News Column

East West Bancorp Reports Net Income for Second Quarter of 2014 of $84.0 Million, Up 13% from Prior Year and $0.58 Per Diluted Share, Up 12% from Prior Year

July 16, 2014

PASADENA, Calif.--(BUSINESS WIRE)-- 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 financial results for the second quarter of 2014. For the second quarter of 2014, net income was $84.0 million or $0.58 per diluted share. East West increased second quarter net income by $10.0 million or 13% and earnings per diluted share by $0.06 or 12% from the prior year period.

“East West is pleased to report solid earnings for the second quarter with $84.0 million net income or $0.58 per diluted share,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Our increase in earnings from both the prior quarter and prior year period is largely fueled by our strong loan growth. Total loans have increased 26% from the prior year period to $20.5 billion as of June 30, 2014, a proud achievement in today’s banking environment. Our profitability continues to remain strong, with a quarterly return on assets of 1.24% and a return on equity of 12.56%, both of which are higher than the previous quarter.”

“At the beginning of this year, we closed the acquisition of MetroCorp, a strategic move that expanded our presence in Texas and California. During the second quarter, we completed the conversion of all MetroCorp systems. We are pleased to be able to offer our newest customers the full range of bridge banking products and services in both the U.S. and China,” continued Ng.

“Our unique position as the financial bridge between the East and the West continues to generate positive returns quarter after quarter. Our knowledge, experience, and capabilities in the U.S. and Greater China markets gives us a competitive advantage over our peers. As we head into the second half of the year with a strong balance sheet and robust growth profile, we believe that we are well-positioned to achieve another year of record earnings,” concluded Ng.

Quarterly Results Summary

   
 
($ in millions, except per share) Quarter Ended
June 30, 2014     March 31, 2014     June 30, 2013
Net income $ 83.99 $ 76.74 $ 74.02
Net income available to common shareholders $ 83.99 $ 76.74 $ 72.30
Earnings per share (diluted) $ 0.58 $ 0.54 $ 0.52
Tangible book value per common share $ 15.28 $ 14.72 $ 13.55
 
Return on average assets 1.24 % 1.18 % 1.29 %
Return on average common equity 12.56 % 12.05 % 12.59 %
 
Net interest income, adjusted (1) $ 218.35 $ 208.97 $ 192.17
Net interest margin, adjusted (1) 3.46 % 3.45 % 3.62 %
Cost of deposits 0.28 % 0.30 % 0.33 %
Efficiency ratio (1) 43.98 % 43.36 % 40.40 %
 


Second Quarter 2014 Highlights

  • Strong Earnings – For the second quarter of 2014, net income was $84.0 million or $0.58 per diluted share. Net income increased $7.2 million or 9% from the first quarter of 2014 and $10.0 million or 13% from the second quarter of 2013. Earnings per diluted share increased $0.04 or 7% from the first quarter of 2014 and $0.06 or 12% from the second quarter of 2013.
  • Strong Loan Growth – Total loans receivable (including covered and non-covered loans) as of June 30, 2014 increased to $20.5 billion, up $615.5 million or 3% from the end of the first quarter of 2014. This increase was primarily due to a $969.4 million increase in non-covered loans, partially offset by decreases in covered loans of $227.4 million and loans held for sale. During the quarter, we sold $181.1 million of government guaranteed student loans from our loans held-for-sale portfolio. In the second quarter of 2014, we experienced growth in all non-covered loan categories, primarily in the commercial, commercial real estate and consumer loans.
  • Deposit Growth – Total deposits as of June 30, 2014 were $22.9 billion, an increase of $47.0 million from $22.8 billion as of March 31, 2014. This increase was comprised of increases in noninterest-bearing demand accounts and interest-bearing checking accounts, partially offset by decreases in money market and time deposits.
  • Healthy Net Interest Income and Net Interest Margin – Total adjusted net interest income for the second quarter of 2014 was $218.4 million, up $9.4 million or 4% from $209.0 million in the first quarter of 2014. Additionally, the adjusted net interest margin for the second quarter of 2014 was 3.46%, up one basis point from the first quarter of 2014. The increases in both net interest income and the net interest margin for the second quarter of 2014 were largely due to the strong loan growth and the reduction in the cost of deposits to 0.28%, down two basis points from the first quarter of 2014.
  • Strong Capital Levels Capital levels for East West remain high. As of June 30, 2014, East West’s Tier 1 risk-based capital and total risk-based capital ratios were 11.0% and 12.8%, respectively, over $550 million greater than the well capitalized requirements of 6% and 10%, respectively.

    Management Guidance

    The Company is providing guidance for the third quarter and full year of 2014. Management currently estimates that fully diluted earnings per share for the full year of 2014 will range from $2.29 to $2.33, an increase of $0.19 to $0.23 or 9% to 11% from $2.10 for the full year of 2013. This EPS guidance for the remainder of 2014 is based on an adjusted net interest margin ranging from 3.35% to 3.40%1, total loan growth of approximately $400 million per quarter, provision for loan losses of approximately $5.0 million to $8.0 million per quarter, noninterest expense of approximately $120 million to $125 million per quarter, and an effective tax rate of 29%. Management currently estimates that fully diluted earnings per share for the third quarter of 2014 will range from $0.58 to $0.60, based on the assumptions stated above.

    Balance Sheet Summary

    Total assets as of June 30, 2014 were $27.6 billion, an increase of $156.1 million or 1% from $27.4 billion as of March 31, 2014. Further, average interest-earning assets increased $785.1 million or 3% from the first quarter of 2014 to $25.3 billion for the second quarter of 2014. The increase in assets and average interest-earning assets was largely attributable to a $918.1 million increase in average non-covered loan balances, partially offset by a $220.5 million decrease in average covered loan balances.

    Year over year, total assets increased $4.2 billion or 18% from $23.3 billion at June 30, 2013. This increase year over year is largely due to growth in the non-covered loan portfolio and the MetroCorp acquisition which closed in January of this year.

    Total loans receivable as of June 30, 2014 were $20.5 billion, an increase of $615.5 million or 3% compared to $19.9 billion as of March 31, 2014, with growth in all non-covered loan categories, primarily in the commercial, commercial real estate and consumer loans. This growth in non-covered loans was partially offset by $181.1 million in government guaranteed student loan sales and the decrease in covered loan balances.

    Covered Loans

    Covered loans, net of discount and allowance for loan losses as of June 30, 2014 totaled $1.8 billion, a decrease of $225.7 million or 11% from March 31, 2014. The decrease in the covered loan portfolio was primarily due to payoffs and paydown activities.

