East West Bancorp Reports Net Income for Second Quarter 2022 of $258 Million and Diluted Earnings Per Share of $1.81; Record Net Interest Income of $473 Million

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the second quarter of 2022. Second quarter 2022 net income was $258.3 million, or $1.81 per diluted share; diluted earnings per share grew 38% linked quarter annualized and 15% year-over-year.

“East West’s outstanding results for the second quarter demonstrate the strengths of our business model. Total revenue for the second quarter was $551 million, or an increase of 45% linked quarter annualized, driven by strong growth in net interest income and stable fee income. Net interest income increased to a record $473 million, up 55% linked quarter annualized, and our net interest margin increased 36 basis points quarter-over-quarter to 3.23%,” stated Dominic Ng, Chairman and Chief Executive Officer of East West.

“Not only is our balance sheet well-positioned for rising interest rates, it is resilient and diversified. Average total loans increased $2.5 billion to $44.6 billion, with broad-based growth across all our major loan categories. Average noninterest-bearing demand deposits increased 8% linked quarter annualized to $23.9 billion and totaled 44% of average total deposits for the second quarter of 2022,” continued Ng.

“Our strong revenue growth, combined with controlled expense management, drove second quarter 2022 adjusted pre-tax, pre-provision income1 growth of 62% linked quarter annualized. We earned an industry-leading return on assets of 1.66% and a return on equity of 18.2% for the second quarter of 2022,” concluded Ng.

FINANCIAL HIGHLIGHTS

Three Months Ended

Qtr-o-Qtr Change

Yr-o-Yr Change

($ in millions, except per share data)

June 30, 2022

% Ann.

Total Loans

46,531

3,039

6,457

Total Deposits

54,343

(595

)

1,761

Total Revenue

551

106

Adj. Pre-tax Pre-provision Income1

370

Net Income

258

Diluted Earnings per Share

1.81

0.15

0.24

_________________________

1 See reconciliation of GAAP to non-GAAP financial measures in Table 12.

BALANCE SHEET

Record Assets – Total assets reached $62.4 billion as of June 30, 2022, up $152.8 million, or 1% annualized, from $62.2 billion as of March 31, 2022. Year-over-year, total assets grew $2.5 billion, or 4%, from $59.9 billion as of June 30, 2021. Second quarter 2022 average interest-earning assets of $58.7 billion were essentially unchanged from $58.7 billion in the first quarter of 2022. Quarter-over-quarter, average loan growth of $2.5 billion was offset by declines in average interest-bearing cash and deposits with banks ($1.7 billion), average resale agreements ($0.5 billion), and average debt securities ($0.4 billion).

Record Loans – Total loans reached $46.5 billion as of June 30, 2022, up $3.0 billion, or 28% annualized, from $43.5 billion as of March 31, 2022. Year-over-year, total loans grew $6.5 billion, or 16%, from $40.1 billion as of June 30, 2021. Second quarter 2022 average loans of $44.6 billion grew $2.5 billion, or 24% linked quarter annualized, with solid growth spread across all our major loan categories of commercial real estate (“CRE”), commercial & industrial (“C&I”), and residential mortgage. Average CRE loans grew $1.2 billion, or 30% linked quarter annualized; average C&I loans grew $715.0 million, or 20% linked quarter annualized; and average residential mortgage loans grew $620.4 million, or 22% linked quarter annualized.

Total Deposits – Total deposits were $54.3 billion as of June 30, 2022, a decrease of $0.6 billion, or 4% annualized, from $54.9 billion as of March 31, 2022. Year-over-year, deposits grew $1.8 billion, or 3%, from $52.6 billion as of June 30, 2021. Second quarter 2022 average deposits of $54.1 billion grew $104.5 million, or 1% linked quarter annualized. Quarter-over-quarter, average noninterest-bearing demand deposits of $23.9 billion grew $454.7 million, or 8% linked quarter annualized. Average noninterest-bearing deposits made up 44% of average total deposits in the second quarter of 2022, compared with 43% in the first quarter of 2022 and 39% in the second quarter of 2021. In the second quarter of 2022, average time deposits grew $138.7 million, or 7% linked quarter annualized, and average money market accounts decreased $593.4 million, or 18% linked quarter annualized.

Strong Capital Levels – As of June 30, 2022, stockholders’ equity was $5.6 billion, or $39.81 per common share, and tangible equity2 per common share was $36.44. As of June 30, 2022, the tangible equity to tangible assets ratio2 was 8.29%, the common equity tier 1 (“CET1”) capital ratio was 12.0%, and the total risk-based capital ratio was 13.2%. Quarter-over-quarter, stockholders’ equity declined by 2%, or $94.0 million, primarily reflecting a negative change in accumulated other comprehensive income (“AOCI”) of $205.7 million, share repurchases of $100.0 million, and $57.4 million in common dividends declared, partially offset by $258.3 million in net income. The negative change in AOCI was primarily due to increased unrealized losses in available-for-sale debt securities. During the second quarter of 2022, the Company repurchased 1.4 million shares of common stock.

____________________

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

OPERATING RESULTS

Second Quarter Earnings – Second quarter 2022 net income was $258.3 million, an increase of 9%, or 35% annualized, from $237.7 million for the first quarter of 2022, and an increase of 15% from $224.7 million for the second quarter of 2021. Second quarter 2022 diluted earnings per share were $1.81, an increase of 9%, or 38% annualized, from $1.66 per diluted share for the first quarter 2022, and an increase of 15% from $1.57 per diluted share for the year-ago quarter.

Second Quarter 2022 Compared to First Quarter 2022

Net Interest Income and Net Interest Margin

Record net interest income (“NII”) totaled $473.0 million, an increase of 14%, or 55% annualized, from $415.6 million. Net interest margin (“NIM”) of 3.23% expanded by 36 basis points from 2.87%.

