East West Bancorp Reports Net Income for Third Quarter 2021 of $225 Million and Diluted Earnings Per Share Of $1.57

Rhea-AI Summary

East West Bancorp (EWBC) reported strong Q3 2021 results with a net income of $225.4 million, or $1.57 per diluted share, reflecting a 41% year-over-year increase. Total loans reached a record $40.5 billion, growing 11% annually, while total deposits hit $53.4 billion, up 28% year-over-year. Revenue surged by 24% year-over-year to $469 million, driven by robust loan growth. The company's return on average assets was 1.46%, and return on average equity stood at 15.75%. Solid capital ratios were maintained, with a common equity tier 1 ratio of 12.8%.

Positive

• Net income of $225.4 million, up 41% YoY.
• Record total loans of $40.5 billion, an 11% annual increase.
• Total deposits reached $53.4 billion, up 28% from last year.
• Revenue increased 24% YoY to $469 million.
• Return on average tangible equity of 17.25%.

Negative

• Net interest margin decreased from 2.75% to 2.70%.
• Adjusted noninterest expense increased 3% from Q2 2021.

PASADENA, Calif.--(BUSINESS WIRE)-- East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the third quarter of 2021. Third quarter 2021 net income was $225.4 million, or $1.57 per diluted share; return on average assets was 1.46%, and return on average equity was 15.75%.

“This was another quarter of outstanding results. Our total loans reached a record $40.5 billion as of September 30, 2021. Loans grew by 11% annualized from June 30, 2021, and by 11% from September 30, 2020, excluding the impact of the Paycheck Protection Program. This growth has come from all of our major loan portfolios of commercial, residential mortgage and commercial real estate,” stated Dominic Ng, Chairman and Chief Executive Officer of East West.

“Total deposits reached a record $53.4 billion as of September 30, 2021, driven by excellent growth in demand deposits. This has transformed our deposit mix. Noninterest-bearing demand deposits now make up 43% of total balances, compared with 36% a year ago.”

“Our robust organic balance sheet growth drove a 21% annualized increase in revenue quarter-over-quarter, even as interest rates remained low. This revenue expansion was achieved while maintaining solid expense discipline, resulting in adjusted pre-tax, pre-provision income¹ growth of 26% annualized from the second quarter,” continued Ng. “Overall, we earned an attractive return on average tangible equity² of 17.25% in the third quarter of 2021.”

“We are looking forward to finishing the year on a high note, and extending the momentum and excellent performance from 2021 into continued growth and success in 2022,” concluded Ng.

FINANCIAL HIGHLIGHTS

		Three Months Ended			Qtr-o-Qtr Change					Yr-o-Yr Change
($ in millions)		September 30, 2021			$		% Ann.			$		%
Total Loans (incl. PPP)		$	40,482		$	408	4	%		$	3,040	8	%
Total Loans (excl. PPP)			39,674			1,034	11				4,005	11
Total Deposits			53,356			774	6				11,676	28
Total Revenue		$	469		$	24	21	%		$	90	24	%
Adj. Pre-tax Pre-provision Income1			302			19	26				78	35
Net Income			225			1	1				66	41

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¹ See reconciliation of GAAP to non-GAAP financial measures in Table 12.
² See reconciliation of GAAP to non-GAAP financial measures in Table 13.

BALANCE SHEET

• Record Assets – Total assets reached $61.0 billion as of September 30, 2021, up by $1.1 billion, or 7% annualized, from $59.9 billion as of June 30, 2021. Year-over-year, total assets grew 21% from $50.4 billion as of September 30, 2020.
  
  Third quarter 2021 average interest-earning assets of $58.2 billion grew by $3.3 billion, or 24% linked quarter annualized. The growth in average interest-earning assets mainly consisted of a $2.0 billion increase in average interest-bearing cash and deposits with banks, a $785.7 million increase in average available-for-sale (“AFS”) debt securities, and a $337.9 million increase in average loans. Excluding Paycheck Protection Program (“PPP”) loans, average loans grew by $1.1 billion.

• Record Loans – Total loans reached $40.5 billion as of September 30, 2021, up by $408.4 million, or 4% annualized, from $40.1 billion as of June 30, 2021. Excluding PPP loans, total loans grew by $1.0 billion, or 11% linked quarter annualized. During the third quarter of 2021, $645.0 million of PPP loans outstanding were forgiven by the Small Business Administration (“SBA”). PPP loans totaled $807.3 million as of September 30, 2021. Year-over-year, total loans, excluding PPP, grew 11% from $35.7 billion as of September 30, 2020.
  
  Third quarter 2021 average loans of $40.0 billion grew by $337.9 million, or 3% linked quarter annualized. Excluding PPP loans, average loans grew by $1.1 billion, or 12% annualized, from the second quarter of 2021. The strongest growth was from average C&I loans excluding PPP, which increased 16% linked quarter annualized, followed by residential mortgage loans, which also increased 16% linked quarter annualized. Average total CRE loans grew by 5% linked quarter annualized.

• Record Deposits – Total deposits reached $53.4 billion as of September 30, 2021, up by $773.6 million, or 6% annualized, from $52.6 billion as of June 30, 2021, and up 28% year-over-year from $41.7 billion as of September 30, 2020. Noninterest-bearing demand deposits reached a record $23.2 billion as of September 30, 2021, up by $1.4 billion, or 25% annualized, from $21.8 billion as of June 30, 2021, and up 55% year-over-year from $14.9 billion as of September 30, 2020. Noninterest-bearing demand deposits made up 43% of total deposits as of September 30, 2021, up from 41% as of June 30, 2021 and 36% as of September 30, 2020.
  
  Third quarter 2021 average deposits of $53.5 billion grew by $3.3 billion, or 26% linked quarter annualized. Growth in the third quarter was led by noninterest-bearing demand deposits, which increased by $3.5 billion or 69% linked quarter annualized. Time deposits decreased quarter-over-quarter, reflecting run-off of higher rate certificates of deposit.

• Strong Capital Levels – As of September 30, 2021, stockholders’ equity was $5.7 billion, or $40.10 per common share, and tangible equity³ per common share was $36.75. Tangible equity per common share increased by 3% quarter-over-quarter and increased by 12% year-over-year. As of September 30, 2021, the tangible equity to tangible assets ratio³ was 8.62%, the common equity tier 1 (“CET1”) capital ratio was 12.8%, and the total risk-based capital ratio was 14.2%.

_____________________________________________________________

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

OPERATING RESULTS

Third Quarter Earnings – Third quarter 2021 net income was $225.4 million, or $1.57 per diluted share, compared with $224.7 million, or $1.57 per diluted share, for the second quarter of 2021.

Third Quarter 2021 Compared to Second Quarter 2021

Net Interest Income and Net Interest Margin

Net interest income (“NII”) totaled $395.7 million, an increase of 20% annualized from $376.5 million. Net interest margin (“NIM”) of 2.70% decreased by five basis points from 2.75%.

