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 its financial results for the second quarter of 2019. For the second quarter of 2019, net income was $150.4 million or $1.03 per diluted share. Second quarter 2019 return on average assets was 1.45% and return on average equity was 12.9%.

“Total loans grew $871 million, or 11% annualized, to a record $33.7 billion as of June 30, 2019 from $32.9 billion as of March 31, 2019. Loan growth was well-diversified across our major lending portfolios,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $204 million, or 2% annualized, to a record $36.5 billion from $36.3 billion as of March 31, 2019. A highlight was robust growth in noninterest-bearing demand deposits.”

“East West achieved record total operating1 revenue of $420 million in the second quarter of 2019, an increase of 4% from $405 million in the first quarter of 2019, and an increase of 8% from $390 million in the second quarter of 2018. Quarter-over-quarter, net interest income grew by 1% and we also saw substantial noninterest income growth of 25%. Year-over-year, net interest income grew by 8% and noninterest income grew by 9%,” continued Ng.

“The growth in revenue combined with strong operating expense control drove improvement in our operating efficiency and an expansion of our pre-tax, pre-provision profitability. Our pre-tax, pre-provision profitability ratio2 was 2.51% in the second quarter of 2019, expanding by 8 basis points linked quarter. Additionally, nonperforming assets, net charge-offs and the provision for credit losses all decreased.”

“Despite macro-economic and geopolitical volatility, East West continues to execute, delivering attractive growth and profitability, demonstrating the strength of our differentiated strategy and the value proposition that we provide for our customers. We are pleased with the solid results of the second quarter and look forward to continued strong performance in the second half of 2019,” concluded Ng.

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1	Operating revenue consists of net interest income before provision for credit losses and noninterest income, excluding non-operating items.
2	See reconciliation of GAAP to non-GAAP financial measures in Table 14.

HIGHLIGHTS OF RESULTS

• Second Quarter Earnings – Second quarter 2019 net income was $150.4 million and diluted earnings per share (“EPS”) were $1.03, compared to first quarter 2019 net income of $164.0 million and diluted EPS of $1.12. During the second quarter, the Company recorded $30.1 million of additional income tax expense to reverse previously claimed tax credits, equivalent to $0.21 per share. Adjusted3 second quarter net income was $180.5 million and adjusted3 diluted EPS were $1.24, both up by 7% from adjusted3 first quarter net income of $168.9 million and adjusted3 first quarter diluted EPS of $1.16.

• Net Interest Income and Net Interest Margin – Second quarter 2019 net interest income (“NII”) was $367.3 million, a quarterly increase of $4.9 million or 1%, and a year-over-year increase of $25.6 million or 8%. Second quarter 2019 net interest margin (“NIM”) was 3.73%, compared to 3.79% in the previous quarter. Net interest income growth in the second quarter primarily reflects loan growth, partially offset by the change in the NIM.

• Record Loans – Total loans of $33.7 billion as of June 30, 2019 were up $871.0 million, or 11% linked quarter annualized, from $32.9 billion as of March 31, 2019. Growth was well-diversified across commercial and industrial loans, commercial real estate and single family residential mortgage portfolios. Total loans grew by $3.5 billion, or 12% year-over-year.

• Record Deposits – Total deposits of $36.5 billion as of June 30, 2019 were up $203.6 million, or 2% linked quarter annualized, from $36.3 billion as of March 31, 2019. Growth in time, noninterest-bearing demand and savings deposits was partially offset by declines in interest-bearing checking and money market balances. Total deposits grew by $3.7 billion, or 11% year-over-year.

• Asset Quality Metrics – The allowance for loan losses was $330.6 million, or 0.98% of loans held-for-investment (“HFI”), as of June 30, 2019, compared to 0.97% of loans HFI as of March 31, 2019, and 1.00% of loans HFI as of June 30, 2018. For the second quarter of 2019, net charge-offs were $7.6 million, or annualized 0.09% of average loans HFI, a decrease from annualized net charge-offs of 0.18% of average loans HFI for the first quarter of 2019 and 0.14% for the year-ago quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $119.3 million, or 0.28% of total assets, as of June 30, 2019, compared to 0.33% of total assets as of March 31, 2019, and 0.27% of total assets as of June 30, 2018.

• Capital Levels – Capital levels for East West continue to be strong. As of June 30, 2019, stockholders’ equity was $4.7 billion, or $32.53 per share. Tangible equity4 per common share was $29.20 as of June 30, 2019, an increase of 3% linked quarter and 17% year-over-year. As of June 30, 2019, the tangible equity to tangible assets ratio4 was 10.0%, the common equity tier 1 (“CET1”) capital ratio was 12.5%, and the total risk-based capital ratio was 13.9%.

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3	See reconciliation of GAAP to non-GAAP financial measures in Table 13.
4	See reconciliation of GAAP to non-GAAP financial measures in Table 16.

QUARTERLY RESULTS SUMMARY
		Quarter Ended
($ in millions, except per share data and ratios)		June 30, 2019				March 31, 2019				June 30, 2018
Net income		$	150.4			$	164.0			$	172.3
Adjusted net income (1)		$	180.5			$	168.9			$	172.3
Earnings per share (diluted)		$	1.03			$	1.12			$	1.18
Adjusted earnings per share (diluted) (1)		$	1.24			$	1.16			$	1.18
Book value per common share		$	32.53			$	31.56			$	28.39
Tangible equity (1) per common share		$	29.20			$	28.21			$	25.01
Tangible equity to tangible assets ratio (1)		10.02		%		9.87		%		9.65		%
Return on average assets (2)		1.45		%		1.63		%		1.84		%
Return on average equity (2)		12.9		%		14.7		%		17.0		%
Return on average tangible equity (1)(2)		14.5		%		16.5		%		19.5		%
Adjusted return on average assets (1)(2)		1.74		%		1.68		%		1.84		%
Adjusted return on average equity (1)(2)		15.5		%		15.1		%		17.0		%
Adjusted return on average tangible equity (1)(2)		17.4		%		17.0		%		19.5		%
Adjusted pre-tax, pre-provision profitability ratio (1)(2)		2.51		%		2.43		%		2.50		%
Net interest income		$	367.3			$	362.5			$	341.7
Adjusted net interest income (1)		$	365.6			$	360.3			$	335.4
Net interest margin (2)		3.73		%		3.79		%		3.83		%
Adjusted net interest margin (1)(2)		3.71		%		3.77		%		3.76		%
Average loan yield (2)		5.28		%		5.30		%		4.95		%
Adjusted average loan yield (1)(2)		5.26		%		5.27		%		4.86		%
Cost of deposits (2)		1.11		%		1.07		%		0.64		%
Efficiency ratio		42.3		%		46.2		%		45.5		%
Adjusted efficiency ratio (1)		38.0		%		39.8		%		39.9		%

(1)		See reconciliation of GAAP to non-GAAP financial measures in Tables 13, 14, 15 and 16.
(2)		Annualized.

MANAGEMENT OUTLOOK FOR 2019

The Company has updated its outlook for the expected full year 2019 results, compared to our full year 2018 results. The components are as follows:

• End of Period Loans: increase by approximately 10%.
• Net Interest Income (excluding ASC 310-30 discount accretion income): increase at a percentage rate in the high single-digits.
• Net Interest Margin (excluding the impact of ASC 310-30 discount accretion): between 3.60% and 3.70%.
• Noninterest Expense (excluding amortization of tax credit investments & core deposit intangibles): increase at a percentage rate in the mid-single-digits.
• Provision for Credit Losses: in the range of $80 million to $90 million.
• Tax Items: projecting full year effective tax rate of approximately 20%, including the impact of the $30.1 million reversal of previously claimed tax credits in the second quarter of 2019, or approximately 15% excluding the tax credit reversal.
• Interest Rates: Two 25-basis point cuts to the fed funds rate, in July and October of 2019.

