East West Bancorp Inc.

10/21/2021 | Press release | Distributed by Public on 10/21/2021 07:57

EAST WEST BANCORP REPORTS NET INCOME FOR THIRD QUARTER 2021 OF $225 MILLION AND DILUTED EARNINGS PER SHARE OF $1.57 - Form 8-K

EAST WEST BANCORP REPORTS NET INCOME FOR THIRD QUARTER 2021
OF $225 MILLION AND DILUTED EARNINGS PER SHARE OF $1.57

Pasadena, California - October 21, 2021 - East West Bancorp, Inc. ("East West" or the "Company") (Nasdaq: EWBC), parent company of East West Bank, today reported its financial results for the third quarter of 2021. Third quarter 2021 net income was $225.4 million, or $1.57 per diluted share; return on average assets was 1.46%, and return on average equity was 15.75%.

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

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

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

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

FINANCIAL HIGHLIGHTS

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

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

BALANCE SHEET

•Record Assets - Total assets reached $61.0 billion as of September 30, 2021, up by $1.1 billion, or 7% annualized, from $59.9 billion as of June 30, 2021. Year-over-year, total assets grew 21% from $50.4 billion as of September 30, 2020.

Third quarter 2021 average interest-earning assets of $58.2 billion grew by $3.3 billion, or 24% linked quarter annualized. The growth in average interest-earning assets mainly consisted of a $2.0 billion increase in average interest-bearing cash and deposits with banks, a $785.7 million increase in average available-for-sale ("AFS") debt securities, and a $337.9 million increase in average loans. Excluding Paycheck Protection Program ("PPP") loans, average loans grew by $1.1 billion.

•Record Loans - Total loans reached $40.5 billion as of September 30, 2021, up by $408.4 million, or 4% annualized, from $40.1 billion as of June 30, 2021. Excluding PPP loans, total loans grew by $1.0 billion, or 11% linked quarter annualized. During the third quarter of 2021, $645.0 million of PPP loans outstanding were forgiven by the Small Business Administration ("SBA"). PPP loans totaled $807.3 million as of September 30, 2021. Year-over-year, total loans, excluding PPP, grew 11% from $35.7 billion as of September 30, 2020.

Third quarter 2021 average loans of $40.0 billion grew by $337.9 million, or 3% linked quarter annualized. Excluding PPP loans, average loans grew by $1.1 billion, or 12% annualized, from the second quarter of 2021. The strongest growth was from average C&I loans excluding PPP, which increased 16% linked quarter annualized, followed by residential mortgage loans, which also increased 16% linked quarter annualized. Average total CRE loans grew by 5% linked quarter annualized.

•Record Deposits - Total deposits reached $53.4 billion as of September 30, 2021, up by $773.6 million, or 6% annualized, from $52.6 billion as of June 30, 2021, and up 28% year-over-year from $41.7 billion as of September 30, 2020. Noninterest-bearing demand deposits reached a record $23.2 billion as of September 30, 2021, up by $1.4 billion, or 25% annualized, from $21.8 billion as of June 30, 2021, and up 55% year-over-year from $14.9 billion as of September 30, 2020. Noninterest-bearing demand deposits made up 43% of total deposits as of September 30, 2021, up from 41% as of June 30, 2021 and 36% as of September 30, 2020.

Third quarter 2021 average deposits of $53.5 billion grew by $3.3 billion, or 26% linked quarter annualized. Growth in the third quarter was led by noninterest-bearing demand deposits, which increased by $3.5 billion or 69% linked quarter annualized. Time deposits decreased quarter-over-quarter, reflecting run-off of higher rate certificates of deposit.

