East West Bancorp Reports Net Income for First Quarter 2021 of $205 Million and Diluted Earnings Per Share of $1.44

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the first quarter of 2021. Net income for the first quarter of 2021 was $205.0 million, or $1.44 per diluted share. First quarter 2021 return on average assets was 1.50% and return on average equity was 15.6%.

“East West had a strong start to 2021. In the first quarter, our loans and deposits grew at a robust pace, our revenue and profitability expanded, and credit quality was stable, resulting in net income growth of 25% from the fourth quarter of 2020,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “As of March 31, 2021, our total loans reached a record $39.6 billion, growing by 13% annualized from December 31, 2020, and our total deposits reached a record $49.5 billion, growing by 42% annualized during the same period.”

“Quarter-over-quarter, our revenue grew 10% annualized and our expenses were well-managed, resulting in an adjusted pre-tax, pre-provision income growth of 17% annualized,” continued Ng. “Due to an improved macroeconomic outlook and stable asset quality, we did not record a provision for credit losses in the first quarter of 2021. Our solid financial performance for the first quarter resulted in a return on average tangible equity of 17.2%.”

“Based on the loan production and deposit growth year-to-date, we are optimistic about our growth trajectory for the full year. We are sanguine about our asset quality outlook, supported by the strength and resilience of our customers and the continued economic recovery,” concluded Ng. “With our strong balance sheet, we are very well positioned to support our customers in their growth and expansion plans as the economy reopens and rebounds.”

BALANCE SHEET

• Record Assets – Total assets reached $56.9 billion as of March 31, 2021, up by $4.7 billion, or 37% annualized, from $52.2 billion as of December 31, 2020.
  
  First quarter 2021 average interest-earning assets of $52.9 billion grew by $3.1 billion, or 26% linked quarter annualized. The growth in average interest-earning assets largely consisted of a $1.4 billion increase in average available-for-sale (“AFS”) debt securities, a $1.0 billion increase in average loans, a $507.8 million increase in interest-bearing cash and deposits with banks, and a $204.1 million increase in average assets purchased under resale agreements (“resale agreements”). On an end-of-period basis, AFS debt securities increased by $2.2 billion and resale agreements increased by $700.0 million between March 31, 2021, and December 31, 2020.

• Record Loans – Total loans reached $39.6 billion as of March 31, 2021, up by $1.2 billion, or 13% annualized, from $38.4 billion as of December 31, 2020. Excluding Paycheck Protection Program (“PPP”) loans of $2.1 billion as of March 31, 2021, total loans grew by $691.3 million, or 8% linked quarter annualized. During the first quarter of 2021, the Company funded 5,075 new PPP loans totaling $828.2 million.
  
  First quarter 2021 average loans of $38.7 billion grew by $1.0 billion, or 11% linked quarter annualized. The strong loan growth during the quarter was broad-based, with the strongest growth from residential mortgage, which increased by $432.5 million, or 18% linked quarter annualized. Excluding PPP loans, average loans grew by 9% annualized from the fourth quarter of 2020.

• Record Deposits – Total deposits reached $49.5 billion as of March 31, 2021, up by $4.7 billion, or 42% annualized, from $44.9 billion as of December 31, 2020. Noninterest-bearing demand deposits reached a record $18.9 billion as of March 31, 2021, up by $2.6 billion, or 65% annualized, from $16.3 billion as of December 31, 2020. Noninterest-bearing demand deposits made up 38% of total deposits as of March 31, 2021, up from 36% as of December 31, 2020.
  
  First quarter 2021 average deposits of $47.8 billion grew by $3.4 billion, or 31% linked quarter annualized. Growth in the first quarter was across all deposit categories, led by noninterest-bearing demand deposits, which increased by $1.8 billion, or 44% linked quarter annualized.

• Capital Levels – Capital levels for East West are strong. As of March 31, 2021, stockholders’ equity was $5.3 billion, or $37.26 per common share, and tangible equity¹ per common share was $33.90. As of March 31, 2021, the tangible equity to tangible assets ratio¹ was 8.53%, the common equity tier 1 (“CET1”) capital ratio was 12.7%, and the total risk-based capital ratio was 14.3%.

OPERATING RESULTS

First Quarter Earnings – First quarter 2021 net income was $205.0 million, or $1.44 per diluted share, an increase of 25% from $164.1 million, or $1.15 per diluted share, for the fourth quarter of 2020.

Fourth quarter 2020 earnings included items related to DC Solar tax credit investments, which added $2.6 million, or two cents per diluted share to earnings. Excluding these items, first quarter 2021 net income increased 27% from fourth quarter adjusted net income² of $161.5 million, or $1.13 per diluted share².

First Quarter 2021 Compared to Fourth Quarter 2020

Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $353.7 million, an increase of 2% (or 8% annualized) from $346.6 million. Net interest margin (“NIM”) of 2.71% decreased by six basis points from 2.77%.

• Excluding the impact of PPP loans, adjusted NII³ totaled $338.7 million, an increase of 2% (or 7% annualized) from $332.7 million. Adjusted NIM³ of 2.70% compressed by six basis points from 2.76%. NII earned on PPP loans contributed $15.0 million to NII in the first quarter, compared with $13.9 million in the fourth quarter.
• NII growth reflected decreased interest expense, due to a lower average cost of deposits, and higher interest income from AFS debt securities, due to volume, partially offset by lower interest income from loans, due to a decrease in the average loan yield.
• Average loan yield of 3.58% contracted by 10 basis points from 3.68%, reflecting the impact of lower interest rates on loans, and origination activity in a low interest rate environment.
• The average cost of deposits of 0.18% decreased by seven basis points from 0.25%. The average cost of interest-bearing deposits of 0.30% decreased by 10 basis points from 0.40%. The decrease in the cost of deposits primarily reflects continued downward repricing of time deposits to market rates.