• Excluding the impact of PPP loans, adjusted NII⁴ totaled $380.5 million, an increase of 21% annualized from $361.1 million. PPP loans contributed $15.2 million to NII in the third quarter, compared with $15.4 million in the second quarter.
• NII growth reflected growth in average balances of loans, securities and other earning assets, as well as the benefit of a lower cost of funds, partially offset by lower yields on earning assets.
• Adjusted NIM⁴ of 2.64% declined by nine basis points from 2.73%. The quarter-over-quarter adjusted NIM compression was largely due to the $2.0 billion growth in average interest-bearing cash and deposits with banks, which earned an average yield of 0.25% in the third quarter. Strong deposit growth in excess of loan growth drove the increase in these assets.
• The third quarter adjusted average loan yield⁴ of 3.56% was two basis points lower than 3.58% for the second quarter.
• The average cost of funds of 0.14% decreased by four basis points from 0.18%. This reflected growth in noninterest-bearing demand deposits, the payoff of higher-cost FHLB advances that matured during the second quarter, and a continued decline in the cost of interest-bearing deposits.

Noninterest Income

Noninterest income totaled $73.1 million in the third quarter, up $4.7 million, or 7%, from $68.4 million in the second quarter.

• Quarter-over-quarter, deposit account fees grew, due to growth in treasury management services, and gains on sale of SBA loans increased, due to a higher volume of SBA 7A loans sold. This was offset by decreases in lending fees and wealth management fees.
• Interest rate contracts (“IRC”) and other derivative income was $7.2 million in the third quarter, compared to a loss of $3.2 million in the second quarter. The quarter-over-quarter increase was due to a favorable change in credit valuation adjustment, which reflected an increase in long-term benchmark interest rates, as well as higher customer-driven IRC revenue.

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⁴ See reconciliation of GAAP to non-GAAP financial measures in Table 14.

Noninterest Expense

Noninterest expense totaled $205.4 million. Third quarter noninterest expense consisted of $166.7 million of adjusted noninterest expense⁵, $38.0 million in amortization of tax credit and other investments, and $0.7 million in amortization of core deposit intangibles.

• Adjusted noninterest expense of $166.7 million increased by 3% from $161.5 million in the second quarter. The largest quarter-over-quarter change was in other operating expense, which increased to $21.0 million, compared with $17.9 million in the second quarter, due to higher loan-related expenses and charitable contributions.
• Amortization of tax credit and other investments totaled $38.0 million, compared with $27.3 million in the second quarter. The quarter-over-quarter change in the amortization of tax credits and other investments partially reflects the impact of investments that closed in the third quarter. For the fourth quarter, the Company expects the amortization of tax credit and other investments to be approximately $30 million.
• The adjusted efficiency ratio⁵ was 35.6% in the third quarter, compared with 36.3% in the second quarter.

TAX RELATED ITEMS

Third quarter 2021 income tax expense was $48.0 million and the effective tax rate was 17.5%. Year-to-date through the third quarter of 2021, the effective tax rate was 16%. For the full year, the Company expects the effective tax rate to be approximately 17%.

ASSET QUALITY

Quarter-over-quarter, nonperforming assets decreased by 24%, to 0.28% of total assets, and criticized loans were down 2%, to 2.50% of loans held-for-investment (“HFI”). The allowance for loan losses (“ALLL”) totaled $560.4 million, or 1.38% of loans HFI, as of September 30, 2021, compared with $585.7 million, or 1.46% of loans HFI, as of June 30, 2021.

• Quarter-over-quarter, the ALLL decreased by $25.3 million, and the ALLL coverage ratio of loans HFI decreased by eight basis points. The change in the ALLL largely reflects an improved macroeconomic forecast as of September 30, 2021, compared with June 30, 2021. Consequently, the Company recorded a negative $10.0 million provision for credit losses during the third quarter of 2021.
• Third quarter 2021 net charge-offs were $13.5 million, or annualized 0.13% of average loans HFI, essentially unchanged from $13.3 million, or annualized 0.13% of average loans HFI, for the second quarter of 2021.
• Quarter-over-quarter, nonperforming assets decreased by $53.1 million, or 24%, and the nonperforming asset ratio improved by 10 basis points. As of September 30, 2021, nonperforming assets were $172.6 million, or 0.28% of total assets, compared with $225.7 million, or 0.38% of total assets, as of June 30, 2021.
• Quarter-over-quarter, criticized loans decreased by $21.7 million, or 2%, and the criticized loans ratio improved by eight basis points. As of September 30, 2021, criticized loans totaled $1,010 million, or 2.50% of loans HFI, compared with $1,032 million, or 2.58% of loans HFI, as of June 30, 2021.

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⁵ See reconciliation of GAAP to non-GAAP financial measures in Table 12.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital ratios as of September 30, 2021, June 30, 2021, and September 30, 2020.

EWBC Risk-Based Capital Ratios
($ in millions)		September 30, 2021 (a)				June 30, 2021 (a)				September 30, 2020 (a)
CET1 capital ratio			12.8	%			12.8	%			12.8	%
Tier 1 capital ratio			12.8	%			12.8	%			12.8	%
Total capital ratio			14.2	%			14.3	%			14.5	%
Leverage ratio			8.8	%			9.1	%			9.8	%
Risk-Weighted Assets (“RWA”) (b)		$	42,128			$	40,609			$	36,922

1. The Company has elected to use the 2020 CECL transition provision in the calculation of its September 30, 2021, June 30, 2021, and September 30, 2020 regulatory capital ratios. The Company’s September 30, 2021 regulatory capital ratios and RWA are preliminary.
2. 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 fourth quarter 2021 dividends for the Company’s common stock. The common stock cash dividend of $0.33 per share is payable on November 15, 2021, to stockholders of record on November 1, 2021.

On March 3, 2020, East West’s Board of Directors authorized the repurchase of up to $500 million of East West’s common stock. East West did not repurchase any shares during the third quarter of 2021, and has not repurchased any shares since the first quarter of 2020, under this authorization.

Conference Call

East West will host a conference call to discuss third quarter 2021 earnings with the public on Thursday, October 21, 2021, at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses third quarter 2021 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 October 21, 2021, at 11:30 a.m. PT through November 21, 2021. 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: 10160606.

