East West Bancorp Reports Net Income For Third Quarter 2012 Of $71.1 Million, Up 14% From Prior Year, And Earnings Per Share Of $0.48, Up 17% From Prior Year

East West Bancorp, Inc. (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported financial results for the third quarter of 2012. For the third quarter of 2012, net income was $71.1 million or $0.48 per dilutive share. East West increased third quarter net income by $8.7 million or 14% and increased earnings per dilutive share $0.07 or 17% from the prior year period.

“We are pleased with our solid financial results for the third quarter of 2012. Third quarter earnings per share totaled $0.48, up 17% from the prior year period, and our seventh consecutive quarter of earnings per share growth,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Our strong financial performance in the third quarter was driven by healthy growth in our loan and deposit portfolios, which resulted in increased total revenue, net income and earnings per share from both the prior quarter and prior year period. During the third quarter of 2012, East West grew non-covered commercial and trade finance loans by $314.1 million or 9%, and increased core deposits by $329.7 million or 3% to a record $11.4 billion from June 30, 2012.”

“Although the interest rate and economic environment continues to be challenging for East West and the banking industry, we are confident that we will continue to perform well. For the third quarter of 2012, our return on assets totaled 1.30%, up 17 basis points from the prior year period, and our return on equity totaled 12.43%, up 144 basis points from the prior year period,” continued Ng.

“At this point, we believe we are well on our way to another year of record earnings for East West for the full year 2012. As the premier financial bridge between the East and the West, we continue to win new business and grow our market share as evidenced by our solid financial results. As we look to 2013 and beyond, we are confident that we will be able to continue to deliver healthy financial results and return strong value to our shareholders,” concluded Ng.
               

Quarterly Results Summary
 
For the three months ended,
Dollars in millions, except per share September 30, 2012           June 30, 2012 September 30, 2011
Net income $ 71.11 $ 70.56 $ 62.43
Net income available to common shareholders $ 69.40 $ 68.84 $ 60.72
Earnings per share (diluted) $ 0.48 $ 0.47 $ 0.41
Tangible book value per common share $ 13.07 $ 12.67 $ 11.83
 
Return on average assets 1.30 % 1.32 % 1.13 %
Return on average common equity 12.43 % 12.46 % 10.99 %
 

Net interest margin, adjusted (1)
3.95 % 4.01 % 3.98 %
Cost of deposits 0.41 % 0.45 % 0.65 %
Efficiency ratio 42.20 % 41.54 % 41.19 %
 
 

Third Quarter 2012 Highlights
  • Strong Third Quarter Earnings – For the third quarter of 2012, net income was $71.1 million or $0.48 per dilutive share. Net income increased by $553 thousand from the second quarter of 2012 and $8.7 million or 14% from the third quarter of 2011. Earnings per dilutive share grew $0.01 or 2% from the second quarter of 2012 and $0.07 or 17% from the third quarter of 2011.
  • Repurchase of 2.3 Million Shares of Common Stock – During the third quarter of 2012, we repurchased 2.3 million shares of our common stock for a total cost of $50.0 million.
  • Strong Loan Growth – Quarter to date, non-covered loans, excluding loans held for sale, grew $360.3 million or 3%. This growth was largely due to increases in commercial and trade finance loans, commercial real estate loans and single family loans, which grew $314.1 million or 9%, $74.6 million or 2% and $47.7 million or 2%, respectively. Total loans, including loans covered under loss-share agreements grew $142.4 million or 1% quarter to date.
  • Strong Core Deposit Growth – Core deposit growth continued in the third quarter and increased by $329.7 million to a record $11.4 billion or 64% of total deposits. Total deposits increased to a record $17.7 billion, an increase of $324.6 million or 2% from $17.3 billion as of June 30, 2012.
  • Cost of Deposits Down 4 bps from Q2 2012 and Down 24 bps from Q3 2011 – The cost of deposits improved to 0.41% for the third quarter of 2012, down from 0.45% in the second quarter of 2012 and 0.65% in the third quarter of 2011. The cost of funds improved to 0.67% for the third quarter of 2012, down from 0.71% in the second quarter of 2012 and 0.93% in the third quarter of 2011.
  • Nonperforming Assets Down to 0.66% of Total Assets – Nonperforming assets decreased to $144.1 million, or 0.66% of total assets at September 30, 2012, an $11.6 million or 7% decrease from June 30, 2012 and a $24.8 million or 15% decrease from September 30, 2011.

Management Guidance

The Company is providing guidance for the fourth quarter and full year of 2012. Management currently estimates that fully diluted earnings per share for the full year of 2012 will range from $1.87 to $1.89, an increase of $0.27 to $0.29 or 17% to 18% from the full year of 2011.

Management currently estimates that fully diluted earnings per share for the fourth quarter of 2012 will range from $0.47 to $0.49 per dilutive share. This EPS guidance for the fourth quarter of 2012 is based on the following assumptions:

  • Stable balance sheet
  • A stable interest rate environment and an adjusted net interest margin of approximately 3.90% 1
  • Provision for loan losses for non-covered loans of approximately $10 to $13 million for the quarter
  • Total noninterest expense of approximately $100 million for the quarter, net of amounts to be reimbursed by the FDIC
  • Effective tax rate of approximately 34%

Balance Sheet Summary

At September 30, 2012, total assets increased to $21.8 billion compared to $21.5 billion at June 30, 2012. The increase in total assets during the third quarter was primarily attributable to an increase in non-covered loans, securities purchased under resale agreements and investment securities with a partial offsetting decrease in cash and cash equivalents. Average earning assets increased during the third quarter of 2012, up $265.6 million or 1% compared to the prior quarter. The increase in average earning assets during the third quarter was primarily attributable to an increase in average loans receivable and securities purchased under resale agreements, offset by a decrease in average investment securities.