NII growth and NIM expansion were driven by strong loan growth and expanding earning asset yields. Average loan growth during the second quarter drove a favorable shift in the asset mix into higher interest earning assets. Average loans made up 76% of average interest-earning assets in the second quarter of 2022, compared with 72% in the first quarter of 2022.
The average loan yield was 3.95%, up 32 basis points from the first quarter. The average interest-earning asset yield was 3.42%, up 43 basis points from the first quarter.
The average cost of funds was 0.20%, up eight basis points from the first quarter. The average cost of deposits was 0.17%, up seven basis points, and the average cost of interest-bearing deposits was 0.30%, up 13 basis points from the first quarter.
The changes in yields and rates reflected rising benchmark interest rates during the year.

Noninterest Income

Noninterest income totaled $78.4 million in the second quarter, a decrease of $1.3 million, or 2%, from $79.7 million in the first quarter. Fee income and net gains on sales of loans were $64.8 million, essentially unchanged from $65.0 million in the first quarter.

Noninterest Expense

Noninterest expense totaled $196.9 million in the second quarter, compared with $189.5 million in the first quarter. Second quarter noninterest expense consisted of $181.4 million of adjusted noninterest expense3, $15.0 million in amortization of tax credit and other investments, and $0.5 million in amortization of core deposit intangibles.

Adjusted noninterest expense of $181.4 million increased 4%, or 15% annualized, from $175.0 million in the first quarter.
Amortization of tax credit and other investments totaled $15.0 million in the second quarter, compared with $13.9 million in the first quarter. Quarter-over-quarter variability in the amortization of tax credits and other investments partially reflects the impact of investments that close in a given period.
The adjusted efficiency ratio3 was 32.9% in the second quarter, compared with 35.3% in the first quarter.

____________________

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

TAX RELATED ITEMS

Second quarter 2022 income tax expense was $82.7 million compared with income tax expense of $60.3 million for the first quarter of 2022. The year-to-date effective tax rate for the first six months of 2022 was 22.4%. The Company expects the full-year 2022 effective tax rate to be approximately 21%, including the impact of tax credit investments expected in the second half of the year.

ASSET QUALITY

The asset quality of the loan portfolio continues to be strong.

The nonperforming asset (“NPA”) ratio improved by one basis point quarter-over-quarter and NPAs decreased by 5%. As of June 30, 2022, NPAs were $89.9 million, or 0.14% of total assets, compared with $94.4 million, or 0.15% of total assets, as of March 31, 2022.
The classified loan ratio improved by six basis points quarter-over-quarter and classified loans were essentially unchanged. As of June 30, 2022, classified loans were $432.4 million, or 0.93% of loans held-for-investment (“HFI”), compared with $430.6 million, or 0.99% of loans HFI as of March 31, 2022. Special mention loans were $590.2 million, or 1.27% of loans HFI, as of June 30, 2022, compared with $402.7 million, or 0.93% of loans HFI, as of March 31, 2022.
Second quarter 2022 net recoveries were $6.6 million, or annualized 0.06% of average loans HFI, compared with net charge-offs of $8.3 million, or annualized 0.08% of average loans HFI, for the first quarter of 2022. The second quarter gross recoveries of $7.7 million were largely driven by C&I loan recoveries.
The allowance for loan losses (“ALLL”) totaled $563.3 million, or 1.21% of loans HFI, as of June 30, 2022, compared with $545.7 million, or 1.25% of loans HFI, as of March 31, 2022. The quarter-over-quarter change in the ALLL and the ALLL coverage ratio largely reflects the mix of the loan portfolio as of June 30, 2022, as well as loan growth during the second quarter.
The provision for credit losses was $13.5 million for the second quarter of 2022, compared with $8.0 million for the first quarter of 2022.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital metrics as of June 30, 2022, March 31, 2022, and June 30, 2021.

EWBC Risk-Based Capital Ratios

($ in millions)

June 30, 2022 (a)

March 31, 2022 (a)

June 30, 2021 (a)

CET1 capital ratio

12.0

12.6

12.8

Tier 1 capital ratio

12.0

12.6

12.8

Total capital ratio

13.2

13.9

14.3

Leverage ratio

9.3

9.1

Risk-Weighted Assets (“RWA”) (b)

48,499

45,432

40,609

(a)

The Company has elected to use the 2020 CECL transition provision in the calculation of its June 30, 2022, March 31, 2022, and June 30, 2021 regulatory capital ratios. The Company’s June 30, 2022 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.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared third quarter 2022 dividends for the Company’s common stock. The common stock cash dividend of $0.40 per share is payable on August 15, 2022, to stockholders of record on August 1, 2022.

On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock, of which $354 million was available as of March 31, 2022. During the second quarter of 2022, East West repurchased $100 million of common stock, or 1.4 million shares. As of June 30, 2022, $254 million remained available under this authorization.

Conference Call

East West will host a conference call to discuss second quarter 2022 earnings with the public on Thursday, July 21, 2022, 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 2022 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 21, 2022, at 11:30 a.m. PT/2:30 p.m. ET through August 21, 2022. 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: 3689081.

