EAST WEST BANCORP INC

For the period ended Jun 30, 2024. Filed Aug 8, 2024.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Jun 30, 2024 · Filed Aug 8, 2024

EWBC$130.97+1.7%Stored close · as of Nov 9, 2026

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Contents

Net Interest Income

The Company’s primary source of revenue is net interest income, which is the interest income earned on interest-earning assets less interest expense paid on interest-bearing liabilities. Net interest margin is the ratio of net interest income to average interest-earning assets. Net interest income and net interest margin are impacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds and asset quality.

Net interest income and net interest margin for the second quarter and first half of 2024 decreased year-over-year. The decreases in net interest income and net interest margin were primarily due to higher deposit funding costs and shifts in the deposit mix to higher cost time and money market deposits and higher Federal Home Loan Bank (“FHLB”) advances, partially offset by higher loan yields and loan growth, a decrease in Bank Term Funding Program (“BTFP”) average balances, and increases in AFS debt securities’ yield and volumes. The changes in yields and rates primarily reflected the impact of thehigher benchmark interest rates.

Average interest-earning assets were $68.1 billion for the second quarter of 2024, an increase of $4.0 billion or 6% from $64.1 billion for the second quarter of 2023. The year-over-year increase in average interest-earning assets primarily reflected loan growth, an increase in AFS debt securities, and a decrease in interest-bearing cash and deposits with banks. For the first half of 2024, the average interest-earning assets were $68.1 billion, an increase of $5.3 billion or 8% from $62.8 billion for the first half of 2023. The year-over-year increase in average interest-earning assets primarily reflected loan growth and increases in AFS debt securities and interest-bearing cash and deposits with banks.

The yield on average interest-earning assets for the second quarter of 2024 was 6.11%, an increase of 44 bps from 5.67% for the second quarter of 2023. The yield on average interest-earning assets for the first half of 2024 was 6.08%, an increase of 49 bps from 5.59% for the first half of 2023. The year-over-year increases in the yield on average interest-earning assets primarily resulted from higher benchmark interest rates.

The average loan yield for the second quarter of 2024 was 6.73%, an increase of 40 bps from 6.33% for the second quarter of 2023. The average loan yield for the first half of 2024 was 6.72%, an increase of 48 bps from 6.24% for the first half of 2023. The year-over-year increases in the average loan yield reflected the loan portfolio’s sensitivity to higher benchmark interest rates and loan growth. Approximately 58% and 60% of loans held-for-investment were variable rateas of June 30, 2024 and 2023, respectively.

Deposits are an important source of funding for the Company. Average deposits were $58.7 billion for the second quarter of 2024, which increased $4.4 billion or 8% from $54.3 billion for the second quarter of 2023. For the first half of 2024, average deposits were $58.1 billion, which increased $3.5 billion or 6% from $54.6 billion for the first half of 2023.

Average noninterest-bearing deposits were $14.7 billion for the second quarter of 2024, a decrease of $2.2 billion or 13% from $16.9 billion for the second quarter of 2023. For the first half of 2024, average noninterest-bearing deposits were $14.8 billion, a decrease of $3.5 billion or 19% from $18.3 billion for the first half of 2023. The year-over-year decreases in noninterest-bearing deposits reflected the deposit mix shift to time and money market deposits. Average noninterest-bearing deposits made up 25% and 31% of average deposits for the second quarters of 2024 and 2023, respectively, and 26% and 34% for the first halves of 2024 and 2023, respectively.

The average cost of deposits was 2.96% for the second quarter of 2024, an 84 bp increase from 2.12% for the second quarter of 2023. The average cost of interest-bearing deposits was 3.94% for the second quarter of 2024, an 85 bp increase from 3.09% for the second quarter of 2023. The average cost of deposits was 2.90% for the first half of 2024, a 104 bp increase from 1.86% for the first half of 2023. The average cost of interest-bearing deposits was 3.89% for the first half of 2024, a 109 bp increase from 2.80% for the first half of 2023. These year-over-year increases primarily reflected shifts in the deposit mix to time and money market deposits, and rising deposit costs in response to the higher interest rate environment.

The average cost of funds calculation includes deposits, BTFP, short-term borrowings and federal funds purchased, FHLB advances, securities sold under repurchase agreements (“repurchase agreements”), and long-term debt and finance lease liabilities. For the second quarter of 2024, the average cost of funds was 3.11%, an 80 bp increase from 2.31% for the second quarter of 2023. For the first half of 2024, the average cost of funds was 3.04%, a 103 bp increase from 2.01% for the first half of 2023. The year-over year increases were mainly driven by the increased cost of deposits as discussed above.