Total loans receivable at September 30, 2012 equaled $14.5 billion, compared to $14.3 billion as of June 30, 2012. During the third quarter non-covered loan balances, excluding loans held for sale, grew $360.3 million or 3%. This growth was largely due to increases in commercial and trade finance loans, commercial real estate loans and single family loans, which grew $314.1 million or 9% and $74.6 million or 2% and $47.7 million or 2%, respectively.

Covered Loans

Covered loans totaled $3.2 billion as of September 30, 2012, a decrease of $238.0 million or 7% from June 30, 2012. The decrease in the covered loan portfolio was primarily due to payoffs and paydown activity, as well as charge-offs.

The covered loan portfolio is comprised of loans acquired from the FDIC-assisted acquisitions of United Commercial Bank (UCB) and Washington First International Bank (WFIB) which are covered under loss-share agreements with the FDIC. During the third quarter of 2012, we recorded a net decrease in the FDIC indemnification asset and receivable included in noninterest (loss)/income of ($26.8) million, largely due to continued improved credit performance of the UCB portfolio as compared to our original estimate.

Deposits and Borrowings

At September 30, 2012, total deposits increased to $17.7 billion, up $324.6 million or 2% from $17.3 billion as of June 30, 2012. In the third quarter of 2012, the Company continued to successfully grow low-cost, commercial deposits. Total core deposits increased 3% quarter over quarter to $11.4 billion at September 30, 2012, largely due to a $290.4 million or 8% increase in noninterest-bearing demand deposits which grew to $4.1 billion as of September 30, 2012. Time deposits remained stable and slightly decreased as we continue to reduce our reliance on higher cost time deposits and focus our strategy on growing core deposits.

During the third quarter of 2012, the Company prepaid $75.0 million of subordinated debt carrying an effective interest rate of 1.60%, incurring a prepayment penalty of $42 thousand, which is included in noninterest expense.

Third Quarter 2012 Operating Results

Net Interest Income

Net interest income, adjusted for the net impact of covered loan dispositions, totaled $196.3 million for the third quarter of 2012, an increase of $1.6 million from $194.7 million in the prior quarter. 1 The core net interest margin, excluding the net impact to interest income of $25.6 million resulting from covered loan activity and amortization of the FDIC indemnification asset, totaled 3.95% for the third quarter of 2012. This compares to a core net interest margin, excluding the net impact to interest income of $38.5 million resulting from covered loan activity and amortization of the FDIC indemnification asset, of 4.01% for the second quarter of 2012. 1

The increase in net interest income from the prior quarter stemmed from higher average interest earning assets, which increased $265.6 million or 1% quarter over quarter, largely fueled by higher total average loans outstanding, which increased $103.8 million or 1% quarter over quarter. The increase in earnings assets for the third quarter reduced the impact of the decrease in the core net interest margin to 3.95% for the third quarter of 2012, down 6 basis points from the prior quarter.

As previously discussed, with the extended low interest rate environment, downward pressure on the net interest margin is expected to continue to be a challenge for East West and the rest of the banking industry. However, East West continues to successfully maximize our asset yields by growing our loan portfolio and earning assets, minimizing our cost of funds, and while also ensuring prudent interest rate risk management.

The cost of funds decreased 4 basis points from 0.71% in the second quarter of 2012 to 0.67% in the third quarter of 2012. The reduction in the cost of funds and interest expense is primarily due to management’s ongoing actions to reduce higher cost funding and time deposits, and grow core deposits. During the third quarter, the Company reduced the average cost of time deposits from 0.84% in the second quarter of 2012 to 0.78% in the third quarter of 2012. In addition, the Company increased core deposit balances by 3%, quarter over quarter. These combined actions resulted in an overall reduction in the cost of deposits of 4 basis points to 0.41% for the third quarter of 2012 from 0.45% in the prior quarter.

Management expects to maintain a relatively stable net interest margin and expects the adjusted net interest margin to be approximately 3.90% for the fourth quarter of 2012.

Noninterest Income/(Loss) & Expense

The Company reported total noninterest income for the third quarter of 2012 of $2.8 million, an increase from noninterest (loss) of ($11.7) million in the second quarter of 2012 and ($13.5) million in the third quarter of 2011. The increase in noninterest income from the prior quarter and prior year is primarily attributable to a decrease in the net reduction of the FDIC indemnification asset and FDIC receivable.

Branch fees, letter of credit and foreign exchange income, ancillary loan fees and other operating income increased and totaled $24.0 million in the third quarter of 2012, an increase from $22.2 million in the second quarter of 2012 and $21.2 million in the third quarter of 2011. In addition, included in noninterest income for the third quarter of 2012 were net gains on sales of loans of $5.3 million, and net gains on sales of investment securities of $93 thousand. A summary of fees and other operating income for the third quarter of 2012, compared to the second quarter of 2012 and third quarter of 2011 is detailed below:
                       
Quarter Ended % Change
($ in thousands) September 30, 2012 June 30, 2012 September 30, 2011 (Yr/Yr)
 
Branch fees $ 8,347 $ 8,641 $ 8,872 -6 %
Letters of credit fees and foreign exchange income 7,166 5,101 6,450 11 %
Ancillary loan fees 1,817 2,188 2,076 -12 %
Other operating income   6,699   6,277   3,835 75 %
Total fees & other operating income $ 24,029 $ 22,207 $ 21,233 13 %
 

Noninterest expense totaled $101.0 million for the third quarter of 2012, a decrease of $652 thousand from the second quarter of 2012 and $3.6 million from the third quarter of 2011.

Noninterest expense, excluding amounts to be reimbursed by the FDIC on covered assets and prepayment penalties for other borrowings, totaled $97.9 million for the third quarter of 2012. 1 A summary of noninterest expense for the third quarter of 2012, compared to the second quarter of 2012 and third quarter of 2011 is detailed below:

                         
($ in thousands) Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
Total noninterest expense: $ 100,956 $ 101,608 $ 104,552
Amounts to be reimbursed by the FDIC on covered assets (80% of actual expense amount) 3,005 2,683 3,539
Prepayment penalties for FHLB advances and other borrowings   42   2,336   3,826
Noninterest expense excluding reimbursable amounts and prepayment penalties for FHLB advances and other borrowings $ 97,909 $ 96,589 $ 97,187
 

Total noninterest expense for the third quarter, excluding amounts to be reimbursed by the FDIC on covered assets and prepayment penalties for other borrowings, increased $1.3 million from the second quarter of 2012 to $97.9 million. The small increase in noninterest expense, excluding amounts to be reimbursed by the FDIC on covered assets and prepayment penalties for other borrowings, was primarily due to an increase in legal expense, offset by a decrease in compensation and employee benefits.