Noninterest Income
Noninterest income totaled $ 72.9 million, an increase of 4% (or 18% annualized) from $ 69.8 million. The quarter-over-quarter change reflects growth in foreign exchange income, wealth management and deposit account fees, and a favorable change in the credit valuation adjustment of interest rate contracts. This was partially offset by a decline in interest rate contract revenue, lower gains on sales of loans, lower other investment income and a decrease in other income. Fourth quarter 2020 noninterest income included $3.4 million in gains on sales of bank premises and other assets, included in other income.

Noninterest Expense
Noninterest expense totaled $191.1 million. First quarter noninterest expense consisted of $165.0 million of adjusted noninterest expense⁴, $25.4 million in amortization of tax credit and other investments, and $0.7 million in amortization of core deposit intangibles.

• Adjusted noninterest expense of $165.0 million decreased by $0.6 million from $165.6 million in the fourth quarter. Reductions in overall operating expenses more than offset increased compensation and employee benefits expense, which is typically higher in the first quarter due to payroll taxes and related expenses.
• Amortization of tax credit and other investments totaled $25.4 million, an increase from $12.3 million in the fourth quarter. Fourth quarter amortization of tax credit and other investments was lower because it included $10.7 million of recoveries related to DC Solar tax credit investments.
• The adjusted efficiency ratio⁴ was 38.7% in the first quarter, an improvement from 39.8% in the fourth quarter.

TAX RELATED ITEMS
First quarter 2021 income tax expense was $30.5 million and the effective tax rate was 13%, compared with income tax expense of $49.3 million and an effective tax rate of 23% for the fourth quarter of 2020.

• First quarter 2021 income tax expense and effective tax rate reflect the benefit of a higher amount of tax credit investments, compared with the fourth quarter of 2020.
• Fourth quarter 2020 income tax expense and effective tax rate were elevated by $8.1 million related to DC Solar tax credit investments.

ASSET QUALITY
The allowance for loan losses (“ALLL”) totaled $607.5 million, or 1.53% of loans held-for-investment (“HFI”), as of March 31, 2021, compared with $620.0 million, or 1.61% of loans HFI, as of December 31, 2020.

• During the first quarter of 2021, we recorded no provision for credit losses, compared with a provision of $24.3 million for the fourth quarter of 2020.
• Quarter-over-quarter, the ALLL decreased by $12.5 million, and the ALLL coverage ratio of loans HFI decreased by 8 basis points. The change in the ALLL largely reflects an improved macroeconomic forecast.
• First quarter 2021 net charge-offs were $13.4 million, or annualized 0.14% of average loans HFI, a decrease from $18.8 million, or annualized 0.20% of average loans HFI for the fourth quarter of 2020. The quarter-over-quarter improvement primarily reflects a decrease in commercial real estate charge-offs.
• As of March 31, 2021, criticized loans totaled $1,216.9 million, or 3.07% of loans HFI, compared with $1,217.4 million, or 3.17% of loans HFI, as of December 31, 2020. Quarter-over-quarter, special mention loans decreased to $504.2 million as of March 31, 2021, from $564.6 million as of December 31, 2020. Classified loans increased to $712.7 million as of March 31, 2021, from $652.9 million as of December 31, 2020.
• Nonperforming assets were $258.1 million, or 0.45% of total assets, as of March 31, 2021, compared with $234.9 million, or 0.45% of total assets, as of December 31, 2020.

____________________
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 10.
3		See reconciliation of GAAP to non-GAAP financial measures in Table 13.
4		See reconciliation of GAAP to non-GAAP financial measures in Table 11.

CAPITAL STRENGTH

Capital levels for East West are strong. The following table presents the regulatory capital ratios as of March 31, 2021, December 31, 2020, and March 31, 2020.

EWBC Regulatory Capital Metrics				Basel III
($ in millions)				March 31, 2021 (a)				December 31, 2020 (a)				March 31, 2020 (a)				Minimum Capital Ratio			Well Capitalized Ratio			Minimum Capital Ratio + Conservation Buffer (b)
Risk-Based Capital Ratios:
CET1 capital ratio				12.7		%		12.7		%		12.4		%		4.5	%		6.5	%		7.0	%
Tier 1 capital ratio				12.7		%		12.7		%		12.4		%		6.0	%		8.0	%		8.5	%
Total capital ratio				14.3		%		14.3		%		13.9		%		8.0	%		10.0	%		10.5	%
Leverage ratio				9.1		%		9.4		%		10.2		%		4.0	%		5.0	%		4.0	%
Risk-Weighted Assets (“RWA”) (c)				$	39,572			$	38,406			$	36,548			N/A			N/A			N/A

N/A Not applicable.
(a)		The Company has elected to use the 2020 CECL transition provision in the calculation of its March 31, 2021, December 31, 2020 and March 31, 2020 regulatory capital ratios. The Company’s March 31, 2021 regulatory capital ratios and RWA are preliminary.
(b)		An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.
(c)		Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West’s Board of Directors has declared second quarter 2021 dividends for the Company’s common stock. The common stock cash dividend of $0.33 per share is payable on May 17, 2021, to shareholders of record on May 3, 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. In 2020, the Company repurchased $145.9 million, or 4.5 million shares, of common stock under this authorization during the first quarter. East West did not repurchase any shares during the first quarter of 2021 under this authorization.

