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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
  
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported)
July 19, 2018

EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)



Delaware
 
000-24939
 
95-4703316
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
135 N Los Robles Ave., 7th Floor, Pasadena, California 91101
(Address of principal executive offices) (Zip code)
 
(626) 768-6000
(Registrant’s telephone number, including area code)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨                                 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




1






East West Bancorp, Inc.
Current Report of Form 8-K


Item 2.02. Results of Operations and Financial Condition
 
On July 19, 2018, East West Bancorp, Inc. (the “Company”) announced, via press release, its financial results for the quarter ended June 30, 2018 (the “Press Release”). The Press Release is available on the Company’s website. The Press Release is “furnished” as Exhibit 99.1 to this Current Report on Form 8-K pursuant to General Instruction B.2 of Form 8-K and is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities under that Section. This exhibit shall not be incorporated by reference into any filings the Company has made or may make under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as otherwise expressly stated in such filing.

Item 7.01. Regulation FD Disclosure

On July 19, 2018, the Company will hold a conference call to discuss its financial results for the quarter ended June 30, 2018, including the Press Release and other matters relating to the Company. The Company has also made available on its website presentation materials containing certain historical and forward-looking information relating to the Company (the “Presentation Materials”). The Presentation Materials are furnished as Exhibit 99.2 and are incorporated by reference in this Item 7.01. All information in Exhibit 99.2 is presented as of the particular date or dates referenced therein, and the Company does not undertake any obligation to, and disclaims any duty to, update any of the information provided. The information provided in Item 7.01 of this report, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, nor shall the information or Exhibit 99.2 be deemed incorporated by reference in any filings under the Securities Act.

Item 9.01. Financial Statements and Exhibits
 
(d) Exhibits
 
99.1           Press Release, dated July 19, 2018.
99.2           Presentation Materials, dated July 19, 2018.

 



2






SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

 
 
EAST WEST BANCORP, INC.
 
 
Date: July 19, 2018
By:
/s/ Irene H. Oh
 
 
 
Irene H. Oh
 
 
Executive Vice President and Chief Financial Officer


3






EXHIBIT INDEX
 
Exhibit
Number
 
Description
99.1
 
Press Release, dated July 19, 2018.
99.2
 
Presentation Materials, dated July 19, 2018.




4



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


 
Exhibit 99.1
 
 
394284298_ewbclogoa07.jpg
East West Bancorp, Inc.
135 N. Los Robles Ave., 7th Fl.
Pasadena, CA 91101
Tel. 626.768.6000
NEWS RELEASE
 
 
 
 
 
 
FOR INVESTOR INQUIRIES, CONTACT:
Irene Oh
Julianna Balicka
Chief Financial Officer
Director of Strategy and Corporate Development
T: (626) 768-6360
T: (626) 768-6985
E: irene.oh@eastwestbank.com
E: julianna.balicka@eastwestbank.com


EAST WEST BANCORP REPORTS NET INCOME FOR SECOND QUARTER 2018
OF $172 MILLION AND DILUTED EARNINGS PER SHARE OF $1.18


Pasadena, California July 19, 2018 East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the second quarter of 2018. For the second quarter of 2018, net income was $172 million or $1.18 per diluted share.

“Total loans grew $644 million, or 9% annualized, to a record $30.2 billion as of June 30, 2018 from $29.6 billion as of March 31, 2018,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $167 million, or 2% annualized, to a record $32.8 billion as of June 30, 2018 from $32.6 billion as of March 31, 2018.”

“East West delivered solid results in the second quarter of 2018. Compared to the first quarter, our net interest margin expanded by 10 basis points to 3.83% and our net interest income grew by 5% to $342 million. Our second quarter adjusted pre-tax, pre-provision income1 reached $234 million, an increase of 7% quarter-over-quarter and 18% year-over-year,” continued Ng.

“In the second quarter, our return on assets reached 1.84% and our return on equity reached 17.0%. Our strong profitability supports our organic growth, capital ratio expansion, and the increase to our common stock dividend, which we have raised by 15%.”
 
“As our profitability and revenue grow, we continue to invest in the bank. Our ongoing investment initiatives include adding talent throughout the organization, enhancing our customers’ experience, and strengthening our risk management infrastructure. Our initiatives demonstrate our commitment to our customers and employees, and our focus on generating long-term value for our shareholders,” concluded Ng.














 
 
 
 
1 See reconciliation of GAAP to non-GAAP financial measures in Table 13.

1



HIGHLIGHTS OF RESULTS

Quarterly Earnings Second quarter 2018 net income of $172.3 million and diluted earnings per share (“EPS”) of $1.18 both decreased by 8% compared to first quarter 2018 net income of $187.0 million and diluted EPS of $1.28. Linked quarter comparisons are impacted by the sale of Desert Community Bank (“DCB”) branches in the first quarter of 2018, which contributed an after-tax gain on sale of $22.2 million or $0.15 per share. Excluding this gain, second quarter net income increased by 5% from adjusted2 net income of $164.9 million for the first quarter of 2018; second quarter diluted EPS increased by 4% from the adjusted2 diluted EPS of $1.13 for the first quarter of 2018.