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

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

OPERATING RESULTS

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

Third Quarter 2021 Compared to Second Quarter 2021

Net Interest Income and Net Interest Margin
Net interest income ("NII") totaled $395.7 million, an increase of 20% annualized from $376.5 million. Net interest margin ("NIM") of 2.70% decreased by five basis points from 2.75%.
•Excluding the impact of PPP loans, adjusted NII4 totaled $380.5 million, an increase of 21% annualized from $361.1 million. PPP loans contributed $15.2 million to NII in the third quarter, compared with $15.4 million in the second quarter.
•NII growth reflected growth in average balances of loans, securities and other earning assets, as well as the benefit of a lower cost of funds, partially offset by lower yields on earning assets.
•Adjusted NIM4 of 2.64% declined by nine basis points from 2.73%. The quarter-over-quarter adjusted NIM compression was largely due to the $2.0 billion growth in average interest-bearing cash and deposits with banks, which earned an average yield of 0.25% in the third quarter. Strong deposit growth in excess of loan growth drove the increase in these assets.
•The third quarter adjusted average loan yield4 of 3.56% was two basis points lower than 3.58% for the second quarter.
•The average cost of funds of 0.14% decreased by four basis points from 0.18%. This reflected growth in noninterest-bearing demand deposits, the payoff of higher-cost FHLB advances that matured during the second quarter, and a continued decline in the cost of interest-bearing deposits.

Noninterest Income
Noninterest income totaled $73.1 million in the third quarter, up $4.7 million, or 7%, from $68.4 million in the second quarter.
•Quarter-over-quarter, deposit account fees grew, due to growth in treasury management services, and gains on sale of SBA loans increased, due to a higher volume of SBA 7A loans sold. This was offset by decreases in lending fees and wealth management fees.
•Interest rate contracts ("IRC") and other derivative income was $7.2 million in the third quarter, compared to a loss of $3.2 million in the second quarter. The quarter-over-quarter increase was due to a favorable change in credit valuation adjustment, which reflected an increase in long-term benchmark interest rates, as well as higher customer-driven IRC revenue.

4 See reconciliation of GAAP to non-GAAP financial measures in Table 14.
3

Noninterest Expense
Noninterest expense totaled $205.4 million. Third quarter noninterest expense consisted of $166.7 million of adjusted noninterest expense5, $38.0 million in amortization of tax credit and other investments, and $0.7 million in amortization of core deposit intangibles.
•Adjusted noninterest expense of $166.7 million increased by 3% from $161.5 million in the second quarter. The largest quarter-over-quarter change was in other operating expense, which increased to $21.0 million, compared with $17.9 million in the second quarter, due to higher loan-related expenses and charitable contributions.
•Amortization of tax credit and other investments totaled $38.0 million, compared with $27.3 million in the second quarter. The quarter-over-quarter change in the amortization of tax credits and other investments partially reflects the impact of investments that closed in the third quarter. For the fourth quarter, the Company expects the amortization of tax credit and other investments to be approximately $30 million.
•The adjusted efficiency ratio5 was 35.6% in the third quarter, compared with 36.3% in the second quarter.

TAX RELATED ITEMS

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

ASSET QUALITY

Quarter-over-quarter, nonperforming assets decreased by 24%, to 0.28% of total assets, and criticized loans were down 2%, to 2.50% of loans held-for-investment ("HFI"). The allowance for loan losses ("ALLL") totaled $560.4 million, or 1.38% of loans HFI, as of September 30, 2021, compared with $585.7 million, or 1.46% of loans HFI, as of June 30, 2021.
1
•Quarter-over-quarter, the ALLL decreased by $25.3 million, and the ALLL coverage ratio of loans HFI decreased by eight basis points. The change in the ALLL largely reflects an improved macroeconomic forecast as of September 30, 2021, compared with June 30, 2021. Consequently, the Company recorded a negative $10.0 million provision for credit losses during the third quarter of 2021.
•Third quarter 2021 net charge-offs were $13.5 million, or annualized 0.13% of average loans HFI, essentially unchanged from $13.3 million, or annualized 0.13% of average loans HFI, for the second quarter of 2021.
•Quarter-over-quarter, nonperforming assets decreased by $53.1 million, or 24%, and the nonperforming asset ratio improved by 10 basis points. As of September 30, 2021, nonperforming assets were $172.6 million, or 0.28% of total assets, compared with $225.7 million, or 0.38% of total assets, as of June 30, 2021.
•Quarter-over-quarter, criticized loans decreased by $21.7 million, or 2%, and the criticized loans ratio improved by eight basis points. As of September 30, 2021, criticized loans totaled $1,010 million, or 2.50% of loans HFI, compared with $1,032 million, or 2.58% of loans HFI, as of June 30, 2021.