About East West

East West Bancorp, Inc. is a public company with total assets of $62.4 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly-owned subsidiary, East West Bank, is the largest independent bank headquartered in Southern California, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, Illinois, Massachusetts, Nevada, New York, Texas and Washington. In China, East West’s presence includes full-service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. These statements may relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business and usually can be identified by the use of forward-looking language, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends to,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to: changes in the global economy, including an economic slowdown, or market disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; changes in local, regional and global business, economic and political conditions and geopolitical events; the economic, financial, reputational and other impacts of the ongoing COVID-19 pandemic including variants thereof and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 pandemic; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the California Department of Financial Protection and Innovation – Division of Financial Institutions; changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve; changes in the commercial and consumer real estate markets; changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors; fluctuations in the Company’s stock price; the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs; the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies; the soundness of other financial institutions; the success and timing of the Company’s business strategies; the Company’s ability to retain key officers and employees; impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix; changes in the Company’s costs of operation, compliance and expansion; the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner; the impact of the benchmark interest rate reform in the U.S. including the transition away from USD London Interbank Offered Rate to alternative reference rates; the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does 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, and materially impact the Company’s ability to provide services to its clients; the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels; the impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; the impact on the Company’s operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions; heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers; the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties; the impact of regulatory investigations and enforcement actions; 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; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; changes in the equity and debt securities markets; fluctuations in foreign currency exchange rates; the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly; significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for loans, a reduction in the availability of funding or increases in funding costs, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s debt securities and equity securities portfolio; and the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2021 Annual Report on Form 10-K under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company’s Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

($ and shares in thousands, except per share data)

(unaudited)

Table 1

June 30, 2022

% or Basis Point Change

June 30, 2022

March 31, 2022

June 30, 2021

Qtr-o-Qtr

Yr-o-Yr

Assets

Cash and due from banks

688,936

571,571

626,716

20.5

9.9

Interest-bearing cash with banks

1,213,117

3,277,129

5,371,089

(63.0

)

(77.4

)

Cash and cash equivalents

1,902,053

3,848,700

5,997,805

(50.6

)

(68.3

)

Interest-bearing deposits with banks

712,709

816,125

830,279

(12.7

)

(14.2

)

Assets purchased under resale agreements (“resale agreements”)

1,422,794

1,956,822

2,299,184

(27.3

)

(38.1

)

Available-for-sale (“AFS”) debt securities (amortized cost of $6,891,522, $7,091,581 and $8,411,142)

6,255,504

6,729,431

8,399,460

(7.0

)

(25.5

)

Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,656,549 and $2,815,968 in 2022)

3,028,302

2,997,702

—

1.0

100.0

Loans held-for-sale (“HFS”)

28,464

631

1,819

Loans held-for-investment (''HFI'') (net of allowance for loan losses of $563,270, $545,685 and $585,724)

45,938,806

42,944,997

39,485,775

7.0

16.3

Investments in qualified affordable housing partnerships, tax credit and other investments, net

634,304

607,985

651,619

4.3

(2.7

)

Goodwill

465,697

—

Operating lease right-of-use assets

107,588

102,491

102,609

5.0

4.9

Other assets

1,898,062

1,770,875

1,620,629

7.2

17.1

Total assets

62,394,283

62,241,456

59,854,876

0.2

4.2

Liabilities and Stockholders’ Equity

Deposits

54,343,354

54,938,361

52,582,575

(1.1

3.3

FHLB advances

174,776

74,619

248,464

134.2

(29.7

)

Assets sold under repurchase agreements (“repurchase agreements”)

611,785

300,000

103.9

Long-term debt and finance lease liabilities

152,663

152,227

151,997

0.3

0.4

Operating lease liabilities

115,387

109,656

110,105

5.2

4.8

Accrued expenses and other liabilities

1,386,836

963,137

914,187

44.0

51.7

Total liabilities

56,784,801

56,538,000

54,307,328

0.4

4.6

Stockholders’ equity

5,609,482

5,703,456

5,547,548

(1.6

)

1.1

Total liabilities and stockholders’ equity

62,394,283

62,241,456

59,854,876

0.2

4.2

Book value per common share

39.81

40.09

39.10

(0.7

1.8

Tangible equity (1) per common share

36.44

36.76

35.75

(0.9

)

1.9

Number of common shares at period-end

140,917

142,257

141,878

(0.9

)

(0.7

)

Tangible equity to tangible assets ratio (1)

8.29

8.47

8.54

(18

)

bps

(25

)

bps

NM - Not meaningful.

(1)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

TOTAL LOANS AND DEPOSITS DETAIL

($ in thousands)

(unaudited)

Table 2

June 30, 2022

% Change

June 30, 2022

March 31, 2022

June 30, 2021

Qtr-o-Qtr

Yr-o-Yr

Loans:

Commercial:

Commercial and industrial (“C&I”) (1)

15,377,117

14,838,134

13,790,461

3.6

11.5

Commercial real estate (“CRE”):

CRE

13,566,748

12,636,787

11,711,369

7.4

15.8

Multifamily residential

4,443,704

3,894,463

3,219,796

14.1

38.0

Construction and land

515,857

443,836

460,678

16.2

12.0

Total CRE

18,526,309

16,975,086

15,391,843

9.1

20.4

Consumer:

Residential mortgage:

Single-family residential

10,234,473

9,283,429

8,869,370

10.2

15.4

Home equity lines of credit (“HELOCs”)

2,280,080

2,266,634

1,872,166

0.6

21.8

Total residential mortgage

12,514,553

11,550,063

10,741,536

8.4

16.5

Other consumer

84,097

127,399

147,659

(34.0

)

(43.0

)

Total loans HFI (2)

46,502,076

43,490,682

40,071,499

6.9

16.0

Loans HFS

28,464

631

1,819

Total loans (2)

46,530,540

43,491,313

40,073,318

7.0

16.1

Allowance for loan losses

(563,270

)

(545,685

)

(585,724

)

3.2

(3.8

)

Net loans (2)

45,967,270

42,945,628

39,487,594

7.0

16.4

Deposits:

Noninterest-bearing demand

23,028,831

24,927,768

21,816,721

(7.6

5.6

Interest-bearing checking

7,094,726

6,774,826

6,762,178

4.7

4.9

Money market

11,814,402

12,108,432

12,853,812

(2.4

)

(8.1

)

Savings

3,027,819

2,897,248

2,719,106

4.5

11.4

Time deposits

9,377,576

8,230,087

8,430,758

13.9

11.2

Total deposits

54,343,354

54,938,361

52,582,575

(1.1

3.3

NM - Not meaningful.