Net Interest Income Growth and Net Interest Margin Expansion Second quarter 2018 net interest income was $341.7 million, a quarterly increase of $15.0 million, or 5%, primarily due to the expansion of loan yields and loan growth, partially offset by an increase in deposit costs. Second quarter 2018 net interest margin (“NIM”) of 3.83% expanded by 10 basis points linked quarter.

Record Loans Total loans of $30.2 billion as of June 30, 2018 were up $643.6 million, or 9% linked quarter annualized, from $29.6 billion as of March 31, 2018. The strongest loan growth came from the single-family mortgage portfolio, followed by commercial and industrial loans. Total loans grew by 11% year-over-year.

Record Deposits Total deposits of $32.8 billion as of June 30, 2018 were up $167.4 million, or 2% linked quarter annualized, from $32.6 billion as of March 31, 2018. The sequential quarter growth was largely from an increase in time deposits. Total deposits grew by 5% year-over-year.

Asset Quality Metrics The allowance for loan losses was $301.6 million, or 1.00% of loans held-for-investment (“HFI”), as of June 30, 2018, compared to $297.7 million, or 1.01% of loans HFI, as of March 31, 2018. For the second quarter of 2018, annualized net charge-offs were 0.15% of average loans HFI, compared to annualized net charge-offs of 0.13% of average loans HFI for the previous quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $103.5 million, or 0.27% of total assets, as of June 30, 2018. This is a decrease of $27.4 million or 21% from $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 June 30, 2018, stockholders’ equity was $4.1 billion, or $28.39 per share. Tangible equity3 per common share was $25.01 as of June 30, 2018, an increase of 4% linked quarter and 14% year-over-year. As of June 30, 2018, the tangible equity to tangible assets ratio was 9.64%, the Common Equity Tier 1 (“CET1”) capital ratio was 12.2%, and the total risk-based capital ratio was 13.7%.






















 
 
 
 
2 See reconciliation of GAAP to non-GAAP financial measures in Table 12.
3 See reconciliation of GAAP to non-GAAP financial measures in Table 15.

2



QUARTERLY RESULTS SUMMARY
 
 
 
Quarter Ended
($ in millions, except per share data)
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
 
 
 
 
 
 
Net income
 
$
172.3

 
$
187.0

 
$
118.3

Adjusted net income (1)
 
$
172.3

 
$
164.9

 
$
118.3

Earnings per share (diluted)
 
$
1.18

 
$
1.28

 
$
0.81

Adjusted earnings per share (diluted) (1)
 
$
1.18

 
$
1.13

 
$
0.81

Book value per common share
 
$
28.39

 
$
27.46

 
$
25.40

Tangible equity (1) per common share
 
$
25.01

 
$
24.07

 
$
21.93

Tangible equity to tangible assets ratio (1)
 
9.64
%
 
9.37
%
 
8.95
%
Return on average assets (2)
 
1.84
%
 
2.03
%
 
1.36
%
Return on average equity (2)
 
17.0
%
 
19.3
%
 
13.0
%
Return on average tangible equity (1)(2)
 
19.5
%
 
22.3
%
 
15.3
%
Adjusted return on average assets (1)(2)
 
1.84
%
 
1.79
%
 
1.36
%
Adjusted return on average equity (1)(2)
 
17.0
%
 
17.0
%
 
13.0
%
Adjusted return on average tangible equity (1)(2)
 
19.5
%
 
19.7
%
 
15.3
%
Adjusted pre-tax, pre-provision profitability ratio (1)(2)
 
2.50
%
 
2.38
%
 
2.27
%
Net interest income
 
$
341.7

 
$
326.7

 
$
290.1

Net interest margin (2)
 
3.83
%
 
3.73
%
 
3.49
%
Cost of deposits (2)
 
0.64
%
 
0.49
%
 
0.36
%
Efficiency ratio
 
45.5
%
 
42.2
%
 
50.1
%
Adjusted efficiency ratio (1)
 
39.9
%
 
40.6
%
 
41.3
%
 
(1)
See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, and 15.
(2)
Annualized.

MANAGEMENT OUTLOOK FOR 2018

We have updated our outlook for the full year 2018, adjusting some components relative to a quarter ago. Compared to our full year 2017 results, our outlook for the expected full year 2018 results is as follows:

End of Period Loans: increase at a percentage rate of approximately 10%.

Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): we expect full year NIM to be approximately 3.75%.

Noninterest Expense (excluding tax credit amortization & deposit premium amortization): increase at a percentage rate in the high single digits.

Provision for Credit Losses: in the range of $70 million to $80 million.

Tax Items: projecting investment in tax-advantaged credits of $115 million, excluding low income housing tax credits, and associated tax credit amortization expense of $100 million. Projecting full year effective tax rate of approximately 13%.

