earning assets:   Due from banks and short-term investments $ 1,276,498 $ 12,306 1.94 % $ 995,055 $ 7,240 1.47 % Securities purchased under resale agreements 910,857 9,072 2.00 % 984,020 9,379 1.92 % Investment securities available-for-sale 2,725,123 38,145 2.81 % 3,020,860 42,110 2.81 % Loans receivable 10,711,442 251,201 4.72 % 9,271,782 234,650 5.10 % Loans receivable - covered 3,712,894 207,874 11.26 % 4,591,211 233,649 10.26 % Federal Home Loan Bank and Federal Reserve Bank stock   179,164     1,814 2.04 %   204,992     1,775 1.75 % Total interest-earning assets   19,515,978     520,412 5.36 %   19,067,920     528,803 5.59 %   Noninterest-earning assets: Cash and cash equivalents 252,896 277,214 Allowance for loan losses (224,646 ) (232,371 ) Other assets   2,064,695     2,120,150   Total assets $ 21,608,923   $ 21,232,913       LIABILITIES AND STOCKHOLDERS' EQUITYInterest-bearing liabilities: Checking accounts 970,526 1,413 0.29 % 782,547 1,347 0.35 % Money market accounts 4,748,698 8,244 0.35 % 4,374,322 11,823 0.55 % Savings deposits 1,207,994 1,229 0.20 % 1,003,074 1,665 0.33 % Time deposits 6,659,958 28,455 0.86 % 7,397,717 40,277 1.10 % Federal funds purchased 4,470 2 0.11 % - - - Federal Home Loan Bank advances 412,879 3,495 1.70 % 875,290 9,733 2.24 % Securities sold under repurchase agreements 1,000,908 23,313 4.68 % 1,072,124 24,133 4.54 % Long-term debt 212,178 2,186 2.07 % 235,456 3,359 2.88 % Other borrowings   -     - -     16,122     296 3.70 % Total interest-bearing liabilities   15,217,611     68,337 0.90 %   15,756,652     92,633 1.19 %   Noninterest-bearing liabilities: Demand deposits 3,635,300 2,828,933 Other liabilities 450,183 468,704 Stockholders' equity   2,305,829     2,178,624   Total liabilities and stockholders' equity $ 21,608,923   $ 21,232,913     Interest rate spread 4.46 % 4.40 %   Net interest income and net interest margin $ 452,075 4.66 % $ 436,170 4.61 %   Net interest income and net interest margin, adjusted(2) $ 398,862 4.11 % $ 376,864 3.99 %   (1)   Annualized. (2) Amounts exclude the net impact of covered loan dispositions and amortization of the FDIC indemnification asset of $53.2 million and $59.3 million for the six months ended June 30, 2012 and 2011, respectively.   EAST WEST BANCORP, INC.QUARTERLY ALLOWANCE FOR LOAN LOSSES RECAP(In thousands)(unaudited)     Quarter Ended6/30/2012     3/31/2012     6/30/2011LOANS   Allowance balance, beginning of period $ 222,521 $ 216,523 $ 226,161 Allowance for unfunded loan commitments and letters of credit 274 (1,778 ) (487 ) Provision for loan losses 15,500 18,100 26,500   Net Charge-offs: Real estate - single family 273 1,295 1,120 Real estate - multifamily 1,021 795 1,081 Real estate - commercial 2,179 4,342 2,164 Real estate - land and construction 665 3,590 18,143 Commercial 6,624 222 8,844 Consumer   906     80     266   Total net charge-offs   11,668     10,324     31,618   Allowance balance, end of period(3) $ 226,627   $ 222,521   $ 220,556     UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT: Allowance balance, beginning of period $ 12,778 $ 11,000 $ 10,710 Provision for unfunded loan commitments and letters of credit   (274 )   1,778     487   Allowance balance, end of period $ 12,504   $ 12,778   $ 11,197   GRAND TOTAL, END OF PERIOD $ 239,131   $ 235,299   $ 231,753     Nonperforming assets to total assets(1) 0.72 % 0.77 % 0.83 % Allowance for loan losses on non-covered loans to total gross non-covered loans held for investment at end of period 2.03 % 2.04 % 2.29 % Allowance for loan losses on non-covered loans and unfunded loan commitments to total gross non-covered loans held for investment at end of period 2.15 % 2.16 % 2.41 % Allowance on non-covered loans to non-covered nonaccrual loans at end of period 195.18 % 177.36 % 129.80 % Nonaccrual loans to total loans(2) 0.78 % 0.83 % 1.17 %   (1)   Nonperforming assets excludes covered loans and covered REOs. Total assets includes covered assets. (2) Nonaccrual loans excludes covered loans. Total loans includes covered loans. (3) Included in the allowance is $7.2 million, $8.3 million, and $6.7 million related to covered loans as of June 30, 2012, March 31, 2012 and June 30, 2011, respectively. This allowance is related to drawdowns on commitments that were in existence as of the acquisition dates and therefore, are covered under the loss share agreements with the FDIC. Allowance on these subsequent drawdowns is accounted for as part of the general allowance.   EAST WEST BANCORP, INC.TOTAL NON-PERFORMING ASSETS, EXCLUDING COVERED ASSETS(In thousands)(unaudited)AS OF JUNE 30, 2012     Total Nonaccrual Loans       90+ DaysDelinquent   Under 90+ DaysDelinquentTotalNonaccrualLoansREO AssetsTotalNon-PerformingAssetsLoan Type Real estate - single family $ 6,405 $ 1,350 $ 7,755 $ 5,055 $ 12,810 Real estate - multifamily 9,278 11,129 20,407 117 20,524 Real estate - commercial 22,751 2,092 24,843 24,906 49,749 Real estate - land and construction 32,390 669 33,059 12,759 45,818 Commercial 17,072 6,000 23,072 53 23,125 Consumer   3,298   -   3,298   332   3,630 Total$91,194$21,240$112,434$43,222$155,656   AS OF MARCH 31, 2012Total Nonaccrual Loans90+ DaysDelinquentUnder 90+ DaysDelinquentTotalNonaccrualLoansREO AssetsTotal Non-PerformingAssetsLoan Type Real estate - single family $ 3,735 $ - $ 3,735 $ 6,591 $ 10,326 Real estate - multifamily 8,067 10,399 18,466 2,766 21,232 Real estate - commercial 39,605 3,449 43,054 23,190 66,244 Real estate - land and construction 38,909 530 39,439 13,084 52,523 Commercial 8,848 4,082 12,930 297 13,227 Consumer   3,174   -   3,174   415   3,589 Total$102,338$18,460$120,798$46,343$167,141   AS OF JUNE 30, 2011Total Nonaccrual Loans90+ DaysDelinquentUnder 90+ DaysDelinquentTotalNonaccrualLoansREO AssetsTotalNon-PerformingAssetsLoan Type Real estate - single family $ 13,326 $ - $ 13,326 $ 1,384 $ 14,710 Real estate - multifamily 11,174 3,708 14,882 833 15,715 Real estate - commercial 38,677 3,432 42,109 4,789 46,898 Real estate - land and construction 48,157 21,013 69,170 9,007 78,177 Commercial 19,078 5,091 24,169 358 24,527 Consumer   1,077   -   1,077   93   1,170 Total$131,489$33,244$164,733$16,464$181,197   EAST WEST BANCORP, INC.GAAP TO NON-GAAP RECONCILIATION(In thousands)(unaudited) The tangible common equity to risk weighted assets and tangible common equity to tangible assets ratios are non-GAAP disclosures. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. As the use of tangible common equity to tangible assets ratio is more prevalent in the banking industry and with banking regulators and analysts, we have included the tangible common equity to risk-weighted assets and tangible common equity to tangible assets ratios.         As ofJune 30, 2012 Stockholders' equity $ 2,294,940 Less: Preferred equity (83,027 ) Goodwill and other intangible assets   (404,304 ) Tangible common equity $ 1,807,609     Risk-weighted assets   13,031,656     Tangible common equity to risk-weighted assets ratio   13.9 %   As ofJune 30, 2012 Total assets $ 21,525,734 Less: Goodwill and other intangible assets   (404,304 ) Tangible assets $ 21,121,430     Tangible common equity to tangible assets ratio 8.6 %   EAST WEST BANCORP, INC.GAAP TO NON-GAAP RECONCILIATION(In thousands)(unaudited) Operating noninterest expense is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. These are noninterest expense line items that are non-core in nature. Operating noninterest expense excludes such non-core noninterest expense line items. The Company believes that presenting operating noninterest expense provides more clarity to the users of financial statements regarding the core noninterest expense amounts.       