(1)

Includes $153.3 million, $318.1 million and $1.43 billion of Paycheck Protection Program (“PPP”) loans as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively. Excluding PPP loans, total loans were $46.38 billion, $43.17 billion and $38.64 billion as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

(2)

Includes $(56.2) million, $(42.7) million and $(67.0) million of net deferred loan fees and net unamortized premiums as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

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, 2022

% Change

June 30, 2022

March 31, 2022

June 30, 2021

Qtr-o-Qtr

Yr-o-Yr

Interest and dividend income (1)

499,754

432,029

399,333

15.7

25.1

Interest expense

26,802

16,416

22,860

63.3

17.2

Net interest income before provision for (reversal of) credit losses

472,952

415,613

376,473

13.8

25.6

Provision for (reversal of) credit losses

13,500

8,000

(15,000

)

68.8

(190.0

)

Net interest income after provision for (reversal of) credit losses

459,452

407,613

391,473

12.7

17.4

Noninterest income

78,444

79,743

68,431

(1.6

)

14.6

Noninterest expense

196,860

189,450

189,523

3.9

Income before income taxes

341,036

297,906

270,381

14.5

26.1

Income tax expense

82,707

60,254

45,639

37.3

81.2

Net income

258,329

237,652

224,742

8.7

14.9

Earnings per share (“EPS”)

- Basic

1.83

1.67

1.58

9.2

15.3

- Diluted

1.81

1.66

1.57

9.3

15.5

Weighted-average number of shares outstanding

- Basic

141,429

142,025

141,868

(0.4

(0.3

- Diluted

142,372

143,223

143,040

(0.6

)

(0.5

)

Three Months Ended

June 30, 2022

% Change

June 30, 2022

March 31, 2022

June 30, 2021

Qtr-o-Qtr

Yr-o-Yr

Noninterest income:

Lending fees

20,142

19,438

21,092

3.6

(4.5

Deposit account fees

22,372

20,315

17,342

10.1

29.0

Interest rate contracts and other derivative income (loss)

9,801

11,133

(3,172

)

(12.0

)

409.0

Foreign exchange income

11,361

12,699

13,007

(10.5

)

(12.7

)

Wealth management fees

6,539

6,052

7,951

8.0

(17.8

)

Net gains on sales of loans

917

2,922

1,491

(68.6

)

(38.5

)

Gains on sales of AFS debt securities

1,278

632

(97.8

)

(95.6

)

Other investment income

4,863

1,627

7,596

198.9

(36.0

)

Other income

2,421

4,279

2,492

(43.4

)

(2.8

)

Total noninterest income

78,444

79,743

68,431

(1.6

14.6

Noninterest expense:

Compensation and employee benefits

113,364

116,269

105,426

(2.5

7.5

Occupancy and equipment expense

15,469

15,464

15,377

0.0

0.6

Deposit insurance premiums and regulatory assessments

4,927

4,717

4,274

4.5

15.3

Deposit account expense

5,671

4,693

3,817

20.8

48.6

Data processing

3,486

3,665

4,035

(4.9

)

(13.6

)

Computer software expense

6,572

7,294

7,521

(9.9

)

(12.6

)

Consulting expense

2,021

1,833

1,868

10.3

8.2

Legal expense

1,047

718

1,975

45.8

(47.0

)

Other operating expense

29,324

20,897

17,939

40.3

63.5

Amortization of tax credit and other investments

14,979

13,900

27,291

7.8

(45.1

)

Total noninterest expense

196,860

189,450

189,523

3.9

(1)

Includes $1.4 million, $5.2 million and $15.4 million of interest income related to PPP loans for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

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, 2022

% Change

June 30, 2022

June 30, 2021

Yr-o-Yr

Interest and dividend income (1)

931,783

780,719

19.3

Interest expense

43,218

50,551

(14.5

)

Net interest income before provision for (reversal of) credit losses

888,565

730,168

21.7

Provision for (reversal of) credit losses

21,500

(15,000

)

(243.3

)

Net interest income after provision for (reversal of) credit losses

867,065

745,168

16.4

Noninterest income

158,187

141,297

12.0

Noninterest expense

386,310

380,600

1.5

Income before income taxes

638,942

505,865

26.3

Income tax expense

142,961

76,129

87.8

Net income

495,981

429,736

15.4

EPS

- Basic

3.50

3.03

15.4

- Diluted

3.47

3.01

15.5

Weighted-average number of shares outstanding

- Basic

141,725

141,758

0.0

- Diluted

142,838

142,963

(0.1

)

Six Months Ended

June 30, 2022

% Change

June 30, 2022

June 30, 2021

Yr-o-Yr

Noninterest income:

Lending fees

39,580

39,449

0.3

Deposit account fees

42,687

32,725

30.4

Interest rate contracts and other derivative income

20,934

13,825

51.4

Foreign exchange income

24,060

22,533

6.8

Wealth management fees

12,591

14,862

(15.3

)

Net gains on sales of loans

3,839

3,272

17.3

Gains on sales of AFS debt securities

1,306

824

58.5

Other investment income

6,490

8,521

(23.8

)

Other income

6,700

5,286

26.7

Total noninterest income

158,187

141,297

12.0

Noninterest expense:

Compensation and employee benefits

229,633

213,234

7.7

Occupancy and equipment expense

30,933

31,299

(1.2

)

Deposit insurance premiums and regulatory assessments

9,644

8,150

18.3

Deposit account expense

10,364

7,709

34.4

Data processing

7,151

8,513

(16.0

)

Computer software expense

13,866

14,680

(5.5

)

Consulting expense

3,854

3,343

15.3

Legal expense

1,765

3,477

(49.2

)