    The covered loan portfolio is comprised of loans acquired from the FDIC-assisted acquisitions of United Commercial Bank (“UCB”) and Washington First International Bank, which are covered under loss-share agreements with the FDIC. During the second quarter of 2014, in the noninterest line item “Changes in FDIC indemnification asset, receivable/payable”, we recorded a reduction of $57.6 million, largely attributable to the continued payoffs and improved credit performance of the UCB portfolio, as compared to our original estimate. Under the loss-share agreements with the FDIC, East West Bank is required to pay the FDIC a calculated amount if specific thresholds of losses are not reached. Included in “Changes in FDIC indemnification asset, receivable/payable” noninterest loss line item for the second quarter of 2014 is an expense of $8.5 million for this liability due to the continuing strong credit performance of the covered portfolios. At the end of the first quarter of 2014 and in previous quarters, due to the estimated losses from the covered portfolio and the corresponding expected payments from the FDIC, we had recorded an FDIC indemnification asset. As of March 31, 2014, the FDIC indemnification asset totaled $27.6 million. As of June 30, 2014, due to the ongoing improvement in credit quality of the covered portfolio, we recorded a net liability to the FDIC of $24.3 million.

    Deposits and Other Liabilities

    In the second quarter of 2014, we continued to execute our strategy to grow low-cost commercial deposits, while reducing our reliance on time deposits. Total deposits as of June 30, 2014 were $22.9 billion, an increase of $47.0 million from $22.8 billion as of March 31, 2014. Core deposits were $16.6 billion as of June 30, 2014, an increase of $198.7 million or 1% from the first quarter of 2014. This increase in core deposits was mainly due to increases in noninterest-bearing demand accounts and interest-bearing checking accounts, partially offset by a decrease in money market accounts. This growth in core deposits was partially offset by a $151.7 million or 2% decrease in time deposits.

    Second Quarter 2014 Operating Results

    Net Interest Income

    Net interest income adjusted for the net impact of covered loan activity and amortization of the FDIC indemnification asset, totaled $218.4 million for the second quarter of 2014, an increase from $209.0 million for the first quarter of 2014 and $192.2 million for the second quarter of 2013. The core net interest margin for the second quarter of 2014 totaled 3.46%, taking into consideration the net impact of $48.1 million to the FDIC indemnification asset due to covered loan activity and amortization of the FDIC indemnification asset. This compares to a core net interest margin of 3.45% and 3.62%, considering the net impact of $49.0 million and $35.5 million to the FDIC indemnification asset due to covered loan activity and amortization of the FDIC indemnification asset, for the first quarter of 2014 and second quarter of 2013, respectively.1

    The one basis point increase in the core net interest margin and $9.4 million or 4% increase in adjusted net interest income compared to the first quarter of 2014 was largely due to the increase in our non-covered loan portfolio and the reduction in the cost of deposits.

    Noninterest Loss & Expense

    Noninterest Loss

    Noninterest loss for the second quarter of 2014 was $14.9 million, unchanged from the first quarter of 2014 and compared to $12.4 million for the second quarter of 2013. Also included in noninterest loss for the second quarter of 2014 were $6.8 million of gains on the sale of loans. The gains on the sale of loans were primarily related to the sale of $181.1 million of government guaranteed student loans and $19.0 million of SBA loans.

    Total fees and other operating income for the second quarter of 2014 totaled $35.0 million, an increase of $6.0 million or 21% from the first quarter of 2014 and $4.6 million or 15% from the second quarter of 2013. The following table presents total fees and other operating income for the quarters ended June 30, 2014, March 31, 2014 and June 30, 2013:

        Quarter Ended
    ($ in thousands) June 30, 2014     March 31, 2014     June 30, 2013
     
    Branch fees $ 9,519 $ 9,446 $ 8,119
    Letters of credit fees and foreign exchange income 8,940 6,856 9,075
    Ancillary loan fees 2,521 2,472 2,634
    Other operating income   13,989   10,150   10,504
    Total fees & other operating income $ 34,969 $ 28,924 $ 30,332
     


    The increase in letters of credit fees and foreign exchange income of $2.1 million resulted from an increase of fee income. Additionally, other operating income increased to $14.0 million for the second quarter of 2014, an increase of $3.8 million from the first quarter of 2014. This increase was largely due to increases in investment advisory fees and commissions and fee income from assisting customers in hedging interest rates.

    Noninterest Expense

    Noninterest expense for the second quarter of 2014 totaled $127.9 million, an increase of $3.5 million or 3% from the first quarter of 2014 and an increase of $33.5 million or 35% from the second quarter of 2013. The increase in noninterest expense from the previous quarter was largely due to a $6.9 million increase in amortization expense related to new affordable housing partnerships and other investments entered into during the quarter and a $5.3 million increase in legal expenses, partially offset by a $8.8 million reduction in integration and merger related expenses. The increase in legal expenses from the previous quarter was due to settlement resolutions reached in the second quarter of 2014. The $33.5 million or 35% increase from the second quarter of 2013 is largely due to an increase in compensation and employee benefits, an increase in amortization expense related to new affordable housing partnerships and other investments purchased in the second quarter of 2014 and other higher operating costs, resulting from both the MetroCorp acquisition and also a result of the growth we have experienced.

    The increase in the amortization of investments in affordable housing partnerships and other investments of $6.9 million was primarily due to the purchase of additional tax credits during the second quarter of 2014. During the quarter, the amortization expense on these investments increased but was more than offset by a lower income tax expense and lower effective tax rate. As such, the effective tax rate decreased from the previously estimated 32% to 29% for the full year of 2014.

    The following table presents noninterest expense, excluding the impact of reimbursable amounts from the FDIC on covered assets, and MetroCorp’s acquisition integration and merger related expenses for the quarters ended June 30, 2014, March 31, 2014 and June 30, 2013:

    ($ in thousands)     Quarter Ended
    June 30, 2014     March 31, 2014     June 30, 2013
    Total noninterest expense $ 127,899 $ 124,427 $ 94,420
    Less:
    Amounts (payable to) reimbursable by the FDIC on covered assets (80% of actual expense amount)* (1,580 ) 2,015 2,910
    Integration and merger related expenses   1,811     10,576  
    Noninterest expense excluding amounts (payable to) reimbursable by the FDIC and integration and merger related expenses $ 127,668   $ 111,836 $ 91,510
     
    *   Pursuant to the loss-share agreements, the FDIC reimburses the Company 80% of eligible losses with respect to covered assets. The FDIC also shares in 80% of the recoveries or gains with respect to covered assets. During the three months ended June 30, 2014, the Company had a net $1.6 million payable to the FDIC.
     


    Total noninterest expense for the second quarter of 2014, excluding the impact of reimbursable amounts from the FDIC on covered assets and MetroCorp’s acquisition integration and merger related expenses, increased $15.8 million or 14% on a sequential quarterly basis. Integration and merger related expenses of $1.8 million and $10.6 million, for the second and first quarters of 2014, respectively, were mainly comprised of compensation and employee benefits, data processing, occupancy and equipment expenses.