About East West

East West Bancorp, Inc. is a public company with total assets of $61.0 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, operating over 120 locations in the United States and in China. The Company’s markets in the United States include California, Georgia, 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 (the “SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are statements that are not historical facts, and 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, such as the future impacts of the COVID-19 pandemic. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” “will,” “would,” “should,” “could,” “may,” “might,” “can,” 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 in the documents incorporated by reference. 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 these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to: changes in the U.S. economy, including an economic slowdown, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; 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 global pandemic and 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 global pandemic; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of 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 DFPI; 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; changes in the commercial and consumer real estate markets; changes in consumer or commercial spending, and savings and borrowing habits, patterns and behaviors; fluctuations in the Company’s stock price; changes in income tax laws and regulations; 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; 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; impact of the benchmark interest rate reform in the U.S. including the transition away from USD LIBOR to alternative reference rates; impact of a communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom 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; 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; impact of adverse changes to the Company’s credit ratings from major credit rating agencies; impact of adverse judgments or settlements in litigation; impact on the Company’s operations due to political developments, disease 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; impact of reputational risk from negative publicity, fines and 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; 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; impact of other potential federal tax changes and spending cuts; the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms; impact on the Company’s liquidity due to changes in the Company’s ability to pay dividends and repurchase common stock and 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; 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, 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 AFS debt securities portfolio; and 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 2020 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
																September 30, 2021 % or Basis Point Change
		September 30, 2021				June 30, 2021				September 30, 2020						Qtr-o-Qtr				Yr-o-Yr
Assets
Cash and due from banks		$	594,631			$	626,716			$	503,376					(5.1	)%			18.1	%
Interest-bearing cash with banks		4,258,270				5,371,089				4,003,565						(20.7	)			6.4
Cash and cash equivalents		4,852,901				5,997,805				4,506,941						(19.1	)			7.7
Interest-bearing deposits with banks		855,162				830,279				699,465						3.0				22.3
Assets purchased under resale agreements (“resale agreements”)		2,596,142				2,299,184				1,210,000						12.9				114.6
Available-for-sale (“AFS”) debt securities (amortized cost of $9,783,180, $8,411,142 and $4,471,694)		9,713,006				8,399,460				4,539,160						15.6				114.0
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock		77,200				76,931				79,172						0.3				(2.5	)
Loans held-for-sale (“HFS”)		—				1,819				4,148						(100.0	)			(100.0	)
Loans held-for-investment (''HFI'') (net of allowance for loan losses of $560,404, $585,724 and $618,252)		39,921,301				39,485,775				36,818,877						1.1				8.4
Investments in qualified affordable housing partnerships, net		297,367				287,432				192,913						3.5				54.1
Investments in tax credit and other investments, net		367,428				364,187				254,512						0.9				44.4
Goodwill		465,697				465,697				465,697						—				—
Operating lease right-of-use assets		99,785				102,609				96,092						(2.8	)			3.8
Other assets		1,713,121				1,543,698				1,504,500						11.0				13.9
Total assets		$	60,959,110			$	59,854,876			$	50,371,477					1.8	%			21.0	%
Liabilities and Stockholders’ Equity
Deposits		$	53,356,190			$	52,582,575			$	41,680,555					1.5	%			28.0	%
Short-term borrowings		—				—				59,613						—				(100.0	)
FHLB advances		248,898				248,464				657,185						0.2				(62.1	)
Assets sold under repurchase agreements (“repurchase agreements”)		300,000				300,000				348,063						—				(13.8	)
Long-term debt and finance lease liabilities		151,795				151,997				1,579,317		(1)				(0.1	)			(90.4	)
Operating lease liabilities		107,107				110,105				103,673						(2.7	)			3.3
Accrued expenses and other liabilities		1,104,919				914,187				816,965						20.9				35.2
Total liabilities		55,268,909				54,307,328				45,245,371						1.8				22.2
Stockholders’ equity		5,690,201				5,547,548				5,126,106						2.6				11.0
Total liabilities and stockholders’ equity		$	60,959,110			$	59,854,876			$	50,371,477					1.8	%			21.0	%
Book value per common share		$	40.10			$	39.10			$	36.22					2.6	%			10.7	%
Tangible equity (2) per common share		$	36.75			$	35.75			$	32.85					2.8				11.9
Number of common shares at period-end		141,884				141,878				141,507						0.0				0.3
Tangible equity to tangible assets ratio (2)		8.62		%		8.54		%		9.32		%				8		bps		(70	)	bps

(1)		Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) as of September 30, 2020.
(2)		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
															September 30, 2021 % Change
			September 30, 2021				June 30, 2021				September 30, 2020				Qtr-o-Qtr			Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”) (1)			$	13,831,649			$	13,790,461			$	13,305,024			0.3	%		4.0	%
Commercial real estate (“CRE”):
CRE			11,818,065				11,711,369				11,037,987				0.9			7.1
Multifamily residential			3,340,378				3,219,796				3,057,274				3.7			9.3
Construction and land			376,921				460,678				578,407				(18.2	)		(34.8	)
Total CRE			15,535,364				15,391,843				14,673,668				0.9			5.9
Consumer:
Residential mortgage:
Single-family residential			9,021,801				8,869,370				7,785,759				1.7			15.9
Home equity lines of credit (“HELOCs”)			1,963,622				1,872,166				1,514,388				4.9			29.7
Total residential mortgage			10,985,423				10,741,536				9,300,147				2.3			18.1
Other consumer			129,269				147,659				158,290				(12.5	)		(18.3	)
Total loans HFI (2)			40,481,705				40,071,499				37,437,129				1.0			8.1
Loans HFS			—				1,819				4,148				(100.0	)		(100.0	)
Total loans (2)			40,481,705				40,073,318				37,441,277				1.0			8.1
Allowance for loan losses			(560,404		)		(585,724		)		(618,252		)		(4.3	)		(9.4	)
Net loans (2)			$	39,921,301			$	39,487,594			$	36,823,025			1.1			8.4
Deposits:
Noninterest-bearing demand			$	23,175,471			$	21,816,721			$	14,924,917			6.2	%		55.3	%
Interest-bearing checking			6,530,601				6,762,178				5,731,573				(3.4	)		13.9
Money market			12,555,879				12,853,812				9,553,574				(2.3	)		31.4
Savings			2,855,597				2,719,106				2,401,318				5.0			18.9
Time deposits			8,238,642				8,430,758				9,069,173				(2.3	)		(9.2	)
Total deposits			$	53,356,190			$	52,582,575			$	41,680,555			1.5	%		28.0	%