Other operating expense

50,221

37,546

33.8

Amortization of tax credit and other investments

28,879

52,649

(45.1

)

Total noninterest expense

386,310

380,600

1.5

(1)

Includes $6.5 million and $30.4 million of interest income related to PPP loans for the six months ended June 30, 2022 and 2021, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED AVERAGE BALANCES

($ in thousands)

(unaudited)

Table 5

Three Months Ended

June 30, 2022

% Change

Six Months Ended

June 30, 2022

% Change

June 30,

2022

March 31,

2022

June 30,

2021

Qtr-o-Qtr

Yr-o-Yr

June 30,

2022

June 30,

2021

Yr-o-Yr

Loans:

Commercial:

C&I (1)

14,986,876

14,271,902

13,811,966

5.0

8.5

14,631,365

13,753,244

6.4

CRE:

CRE

13,049,058

12,279,365

11,616,916

6.3

12.3

12,666,338

11,472,102

10.4

Multifamily residential

4,112,411

3,749,571

3,125,001

9.7

31.6

3,931,993

3,083,769

27.5

Construction and land

475,933

392,923

477,860

21.1

(0.4

)

434,657

513,401

(15.3

)

Total CRE

17,637,402

16,421,859

15,219,777

7.4

15.9

17,032,988

15,069,272

13.0

Consumer:

Residential mortgage:

Single-family residential

9,624,242

9,111,188

8,650,706

5.6

11.3

9,369,132

8,483,806

10.4

HELOCs

2,290,378

2,183,080

1,800,213

4.9

27.2

2,237,025

1,733,593

29.0

Total residential mortgage

11,914,620

11,294,268

10,450,919

5.5

14.0

11,606,157

10,217,399

13.6

Other consumer

87,590

124,389

139,608

(29.6

)

(37.3

)

105,888

138,340

(23.5

)

Total loans (2)

44,626,488

42,112,418

39,622,270

6.0

12.6

43,376,398

39,178,255

10.7

Interest-earning assets

58,668,677

58,692,366

54,901,209

0.0

6.9

58,680,456

53,882,288

8.9

Total assets

62,232,841

61,758,048

57,771,837

0.8

7.7

61,996,756

56,689,075

9.4

Deposits:

Noninterest-bearing demand

23,887,452

23,432,746

19,717,315

1.9

21.1

23,661,355

18,909,991

25.1

Interest-bearing checking

6,712,890

6,648,065

6,671,358

1.0

0.6

6,680,657

6,532,965

2.3

Money market

12,319,930

12,913,336

12,596,515

(4.6

)

(2.2

)

12,614,994

12,088,006

4.4

Savings

2,970,007

2,930,309

2,676,865

1.4

11.0

2,950,268

2,675,677

10.3

Time deposits

8,239,571

8,100,890

8,518,936

1.7

(3.3

)

8,170,613

8,814,159

(7.3

)

Total deposits

54,129,850

54,025,346

50,180,989

0.2

7.9

54,077,887

49,020,798

10.3

Interest-bearing liabilities

30,957,475

31,218,479

31,394,114

(0.8

(1.4

31,087,256

31,130,307

(0.1

Stockholders’ equity

5,682,427

5,842,615

5,425,952

(2.7

4.7

5,762,078

5,382,267

7.1

(1)

Average balances of PPP loans were $223.2 million, $410.6 million and $1.87 billion for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively, and $316.4 million and $1.90 billion for the six months ended June 30, 2022 and 2021, respectively.

(2)

Includes loans HFS.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 6

Three Months Ended

June 30, 2022

March 31, 2022

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

Assets

Interest-earning assets:

Interest-bearing cash and deposits with banks

2,797,711

4,787

0.69

4,466,012

3,260

0.30

Resale agreements

1,641,723

8,553

2.09

2,097,998

8,383

1.62

AFS debt securities

6,503,677

33,438

2.06

7,969,795

34,469

1.75

HTM debt securities

3,021,239

12,738

1.69

1,968,568

8,198

1.69

Loans (2)

44,626,488

439,416

3.95

42,112,418

377,110

3.63

FHLB and FRB stock

77,839

822

4.24

77,575

609

3.18

Total interest-earning assets

58,668,677

499,754

3.42

58,692,366

432,029

2.99

Noninterest-earning assets:

Cash and due from banks

712,884

641,882

Allowance for loan losses

(545,489

)

(543,345

)

Other assets

3,396,769

2,967,145

Total assets

62,232,841

61,758,048

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Checking deposits

6,712,890

3,178

0.19

6,648,065

1,402

0.09

Money market deposits

12,319,930

8,892

0.29

12,913,336

3,203

0.10

Savings deposits

2,970,007

1,864

0.25

2,930,309

1,704

0.24

Time deposits

8,239,571

8,554

0.42

8,100,890

6,680

0.33

Federal funds purchased and other short-term borrowings

64,145

241

1.51

1,866

1.96

FHLB advances

138,960

559

1.61

160,018

578

1.46

Repurchase agreements

359,778

2,418

2.70

311,984

2,016

2.62

Long-term debt and finance lease liabilities

152,194

1,096

2.89

152,011

824

2.20

Total interest-bearing liabilities

30,957,475

26,802

0.35

31,218,479

16,416

0.21

Noninterest-bearing liabilities and stockholders’ equity:

Demand deposits

23,887,452

23,432,746

Accrued expenses and other liabilities

1,705,487

1,264,208

Stockholders’ equity

5,682,427

5,842,615

Total liabilities and stockholders’ equity

62,232,841

61,758,048

Interest rate spread

3.07

2.78

Net interest income and net interest margin

472,952

3.23

415,613

2.87

(1)

Annualized.

