Safe and Sound

East West Bank

Pasadena, CA
5
Star Rating
Started in 1972, East West Bank is an FDIC-insured bank based in Pasadena, CA. Regulatory filings show the bank having equity of $3.83 billion on $37.12 billion in assets, as of December 31, 2017.

U.S. bank customers have $30.53 billion on deposit at 122 offices in multiple states run by 2,933 full-time employees. With that footprint, the bank has amassed loans and leases worth $28.82 billion, including real estate loans of $18.71 billion.

Overall, Bankrate believes that, as of December 31, 2017, East West Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a look at how the bank did on the three major criteria Bankrate used to score U.S. banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital is a crucial measurement of an institution's financial resilience. It acts as a cushion against losses and affords protection for depositors during periods of financial instability for the bank. When it comes to safety and soundness, the higher the capital, the better.

East West Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 10 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. East West Bank's Tier 1 capital ratio was 11.40 percent, exceeding the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to financial difficulties.

Overall, East West Bank held equity amounting to 10.32 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as past-due mortgages.

Having lots of these types of assets suggests a bank may eventually have to use capital to absorb losses, cutting down on its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning money, reducing earnings and increasing the risk of a failure in the future.

On Bankrate's asset quality test, East West Bank scored 40 out of a possible 40 points, beating the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.41 percent of East West Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problematic loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on East West Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, likely making the bank better prepared to withstand economic trouble. Obviously, banks that are losing money are less able to do those things.

East West Bank scored 22 out of a possible 30 on Bankrate's test of earnings, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. East West Bank's most recent annualized quarterly return on equity was 13.58 percent, above the national average of 8.10 percent.

The bank recorded net income of $502.3 million on total equity of $3.83 billion for the twelve months ended December 31, 2017. The bank experienced an annualized return on average assets, or ROA, of 1.40 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.