(1)		Includes $807.3 million, $1.43 billion and $1.77 billion of Paycheck Protection Program (“PPP”) loans as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(2)		Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(54.3) million, $(67.0) million and $(67.0) million as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively. Net origination fees related to PPP loans were $(13.5) million, $(25.9) million and $(22.6) million as of September 30, 2021, June 30, 2021 and September 30, 2020, 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													September 30, 2021 % Change
		September 30, 2021				June 30, 2021				September 30, 2020					Qtr-o-Qtr				Yr-o-Yr
Interest and dividend income (1)		$	415,307			$	399,333			$	365,728				4.0	%			13.6	%
Interest expense		19,601				22,860				41,598					(14.3	)			(52.9	)
Net interest income before provision for credit losses		395,706				376,473				324,130					5.1				22.1
(Reversal of) provision for credit losses		(10,000		)		(15,000		)		10,000					(33.3	)			NM
Net interest income after provision for credit losses		405,706				391,473				314,130					3.6				29.2
Noninterest income		73,109				68,431				54,503			(2)		6.8				34.1
Noninterest expense		205,384				189,523				172,573			(2)		8.4				19.0
Income before income taxes		273,431				270,381				196,060					1.1				39.5
Income tax expense		47,982				45,639				36,523					5.1				31.4
Net income		$	225,449			$	224,742			$	159,537				0.3	%			41.3	%
Earnings per share (“EPS”)
- Basic		$	1.59			$	1.58			$	1.13				0.3	%			40.9	%
- Diluted		$	1.57			$	1.57			$	1.12				0.2				40.2
Weighted-average number of shares outstanding
- Basic		141,880				141,868				141,498					0.0	%			0.3	%
- Diluted		143,143				143,040				142,043					0.1				0.8
		Three Months Ended													September 30, 2021 % Change
		September 30, 2021				June 30, 2021				September 30, 2020					Qtr-o-Qtr				Yr-o-Yr
Noninterest income:
Lending fees		$	17,516			$	21,092			$	18,736				(17.0	)%			(6.5	)%
Deposit account fees		18,508				17,342				12,573					6.7				47.2
Interest rate contracts and other derivative income (loss)		7,156				(3,172		)		5,538					(325.6	)			29.2
Foreign exchange income		13,101				13,007				3,310					0.7				295.8
Wealth management fees		5,598				7,951				4,553					(29.6	)			23.0
Net gains on sales of loans		3,329				1,491				361					123.3				822.2
Gains on sales of AFS debt securities		354				632				698					(44.0	)			(49.3	)
Other investment income		5,349				7,596				5,239			(2)		(29.6	)			2.1
Other income		2,198				2,492				3,495					(11.8	)			(37.1	)
Total noninterest income		$	73,109			$	68,431			$	54,503		(2)		6.8	%			34.1	%
Noninterest expense:
Compensation and employee benefits		$	105,751			$	105,426			$	99,756				0.3	%			6.0	%
Occupancy and equipment expense		15,851				15,377				16,648					3.1				(4.8	)
Deposit insurance premiums and regulatory assessments		4,641				4,274				4,006					8.6				15.9
Deposit account expense		4,136				3,817				3,113					8.4				32.9
Data processing		3,575				4,035				3,590					(11.4	)			(0.4	)
Computer software expense		8,426				7,521				8,539					12.0				(1.3	)
Consulting expense		1,635				1,868				1,224					(12.5	)			33.6
Legal expense		2,363				1,975				1,366					19.6				73.0
Other operating expense		20,998				17,939				17,122					17.1				22.6
Amortization of tax credit and other investments		38,008				27,291				17,209			(2)		39.3				120.9
Total noninterest expense		$	205,384			$	189,523			$	172,573		(2)		8.4	%			19.0	%

NM - Not meaningful.
(1)		Includes $15.2 million, $15.4 million and $7.8 million of interest income related to PPP loans for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(2)		Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. September 30, 2020 comparative amounts have been revised to conform with the current presentation.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 4
		Nine Months Ended									September 30, 2021 % Change
		September 30, 2021				September 30, 2020					Yr-o-Yr
Interest and dividend income (1)		$	1,196,026			$	1,213,694				(1.5	)%
Interest expense		70,152				183,082					(61.7	)
Net interest income before provision for credit losses		1,125,874				1,030,612					9.2
(Reversal of ) provision for credit losses		(25,000		)		186,313					(113.4	)
Net interest income after provision for credit losses		1,150,874				844,299					36.3
Noninterest income		214,406				165,715			(2)		29.4
Noninterest expense		585,984				537,671			(2)		9.0
Income before income taxes		779,296				472,343					65.0
Income tax expense		124,111				68,630					80.8
Net income		$	655,185			$	403,713				62.3	%
EPS
- Basic		$	4.62			$	2.83				63.2	%
- Diluted		$	4.58			$	2.82				62.3
Weighted-average number of shares outstanding
- Basic		141,799				142,595					(0.6	)%
- Diluted		143,051				143,082					(0.0	)
		Nine Months Ended									September 30, 2021 % Change
		September 30, 2021				September 30, 2020					Yr-o-Yr
Noninterest income:
Lending fees		$	56,965			$	56,455				0.9	%
Deposit account fees		51,233				33,892					51.2
Interest rate contracts and other derivative income		20,981				18,718					12.1
Foreign exchange income		35,634				15,691					127.1
Wealth management fees		20,460				12,997					57.4
Net gains on sales of loans		6,601				1,443					357.4
Gains on sales of AFS debt securities		1,178				11,867					(90.1	)
Other investment income		13,870				6,652			(2)		108.5
Other income		7,484				8,000					(6.5	)
Total noninterest income		$	214,406			$	165,715		(2)		29.4	%
Noninterest expense:
Compensation and employee benefits		$	318,985			$	298,671				6.8	%
Occupancy and equipment expense		47,150				49,941					(5.6	)
Deposit insurance premiums and regulatory assessments		12,791				11,133					14.9
Deposit account expense		11,845				10,029					18.1
Data processing		12,088				11,896					1.6
Computer software expense		23,106				22,006					5.0
Consulting expense		4,978				3,854					29.2
Legal expense		5,840				6,093					(4.2	)
Other operating expense		58,544				57,489					1.8
Amortization of tax credit and other investments		90,657				57,819			(2)		56.8
Repurchase agreements’ extinguishment cost		—				8,740					(100.0	)
Total noninterest expense		$	585,984			$	537,671		(2)		9.0	%