5 See reconciliation of GAAP to non-GAAP financial measures in Table 12.
4

CAPITAL STRENGTH

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

EWBC Risk-Based Capital Ratios
($ in millions)
September 30, 2021 (a)
June 30, 2021 (a)
September 30, 2020 (a)
CET1 capital ratio 12.8% 12.8% 12.8%
Tier 1 capital ratio 12.8% 12.8% 12.8%
Total capital ratio 14.2% 14.3% 14.5%
Leverage ratio 8.8% 9.1% 9.8%
Risk-Weighted Assets ("RWA") (b)
$42,128 $40,609 $36,922
(a)The Company has elected to use the 2020 CECL transition provision in the calculation of its September 30, 2021, June 30, 2021 and September 30, 2020 regulatory capital ratios. The Company's September 30, 2021 regulatory capital ratios and RWA are preliminary.
(b)Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.

DIVIDEND PAYOUT AND CAPITAL ACTIONS

East West's Board of Directors has declared fourth quarter 2021 dividends for the Company's common stock. The common stock cash dividend of $0.33 per share is payable on November 15, 2021, to stockholders of record on November 1, 2021.

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

Conference Call

East West will host a conference call to discuss third quarter 2021 earnings with the public on Thursday, October 21, 2021 at 8:30 a.m. PT/11:30 a.m. ET. The public and investment community are invited to listen as management discusses third quarter 2021 results and operating developments.
•The following dial-in information is provided for participation in the conference call: calls within the U.S. - (877) 506-6399; calls within Canada - (855) 669-9657; international calls - (412) 902-6699.
•A presentation to accompany the earnings call will be available on the Investor Relations page of the Company's website at www.eastwestbank.com/investors.
•A listen-only live broadcast of the call will also be available on the Investor Relations page of the Company's website at www.eastwestbank.com/investors.
•A replay of the conference call will be available on October 21, 2021 at 11:30 a.m. PT through November 21, 2021. The replay numbers are: within the U.S. - (877) 344-7529; within Canada - (855) 669-9658; international calls - (412) 317-0088; and the replay access code is: 10160606.

5

About East West

East West Bancorp, Inc. is a public company with total assets of $61.0 billion and is traded on the Nasdaq Global Select Market under the symbol "EWBC". The Company's wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California, operating over 120 locations in the United States and in China. The Company's markets in the United States include California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In China, East West's presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, and Xiamen. For more information on East West, visit the Company's website at www.eastwestbank.com.

Forward-Looking Statements
Certain matters set forth herein (including any exhibits hereto) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the U.S. Securities and Exchange Commission (the "SEC") and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are statements that are not historical facts, and are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company's control, such as the future impacts of the COVID-19 pandemic. These statements relate to the Company's financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as "likely result in," "expects," "anticipates," "estimates," "forecasts," "projects," "intends to," "assumes," "believes," "plans," "trend," "objective," "continues," "remains," "will," "would," "should," "could," "may," "might," "can," or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

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

For a more detailed discussion of some of the factors that might cause such differences, see the Company's 2020 Form 10-K under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in the Company's Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.
6