Conference Call

East West will host a conference call to discuss first quarter 2021 earnings with the public on Thursday, April 22, 2021 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses first quarter 2021 results and operating developments.

• The following dial-in information is provided for participation in the conference call: calls within the U.S. – [phone]; calls within Canada – [phone]; international calls – [phone].
• 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 April 22, 2021 at 11:30 a.m. Pacific Time through May 22, 2021. The replay numbers are: within the U.S. – [phone]; within Canada – [phone]; international calls – [phone]; and the replay access code is: 10153738.

About East West

East West Bancorp, Inc. is a public company with total assets of $56.9 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California, 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 certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking 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 SEC and management may make forward-looking statements to analysts, investors, representatives of media 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, particularly with regard to developments related to 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,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs, 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: the impact of disease pandemics, such as the resurgences and subsequent waves of the COVID-19 pandemic, on the Company, its operations, customers, and employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address such a pandemic, which may precipitate or exacerbate one or more of the below-mentioned or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period; changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the Small Business Administration’s (“SBA”) Paycheck Protection Program, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and any similar or related rules and regulations, efforts of the Federal Reserve to provide liquidity to the United States (“U.S.”) financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers; changes in the U.S. economy, including an economic slowdown or recession, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; 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 (“FDIC”), the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission (“SEC”), the Consumer Financial Protection Bureau (“CFPB”) and the California Department of Financial Protection and Innovation (“DFPI”) - Division of Financial Institutions, and SBA; 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 spending and savings habits; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against other financial institutions in its banking markets; 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 benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate (“SOFR”) being selected as the preferred alternative reference rate to the London Interbank Offered Rate (“LIBOR”); 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 international operations due to political developments, disease pandemics, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect 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 and legal actions and from 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 (“FASB”) 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 climate change, social and sustainability concerns; significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increases in funding costs, a reduction in investor demand for mortgage loans and declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s AFS debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts, terrorism or other events that may directly or indirectly result in a negative impact on the Company’s financial performance. Given the ongoing and dynamic nature of the COVID-19 pandemic, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others.

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
														March 31, 2021 % or Basis Point Change
		March 31, 2021				December 31, 2020				March 31, 2020				Qtr-o-Qtr			Yr-o-Yr
Assets
Cash and due from banks		$	582,270			$	592,117			$	427,415			(1.7	)%		36.2	%
Interest-bearing cash with banks		4,036,863				3,425,854				2,652,627				17.8			52.2
Cash and cash equivalents		4,619,133				4,017,971				3,080,042				15.0			50.0
Interest-bearing deposits with banks		741,923				809,728				293,509				(8.4	)		152.8
Assets purchased under resale agreements (“resale agreements”)		2,160,038				1,460,000				860,000				47.9			151.2
Available-for-sale (“AFS”) debt securities (amortized cost of $7,904,546, $5,470,523 and $3,660,413)		7,789,213				5,544,658				3,695,943				40.5			110.8
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock		83,250				83,046				78,745				0.2			5.7
Loans held-for-sale (“HFS”)		—				1,788				1,594				(100.0	)		(100.0	)
Loans held-for-investment (''HFI'') (net of allowance for loan losses of $607,506, $619,983 and $557,003)		38,981,242				37,770,972				35,336,390				3.2			10.3
Investments in qualified affordable housing partnerships, net		284,862				213,555				198,653				33.4			43.4
Investments in tax credit and other investments, net		361,438				266,525				268,330				35.6			34.7
Goodwill		465,697				465,697				465,697				—			—
Operating lease right-of-use assets		94,483				95,460				101,381				(1.0	)		(6.8	)
Other assets		1,292,867				1,427,513				1,568,261				(9.4	)		(17.6	)
Total assets		$	56,874,146			$	52,156,913			$	45,948,545			9.0	%		23.8	%
Liabilities and Stockholders’ Equity
Deposits		$	49,547,136			$	44,862,752			$	38,686,958			10.4	%		28.1	%
Short-term borrowings		—				21,009				66,924				(100.0	)		(100.0	)
FHLB advances		653,035				652,612				646,336				0.1			1.0
Assets sold under repurchase agreements (“repurchase agreements”)		300,000				300,000				450,000				—			(33.3	)
Long-term debt and finance lease liabilities		152,195				151,739				152,162				0.3			0.0
Operating lease liabilities		101,828				102,830				109,356				(1.0	)		(6.9	)
Accrued expenses and other liabilities		834,925				796,796				933,824				4.8			(10.6	)
Total liabilities		51,589,119				46,887,738				41,045,560				10.0			25.7
Stockholders’ equity		5,285,027				5,269,175				4,902,985				0.3			7.8
Total liabilities and stockholders’ equity		$	56,874,146			$	52,156,913			$	45,948,545			9.0	%		23.8	%
Book value per common share		$	37.26			$	37.22			$	34.67			0.1	%		7.5	%
Tangible equity (1) per common share		$	33.90			$	33.85			$	31.27			0.1			8.4
Number of common shares at period-end		141,843				141,565				141,435				0.2			0.3
Tangible equity to tangible assets ratio (1)		8.53		%		9.27		%		9.73		%		(74	)	bps	(120	)	bps

(1)