(2)

Includes loans HFS. Average balances of PPP loans were $223.2 million and $410.6 million for the three months ended June 30, 2022 and March 31, 2022, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 7

Three Months Ended

June 30, 2022

June 30, 2021

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

Assets

Interest-earning assets:

Interest-bearing cash and deposits with banks

2,797,711

4,787

0.69

5,072,225

3,628

0.29

Resale agreements

1,641,723

8,553

2.09

2,129,567

8,021

1.51

AFS debt securities

6,503,677

33,438

2.06

7,997,005

34,690

1.74

HTM debt securities

3,021,239

12,738

1.69

—

Loans (2)

44,626,488

439,416

3.95

39,622,270

352,453

3.57

FHLB and FRB stock

77,839

822

4.24

80,142

541

2.71

Total interest-earning assets

58,668,677

499,754

3.42

54,901,209

399,333

2.92

Noninterest-earning assets:

Cash and due from banks

712,884

600,053

Allowance for loan losses

(545,489

)

(607,523

)

Other assets

3,396,769

2,878,098

Total assets

62,232,841

57,771,837

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Checking deposits

6,712,890

3,178

0.19

6,671,358

3,777

0.23

Money market deposits

12,319,930

8,892

0.29

12,596,515

3,712

0.12

Savings deposits

2,970,007

1,864

0.25

2,676,865

2,078

0.31

Time deposits

8,239,571

8,554

0.42

8,518,936

8,431

0.40

Federal funds purchased and other short-term borrowings

64,145

241

1.51

336

—

FHLB advances

138,960

559

1.61

474,887

2,099

1.77

Repurchase agreements

359,778

2,418

2.70

303,118

1,991

2.63

Long-term debt and finance lease liabilities

152,194

1,096

2.89

152,099

772

2.04

Total interest-bearing liabilities

30,957,475

26,802

0.35

31,394,114

22,860

0.29

Noninterest-bearing liabilities and stockholders’ equity:

Demand deposits

23,887,452

19,717,315

Accrued expenses and other liabilities

1,705,487

1,234,456

Stockholders’ equity

5,682,427

5,425,952

Total liabilities and stockholders’ equity

62,232,841

57,771,837

Interest rate spread

3.07

2.63

Net interest income and net interest margin

472,952

3.23

376,473

2.75

(1)

Annualized.

(2)

Includes loans HFS. Average balances of PPP loans were $223.2 million and $1.87 billion for the three months ended June 30, 2022 and June 30, 2021, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES

($ in thousands)

(unaudited)

Table 8

Six Months Ended

June 30, 2022

June 30, 2021

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

Assets

Interest-earning assets:

Interest-bearing cash and deposits with banks

3,627,253

8,047

0.45

5,592,124

7,260

0.26

Resale agreements

1,868,600

16,936

1.83

1,797,578

14,120

1.58

AFS debt securities

7,232,686

67,907

1.89

7,232,686

63,790

1.78

HTM debt securities

2,497,811

20,936

1.69

—

Loans (2)

43,376,398

816,526

3.80

39,178,255

694,461

3.57

FHLB and FRB stock

77,708

1,431

3.71

81,645

1,088

2.69

Total interest-earning assets

58,680,456

931,783

3.20

53,882,288

780,719

2.92

Noninterest-earning assets:

Cash and due from banks

677,579

590,219

Allowance for loan losses

(544,423

)

(613,026

)

Other assets

3,183,144

2,829,594

Total assets

61,996,756

56,689,075

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Checking deposits

6,680,657

4,580

0.14

6,532,965

7,991

0.25

Money market deposits

12,614,994

12,095

0.19

12,088,006

8,423

0.14

Savings deposits

2,950,268

3,568

0.24

2,675,677

3,819

0.29

Time deposits

8,170,613

15,234

0.38

8,814,159

19,587

0.45

Federal funds purchased and other short-term borrowings

33,177

250

1.52

2,508

3.38

FHLB advances

149,431

1,137

1.53

563,331

5,168

1.85

Repurchase agreements

336,013

4,434

2.66

301,567

3,969

2.65

Long-term debt and finance lease liabilities

152,103

1,920

2.55

152,094

1,552

2.06

Total interest-bearing liabilities

31,087,256

43,218

0.28

31,130,307

50,551

0.33

Noninterest-bearing liabilities and stockholders’ equity:

Demand deposits

23,661,355

18,909,991

Accrued expenses and other liabilities

1,486,067

1,266,510

Stockholders’ equity

5,762,078

5,382,267

Total liabilities and stockholders’ equity

61,996,756

56,689,075

Interest rate spread

2.92

2.59

Net interest income and net interest margin

888,565

3.05

730,168

2.73

(1)

Annualized.

(2)

Includes loans HFS. Average balances of PPP loans were $316.4 million and $1.90 billion for the six months ended June 30, 2022 and 2021, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

SELECTED RATIOS

(unaudited)

Table 9

Three Months Ended (1)

June 30, 2022

Basis Point Change

June 30, 2022

March 31, 2022

June 30, 2021

Qtr-o-Qtr

Yr-o-Yr

Return on average assets

1.66

1.56

bps

Return on average equity

18.23

16.50

16.61

173

162

Tangible return on average tangible equity (2)

19.94

18.00

18.28

194

166

Interest rate spread

3.07

2.78

2.63

Net interest margin

3.23

2.87

2.75

Average loan yield

3.95

3.63

3.57

Yield on average interest-earning assets

3.42

2.99

2.92

Average cost of interest-bearing deposits

0.30

0.17

0.24

Average cost of deposits

0.17

0.10

0.14

Average cost of funds

0.20

0.12

0.18

Adjusted pre-tax, pre-provision profitability ratio (3)

2.38

2.10

1.97

Adjusted noninterest expense/average assets (3)

1.17

1.15

1.12

Efficiency ratio

35.70

38.25

42.60

(255

)

(690

)

Adjusted efficiency ratio (3)