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in thousands, except per share data)
(unaudited)
Table 1
September 30, 2021
% or Basis Point Change
September 30, 2021 June 30, 2021 September 30, 2020 Qtr-o-Qtr Yr-o-Yr
Assets
Cash and due from banks $ 594,631 $ 626,716 $ 503,376 (5.1) % 18.1 %
Interest-bearing cash with banks 4,258,270 5,371,089 4,003,565 (20.7) 6.4
Cash and cash equivalents 4,852,901 5,997,805 4,506,941 (19.1) 7.7
Interest-bearing deposits with banks 855,162 830,279 699,465 3.0 22.3
Assets purchased under resale agreements ("resale agreements") 2,596,142 2,299,184 1,210,000 12.9 114.6
Available-for-sale ("AFS") debt securities (amortized cost of $9,783,180, $8,411,142 and $4,471,694) 9,713,006 8,399,460 4,539,160 15.6 114.0
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock
77,200 76,931 79,172 0.3 (2.5)
Loans held-for-sale ("HFS") - 1,819 4,148 (100.0) (100.0)
Loans held-for-investment (''HFI'') (net of allowance for loan losses of $560,404, $585,724 and $618,252) 39,921,301 39,485,775 36,818,877 1.1 8.4
Investments in qualified affordable housing partnerships, net
297,367 287,432 192,913 3.5 54.1
Investments in tax credit and other investments, net
367,428 364,187 254,512 0.9 44.4
Goodwill 465,697 465,697 465,697 - -
Operating lease right-of-use assets 99,785 102,609 96,092 (2.8) 3.8
Other assets 1,713,121 1,543,698 1,504,500 11.0 13.9
Total assets $ 60,959,110 $ 59,854,876 $ 50,371,477 1.8 % 21.0 %
Liabilities and Stockholders' Equity
Deposits $ 53,356,190 $ 52,582,575 $ 41,680,555 1.5 % 28.0 %
Short-term borrowings - - 59,613 - (100.0)
FHLB advances 248,898 248,464 657,185 0.2 (62.1)
Assets sold under repurchase agreements ("repurchase agreements") 300,000 300,000 348,063 - (13.8)
Long-term debt and finance lease liabilities 151,795 151,997 1,579,317
(1)
(0.1) (90.4)
Operating lease liabilities 107,107 110,105 103,673 (2.7) 3.3
Accrued expenses and other liabilities 1,104,919 914,187 816,965 20.9 35.2
Total liabilities 55,268,909 54,307,328 45,245,371 1.8 22.2
Stockholders' equity 5,690,201 5,547,548 5,126,106 2.6 11.0
Total liabilities and stockholders' equity $ 60,959,110 $ 59,854,876 $ 50,371,477 1.8 % 21.0 %
Book value per common share $ 40.10 $ 39.10 $ 36.22 2.6 % 10.7 %
Tangible equity (2) per common share
$ 36.75 $ 35.75 $ 32.85 2.8 11.9
Number of common shares at period-end 141,884 141,878 141,507 0.0 0.3
Tangible equity to tangible assets ratio (2)
8.62 % 8.54 % 9.32 % 8 bps (70) bps
(1)Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility ("PPPLF") as of September 30, 2020.
(2)See reconciliation of GAAP to non-GAAP financial measures in Table 13.
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EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
September 30, 2021
% Change
September 30, 2021 June 30, 2021 September 30, 2020 Qtr-o-Qtr Yr-o-Yr
Loans:
Commercial:
Commercial and industrial ("C&I") (1)
$ 13,831,649 $ 13,790,461 $ 13,305,024 0.3 % 4.0 %
Commercial real estate ("CRE"):
CRE
11,818,065 11,711,369 11,037,987 0.9 7.1
Multifamily residential
3,340,378 3,219,796 3,057,274 3.7 9.3
Construction and land
376,921 460,678 578,407 (18.2) (34.8)
Total CRE
15,535,364 15,391,843 14,673,668 0.9 5.9
Consumer:
Residential mortgage:
Single-family residential
9,021,801 8,869,370 7,785,759 1.7 15.9
Home equity lines of credit ("HELOCs") 1,963,622 1,872,166 1,514,388 4.9 29.7
Total residential mortgage
10,985,423 10,741,536 9,300,147 2.3 18.1
Other consumer
129,269 147,659 158,290 (12.5) (18.3)
Total loans HFI (2)
40,481,705