Credit cycle costs, which include other real estate owned expense, loan related expense, and legal expense totaled $14.9 million for the third quarter of 2012, as compared to $12.8 million for the second quarter of 2012 and $15.7 million for the third quarter of 2011. Of the total credit cycle costs incurred in the third quarter, $3.8 million is related to covered loans and other real estate owned for which we expect that 80% or $3.0 million is reimbursable by the FDIC.

Management anticipates that for the fourth quarter of 2012, noninterest expense will total approximately $100.0 million, net of amounts reimbursable from the FDIC.

The effective tax rate for the third quarter remained unchanged from the prior quarter at 32.4%. The effective tax rate is reduced from the statutory tax rate primarily due to the utilization of tax credits related to affordable housing investments. The expected effective tax rate for the remainder of 2012 is approximately 34%.

Credit Quality

Non-covered Loans

As a result of continued credit quality improvement, nonperforming assets as of September 30, 2012, were down to $144.1 million, a decrease of 7% from the previous quarter and 15% from the prior year quarter. The provision for loan losses for non-covered loans declined to $13.3 million for the third quarter of 2012, a decrease of $3.3 million or 20% from the prior quarter, and a decrease of $9.0 million or 40% as compared to the third quarter of 2011. Additionally, nonaccrual loans, excluding covered loans, decreased to $104.1 million or 0.72% of total loans as of September 30, 2012.

Total net charge-offs on the non-covered loans decreased to $10.6 million for the third quarter of 2012, down from $11.7 million in the second quarter of 2012. East West continues to maintain an allowance for non-covered loan losses at $223.6 million or 2.00% of non-covered loans receivable at September 30, 2012. This compares to an allowance for non-covered loan losses of $219.5 million or 2.03% of non-covered loans at June 30, 2012 and $211.7 million or 2.16% of non-covered loans at September 30, 2011. The total nonperforming assets, excluding covered assets, to total assets ratio was under 1.00% for the twelfth consecutive quarter with nonperforming assets of $144.1 million or 0.66% of total assets at September 30, 2012.

Covered Loans

During the third quarter of 2012, the Company recorded provision for loan losses on covered loans of $5.2 million, resulting from charge-offs of $6.5 million on three covered loans outside of the scope of ASC 310-30. As these loans are covered under loss-sharing agreements with the FDIC, the Company recorded income of $5.2 million or 80% of the charge-off amount of $6.5 million in noninterest income as a net increase in the FDIC receivable, resulting in a net impact to earnings for the third quarter of ($1.3) million.
                         

Capital Strength
 
(Dollars in millions)

September 30, 2012

Well Capitalized

Regulatory

Requirement

Total Excess Above

Well Capitalized

Requirement
 
Tier 1 leverage capital ratio 9.7 % 5.00 % $ 992
Tier 1 risk-based capital ratio 15.3 % 6.00 % 1,253
Total risk-based capital ratio 16.6 % 10.00 % 885
Tangible common equity to tangible assets ratio 8.6 % N/A N/A
Tangible common equity to risk weighted assets ratio 13.7 % N/A N/A
 

Our capital ratios remain very strong. As of September 30, 2012, our Tier 1 leverage capital ratio totaled 9.7%, our Tier 1 risk-based capital ratio totaled 15.3% and our total risk-based capital ratio totaled 16.6%.

The Company is focused on active capital management and is committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a strong return to our shareholders. During the third quarter of 2012, the Company repurchased 2.3 million shares of common stock at an average price of $21.86 per share, or $50.0 million in total cost. Under the repurchase program authorized by East West’s Board of Directors earlier in the year, management had the authority to repurchase up to a total of $200.0 million of the Company’s common stock. As of September 30, 2012, the Company had completed the authorized repurchase program, purchasing a total of 9.1 million shares of common stock at a total cost of $199.9 million during the year.

Dividend Payout

East West’s Board of Directors has declared fourth quarter dividends on the common stock and Series A Preferred Stock. The common stock cash dividend of $0.10 is payable on or about November 23, 2012 to shareholders of record on November 9, 2012. The dividend on the Series A Preferred Stock of $20.00 per share is payable on November 1, 2012 to shareholders of record on October 15, 2012.

Conference Call

East West will host a conference call to discuss third quarter 2012 earnings with the public on Thursday, October 18, 2012, at 8:30 a.m. PDT/11:30 a.m. EDT. The public and investment community are invited to listen as management discusses third quarter results and operating developments. The following dial-in information is provided for participation in the conference call: Calls within the US – (877) 317-6789; Calls within Canada – (866) 605-3852; International calls – (412) 317-6789. A listen-only live broadcast of the call also will be available on the investor relations page of the Company's website at www.eastwestbank.com.