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

EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
														March 31, 2021 % Change
		March 31, 2021				December 31, 2020				March 31, 2020				Qtr-o-Qtr			Yr-o-Yr
Loans:
Commercial:
Commercial and industrial (“C&I”) (1)		$	14,081,110			$	13,631,726			$	12,590,764			3.3	%		11.8	%
Commercial real estate (“CRE”):
CRE		11,563,034				11,174,611				10,682,242				3.5			8.2
Multifamily residential		3,066,515				3,033,998				2,902,601				1.1			5.6
Construction and land		459,254				599,692				606,209				(23.4	)		(24.2	)
Total CRE		15,088,803				14,808,301				14,191,052				1.9			6.3
Consumer:
Residential mortgage:
Single-family residential		8,524,287				8,185,953				7,403,723				4.1			15.1
Home equity lines of credit (“HELOCs”)		1,749,172				1,601,716				1,452,862				9.2			20.4
Total residential mortgage		10,273,459				9,787,669				8,856,585				5.0			16.0
Other consumer		145,376				163,259				254,992				(11.0	)		(43.0	)
Total loans HFI (2)		39,588,748				38,390,955				35,893,393				3.1			10.3
Loans HFS		—				1,788				1,594				(100.0	)		(100.0	)
Total loans (2)		39,588,748				38,392,743				35,894,987				3.1			10.3
Allowance for loan losses		(607,506		)		(619,983		)		(557,003		)		(2.0	)		9.1
Net loans (2)		$	38,981,242			$	37,772,760			$	35,337,984			3.2			10.3
Deposits:
Noninterest-bearing demand		$	18,919,298			$	16,298,301			$	11,833,397			16.1	%		59.9	%
Interest-bearing checking		7,005,693				6,142,193				5,467,508				14.1			28.1
Money market		12,218,957				10,740,667				9,302,246				13.8			31.4
Savings		2,604,355				2,681,242				2,117,274				(2.9	)		23.0
Time deposits		8,798,833				9,000,349				9,966,533				(2.2	)		(11.7	)
Total deposits		$	49,547,136			$	44,862,752			$	38,686,958			10.4	%		28.1	%

(1)		Includes $2.07 billion and $1.57 billion of Paycheck Protection Program (“PPP”) loans as of March 31, 2021 and December 31, 2020, respectively.
(2)		Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(76.9) million, $(58.8) million, and $(50.3) million as of March 31, 2021, December 31, 2020, and March 31, 2020, respectively. Net origination fees related to PPP loans were $(34.3) million and $(12.7) million as of March 31, 2021 and December 31, 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												March 31, 2021 % Change
		March 31, 2021				December 31, 2020				March 31, 2020				Qtr-o-Qtr			Yr-o-Yr
Interest and dividend income (1)		$	381,386			$	381,348			$	449,190			0.0	%		(15.1	)%
Interest expense		27,691				34,767				86,483				(20.4	)		(68.0	)
Net interest income before provision for credit losses		353,695				346,581				362,707				2.1			(2.5	)
Provision for credit losses		—				24,340				73,870				(100.0	)		(100.0	)
Net interest income after provision for credit losses		353,695				322,241				288,837				9.8			22.5
Noninterest income (2)		72,866				69,832				55,506				4.3			31.3
Noninterest expense (2)		191,077				178,651		(3)		180,333				7.0			6.0
Income before income taxes		235,484				213,422				164,010				10.3			43.6
Income tax expense		30,490				49,338				19,186				(38.2	)		58.9
Net income		$	204,994			$	164,084			$	144,824			24.9	%		41.5	%
Earnings per share (“EPS”)
- Basic		$	1.45			$	1.16			$	1.00			24.9	%		44.7	%
- Diluted		$	1.44			$	1.15			$	1.00			24.7			44.0
Weighted-average number of shares outstanding
- Basic		141,646				141,564				144,814				0.1	%		(2.2	)%
- Diluted		142,844				142,529				145,285				0.2			(1.7	)
		Three Months Ended												March 31, 2021 % Change
		March 31, 2021				December 31, 2020				March 31, 2020				Qtr-o-Qtr			Yr-o-Yr
Noninterest income:
Lending fees		$	18,357			$	18,387			$	15,773			(0.2	)%		16.4	%
Deposit account fees		15,383				14,256				10,447				7.9			47.2
Interest rate contracts and other derivative income		16,997				12,967				7,073				31.1			140.3
Foreign exchange income		9,526				6,679				7,819				42.6			21.8
Wealth management fees		6,911				4,497				5,353				53.7			29.1
Net gains on sales of loans		1,781				3,058				950				(41.8	)		87.5
Gains on sales of AFS debt securities		192				432				1,529				(55.6	)		(87.4	)
Other investment income (2)		925				3,989				3,378				(76.8	)		(72.6	)
Other income		2,794				5,567				3,184				(49.8	)		(12.3	)
Total noninterest income (2)		$	72,866			$	69,832			$	55,506			4.3	%		31.3	%
Noninterest expense:
Compensation and employee benefits		$	107,808			$	105,400			$	101,960			2.3	%		5.7	%
Occupancy and equipment expense		15,922				16,548				17,076				(3.8	)		(6.8	)
Deposit insurance premiums and regulatory assessments		3,876				3,995				3,427				(3.0	)		13.1
Deposit account expense		3,892				3,501				3,563				11.2			9.2
Data processing		4,478				4,707				3,826				(4.9	)		17.0
Computer software expense		7,159				7,027				6,166				1.9			16.1
Consulting expense		1,475				1,537				1,217				(4.0	)		21.2
Legal expense		1,502				1,673				3,197				(10.2	)		(53.0	)
Other operating expense		19,607				22,000				21,119				(10.9	)		(7.2	)
Amortization of tax credit and other investments (2)		25,358				12,263		(3)		18,782				106.8			35.0
Total noninterest expense (2)		$	191,077			$	178,651	(3)		$	180,333			7.0	%		6.0	%