    Credit Quality

    Non-covered Loans

    Provision for loan losses for non-covered loans for the second quarter of 2014 was $8.9 million. This compares to a provision for loan losses for the first quarter of 2014 and the second quarter of 2013 of $8.0 million and $8.3 million, respectively. Net charge-offs totaled $7.3 million in the second quarter of 2014, compared to $4.1 million in the first quarter of 2014 and $4.0 million in the second quarter of 2013.

    Nonaccrual loans, excluding covered loans, as of June 30, 2014, totaled $118.9 million or 0.58% of total loans, a decrease from 0.67% of total loans as of March 31, 2014 and a decrease from 0.69% of total loans as of June 30, 2013. The nonperforming assets to total assets ratio remained low at 0.59% as of June 30, 2014 and March 31, 2014, compared to 0.57% as of June 30, 2013.

    The allowance for non-covered loan losses as of June 30, 2014 was $246.5 million or 1.35% of non-covered loans. This compares to an allowance for non-covered loan losses of $245.6 million or 1.42% of non-covered loans at March 31, 2014 and $233.5 million or 1.73% of non-covered loans at June 30, 2013.

    The Company recorded a provision for unfunded commitments and letters of credit of $829 thousand for the second quarter of 2014. The allowance for unfunded commitments and letters of credit was $12.3 million, $11.5 million and $8.3 million, as of June 30, 2014, March 31, 2014 and June 30, 2013, respectively.

    Covered Loans

    Allowance for covered loans as of June 30, 2014, March 31, 2014 and June 30, 2013 were $4.9 million, $6.5 million and $9.6 million, respectively. During the second quarter of 2014, the Company recorded a reversal of provision for loan losses on covered loans of $944 thousand and net charge-offs of $694 thousand. As such loans are covered under FDIC loss-share agreements, the Company records 80% of the charge-off amounts in noninterest income and as a net increase in FDIC receivable, resulting in a net impact to earnings of 20% of the charge-off amounts. The Company also shares 80% of the recovered amounts with the FDIC.

    Capital Strength

    ($ in millions)

               
    June 30, 2014

    Well Capitalized

    Regulatory

    Requirement

    Total Excess Above

    Well Capitalized

    Requirement

     
    Tier 1 leverage capital ratio 8.5 % 5.0 % $ 937
    Tier 1 risk-based capital ratio 11.0 % 6.0 % 1,035
    Total risk-based capital ratio 12.8 % 10.0 % 579
    Tangible equity to tangible assets ratio 8.1 % N/A N/A
    Tangible equity to risk weighted assets ratio 10.7 % N/A N/A
     


    Our capital ratios remain very strong. As of June 30, 2014, our Tier 1 leverage capital ratio totaled 8.5%, our Tier 1 risk-based capital ratio totaled 11.0% and our total risk-based capital ratio totaled 12.8%.

    The Company is focused on active capital management and is committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a strong return to our shareholders.

    Dividend Payout and Capital Actions

    East West’s Board of Directors has declared third quarter dividends for the common stock. The common stock cash dividend of $0.18 is payable on or about August 15, 2014 to shareholders of record on August 1, 2014.

    Conference Call

    East West will host a conference call to discuss second quarter 2014 earnings with the public on Thursday, July 17, 2014 at 8:30 a.m. PDT/11:30 a.m. EDT. The public and investment community are invited to listen as management discusses second quarter 2014 results and operating developments. The following dial-in information is provided for participation in the conference call: Calls within the US – (877) 506-6399; Calls within Canada – (855) 669-9657; International calls – (412) 902-6699. A listen-only live broadcast of the call also will be available on the investor relations page of the Company's website at www.eastwestbank.com.

    About East West

    East West Bancorp is a publicly owned company with $27.6 billion in assets and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 130 locations worldwide, including in the United States markets of California, Georgia, Nevada, New York, Massachusetts, Texas and Washington. In Greater China, East West’s presence includes a full service branch in Hong Kong and representative offices in Beijing, Chongqing, Shenzhen, Taipei and Xiamen. Through a wholly-owned subsidiary bank, East West’s presence in Greater China also includes full service branches in Shanghai and Shantou and a representative office in Guangzhou. For more information on East West Bancorp, 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 “will likely result,” “may,” “are expected to,” “is anticipated,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “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 include, but are not limited to, our ability to achieve the projected synergies of the MetroCorp BancShares, Inc. acquisition; our ability to manage the loan portfolios acquired from Federal Deposit Insurance Corporation (FDIC)-assisted acquisitions within the limits of the loss protection provided by the FDIC; changes in our borrowers’ performance on loans; changes in the commercial and consumer real estate markets; changes in our costs of operation, compliance and expansion; changes in the U.S. economy, including inflation; changes in government interest rate policies; changes in laws or the regulatory environment; changes in the economy of and monetary policy in the People’s Republic of China; changes in critical accounting policies and judgments; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; changes in the equity and debt securities markets; changes in competitive pressures on financial institutions; the effect of additional provision for loan losses; the effect of government budget cuts and government shut down; fluctuations of our stock price; the success and timing of our business strategies; the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity; the impact of potential federal tax increases and spending cuts; the impact of adverse judgments or settlements in litigation against the Company; changes in our ability to receive dividends from our subsidiaries; and political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; 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, 2013, 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, East West’s results could differ materially from those expressed in, implied or projected by such forward-looking statements.East West assumes no obligation to update such forward-looking statements.

    1 See reconciliation of the GAAP financial measure to the non-GAAP financial measure in the tables attached.

     
    EAST WEST BANCORP, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands, except per share amounts)
    (unaudited)
     
        June 30, 2014     March 31, 2014     June 30, 2013
    Assets
    Cash and cash equivalents $ 1,246,044 $ 1,884,855 $ 1,050,214
    Short-term investments 286,130 323,266 330,438
    Securities purchased under resale agreements 1,275,000 1,200,000 1,450,000
    Investment securities 2,529,652 2,474,744 2,667,172

    Loans receivable, excluding covered loans (net of allowance for loan losses of $246,468, $245,618 and $233,480)

    18,476,575 17,630,797 13,509,241

    Covered loans (net of allowance for loan losses of $4,880, $6,518 and $9,629)

      1,803,090   2,028,806   2,504,315

    Total loans receivable, net

    20,279,665 19,659,603 16,013,556
    Federal Home Loan Bank and Federal Reserve Bank stock 91,948 102,480 134,250
    FDIC indemnification asset 27,552 219,942
    Other real estate owned, net 42,458 28,421 21,433
    Other real estate owned covered, net 24,779 30,610 29,836
    Premiums on deposits acquired, net 50,389 53,013 51,501
    Goodwill 458,467 458,467 337,438
    Other assets   1,272,573   1,158,015   1,002,626
    Total assets $ 27,557,105 $ 27,401,026 $ 23,308,406
     