About East West

East West Bancorp is a publicly owned company with $21.8 billion in assets and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 120 locations worldwide, including in the United States markets of California, New York, Georgia, Massachusetts, Texas and Washington. In Greater China, East West’s presence includes a full service branch in Hong Kong and representative offices in Beijing, Shenzhen and Taipei. Through a wholly-owned subsidiary bank, East West’s presence in Greater China also includes full service branches in Shanghai and Shantou and a representative office in Guangzhou. For more information on East West Bancorp, visit the Company's website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic, political or industry conditions and events and the impact they may have on us and our customers; our ability to attract deposits and other sources of liquidity; continued deterioration in values of real estate in California and other states where our bank makes loans, both residential and commercial; our ability to manage the loan portfolios acquired from FDIC-assisted acquisitions within the limits of the loss protection provided by the FDIC; changes in the financial performance and/or condition of our borrowers; changes in the level of nonperforming assets, reserve requirements, and charge-offs; the effect of changes in laws, regulations, and accounting standards, and related costs of these changes; inflation, interest rate, securities market and monetary fluctuations; changes in the competitive environment among financial and bank holding companies and other financial service providers; changes in our organization, management; the adequacy of our enterprise risk management framework; the ability to manage our growth and the effect of acquisitions we may make and the integration of acquired businesses and branching efforts; our success at managing the risks involved in the foregoing items and other factors set forth in the Company’s public reports including its Annual Report on Form 10-K for the year ended December 31, 2011, and particularly the discussion of risk factors within that document.

1 See reconciliation of the GAAP financial measure to the non-GAAP financial measure in the tables attached.
                 
EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
 
September 30, 2012 June 30, 2012 September 30, 2011
Assets
Cash and cash equivalents $ 1,836,372 $ 2,459,614 $ 1,135,888
Short-term investments 347,001 254,714 66,009
Securities purchased under resale agreements 1,100,000 675,000 951,824
Investment securities 2,237,848 1,873,739 3,279,592
Loans receivable, excluding covered loans (net of allowance for loan
losses of $223,637, $219,454 and $211,738) 11,074,255 10,693,466 9,830,686
Covered loans, net   3,178,585     3,416,613     4,139,902  
Total loans receivable, net 14,252,840 14,110,079 13,970,588
Federal Home Loan Bank and Federal Reserve Bank stock 165,825 171,971 190,765
FDIC indemnification asset 368,473 409,287 569,157
Other real estate owned, net 40,007 43,222 21,178
Other real estate owned covered, net 27,613 35,577 87,298
Premiums on deposits acquired, net 58,746 61,480 70,115
Goodwill 337,438 337,438 337,438
Other assets   1,041,002     1,093,613     1,133,194  
Total assets $ 21,813,165   $ 21,525,734   $ 21,813,046  
 
Liabilities and Stockholders' Equity
Deposits $ 17,666,427 $ 17,341,872 $ 17,308,700
Federal Home Loan Bank advances 363,119 362,885 457,075
Securities sold under repurchase agreements 995,000 995,000 1,024,949
Long-term debt 137,178 212,178 214,178
Other borrowings 4,955
Accrued expenses and other liabilities   333,232     318,859     542,020  
Total liabilities 19,494,956 19,230,794 19,551,877
Stockholders' equity   2,318,209     2,294,940     2,261,169  
Total liabilities and stockholders' equity $ 21,813,165   $ 21,525,734   $ 21,813,046  
Book value per common share $ 15.93 $ 15.51 $ 14.62
Tangible book value per common share $ 13.07 $ 12.67 $ 11.83
Number of common shares at period end 140,301 142,646 148,962
 
Ending Balances
September 30, 2012 June 30, 2012 September 30, 2011
Loans receivable
Real estate - single family $ 2,065,622 $ 2,017,877 $ 1,517,954
Real estate - multifamily 911,781 912,941 942,428
Real estate - commercial 3,519,601 3,444,957 3,459,001
Real estate - land and construction 250,872 299,739 372,140
Commercial 3,732,785 3,418,637 3,012,152
Consumer   674,547     700,719     503,575  
Total non-covered loans receivable, excluding loans held for sale 11,155,208 10,794,870 9,807,250
Loans held for sale 157,869 137,812 251,920
Covered loans, net   3,178,585     3,416,613     4,139,902  
Total loans receivable 14,491,662 14,349,295 14,199,072
Unearned fees, premiums and discounts (15,185 ) (19,762 ) (16,746 )
Allowance for loan losses on non-covered loans   (223,637 )   (219,454 )   (211,738 )
Net loans receivable $ 14,252,840 $ 14,110,079 $ 13,970,588
 
Deposits
Noninterest-bearing demand $ 4,118,502 $ 3,828,116 $ 3,377,559
Interest-bearing checking 1,167,477 1,044,439 948,679
Money market 4,785,447 4,913,524 4,434,983
Savings   1,298,431     1,254,072     1,063,086  
Total core deposits 11,369,857 11,040,151 9,824,307
Time deposits   6,296,570     6,301,721     7,484,393  
Total deposits $ 17,666,427 $ 17,341,872 $ 17,308,700
 
 
                 
EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
 
Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
 
Interest and dividend income $ 254,162 $ 266,362 $ 282,741
Interest expense   (32,254 )   (33,205 )   (44,959 )
Net interest income before provision for loan losses 221,908 233,157 237,782
Provision for loan losses, excluding covered loans (13,321 ) (16,595 ) (22,297 )
(Provision) reversal for loan losses on covered loans   (5,179 )   1,095     297  
Net interest income after provision for loan losses 203,408 217,657 215,782
Noninterest income (loss) 2,751 (11,655 ) (13,545 )
Noninterest expense   (100,956 )   (101,608 )   (104,552 )
Income before provision for income taxes 105,203 104,394 97,685
Provision for income taxes   34,093     33,837     35,253  
Net income 71,110 70,557 62,432
Preferred stock dividend   (1,714 )   (1,714 )   (1,714 )
Net income available to common stockholders $ 69,396 $ 68,843 $ 60,718
Net income per share, basic $ 0.49 $ 0.48 $ 0.41
Net income per share, diluted $ 0.48 $ 0.47 $ 0.41
Shares used to compute per share net income:
- Basic 139,621 142,107 147,162
- Diluted 145,358 147,786 153,453
 
 
Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
Noninterest income (loss):
Branch fees $ 8,347 $ 8,641 $ 8,872
Decrease in FDIC indemnification asset and FDIC receivable (26,757 ) (40,345 ) (43,451 )
Net gain on sales of loans 5,346 6,375 5,452
Letters of credit fees and foreign exchange income 7,166 5,101 6,450
Net gain on sales of investment securities 93 71 3,191
Net gain on sale of fixed assets 40 37 30
Ancillary loan fees 1,817 2,188 2,076
Other operating income   6,699     6,277     3,835  
Total noninterest income (loss): $ 2,751 $ (11,655 ) $ (13,545 )
 