Quarter EndedJune 30, 2012     March 31, 2012     June 30, 2011 Total noninterest expense: $ 101,608 $ 114,763 $ 117,597 Amounts to be reimbursed by the FDIC on covered assets (80% of actual expense amount) 2,683 12,122 13,574 Prepayment penalties for FHLB advances   2,336   1,321   4,433 Noninterest expense excluding reimbursable amounts and prepayment penalties for FHLB advances $ 96,589 $ 101,320 $ 99,590   EAST WEST BANCORP, INC.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 to provide additional disclosure. The net interest income on covered loans includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income on covered loans excluding such non-core items provides additional clarity to the users of financial statements regarding the covered loan yield, comparability to prior periods and the ongoing performance of the Company.     Quarter Ended June 30, 2012 Average Volume     Interest     Yield(1) Loans receivable - covered $ 3,572,300 $ 112,510 12.67 % Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (38,504 ) Covered loans excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 74,006   8.33 %   Quarter Ended March 31, 2012 Average Volume Interest Yield(1) Loans receivable - covered $ 3,853,488 $ 95,364 9.95 % Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (14,709 ) Covered loans excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 80,655   8.42 %   (1)   Annualized.   EAST WEST BANCORP, INC.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 to provide additional disclosure. The net interest margin includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income and net interest margin excluding such non-core items provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin, comparability to prior periods and the ongoing performance of the Company.     Quarter Ended June 30, 2012 Average Volume     Interest     Yield(1) Total interest-earning assets $ 19,508,910 $ 266,362 5.49 % Net interest income and net interest margin 233,157 4.81 % Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (38,504 ) Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 194,653   4.01 %   Quarter Ended March 31, 2012 Average Volume Interest Yield (1) Total interest-earning assets $ 19,523,046 $ 254,050 5.23 % Net interest income and net interest margin 218,918 4.51 % Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (14,709 ) Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 204,209   4.21 %   Quarter Ended June 30, 2011 Average Volume Interest Yield(1) Total interest-earning assets $ 19,402,969 $ 274,468 5.67 % Net interest income and net interest margin 227,336 4.70 %   Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (32,381 ) Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 194,955   4.03 %   (1)   Annualized.   EAST WEST BANCORP, INC.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 to provide additional disclosure. The net interest margin includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income and net interest margin excluding such non-core items provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin, comparability to prior periods and the ongoing performance of the Company.     Year to Date June 30, 2012 Average Volume     Interest     Yield Total interest-earning assets $ 19,515,978 $ 520,412 5.36 % Net interest income and net interest margin 452,075 4.66 % Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (53,213 ) Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 398,862   4.11 %   Year to Date June 30, 2011 Average Volume Interest Yield Total interest-earning assets $ 19,067,920 $ 528,803 5.59 % Net interest income and net interest margin 436,170 4.61 % Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset   (59,306 ) Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset $ 376,864   3.99 % East West Bancorp, Inc.Irene OhChief Financial Officer626-768-6360