(1)		Includes $45.6 million and $29.1 million of interest income related to PPP loans for the nine months ended September 30, 2021 and 2020, respectively.
(2)		Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. September 30, 2020 comparative amounts have been revised to conform with the current presentation.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
		Three Months Ended									September 30, 2021 % Change						Nine Months Ended						September 30, 2021 % Change
		September 30, 2021			June 30, 2021			September 30, 2020			Qtr-o-Qtr			Yr-o-Yr			September 30, 2021			September 30, 2020			Yr-o-Yr
Loans:
Commercial:
C&I (1)		$	13,531,338		$	13,811,966		$	13,235,845		(2.0	)%		2.2	%		$	13,678,462		$	12,988,486		5.3	%
CRE:
CRE		11,747,607			11,616,916			10,942,780			1.1			7.4			11,564,946			10,747,669			7.6
Multifamily residential		3,248,281			3,125,001			3,107,294			3.9			4.5			3,139,209			2,995,227			4.8
Construction and land		415,812			477,860			564,219			(13.0	)		(26.3	)		480,514			599,957			(19.9	)
Total CRE		15,411,700			15,219,777			14,614,293			1.3			5.5			15,184,669			14,342,853			5.9
Consumer:
Residential mortgage:
Single-family residential		8,962,533			8,650,706			7,695,838			3.6			16.5			8,645,135			7,487,347			15.5
HELOCs		1,912,629			1,800,213			1,475,098			6.2			29.7			1,793,928			1,454,237			23.4
Total residential mortgage		10,875,162			10,450,919			9,170,936			4.1			18.6			10,439,063			8,941,584			16.7
Other consumer		141,951			139,608			139,371			1.7			1.9			139,557			214,936			(35.1	)
Total loans (2)		$	39,960,151		$	39,622,270		$	37,160,445		0.9	%		7.5	%		$	39,441,751		$	36,487,859		8.1	%
Interest-earning assets		$	58,239,480		$	54,901,209		$	47,428,586		6.1	%		22.8	%		$	55,350,645		$	45,076,734		22.8	%
Total assets		$	61,359,533		$	57,771,837		$	50,247,259		6.2	%		22.1	%		$	58,263,002		$	47,753,030		22.0	%
Deposits:
Noninterest-bearing demand		$	23,169,323		$	19,717,315		$	14,296,475		17.5	%		62.1	%		$	20,345,370		$	12,987,813		56.6	%
Interest-bearing checking		6,646,515			6,671,358			5,663,873			(0.4	)		17.3			6,571,231			5,119,568			28.4
Money market		12,604,827			12,596,515			9,981,704			0.1			26.3			12,262,173			9,630,918			27.3
Savings		2,792,702			2,676,865			2,259,788			4.3			23.6			2,715,114			2,162,365			25.6
Time deposits		8,283,265			8,518,936			9,008,907			(2.8	)		(8.1	)		8,635,249			9,633,582			(10.4	)
Total deposits		$	53,496,632		$	50,180,989		$	41,210,747		6.6	%		29.8	%		$	50,529,137		$	39,534,246		27.8	%
Interest-bearing liabilities		$	31,039,410		$	31,394,114		$	29,552,756		(1.1	)%		5.0	%		$	31,099,675		$	28,506,736		9.1	%
Stockholders’ equity		$	5,680,306		$	5,425,952		$	5,079,351		4.7	%		11.8	%		$	5,482,705		$	5,028,122		9.0	%

(1)		Includes average balances of PPP loans of $1.11 billion, $1.87 billion and $1.76 billion for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, and $1.63 billion and $1.08 billion for the nine months ended September 30, 2021 and 2020, 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
			September 30, 2021											June 30, 2021
			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			$	7,036,823			$	4,521			0.25	%		$	5,072,225			$	3,628			0.29	%
Resale agreements			2,382,741				8,957				1.49	%		2,129,567				8,021				1.51	%
AFS debt securities			8,782,682				37,826				1.71	%		7,997,005				34,690				1.74	%
Loans (2)			39,960,151				363,503				3.61	%		39,622,270				352,453				3.57	%
FHLB and FRB stock			77,083				500				2.57	%		80,142				541				2.71	%
Total interest-earning assets			58,239,480				415,307				2.83	%		54,901,209				399,333				2.92	%
Noninterest-earning assets:
Cash and due from banks			627,640											600,053
Allowance for loan losses			(584,827		)									(607,523		)
Other assets			3,077,240											2,878,098
Total assets			$	61,359,533										$	57,771,837
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits			$	6,646,515			$	3,186			0.19	%		$	6,671,358			$	3,777			0.23	%
Money market deposits			12,604,827				3,446				0.11	%		12,596,515				3,712				0.12	%
Savings deposits			2,792,702				1,943				0.28	%		2,676,865				2,078				0.31	%
Time deposits			8,283,265				7,395				0.35	%		8,518,936				8,431				0.40	%
Federal funds purchased and other short-term borrowings			620				—				—	%		336				—				—	%
FHLB advances			248,614				857				1.37	%		474,887				2,099				1.77	%
Repurchase agreements			310,997				2,012				2.57	%		303,118				1,991				2.63	%
Long-term debt and finance lease liabilities			151,870				762				1.99	%		152,099				772				2.04	%
Total interest-bearing liabilities			31,039,410				19,601				0.25	%		31,394,114				22,860				0.29	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits			23,169,323											19,717,315
Accrued expenses and other liabilities			1,470,494											1,234,456
Stockholders’ equity			5,680,306											5,425,952
Total liabilities and stockholders’ equity			$	61,359,533										$	57,771,837
Interest rate spread											2.58	%										2.63	%
Net interest income and net interest margin							$	395,706			2.70	%						$	376,473			2.75	%
Adjusted net interest income and adjusted net interest margin (3)							$	380,494			2.64	%						$	361,096			2.73	%

(1)		Annualized.
(2)		Includes loans HFS.
(3)		Net interest income and net interest margin for the three months ended September 30, 2021 and June 30, 2021 have been adjusted for the impact of PPP loans. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
		Three Months Ended
		September 30, 2021										September 30, 2020
		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		$	7,036,823			$	4,521		0.25	%		$	4,904,394						$	5,045		0.41	%
Resale agreements		2,382,741				8,957			1.49	%		1,225,217							5,295			1.72	%
AFS debt securities		8,782,682				37,826			1.71	%		4,059,456							18,493			1.81	%
Loans (2)		39,960,151				363,503			3.61	%		37,160,445							336,542			3.60	%
FHLB and FRB stock		77,083				500			2.57	%		79,074							353			1.78	%
Total interest-earning assets		58,239,480				415,307			2.83	%		47,428,586							365,728			3.07	%
Noninterest-earning assets:
Cash and due from banks		627,640										522,699
Allowance for loan losses		(584,827		)								(632,216		)
Other assets		3,077,240										2,928,190
Total assets		$	61,359,533									$	50,247,259
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits		$	6,646,515			$	3,186		0.19	%		$	5,663,873						$	4,345		0.31	%
Money market deposits		12,604,827				3,446			0.11	%		9,981,704							6,837			0.27	%
Savings deposits		2,792,702				1,943			0.28	%		2,259,788							1,481			0.26	%
Time deposits		8,283,265				7,395			0.35	%		9,008,907							21,135			0.93	%
Federal funds purchased and other short-term borrowings		620				—			—	%		84,858							407			1.91	%
FHLB advances		248,614				857			1.37	%		656,906							3,146			1.91	%
Repurchase agreements		310,997				2,012			2.57	%		317,097							2,155			2.70	%
Long-term debt and finance lease liabilities		151,870				762			1.99	%		1,579,623				(3)			2,092			0.53	%
Total interest-bearing liabilities		31,039,410				19,601			0.25	%		29,552,756							41,598			0.56	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits		23,169,323										14,296,475
Accrued expenses and other liabilities		1,470,494										1,318,677
Stockholders’ equity		5,680,306										5,079,351
Total liabilities and stockholders’ equity		$	61,359,533									$	50,247,259
Interest rate spread									2.58	%												2.51	%
Net interest income and net interest margin						$	395,706		2.70	%									$	324,130		2.72	%
Adjusted net interest income and adjusted net interest margin (4)						$	380,494		2.64	%									$	317,611		2.77	%