OPERATING RESULTS SUMMARY

Second Quarter 2019 Compared to First Quarter 2019

Net Interest Income and Net Interest Margin
Net interest income totaled $367.3 million, a 1% increase from $362.5 million. Net interest margin of 3.73% contracted by six basis points from 3.79%.

• Excluding the impact of ASC 310-30 discount accretion, adjusted5 NII of $365.6 million also increased by 1%, and adjusted5 NIM of 3.71% also decreased by six basis points. ASC 310-30 discount accretion income was $1.7 million, a decrease from $2.2 million last quarter.
• Average loans of $33.0 billion grew by $566.6 million, or 7% linked quarter annualized. Growth was well-diversified across all our major commercial and consumer loan portfolios.
• Average deposits of $35.3 billion grew by $403.0 million, or 5% linked quarter annualized. Growth was primarily in time and noninterest-bearing demand deposits, partially offset by a decline in money market balances.
• The yield on loans contracted by two basis points to 5.28% from 5.30%. Excluding the impact of ASC 310-30 discount accretion, the adjusted5 yield on loans contracted by one basis point to 5.26% from 5.27%, reflecting an unchanged fed funds rate and the decline in Libor rates.
• The cost of deposits increased by four basis points to 1.11% from 1.07% linked quarter. This is a deceleration from the linked quarter cost of deposits increases in the first quarter of 2019 and in the second quarter of 2018, which were 17 basis points and 15 basis points, respectively.

Noninterest Income
Noninterest income totaled $52.8 million, a 25% increase from $42.1 million.

• The linked quarter increase in noninterest income was primarily attributable to interest rate contracts and other derivative income, which increased by $7.2 million, reflecting strong customer demand for interest rate swaps in response to the inverted yield curve.
• Additionally, foreign exchange income increased by $2.3 million, reflecting revaluations of foreign currency-denominated balance sheet items, and lending fees increased by $1.4 million.

Noninterest Expense
Noninterest expense totaled $177.7 million, a 5% decrease from $186.9 million. Second quarter noninterest expense consisted of $159.8 million of adjusted6 noninterest expense, $16.7 million in amortization of tax credit and other investments, and $1.2 million in amortization of core deposit intangibles.

• Adjusted noninterest expense of $159.8 million decreased by $1.1 million, or 1%, from $160.8 million. The linked quarter change primarily reflected a decrease in compensation and employee benefits expense.
• The adjusted6 efficiency ratio was 38.0% in the second quarter, compared to 39.8% in the previous quarter.

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5		See reconciliation of GAAP to non-GAAP financial measures in Table 15.
6		See reconciliation of GAAP to non-GAAP financial measures in Table 14.

TAX RELATED ITEMS

Second quarter 2019 income tax expense was $72.8 million and the effective tax rate was 33%. Included in the second quarter 2019 income tax expense was a $30.1 million reversal of certain previously claimed tax credits related to DC Solar. Adjusted, tax expense was $42.7 million7 and the effective tax rate was 19%7 in the second quarter of 2019. This compares to a tax expense of $31.1 million and an effective tax rate of 16% in the first quarter of 2019.

• For the full year 2019, the Company projects that its effective tax rate will be approximately 20%, including the impact of the $30.1 million tax credit reversal in the second quarter of 2019, or approximately 15% excluding the tax credit reversal.

CREDIT QUALITY

The allowance for loan losses totaled $330.6 million, or 0.98% of loans HFI, as of June 30, 2019, compared to $317.9 million, or 0.97% of loans HFI, as of March 31, 2019, and $301.6 million, or 1.00% of loans HFI, as of June 30, 2018.

• The provision for credit losses recorded for the second quarter of 2019 was $19.2 million, compared to $22.6 million for the first quarter of 2019, and $15.5 million for the year-ago quarter.
• Net charge-offs for the current quarter were $7.6 million, or annualized 0.09% of average loans HFI. This is a decrease from net charge-offs of $14.4 million, or annualized 0.18% of average loans HFI, for the first quarter of 2019, and net charge-offs of $10.6 million, or annualized 0.14% of average loans HFI, for the second quarter of 2018.
• Non-PCI nonperforming assets were $119.3 million, or 0.28% of total assets, as of June 30, 2019, compared to $138.0 million, or 0.33% of total assets, as of March 31, 2019, and $103.5 million, or 0.27% of total assets, as of June 30, 2018.

CAPITAL STRENGTH

Capital levels for East West continue to be strong. The following table presents the regulatory capital ratios for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018.

EWBC Regulatory Capital Metrics				Basel III
($ in millions)				June 30, 2019 (a)				March 31, 2019				June 30, 2018				Minimum Capital Ratio			Well Capitalized Ratio			Minimum Capital Ratio + Conservation Buffer (b)
CET1 capital ratio				12.5		%		12.4		%		12.2		%		4.5	%		6.5	%		7.0	%
Tier 1 risk-based capital ratio				12.5		%		12.4		%		12.2		%		6.0	%		8.0	%		8.5	%
Total risk-based capital ratio				13.9		%		13.9		%		13.7		%		8.0	%		10.0	%		10.5	%
Tier 1 leverage capital ratio				10.4		%		10.2		%		10.0		%		4.0	%		5.0	%		4.0	%
Risk-Weighted Assets (“RWA”) (c)				$	34,161			$	33,162			$	30,415			N/A			N/A			N/A

N/A Not applicable.
(a)		The Company’s June 30, 2019 regulatory capital ratios and RWA are preliminary.
(b)		An additional 2.5% capital conservation buffer above the minimum capital ratios is required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.
(c)		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.

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

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared third quarter 2019 dividends for the Company’s common stock. The common stock cash dividend of $0.275 per share is payable on August 15, 2019 to shareholders of record on August 1, 2019.

