East-West Bancorp (EWBC) Tops Q1 EPS by 13c, Beats on Revenues

East-West Bancorp (NASDAQ: EWBC) reported Q1 EPS of $1.13, $0.13 better than the analyst estimate of $1.00. Revenue for the quarter came in at $369.67 million versus the consensus estimate of $329.12 million.

HIGHLIGHTS OF RESULTS

• First Quarter Earnings – Net income of $187.0 million for the first quarter of 2018 increased by 120% compared to $84.9 million for the fourth quarter of 2017; diluted earnings per share (“EPS”) of $1.28 also increased by 120% linked quarter from $0.58. First quarter net income included $22.2 million of after tax gain on the sale of Desert Community Bank (“DCB”) branches, and fourth quarter net income included $41.7 million of additional income tax expense related to the enactment of the Tax Cuts and Jobs Act, impacting quarter-over-quarter comparisons. Excluding these items, adjusted2 net income of $164.9 million and adjusted2 diluted EPS of $1.13 for the first quarter of 2018 both increased by 30% from the fourth quarter of 2017.
• Sale of Desert Community Bank Branches – In March 2018, East West Bank closed the sale of its eight DCB branches, including $613.7 million of deposits, $59.1 million of loans, and other related assets. In the first quarter of 2018, East West recognized a pre-tax gain on sale of $31.5 million or $22.2 million after tax. The diluted EPS impact from the DCB sale was $0.15, net of tax.
• Net Interest Income Growth and Net Interest Margin Expansion – Net interest income totaled $326.7 million for the first quarter of 2018, an increase of $7.0 million, or 2% linked quarter, primarily due to the expansion of loan yields and loan growth. First quarter 2018 net interest margin (“NIM”) of 3.73% expanded by 16 basis points linked quarter.
• Record Loans – Total loans of $29.6 billion as of March 31, 2018 were up $547.5 million or 2%, from $29.1 billion as of December 31, 2017. DCB loans sold did not materially impact linked quarter growth comparisons, which still would have been 2% had the loans not been sold. The strongest sequential quarter loan growth came from the single family mortgage portfolio; quarter-over-quarter, all commercial lending categories grew. Total loans grew by 12% year-over-year.
• Record Deposits – Total deposits of $32.6 billion as of March 31, 2018 were up $388.6 million or 1%, from $32.2 billion as of December 31, 2017. Total deposits grew by 7% year-over-year. Deposit growth in the quarter more than offset the impact of the DCB branch sale. Adding back the $613.7 million of deposits sold, deposit growth would have been 3% linked quarter and 9% year-over-year. Noninterest-bearing demand deposits of $11.8 billion were 36% of total deposits as of March 31, 2018, an increase from 34% as of December 31, 2017.
• Asset Quality Metrics – The allowance for loan losses was $297.7 million, or 1.01% of loans held-for-investment (“HFI”), as of March 31, 2018, compared to $287.1 million, or 0.99% of loans HFI, as of December 31, 2017. For the first quarter of 2018, annualized net charge-offs were 0.13% of average loans HFI, compared to annualized net charge-offs of 0.22% of average loans HFI for the previous quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $131.0 million, or 0.35% of total assets, as of March 31, 2018.
• Capital Levels – Capital levels for East West continue to be strong. As of March 31, 2018, stockholders’ equity was $4.0 billion, or $27.46 per share. Tangible equity3 per common share was $24.07 as of March 31, 2018, an increase of 4% linked quarter and 14% year-over-year. As of March 31, 2018, the tangible equity to tangible assets ratio3 was 9.37%, the Common Equity Tier 1 (“CET1”) capital ratio was 11.9%, and the total risk-based capital ratio was 13.4%.

For earnings history and earnings-related data on East-West Bancorp (EWBC) click here.

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