    Liabilities and Stockholders' Equity
    Deposits $ 22,875,089 $ 22,828,057 $ 19,282,207
    Federal Home Loan Bank advances 316,156 315,620 314,022
    Securities sold under repurchase agreements 1,005,211 1,005,316 995,000
    Long-term debt 235,732 240,675 137,178
    Net payable to FDIC 24,337
    Accrued expenses and other liabilities   399,556   387,138   322,048
    Total liabilities 24,856,081 24,776,806 21,050,455
    Stockholders' equity   2,701,024   2,624,220   2,257,951
    Total liabilities and stockholders' equity $ 27,557,105 $ 27,401,026 $ 23,308,406
    Book value per common share $ 18.84 $ 18.30 $ 16.40
    Tangible book value per common share $ 15.28 $ 14.72 $ 13.55
    Number of common shares at period end 143,389 143,368 137,705
     
    EAST WEST BANCORP, INC.
    TOTAL LOANS AND DEPOSIT DETAIL
    (In thousands)
    (unaudited)
     

    As of June 30, 2014

        Non-covered     Covered    

    Total loans

    receivable

    Loans receivable
    Real estate - single family $ 3,316,581 $ 242,590 $ 3,559,171
    Real estate - multifamily 1,133,146 335,745 1,468,891
    Real estate - commercial 5,358,710 803,438 6,162,148
    Real estate - land and construction 439,593 52,640 492,233
    Commercial 6,673,303 311,509 6,984,812
    Consumer   1,356,435     62,048     1,418,483  
    Total loans receivable (1), excluding loans held for sale 18,277,768 1,807,970 20,085,738
    Loans held for sale   450,864         450,864  
    Total loans receivable 18,728,632 1,807,970 20,536,602
    Unearned fees, premiums and discounts (5,589 ) (5,589 )
    Allowance for loan losses   (246,468 )   (4,880 )   (251,348 )
    Net loans receivable $ 18,476,575   $ 1,803,090   $ 20,279,665  
     
     
    June 30, 2014March 31, 2014June 30, 2013
    Loans receivable
    Real estate - single family $ 3,316,581 $ 3,238,298 $ 2,575,975
    Real estate - multifamily 1,133,146 1,111,188 929,867
    Real estate - commercial 5,358,710 5,118,377 3,917,082
    Real estate - land and construction 439,593 401,543 233,302
    Commercial 6,673,303 6,201,083 4,709,675
    Consumer   1,356,435     1,237,922     1,160,013  
    Total non-covered loans receivable (1), excluding loans held for sale 18,277,768 17,308,411 13,525,914
    Loans held for sale 450,864 577,353 245,026
    Covered loans, net of discount (1)   1,807,970     2,035,324     2,513,944  
    Total loans receivable 20,536,602 19,921,088 16,284,884
    Unearned fees, premiums and discounts (5,589 ) (9,349 ) (28,219 )
    Allowance for loan losses on non-covered loans (246,468 ) (245,618 ) (233,480 )

    Allowance for loan losses on covered loans

      (4,880 )   (6,518 )   (9,629 )
    Net loans receivable $ 20,279,665   $ 19,659,603   $ 16,013,556  
     
    Deposits
    Noninterest-bearing demand $ 6,889,950 $ 6,636,874 $ 5,128,894
    Interest-bearing checking 2,210,514 2,028,134 1,483,854
    Money market 6,032,922 6,302,002 5,448,098
    Savings   1,510,088     1,477,754     1,269,029  
    Total core deposits 16,643,474 16,444,764 13,329,875
    Time deposits   6,231,615     6,383,293     5,952,332  
    Total deposits $ 22,875,089   $ 22,828,057   $ 19,282,207  
     

    (1) Includes loans net of ASC 310-30 discount.

     

    EAST WEST BANCORP, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME

    (In thousands, except per share amounts)

    (unaudited)

               
    Quarter Ended
    June 30, 2014March 31, 2014June 30, 2013
     
    Interest and dividend income $ 294,442 $ 286,173 $ 255,353
    Interest expense   (27,992 )   (28,207 )   (27,709 )
    Net interest income before provision for loan losses 266,450 257,966 227,644
    Provision for loan losses, excluding covered loans (8,944 ) (7,954 ) (8,277 )
    Reversal of (provision for) loan losses on covered loans   944     1,021     (723 )
    Net interest income after provision for loan losses 258,450 251,033 218,644
    Noninterest loss (14,945 ) (14,916 ) (12,354 )
    Noninterest expense   (127,899 )   (124,427 )   (94,420 )
    Income before provision for income taxes 115,606 111,690 111,870
    Provision for income taxes   31,618     34,949     37,855  
    Net income 83,988 76,741 74,015
    Preferred stock dividend           (1,714 )
    Net income available to common stockholders $ 83,988   $ 76,741   $ 72,301  
    Net income per share, basic $ 0.59 $ 0.54 $ 0.52
    Net income per share, diluted $ 0.58 $ 0.54 $ 0.52
    Shares used to compute per share net income:
    - Basic 143,187 141,962 137,536
    - Diluted 143,689 142,632 137,816
     
     
    Quarter Ended
    June 30, 2014March 31, 2014June 30, 2013

    Noninterest income (loss):

    Branch fees $ 9,519 $ 9,446 $ 8,119
    Changes in FDIC indemnification asset, receivable/payable (57,558 ) (53,634 ) (47,905 )
    Net gains (losses) on sales of loans 6,793 6,196 (354 )
    Letters of credit fees and foreign exchange income 8,940 6,856 9,075
    Net gains on sales of investment securities 671 3,418 5,345
    Net gains on sales of fixed assets 180 180 228
    Ancillary loan fees 2,521 2,472 2,634
    Other operating income   13,989     10,150     10,504  

    Total noninterest loss

    $ (14,945 ) $ (14,916 ) $ (12,354 )
     

    Noninterest expense:

    Compensation and employee benefits $ 55,081 $ 59,277 $ 42,026
    Occupancy and equipment expense 16,534 15,851 13,706
    Loan related (income) expenses (1,098 ) 2,575 3,573
    Other real estate owned expense (gains on sale) 783 1,334 (1,188 )
    Deposit insurance premiums and regulatory assessments 5,812 5,702 3,875
    Legal expense 9,104 3,799 5,467
    Amortization of premiums on deposits acquired 2,624 2,500 2,375
    Data processing 2,940 8,200 2,200
    Consulting expense 2,328 1,049 1,003

    Amortization of investments in affordable housing partnerships and other investments

    12,851 5,964 5,064
    Other operating expense   20,940     18,176     16,319  
    Total noninterest expense $ 127,899   $ 124,427   $ 94,420  
     

    EAST WEST BANCORP, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME

    (In thousands, except per share amounts)

    (unaudited)

     