Conference Call

East West will host a conference call to discuss second quarter 2019 earnings with the public on Thursday, July 18, 2019 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 2019 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 18, 2019 at 11:30 a.m. Pacific Time through August 18, 2019. 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: 10132709.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $42.9 billion 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, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei 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) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to our 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 “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, and the negative thereof. 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, some of which are beyond our control, include, but are not limited to, the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China; our ability to compete effectively against other financial institutions in our banking markets; success and timing of our business strategies; our ability to retain key officers and employees; impact on our funding costs, net interest income and net interest margin due to changes in key variable market interest rates, competition, regulatory requirements and our product mix; changes in our costs of operation, compliance and expansion; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do 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; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; impact of adverse changes to our credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; changes in the commercial and consumer real estate markets; changes in consumer spending and savings habits; changes in the United States (“U.S.”) economy, including inflation, deflation, employment levels, rate of growth and general business conditions; government intervention in the financial system, including changes in government interest rate policies; impact of benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate selected as the preferred alternative reference rate to the London Interbank Offered Rate; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions; impact of the Dodd-Frank Act on our business, business practices, cost of operations and executive compensation; heightened regulatory and governmental oversight and scrutiny of our business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from our interactions with business partners, counterparties, service providers and other third parties; impact of regulatory 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; changes in income tax laws and regulations and the impact of the Tax Cuts and Jobs Act of 2017; impact of other potential federal tax changes and spending cuts; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; changes in our ability to receive dividends from our subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations in our stock price; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on our financial performance; and other factors set forth in our public reports including its Annual Report on Form 10-K for the year ended December 31, 2018, 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, our results could differ materially from those expressed in, implied or projected by such forward-looking statements. We assume no obligation to update or revise such forward-looking statements, whether as a result of new information, future events, or otherwise, 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, 2019 % or Basis Point Change
			June 30, 2019						March 31, 2019						June 30, 2018						Qtr-o-Qtr			Yr-o-Yr
Assets
	Cash and due from banks		$			425,949			$			462,254			$			415,653			(7.9	)%		2.5	%
	Interest-bearing cash with banks					3,195,665						3,323,071						1,881,818			(3.8	)		69.8
	Cash and cash equivalents					3,621,614						3,785,325						2,297,471			(4.3	)		57.6
	Interest-bearing deposits with banks					150,273						134,000						360,900			12.1			(58.4	)
	Securities purchased under resale agreements (“resale agreements”) (1)					1,010,000						1,035,000						975,000			(2.4	)		3.6
	Available-for-sale (“AFS”) investment securities					2,592,913						2,640,158						2,707,444			(1.8	)		(4.2	)
	Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock					78,093						74,736						73,524			4.5			6.2
	Loans held-for-sale (“HFS”)					3,879			—									14,658			100.0			(73.5	)
	Loans held-for-investment (net of allowance for loan losses of $330,625, $317,894 and $301,550)					33,399,752						32,545,392						29,928,829			2.6			11.6
	Investments in qualified affordable housing partnerships, net					198,466						197,470						152,556			0.5			30.1
	Investments in tax credit and other investments, net					210,387						217,445						242,595			(3.2	)		(13.3	)
	Goodwill					465,697						465,697						465,547			—			0.0
	Operating lease right-of-use assets (2)					109,032						104,289			—						4.5			100.0
	Other assets					1,052,252						891,921						824,672			18.0			27.6
	Total assets		$			42,892,358			$			42,091,433			$			38,043,196			1.9	%		12.7	%
Liabilities and Stockholders’ Equity
	Deposits		$			36,477,542			$			36,273,972			$			32,776,132			0.6	%		11.3	%
	Short-term borrowings					19,972						39,550						58,523			(49.5	)		(65.9	)
	FHLB advances					745,074						344,657						325,020			116.2			129.2
	Securities sold under repurchase agreements (“repurchase agreements”) (1)					50,000						50,000						50,000			—			—
	Long-term debt and finance lease liabilities					152,506						152,433						161,704			0.0			(5.7	)
	Operating lease liabilities (2)					117,448						112,843			—						4.1			100.0
	Accrued expenses and other liabilities					595,223						526,048						557,533			13.1			6.8
	Total liabilities					38,157,765						37,499,503						33,928,912			1.8			12.5
	Stockholders’ equity (2)					4,734,593						4,591,930						4,114,284			3.1			15.1
	Total liabilities and stockholders’ equity		$			42,892,358			$			42,091,433			$			38,043,196			1.9	%		12.7	%
	Book value per common share		$			32.53			$			31.56			$			28.39			3.1	%		14.6	%
	Tangible equity (3) per common share		$			29.20			$			28.21			$			25.01			3.5			16.8
	Number of common shares at period-end					145,547						145,501						144,905			0.0			0.4
	Tangible equity to tangible assets ratio (3)					10.02	%					9.87	%					9.65	%		15		bps	37		bps

(1)		Resale and repurchase agreements have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of each of June 30, 2019, March 31, 2019 and June 30, 2018, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.
(2)		The Company’s adoption of ASU 2016-02, Leases (Topic 842) in the first quarter of 2019 resulted in the recognition of $104.3 million and $112.8 million increase in right-of-use assets and associated lease liabilities, respectively, arising from operating leases in which the Company is the lessee. We adopted this guidance using the alternative transition method, which allows the adoption of the accounting standard prospectively without adjusting comparative prior period financial information and also recognized a cumulative effect adjustment of approximately $14.7 million that increased retained earnings related to deferred gains on our prior sale-leaseback transactions.
(3)		See reconciliation of GAAP to non-GAAP financial measures in Table 16.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
																					June 30, 2019 % Change
			June 30, 2019						March 31, 2019						June 30, 2018						Qtr-o-Qtr			Yr-o-Yr
Loans:
Commercial:
	Commercial and industrial (“C&I”)		$			12,402,967			$			12,040,806			$			11,059,019			3.0	%		12.2	%
	Commercial real estate (“CRE”)					9,868,433						9,636,338						9,054,567			2.4			9.0
	Multifamily residential					2,372,345						2,270,590						2,032,522			4.5			16.7
	Construction and land					674,798						647,380						623,837			4.2			8.2
Consumer:
	Single-family residential					6,494,882						6,309,331						5,316,895			2.9			22.2
	Home equity lines of credit (“HELOCs”)					1,575,150						1,626,222						1,769,511			(3.1	)		(11.0	)
	Other consumer					341,802						332,619						374,028			2.8			(8.6	)
	Total loans held-for-investment (1)(2)					33,730,377						32,863,286						30,230,379			2.6			11.6
Loans HFS						3,879			—									14,658			100.0			(73.5	)
	Total loans (1)(2)					33,734,256						32,863,286						30,245,037			2.7			11.5
Allowance for loan losses						(330,625	)					(317,894	)					(301,550	)		4.0			9.6
	Net loans (1)(2)		$			33,403,631			$			32,545,392			$			29,943,487			2.6	%		11.6	%
Deposits:
	Noninterest-bearing demand		$			10,599,088			$			10,011,533			$			10,739,333			5.9	%		(1.3	)%
	Interest-bearing checking					5,083,675						6,123,681						4,323,698			(17.0	)		17.6
	Money market					8,009,325						8,243,003						7,634,850			(2.8	)		4.9
	Savings					2,188,738						2,049,086						2,218,228			6.8			(1.3	)
	Total core deposits					25,880,826						26,427,303						24,916,109			(2.1	)		3.9
	Time deposits					10,596,716						9,846,669						7,860,023			7.6			34.8
	Total deposits		$			36,477,542			$			36,273,972			$			32,776,132			0.6	%		11.3	%