Noninterest expense:
Compensation and employee benefits $ 40,509 $ 42,863 $ 39,885
Occupancy and equipment expense 14,162 13,057 12,580
Loan related expenses 4,011 4,175 5,208
Other real estate owned expense 2,683 4,486 4,489
Deposit insurance premiums and regulatory assessments 3,461 3,323 2,430
Prepayment penalties for FHLB advances and other borrowings 42 2,336 3,826
Legal expense 8,213 4,150 6,028
Amortization of premiums on deposits acquired 2,734 2,838 3,067
Data processing 2,313 2,197 1,827
Consulting expense 2,692 1,568 2,094
Amortization of investments in affordable housing partnerships 3,378 4,425 5,287
Other operating expense   16,758     16,190     17,831  
Total noninterest expense $ 100,956 $ 101,608 $ 104,552
 
 
               
EAST WEST BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
 
Year To Date
September 30, 2012 September 30, 2011
 
Interest and dividend income $ 774,574 $ 811,544
Interest expense   (100,591 )   (137,592 )
Net interest income before provision for loan losses 673,983 673,952
Provision for loan losses, excluding covered loans (46,395 ) (72,797 )
Provision for loan losses on covered loans   (5,705 )   (2,209 )
Net interest income after provision for loan losses 621,883 598,946
Noninterest income 12,836 9,987
Noninterest expense   (317,327 )   (328,938 )
Income before provision for income taxes 317,392 279,995
Provision for income taxes   107,642     100,967  
Net income 209,750 179,028
Preferred stock dividend   (5,142 )   (5,143 )
Net income available to common stockholders $ 204,608 $ 173,885
Net income per share, basic $ 1.42 $ 1.18
Net income per share, diluted $ 1.40 $ 1.17
Shares used to compute per share net income:
- Basic 142,348 147,013
- Diluted 148,051 153,372
 
 
Year To Date
September 30, 2012 September 30, 2011
Noninterest income:
Branch fees $ 25,282 $ 25,704
Decrease in FDIC indemnification asset and FDIC receivable (72,520 ) (79,700 )
Net gain on sales of loans 16,900 18,753
Letters of credit fees and foreign exchange income 18,338 17,636
Net gain on sales of investment securities 647 6,823
Net gain on sale of fixed assets 113 2,236
Impairment loss on investment securities (99 ) (464 )
Ancillary loan fees 6,013 6,122
Other operating income   18,162     12,877  
Total noninterest income $ 12,836 $ 9,987
 
Noninterest expense:
Compensation and employee benefits $ 129,781 $ 119,025
Occupancy and equipment expense 40,737 37,353
Loan related expenses 12,667 12,591
Other real estate owned expense 18,034 29,738
Deposit insurance premiums and regulatory assessments 10,776 16,454
Prepayment penalties for FHLB advances and other borrowings 3,699 12,281
Legal expense 19,536 16,920
Amortization of premiums on deposits acquired 8,445 9,403
Data processing 6,974 6,530
Consulting expense 5,727 6,098
Amortization of investments in affordable housing partnerships 12,269 14,410
Other operating expense   48,682     48,135  
Total noninterest expense $ 317,327 $ 328,938
 
 
                 
EAST WEST BANCORP, INC.
SELECTED FINANCIAL INFORMATION
(In thousands)
(unaudited)
 
Average Balances Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
Loans receivable
Real estate - single family $ 2,039,136 $ 1,991,863 $ 1,382,715
Real estate - multifamily 902,367 914,223 945,007
Real estate - commercial 3,506,638 3,458,288 3,447,983
Real estate - land and construction 284,294 313,992 416,640
Commercial 3,574,563 3,278,965 2,859,985
Consumer   812,321     785,341     773,229  
Total loans receivable, excluding covered loans 11,119,319 10,742,672 9,825,559
Covered loans   3,299,459     3,572,300     4,253,687  
Total loans receivable 14,418,778 14,314,972 14,079,246
Investment securities 2,084,165 2,487,725 3,255,701
Earning assets 19,774,467 19,508,910 19,810,633
Total assets 21,686,220 21,527,394 21,978,123
 
Deposits
Noninterest-bearing demand $ 3,949,807 $ 3,724,399 $ 3,236,683
Interest-bearing checking 1,090,227 978,085 895,223
Money market 4,957,938 4,831,665 4,453,224
Savings   1,290,159     1,232,663     1,048,004  
Total core deposits 11,288,131 10,766,812 9,633,134
Time deposits   6,226,133     6,474,566     7,665,429  
Total deposits 17,514,264 17,241,378 17,298,563
Interest-bearing liabilities 15,094,664 15,118,148 15,842,752
Stockholders' equity 2,304,804 2,305,942 2,275,803
 
 
Selected Ratios Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
For The Period
Return on average assets 1.30 % 1.32 % 1.13 %
Return on average common equity 12.43 % 12.46 % 10.99 %
Interest rate spread 4.26 % 4.61 % 4.53 %
Net interest margin 4.46 % 4.81 % 4.76 %
Yield on earning assets 5.11 % 5.49 % 5.66 %
Cost of deposits 0.41 % 0.45 % 0.65 %
Cost of funds 0.67 % 0.71 % 0.93 %

Noninterest expense/average assets (1)
1.74 % 1.72 % 1.67 %

Efficiency ratio (2)
42.20 % 41.54 % 41.19 %
 
(1)     Excludes the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances and other borrowings.
(2) Represents noninterest expense, excluding the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances and other borrowings, divided by the aggregate of net interest income before provision for loan losses and noninterest income, excluding items that are non-recurring in nature.
 