        Year To Date
    June 30, 2014     June 30, 2013
     
    Interest and dividend income $ 580,615 $ 493,776
    Interest expense   (56,199 )   (56,841 )
    Net interest income before provision for loan losses 524,416 436,935
    Provision for loan losses, excluding covered loans (16,898 ) (7,515 )
    Reversal of (provision for) loan losses on covered loans   1,965     (5,812 )
    Net interest income after provision for loan losses 509,483 423,608
    Noninterest loss (29,861 ) (14,453 )
    Noninterest expense   (252,326 )   (190,775 )
    Income before provision for income taxes 227,296 218,380
    Provision for income taxes   66,567     72,274  
    Net income 160,729 146,106
    Preferred stock dividend       (3,428 )
    Net income available to common stockholders $ 160,729   $ 142,678  
    Net income per share, basic $ 1.13 $ 1.03
    Net income per share, diluted $ 1.12 $ 1.03
    Shares used to compute per share net income:
    - Basic 142,578 137,592
    - Diluted 143,158 141,573
     
     
    Year To Date
    June 30, 2014June 30, 2013

    Noninterest income (loss):

    Branch fees $ 18,965 $ 15,773
    Changes in FDIC indemnification asset, receivable/payable (111,192 ) (79,804 )
    Net gains (losses) on sales of loans 12,989 (260 )
    Letters of credit fees and foreign exchange income 15,796 16,473
    Net gains on sales of investment securities 4,089 10,922
    Net gains on sales of fixed assets 360 352
    Ancillary loan fees 4,993 4,686
    Other operating income   24,139     17,405  
    Total noninterest loss $ (29,861 ) $ (14,453 )
     

    Noninterest expense:

    Compensation and employee benefits $ 114,358 $ 87,757
    Occupancy and equipment expense 32,385 27,514
    Loan related expenses 1,477 7,157
    Other real estate owned (gains on sale) expense 2,117 (2,172 )
    Deposit insurance premiums and regulatory assessments 11,514 7,657
    Legal expense 12,903 9,911
    Amortization of premiums on deposits acquired 5,124 4,784
    Data processing 11,140 4,637
    Consulting expense 3,377 1,457

    Amortization of investments in affordable housing partnerships and other investments

    18,815 9,347
    Other operating expense   39,116     32,726  
    Total noninterest expense $ 252,326   $ 190,775  
     
    EAST WEST BANCORP, INC.
    SELECTED FINANCIAL INFORMATION
    (In thousands)
    (unaudited)
     
    Average Balances     Quarter Ended
    June 30, 2014     March 31, 2014     June 30, 2013
    Loans receivable
    Real estate - single family $ 3,272,711 $ 3,230,976 $ 2,444,883
    Real estate - multifamily 1,121,258 1,056,092 924,552
    Real estate - commercial 5,212,722 4,958,490 3,800,664
    Real estate - land and construction 423,507 367,661 224,509
    Commercial 6,375,743 5,771,525 4,478,848
    Consumer   1,749,935     1,853,060     1,225,830  
    Total loans receivable, excluding covered loans 18,155,876 17,237,804 13,099,286
    Covered loans   1,874,927     2,095,390     2,641,324  
    Total loans receivable 20,030,803 19,333,194 15,740,610
    Investment securities 2,486,303 2,582,819 2,582,899
    Earning assets 25,326,247 24,541,104 21,289,420
    Total assets 27,131,412 26,330,186 22,994,664
     
    Deposits
    Noninterest-bearing demand $ 6,553,899 $ 6,121,649 $ 4,882,823
    Interest-bearing checking 2,139,537 1,838,201 1,440,538
    Money market 6,035,120 5,901,145 5,332,345
    Savings   1,495,295     1,447,339     1,256,146  
    Total core deposits 16,223,851 15,308,334 12,911,852
    Time deposits   6,288,684     6,263,607     5,993,464  
    Total deposits 22,512,535 21,571,941 18,905,316
    Interest-bearing liabilities 17,520,676 17,155,357 15,468,377
    Stockholders' equity 2,681,281 2,582,724 2,331,306
     
     
    Selected RatiosQuarter Ended
    June 30, 2014March 31, 2014June 30, 2013
    For The Period
    Return on average assets 1.24 % 1.18 % 1.29 %
    Return on average common equity 12.56 % 12.05 % 12.59 %
    Interest rate spread 4.02 % 4.06 % 4.09 %
    Net interest margin 4.22 % 4.26 % 4.29 %
    Yield on earning assets 4.66 % 4.73 % 4.81 %
    Cost of deposits 0.28 % 0.30 % 0.33 %
    Cost of funds 0.47 % 0.49 % 0.55 %
    Noninterest expense/average assets (1) 1.64 % 1.62 % 1.52 %
    Efficiency ratio (2) 43.98 % 43.36 % 40.40 %
     

    (1)

      Excludes the amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and other investments, and integration and merger related expenses.
     

    (2)

    Represents noninterest expense, excluding the amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and other investments, and integration and merger related expenses, divided by the aggregate of net interest income before provision for loan losses and noninterest income (loss).
     
    EAST WEST BANCORP, INC.
    SELECTED FINANCIAL INFORMATION
    (In thousands)
    (unaudited)
     
    Average Balances     Year To Date
    June 30, 2014     June 30, 2013
    Loans receivable
    Real estate - single family $ 3,251,959 $ 2,350,511
    Real estate - multifamily 1,088,855 909,959
    Real estate - commercial 5,086,308 3,732,375
    Real estate - land and construction 395,738 235,160
    Commercial 6,075,303 4,343,461
    Consumer   1,801,213     1,094,551  
    Total loans receivable, excluding covered loans 17,699,376 12,666,017
    Covered loans   1,984,549     2,742,595  
    Total loans receivable 19,683,925 15,408,612
    Investment securities 2,534,294 2,607,723
    Earning assets 24,935,843 20,994,246
    Total assets 26,733,013 22,786,806
     
    Deposits
    Noninterest-bearing demand $ 6,338,968 $ 4,682,398
    Interest-bearing checking 1,989,701 1,363,333
    Money market 5,968,502 5,325,624
    Savings   1,471,449     1,239,544  
    Total core deposits 15,768,620 12,610,899
    Time deposits   6,276,215     6,030,904  
    Total deposits 22,044,835 18,641,803
    Interest-bearing liabilities 17,339,025 15,405,152
    Stockholders' equity 2,632,274 2,353,659
     
     
    Selected RatiosYear To Date
    June 30, 2014June 30, 2013
    For The Period
    Return on average assets 1.21 % 1.29 %
    Return on average common equity 12.31 % 12.52 %
    Interest rate spread 4.05 % 4.00 %
    Net interest margin 4.24 % 4.20 %
    Yield on earning assets 4.70 % 4.74 %
    Cost of deposits 0.29 % 0.35 %
    Cost of funds 0.48 % 0.57 %
    Noninterest expense/average assets (1) 1.63 % 1.56 %
    Efficiency ratio (2) 43.68 % 41.81 %
     

    (1)

      Excludes the amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and other investments, and integration and merger related expenses.
     