(1)		Includes $(43.8) million, $(46.0) million and $(40.4) million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.
(2)		Includes ASC 310-30 discount of $18.9 million, $20.4 million and $26.8 million as of June 30, 2019, March 31, 2019 and June 30, 2018, 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, 2019 % Change
			June 30, 2019					March 31, 2019					June 30, 2018					Qtr-o-Qtr			Yr-o-Yr
Interest and dividend income			$		474,844			$		463,311			$		400,311			2.5	%		18.6	%
Interest expense					107,518					100,850					58,632			6.6			83.4
Net interest income before provision for credit losses					367,326					362,461					341,679			1.3			7.5
Provision for credit losses					19,245					22,579					15,536			(14.8	)		23.9
Net interest income after provision for credit losses					348,081					339,882					326,143			2.4			6.7
Noninterest income					52,759					42,131					48,268			25.2			9.3
Noninterest expense					177,663					186,922					177,419			(5.0	)		0.1
Income before income taxes					223,177					195,091					196,992			14.4			13.3
Income tax expense					72,797					31,067					24,643			134.3			195.4
Net income			$		150,380			$		164,024			$		172,349			(8.3	)%		(12.7	)%
Earnings per share (“EPS”)
- Basic			$		1.03			$		1.13			$		1.19			(8.5	)%		(13.1	)%
- Diluted			$		1.03			$		1.12			$		1.18			(8.4	)		(12.7	)
Weighted average number of shares outstanding
- Basic					145,546					145,256					144,899			0.2	%		0.4	%
- Diluted					146,052					145,921					146,091			0.1			0.0
			Three Months Ended															June 30, 2019 % Change
			June 30, 2019					March 31, 2019					June 30, 2018					Qtr-o-Qtr			Yr-o-Yr
Noninterest income:
	Lending fees		$		16,242			$		14,796			$		14,692			9.8	%		10.5	%
	Deposit account fees				9,788					9,641					10,140			1.5			(3.5	)
	Foreign exchange income				7,286					5,015					6,822			45.3			6.8
	Wealth management fees				3,800					3,812					4,501			(0.3	)		(15.6	)
	Interest rate contracts and other derivative income				10,398					3,216					6,570			223.3			58.3
	Net gains on sales of loans				15					915					2,354			(98.4	)		(99.4	)
	Net gains on sales of AFS investment securities				1,447					1,561					210			(7.3	)		589.0
	Other income				3,783					3,175					2,979			19.1			27.0
Total noninterest income			$		52,759			$		42,131			$		48,268			25.2	%		9.3	%
Noninterest expense:
	Compensation and employee benefits		$		100,531			$		102,299			$		93,865			(1.7	)%		7.1	%
	Occupancy and equipment expense				17,362					17,318					16,707			0.3			3.9
	Deposit insurance premiums and regulatory assessments				2,919					3,088					5,832			(5.5	)		(49.9	)
	Legal expense				2,355					2,225					2,837			5.8			(17.0	)
	Data processing				3,460					3,157					3,327			9.6			4.0
	Consulting expense				2,069					2,059					5,120			0.5			(59.6	)
	Deposit related expense				3,338					3,504					2,922			(4.7	)		14.2
	Computer software expense				6,211					6,078					5,549			2.2			11.9
	Other operating expense				22,679					22,289					20,779			1.7			9.1
	Amortization of tax credit and other investments				16,739					24,905					20,481			(32.8	)		(18.3	)
Total noninterest expense			$		177,663			$		186,922			$		177,419			(5.0	)%		0.1	%

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, 2019 % Change
			June 30, 2019					June 30, 2018					Yr-o-Yr
Interest and dividend income			$		938,155			$		772,184			21.5	%
Interest expense					208,368					103,812			100.7
Net interest income before provision for credit losses					729,787					668,372			9.2
Provision for credit losses					41,824					35,754			17.0
Net interest income after provision for credit losses					687,963					632,618			8.7
Noninterest income					94,890					122,712			(22.7	)
Noninterest expense					364,585					346,554			5.2
Income before income taxes					418,268					408,776			2.3
Income tax expense					103,864					49,395			110.3
Net income			$		314,404			$		359,381			(12.5	)%
EPS
- Basic			$		2.16			$		2.48			(12.9	)%
- Diluted			$		2.15			$		2.46			(12.5	)
Weighted average number of shares outstanding
- Basic					145,402					144,782			0.4	%
- Diluted					146,016					146,046			0.0
			Six Months Ended										June 30, 2019 % Change
			June 30, 2019					June 30, 2018					Yr-o-Yr
Noninterest income:
	Lending fees		$		31,038			$		28,705			8.1	%
	Deposit account fees				19,429					20,570			(5.5	)
	Foreign exchange income				12,301					7,992			53.9
	Wealth management fees				7,612					7,454			2.1
	Interest rate contracts and other derivative income				13,614					13,260			2.7
	Net gains on sales of loans				930					3,936			(76.4	)
	Net gains on sales of AFS investment securities				3,008					2,339			28.6
	Net gain on sale of business		—							31,470			(100.0	)
	Other income				6,958					6,986			(0.4	)
Total noninterest income			$		94,890			$		122,712			(22.7	)%
Noninterest expense:
	Compensation and employee benefits		$		202,830			$		189,099			7.3	%
	Occupancy and equipment expense				34,680					33,587			3.3
	Deposit insurance premiums and regulatory assessments				6,007					12,105			(50.4	)
	Legal expense				4,580					5,092			(10.1	)
	Data processing				6,617					6,728			(1.6	)
	Consulting expense				4,128					7,472			(44.8	)
	Deposit related expense				6,842					5,601			22.2
	Computer software expense				12,289					10,603			15.9
	Other operating expense				44,968					38,386			17.1
	Amortization of tax credit and other investments				41,644					37,881			9.9
Total noninterest expense			$		364,585			$		346,554			5.2	%

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
			Three Months Ended															June 30, 2019 % Change						Six Months Ended										June 30, 2019 % Change
			June 30, 2019					March 31, 2019					June 30, 2018					Qtr-o-Qtr			Yr-o-Yr			June 30, 2019					June 30, 2018					Yr-o-Yr
Loans:
Commercial:
	C&I		$		12,003,277			$		11,845,860			$		10,747,074			1.3	%		11.7	%		$		11,925,003			$		10,729,924			11.1	%
	CRE				9,700,208					9,568,571					9,038,228			1.4			7.3					9,634,753					9,022,498			6.8
	Multifamily residential				2,311,629					2,307,374					1,970,538			0.2			17.3					2,309,513					1,957,599			18.0
	Construction and land				675,967					584,445					667,997			15.7			1.2					630,459					662,811			(4.9	)
Consumer:
	Single-family residential				6,373,715					6,151,550					5,103,008			3.6			24.9					6,263,246					4,938,134			26.8
	HELOCs				1,607,311					1,652,211					1,787,036			(2.7	)		(10.1	)				1,629,637					1,783,160			(8.6	)
	Other consumer				309,267					304,774					332,885			1.5			(7.1	)				307,033					336,411			(8.7	)
	Total loans (1)(2)		$		32,981,374			$		32,414,785			$		29,646,766			1.7	%		11.2	%		$		32,699,644			$		29,430,537			11.1	%
AFS investment securities			$		2,551,383			$		2,642,299			$		2,735,023			(3.4	)%		(6.7	)%		$		2,596,590			$		2,794,350			(7.1	)%
Interest-earning assets			$		39,461,101			$		38,745,004			$		35,767,808			1.8	%		10.3	%		$		39,105,030			$		35,641,438			9.7	%
Total assets			$		41,545,441			$		40,738,404			$		37,568,895			2.0	%		10.6	%		$		41,144,152			$		37,475,515			9.8	%
Deposits:
	Noninterest-bearing demand		$		10,237,868			$		10,071,370			$		10,984,950			1.7	%		(6.8	)%		$		10,155,079			$		11,136,389			(8.8	)%
	Interest-bearing checking				5,221,110					5,270,855					4,387,479			(0.9	)		19.0					5,245,845					4,473,111			17.3
	Money market				7,856,055					8,080,848					7,880,601			(2.8	)		(0.3	)				7,967,831					8,075,796			(1.3	)
	Savings				2,106,626					2,091,406					2,214,793			0.7			(4.9	)				2,099,058					2,332,966			(10.0	)
	Total core deposits				25,421,659					25,514,479					25,467,823			(0.4	)		(0.2	)				25,467,813					26,018,262			(2.1	)
	Time deposits				9,904,726					9,408,897					6,907,174			5.3			43.4					9,658,181					6,315,194			52.9
	Total deposits		$		35,326,385			$		34,923,376			$		32,374,997			1.2	%		9.1	%		$		35,125,994			$		32,333,456			8.6	%
Interest-bearing liabilities			$		25,860,541			$		25,452,835			$		21,938,134			1.6	%		17.9	%		$		25,657,814			$		21,746,927			18.0	%
Stockholders’ equity			$		4,684,348			$		4,537,301			$		4,062,311			3.2	%		15.3	%		$		4,611,231			$		3,993,004			15.5	%

