EAST WEST BANCORP INC
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
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FY2024 · Filed Feb 28, 2025
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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 2024 decreased year-over-year, which primarily reflected higher deposit funding costs and shifts in the deposit mix to higher cost time and money market deposits, partially offset by loan growth and higher loan yields, and increases in AFS debt securities’ volume and yield. Although the Federal Reserve cut interest rates three times since September 2024, the impacts of prior interest rate hikes spurred customers to seek high-yielding time deposits, which increased deposit costs at a faster rate than the increase in loan yields, and resulted in slight pressures on the Company’s net interest margin during 2024.
Average interest-earning assets increased $5.7 billion or 9% to $69.7 billion in 2024. The yield on average interest-earning assets was 6.01% in 2024, an increase of 24 bps from 2023. The increases in both the average balance and yield on interest-earning assets primarily reflected loan growth, an increase in AFS debt securities, and higher benchmark interest rates.
The average loan yield was 6.67% in 2024, an increase of 27 bps from 2023. The year-over-year change in the average loan yield primarily reflected loan growth and the loan portfolio’s sensitivity to higher benchmark interest rates. Approximately 58% of loans held-for-investment were variable-rate as of both December 31, 2024 and 2023.
Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits of $59.7 billion in 2024, increased $4.7 billion or 9% from 2023. Average noninterest-bearing deposits of $14.8 billion in 2024, decreased $2.4 billion or 14% from 2023. Average noninterest-bearing deposits made up 25% and 31% of average deposits for 2024 and 2023, respectively.
The average cost of deposits was 2.88% in 2024, an increase of 69 bps from 2023. The average cost of interest-bearing deposits was 3.83% in 2024, an increase of 64 bps from 2023. These year-over-year increases primarily reflected shifts in the deposit mix to time and money market deposits, and higher deposit costs in response to the interest rate environment.
The average cost of funds calculation includes deposits, short-term borrowings, FHLB advances, assets sold under repurchase agreements (“repurchase agreements”) and long-term debt. In 2024, the average cost of funds was 3.02%, an increase of 67 bps from 2023. The year-over-year increase was mainly driven by the change in the average cost of deposits discussed above.
The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 7. MD&A — Risk Management — Market Risk Management for details.
The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component in 2024, 2023 and 2022:
| Year Ended December 31, | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 · 2023 · 2022 | ||||||||||||||||
| ($ in thousands) · Average Balance · Interest · Average Yield/Rate · Average Balance · Interest · Average Yield/Rate · Average Balance · Interest · Average Yield/Rate | ||||||||||||||||
| ASSETS | ||||||||||||||||
| Interest-earning assets: | ||||||||||||||||
| Interest-bearing cash and deposits with banks | $4,936,550 | $231,794 | 4.70% | $4,638,630 | $220,643 | 4.76% | $3,127,234 | $41,113 | 1.31% | |||||||
| Assets purchased under resale agreements (1) | 519,263 | 11,254 | 2.17% | 691,223 | 20,164 | 2.92% | 1,398,080 | 29,767 | 2.13% | |||||||
| Debt securities: | ||||||||||||||||
| AFS (2)(3) | 8,811,274 | 399,280 | 4.53% | 6,105,999 | 225,592 | 3.69% | 6,629,945 | 152,514 | 2.30% | |||||||