Interest Rates: our outlook assumes one more fed funds rate increase in September 2018.

3



OPERATING RESULTS SUMMARY

Second Quarter 2018 Compared to First Quarter 2018

Net Interest Income and Net Interest Margin
Net interest income totaled $341.7 million, a 5% increase from $326.7 million. Net interest margin expanded by 10 basis points to 3.83% from 3.73%.
Average loans of $29.6 billion grew by $434.9 million, or 6% linked quarter annualized.
Average deposits of $32.4 billion grew by $83.5 million, or 1% linked quarter annualized.
The yield on loans expanded by 26 basis points to 4.95% from 4.69%.
The yield on earning assets expanded by 24 basis points to 4.49% from 4.25%.
The cost of deposits increased by 15 basis points to 0.64% from 0.49%.
The cost of funds increased by 15 basis points to 0.71% from 0.56%.

Noninterest Income
Total noninterest income totaled $48.3 million, a decrease from $74.4 million in the first quarter, which included a pre-tax gain of $31.5 million from the sale of DCB branches. Excluding the impact of all gains on sales, total fees and other operating income of $44.6 million in the second quarter of 2018 increased by 17% from $38.2 million.
The increase in letters of credit fees and foreign exchange income largely reflects mark-to-market revaluations for foreign currency balance sheet items.

The following table presents total fees and other operating income for the three months ended June 30, 2018, March 31, 2018, and June 30, 2017.
($ in thousands)
 
Quarter Ended
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
Branch fees
 
$
10,140

 
$
10,430

 
$
10,321

Letters of credit fees and foreign exchange income
 
15,673

 
9,602

 
12,365

Ancillary loan fees and other income
 
5,841

 
5,581

 
5,907

Wealth management fees
 
4,501

 
2,953

 
3,381

Derivative fees and other income
 
6,570

 
6,690

 
3,765

Other fees and operating income
 
1,865

 
2,921

 
6,197

Total fees and other operating income
 
$
44,590

 
$
38,177

 
$
41,936

 
 
 
 
 
 
 

Noninterest Expense
Noninterest expense of $177.4 million included $155.6 million of adjusted4 noninterest expense, $20.5 million in amortization of tax credit and other investments, and $1.4 million in amortization of core deposit intangibles.
Adjusted noninterest expense of $155.6 million increased by $5.3 million, or 4%, linked quarter. Compared to the prior quarter, we had larger increases in consulting, legal and computer software expenses. These were partially offset by a decrease in compensation and employee benefits from a seasonally higher first quarter, as well as a decrease in deposit insurance premiums and regulatory assessments.
The adjusted4 efficiency ratio was 39.9% in the second quarter, compared to 40.6% in the first quarter.













 
 
 
 
4 See reconciliation of GAAP to non-GAAP financial measures in Table 13.

4



TAX RELATED ITEMS

Tax expense in the second quarter of 2018 was $24.6 million and the effective tax rate was 13%, compared to a tax expense of $24.8 million and an effective tax rate of 12% in the first quarter of 2018.
Tax expense in the first quarter included two discrete items: the accounting for stock-based compensation and the reversal of a liability related to state taxes for prior years, which reduced tax expense by $4.8 million and $3.9 million, respectively.
Currently, we are projecting a full year 2018 effective tax rate of approximately 13%; previously, we had projected an effective tax rate of 16%. The reduction in the tax rate for the second quarter and full year 2018 to 13% largely reflects a new tax credit investment added in the quarter.

CREDIT QUALITY

The allowance for loan losses totaled $301.6 million, or 1.00% of loans HFI, as of June 30, 2018, compared to $297.7 million, or 1.01% of loans HFI, as of March 31, 2018, and $276.3 million, or 1.02% of loans HFI, as of June 30, 2017.
The provision for credit losses recorded for the current quarter was $15.5 million, compared to $20.2 million for the first quarter of 2018, and $10.7 million for the second quarter of 2017.
Net charge-offs for the current quarter were $11.2 million, or annualized 0.15% of average loans HFI. This compares to net charge-offs of $9.4 million, or annualized 0.13% of average loans HFI, for the first quarter of 2018, and net recoveries of $2.6 million, or annualized 0.04% of average loans HFI, for the second quarter of 2017.
Non-PCI nonperforming assets of $103.5 million, or 0.27% of total assets, as of June 30, 2018, decreased from $131.0 million, or 0.35% of total assets, as of March 31, 2018, and $133.0 million, or 0.37% of total assets, as of June 30, 2017.