    (2)

    Represents noninterest expense, excluding the amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and other investments, and integration and merger related expenses, divided by the aggregate of net interest income before provision for loan losses and noninterest income (loss).
     
    EAST WEST BANCORP, INC.
    QUARTER TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID
    (In thousands)
    (unaudited)
       
    Quarter Ended
    June 30, 2014     June 30, 2013
    Average         Average        
    VolumeInterestYield (1)VolumeInterestYield (1)
     

    ASSETS

    Interest-earning assets:
    Due from banks and short-term investments $ 1,481,361 $ 6,354 1.72 % $ 1,247,457 $ 4,292 1.38 %
    Securities purchased under resale agreements 1,230,769 4,559 1.49 % 1,578,846 5,435 1.38 %
    Investment securities available-for-sale 2,486,303 12,490 2.01 % 2,582,899 9,594 1.49 %
    Loans receivable, excluding covered loans 18,155,876 190,763 4.21 % 13,099,286 141,904 4.35 %
    Covered loans 1,874,927 78,721 16.84 % 2,641,324 92,386 14.03 %
    Federal Home Loan Bank and Federal Reserve Bank stock   97,011     1,555 6.43 %   139,608     1,742 5.00 %
    Total interest-earning assets   25,326,247     294,442 4.66 %   21,289,420     255,353 4.81 %
     
    Noninterest-earning assets:
    Cash and cash equivalents 305,151 265,915
    Allowance for loan losses (254,282 ) (238,702 )
    Other assets   1,754,296     1,678,031  
    Total assets $ 27,131,412   $ 22,994,664  
     
     

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Interest-bearing liabilities:
    Checking accounts $ 2,139,537 $ 1,216 0.23 % $ 1,440,538 $ 876 0.24 %
    Money market accounts 6,035,120 3,982 0.26 % 5,332,345 3,875 0.29 %
    Savings deposits 1,495,295 635 0.17 % 1,256,146 512 0.16 %
    Time deposits 6,288,684 9,736 0.62 % 5,993,464 10,475 0.70 %
    Federal funds purchased and other borrowings 315 29
    Federal Home Loan Bank advances 315,805 1,015 1.29 % 313,677 1,047 1.34 %
    Securities sold under repurchase agreements 1,005,280 10,189 4.07 % 995,000 10,217 4.12 %
    Long-term debt   240,640     1,219 2.03 %   137,178     707 2.07 %
    Total interest-bearing liabilities   17,520,676     27,992 0.64 %   15,468,377     27,709 0.72 %
     
    Noninterest-bearing liabilities:
    Demand deposits 6,553,899 4,882,823
    Other liabilities 375,556 312,158
    Stockholders' equity   2,681,281     2,331,306  
    Total liabilities and stockholders' equity $ 27,131,412   $ 22,994,664  
     
    Interest rate spread 4.02 % 4.09 %
     
    Net interest income and net interest margin $ 266,450 4.22 % $ 227,644 4.29 %
     
    Net interest income and net interest margin, adjusted (2) $ 218,352 3.46 % $ 192,170 3.62 %
     

    (1)

      Annualized.

    (2)

    Amounts considering the net impact of covered loan activity and amortization of the FDIC indemnification asset of $48.1 million and $35.5 million for the three months ended June 30, 2014 and 2013, respectively.
     
    EAST WEST BANCORP, INC.
    YEAR TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID
    (In thousands)
    (unaudited)
     
        Year To Date
    June 30, 2014     June 30, 2013
    Average         Average        
    VolumeInterestYield (1)VolumeInterestYield (1)
     

    ASSETS

    Interest-earning assets:
    Due from banks and short-term investments $ 1,326,696 $ 11,956 1.82 % $ 1,227,261 $ 8,568 1.41 %
    Securities purchased under resale agreements 1,285,912 9,412 1.48 % 1,603,591 10,964 1.38 %
    Investment securities available-for-sale 2,534,294 24,766 1.97 % 2,607,723 19,804 1.53 %
    Loans receivable, excluding covered loans 17,699,376 371,672 4.23 % 12,666,017 272,872 4.34 %
    Covered loans 1,984,549 159,383 16.20 % 2,742,595 178,577 13.13 %
    Federal Home Loan Bank and Federal Reserve Bank stock   105,016     3,426 6.58 %   147,059     2,991 4.10 %
    Total interest-earning assets   24,935,843     580,615 4.70 %   20,994,246     493,776 4.74 %
     
    Noninterest-earning assets:
    Cash and cash equivalents 308,192 308,725
    Allowance for loan losses (255,016 ) (237,501 )
    Other assets   1,743,994     1,721,336  
    Total assets $ 26,733,013   $ 22,786,806  
     
     

    LIABILITIES AND STOCKHOLDERS' EQUITY

     

     

    Interest-bearing liabilities:
    Checking accounts $ 1,989,701 $ 2,197 0.22 % $ 1,363,333 $ 1,765 0.26 %
    Money market accounts 5,968,502 7,765 0.26 % 5,325,624 8,213 0.31 %
    Savings deposits 1,471,449 1,260 0.17 % 1,239,544 1,054 0.17 %
    Time deposits 6,276,215 20,229 0.65 % 6,030,904 21,560 0.72 %
    Federal funds purchased and other borrowings 205 153
    Federal Home Loan Bank advances 383,469 2,060 1.08 % 313,416 2,086 1.34 %
    Securities sold under repurchase agreements 1,007,160 20,267 4.06 % 995,000 20,746 4.20 %
    Long-term debt   242,324     2,421 2.01 %   137,178     1,417 2.08 %
    Total interest-bearing liabilities   17,339,025     56,199 0.65 %   15,405,152     56,841 0.74 %
     
    Noninterest-bearing liabilities:
    Demand deposits 6,338,968 4,682,398
    Other liabilities 422,746 345,597
    Stockholders' equity   2,632,274     2,353,659  

    Total liabilities and stockholders' equity

    $ 26,733,013   $ 22,786,806  
     
    Interest rate spread 4.05 % 4.00 %
     
    Net interest income and net interest margin $ 524,416 4.24 % $ 436,935 4.20 %
     
    Net interest income and net interest margin, adjusted (2) $ 427,316 3.46 % $ 376,790 3.62 %
     

    (1)

      Annualized.

    (2)

    Amounts considering the net impact of covered loan activity and amortization of the FDIC indemnification asset of $97.1 million and $60.1 million for the six months ended June 30, 2014 and 2013, respectively.
     