| Held-to-maturity (“HTM”) (2) | 2,935,937 | 49,785 | 1.70% | 2,976,237 | 50,598 | 1.70% | 2,756,382 | 46,392 | 1.68% | |||||||
| Total debt securities (2) | 11,747,211 | 449,065 | 3.82% | 9,082,236 | 276,190 | 3.04% | 9,386,327 | 198,906 | 2.12% | |||||||
| Loans: | ||||||||||||||||
| Commercial and industrial (“C&I”) (2) | 16,492,472 | 1,294,451 | 7.85% | 15,499,899 | 1,190,940 | 7.68% | 15,013,560 | 715,778 | 4.77% | |||||||
| CRE (2) | 20,316,013 | 1,292,973 | 6.36% | 19,824,272 | 1,227,795 | 6.19% | 17,896,853 | 791,839 | 4.42% | |||||||
| Residential mortgage | 15,504,795 | 900,514 | 5.81% | 14,155,784 | 750,813 | 5.30% | 12,315,334 | 538,255 | 4.37% | |||||||
| Other consumer | 55,500 | 3,041 | 5.48% | 65,181 | 3,198 | 4.91% | 93,711 | 2,429 | 2.59% | |||||||
| Total loans (2)(4)(5) | 52,368,780 | 3,490,979 | 6.67% | 49,545,136 | 3,172,746 | 6.40% | 45,319,458 | 2,048,301 | 4.52% | |||||||
| Restricted equity securities | 147,080 | 10,104 | 6.87% | 82,177 | 4,062 | 4.94% | 77,963 | 3,144 | 4.03% | |||||||
| Total interest-earning assets | $69,718,884 | $4,193,196 | 6.01% | $64,039,402 | $3,693,805 | 5.77% | $59,309,062 | $2,321,231 | 3.91% | |||||||
| Noninterest-earning assets: | ||||||||||||||||
| Cash and due from banks | 345,056 | 555,689 | 652,673 | |||||||||||||
| Allowance for loan losses | (688,448) | (625,785) | (559,746) | |||||||||||||
| Other assets | 3,446,350 | 3,788,199 | 3,436,293 | |||||||||||||
| Total assets | $72,821,842 | $67,757,505 | $62,838,282 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||
| Checking deposits | $7,731,828 | $221,367 | 2.86% | $7,658,414 | $179,200 | 2.34% | $6,696,200 | $29,808 | 0.45% | |||||||
| Money market deposits | 13,970,375 | 525,870 | 3.76% | 11,680,540 | 399,482 | 3.42% | 12,443,437 | 107,442 | 0.86% | |||||||
| Savings deposits | 1,770,041 | 17,764 | 1.00% | 2,128,943 | 15,573 | 0.73% | 2,901,940 | 8,550 | 0.29% | |||||||
| Time deposits | 21,400,834 | 955,173 | 4.46% | 16,301,856 | 611,295 | 3.75% | 9,473,744 | 106,038 | 1.12% | |||||||
| Total interest-bearing deposits | 44,873,078 | 1,720,174 | 3.83% | 37,769,753 | 1,205,550 | 3.19% | 31,515,321 | 251,838 | 0.80% | |||||||
| Bank Term Funding Program (“BTFP”), short-term borrowings and federal funds purchased | 962,061 | 42,163 | 4.38% | 3,591,114 | 157,002 | 4.37% | 81,719 | 1,801 | 2.20% | |||||||
| FHLB advances | 2,752,733 | 147,269 | 5.35% | 123,288 | 6,430 | 5.22% | 105,966 | 1,754 | 1.66% | |||||||
| Repurchase agreements | 3,613 | 197 | 5.45% | 34,443 | 1,497 | 4.35% | 467,413 | 14,362 | 3.07% | |||||||
| Long-term debt and finance lease liabilities | 58,467 | 4,677 | 8.00% | 152,790 | 11,072 | 7.25% | 152,325 | 5,595 | 3.67% | |||||||
| Total interest-bearing liabilities | $48,649,952 | $1,914,480 | 3.94% | $41,671,388 | $1,381,551 | 3.32% | $32,322,744 | $275,350 | 0.85% | |||||||
| Noninterest-bearing liabilities and stockholders’ equity: | ||||||||||||||||
| Demand deposits | 14,799,961 | 17,192,978 | 22,784,258 | |||||||||||||
| Accrued expenses and other liabilities | 2,056,755 | 2,410,154 | 1,948,255 | |||||||||||||
| Stockholders’ equity | 7,315,174 | 6,482,985 | 5,783,025 | |||||||||||||
| Total liabilities and stockholders’ equity | $72,821,842 | $67,757,505 | $62,838,282 | |||||||||||||
| Interest rate spread | 2.07% | 2.45% | 3.06% | |||||||||||||
| Net interest income and net interest margin | $2,278,716 | 3.27% | $2,312,254 | 3.61% | $2,045,881 | 3.45% | ||||||||||
(1)Includes the average balances and interest income for securities and loans purchased under resale agreements for 2023. There were no loans purchased under resale agreements for 2024.