CAPITAL STRENGTH

Capital levels for East West continue to be strong. As of June 30, 2018, stockholders’ equity was $4.1 billion, or $28.39 per share. Tangible equity per common share was $25.01 as of June 30, 2018, an increase of 4% linked quarter and 14% year-over-year. The following table presents the regulatory capital ratios for the quarters ended June 30, 2018, March 31, 2018, and June 30, 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EWBC Regulatory Capital Metrics
 
Basel III
($ in millions)
 
June 30, 2018 (a)
 
March 31, 2018
 
June 30, 2017
 
Minimum
Regulatory
Requirements
 
Well
Capitalized
Regulatory
Requirements
 
Fully Phased-
in Minimum
Regulatory
Requirements
 
 
 
 
 
 
 
 
 
 
 
 
 
CET1 capital ratio
 
12.2
%
 
11.9
%
 
11.3
%
 
4.5
%
 
6.5
%
 
7.0
%
Tier 1 risk-based capital ratio
 
12.2
%
 
11.9
%
 
11.3
%
 
6.0
%
 
8.0
%
 
8.5
%
Total risk-based capital ratio
 
13.7
%
 
13.4
%
 
12.8
%
 
8.0
%
 
10.0
%
 
10.5
%
Tier 1 leverage capital ratio
 
10.0
%
 
9.6
%
 
9.3
%
 
4.0
%
 
5.0
%
 
4.0
%
Risk-Weighted Assets (“RWA”) (b)
 
$
30,424

 
$
29,892

 
$
28,445

 
N/A

 
N/A

 
N/A

 
 
 
 
 
 
 

 
 

 
 

 
 
 
 
N/A Not applicable.
(a)
The Company’s June 30, 2018 regulatory capital ratios and RWA are preliminary.
(b)
Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.

















5



DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared third quarter 2018 dividends for the Company’s common stock. The common stock cash dividend of $0.23 per share is payable on August 15, 2018 to stockholders of record on August 1, 2018. As announced on May 29, 2018, this is a 15% increase to the quarterly common stock dividend, up from $0.20 per share previously.


Conference Call

East West will host a conference call to discuss second quarter 2018 earnings with the public on Thursday, July 19, 2018 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses second quarter 2018 results and operating developments.
The following dial-in information is provided for participation in the conference call: calls within the U.S. - (877) 506-6399; calls within Canada - (855) 669-9657; international calls - (412) 902-6699.
A presentation to accompany the earnings call will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company’s website at www.eastwestbank.com/investors.
A replay of the conference call will be available on July 19, 2018 at 11:30 a.m. Pacific Time through August 19, 2018. The replay numbers are: within the U.S. - (877) 344-7529; within Canada - (855) 669-9658; International calls - (412) 317-0088; and the replay access code is: 10121411.







































6



About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $38.1 billion that trades on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is the premier bank exclusively focused on the United States and Greater China markets, and is one of the largest independent banks headquartered in California. With over 130 locations worldwide, East West operates in California, Georgia, Massachusetts, Nevada, New York, Texas and Washington in the United States. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen. For more information about East West, visit the Company’s website at www.eastwestbank.com.



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 expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. 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, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; changes in the commercial and consumer real estate markets; changes in our costs of operation, compliance and expansion; changes in the United States (“U.S.”) economy, including inflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight - Division of Financial Institutions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; changes in the economy of and monetary policy in the People’s Republic of China; changes in income tax laws and regulations and the impact of the Tax Cuts and Jobs Act; impact of other potential federal tax changes and spending cuts; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; changes in the equity and debt securities markets; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; fluctuations of our stock price; fluctuations in foreign currency exchange rates; success and timing of our business strategies; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions; impact of adverse judgments or settlements in litigation; impact of regulatory enforcement actions; changes in our ability to receive dividends from our subsidiaries; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance; continuing consolidation in the financial services industry; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices and cost of operations; impact of adverse changes to our credit ratings from the major credit rating agencies; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; changes in interest rates on our net interest income and net interest margin; the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; the Company’s ability to retain key officers and employees; any future strategic acquisitions or divestitures; 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, 2017, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, the Company’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. The Company assumes no obligation to update such forward-looking statements.

7



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in thousands, except per share data)
(unaudited)
Table 1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
Qtr-o-Qtr
 
Yr-o-Yr
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
415,653

 
$
413,017

 
$
429,121

 
0.6
%
 
(3.1
)%
 
Interest-bearing cash with banks
 
1,881,818

 
1,901,921

 
2,323,355

 
(1.1
)
 
(19.0
)
 
Cash and cash equivalents
 
2,297,471

 
2,314,938

 
2,752,476

 
(0.8
)
 
(16.5
)
 
Interest-bearing deposits with banks
 
360,900

 
478,871

 
296,679

 
(24.6
)
 
21.6

 
Securities purchased under resale agreements (“resale agreements”) (1)
 
975,000

 
1,050,000

 
1,300,000

 
(7.1
)
 
(25.0
)
 
Investment securities
 
2,707,444

 
2,811,416

 
2,943,856

 
(3.7
)
 
(8.0
)
 
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock
 
73,524

 
73,787

 
73,173

 
(0.4
)
 
0.5

 
Loans held-for-sale (“HFS”)
 
14,658

 
46,181

 
11,649

 
(68.3
)
 