(1)		Includes $15.0 million and $14.2 million of interest income related to PPP loans for the three months ended March 31, 2021 and December 31, 2020, respectively.
(2)		In the 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.
(3)		Includes $10.7 million in recoveries related to the Company’s investment in DC Solar for the three months ended December 31, 2020.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 4
		Three Months Ended												March 31, 2021 % Change
		March 31, 2021				December 31, 2020				March 31, 2020				Qtr-o-Qtr			Yr-o-Yr
Loans:
Commercial:
C&I (1)		$	13,693,869			$	13,332,194			$	12,166,178			2.7	%		12.6	%
CRE:
CRE		11,325,679				11,067,392				10,485,683				2.3			8.0
Multifamily residential		3,042,079				3,051,472				2,889,844				(0.3	)		5.3
Construction and land		549,337				588,665				641,079				(6.7	)		(14.3	)
Total CRE		14,917,095				14,707,529				14,016,606				1.4			6.4
Consumer:
Residential mortgage:
Single-family residential		8,315,052				7,990,035				7,257,367				4.1			14.6
HELOCs		1,666,233				1,558,781				1,442,450				6.9			15.5
Total residential mortgage		9,981,285				9,548,816				8,699,817				4.5			14.7
Other consumer		137,058				137,186				271,367				(0.1	)		(49.5	)
Total loans (2)		$	38,729,307			$	37,725,725			$	35,153,968			2.7	%		10.2	%
Interest-earning assets		$	52,852,045			$	49,703,349			$	42,362,531			6.3	%		24.8	%
Total assets		$	55,594,283			$	52,466,325			$	44,755,509			6.0	%		24.2	%
Deposits:
Noninterest-bearing demand		$	18,093,696			$	16,311,010			$	11,117,710			10.9	%		62.7	%
Interest-bearing checking		6,393,034				6,067,849				5,001,672				5.4			27.8
Money market		11,573,847				10,626,940				9,013,381				8.9			28.4
Savings		2,674,476				2,450,980				2,076,270				9.1			28.8
Time deposits		9,112,662				8,965,337				10,264,007				1.6			(11.2	)
Total deposits		$	47,847,715			$	44,422,116			$	37,473,040			7.7	%		27.7	%
Interest-bearing liabilities		$	30,863,568			$	29,666,559			$	27,593,341			4.0	%		11.9	%
Stockholders’ equity		$	5,338,098			$	5,243,203			$	5,022,005			1.8	%		6.3	%

(1)		Includes average balances of PPP loans of $1.93 billion and $1.70 billion for the three months ended March 31, 2021 and December 31, 2020, respectively.
(2)		Includes loans HFS.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 5
		Three Months Ended
		March 31, 2021											December 31, 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		$	6,117,799			$	3,632			0.24	%		$	5,609,965			$	4,458			0.32	%
Resale agreements (2)		1,461,900				6,099				1.69	%		1,257,826				4,955				1.57	%
AFS debt securities		6,459,875				29,100				1.83	%		5,029,820				22,914				1.81	%
Loans (3)		38,729,307				342,008				3.58	%		37,725,725				348,578				3.68	%
FHLB and FRB stock		83,164				547				2.67	%		80,013				443				2.20	%
Total interest-earning assets		52,852,045				381,386				2.93	%		49,703,349				381,348				3.05	%
Noninterest-earning assets:
Cash and due from banks		580,277											580,989
Allowance for loan losses		(618,589		)									(618,207		)
Other assets		2,780,550											2,800,194
Total assets		$	55,594,283										$	52,466,325
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits		$	6,393,034			$	4,214			0.27	%		$	6,067,849			$	4,218			0.28	%
Money market deposits		11,573,847				4,711				0.17	%		10,626,940				5,542				0.21	%
Savings deposits		2,674,476				1,741				0.26	%		2,450,980				1,655				0.27	%
Time deposits		9,112,662				11,156				0.50	%		8,965,337				16,727				0.74	%
Federal funds purchased and other short-term borrowings		4,703				42				3.62	%		47,500				276				2.31	%
FHLB advances		652,758				3,069				1.91	%		653,748				3,137				1.91	%
Repurchase agreements (2)		300,000				1,978				2.67	%		335,737				2,080				2.46	%
Long-term debt and finance lease liabilities		152,088				780				2.08	%		518,468			(4)	1,132				0.87	%
Total interest-bearing liabilities		30,863,568				27,691				0.36	%		29,666,559				34,767				0.47	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits		18,093,696											16,311,010
Accrued expenses and other liabilities		1,298,921											1,245,553
Stockholders’ equity		5,338,098											5,243,203
Total liabilities and stockholders’ equity		$	55,594,283										$	52,466,325
Interest rate spread										2.57	%										2.58	%
Net interest income and net interest margin						$	353,695			2.71	%						$	346,581			2.77	%
Adjusted net interest income and adjusted net interest margin (5)						$	338,678			2.70	%						$	332,701			2.76	%