32.90

35.34

36.30

(244

)

bps

(340

)

bps

Six Months Ended (1)

June 30, 2022

Basis Point Change

June 30, 2022

June 30, 2021

Yr-o-Yr

Return on average assets

1.61

1.53

bps

Return on average equity

17.36

16.10

126

Tangible return on average tangible equity (2)

18.96

17.73

123

Interest rate spread

2.92

2.59

Net interest margin

3.05

2.73

Average loan yield

3.80

3.57

Yield on average interest-earning assets

3.20

2.92

Average cost of interest-bearing deposits

0.24

0.27

)

Average cost of deposits

0.13

0.16

)

Average cost of funds

0.16

0.20

)

Adjusted pre-tax, pre-provision profitability ratio (3)

2.25

1.94

Adjusted noninterest expense/average assets (3)

1.16

—

Efficiency ratio

36.91

43.67

(676

)

Adjusted efficiency ratio (3)

34.05

37.47

(342

)

bps

(1)

Annualized except for efficiency ratio.

(2)

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

(3)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES

ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES

($ in thousands)

(unaudited)

Table 10

Three Months Ended June 30, 2022

Commercial

Consumer

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

Total

Allowance for loan losses, March 31, 2022

339,446

182,296

21,958

1,985

545,685

Provision for (reversal of) credit losses on loans

(a)

19,030

(9,181

)

3,122

(502

)

12,469

Gross charge-offs

(240

)

(679

)

(193

)

(34

)

(1,146

)

Gross recoveries

6,514

1,043

173

—

7,730

Total net recoveries (charge-offs)

6,274

364

(20

)

(34

)

6,584

Foreign currency translation adjustment

(1,468

)

—

(1,468

)

Allowance for loan losses, June 30, 2022

363,282

173,479

25,060

1,449

563,270

Three Months Ended March 31, 2022

Commercial

Consumer

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

Total

Allowance for loan losses, December 31, 2021

338,252

180,808

20,595

1,924

541,579

Provision for credit losses on loans

(a)

9,262

1,658

1,225

107

12,252

Gross charge-offs

(11,188

)

(399

)

—

(46

)

(11,633

)

Gross recoveries

3,002

229

138

—

3,369

Total net (charge-offs) recoveries

(8,186

)

(170

)

138

(46

)

(8,264

)

Foreign currency translation adjustment

118

—

118

Allowance for loan losses, March 31, 2022

339,446

182,296

21,958

1,985

545,685

Three Months Ended June 30, 2021

Commercial

Consumer

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

Total

Allowance for loan losses, March 31, 2021

394,084

192,895

18,509

2,018

607,506

(Reversal of) provision for credit losses on loans

(a)

(22,605

)

10,747

859

2,209

(8,790

)

Gross charge-offs

(10,572

)

(4,456

)

—

(32

)

(15,060

)

Gross recoveries

1,338

344

100

1,785

Total net (charge-offs) recoveries

(9,234

)

(4,112

)

100

(29

)

(13,275

)

Foreign currency translation adjustment

283

—

283

Allowance for loan losses, June 30, 2021

362,528

199,530

19,468

4,198

585,724

Six Months Ended June 30, 2022

Commercial

Consumer

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

Total

Allowance for loan losses, December 31, 2021

338,252

180,808

20,595

1,924

541,579

Provision for (reversal of) credit losses on loans

(a)

28,292

(7,523

)

4,347

(395

)

24,721

Gross charge-offs

(11,428

)

(1,078

)

(193

)

(80

)

(12,779

)

Gross recoveries

9,516

1,272

311

—

11,099

Total net (charge-offs) recoveries

(1,912

)

194

118

(80

)

(1,680

)

Foreign currency translation adjustment

(1,350

)

—

(1,350

)

Allowance for loan losses, June 30, 2022

363,282

173,479

25,060

1,449

563,270

Six Months Ended June 30, 2021

Commercial

Consumer

C&I

Total CRE

Total Residential

Mortgage

Other Consumer

Total

Allowance for loan losses, December 31, 2020

398,040

201,603

18,210

2,130

619,983

(Reversal of) provision for credit losses on loans

(a)

(18,763

)

7,671

1,257

2,096

(7,739

)

Gross charge-offs

(19,008

)

(11,739

)

(179

)

(33

)

(30,959

)

Gross recoveries

2,098

1,995

180

4,278

Total net (charge-offs) recoveries

(16,910

)

(9,744

)

(28

)

(26,681

)

Foreign currency translation adjustment

161

—

161

Allowance for loan losses, June 30, 2021

362,528

199,530

19,468

4,198

585,724

Three Months Ended

Six Months Ended

June 30, 2022

March 31, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Unfunded Credit Facilities

Allowance for unfunded credit commitments, beginning of period (1)

23,262

27,514

32,529

27,514

33,577

Provision for (reversal of) credit losses on unfunded credit commitments

(b)

1,031

(4,252

)

(6,210

)

(3,221

)

(7,261

)

Foreign currency translation adjustment

—

(19

)

(16

)

Allowance for unfunded credit commitments, end of period (1)

24,304

23,262

26,300

24,304

26,300

Provision for (reversal of) credit losses

(a)+(b)

13,500

8,000

(15,000

)

21,500

(15,000

)

(1)

Included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CRITICIZED LOANS, NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS

($ in thousands)

(unaudited)

Table 11

Criticized Loans

June 30, 2022

March 31, 2022

June 30, 2021

Special mention loans

590,227

402,704

386,807

Classified loans

432,414

430,633

645,180

Total criticized loans

1,022,641

833,337

1,031,987

Nonperforming Assets

June 30, 2022

March 31, 2022

June 30, 2021

Nonaccrual loans:

Commercial:

C&I

40,053

51,773

83,225

CRE:

Total CRE

12,742

9,827

81,573

Consumer:

Total residential mortgage

37,129

23,197

30,489

Other consumer

2,503

Total nonaccrual loans

89,935

84,834

197,790

Other real estate owned, net

—

14,914

Other nonperforming assets

—

9,548

13,025

Total nonperforming assets

89,935

94,382

225,729

Credit Quality Ratios

June 30, 2022

March 31, 2022

June 30, 2021

Annualized quarterly net (recoveries) charge-offs to average loans HFI

(0.06

0.08

0.13

Special mention loans to loans HFI

1.27

0.93

0.97

Classified loans to loans HFI

0.93

0.99

1.61

Criticized loans to loans HFI

2.20

1.92

2.58

Nonperforming assets to total assets

0.14

0.15

0.38

Nonaccrual loans to loans HFI

0.19

0.20

0.49

Allowance for loan losses to loans HFI

1.21

1.25

1.46

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 12 The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods.