25.8

 
Loans held-for-investment (net of allowance for loan losses of $301,550, $297,654 and $276,316)
 
29,928,829

 
29,257,594

 
26,934,350

 
2.3

 
11.1

 
Investments in qualified affordable housing partnerships, net
 
152,556

 
160,574

 
169,103

 
(5.0
)
 
(9.8
)
 
Investments in tax credit and other investments, net
 
242,595

 
246,183

 
189,405

 
(1.5
)
 
28.1

 
Goodwill
 
465,547

 
465,547

 
469,433

 

 
(0.8
)
 
Other assets
 
854,430

 
788,067

 
777,493

 
8.4

 
9.9

 
Total assets
 
$
38,072,954


$
37,693,158


$
35,917,617

 
1.0
%
 
6.0
%
 
 
 
 
 
 
 
 
 


 


Liabilities and Stockholders’ Equity
 
 

 
 

 
 

 


 


 
Deposits
 
$
32,776,132

 
$
32,608,777

 
$
31,154,287

 
0.5
%
 
5.2
%
 
Short-term borrowings
 
58,523

 
30,277

 
24,426

 
93.3

 
139.6

 
FHLB advances
 
325,020

 
324,451

 
322,756

 
0.2

 
0.7

 
Securities sold under repurchase agreements (“repurchase agreements”) (1)
 
50,000

 
50,000

 
50,000

 

 

 
Long-term debt
 
161,704

 
166,640

 
176,450

 
(3.0
)
 
(8.4
)
 
Accrued expenses and other liabilities
 
587,291

 
534,258

 
519,437

 
9.9

 
13.1

 
Total liabilities
 
33,958,670

 
33,714,403

 
32,247,356

 
0.7

 
5.3

 
Stockholders’ equity
 
4,114,284

 
3,978,755

 
3,670,261

 
3.4

 
12.1

 
Total liabilities and stockholders’ equity
 
$
38,072,954

 
$
37,693,158

 
$
35,917,617

 
1.0
%
 
6.0
%
 
 
 
 
 
 
 
 
 


 


 
Book value per common share
 
$
28.39

 
$
27.46

 
$
25.40

 
3.4
%
 
11.8
%
 
Tangible equity (2) per common share
 
$
25.01

 
$
24.07

 
$
21.93

 
3.9

 
14.0

 
Tangible equity to tangible assets ratio (2)
 
9.64
%
 
9.37
%
 
8.95
%
 
2.9

 
7.8

 
Number of common shares at period-end
 
144,905

 
144,873

 
144,486

 
0.0

 
0.3

 
 
 
 
 
 
(1)
Resale and repurchase agreements are reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45, Balance Sheet Offsetting. As of each of June 30, 2018, March 31, 2018 and June 30, 2017, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.
(2)
See reconciliation of GAAP to non-GAAP financial measures in Table 15.


8



EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
Qtr-o-Qtr
 
Yr-o-Yr
Loans:
 
 
 
 
 
 
 
 
 
 
Commercial lending:
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial (“C&I”)
 
$
11,059,019

 
$
10,818,304

 
$
10,187,349

 
2.2
%
 
8.6
%
 
Commercial real estate (“CRE”)
 
9,054,567

 
9,022,746

 
8,465,030

 
0.4

 
7.0

 
Multifamily residential
 
2,032,522

 
1,954,855

 
1,772,741

 
4.0

 
14.7

 
Construction and land
 
623,837

 
669,340

 
660,819

 
(6.8
)
 
(5.6
)
Consumer lending:
 
 
 
 
 
 
 
 
 
 
 
Single-family residential
 
5,316,895

 
4,930,580

 
4,001,488

 
7.8

 
32.9

 
Home equity lines of credit (“HELOCs”)
 
1,769,511

 
1,775,443

 
1,786,207

 
(0.3
)
 
(0.9
)
 
Other consumer
 
374,028

 
383,980

 
337,032

 
(2.6
)
 
11.0

 
Total loans held-for-investment (1)(2)
 
30,230,379


29,555,248


27,210,666

 
2.3

 
11.1

Loans HFS
 
14,658

 
46,181

 
11,649

 
(68.3
)
 
25.8

 
Total loans (1)(2)
 
30,245,037

 
29,601,429

 
27,222,315

 
2.2

 
11.1

Allowance for loan losses
 
(301,550
)
 
(297,654
)
 
(276,316
)
 
1.3

 
9.1

 
Net loans (1)(2)
 
$
29,943,487

 
$
29,303,775

 
$
26,945,999

 
2.2
%
 
11.1
%
 
 
 
 
 
 
 
 
 
 
 


Deposits:
 
 

 
 

 
 

 
 
 


 
Noninterest-bearing demand
 
$
10,739,333

 
$
11,763,936

 
$
10,460,230

 
(8.7
)%
 
2.7
%
 
Interest-bearing checking
 
4,323,698

 
4,428,952

 
4,059,046

 
(2.4
)
 