40,071,499

37,437,129 1.0 8.1
Loans HFS
- 1,819 4,148 (100.0) (100.0)
Total loans (2)
40,481,705 40,073,318 37,441,277 1.0 8.1
Allowance for loan losses (560,404) (585,724) (618,252) (4.3) (9.4)
Net loans (2)
$ 39,921,301 $ 39,487,594 $ 36,823,025 1.1 8.4
Deposits:
Noninterest-bearing demand
$ 23,175,471 $ 21,816,721 $ 14,924,917 6.2 % 55.3 %
Interest-bearing checking
6,530,601 6,762,178 5,731,573 (3.4) 13.9
Money market
12,555,879 12,853,812 9,553,574 (2.3) 31.4
Savings
2,855,597 2,719,106 2,401,318 5.0 18.9
Time deposits
8,238,642 8,430,758 9,069,173 (2.3) (9.2)
Total deposits
$ 53,356,190 $ 52,582,575 $ 41,680,555 1.5 % 28.0 %
(1)Includes $807.3 million, $1.43 billion and $1.77 billion of Paycheck Protection Program ("PPP") loans as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(2)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(54.3) million, $(67.0) million and $(67.0) million as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively. Net origination fees related to PPP loans were $(13.5) million, $(25.9) million and $(22.6) million as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.

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EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 3
Three Months Ended September 30, 2021
% Change
September 30, 2021 June 30, 2021 September 30, 2020 Qtr-o-Qtr Yr-o-Yr
Interest and dividend income (1)
$ 415,307 $ 399,333 $ 365,728 4.0 % 13.6 %
Interest expense
19,601 22,860 41,598 (14.3) (52.9)
Net interest income before provision for credit losses
395,706 376,473 324,130 5.1 22.1
(Reversal of) provision for credit losses (10,000) (15,000) 10,000 (33.3) NM
Net interest income after provision for credit losses
405,706 391,473 314,130 3.6 29.2
Noninterest income 73,109 68,431 54,503
(2)
6.8 34.1
Noninterest expense 205,384 189,523 172,573
(2)
8.4 19.0
Income before income taxes
273,431 270,381 196,060 1.1 39.5
Income tax expense
47,982 45,639 36,523 5.1 31.4
Net income
$ 225,449 $ 224,742 $ 159,537 0.3 % 41.3 %
Earnings per share ("EPS")
- Basic
$ 1.59 $ 1.58 $ 1.13 0.3 % 40.9 %
- Diluted
$ 1.57 $ 1.57 $ 1.12 0.2 40.2
Weighted-average number of shares outstanding
- Basic
141,880 141,868 141,498 0.0 % 0.3 %
- Diluted
143,143 143,040 142,043 0.1 0.8
Three Months Ended September 30, 2021
% Change
September 30, 2021 June 30, 2021 September 30, 2020 Qtr-o-Qtr Yr-o-Yr
Noninterest income:
Lending fees
$ 17,516 $ 21,092 $ 18,736 (17.0) % (6.5) %
Deposit account fees 18,508 17,342 12,573 6.7 47.2
Interest rate contracts and other derivative income (loss) 7,156 (3,172) 5,538 (325.6) 29.2
Foreign exchange income
13,101 13,007 3,310 0.7 295.8
Wealth management fees
5,598 7,951 4,553 (29.6) 23.0
Net gains on sales of loans
3,329 1,491 361 123.3 822.2
Gains on sales of AFS debt securities
354 632 698 (44.0) (49.3)
Other investment income 5,349 7,596 5,239
(2)
(29.6) 2.1
Other income
2,198 2,492 3,495 (11.8) (37.1)
Total noninterest income $ 73,109 $ 68,431 $ 54,503
(2)
6.8 % 34.1 %
Noninterest expense:
Compensation and employee benefits
$ 105,751 $ 105,426 $ 99,756 0.3 % 6.0 %
Occupancy and equipment expense
15,851 15,377 16,648 3.1 (4.8)
Deposit insurance premiums and regulatory assessments
4,641 4,274 4,006 8.6 15.9
Deposit account expense 4,136 3,817 3,113 8.4 32.9
Data processing 3,575 4,035 3,590 (11.4) (0.4)
Computer software expense 8,426 7,521 8,539 12.0 (1.3)
Consulting expense 1,635 1,868 1,224 (12.5) 33.6
Legal expense
2,363 1,975 1,366 19.6 73.0
Other operating expense
20,998 17,939 17,122 17.1 22.6
Amortization of tax credit and other investments 38,008 27,291 17,209
(2)
39.3 120.9
Total noninterest expense $ 205,384 $ 189,523 $ 172,573
(2)
8.4 % 19.0 %
NM - Not meaningful.
(1)Includes $15.2 million, $15.4 million and $7.8 million of interest income related to PPP loans for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(2)Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. September 30, 2020 comparative amounts have been revised to conform with the current presentation.
9