 
               
EAST WEST BANCORP, INC.
SELECTED FINANCIAL INFORMATION
(In thousands)
(unaudited)
 
Average Balances Year To Date
September 30, 2012 September 30, 2011
Loans receivable
Real estate - single family $ 1,969,929 $ 1,259,419
Real estate - multifamily 915,898 952,426
Real estate - commercial 3,482,550 3,407,097
Real estate - land and construction 315,964 460,512
Commercial 3,345,493 2,458,701
Consumer   818,560     920,248  
Total loans receivable, excluding covered loans 10,848,394 9,458,403
Covered loans   3,574,076     4,477,467  
Total loans receivable 14,422,470 13,935,870
Investment securities 2,509,911 3,100,000
Earning assets 19,602,770 19,318,212
Total assets 21,634,877 21,484,046
 
Deposits
Noninterest-bearing demand $ 3,740,901 $ 2,966,343
Interest-bearing checking 1,010,718 820,518
Money market 4,818,954 4,400,912
Savings   1,235,582     1,018,215  
Total core deposits 10,806,155 9,205,988
Time deposits   6,514,294     7,487,935  
Total deposits 17,320,449 16,693,923
Interest-bearing liabilities 15,176,330 15,785,667
Stockholders' equity 2,305,485 2,211,373
 
 
Selected Ratios Year To Date
September 30, 2012 September 30, 2011
For The Period
Return on average assets 1.30 % 1.11 %
Return on average common equity 12.30 % 10.92 %
Interest rate spread 4.39 % 4.45 %
Net interest margin 4.59 % 4.66 %
Yield on earning assets 5.28 % 5.62 %
Cost of deposits 0.44 % 0.67 %
Cost of funds 0.71 % 0.98 %

Noninterest expense/average assets (1)
1.81 % 1.82 %

Efficiency ratio (2)
42.64 % 42.79 %
 
(1)     Excludes the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances and other borrowings.
(2) Represents noninterest expense, excluding the amortization of intangibles, amortization of premiums on deposits acquired, amortization of investments in affordable housing partnerships and prepayment penalties for FHLB advances and other borrowings, divided by the aggregate of net interest income before provision for loan losses and noninterest income, excluding items that are non-recurring in nature.
 
 
                           
EAST WEST BANCORP, INC.
QUARTER TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID
(In thousands)
(unaudited)
 
Quarter Ended
September 30, 2012 September 30, 2011
Average Average
Volume Interest

Yield (1)
Volume Interest

Yield (1)
 

ASSETS
Interest-earning assets:
Due from banks and short-term investments $ 1,586,995 $ 5,211 1.31 % $ 1,164,302 $ 7,866 2.68 %
Securities purchased under resale agreements 1,515,761 5,530 1.45 % 1,117,493 5,064 1.80 %
Investment securities available-for-sale 2,084,165 10,380 1.98 % 3,255,701 24,503 2.99 %
Loans receivable 11,119,319 128,896 4.61 % 9,825,559 120,596 4.87 %
Loans receivable - covered 3,299,459 103,299 12.46 % 4,253,687 123,927 11.56 %
Federal Home Loan Bank and Federal Reserve Bank stock   168,768     846 2.00 %   193,891     785 1.61 %
Total interest-earning assets   19,774,467     254,162 5.11 %   19,810,633     282,741 5.66 %
 
Noninterest-earning assets:
Cash and cash equivalents 233,111 254,918
Allowance for loan losses (229,474 ) (225,395 )
Other assets   1,908,116     2,137,967  
Total assets $ 21,686,220   $ 21,978,123  
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Checking accounts 1,090,227 838 0.31 % 895,223 936 0.41 %
Money market accounts 4,957,938 4,437 0.36 % 4,453,224 4,798 0.43 %
Savings deposits 1,290,159 764 0.24 % 1,048,004 756 0.29 %
Time deposits 6,226,133 12,163 0.78 % 7,665,429 21,726 1.12 %
Federal funds purchased 9 462
Federal Home Loan Bank advances 362,966 1,468 1.61 % 508,913 3,013 2.35 %
Securities sold under repurchase agreements 995,000 11,664 4.66 % 1,035,466 12,218 4.68 %
Long-term debt 172,232 920 2.13 % 222,490 1,424 2.54 %
Other borrowings           13,541     88 2.58 %
Total interest-bearing liabilities   15,094,664     32,254 0.85 %   15,842,752     44,959 1.13 %
 
Noninterest-bearing liabilities:
Demand deposits 3,949,807 3,236,683
Other liabilities 336,945 622,885
Stockholders' equity   2,304,804     2,275,803  
Total liabilities and stockholders' equity $ 21,686,220   $ 21,978,123  
 
Interest rate spread 4.26 % 4.53 %
 
Net interest income and net interest margin $ 221,908 4.46 % $ 237,782 4.76 %
 

Net interest income and net interest margin, adjusted (2)
$ 196,285 3.95 % $ 198,489 3.98 %
 
(1)     Annualized.
(2) Amounts exclude the net impact of covered loan dispositions and amortization of the FDIC indemnification asset of $25.6 million and $39.3 million for the three months ended September 30, 2012 and 2011, respectively.
 