(1)		Annualized.
(2)		Includes loans HFS.
(3)		Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.
(4)		Net interest income and net interest margin for the three months ended September 30, 2021 and September 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the three months ended September 30, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
			Nine Months Ended
			September 30, 2021											September 30, 2020
			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			$	6,078,982			$	11,781			0.26	%		$	3,775,242			$	20,717			0.73	%
Resale agreements (2)			1,994,776				23,077				1.55	%		1,048,923				16,434				2.09	%
AFS debt securities			7,755,029				101,616				1.75	%		3,685,837				59,639				2.16	%
Loans (3)			39,441,751				1,057,964				3.59	%		36,487,859				1,115,804				4.08	%
FHLB and FRB stock			80,107				1,588				2.65	%		78,873				1,100				1.86	%
Total interest-earning assets			55,350,645				1,196,026				2.89	%		45,076,734				1,213,694				3.60	%
Noninterest-earning assets:
Cash and due from banks			602,830											510,750
Allowance for loan losses			(603,523)											(563,912)
Other assets			2,913,050											2,729,458
Total assets			$	58,263,002										$	47,753,030
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits			$	6,571,231			$	11,177			0.23	%		$	5,119,568			$	19,995			0.52	%
Money market deposits			12,262,173				11,869				0.13	%		9,630,918				37,178				0.52	%
Savings deposits			2,715,114				5,762				0.28	%		2,162,365				4,743				0.29	%
Time deposits			8,635,250				26,982				0.42	%		9,633,582				94,684				1.31	%
Federal funds purchased and other short-term borrowings			1,871				42				3.00	%		128,846				1,228				1.27	%
FHLB advances			457,273				6,025				1.76	%		667,935				10,655				2.13	%
Repurchase agreements (2)			304,745				5,981				2.62	%		355,923				9,686				3.64	%
Long-term debt and finance lease liabilities			152,018				2,314				2.04	%		807,599			(4)	4,913				0.81	%
Total interest-bearing liabilities			31,099,675				70,152				0.30	%		28,506,736				183,082				0.86	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits			20,345,370											12,987,813
Accrued expenses and other liabilities			1,335,252											1,230,359
Stockholders’ equity			5,482,705											5,028,122
Total liabilities and stockholders’ equity			$	58,263,002										$	47,753,030
Interest rate spread											2.59	%										2.74	%
Net interest income and net interest margin							$	1,125,874			2.72	%						$	1,030,612			3.05	%
Adjusted net interest income and adjusted net interest margin (5)							$	1,080,268			2.69	%						$	1,003,267			3.05	%

(1)		Annualized.
(2)		Average balances of resale and repurchase agreements for the nine months ended September 30, 2020 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 and gross repurchase agreements for the nine months ended September 30, 2020 were 2.09% and 3.48%, respectively.
(3)		Includes loans HFS.
(4)		Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.
(5)		Net interest income and net interest margin for the nine months ended September 30, 2021 and September 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the nine months ended September 30, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
		Three Months Ended (1)											September 30, 2021 Basis Point Change
		September 30, 2021			June 30, 2021			September 30, 2020					Qtr-o-Qtr			Yr-o-Yr
Return on average assets		1.46	%		1.56	%		1.26	%				(10	)	bps	20		bps
Return on average equity		15.75	%		16.61	%		12.50	%				(86	)		325
Return on average tangible equity (2)		17.25	%		18.28	%		13.88	%				(103	)		337
Interest rate spread		2.58	%		2.63	%		2.51	%				(5	)		7
Net interest margin		2.70	%		2.75	%		2.72	%				(5	)		(2	)
Adjusted net interest margin (2)		2.64	%		2.73	%		2.77	%				(9	)		(13	)
Average loan yield		3.61	%		3.57	%		3.60	%				4			1
Adjusted average loan yield (2)		3.56	%		3.58	%		3.70	%				(2	)		(14	)
Yield on average interest-earning assets		2.83	%		2.92	%		3.07	%				(9	)		(24	)
Average cost of interest-bearing deposits		0.21	%		0.24	%		0.50	%				(3	)		(29	)
Average cost of deposits		0.12	%		0.14	%		0.33	%				(2	)		(21	)
Average cost of funds		0.14	%		0.18	%		0.38	%				(4	)		(24	)
Adjusted pre-tax, pre-provision profitability ratio (2)		1.95	%		1.97	%		1.78	%				(2	)		17
Adjusted noninterest expense/average assets (2)		1.08	%		1.12	%		1.22	%				(4	)		(14	)
Efficiency ratio		43.81	%		42.60	%		45.58	%				121			(177	)
Adjusted efficiency ratio (2)		35.55	%		36.30	%		40.79	%				(75	)	bps	(524	)	bps
		Nine Months Ended (1)						September 30, 2021 Basis Point Change
		September 30, 2021			September 30, 2020			Yr-o-Yr
Return on average assets		1.50	%		1.13	%		37		bps
Return on average equity		15.98	%		10.73	%		525
Return on average tangible equity (2)		17.56	%		11.95	%		561
Interest rate spread		2.59	%		2.74	%		(15	)
Net interest margin		2.72	%		3.05	%		(33	)
Adjusted net interest margin (2)		2.69	%		3.05	%		(36	)
Average loan yield		3.59	%		4.08	%		(49	)
Adjusted average loan yield (2)		3.58	%		4.10	%		(52	)
Yield on average interest-earning assets		2.89	%		3.60	%		(71	)
Average cost of interest-bearing deposits		0.25	%		0.79	%		(54	)
Average cost of deposits		0.15	%		0.53	%		(38	)
Average cost of funds		0.18	%		0.59	%		(41	)
Adjusted pre-tax, pre-provision profitability ratio (2)		1.94	%		2.04	%		(10	)
Adjusted noninterest expense/average assets (2)		1.13	%		1.31	%		(18	)
Efficiency ratio		43.72	%		44.94	%		(122	)
Adjusted efficiency ratio (2)		36.80	%		39.14	%		(234	)	bps

(1)		Annualized except for efficiency ratio.
(2)		See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13 and 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10
			Three Months Ended September 30, 2021
			Commercial								Consumer
			C&I				Total CRE				Total Residential Mortgage				Other Consumer				Total
Allowance for loan losses, June 30, 2021			$	362,528			$	199,530			$	19,468			$	4,198			$	585,724
(Reversal of) provision for credit losses on loans	(a)		(23,365		)		8,527				2,972				130				(11,736		)
Gross charge-offs			(1,154		)		(16,903		)		(912		)		(10		)		(18,979		)
Gross recoveries			4,203				1,106				156				—				5,465
Total net recoveries (charge-offs)			3,049				(15,797		)		(756		)		(10		)		(13,514		)
Foreign currency translation adjustment			(70		)		—				—				—				(70		)
Allowance for loan losses, September 30, 2021			$	342,142			$	192,260			$	21,684			$	4,318			$	560,404

			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)		(22,586		)		10,747				859				2,209				(8,771		)
Gross charge-offs			(10,572		)		(4,456		)		—				(32		)		(15,060		)
Gross recoveries			1,338				344				100				3				1,785
Total net (charge-offs) recoveries			(9,234		)		(4,112		)		100				(29		)		(13,275		)
Foreign currency translation adjustment			264				—				—				—					264
Allowance for loan losses, June 30, 2021			$	362,528			$	199,530			$	19,468			$	4,198			$	585,724