6.5

 
Money market
 
7,634,850

 
7,913,040

 
8,193,086

 
(3.5
)
 
(6.8
)
 
Savings
 
2,218,228

 
2,301,780

 
2,368,611

 
(3.6
)
 
(6.3
)
 
Total core deposits
 
24,916,109

 
26,407,708

 
25,080,973

 
(5.6
)
 
(0.7
)
 
Time deposits
 
7,860,023

 
6,201,069

 
6,073,314

 
26.8

 
29.4

 
Total deposits
 
$
32,776,132

 
$
32,608,777


$
31,154,287

 
0.5
%
 
5.2
%
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Includes $(40.4) million, $(36.6) million and $(9.6) million as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.
(2)
Includes ASC 310-30 discount of $26.8 million, $32.2 million and $42.9 million as of June 30, 2018, March 31, 2018 and June 30, 2017, respectively.


9



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
Qtr-o-Qtr
 
Yr-o-Yr
Interest and dividend income
 
$
400,311

 
$
371,873

 
$
322,775

 
7.6
%
 
24.0
%
Interest expense
 
58,632

 
45,180

 
32,684

 
29.8

 
79.4

Net interest income before provision for credit losses
 
341,679

 
326,693

 
290,091

 
4.6

 
17.8

Provision for credit losses
 
15,536

 
20,218

 
10,685

 
(23.2
)
 
45.4

Net interest income after provision for credit losses
 
326,143

 
306,475

 
279,406

 
6.4

 
16.7

Noninterest income
 
48,268

 
74,444

 
47,244

 
(35.2
)
 
2.2

Noninterest expense
 
177,419

 
169,135

 
168,965

 
4.9

 
5.0

Income before income taxes
 
196,992

 
211,784

 
157,685

 
(7.0
)
 
24.9

Income tax expense
 
24,643

 
24,752

 
39,355

 
(0.4
)
 
(37.4
)
Net income
 
$
172,349

 
$
187,032

 
$
118,330

 
(7.9
)%
 
45.7
%
Earnings per share (“EPS”)
 
 

 
 

 
 

 


 


- Basic
 
$
1.19

 
$
1.29

 
$
0.82

 
(8.0
)%
 
45.2
%
- Diluted
 
$
1.18

 
$
1.28

 
$
0.81

 
(7.9
)
 
45.3

Weighted average number of shares outstanding
 
 
 
 
 
 
 


 


- Basic
 
144,899

 
144,664

 
144,485

 
0.2
%
 
0.3
%
- Diluted
 
146,091

 
145,939

 
145,740

 
0.1

 
0.2

 
 
 
 
 
 
 
 
 


 


 
 
 
Three Months Ended
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
Qtr-o-Qtr
 
Yr-o-Yr
Noninterest income:
 
 

 
 

 
 

 


 


 
Branch fees
 
$
10,140

 
$
10,430

 
$
10,321

 
(2.8
)%
 
(1.8
)%
 
Letters of credit fees and foreign exchange income
 
15,673

 
9,602

 
12,365

 
63.2

 
26.8

 
Ancillary loan fees and other income
 
5,841

 
5,581

 
5,907

 
4.7

 
(1.1
)
 
Wealth management fees
 
4,501

 
2,953

 
3,381

 
52.4

 
33.1

 
Derivative fees and other income
 
6,570

 
6,690

 
3,765

 
(1.8
)
 
74.5

 
Net gains on sales of loans
 
2,354

 
1,582

 
1,546

 
48.8

 
52.3

 
Net gains on sales of available-for-sale investment securities
 
210

 
2,129

 
2,720

 
(90.1
)
 
(92.3
)
 
Net gains on sales of fixed assets
 
1,114

 
1,086

 
1,042

 
2.6

 
6.9

 
Net gain on sale of business
 

 
31,470

 

 
(100.0
)
 

 
Other fees and operating income
 
1,865

 
2,921

 
6,197

 
(36.2
)
 
(69.9
)
Total noninterest income
 
$
48,268

 
$
74,444

 
$
47,244

 
(35.2
)%
 
2.2
%
Noninterest expense:
 
 

 
 

 
 

 


 


 
Compensation and employee benefits
 
$
93,865

 
$
95,234

 
$
80,744

 
(1.4
)%
 
16.3
%
 
Occupancy and equipment expense
 
16,707

 
16,880

 
15,554

 
(1.0
)
 
7.4

 
Deposit insurance premiums and regulatory assessments
 
5,832

 
6,273

 
5,779

 
(7.0
)
 
0.9

 
Legal expense
 
2,837

 
2,255

 
2,552

 
25.8

 
11.2

 
Data processing
 
3,327

 
3,401

 
3,058

 
(2.2
)
 