 
                           
EAST WEST BANCORP, INC.
YEAR TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID
(In thousands)
(unaudited)
 
Year To Date
September 30, 2012 September 30, 2011
Average Average
Volume Interest

Yield (1)
Volume Interest

Yield (1)
 

ASSETS
Interest-earning assets:
Due from banks and short-term investments $ 1,380,753 $ 17,517 1.69 % $ 1,052,091 $ 15,106 1.92 %
Securities purchased under resale agreements 1,113,963 14,602 1.75 % 1,029,000 14,443 1.88 %
Investment securities available-for-sale 2,509,911 48,525 2.58 % 3,100,000 66,613 2.87 %
Loans receivable 10,848,394 380,097 4.68 % 9,458,403 355,246 5.02 %
Loans receivable - covered 3,574,076 311,173 11.63 % 4,477,467 357,576 10.68 %
Federal Home Loan Bank and Federal Reserve Bank stock   175,673     2,660 2.02 %   201,251     2,560 1.70 %
Total interest-earning assets   19,602,770     774,574 5.28 %   19,318,212     811,544 5.62 %
 
Noninterest-earning assets:
Cash and cash equivalents 246,253 269,700
Allowance for loan losses (226,267 ) (230,020 )
Other assets   2,012,121     2,126,154  
Total assets $ 21,634,877   $ 21,484,046  
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Checking accounts 1,010,718 2,251 0.30 % 820,518 2,283 0.37 %
Money market accounts 4,818,954 12,681 0.35 % 4,400,912 16,621 0.50 %
Savings deposits 1,235,582 1,993 0.22 % 1,018,215 2,421 0.32 %
Time deposits 6,514,294 40,618 0.83 % 7,487,935 62,003 1.11 %
Federal funds purchased 2,972 2 0.11 % 113
Federal Home Loan Bank advances 396,120 4,963 1.67 % 751,822 12,746 2.27 %
Securities sold under repurchase agreements 998,924 34,977 4.68 % 1,059,770 36,351 4.59 %
Long-term debt 198,766 3,106 2.09 % 231,087 4,783 2.77 %
Other borrowings           15,295     384 3.36 %
Total interest-bearing liabilities   15,176,330     100,591 0.89 %   15,785,667     137,592 1.17 %
 
Noninterest-bearing liabilities:
Demand deposits 3,740,901 2,966,343
Other liabilities 412,161 520,663
Stockholders' equity   2,305,485     2,211,373  
Total liabilities and stockholders' equity $ 21,634,877   $ 21,484,046  
 
Interest rate spread 4.39 % 4.45 %
 
Net interest income and net interest margin $ 673,983 4.59 % $ 673,952 4.66 %
 

Net interest income and net interest margin, adjusted (2)
$ 595,147 4.06 % $ 575,353 3.98 %
 
(1)     Annualized.
(2) Amounts exclude the net impact of covered loan dispositions and amortization of the FDIC indemnification asset of $78.8 million and $98.6 million for the nine months ended September 30, 2012 and 2011, respectively.
 
 
                 
EAST WEST BANCORP, INC.
QUARTERLY ALLOWANCE FOR LOAN LOSSES RECAP
(In thousands)
(unaudited)
 
  Quarter Ended
9/30/2012 6/30/2012 9/30/2011
NON-COVERED LOANS
Allowance for non-covered loans, beginning of period $ 219,454 $ 214,253 $ 213,825
Allowance for unfunded loan commitments and letters of credit 1,502 274 -
Provision for loan losses, excluding covered loans 13,321 16,595 22,297
 
Net Charge-offs:
Real estate - single family 1,595 273 1,563
Real estate - multifamily 1,101 1,021 2,069
Real estate - commercial 785 2,179 1,157
Real estate - land and construction 1,796 665 12,855
Commercial 4,878 6,624 6,487
Consumer   485     906     253  
Total net charge-offs   10,640     11,668     24,384  
Allowance for non-covered loans, end of period $ 223,637   $ 219,454   $ 211,738  
 
COVERED LOANS

Allowance for covered loans, beginning of period (1)
$ 7,173 $ 8,268 $ 6,731
Provision (reversal) for loan losses, covered loans 5,179 (1,095 ) (297 )
 
Net Charge-offs:
Real estate - land and construction 1,509
Commercial   4,966          
Total net charge-offs   6,475          

Allowance for covered loans, end of period (1)
$ 5,877   $ 7,173   $ 6,434  
 
UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT:
Allowance balance, beginning of period $ 12,504 $ 12,778 $ 11,197
(Reversal of) provision for unfunded loan commitments and letters of credit   (1,502 )   (274 )   -  
Allowance balance, end of period $ 11,002   $ 12,504   $ 11,197  
GRAND TOTAL, END OF PERIOD $ 240,516   $ 239,131   $ 229,369  
 

Nonperforming assets to total assets (2)
0.66 % 0.72 % 0.77 %
Allowance for loan losses on non-covered loans to total gross non-covered loans held for investment at end of period 2.00 % 2.03 % 2.16 %
Allowance for loan losses on non-covered loans and unfunded loan commitments to total gross non-covered loans held for investment at end of period 2.10 % 2.15 % 2.27 %
Allowance on non-covered loans to non-covered nonaccrual loans at end of period 214.85 % 195.18 % 143.35 %

Nonaccrual loans to total loans (3)
0.72 % 0.78 % 1.04 %
 
(1)     This allowance is related to drawdowns on commitments that were in existence as of the acquisition dates of WFIB and UCB and, therefore, are covered under the shared-loss agreements with the FDIC. Allowance on these subsequent drawdowns is accounted for as part of the allowance for loan losses.
(2) Nonperforming assets excludes covered loans and covered REOs. Total assets includes covered assets.
(3) Nonaccrual loans excludes covered loans. Total loans includes covered loans.
 
 
                     
EAST WEST BANCORP, INC.
TOTAL NON-PERFORMING ASSETS, EXCLUDING COVERED ASSETS
(In thousands)
(unaudited)
 
AS OF SEPTEMBER 30, 2012
Total Nonaccrual Loans

90+ Days

Delinquent

Under 90+ Days

Delinquent

Total

Nonaccrual

Loans
REO Assets

Total

Non-Performing

Assets
Loan Type
Real estate - single family $ 7,742 $ 1,010 $ 8,752 $ 3,993 $ 12,745
Real estate - multifamily 11,594 11,440 23,034 106 23,140
Real estate - commercial 17,229 3,478 20,707 22,939 43,646
Real estate - land and construction 29,065 652 29,717 12,600 42,317
Commercial 13,902 4,241 18,143 37 18,180
Consumer   3,739   -   3,739   332   4,071
Total $ 83,271 $ 20,821 $ 104,092 $ 40,007 $ 144,099
 