			Three Months Ended September 30, 2020
			Commercial								Consumer
			C&I				Total CRE				Total Residential Mortgage				Other Consumer				Total
Allowance for loan losses, June 30, 2020			$	380,723			$	219,649			$	29,181			$	2,518			$	632,071
Provision for (reversal of) credit losses on loans	(a)		31,691				(18,397		)		(3,329		)		(76		)		9,889
Gross charge-offs			(25,111		)		(1,414		)		—				(124		)		(26,649		)
Gross recoveries			1,218				1,180				43				—				2,441
Total net (charge-offs) recoveries			(23,893		)		(234		)		43				(124		)		(24,208		)
Foreign currency translation adjustment			500				—				—				—				500
Allowance for loan losses, September 30, 2020			$	389,021			$	201,018			$	25,895			$	2,318			$	618,252

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
			Nine Months Ended September 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)		(42,112		)		16,198				4,229				2,226				(19,459		)
Gross charge-offs			(20,162		)		(28,642		)		(1,091		)		(43		)		(49,938		)
Gross recoveries			6,301				3,101				336				5				9,743
Total net charge-offs			(13,861		)		(25,541		)		(755		)		(38		)		(40,195		)
Foreign currency translation adjustment			75				—				—				—				75
Allowance for loan losses, September 30, 2021			$	342,142			$	192,260			$	21,684			$	4,318			$	560,404

			Nine Months Ended September 30, 2020
			Commercial								Consumer
			C&I				Total CRE				Total Residential Mortgage				Other Consumer				Total
Allowance for loan losses, December 31, 2019			$	238,376			$	82,739			$	33,792			$	3,380			$	358,287
Impact of ASU 2016-13 adoption			74,237				54,168				(5,468		)		2,221				125,158
Allowance for loan losses, January 1, 2020			$	312,613			$	136,907			$	28,324			$	5,601			$	483,445
Provision for (reversal of) credit losses on loans	(a)		130,171				54,550				(2,679		)		(3,197		)		178,845
Gross charge-offs			(57,466		)		(2,688		)		(221		)		(180		)		(60,555		)
Gross recoveries			3,395				12,249				471				94				16,209
Total net (charge-offs) recoveries			(54,071		)		9,561				250				(86		)			(44,346	)
Foreign currency translation adjustment			308				—				—				—					308
Allowance for loan losses, September 30, 2020			$	389,021			$	201,018			$	25,895			$	2,318			$	618,252

			Three Months Ended												Nine Months Ended
			September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Unfunded Credit Facilities
Allowance for unfunded credit commitments, beginning of period (1)			$	26,300			$	32,529			$	28,972			$	33,577			$	11,158
Impact of ASU 2016-13 adoption			—				—				—				—				10,457
Provision for (reversal of) credit losses on unfunded credit commitments	(b)		1,736				(6,229		)		111				(5,541		)		7,468
Allowance for unfunded credit commitments, end of period (1)			$	28,036			$	26,300			$	29,083			$	28,036			$	29,083
(Reversal of) provision for credit losses	(a)+(b)		$	(10,000	)		$	(15,000	)		$	10,000			$	(25,000	)		$	186,313

(1)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CRITICIZED LOANS, NONPERFORMING ASSETS AND CREDIT QUALITY RATIOS
($ in thousands)
(unaudited)
Table 11
Criticized Loans		September 30, 2021				June 30, 2021				September 30, 2020
Special mention loans		$	448,497			$	386,807			$	722,920
Classified loans		561,787				645,180				758,496
Total criticized loans		$	1,010,284			$	1,031,987			$	1,481,416
Nonperforming Assets		September 30, 2021				June 30, 2021				September 30, 2020
Nonaccrual loans:
Commercial:
C&I		$	97,157			$	83,225			$	145,986
Total CRE		15,359				81,573				59,724
Consumer:
Total residential mortgage		18,153				30,489				28,289
Other consumer		2,491				2,503				2,495
Total nonaccrual loans		133,160				197,790				236,494
Other real estate owned, net		28,800				14,914				19,504
Other nonperforming assets		10,681				13,025				3,890
Total nonperforming assets		$	172,641			$	225,729			$	259,888
Credit Quality Ratios		September 30, 2021				June 30, 2021				September 30, 2020
Annualized quarterly net charge-offs to average loans HFI		0.13		%		0.13		%		0.26		%
Special mention loans to loans HFI		1.11		%		0.97		%		1.93		%
Classified loans to loans HFI		1.39		%		1.61		%		2.03		%
Criticized loans to loans HFI		2.50		%		2.58		%		3.96		%
Nonperforming assets to total assets		0.28		%		0.38		%		0.52		%
Nonaccrual loans to loans HFI		0.33		%		0.49		%		0.63		%
Allowance for loan losses to loans HFI		1.38		%		1.46		%		1.65		%

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 12
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, the amortization of core deposit intangibles and the extinguishment cost on repurchase agreements. 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
				September 30, 2021				June 30, 2021				September 30, 2020
Net interest income before provision for credit losses		(a)		$	395,706			$	376,473			$	324,130
Total noninterest income (1)				73,109				68,431				54,503
Total revenue		(b)		$	468,815			$	444,904			$	378,633
Total noninterest expense (1)		(c)		$	205,384			$	189,523			$	172,573
Less: Amortization of tax credit and other investments (1)				(38,008		)		(27,291		)		(17,209		)
Amortization of core deposit intangibles				(705		)		(710		)		(927		)
Adjusted noninterest expense		(d)		$	166,671			$	161,522			$	154,437
Efficiency ratio		(c)/(b)		43.81		%		42.60		%		45.58		%
Adjusted efficiency ratio		(d)/(b)		35.55		%		36.30		%		40.79		%
Adjusted pre-tax, pre-provision income		(b)-(d) = (e)		$	302,144			$	283,382			$	224,196
Average total assets		(f)		$	61,359,533			$	57,771,837			$	50,247,259
Adjusted pre-tax, pre-provision profitability ratio (2)		(e)/(f)		1.95		%		1.97		%		1.78		%
Adjusted noninterest expense/average assets (2)		(d)/(f)		1.08		%		1.12		%		1.22		%
				Nine Months Ended
				September 30, 2021				September 30, 2020
Net interest income before provision for credit losses		(g)		$	1,125,874			$	1,030,612
Total noninterest income (1)				214,406				165,715
Total revenue		(h)		$	1,340,280			$	1,196,327
Total noninterest expense (1)		(i)		$	585,984			$	537,671
Less: Amortization of tax credit and other investments (1)				(90,657		)		(57,819		)
Amortization of core deposit intangibles				(2,147		)		(2,811		)
Repurchase agreements’ extinguishment cost				—				(8,740		)
Adjusted noninterest expense		(j)		$	493,180			$	468,301
Efficiency ratio		(i)/(h)		43.72		%		44.94		%
Adjusted efficiency ratio		(j)/(h)		36.80		%		39.14		%
Adjusted pre-tax, pre-provision income		(h)-(j) = (k)		$	847,100			$	728,026
Average total assets		(l)		$	58,263,002			$	47,753,030
Adjusted pre-tax, pre-provision profitability ratio (2)		(k)/(l)		1.94		%		2.04		%
Adjusted noninterest expense/average assets (2)		(j)/(l)		1.13		%		1.31		%