8.8

 
Consulting expense
 
5,120

 
2,352

 
4,769

 
117.7

 
7.4

 
Deposit related expense
 
2,922

 
2,679

 
2,505

 
9.1

 
16.6

 
Computer software expense
 
5,549

 
5,054

 
5,462

 
9.8

 
1.6

 
Other operating expense
 
20,779

 
17,607

 
20,670

 
18.0

 
0.5

 
Amortization of tax credit and other investments
 
20,481

 
17,400

 
27,872

 
17.7

 
(26.5
)
Total noninterest expense
 
$
177,419

 
$
169,135

 
$
168,965

 
4.9
%
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 


10



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 4
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
June 30, 2017
 
Yr-o-Yr
Interest and dividend income
 
$
772,184

 
$
625,444

 
23.5
%
Interest expense
 
103,812

 
63,231

 
64.2

Net interest income before provision for credit losses
 
668,372

 
562,213

 
18.9

Provision for credit losses
 
35,754

 
17,753

 
101.4

Net interest income after provision for credit losses
 
632,618

 
544,460

 
16.2

Noninterest income
 
122,712

 
163,072

 
(24.7
)
Noninterest expense
 
346,554

 
321,843

 
7.7

Income before income taxes
 
408,776

 
385,689

 
6.0

Income tax expense
 
49,395

 
97,623

 
(49.4
)
Net income
 
$
359,381

 
$
288,066

 
24.8
%
EPS
 
 

 
 

 


- Basic
 
$
2.48

 
$
2.00

 
24.4
%
- Diluted
 
$
2.46

 
$
1.98

 
24.5

Weighted average number of shares outstanding
 
 
 
 
 


- Basic
 
144,782

 
144,368

 
0.3
%
- Diluted
 
146,046

 
145,774

 
0.2

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
June 30, 2017
 
Yr-o-Yr
Noninterest income:
 
 

 
 

 
 
 
Branch fees
 
$
20,570

 
$
20,245

 
1.6
%
 
Letters of credit fees and foreign exchange income
 
25,275

 
23,806

 
6.2

 
Ancillary loan fees and other income
 
11,422

 
10,889

 
4.9

 
Wealth management fees
 
7,454

 
7,716

 
(3.4
)
 
Derivative fees and other income
 
13,260

 
6,271

 
111.4

 
Net gains on sales of loans
 
3,936

 
4,300

 
(8.5
)
 
Net gains on sales of available-for-sale investment securities
 
2,339

 
5,194

 
(55.0
)
 
Net gains on sales of fixed assets
 
2,200

 
73,049

 
(97.0
)
 
Net gain on sale of business
 
31,470

 

 
100.0

 
Other fees and operating income
 
4,786

 
11,602

 
(58.7
)
Total noninterest income
 
$
122,712


$
163,072

 
(24.7
)%
Noninterest expense:
 
 

 
 

 


 
Compensation and employee benefits
 
$
189,099

 
$
165,347

 
14.4
%
 
Occupancy and equipment expense
 
33,587

 
31,194

 
7.7

 
Deposit insurance premiums and regulatory assessments
 
12,105

 
11,708

 
3.4

 
Legal expense
 
5,092

 
5,614

 
(9.3
)
 
Data processing
 
6,728

 
6,005

 
12.0

 
Consulting expense
 
7,472

 
6,688

 
11.7

 
Deposit related expense
 
5,601

 
4,870

 
15.0

 
Computer software expense
 
10,603

 
9,430

 
12.4

 
Other operating expense
 
38,386

 
38,755

 
(1.0
)
 
Amortization of tax credit and other investments
 
37,881

 
42,232

 
(10.3
)
Total noninterest expense
 
$
346,554

 
$
321,843

 
7.7
%
 
 
 
 
 
 
 
 

11



EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
June 30, 2018
% Change
 
Six Months Ended
 
June 30, 2018
% Change
 
 
 
June 30, 2018
 
March 31, 2018
 
June 30, 2017
 
Qtr-o-Qtr
 
Yr-o-Yr
 
June 30, 2018
 
June 30, 2017
 
Yr-o-Yr
Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial lending:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C&I
 
$
10,747,074

 
$
10,712,583

 
$
9,975,216

 
0.3
%
 
7.7
%
 
$
10,729,924

 
$
9,968,745

 
7.6
%
 
CRE
 
9,038,228

 
9,006,593

 
8,351,403

 
0.4

 
8.2

 
9,022,498

 
8,248,718

 
9.4

 
Multifamily residential
 
1,970,538

 
1,944,516

 
1,764,720

 
1.3

 
11.7

 
1,957,599

 
1,710,111

 
14.5

 
Construction and land
 
667,997

 
657,568

 
655,588

 
1.6

 
1.9

 
662,811

 
664,465

 
(0.2
)
Consumer lending:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Single-family residential
 
5,103,008

 
4,771,427

 
3,816,572

 
6.9

 
33.7

 
4,938,134

 
3,690,782

 
33.8

 
HELOCs
 
1,787,036

 
1,779,242

 
1,800,022

 
0.4

 
(0.7
)
 