 
AS OF JUNE 30, 2012
Total Nonaccrual Loans

90+ Days

Delinquent

Under 90+ Days

Delinquent

Total

Nonaccrual

Loans
REO Assets

Total

Non-Performing

Assets
Loan Type
Real estate - single family $ 6,405 $ 1,350 $ 7,755 $ 5,055 $ 12,810
Real estate - multifamily 9,278 11,129 20,407 117 20,524
Real estate - commercial 22,751 2,092 24,843 24,906 49,749
Real estate - land and construction 32,390 669 33,059 12,759 45,818
Commercial 17,072 6,000 23,072 53 23,125
Consumer   3,298   -   3,298   332   3,630
Total $ 91,194 $ 21,240 $ 112,434 $ 43,222 $ 155,656
 
 
AS OF SEPTEMBER 30, 2011
Total Nonaccrual Loans

90+ Days

Delinquent

Under 90+ Days

Delinquent

Total

Nonaccrual

Loans
REO Assets

Total

Non-Performing

Assets
Loan Type
Real estate - single family $ 7,173 $ 99 $ 7,272 $ 4,118 $ 11,390
Real estate - multifamily 12,906 5,468 18,374 - 18,374
Real estate - commercial 40,063 17,544 57,607 6,188 63,795
Real estate - land and construction 43,593 3,532 47,125 10,654 57,779
Commercial 11,121 3,275 14,396 142 14,538
Consumer   2,935   -   2,935   76   3,011
Total $ 117,791 $ 29,918 $ 147,709 $ 21,178 $ 168,887
 
 
     
EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
(unaudited)
 
The tangible common equity to risk weighted assets and tangible common equity to tangible assets ratios are non-GAAP disclosures. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. As the use of tangible common equity to tangible assets ratio is more prevalent in the banking industry and with banking regulators and analysts, we have included the tangible common equity to risk-weighted assets and tangible common equity to tangible assets ratios.
 
As of
September 30, 2012
Stockholders' equity $ 2,318,209
Less:
Preferred equity (83,027 )
Goodwill and other intangible assets   (400,842 )
Tangible common equity $ 1,834,340  
 
Risk-weighted assets   13,402,985  
 
Tangible common equity to risk-weighted assets ratio   13.7 %
 
 
As of
September 30, 2012
Total assets $ 21,813,165
Less:
Goodwill and other intangible assets   (400,842 )
Tangible assets $ 21,412,323  
 
Tangible common equity to tangible assets ratio 8.6 %
 
 
                 
EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
(unaudited)
 
Operating noninterest expense is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. These are noninterest expense line items that are non-core in nature. Operating noninterest expense excludes such non-core noninterest expense line items. The Company believes that presenting operating noninterest expense provides more clarity to the users of financial statements regarding the core noninterest expense amounts.
 
Quarter Ended
September 30, 2012 June 30, 2012 September 30, 2011
Total noninterest expense: $ 100,956 $ 101,608 $ 104,552
Amounts to be reimbursed by the FDIC on covered assets (80% of actual expense amount) 3,005 2,683 3,539
Prepayment penalties for FHLB advances and other borrowings   42   2,336   3,826
Noninterest expense excluding reimbursable amounts and prepayment penalties for FHLB advances and other borrowings $ 97,909 $ 96,589 $ 97,187
 
 
                 
EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
(unaudited)
 
The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest income on covered loans includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income on covered loans excluding such non-core items provides additional clarity to the users of financial statements regarding the covered loan yield, comparability to prior periods and the ongoing performance of the Company.
 
Quarter Ended September 30, 2012
Average Volume Interest

Yield (1)
Loans receivable - covered $ 3,299,459 $ 103,299 12.46 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (25,623 )

Covered loans excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 77,676   9.37 %
 
 
Quarter Ended June 30, 2012
Average Volume Interest

Yield (1)
Loans receivable - covered $ 3,572,300 $ 112,510 12.67 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (38,504 )

Covered loans excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 74,006   8.33 %
 

(1) Annualized.
                 
EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
(unaudited)
 
The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest margin includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income and net interest margin excluding such non-core items provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin, comparability to prior periods and the ongoing performance of the Company.
 
Quarter Ended September 30, 2012
Average Volume Interest

Yield (1)
Total interest-earning assets $ 19,774,467 $ 254,162 5.11 %
Net interest income and net interest margin 221,908 4.46 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (25,623 )

Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 196,285   3.95 %
 
 
Quarter Ended June 30, 2012
Average Volume Interest

Yield (1)
Total interest-earning assets $ 19,508,910 $ 266,362 5.49 %
Net interest income and net interest margin 233,157 4.81 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (38,504 )

Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 194,653   4.01 %
 
 
Quarter Ended September 30, 2011
Average Volume Interest

Yield (1)
Total interest-earning assets $ 19,810,633 $ 282,741 5.66 %
Net interest income and net interest margin 237,782 4.76 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (39,293 )

Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 198,489   3.98 %
 

(1) Annualized.
                 
 
EAST WEST BANCORP, INC.
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
(unaudited)
 
The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance to provide additional disclosure. The net interest margin includes amounts that are non-core in nature. As such, the Company believes that presenting the net interest income and net interest margin excluding such non-core items provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin, comparability to prior periods and the ongoing performance of the Company.
 
Year to Date September 30, 2012
Average Volume Interest

Yield (1)
Total interest-earning assets $ 19,602,770 $ 774,574 5.28 %
Net interest income and net interest margin 673,983 4.59 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (78,836 )

Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 595,147   4.06 %
 
 
Year to Date September 30, 2011
Average Volume Interest

Yield (1)
Total interest-earning assets $ 19,318,212 $ 811,544 5.62 %
Net interest income and net interest margin 673,952 4.66 %

Less net impact of covered loan dispositions and amortization of the FDIC indemnification asset
  (98,599 )

Net interest income and net interest margin, excluding net impact of covered loan dispositions and amortization of the FDIC indemnification asset
$ 575,353   3.98 %
 

(1) Annualized.

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