(1)		Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.
(2)		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.
				September 30, 2021				June 30, 2021				September 30, 2020
Stockholders’ equity		(a)		$	5,690,201			$	5,547,548			$	5,126,106
Less: Goodwill				(465,697		)		(465,697		)		(465,697		)
Other intangible assets (1)				(9,849		)		(10,309		)		(12,369		)
Tangible equity		(b)		$	5,214,655			$	5,071,542			$	4,648,040
Total assets		(c)		$	60,959,110			$	59,854,876			$	50,371,477
Less: Goodwill				(465,697		)		(465,697		)		(465,697		)
Other intangible assets (1)				(9,849		)		(10,309		)		(12,369		)
Tangible assets		(d)		$	60,483,564			$	59,378,870			$	49,893,411
Total stockholders’ equity to total assets ratio		(a)/(c)		9.33		%		9.27		%		10.18		%
Tangible equity to tangible assets ratio		(b)/(d)		8.62		%		8.54		%		9.32		%

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												Nine Months Ended
				September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net Income				$	225,449			$	224,742			$	159,537			$	655,185			$	403,713
Add: Amortization of core deposit intangibles				705				710				927				2,147				2,811
Amortization of mortgage servicing assets				430				420				450				1,264				1,492
Tax effect of amortization adjustments (2)				(322		)		(321		)		(390		)		(968		)		(1,220		)
Tangible net income		(e)		$	226,262			$	225,551			$	160,524			$	657,628			$	406,796
Average stockholders’ equity				$	5,680,306			$	5,425,952			$	5,079,351			$	5,482,705			$	5,028,122
Less: Average goodwill				(465,697		)		(465,697		)		(465,697		)		(465,697		)		(465,697		)
Average other intangible assets (1)				(10,135		)		(10,827		)		(13,083		)		(10,847		)		(14,302		)
Average tangible equity		(f)		$	5,204,474			$	4,949,428			$	4,600,571			$	5,006,161			$	4,548,123
Return on average tangible equity (3)		(e)/(f)		17.25		%		18.28		%		13.88		%		17.56		%		11.95		%

(1)		Includes core deposit intangibles and mortgage servicing assets.
(2)		Applied statutory tax rate of 28.37% for the three and nine months ended September 30, 2021, and the three months ended June 30, 2021. Applied statutory tax rate of 28.35% for the three and nine months ended September 30, 2020.
(3)		Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 14
In April 2020, the Company started accepting applications under the PPP administered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act and began to originate loans to qualified small businesses. In January 2021, the Company began processing applications under the second round of the SBA’s PPP in response to the Consolidated Appropriations Act, 2021 signed by the President on December 27, 2020. The PPP ended on May 31, 2021.
These loans are included in the Company’s C&I portfolio, have an interest rate of one percent and are 100% guaranteed by the SBA. Loan processing fees paid to the Company from the SBA are accounted for as loan origination fees, where net deferred fees are recognized on a straight line basis over the estimated life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period. The Company drew down $1.44 billion from the PPPLF during the second quarter of 2020. The remaining balance of $1.43 billion as of September 2020 was repaid in full during the fourth quarter of 2020.
Adjusted loan yield and adjusted net interest margin for the three and nine months ended September 30, 2021 and 2020, and three months ended June 30, 2020 exclude the impact of PPP loans. Net interest margin for the three and nine months ended September 30, 2020 has also been adjusted for advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provide comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company’s performance.
				Three Months Ended												Nine Months Ended
Yield on Average Loans				September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Interest income on loans		(a)		$	363,503			$	352,453			$	336,542			$	1,057,964			$	1,115,804
Less: Interest income on PPP loans				(15,212		)		(15,377		)		(7,778		)		(45,606		)		(29,067		)
Adjusted interest income on loans		(b)		$	348,291			$	337,076			$	328,764			$	1,012,358			$	1,086,737
Average loans		(c)		$	39,960,151			$	39,622,270			$	37,160,445			$	39,441,751			$	36,487,859
Less: Average PPP loans				(1,111,404		)		(1,870,385		)		(1,764,411		)		(1,634,617		)		(1,078,985		)
Adjusted average loans		(d)		$	38,848,747			$	37,751,885			$	35,396,034			$	37,807,134			$	35,408,874
Average loan yield (1)		(a)/(c)		3.61		%		3.57		%		3.60		%	(1)	3.59		%		4.08		%
Adjusted average loan yield (1)		(b)/(d)		3.56		%		3.58		%		3.70		%	(1)	3.58		%		4.10		%
Net Interest Margin
Net interest income before provision for credit losses		(e)		$	395,706			$	376,473			$	324,130			$	1,125,874			$	1,030,612
Less: Interest income on PPP loans				(15,212		)		(15,377		)		(7,778		)		(45,606		)		(29,067		)
Add: Interest expense on advances from the PPPLF				—				—				1,259				—				1,722
Adjusted net interest income		(f)		$	380,494			$	361,096			$	317,611			$	1,080,268			$	1,003,267
Average interest-earning assets		(g)		$	58,239,480			$	54,901,209			$	47,428,586			$	55,350,645			$	45,076,734
Less: Average PPP loans				(1,111,404		)		(1,870,385		)		(1,764,411		)		(1,634,617		)		(1,078,985		)
Adjusted average interest-earning assets		(h)		$	57,128,076			$	53,030,824			$	45,664,175			$	53,716,028			$	43,997,749
Net interest margin (1)		(e)/(g)		2.70		%		2.75		%		2.72		%	(1)	2.72		%		3.05		%
Adjusted net interest margin (1)		(f)/(h)		2.64		%		2.73		%		2.77		%	(1)	2.69		%		3.05		%

(1)

Annualized.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211021005319/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

Source: East West Bancorp, Inc.

FAQ

What were East West Bancorp's Q3 2021 earnings results?

East West Bancorp reported net income of $225.4 million, or $1.57 per diluted share, for Q3 2021.

How much did East West Bancorp's total loans grow in Q3 2021?

Total loans reached a record $40.5 billion in Q3 2021, reflecting an 11% annual growth.

What is the revenue growth for East West Bancorp in Q3 2021?

Total revenue for Q3 2021 was $469 million, up 24% year-over-year.

What is East West Bancorp's dividend announcement for Q4 2021?

The Board of Directors declared a cash dividend of $0.33 per share payable on November 15, 2021.

What were East West Bancorp's capital ratios as of September 30, 2021?

East West Bancorp maintained a common equity tier 1 ratio of 12.8% as of September 30, 2021.