(1)		Includes ASC 310-30 discount of $19.9 million, $21.6 million and $30.0 million for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, and $20.8 million and $32.0 million for the six months ended June 30, 2019 and 2018, 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, 2019													March 31, 2019
		Average										Average			Average										Average
		Balance					Interest					Yield/Rate (1)			Balance					Interest					Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with banks		$		2,852,060			$		16,861			2.37	%		$		2,578,686			$		15,470			2.43	%
Resale agreements (2)				999,835					7,343			2.95	%				1,035,000					7,846			3.07	%
AFS investment securities				2,551,383					15,685			2.47	%				2,642,299					15,748			2.42	%
Loans (3)				32,981,374					434,450			5.28	%				32,414,785					423,534			5.30	%
FHLB and FRB stock				76,449					505			2.65	%				74,234					713			3.90	%
Total interest-earning assets				39,461,101					474,844			4.83	%				38,745,004					463,311			4.85	%
Noninterest-earning assets:
Cash and due from banks				439,449													468,159
Allowance for loan losses				(321,335	)												(314,446	)
Other assets				1,966,226													1,839,687
Total assets		$		41,545,441											$		40,738,404
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits		$		5,221,110			$		15,836			1.22	%		$		5,270,855			$		14,255			1.10	%
Money market deposits				7,856,055					28,681			1.46	%				8,080,848					30,234			1.52	%
Savings deposits				2,106,626					2,477			0.47	%				2,091,406					2,227			0.43	%
Time deposits				9,904,726					50,970			2.06	%				9,408,897					45,289			1.95	%
Federal funds purchased and other short-term borrowings				35,575					361			4.07	%				60,442					616			4.13	%
FHLB advances				533,841					4,011			3.01	%				338,027					2,979			3.57	%
Repurchase agreements (2)				50,000					3,469			27.83	%				50,000					3,492			28.32	%
Long-term debt and finance lease liabilities				152,608					1,713			4.50	%				152,360					1,758			4.68	%
Total interest-bearing liabilities				25,860,541					107,518			1.67	%				25,452,835					100,850			1.61	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits				10,237,868													10,071,370
Accrued expenses and other liabilities				762,684													676,898
Stockholders’ equity				4,684,348													4,537,301
Total liabilities and stockholders’ equity		$		41,545,441											$		40,738,404
Interest rate spread												3.16	%												3.24	%
Net interest income and net interest margin							$		367,326			3.73	%							$		362,461			3.79	%
Adjusted net interest income and adjusted net interest margin (4)							$		365,607			3.71	%							$		360,283			3.77	%

(1)		Annualized.
(2)		Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.70% and 2.80% for the three months ended June 30, 2019 and March 31, 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 4.93% and 5.01% for the three months ended June 30, 2019 and March 31, 2019, respectively.
(3)		Includes loans HFS. ASC 310-30 discount was $19.9 million and $21.6 million for the three months ended June 30, 2019 and March 31, 2019, respectively.
(4)		GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
		Three Months Ended
		June 30, 2019													June 30, 2018
		Average										Average			Average										Average
		Balance					Interest					Yield/Rate (1)			Balance					Interest					Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with banks		$		2,852,060			$		16,861			2.37	%		$		2,316,194			$		11,715			2.03	%
Resale agreements (2)				999,835					7,343			2.95	%				996,154					7,182			2.89	%
AFS investment securities				2,551,383					15,685			2.47	%				2,735,023					15,059			2.21	%
Loans (3)				32,981,374					434,450			5.28	%				29,646,766					365,555			4.95	%
FHLB and FRB stock				76,449					505			2.65	%				73,671					800			4.36	%
Total interest-earning assets				39,461,101					474,844			4.83	%				35,767,808					400,311			4.49	%
Noninterest-earning assets:
Cash and due from banks				439,449													432,401
Allowance for loan losses				(321,335	)												(292,645	)
Other assets				1,966,226													1,661,331
Total assets		$		41,545,441											$		37,568,895
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits		$		5,221,110			$		15,836			1.22	%		$		4,387,479			$		8,416			0.77	%
Money market deposits				7,856,055					28,681			1.46	%				7,880,601					18,805			0.96	%
Savings deposits				2,106,626					2,477			0.47	%				2,214,793					2,035			0.37	%
Time deposits				9,904,726					50,970			2.06	%				6,907,174					22,009			1.28	%
Federal funds purchased and other short-term borrowings				35,575					361			4.07	%				11,695					124			4.25	%
FHLB advances				533,841					4,011			3.01	%				324,665					2,552			3.15	%
Repurchase agreements (2)				50,000					3,469			27.83	%				50,000					3,042			24.40	%
Long-term debt and finance lease liabilities				152,608					1,713			4.50	%				161,727					1,649			4.09	%
Total interest-bearing liabilities				25,860,541					107,518			1.67	%				21,938,134					58,632			1.07	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits				10,237,868													10,984,950
Accrued expenses and other liabilities				762,684													583,500
Stockholders’ equity				4,684,348													4,062,311
Total liabilities and stockholders’ equity		$		41,545,441											$		37,568,895
Interest rate spread												3.16	%												3.42	%
Net interest income and net interest margin							$		367,326			3.73	%							$		341,679			3.83	%
Adjusted net interest income and adjusted net interest margin (4)							$		365,607			3.71	%							$		335,380			3.76	%

(1)		Annualized
(2)		Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.70% and 2.63% for the three months ended June 30, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.93% and 4.48% for the three months ended June 30, 2019 and 2018, respectively.
(3)		Includes loans HFS. ASC 310-30 discount was $19.9 million and $30.0 million for the three months ended June 30, 2019 and 2018, respectively.
(4)		See reconciliation of GAAP to non-GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
		Six Months Ended
		June 30, 2019													June 30, 2018
		Average										Average			Average										Average
		Balance					Interest					Yield/Rate (1)			Balance					Interest					Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with banks		$		2,716,128			$		32,331			2.40	%		$		2,319,962			$		22,660			1.97	%
Resale agreements (2)				1,017,320					15,189			3.01	%				1,022,928					14,116			2.78	%
AFS investment securities				2,596,590					31,433			2.44	%				2,794,350					30,515			2.20	%
Loans (3)				32,699,644					857,984			5.29	%				29,430,537					703,459			4.82	%
FHLB and FRB stock				75,348					1,218			3.26	%				73,661					1,434			3.93	%
Total interest-earning assets				39,105,030					938,155			4.84	%				35,641,438					772,184			4.37	%
Noninterest-earning assets:
Cash and due from banks				453,725													437,848
Allowance for loan losses				(317,909	)												(289,259	)
Other assets				1,903,306													1,685,488
Total assets		$		41,144,152											$		37,475,515
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits		$		5,245,845			$		30,091			1.16	%		$		4,473,111			$		15,143			0.68	%
Money market deposits				7,967,831					58,915			1.49	%				8,075,796					34,645			0.87	%
Savings deposits				2,099,058					4,704			0.45	%				2,332,966					4,056			0.35	%
Time deposits				9,658,181					96,259			2.01	%				6,315,194					36,557			1.17	%
Federal funds purchased and other short-term borrowings				47,939					977			4.11	%				6,314					131			4.18	%
FHLB advances				436,475					6,990			3.23	%				329,367					4,812			2.95	%
Repurchase agreements (2)				50,000					6,961			28.07	%				50,000					5,348			21.57	%
Long-term debt and finance lease liabilities				152,485					3,471			4.59	%				164,179					3,120			3.83	%
Total interest-bearing liabilities				25,657,814					208,368			1.64	%				21,746,927					103,812			0.96	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits				10,155,079													11,136,389
Accrued expenses and other liabilities				720,028													599,195
Stockholders’ equity				4,611,231													3,993,004
Total liabilities and stockholders’ equity		$		41,144,152											$		37,475,515
Interest rate spread												3.20	%												3.41	%
Net interest income and net interest margin							$		729,787			3.76	%							$		668,372			3.78	%
Adjusted net interest income and adjusted net interest margin (4)							$		725,890			3.74	%							$		656,873			3.71	%