The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 2. MD&A — Risk Management — Market Risk Managementin this Form 10-Q.

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the second quarters of 2024 and 2023:

	Three Months Ended June 30,
2024 · 2023
($ in thousands) · Average Balance · Interest · Average Yield/Rate (1) · Average Balance · Interest · Average Yield/Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks	$4,058,515		$49,406			4.90%		$5,247,755			$60,995		4.66%
Assets purchased under resale agreements (2)	485,000		1,885			1.56%		641,939			3,969		2.48%
Debt securities:
AFS debt securities (3)(4)	8,481,948		99,242			4.71%		6,257,397			56,292		3.61%
Held-to-maturity (“HTM”) debt securities (3)	2,941,150		12,490			1.71%		2,983,780			12,678		1.70%
Total debt securities (3)	11,423,098		111,732			3.93%		9,241,177			68,970		2.99%
Loans:
Commercial and industrial (“C&I”)	16,209,659		322,648			8.01%		15,244,826			287,799		7.57%
CRE	20,270,816		323,106			6.41%		19,599,138			300,721		6.15%
Residential mortgage	15,386,858		221,966			5.80%		13,942,721			182,035		5.24%
Other consumer	51,455		721			5.64%		65,035			709		4.37%
Total loans (5)(6)	51,918,788		868,441			6.73%		48,851,720			771,264		6.33%
Restricted equity securities	164,649		2,950			7.21%		78,978			936		4.75%
Total interest-earning assets	$68,050,050		$1,034,414			6.11%		$64,061,569			$906,134		5.67%
Noninterest-earning assets:
Cash and due from banks	468,374						569,227
Allowance for loan losses	(675,346)						(619,868)
Other assets	3,346,122						3,486,439
Total assets	$71,189,200						$67,497,367
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits	$7,467,801		$52,680			2.84%		$8,434,655			$49,571		2.36%
Money market deposits	13,724,230		135,405			3.97%		10,433,839			86,419		3.32%
Savings deposits	1,795,242		5,004			1.12%		2,200,124			3,963		0.72%
Time deposits	21,028,737		238,393			4.56%		16,289,320			147,524		3.63%
BTFP, short-term borrowings and federal funds purchased	2,889		32			4.45%		4,500,566			49,032		4.37%
Short-term repurchase agreements	4,104		58			5.68%		15,579			211		5.43%
FHLB advances	3,500,001		48,840			5.61%		1			—		—%
Long-term debt and finance lease liabilities	36,335		773			8.56%		152,760			2,668		7.01%
Total interest-bearing liabilities	$47,559,339		$481,185			4.07%		$42,026,844			$339,388		3.24%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	14,664,789						16,926,937
Accrued expenses and other liabilities	1,877,572						2,102,590
Stockholders’ equity	7,087,500						6,440,996
Total liabilities and stockholders’ equity	$71,189,200						$67,497,367
Interest rate spread				2.04%						2.43%
Net interest income and net interest margin		$553,229			3.27%				$566,746			3.55%

(1)Annualized.

(2)Includes securities purchased under resale agreements for the second quarter of 2024. Includes both securities and loans purchased under resale agreements for the second quarter of 2023.

(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.

(4)Includes the amortization of net premiums on AFS debt securities of $10 million and $7 million for the second quarters of 2024 and 2023, respectively.

(5)Average balances include nonperforming loans and loans held-for-sale.

(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $14 million and $13 million for the second quarters of 2024 and 2023, respectively.