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 4
Nine Months Ended September 30, 2021
% Change
September 30, 2021 September 30, 2020 Yr-o-Yr
Interest and dividend income (1)
$ 1,196,026 $ 1,213,694 (1.5)%
Interest expense
70,152 183,082 (61.7)
Net interest income before provision for credit losses
1,125,874 1,030,612 9.2
(Reversal of ) provision for credit losses (25,000) 186,313 (113.4)
Net interest income after provision for credit losses
1,150,874 844,299 36.3
Noninterest income 214,406 165,715
(2)
29.4
Noninterest expense 585,984 537,671
(2)
9.0
Income before income taxes
779,296 472,343 65.0
Income tax expense
124,111 68,630 80.8
Net income
$ 655,185 $ 403,713 62.3%
EPS
- Basic
$ 4.62 $ 2.83 63.2%
- Diluted
$ 4.58 $ 2.82 62.3
Weighted-average number of shares outstanding
- Basic
141,799 142,595 (0.6)%
- Diluted
143,051 143,082 (0.0)
Nine Months Ended September 30, 2021
% Change
September 30, 2021 September 30, 2020 Yr-o-Yr
Noninterest income:
Lending fees
$ 56,965 $ 56,455 0.9%
Deposit account fees
51,233 33,892 51.2
Interest rate contracts and other derivative income 20,981 18,718 12.1
Foreign exchange income
35,634 15,691 127.1
Wealth management fees
20,460 12,997 57.4
Net gains on sales of loans
6,601 1,443 357.4
Gains on sales of AFS debt securities 1,178 11,867 (90.1)
Other investment income 13,870 6,652
(2)
108.5
Other income
7,484 8,000 (6.5)
Total noninterest income $ 214,406 $ 165,715
(2)
29.4%
Noninterest expense:
Compensation and employee benefits
$ 318,985 $ 298,671 6.8%
Occupancy and equipment expense
47,150 49,941 (5.6)
Deposit insurance premiums and regulatory assessments
12,791 11,133 14.9
Deposit account expense 11,845 10,029 18.1
Data processing
12,088 11,896 1.6
Computer software expense
23,106 22,006 5.0
Consulting expense
4,978 3,854 29.2
Legal expense
5,840 6,093 (4.2)
Other operating expense
58,544 57,489 1.8
Amortization of tax credit and other investments 90,657 57,819
(2)
56.8
Repurchase agreements' extinguishment cost - 8,740 (100.0)
Total noninterest expense $ 585,984 $ 537,671
(2)
9.0%
(1)Includes $45.6 million and $29.1 million of interest income related to PPP loans for the nine months ended September 30, 2021 and 2020, respectively.
(2)Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. September 30, 2020 comparative amounts have been revised to conform with the current presentation.
10