(1)		Annualized.
(2)		Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.75% and 2.57% for the six months ended June 30, 2019 and 2018, respectively. The weighted-average interest rates of gross repurchase agreements were 4.97% and 4.21% for the six months ended June 30, 2019 and 2018, respectively.
(3)		Includes loans HFS. ASC 310-30 discount was $20.8 million and $32.0 million for the six months ended June 30, 2019 and 2018, respectively.
(4)		See reconciliation of GAAP to non-GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
			Three Months Ended (1)									June 30, 2019 Basis Point Change
			June 30, 2019			March 31, 2019			June 30, 2018			Qtr-o-Qtr			Yr-o-Yr
	Return on average assets		1.45	%		1.63	%		1.84	%		(18	)	bps	(39	)	bps
	Adjusted return on average assets (2)		1.74	%		1.68	%		1.84	%		6			(10	)
	Return on average equity		12.88	%		14.66	%		17.02	%		(178	)		(414	)
	Adjusted return on average equity (2)		15.45	%		15.10	%		17.02	%		35			(157	)
	Return on average tangible equity (2)		14.51	%		16.53	%		19.50	%		(202	)		(499	)
	Adjusted return on average tangible equity (2)		17.39	%		17.02	%		19.50	%		37			(211	)
	Interest rate spread		3.16	%		3.24	%		3.42	%		(8	)		(26	)
	Net interest margin		3.73	%		3.79	%		3.83	%		(6	)		(10	)
	Adjusted net interest margin (2)		3.71	%		3.77	%		3.76	%		(6	)		(5	)
	Average loan yield		5.28	%		5.30	%		4.95	%		(2	)		33
	Adjusted average loan yield (2)		5.26	%		5.27	%		4.86	%		(1	)		40
	Yield on average interest-earning assets		4.83	%		4.85	%		4.49	%		(2	)		34
	Cost of interest-bearing deposits		1.57	%		1.50	%		0.96	%		7			61
	Cost of deposits		1.11	%		1.07	%		0.64	%		4			47
	Cost of funds		1.19	%		1.15	%		0.71	%		4			48
	Adjusted pre-tax, pre-provision profitability ratio (2)		2.51	%		2.43	%		2.50	%		8			1
	Adjusted noninterest expense/average assets (2)		1.54	%		1.60	%		1.66	%		(6	)		(12	)
	Efficiency ratio		42.29	%		46.20	%		45.50	%		(391	)		(321	)
	Adjusted efficiency ratio (2)		38.03	%		39.75	%		39.89	%		(172	)	bps	(186	)	bps
			Six Months Ended (1)						June 30, 2019 Basis Point Change
			June 30, 2019			June 30, 2018			Yr-o-Yr
	Return on average assets		1.54	%		1.93	%		(39	)	bps
	Adjusted return on average assets (2)		1.71	%		1.81	%		(10	)
	Return on average equity		13.75	%		18.15	%		(440	)
	Adjusted return on average equity (2)		15.28	%		17.03	%		(175	)
	Return on average tangible equity (2)		15.50	%		20.87	%		(537	)
	Adjusted return on average tangible equity (2)		17.21	%		19.59	%		(238	)
	Interest rate spread		3.20	%		3.41	%		(21	)
	Net interest margin		3.76	%		3.78	%		(2	)
	Adjusted net interest margin (2)		3.74	%		3.71	%		3
	Average loan yield		5.29	%		4.82	%		47
	Adjusted average loan yield (2)		5.26	%		4.74	%		52
	Yield on average interest-earning assets		4.84	%		4.37	%		47
	Cost of interest-bearing deposits		1.53	%		0.86	%		67
	Cost of deposits		1.09	%		0.56	%		53
	Cost of funds		1.17	%		0.64	%		53
	Adjusted pre-tax, pre-provision profitability ratio (2)		2.47	%		2.44	%		3
	Adjusted noninterest expense/average assets (2)		1.57	%		1.65	%		(8	)
	Efficiency ratio		44.21	%		43.81	%		40
	Adjusted efficiency ratio (2)		38.88	%		40.26	%		(138	)	bps

(1)		Annualized except for efficiency ratio.
(2)		See reconciliation of GAAP to non-GAAP financial measures in Tables 13, 14, 15 and 16.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR CREDIT LOSSES
($ in thousands)
(unaudited)
Table 10
			Three Months Ended															Six Months Ended
			June 30, 2019					March 31, 2019					June 30, 2018					June 30, 2019					June 30, 2018
Non-Purchased Credit Impaired (“Non-PCI”) Loans
	Allowance for non-PCI loans, beginning of period		$		317,880			$		311,300			$		297,607			$		311,300			$		287,070
	Provision for loan losses on non-PCI loans				20,740					20,648					15,139					41,388					35,072
	Net (charge-offs) recoveries:
	Commercial:
	C&I				(10,032	)				(14,993	)				(12,383	)				(25,025	)				(23,549	)
	CRE				1,837					222					2					2,059					429
	Multifamily residential				53					281					1,061					334					1,394
	Construction and land				439					63					258					502					693
	Consumer:
	Single-family residential				72					2					629					74					812
	HELOCs		—							2			—							2			—
	Other consumer				(7	)				(14	)				(162	)				(21	)				(178	)
	Total net charge-offs				(7,638	)				(14,437	)				(10,595	)				(22,075	)				(20,399	)
	Foreign currency translation adjustments				(362	)				369					(640	)				7					(232	)
	Allowance for non-PCI loans, end of period				330,620					317,880					301,511					330,620					301,511
Purchased Credit Impaired (“PCI”) Loans
	Allowance for PCI loans, beginning of period				14					22					47					22					58
	Reversal of loan losses on PCI loans				(9	)				(8	)				(8	)				(17	)				(19	)
	Allowance for PCI loans, end of period				5					14					39					5					39
	Allowance for loan losses				330,625					317,894					301,550					330,625					301,550
Unfunded Credit Facilities
	Allowance for unfunded credit reserves, beginning of period				14,505					12,566					13,614					12,566					13,318
	(Reversal of) provision for unfunded credit reserves				(1,486	)				1,939					405					453					701
	Allowance for unfunded credit reserves, end of period				13,019					14,505					14,019					13,019					14,019
	Allowance for credit losses		$		343,644			$		332,399			$		315,569			$		343,644			$		315,569

