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East West Bancorp Reports Record Net Income For Full Year 2011 Of $245 Million; Increase In Annual Dividend Rate To $0.40 And New $200 Million Common Stock Repurchase Program

Stocks in this article: EWBC

Although operating in a low interest rate environment has been challenging, East West is taking measures to maintain a strong net interest margin while continuing prudent interest rate risk management practices. Additionally, management is confident that East West will continue to organically grow the loan portfolio. As such, while the net interest margin may decrease from current levels, management still expects to maintain a relatively stable net interest margin and expects the adjusted net interest margin to approximate 3.90% for the first quarter of 2012 and 3.85% for the full year 2012.

Noninterest Income (Loss) & Expense

The Company reported total noninterest income for the fourth quarter of 2011 of $937 thousand, compared to total noninterest (loss) of ($13.5) million in the third quarter of 2011 and noninterest (loss) of ($17.3) million in the fourth quarter of 2010. Branch fees, loan fees and letter of credit and foreign exchange income totaled $15.8 million in the fourth quarter of 2011, as compared to $17.4 million in the third quarter of 2011 and $13.7 million in the fourth quarter of 2010. Also included in noninterest income for the fourth quarter of 2011 were gains on sales of SBA loans of $1.4 million and gains on sales of investment securities of $2.9 million.

Noninterest expense totaled $106.7 million for the fourth quarter of 2011, an increase of $2.1 million from the third quarter of 2011 and a decrease of $7.1 million from the fourth quarter of 2010.

Noninterest expense, excluding amounts to be reimbursed by the FDIC, totaled $98.1 million for the fourth quarter of 2011. 1 A summary of the noninterest expenses for the fourth quarter 2011, compared to the third quarter 2011 and fourth quarter 2010, is detailed below:

Quarter Ended
December 31, 2011 September 30, 2011 December 31, 2010
Total noninterest expense: $ 106,672 $ 104,552 $ 113,743
Amounts to be reimbursed on covered assets (80% of actual expense amount) 8,551 3,539 12,958
Prepayment penalties for FHLB advances and other borrowings   -   3,826   -
Noninterest expense excluding reimbursable amounts and prepayment penalties for FHLB advances and other borrowings $ 98,121 $ 97,187 $ 100,785

Overall, noninterest expense for the fourth quarter, excluding amounts to be reimbursed by the FDIC, was in line with the third quarter of 2011. Compensation and employee benefits and occupancy and equipment expense increased 3% or $1.2 million and 1% or $149 thousand, respectively, for the fourth quarter of 2011. Deposit insurance premium expense increased in the fourth quarter 2011 as compared to the prior quarter due to a third quarter adjustment resulting from a lower actual assessment in that period. Credit cycle costs including other real estate owned expense, loan related expense, and legal expense totaled $21.9 million for the fourth quarter 2011, as compared to $15.7 million for the third quarter 2011. Of total credit cycle costs incurred in the fourth quarter, $10.7 million related to covered loans and real estate owned for which we expect that 80% or $8.6 million is reimbursable by the FDIC. Additionally, in the fourth quarter, amortization of investments in affordable housing partnerships decreased $2.4 million to $2.9 million and consulting expense decreased $1.0 million to $1.1 million, as compared to the prior quarter.

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