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
Three Months Ended September 30, 2021
% Change 		Nine Months Ended September 30, 2021
% Change
September 30, 2021 June 30,
2021 		September 30, 2020 Qtr-o-Qtr Yr-o-Yr September 30, 2021 September 30, 2020 Yr-o-Yr
Loans:
Commercial:
C&I (1)
$ 13,531,338 $ 13,811,966 $ 13,235,845 (2.0)% 2.2% $ 13,678,462 $ 12,988,486 5.3%
CRE:
CRE
11,747,607 11,616,916 10,942,780 1.1 7.4 11,564,946 10,747,669 7.6
Multifamily residential
3,248,281 3,125,001 3,107,294 3.9 4.5 3,139,209 2,995,227 4.8
Construction and land
415,812 477,860 564,219 (13.0) (26.3) 480,514 599,957 (19.9)
Total CRE
15,411,700 15,219,777 14,614,293 1.3 5.5 15,184,669 14,342,853 5.9
Consumer:
Residential mortgage:
Single-family residential
8,962,533 8,650,706 7,695,838 3.6 16.5 8,645,135 7,487,347 15.5
HELOCs
1,912,629 1,800,213 1,475,098 6.2 29.7 1,793,928 1,454,237 23.4
Total residential mortgage
10,875,162 10,450,919 9,170,936 4.1 18.6 10,439,063 8,941,584 16.7
Other consumer
141,951 139,608 139,371 1.7 1.9 139,557 214,936 (35.1)
Total loans (2)
$ 39,960,151 $ 39,622,270 $ 37,160,445 0.9% 7.5% $ 39,441,751 $ 36,487,859 8.1%
Interest-earning assets
$ 58,239,480 $ 54,901,209 $ 47,428,586 6.1% 22.8% $ 55,350,645 $ 45,076,734 22.8%
Total assets
$ 61,359,533 $ 57,771,837 $ 50,247,259 6.2% 22.1% $ 58,263,002 $ 47,753,030 22.0%
Deposits:
Noninterest-bearing demand
$ 23,169,323 $ 19,717,315 $ 14,296,475 17.5% 62.1% $ 20,345,370 $ 12,987,813 56.6%
Interest-bearing checking
6,646,515 6,671,358 5,663,873 (0.4) 17.3 6,571,231 5,119,568 28.4
Money market
12,604,827 12,596,515 9,981,704 0.1 26.3 12,262,173 9,630,918 27.3
Savings
2,792,702 2,676,865 2,259,788 4.3 23.6 2,715,114 2,162,365 25.6
Time deposits
8,283,265 8,518,936 9,008,907 (2.8) (8.1) 8,635,249 9,633,582 (10.4)
Total deposits
$ 53,496,632 $ 50,180,989 $ 41,210,747 6.6% 29.8% $ 50,529,137 $ 39,534,246 27.8%
Interest-bearing liabilities
$ 31,039,410 $ 31,394,114 $ 29,552,756 (1.1)% 5.0% $ 31,099,675 $ 28,506,736 9.1%
Stockholders' equity
$ 5,680,306 $ 5,425,952 $ 5,079,351 4.7% 11.8% $ 5,482,705 $ 5,028,122 9.0%
(1)Includes average balances of PPP loans of $1.11 billion, $1.87 billion and $1.76 billion for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, and $1.63 billion and $1.08 billion for the nine months ended September 30, 2021 and 2020, respectively.
(2)Includes loans HFS.