(2)Yields on tax-exempt debt securities and loans are not presented on a tax-equivalent basis.
(3)Includes the amortization of net premiums on AFS debt securities of $35 million, $31 million and $72 million for 2024, 2023 and 2022, respectively.
(4)Average balances include nonperforming loans and loans held-for-sale.
(5)Includes the accretion of net deferred loan fees and amortization of net premiums, which totaled $53 million for each of 2024 and 2023, and $50 million for 2022.
The following table summarizes the extent to which changes in (1) interest rates, and (2) volume of average interest-earning assets and average interest-bearing liabilities affected the Company’s net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2024 vs. 2023 · 2023 vs. 2022 | ||||||
| Total Change · Changes Due to · Total Change · Changes Due to | ||||||
| ($ in thousands) · Volume · Yield/Rate · Volume · Yield/Rate | ||||||
| Interest-earning assets: | ||||||
| Interest-bearing cash and deposits with banks | $11,151 | $14,019 | $(2,868) | $179,530 | $27,977 | $151,553 |
| Assets purchased under resale agreements (1) | (8,910) | (4,382) | (4,528) | (9,603) | (18,266) | 8,663 |
| Debt securities: | ||||||
| AFS | 173,688 | 114,930 | 58,758 | 73,078 | (12,895) | 85,973 |
| HTM | (813) | (684) | (129) | 4,206 | 3,733 | 473 |
| Total debt securities | 172,875 | 114,246 | 58,629 | 77,284 | (9,162) | 86,446 |
| Loans: | ||||||
| C&I | 103,511 | 77,492 | 26,019 | 475,162 | 23,900 | 451,262 |
| CRE | 65,178 | 30,853 | 34,325 | 435,956 | 95,037 | 340,919 |
| Residential mortgage | 149,701 | 74,955 | 74,746 | 212,558 | 87,511 | 125,047 |
| Other consumer | (157) | (506) | 349 | 769 | (907) | 1,676 |
| Total loans | 318,233 | 182,794 | 135,439 | 1,124,445 | 205,541 | 918,904 |
| Restricted equity securities | 6,042 | 4,045 | 1,997 | 918 | 177 | 741 |
| Total interest and dividend income | $499,391 | $310,722 | $188,669 | $1,372,574 | $206,267 | $1,166,307 |
| Interest-bearing liabilities: | ||||||
| Checking deposits | $42,167 | $1,734 | $40,433 | $149,392 | $4,879 | $144,513 |
| Money market deposits | 126,388 | 83,521 | 42,867 | 292,040 | (6,983) | 299,023 |
| Saving deposits | 2,191 | (2,930) | 5,121 | 7,023 | (2,792) | 9,815 |
| Time deposits | 343,878 | 213,823 | 130,055 | 505,257 | 118,581 | 386,676 |
| Total interest-bearing deposits | 514,624 | 296,148 | 218,476 | 953,712 | 113,685 | 840,027 |
| BTFP, short-term borrowings and federal funds purchased | (114,839) | (115,219) | 380 | 155,201 | 151,725 | 3,476 |
| FHLB advances | 140,839 | 140,669 | 170 | 4,676 | 330 | 4,346 |
| Repurchase agreements | (1,300) | (1,606) | 306 | (12,865) | (17,113) | 4,248 |
| Long-term debt and finance lease liabilities | (6,395) | (7,443) | 1,048 | 5,477 | 17 | 5,460 |
| Total interest expense | $532,929 | $312,549 | $220,380 | $1,106,201 | $248,644 | $857,557 |
| Changes in net interest income | $(33,538) | $(1,827) | $(31,711) | $266,373 | $(42,377) | $308,750 |
(1)Includes the impact of securities purchased under resale agreements for 2024, and both securities and loans purchased under resale agreements for 2023 and 2022.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.