(1)		Annualized.
(2)		There was no netting of repurchase agreements against resale agreements for the three months ended March 31, 2021 and December 31, 2020.
(3)		Includes loans HFS.
(4)		Includes average balances of Federal Reserve Paycheck Protection Program Liquidity Facility ("PPPLF"), which was repaid in full during the fourth quarter of 2020.
(5)		Net interest income and net interest margin for the three months ended March 31, 2021 and December 31, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the three months ended December 31, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 13.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
		Three Months Ended
		March 31, 2021										March 31, 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		$	6,117,799			$	3,632		0.24	%		$	2,973,006			$	11,108		1.50	%
Resale agreements (2)		1,461,900				6,099			1.69	%		882,142				5,625			2.56	%
AFS debt securities		6,459,875				29,100			1.83	%		3,274,740				20,142			2.47	%
Loans (3)		38,729,307				342,008			3.58	%		35,153,968				411,869			4.71	%
FHLB and FRB stock		83,164				547			2.67	%		78,675				446			2.28	%
Total interest-earning assets		52,852,045				381,386			2.93	%		42,362,531				449,190			4.26	%
Noninterest-earning assets:
Cash and due from banks		580,277										510,512
Allowance for loan losses		(618,589		)								(492,297		)
Other assets		2,780,550										2,374,763
Total assets		$	55,594,283									$	44,755,509
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Checking deposits		$	6,393,034			$	4,214		0.27	%		$	5,001,672			$	10,246		0.82	%
Money market deposits		11,573,847				4,711			0.17	%		9,013,381				22,248			0.99	%
Savings deposits		2,674,476				1,741			0.26	%		2,076,270				1,817			0.35	%
Time deposits		9,112,662				11,156			0.50	%		10,264,007				42,092			1.65	%
Federal funds purchased and other short-term borrowings		4,703				42			3.62	%		59,978				556			3.73	%
FHLB advances		652,758				3,069			1.91	%		693,357				4,166			2.42	%
Repurchase agreements (2)		300,000				1,978			2.67	%		332,417				3,991			4.83	%
Long-term debt and finance lease liabilities		152,088				780			2.08	%		152,259				1,367			3.61	%
Total interest-bearing liabilities		30,863,568				27,691			0.36	%		27,593,341				86,483			1.26	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits		18,093,696										11,117,710
Accrued expenses and other liabilities		1,298,921										1,022,453
Stockholders’ equity		5,338,098										5,022,005
Total liabilities and stockholders’ equity		$	55,594,283									$	44,755,509
Interest rate spread									2.57	%									3.00	%
Net interest income and net interest margin						$	353,695		2.71	%						$	362,707		3.44	%
Adjusted net interest income and adjusted net interest margin (4)						$	338,678		2.70	%						$	362,707		3.44	%

(1)		Annualized.
(2)		There was no netting of repurchase agreements against resale agreements for the three months ended March 31, 2021. Average balances of resale and repurchase agreements for the three months ended March 31, 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 agreements were 1.69% and 2.50% for the three months ended March 31, 2021 and 2020, respectively. The weighted-average interest rates of gross repurchase agreements were 2.67% and 4.10% for the three months ended March 31, 2021 and 2020, respectively.
(3)		Includes loans HFS.
(4)		Net interest income and net interest margin have been adjusted for the impact of PPP loans. See reconciliation of GAAP to non-GAAP financial measures in Table 13.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 7
		Three Months Ended (1)									March 31, 2021 Basis Point Change
		March 31, 2021			December 31, 2020			March 31, 2020			Qtr-o-Qtr			Yr-o-Yr
Return on average assets		1.50	%		1.24	%		1.30	%		26		bps	20		bps
Adjusted return on average assets (2)		1.50	%		1.22	%		1.30	%		28			20
Return on average equity		15.57	%		12.45	%		11.60	%		312			397
Adjusted return on average equity (2)		15.57	%		12.26	%		11.60	%		331			397
Return on average tangible equity (2)		17.17	%		13.77	%		12.93	%		340			424
Adjusted return on average tangible equity (2)		17.17	%		13.56	%		12.93	%		361			424
Interest rate spread		2.57	%		2.58	%		3.00	%		(1	)		(43	)
Net interest margin		2.71	%		2.77	%		3.44	%		(6	)		(73	)
Adjusted net interest margin (2)		2.70	%		2.76	%		3.44	%		(6	)		(74	)
Average loan yield		3.58	%		3.68	%		4.71	%		(10	)		(113	)
Adjusted average loan yield (2)		3.60	%		3.69	%		4.71	%		(9	)		(111	)
Yield on average interest-earning assets		2.93	%		3.05	%		4.26	%		(12	)		(133	)
Average cost of interest-bearing deposits		0.30	%		0.40	%		1.17	%		(10	)		(87	)
Average cost of deposits		0.18	%		0.25	%		0.82	%		(7	)		(64	)
Average cost of funds		0.23	%		0.30	%		0.90	%		(7	)		(67	)
Adjusted pre-tax, pre-provision profitability ratio (2)		1.91	%		1.90	%		2.32	%		1			(41	)
Adjusted noninterest expense/average assets (2)		1.20	%		1.26	%		1.44	%		(6	)		(24	)
Efficiency ratio		44.79	%		42.90	%		43.12	%		189			167
Adjusted efficiency ratio (2)		38.68	%		39.76	%		38.40	%		(108	)	bps	28		bps