    EAST WEST BANCORP, INC.
    QUARTERLY ALLOWANCE FOR LOAN LOSSES RECAP
    (In thousands)
    (unaudited)
       
    Quarter Ended
    6/30/2014     3/31/2014     6/30/2013
    NON-COVERED LOANS
    Allowance for non-covered loans, beginning of period $ 245,618 $ 241,930 $ 228,796
    Provision allocation for unfunded loan commitments and letters of credit (829 ) (215 ) 432
    Provision for (reversal of) loan losses, excluding covered loans 8,944 7,954 8,277
     
    Net Charge-offs/(Recoveries):
    Residential (2 ) 146 247
    Commercial real estate (1) 763 (509 ) (298 )
    Commercial 6,506 4,414 3,211
    Consumer   (2 )       865  
    Total net charge-offs   7,265     4,051     4,025  
    Allowance for non-covered loans, end of period (2) $ 246,468   $ 245,618   $ 233,480  
     
    COVERED LOANS
    Allowance for covered loans not accounted under ASC 310-30, beginning of period (3) $ 4,316 $ 5,476 $ 8,118
    Provision for (reversal of) loan losses on covered loans not accounted under ASC 310-30 70 (954 ) 186
    Total net charge-offs   694     206     1,204  

    Allowance for covered loans not accounted under ASC 310-30, end of period (3)

    $ 3,692   $ 4,316   $ 7,100  
     
    Allowance for covered loans accounted under ASC 310-30, beginning of period (4) $ 2,202 $ 2,269 $ 1,992
    (Reversal of) provision for loan losses on covered loans accounted under ASC 310-30   (1,014 )   (67 )   537  
    Allowance for covered loans accounted under ASC 310-30, end of period (4) $ 1,188   $ 2,202   $ 2,529  
    Total allowance for covered loans, end of period $ 4,880   $ 6,518   $ 9,629  
    UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
    Allowance balance, beginning of period $ 11,497 $ 11,282 $ 8,721
    Provision for (reversal of) unfunded loan commitments and letters of credit   829     215     (432 )
    Allowance balance, end of period $ 12,326   $ 11,497   $ 8,289  
    GRAND TOTAL, END OF PERIOD $ 263,674   $ 263,633   $ 251,398  
     

    (1)

      Includes a charge-off of $523 thousand related to a non-covered loan accounted for under ASC 310-30 for the three months ended June 30, 2014.

    (2)

    Includes an allowance of $370 thousand related to non-covered loans accounted for under ASC 310-30 as of June 30, 2014.

    (3)

    This allowance is related to subsequent drawdowns on commitments that were in existence as of the acquisition dates of WFIB and UCB and are covered under the loss-share agreements with the FDIC. Allowance on these subsequent drawdowns is included as part of the allowance for loan losses.

    (4)

    This allowance is related to loans covered under the loss-share agreements with the FDIC, accounted for under ASC 310-30.
     
    EAST WEST BANCORP, INC.
    QUARTERLY CREDIT QUALITY ANALYSIS
    (In thousands)
    (unaudited)
               
    Non-Performing Assets, Excluding Covered Assets
    6/30/20143/31/20146/30/2013
    Nonaccrual Loan Type
    Real estate - single family $ 8,481 $ 14,068 $ 7,210
    Real estate - multifamily 25,498 22,690 30,226
    Real estate - commercial 43,146 47,756 17,271
    Real estate - land and construction 14,325 17,926 11,201
    Commercial 23,973 27,075 45,327
    Consumer   3,499     3,011     796  
    Total non-covered nonaccrual loans $ 118,922 $ 132,526 $ 112,031
    Other real estate owned, net   42,458     28,421     21,433  
    Total non-performing assets, excluding covered assets $ 161,380   $ 160,947   $ 133,464  
     
     
    Nonperforming assets to total assets (1) 0.59 % 0.59 % 0.57 %

    Allowance for loan losses on non-covered loans to total gross non-covered loans held for investment at end of period

    1.35 % 1.42 % 1.73 %

    Allowance for loan losses on non-covered loans and unfunded loan commitments to total gross non-covered loans held for investment at end of period

    1.42 % 1.49 % 1.79 %
    Allowance on non-covered loans to non-covered nonaccrual loans at end of period 207.25 % 185.34 % 208.41 %
    Nonaccrual loans to total loans (2) 0.58 % 0.67 % 0.69 %
    Net charge-offs on non-covered loans to average total non-covered loans (3) 0.16 % 0.10 % 0.12 %
     
    (1)   Nonperforming assets exclude covered loans and covered REOs. Total assets include covered assets.
    (2) Nonaccrual loans exclude covered loans. Total loans include covered loans.
    (3) Annualized.
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    The tangible common equity to risk weighted assets and tangible common equity to tangible assets ratios are non-GAAP disclosures. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. As the use of tangible common equity to tangible assets ratio is more prevalent in the banking industry and with banking regulators and analysts, we have included the tangible common equity to risk-weighted assets and tangible common equity to tangible assets ratios.
     
        As of
    June 30, 2014
    Stockholders' equity $ 2,701,024
    Less:
    Goodwill and other intangible assets   (510,401 )
    Tangible equity $ 2,190,623  
     
    Risk-weighted assets   20,567,621  
     
    Tangible equity to risk-weighted assets ratio   10.7 %
     
    As of
    June 30, 2014
    Total assets $ 27,557,105
    Less:
    Goodwill and other intangible assets   (510,401 )
    Tangible assets $ 27,046,704  
     
    Tangible equity to tangible assets ratio 8.1 %
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands, except per share amounts)
    (unaudited)
     
    Net income per diluted share excluding integration and merger related expenses is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. These integration and merger expenses are non-core in nature. The Company believes that presenting net income per diluted share excluding integration and merger related expenses provides more clarity to the users of financial statements and assists in the comparison with prior periods.
     
        Quarter Ended
    June 30, 2014     March 31, 2014     June 30, 2013
     
    Net income per diluted share $ 0.58 $ 0.54 $ 0.52
     
    Integration and merger related expenses, net of tax 1,050 6,134 $
    Shares used to compute diluted earnings per share   143,689   142,632   137,816
    Integration and merger related expenses per diluted share $ 0.01 $ 0.04 $
     
    Net income per diluted share excluding integration and merger related expenses $ 0.59 $ 0.58 $ 0.52
     
     
    Year Ended
    June 30, 2014June 30, 2013
     
    Net income per diluted share $ 1.12 $ 1.03
     
    Integration and merger related expenses, net of tax $ 7,184 $
    Shares used to compute diluted earnings per share   143,158   141,573
    Integration and merger related expenses per diluted share $ 0.05 $
     
    Net income per diluted share excluding integration and merger related expenses $ 1.17 $ 1.03
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    Noninterest expense excluding amounts (payable to) reimbursable by the FDIC and integration and merger related expenses is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. These are noninterest expense line items that are non-core in nature. The Company believes that presenting noninterest expense excluding reimbursable amounts and integration and merger related expenses provides more clarity to the users of financial statements regarding the core noninterest expense amounts.
     