Three Months Ended

June 30, 2022

March 31, 2022

June 30, 2021

Net interest income before provision for (reversal of) credit losses

472,952

415,613

376,473

Total noninterest income

78,444

79,743

68,431

Total revenue

(a)

551,396

495,356

444,904

Total noninterest expense

(b)

196,860

189,450

189,523

Less:

Amortization of tax credit and other investments

(14,979

)

(13,900

)

(27,291

)

Amortization of core deposit intangibles

(488

)

(511

)

(710

)

Adjusted noninterest expense

(c)

181,393

175,039

161,522

Efficiency ratio

(b)/(a)

35.70

38.25

42.60

Adjusted efficiency ratio

(c)/(a)

32.90

35.34

36.30

Adjusted pre-tax, pre-provision income

(a)-(c) = (d)

370,003

320,317

283,382

Average total assets

(e)

62,232,841

61,758,048

57,771,837

Adjusted pre-tax, pre-provision profitability ratio (1)

(d)/(e)

2.38

2.10

1.97

Adjusted noninterest expense/average assets (1)

(c)/(e)

1.17

1.15

1.12

Six Months Ended

June 30, 2022

June 30, 2021

Net interest income before provision for (reversal of) credit losses

888,565

730,168

Total noninterest income

158,187

141,297

Total revenue

(f)

1,046,752

871,465

Total noninterest expense

(g)

386,310

380,600

Less:

Amortization of tax credit and other investments

(28,879

)

(52,649

)

Amortization of core deposit intangibles

(999

)

(1,442

)

Adjusted noninterest expense

(h)

356,432

326,509

Efficiency ratio

(g)/(f)

36.91

43.67

Adjusted efficiency ratio

(h)/(f)

34.05

37.47

Adjusted pre-tax, pre-provision income

(f)-(h) = (i)

690,320

544,956

Average total assets

(j)

61,996,756

56,689,075

Adjusted pre-tax, pre-provision profitability ratio (1)

(i)/(j)

2.25

1.94

Adjusted noninterest expense/average assets (1)

(h)/(j)

1.16

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION

($ in thousands)

(unaudited)

Table 13

The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. Tangible equity and tangible equity to tangible assets ratio are non-GAAP financial measures. Tangible equity and tangible assets represent stockholders’ equity and total assets, respectively, which have been reduced by goodwill and other intangible assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.

June 30, 2022

March 31, 2022

June 30, 2021

Stockholders’ equity

(a)

5,609,482

5,703,456

5,547,548

Less:

Goodwill

(465,697

)

(465,697

)

(465,697

)

Other intangible assets (1)

(8,537

)

(9,044

)

(10,309

)

Tangible equity

(b)

5,135,248

5,228,715

5,071,542

Total assets

(c)

62,394,283

62,241,456

59,854,876

Less:

Goodwill

(465,697

)

(465,697

)

(465,697

)

Other intangible assets (1)

(8,537

)

(9,044

)

(10,309

)

Tangible assets

(d)

61,920,049

61,766,715

59,378,870

Total stockholders’ equity to total assets ratio

(a)/(c)

8.99

9.16

9.27

Tangible equity to tangible assets ratio

(b)/(d)

8.29

8.47

8.54

Tangible return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.

Three Months Ended

Six Months Ended

June 30, 2022

March 31, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net income

(e)

258,329

237,652

224,742

495,981

429,736

Add:

Amortization of core deposit intangibles

488

511

710

999

1,442

Amortization of mortgage servicing assets

364

392

420

756

834

Tax effect of amortization adjustments (2)

(245

)

(260

)

(321

)

(505

)

(646

)

Tangible net income

(f)

258,936

238,295

225,551

497,231

431,366

Average stockholders’ equity

(g)

5,682,427

5,842,615

5,425,952

5,762,078

5,382,267

Less:

Average goodwill

(465,697

)

(465,697

)

(465,697

)

(465,697

)

(465,697

)

Average other intangible assets (1)

(8,827

)

(9,207

)

(10,827

)

(9,016

)

(11,209

)

Average tangible equity

(h)

5,207,903

5,367,711

4,949,428

5,287,365

4,905,361

Return on average equity (3)

(e)/(g)

18.23

16.50

16.61

17.36

16.10

Tangible return on average tangible equity (3)

(f)/(h)

19.94

18.00

18.28

18.96

17.73

(1)

Includes core deposit intangibles and mortgage servicing assets.

(2)

Applied statutory tax rate of 28.77% for the three and six months ended June 30, 2022 and the three months ended March 31, 2022. Applied statutory tax rate of 28.37% for the three and six months ended June 30, 2021.

(3)

Annualized.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220721005021/en/

FOR INVESTOR INQUIRIES, CONTACT: Irene Oh Chief Financial Officer T: (626) 768-6360 E: irene.oh@eastwestbank.com

Julianna Balicka Director of Investor Relations and Corporate Finance T: (626) 768-6985 E: julianna.balicka@eastwestbank.com

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