Pasadena-based East West Bancorp Inc., parent of the $42.9 billion-in-asset East West Bank, saw profits fall 13% to $150.4 million in its second quarter compared to the same year-ago period.
The profits fell largely due to higher income taxes and the costs of reversing previously claimed solar tax credit investments.
The bank said in a filing in February that it had a $53.9 million exposure related to its investments in mobile solar generators sold and managed by DC Solar, which the FBI said was operating a Ponzi-like scheme. DC Solar filed for federal bankruptcy protection in February.
East West Bank recorded a pretax $7 million impairment charge related to the alleged fraud, according to a May filing. During the second quarter, the company recorded $30.1 million of additional income tax expense to reverse the previously claimed solar tax credits.
East West’s income taxes nearly tripled to $72.8 million in the quarter, compared to $25 million a year ago.
The bank saw profits fall 13% from the $172.3 million in the 2018 second quarter, and 8.3% from $164 million in the first quarter of 2019.
Assets grew 12.8% in the second quarter to $42.9 billion from $38 billion in the same year-ago quarter, and 1.9% from the $42.1 billion in the 2019 first quarter — a clear sign of slowing growth.
Loans grew $871 million, or 11% annualized, to a record $33.7 billion as of June 30, from $32.9 billion as of March 31.
Deposits in the second quarter grew to a record $36.5 billion, up 11.5% from the same year ago quarter, and less than 1% higher than its 2019 first quarter deposits of $36.3 billion.
Aaron James Deer, a banking analyst with Sandler O’Neill, wrote in a research note that the bank said future drivers of its performance are expected to reflect potential quarter-point rate cuts by the Federal Reserve in July and October. The bank had previously not assumed rate cuts.
“Credit trends were healthy with a drop in both nonperformers and net charge-offs, and capital ratios continued to climb,” Deer said. “Operating expenses were well controlled, supporting solid profitability.”
East West shares closed July 18 at $47.19, up $2.34, or 5.2%.
Finance reporter Pat Maio can be reached at [email protected] or (323) 556-8329.