1,783,160

 
1,784,464

 
(0.1
)
 
Other consumer
 
332,885

 
339,977

 
335,266

 
(2.1
)
 
(0.7
)
 
336,411

 
336,260

 
0.0

 
Total loans (1)(2)
 
$
29,646,766

 
$
29,211,906

 
$
26,698,787

 
1.5
%
 
11.0
%
 
$
29,430,537

 
$
26,403,545

 
11.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities
 
$
2,735,023

 
$
2,854,335

 
$
2,962,201

 
(4.2
)%
 
(7.7
)%
 
$
2,794,350

 
$
3,110,280

 
(10.2
)%
Interest-earning assets
 
$
35,767,808

 
$
35,513,663

 
$
33,295,012

 
0.7
%
 
7.4
%
 
$
35,641,438

 
$
33,204,629

 
7.3
%
Total assets
 
$
37,568,895

 
$
37,381,098

 
$
34,994,935

 
0.5
%
 
7.4
%
 
$
37,475,515

 
$
34,961,668

 
7.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 

 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
Noninterest-bearing demand
 
$
10,984,950

 
$
11,289,512

 
$
10,195,755

 
(2.7
)%
 
7.7
%
 
$
11,136,389

 
$
10,154,195

 
9.7
%
 
Interest-bearing checking
 
4,387,479

 
4,559,695

 
3,872,347

 
(3.8
)
 
13.3

 
4,473,111

 
3,736,334

 
19.7

 
Money market
 
7,880,601

 
8,273,160

 
7,964,286

 
(4.7
)
 
(1.1
)
 
8,075,796

 
7,953,618

 
1.5

 
Savings
 
2,214,793

 
2,452,452

 
2,295,299

 
(9.7
)
 
(3.5
)
 
2,332,966

 
2,289,739

 
1.9

 
Total core deposits
 
25,467,823

 
26,574,819

 
24,327,687

 
(4.2
)
 
4.7

 
26,018,262

 
24,133,886

 
7.8

 
Time deposits
 
6,907,174

 
5,716,638

 
5,871,236

 
20.8

 
17.6

 
6,315,194

 
5,821,587

 
8.5

 
Total deposits
 
$
32,374,997

 
$
32,291,457

 
$
30,198,923

 
0.3
%
 
7.2
%
 
$
32,333,456

 
$
29,955,473

 
7.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
$
21,938,134

 
$
21,553,595

 
$
20,662,124

 
1.8
%
 
6.2
%
 
$
21,746,927

 
$
20,723,804

 
4.9
%
Stockholders’ equity
 
$
4,062,311

 
$
3,922,926

 
$
3,637,695

 
3.6
%
 
11.7
%
 
$
3,993,004

 
$
3,565,944

 
12.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Includes ASC 310-30 discount of $30.0 million, $34.1 million and $45.4 million for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively, and $32.0 million and $47.0 million for the six months ended June 30, 2018 and 2017, respectively.
(2)
Includes loans HFS.

12



<
EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
June 30, 2018
 
March 31, 2018
 
 
 
Average
 
 
 
Average
 
Average
 
 
 
Average
 
 
 
Balance
 
Interest
 
Yield/Rate(1)
 
Balance
 
Interest
 
Yield/Rate(1)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing cash and deposits with banks
 
$
2,316,194

 
$
11,715

 
2.03
%
 
$
2,323,771

 
$
10,945

 
1.91
%
 
Resale agreements (2)
 
996,154

 
7,182

 
2.89
%
 
1,050,000

 
6,934

 
2.68
%
 
Investment securities
 
2,735,023

 
15,059

 
2.21
%
 
2,854,335

 
15,456

 
2.20
%
 
Loans (3)
 
29,646,766

 
365,555

 
4.95
%
 
29,211,906

 
337,904

 
4.69
%
 
FHLB and FRB stock
 
73,671

 
800

 
4.36
%
 
73,651

 
634

 
3.49
%
 
Total interest-earning assets
 
35,767,808

 
400,311

 
4.49
%
 
35,513,663

 
371,873

 
4.25
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-earning assets:
 
 

 
 

 
 

 
 

 
 

 
 

 
Cash and due from banks
 
432,401

 
 
 
 
 
443,357

 
 

 
 

 
Allowance for loan losses
 
(292,645
)
 
 
 
 
 
(285,836
)
 
 

 
 

 
Other assets
 
1,661,331

 
 
 
 
 
1,709,914

 
 

 
 

 
Total assets
 
$
37,568,895

 
 

 
 

 
$
37,381,098

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 

 
 

 
 

 
 

 
 

Interest-bearing liabilities:
 
 

 
 

 
 

 
 

 
 

 
 

 
Checking deposits
 
$
4,387,479

 
$
8,416

 
0.77
%
 
$
4,559,695

 
$
6,727

 
0.60
%
 
Money market deposits
 
7,880,601

 
18,805

 
0.96
%
 
8,273,160

 
15,840

 
0.78