(1)		Annualized except for efficiency ratio.
(2)		See reconciliation of GAAP to non-GAAP financial measures in Tables 10, 11, 12 and 13.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 8
				Three Months Ended March 31, 2021
				Commercial								Consumer								Total
				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
Provision for (reversal of) credit losses on loans		(a)		3,839				(3,076		)		398				(113		)		1,048
Gross charge-offs				(8,436		)		(7,283		)		(179		)		(1		)		(15,899		)
Gross recoveries				760				1,651				80				2				2,493
Total net (charge-offs) recoveries				(7,676		)		(5,632		)		(99		)		1				(13,406		)
Foreign currency translation adjustment				(119		)		—				—				—				(119		)
Allowance for loan losses, March 31, 2021				$	394,084			$	192,895			$	18,509			$	2,018			$	607,506
				Three Months Ended December 31, 2020
				Commercial								Consumer								Total
				C&I				Total CRE				Total Residential Mortgage				Other Consumer				Total
Allowance for loan losses, September 30, 2020				$	389,021			$	201,018			$	25,895			$	2,318			$	618,252
Provision for (reversal of) credit losses on loans		(a)		15,041				12,837				(7,848		)		(184		)		19,846
Gross charge-offs				(8,759		)		(12,518		)		—				(5		)		(21,282		)
Gross recoveries				2,033				266				163				1				2,463
Total net (charge-offs) recoveries				(6,726		)		(12,252		)		163				(4		)		(18,819		)
Foreign currency translation adjustment				704				—				—				—				704
Allowance for loan losses, December 31, 2020				$	398,040			$	201,603			$	18,210			$	2,130			$	619,983
				Three Months Ended March 31, 2020
				Commercial								Consumer								Total
				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)		60,618				14,198				2,112				(2,272		)		74,656
Gross charge-offs				(11,977		)		(954		)		—				(26		)		(12,957		)
Gross recoveries				1,575				10,216				267				1				12,059
Total net (charge-offs) recoveries				(10,402		)		9,262				267				(25		)		(898		)
Foreign currency translation adjustment				(200		)		—				—				—				(200		)
Allowance for loan losses, March 31, 2020				$	362,629			$	160,367			$	30,703			$	3,304			$	557,003

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 8 (continued)
				Three Months Ended
				March 31, 2021				December 31, 2020			March 31, 2020
Unfunded Credit Facilities
Allowance for unfunded credit commitments, beginning of period (1)				$	33,577			$	29,083		$	11,158
Impact of ASU 2016-13 adoption				—				—			10,457
(Reversal of) provision for credit losses on unfunded credit commitments		(b)		(1,048		)		4,494			(786		)
Allowance for unfunded credit commitments, end of period (1)				$	32,529			$	33,577		$	20,829
Provision for credit losses		(a)+(b)		$	—			$	24,340		$	73,870

(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 9
Criticized Loans		March 31, 2021				December 31, 2020				March 31, 2020
Special mention loans		504,226				564,555				551,643
Classified loans		712,693				652,880				455,085
Total criticized loans		$	1,216,919			$	1,217,435			$	1,006,728
Nonperforming Assets		March 31, 2021				December 31, 2020				March 31, 2020
Nonaccrual loans:
Commercial:
C&I		$	125,536			$	133,939			$	89,079
Total CRE		74,727				50,214				7,101
Consumer:
Total residential mortgage		29,173				28,510				27,982
Other consumer		2,526				2,491				2,506
Total nonaccrual loans		231,962				215,154				126,668
Other real estate owned, net		15,824				15,824				19,504
Other nonperforming assets		10,360				3,890				4,758
Total nonperforming assets		$	258,146			$	234,868			$	150,930
Credit Quality Ratios		March 31, 2021				December 31, 2020				March 31, 2020
Annualized quarterly net charge-offs to average loans HFI		0.14		%		0.20		%		0.01		%
Special mention loans to loans HFI		1.27		%		1.47		%		1.54		%
Classified loans to loans HFI		1.80		%		1.70		%		1.27		%
Criticized loans to loans HFI		3.07		%		3.17		%		2.80		%
Nonperforming assets to total assets		0.45		%		0.45		%		0.33		%
Nonaccrual loans to loans HFI		0.59		%		0.56		%		0.35		%
Allowance for loan losses to loans HFI		1.53		%		1.61		%		1.55		%

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ and shares in thousands, except for per share data)
(unaudited)
Table 10
During the fourth quarter of 2020, the Company recorded $10.7 million in pre-tax recovery and $5.1 million in uncertain tax position related to the Company’s investment in DC Solar. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that adjust for the above discussed non-recurring items provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.
				Three Months Ended
				March 31, 2021				December 31, 2020				March 31, 2020
Net income		(a)		$	204,994			$	164,084			$	144,824
Adjustments related to DC Solar
Less: Recoveries (1)				—				(10,739		)		—
Tax effect of recoveries (2)				—				3,047				—
Add: Uncertain tax position recorded in income tax expense				—				5,127				—
Adjusted net income		(b)		$	204,994			$	161,519			$	144,824
Diluted weighted-average number of shares outstanding				142,844				142,529				145,285
Diluted EPS				$	1.44			$	1.15			$	1.00
Adjustments related to DC Solar
Recoveries, net of tax				—				(0.06		)		—
Uncertain tax position recorded in income tax expense				—				0.04				—
Adjusted diluted EPS				$	1.44			$	1.13			$	1.00
Average total assets		(c)		$	55,594,283			$	52,466,325			$	44,755,509
Average stockholders’ equity		(d)		$	5,338,098			$	5,243,203			$	5,022,005
Return on average assets (3)		(a)/(c)		1.50		%		1.24		%		1.30		%
Adjusted return on average assets (3)		(b)/(c)		1.50		%		1.22		%		1.30		%
Return on average equity (3)		(a)/(d)		15.57		%		12.45		%		11.60		%
Adjusted return on average equity (3)		(b)/(d)		15.57		%		12.26		%		11.60		%