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CREDIT QUALITY
($ in thousands)
(unaudited)
Table 11
Non-PCI Nonperforming Assets		June 30, 2019					March 31, 2019					June 30, 2018
Nonaccrual loans:
Commercial:
C&I		$		73,150			$		86,466			$		57,097
CRE				20,914					25,209					25,748
Multifamily residential				1,027					1,620					1,727
Consumer:
Single-family residential				13,075					10,467					7,625
HELOCs				7,344					10,473					8,135
Other consumer				2,504					2,506					2,491
Total nonaccrual loans				118,014					136,741					102,823
Other real estate owned, net				130					133					709
Other nonperforming assets				1,167					1,167			—
Total nonperforming assets		$		119,311			$		138,041			$		103,532
Credit Quality Ratios		June 30, 2019					March 31, 2019					June 30, 2018
Non-PCI nonperforming assets to total assets (1)				0.28	%				0.33	%				0.27	%
Non-PCI nonaccrual loans to loans held-for-investment (1)				0.35	%				0.42	%				0.34	%
Allowance for loan losses to loans held-for-investment (1)				0.98	%				0.97	%				1.00	%
Allowance for loan losses to non-PCI nonaccrual loans				280.16	%				232.48	%				293.27	%
Annualized quarterly net charge-offs to average loans held-for-investment				0.09	%				0.18	%				0.14	%

(1)

Total assets and loans held-for-investment include PCI loans of $270.9 million, $290.3 million and $383.7 million as of June 30, 2019, March 31, 2019 and June 30, 2018, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 12
During the second quarter of 2019, the Company reversed $30.1 million of certain previously claimed tax credits related to the DC Solar tax credit investments (“DC Solar”). The table below shows the computation of the Company’s effective tax rate excluding the impact of the DC Solar tax credits reversal. Management believes that excluding the impact of the DC Solar tax credits reversal from the effective tax rate computation allows comparability to prior periods.
				Three Months Ended
				June 30, 2019					March 31, 2019					June 30, 2018
Income tax expense		(a)		$		72,797			$		31,067			$		24,643
Less: Reversal of certain previously claimed tax credits related to DC Solar		(b)				(30,104	)		—					—
Adjusted income tax expense		(c)		$		42,693			$		31,067			$		24,643
Income before income taxes		(d)				223,177					195,091					196,992
Effective tax rate		(a)/(d)				32.6	%				15.9	%				12.5	%
Less: Reversal of certain previously claimed tax credits related to DC Solar		(b)/(d)				(13.5	)%		—			%		—			%
Adjusted effective tax rate		(c)/(d)				19.1	%				15.9	%				12.5	%
				Six Months Ended
				June 30, 2019					June 30, 2018
Income tax expense		(e)		$		103,864			$		49,395
Less: Reversal of certain previously claimed tax credits related to DC Solar		(f)				(30,104	)		—
Adjusted income tax expense		(g)		$		73,760			$		49,395
Income before income taxes		(h)				418,268					408,776
Effective tax rate		(e)/(h)				24.8	%				12.1	%
Less: Reversal of certain previously claimed tax credits related to DC Solar		(f)/(h)				(7.2	)%		—			%
Adjusted effective tax rate		(g)/(h)				17.6	%				12.1	%

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ and shares in thousands, except for per share data)
(unaudited)
Table 13
During the first quarter of 2019, the Company recorded a $7.0 million pre-tax impairment charge related to DC Solar. During the second quarter of 2019, the Company reversed $30.1 million of certain previously claimed tax credits related to DC Solar. During the first quarter of 2018, the Company sold its Desert Community Bank (“DCB”) branches and recognized a pre-tax gain on sale of $31.5 million. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that exclude the after-tax impact of the impairment charge related to DC Solar, the reversal of certain previously claimed tax credits related to DC Solar and the after-tax impact of the gain on the sale of the DCB branches (where applicable) provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.
				Three Months Ended
				June 30, 2019					March 31, 2019					June 30, 2018
Net income		(a)		$		150,380			$		164,024			$		172,349
Add: Impairment charge related to DC Solar (1)				—							6,978			—
Tax effect of adjustment (2)				—							(2,063	)		—
Add: Reversal of certain previously claimed tax credits related to DC Solar						30,104			—					—
Adjusted net income		(b)		$		180,484			$		168,939			$		172,349
Diluted weighted average number of shares outstanding						146,052					145,921					146,091
Diluted EPS				$		1.03			$		1.12			$		1.18
Diluted EPS impact of impairment charge related to DC Solar, net of tax				—							0.04			—
Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar						0.21			—					—
Adjusted diluted EPS				$		1.24			$		1.16			$		1.18
Average total assets		(c)		$		41,545,441			$		40,738,404			$		37,568,895
Average stockholders’ equity		(d)		$		4,684,348			$		4,537,301			$		4,062,311
Return on average assets (3)		(a)/(c)				1.45	%				1.63	%				1.84	%
Adjusted return on average assets (3)		(b)/(c)				1.74	%				1.68	%				1.84	%
Return on average equity (3)		(a)/(d)				12.88	%				14.66	%				17.02	%
Adjusted return on average equity (3)		(b)/(d)				15.45	%				15.10	%				17.02	%
				Six Months Ended
				June 30, 2019					June 30, 2018
Net income		(e)		$		314,404			$		359,381
Add: Impairment charge related to DC Solar (1)						6,978			—
Less: Gain on sale of business				—							(31,470	)
Tax effect of adjustments (2)						(2,063	)				9,303
Add: Reversal of certain previously claimed tax credits related to DC Solar						30,104			—
Adjusted net income		(f)		$		349,423			$		337,214
Diluted weighted average number of shares outstanding						146,016					146,046
Diluted EPS				$		2.15			$		2.46
Diluted EPS impact of impairment charge related to DC Solar, net of tax						0.03			—
Diluted EPS impact of gain on sale of business, net of tax				—							(0.15	)
Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar						0.21			—
Adjusted diluted EPS				$		2.39			$		2.31
Average total assets		(g)		$		41,144,152			$		37,475,515
Average stockholders’ equity		(h)		$		4,611,231			$		3,993,004
Return on average assets (3)		(e)/(g)				1.54	%				1.93	%
Adjusted return on average assets (3)		(f)/(g)				1.71	%				1.81	%
Return on average equity (3)		(e)/(h)				13.75	%				18.15	%
Adjusted return on average equity (3)		(f)/(h)				15.28	%				17.03	%