        Quarter Ended
    June 30, 2014     March 31, 2014     June 30, 2013
    Total noninterest expense $ 127,899 $ 124,427 $ 94,420
    Less:
    Amounts (payable to) reimbursable by the FDIC on covered assets (80% of actual expense amount) (1) (1,580 ) 2,015 2,910
    Integration and merger related expenses   1,811     10,576  
    Noninterest expense excluding amounts (payable to) reimbursable by the FDIC and integration and merger related expenses $ 127,668   $ 111,836 $ 91,510
     

    (1)

    Pursuant to the loss-share agreements, the FDIC reimburses the Company 80% of eligible losses with respect to covered assets. The FDIC also shares in 80% of the recoveries or gains with respect to covered assets. During the three months ended June 30, 2014, the Company had a net $1.6 million payable to the FDIC.

     
    Year To Date
    June 30, 2014June 30, 2013
    Total noninterest expense $ 252,326 $ 190,775
    Less:
    Amounts reimbursable by the FDIC on covered assets (80% of actual expense amount) 435 2,849
    Integration and merger related expenses   12,387    
    Noninterest expense excluding amounts reimbursable by the FDIC and integration and merger related expenses $ 251,891   $ 187,926
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The efficiency ratio represents noninterest expense, excluding the amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and other investments, and integration and merger related expenses, divided by the aggregate of net interest income before provision for loan losses and noninterest income (loss). As such, the Company believes that presenting the efficiency ratio provides additional clarity to the users of financial statements regarding the comparability to prior periods and the ongoing performance of the Company.
     
        Quarter Ended
    June 30, 2014     March 31, 2014     June 30, 2013
    Total noninterest expense $ 127,899 $ 124,427 $ 94,420
    Less:
    Integration and merger related expenses (1,811 ) (10,576 )
    Amortization of premiums on deposits acquired (2,624 ) (2,500 ) (2,375 )
    Amortization of investments in affordable housing partnerships and other investments   (12,851 )   (5,964 )   (5,064 )
    Noninterest expense, as adjusted $ 110,613   $ 105,387   $ 86,981  
     
    Net interest income before provision for loan losses $ 266,450 $ 257,966 $ 227,644
    Noninterest loss   (14,945 )   (14,916 )   (12,354 )
    Net interest income and noninterest loss $ 251,505   $ 243,050   $ 215,290  
     
    Efficiency Ratio 43.98 % 43.36 % 40.40 %
     
     
    Year To Date
    June 30, 2014June 30, 2013
    Total noninterest expense $ 252,326 $ 190,775
    Less:
    Integration and merger related expenses (12,387 )
    Amortization of premiums on deposits acquired (5,124 ) (4,784 )
    Amortization of investments in affordable housing partnerships and other investments   (18,815 )   (9,347 )
    Noninterest expense, as adjusted $ 216,000   $ 176,644  
     
    Net interest income before provision for loan losses $ 524,416 $ 436,935
    Noninterest loss   (29,861 )   (14,453 )
    Net interest income and noninterest loss excluding non-recurring items $ 494,555   $ 422,482  
     
    Efficiency Ratio 43.68 % 41.81 %
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest income on covered loans includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income on covered loans considering such non-core items provides additional clarity to the users of financial statements regarding the covered loan yield, comparability to prior periods and the ongoing performance of the Company.
     
        Quarter Ended June 30, 2014
    Average Volume     Interest     Yield (1)
    Covered loans $ 1,874,927 $ 78,721 16.84 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (48,098 )

    Covered loans considering net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 30,623   6.55 %
     
    Quarter Ended June 30, 2013
    Average Volume Interest Yield (1)
    Covered loans $ 2,641,324 $ 92,386 14.03 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (35,474 )

    Covered loans considering net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 56,912   8.64 %
     
    (1) Annualized.
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest income on covered loans includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income on covered loans considering such non-core items provides additional clarity to the users of financial statements regarding the covered loan yield, comparability to prior periods and the ongoing performance of the Company.
     
        Year to Date June 30, 2014
    Average Volume     Interest     Yield (1)
    Covered loans $ 1,984,549 $ 159,383 16.20 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (97,100 )

    Covered loans considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 62,283   6.33 %
     
    Year to Date June 30, 2013
    Average Volume Interest Yield (1)
    Covered loans $ 2,742,595 $ 178,577 13.13 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (60,145 )

    Covered loans considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 118,432   8.71 %
     

    (1) Annualized.

     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest margin includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income and net interest margin considering such non-core items provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin, comparability to prior periods and the ongoing performance of the Company.
     
        Quarter Ended June 30, 2014
    Average Volume     Interest     Yield (1)
    Total interest-earning assets $ 25,326,247 $ 294,442 4.66 %
    Net interest income and net interest margin 266,450 4.22 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (48,098 )

    Adjusted net interest income and net interest margin, considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 218,352   3.46 %
     
    Quarter Ended March 31, 2014
    Average Volume Interest Yield (1)
    Total interest-earning assets $ 24,541,104 $ 286,173 4.73 %
    Net interest income and net interest margin 257,966 4.26 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (49,001 )

    Adjusted net interest income and net interest margin, considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 208,965   3.45 %
     
    Quarter Ended June 30, 2013
    Average Volume Interest Yield (1)
    Total interest-earning assets $ 21,289,420 $ 255,353 4.81 %
    Net interest income and net interest margin 227,644 4.29 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (35,474 )

    Adjusted net interest income and net interest margin, considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 192,170   3.62 %
     
    (1) Annualized.
     
    EAST WEST BANCORP, INC.
    GAAP TO NON-GAAP RECONCILIATION
    (In thousands)
    (unaudited)
     
    The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest margin includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income and net interest margin considering such non-core items provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin, comparability to prior periods and the ongoing performance of the Company.
     
        Year to Date June 30, 2014
    Average Volume     Interest     Yield (1)
    Total interest-earning assets $ 24,935,843 $ 580,615 4.70 %
    Net interest income and net interest margin 524,416 4.24 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (97,100 )

    Net interest income and net interest margin, considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 427,316   3.46 %
     
    Year to Date June 30, 2013
    Average Volume Interest Yield (1)
    Total interest-earning assets $ 20,994,246 $ 493,776 4.74 %
    Net interest income and net interest margin 436,935 4.20 %

    Less net impact of covered loan activity and amortization of the FDIC indemnification asset

      (60,145 )

    Net interest income and net interest margin, considering the net impact of covered loan activity and amortization of the FDIC indemnification asset

    $ 376,790   3.62 %
     
    (1) Annualized.





    East West Bancorp, Inc.

    Irene Oh, 626-768-6360

    Chief Financial Officer

    Source: East West Bancorp, Inc.


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