(1)		Included in Amortization of tax credit and other investments on the Consolidated Statement of Income.
(2)		Applied statutory tax rate of 28.37% for the three months ended December 31, 2020.
(3)		Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 11
Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods.
				Three Months Ended
				March 31, 2021				December 31, 2020				March 31, 2020
Net interest income before provision for credit losses		(a)		$	353,695			$	346,581			$	362,707
Total noninterest income (1)				72,866				69,832				55,506
Total revenue		(b)		$	426,561			$	416,413			$	418,213
Total noninterest expense (1)		(c)		$	191,077			$	178,651			$	180,333
Less: Amortization of tax credit and other investments (1)				(25,358		)		(12,263		)		(18,782		)
Amortization of core deposit intangibles				(732		)		(823		)		(953		)
Adjusted noninterest expense		(d)		$	164,987			$	165,565			$	160,598
Efficiency ratio		(c)/(b)		44.79		%		42.90		%		43.12		%
Adjusted efficiency ratio		(d)/(b)		38.68		%		39.76		%		38.40		%
Adjusted pre-tax, pre-provision income		(b)-(d) = (e)		$	261,574			$	250,848			$	257,615
Average total assets		(f)		$	55,594,283			$	52,466,325			$	44,755,509
Adjusted pre-tax, pre-provision profitability ratio (2)		(e)/(f)		1.91		%		1.90		%		2.32		%
Adjusted noninterest expense/average assets (2)		(d)/(f)		1.20		%		1.26		%		1.44		%

(1)		In the 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 12
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.
				March 31, 2021				December 31, 2020				March 31, 2020
Stockholders’ equity		(a)		$	5,285,027			$	5,269,175			$	4,902,985
Less: Goodwill				(465,697		)		(465,697		)		(465,697		)
Other intangible assets (1)				(11,151		)		(11,899		)		(14,769		)
Tangible equity		(b)		$	4,808,179			$	4,791,579			$	4,422,519
Total assets		(c)		$	56,874,146			$	52,156,913			$	45,948,545
Less: Goodwill				(465,697		)		(465,697		)		(465,697		)
Other intangible assets (1)				(11,151		)		(11,899		)		(14,769		)
Tangible assets		(d)		$	56,397,298			$	51,679,317			$	45,468,079
Total stockholders’ equity to total assets ratio		(a)/(c)		9.29		%		10.10		%		10.67		%
Tangible equity to tangible assets ratio		(b)/(d)		8.53		%		9.27		%		9.73		%

Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets, recoveries and uncertain tax position related to DC Solar (where applicable). Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.
				Three Months Ended
				March 31, 2021				December 31, 2020				March 31, 2020
Net Income				$	204,994			$	164,084			$	144,824
Add: Amortization of core deposit intangibles				732				823				953
Amortization of mortgage servicing assets				414				428				584
Tax effect of amortization adjustments (2)				(325		)		(355		)		(436		)
Tangible net income		(e)		$	205,815			$	164,980			$	145,925
Adjustments related to DC Solar
Less: Recoveries (3)				—				(10,739		)		—
Tax effects of adjustments (2)				—				3,047				—
Add: Uncertain tax position recorded in income tax expense				—				5,127				—
Adjusted tangible net income		(f)		$	205,815			$	162,415			$	145,925
Average stockholders’ equity				$	5,338,098			$	5,243,203			$	5,022,005
Less: Average goodwill				(465,697		)		(465,697		)		(465,697		)
Average other intangible assets (1)				(11,594		)		(12,182		)		(15,588		)
Average tangible equity		(g)		$	4,860,807			$	4,765,324			$	4,540,720
Return on average tangible equity (4)		(e)/(g)		17.17		%		13.77		%		12.93		%
Adjusted return on average tangible equity (4)		(f)/(g)		17.17		%		13.56		%		12.93		%

(1)		Includes core deposit intangibles and mortgage servicing assets.
(2)		Applied statutory tax rates of 28.37% for the three months ended March 31, 2021 and December 31, 2020, and 28.35% for the three months ended March 31, 2020.
(3)		Included in Amortization of tax credit and other investments on the Consolidated Statement of Income.
(4)		Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 13
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 signed by the President on December 27, 2020. 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 months ended March 31, 2021 and December 31, 2020 exclude the impact of PPP loans. Net interest margin for the three months ended December 31, 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
Yield on Average Loans				March 31, 2021				December 31, 2020					March 31, 2020
Interest income on loans		(a)		$	342,008			$	348,578				$	411,869
Less: Interest income on PPP loans				(15,017		)		(14,204		)			—
Adjusted interest income on loans		(b)		$	326,991			$	334,374				$	411,869
Average loans		(c)		$	38,729,307			$	37,725,725				$	35,153,968
Less: Average PPP loans				(1,931,071		)		(1,704,608		)			—
Adjusted average loans		(d)		$	36,798,236			$	36,021,117				$	35,153,968
Average loan yield (1)		(a)/(c)		3.58		%		3.68			%		4.71		%
Adjusted average loan yield (1)		(b)/(d)		3.60		%		3.69			%		4.71		%
Net Interest Margin
Net interest income		(e)		$	353,695			$	346,581				$	362,707
Less: Interest income on PPP loans				(15,017		)		(14,204		)			—
Add: Interest expense on advances from the PPPLF				—				324					—
Adjusted net interest income		(f)		$	338,678			$	332,701				$	362,707
Average interest-earning assets		(g)		$	52,852,045			$	49,703,349				$	42,362,531
Less: Average PPP loans				(1,931,071		)		(1,704,608		)			—
Adjusted average interest-earning assets		(h)		$	50,920,974			$	47,998,741				$	42,362,531
Net interest margin (1)		(e)/(g)		2.71		%		2.77			%		3.44		%
Adjusted net interest margin (1)		(f)/(h)		2.70		%		2.76			%		3.44		%

(1)

Annualized.

 

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