(1)		Included in Amortization of tax credit and other investments.
(2)		Applied statutory rate of 29.56%.
(3)		Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 14
Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of adjusted revenue less adjusted noninterest expense, divided by average total assets. Adjusted revenue represents the aggregate of net interest income and adjusted noninterest income, where adjusted noninterest income excludes the gain on the sale of the DCB branches that were sold in the first quarter of 2018 (where applicable). 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, 2019					March 31, 2019					June 30, 2018
Net interest income before provision for credit losses		(a)		$		367,326			$		362,461			$		341,679
Total noninterest income						52,759					42,131					48,268
Total revenue		(b)		$		420,085			$		404,592			$		389,947
Total noninterest expense		(c)		$		177,663			$		186,922			$		177,419
Less: Amortization of tax credit and other investments						(16,739	)				(24,905	)				(20,481	)
Amortization of core deposit intangibles						(1,152	)				(1,174	)				(1,373	)
Adjusted noninterest expense		(d)		$		159,772			$		160,843			$		155,565
Efficiency ratio		(c)/(b)				42.29	%				46.20	%				45.50	%
Adjusted efficiency ratio		(d)/(b)				38.03	%				39.75	%				39.89	%
Adjusted pre-tax, pre-provision income		(b)-(d) = (e)		$		260,313			$		243,749			$		234,382
Average total assets		(f)		$		41,545,441			$		40,738,404			$		37,568,895
Adjusted pre-tax, pre-provision profitability ratio (1)		(e)/(f)				2.51	%				2.43	%				2.50	%
Adjusted noninterest expense (1)/average assets		(d)/(f)				1.54	%				1.60	%				1.66	%
				Six Months Ended
				June 30, 2019					June 30, 2018
Net interest income before provision for credit losses		(g)		$		729,787			$		668,372
Total noninterest income						94,890					122,712
Total revenue		(h)				824,677					791,084
Noninterest income						94,890					122,712
Less: Gain on sale of business				—							(31,470	)
Adjusted noninterest income		(i)		$		94,890			$		91,242
Adjusted revenue		(g)+(i) = (j)		$		824,677			$		759,614
Total noninterest expense		(k)		$		364,585			$		346,554
Less: Amortization of tax credit and other investments						(41,644	)				(37,881	)
Amortization of core deposit intangibles						(2,326	)				(2,858	)
Adjusted noninterest expense		(l)		$		320,615			$		305,815
Efficiency ratio		(k)/(h)				44.21	%				43.81	%
Adjusted efficiency ratio		(l)/(j)				38.88	%				40.26	%
Adjusted pre-tax, pre-provision income		(j)-(l) = (m)		$		504,062			$		453,799
Average total assets		(n)		$		41,144,152			$		37,475,515
Adjusted pre-tax, pre-provision profitability ratio (1)		(m)/(n)				2.47	%				2.44	%
Adjusted noninterest expense (1)/average assets		(l)/(n)				1.57	%				1.65	%

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 15
Management believes that presenting the adjusted average loan yield and adjusted net interest margin that exclude the ASC 310-30 discount accretion impact provides clarity to financial statement users regarding the change in loan contractual yields and allows comparability to prior periods.
Yield on Average Loans				Three Months Ended															Six Months Ended
				June 30, 2019					March 31, 2019					June 30, 2018					June 30, 2019					June 30, 2018
Interest income on loans		(a)		$		434,450			$		423,534			$		365,555			$		857,984			$		703,459
Less: ASC 310-30 discount accretion income						(1,719	)				(2,178	)				(6,299	)				(3,897	)				(11,499	)
Adjusted interest income on loans		(b)		$		432,731			$		421,356			$		359,256			$		854,087			$		691,960
Average loans		(c)		$		32,981,374			$		32,414,785			$		29,646,766			$		32,699,644			$		29,430,537
Add: ASC 310-30 discount						19,909					21,639					29,997					20,769					32,017
Adjusted average loans		(d)		$		33,001,283			$		32,436,424			$		29,676,763			$		32,720,413			$		29,462,554
Average loan yield (1)		(a)/(c)				5.28	%				5.30	%				4.95	%				5.29	%				4.82	%
Adjusted average loan yield (1)		(b)/(d)				5.26	%				5.27	%				4.86	%				5.26	%				4.74	%
Net Interest Margin
Net interest income		(e)		$		367,326			$		362,461			$		341,679			$		729,787			$		668,372
Less: ASC 310-30 discount accretion income						(1,719	)				(2,178	)				(6,299	)				(3,897	)				(11,499	)
Adjusted net interest income		(f)		$		365,607			$		360,283			$		335,380			$		725,890			$		656,873
Average interest-earning assets		(g)		$		39,461,101			$		38,745,004			$		35,767,808			$		39,105,030			$		35,641,438
Add: ASC 310-30 discount						19,909					21,639					29,997					20,769					32,017
Adjusted average interest-earning assets		(h)		$		39,481,010			$		38,766,643			$		35,797,805			$		39,125,799			$		35,673,455
Net interest margin (1)		(e)/(g)				3.73	%				3.79	%				3.83	%				3.76	%				3.78	%
Adjusted net interest margin (1)		(f)/(h)				3.71	%				3.77	%				3.76	%				3.74	%				3.71	%

(1)

Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 16
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, 2019					March 31, 2019					June 30, 2018
Stockholders’ equity		(a)		$		4,734,593			$		4,591,930			$		4,114,284
Less: Goodwill						(465,697	)				(465,697	)				(465,547	)
Other intangible assets (1)						(18,952	)				(21,109	)				(25,029	)
Tangible equity		(b)		$		4,249,944			$		4,105,124			$		3,623,708
Total assets		(c)		$		42,892,358			$		42,091,433			$		38,043,196
Less: Goodwill						(465,697	)				(465,697	)				(465,547	)
Other intangible assets (1)						(18,952	)				(21,109	)				(25,029	)
Tangible assets		(d)		$		42,407,709			$		41,604,627			$		37,552,620
Total stockholders’ equity to total assets ratio		(a)/(c)				11.04	%				10.91	%				10.81	%
Tangible equity to tangible assets ratio		(b)/(d)				10.02	%				9.87	%				9.65	%

Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets, impairment charge related to DC Solar and the gain on the sale of the DCB branches; and the reversal of certain previously claimed tax credits related to DC Solar (where applicable). 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, 2019				March 31, 2019				June 30, 2018				June 30, 2019				June 30, 2018
Net Income				$	150,380			$	164,024			$	172,349			$	314,404			$	359,381
Add: Amortization of core deposit intangibles				1,152				1,174				1,373				2,326				2,858
Amortization of mortgage servicing assets				1,013				324				433				1,337				906
Tax effect of adjustments (2)				(640		)		(443		)		(534		)		(1,083		)		(1,113		)
Tangible net income		(e)		$	151,905			$	165,079			$	173,621			$	316,984			$	362,032
Add: Impairment charge related to DC Solar (3)				—				6,978				—				6,978				—
Less: Gain on sale of business				—				—				—				—				(31,470		)
Tax effect of adjustment (2)				—				(2,063		)		—				(2,063		)		9,303
Add: Reversal of certain previously claimed tax credits related to DC Solar				30,104				—				—				30,104				—
Adjusted tangible net income		(f)		$	182,009			$	169,994			$	173,621			$	352,003			$	339,865
Average stockholders’ equity				$	4,684,348			$	4,537,301			$	4,062,311			$	4,611,231			$	3,993,004
Less: Average goodwill				(465,697		)		(465,559		)		(465,547		)		(465,629		)		(467,157		)
Average other intangible assets (1)				(20,380		)		(21,860		)		(25,648		)		(21,116		)		(26,868		)
Average tangible equity		(g)		$	4,198,271			$	4,049,882			$	3,571,116			$	4,124,486			$	3,498,979
Return on average tangible equity (4)		(e)/(g)		14.51		%		16.53		%		19.50		%		15.50		%		20.87		%
Adjusted return on average tangible equity (4)		(f)/(g)		17.39		%		17.02		%		19.50		%		17.21		%		19.59		%

			(1)	Includes core deposit intangibles and mortgage servicing assets.
			(2)	Applied statutory rate of 29.56%.
			(3)	Included in Amortization of tax credit and other investments.
			(4)	Annualized.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190718005183/en/

FOR INVESTOR INQUIRIES, CONTACT:

Irene Oh

Chief Financial Officer

T: (626) 768-6360

E: [email protected]

Julianna Balicka

Director of Strategy and Corporate Development

T: (626) 768-6985

E: [email protected]

Source: East West Bancorp, Inc.