	Six Months Ended June 30,
2024 · 2023
($ in thousands) · Average Balance · Interest · Average Yield/Rate (1) · Average Balance · Interest · Average Yield/Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks	$4,960,016		$123,788			5.02%		$4,353,658			$96,642		4.48%
Assets purchased under resale agreements (2)	605,330		8,000			2.66%		665,229			8,472		2.57%
Debt securities:
AFS debt securities (3)(4)	7,524,158		162,100			4.33%		6,183,522			109,489		3.57%
HTM debt securities (3)	2,945,918		25,024			1.71%		2,989,695			25,412		1.71%
Total debt securities (3)	10,470,076		187,124			3.59%		9,173,217			134,901		2.97%
Loans:
C&I	16,230,641		648,458			8.03%		15,322,480			563,372		7.41%
CRE	20,342,200		647,193			6.40%		19,404,599			583,185		6.06%
Residential mortgage	15,294,601		437,640			5.75%		13,706,798			351,529		5.17%
Other consumer	54,372		1,539			5.69%		68,840			1,564		4.58%
Total loans (5)(6)	51,921,814		1,734,830			6.72%		48,502,717			1,499,650		6.24%
Restricted equity securities	128,812		4,289			6.70%		84,852			1,975		4.69%
Total interest-earning assets	$68,086,048		$2,058,031			6.08%		$62,779,673			$1,741,640		5.59%
Noninterest-earning assets:
Cash and due from banks	457,070						595,022
Allowance for loan losses	(677,231)						(611,358)
Other assets	3,567,911						3,548,733
Total assets	$71,433,798						$66,312,070
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits	$7,581,615		$106,501			2.82%		$7,469,621			$72,745		1.96%
Money market deposits	13,680,220		270,066			3.97%		10,844,992			162,521		3.02%
Savings deposits	1,802,405		9,124			1.02%		2,317,702			7,632		0.66%
Time deposits	20,187,490		451,990			4.50%		15,674,457			261,373		3.36%
BTFP, short-term borrowings and federal funds purchased	1,933,707		42,138			4.38%		2,666,249			57,857		4.38%
FHLB advances	2,027,474		56,579			5.61%		248,619			6,430		5.22%
Repurchase agreements	3,327		93			5.62%		60,931			1,263		4.18%
Long-term debt and finance lease liabilities	81,076		3,172			7.87%		152,591			5,212		6.89%
Total interest-bearing liabilities	$47,297,314		$939,663			4.00%		$39,435,162			$575,033		2.94%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	14,809,871						18,310,770
Accrued expenses and other liabilities	2,286,584						2,253,266
Stockholders’ equity	7,040,029						6,312,872
Total liabilities and stockholders’ equity	$71,433,798						$66,312,070
Interest rate spread				2.08%						2.65%
Net interest income and net interest margin		$1,118,368			3.30%				$1,166,607			3.75%

(1)Annualized.

(2)Includes securities purchased under resale agreements for the first half of 2024. Includes both securities and loans purchased under resale agreements for the first half of 2023.

(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.

(4)Includes the amortization of net premiums on AFS debt securities of $17 million and $16 million for the first halves of 2024 and 2023, respectively.

(5)Average balances include nonperforming loans and loans held-for-sale.

(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $28 million and $27 million for the first halves of 2024 and 2023, respectively.

The following table summarizes the extent to which changes in (1) interest rates, and (2) volume of average interest-earning assets and average interest-bearing liabilities affected the Company’s net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.

Three Months Ended June 30, · Six Months Ended June 30,
2024 vs. 2023 · 2024 vs. 2023
	Changes Due to			Changes Due to
($ in thousands)	Total Change	Volume	Yield/Rate	Total Change	Volume	Yield/Rate
Interest-earning assets:
Interest-bearing cash and deposits with banks	$(11,589)	$(14,488)	$2,899	$27,146	$14,515	$12,631
Assets purchased under resale agreements (1)	(2,084)	(830)	(1,254)	(472)	(767)	295
Debt securities:
AFS debt securities	42,950	23,146	19,804	52,611	26,517	26,094
HTM debt securities	(188)	(211)	23	(388)	(315)	(73)
Total debt securities	42,762	22,935	19,827	52,223	26,202	26,021
Loans:
C&I	34,849	18,298	16,551	85,086	35,294	49,792
CRE	22,385	10,100	12,285	64,008	29,740	34,268
Residential mortgage	39,931	19,553	20,378	86,111	43,661	42,450
Other consumer	12	(166)	178	(25)	(365)	340
Total loans	97,177	47,785	49,392	235,180	108,330	126,850
Restricted equity securities	2,014	1,365	649	2,314	1,269	1,045
Total interest and dividend income	$128,280	$56,767	$71,513	$316,391	$149,549	$166,842
Interest-bearing liabilities:
Checking deposits	$3,109	$(6,131)	$9,240	$33,756	$1,116	$32,640
Money market deposits	48,986	30,302	18,684	107,545	48,887	58,658
Savings deposits	1,041	(830)	1,871	1,492	(1,962)	3,454
Time deposits	90,869	48,410	42,459	190,617	87,546	103,071
BTFP, short-term borrowings and federal funds purchased	(49,000)	(49,003)	3	(15,719)	(15,803)	84
FHLB advances	48,840	48,840	—	50,149	49,622	527
Repurchase agreements	(153)	(162)	9	(1,170)	(1,497)	327
Long-term debt and finance lease liabilities	(1,895)	(2,381)	486	(2,040)	(2,706)	666
Total interest expense	$141,797	$69,045	$72,752	$364,630	$165,203	$199,427
Change in net interest income	$(13,517)	$(12,278)	$(1,239)	$(48,239)	$(15,654)	$(32,585)

(1)Includes the impact of securities purchased under resale agreements for the second quarter and first half of 2024. Includes the impact of securities and loans purchased under resale agreements for the second quarter and first half of 2023.

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