11

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
Three Months Ended
September 30, 2021 June 30, 2021
Average Average Average Average
Balance Interest
Yield/Rate (1)
Balance Interest
Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with banks
$ 7,036,823 $ 4,521 0.25 % $ 5,072,225 $ 3,628 0.29 %
Resale agreements 2,382,741 8,957 1.49 % 2,129,567 8,021 1.51 %
AFS debt securities
8,782,682 37,826 1.71 % 7,997,005 34,690 1.74 %
Loans (2)
39,960,151 363,503 3.61 % 39,622,270 352,453 3.57 %
FHLB and FRB stock
77,083 500 2.57 % 80,142 541 2.71 %
Total interest-earning assets
58,239,480 415,307 2.83 % 54,901,209 399,333 2.92 %
Noninterest-earning assets:
Cash and due from banks
627,640 600,053
Allowance for loan losses (584,827) (607,523)
Other assets
3,077,240 2,878,098
Total assets
$ 61,359,533 $ 57,771,837
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Checking deposits
$ 6,646,515 $ 3,186 0.19 % $ 6,671,358 $ 3,777 0.23 %
Money market deposits
12,604,827 3,446 0.11 % 12,596,515 3,712 0.12 %
Savings deposits
2,792,702 1,943 0.28 % 2,676,865 2,078 0.31 %
Time deposits
8,283,265 7,395 0.35 % 8,518,936 8,431 0.40 %
Federal funds purchased and other short-term borrowings
620 - - % 336 - - %
FHLB advances
248,614 857 1.37 % 474,887 2,099 1.77 %
Repurchase agreements 310,997 2,012 2.57 % 303,118 1,991 2.63 %
Long-term debt and finance lease liabilities
151,870 762 1.99 % 152,099 772 2.04 %
Total interest-bearing liabilities
31,039,410 19,601 0.25 % 31,394,114 22,860 0.29 %
Noninterest-bearing liabilities and stockholders' equity:
Demand deposits
23,169,323 19,717,315
Accrued expenses and other liabilities
1,470,494 1,234,456
Stockholders' equity
5,680,306 5,425,952
Total liabilities and stockholders' equity
$ 61,359,533 $ 57,771,837
Interest rate spread
2.58 % 2.63 %
Net interest income and net interest margin
$ 395,706 2.70 % $ 376,473 2.75 %
Adjusted net interest income and adjusted net interest margin (3)
$ 380,494 2.64 % $ 361,096 2.73 %
(1)Annualized.
(2)Includes loans HFS.
(3)Net interest income and net interest margin for the three months ended September 30, 2021 and June 30, 2021 have been adjusted for the impact of PPP loans. See reconciliation of GAAP to non-GAAP financial measures in Table 14.
12

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

13

EAST WEST BANCORP, INC. AND SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
Nine Months Ended
September 30, 2021 September 30, 2020
Average Average Average Average
Balance Interest
Yield/Rate (1)
Balance Interest
Yield/Rate (1)
Assets
Interest-earning assets:
Interest-bearing cash and deposits with banks
$ 6,078,982 $ 11,781 0.26 % $ 3,775,242 $ 20,717 0.73 %
Resale agreements (2)
1,994,776 23,077 1.55 % 1,048,923 16,434 2.09 %
AFS debt securities 7,755,029 101,616 1.75 % 3,685,837 59,639 2.16 %
Loans (3)
39,441,751 1,057,964 3.59 % 36,487,859 1,115,804 4.08 %
FHLB and FRB stock
80,107 1,588 2.65 % 78,873 1,100 1.86 %
Total interest-earning assets
55,350,645 1,196,026 2.89 % 45,076,734 1,213,694 3.60 %
Noninterest-earning assets:
Cash and due from banks
602,830 510,750
Allowance for loan losses
(603,523) (563,912)
Other assets
2,913,050 2,729,458
Total assets
$ 58,263,002 $ 47,753,030
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Checking deposits
$ 6,571,231 $ 11,177 0.23 % $ 5,119,568 $ 19,995 0.52 %
Money market deposits
12,262,173 11,869 0.13 % 9,630,918 37,178 0.52 %
Savings deposits
2,715,114 5,762 0.28 % 2,162,365 4,743 0.29 %
Time deposits
8,635,250 26,982 0.42 % 9,633,582 94,684 1.31 %
Federal funds purchased and other short-term borrowings
1,871 42 3.00 % 128,846 1,228 1.27 %
FHLB advances
457,273 6,025 1.76 % 667,935 10,655 2.13 %
Repurchase agreements (2)
304,745 5,981 2.62 % 355,923 9,686 3.64 %
Long-term debt and finance lease liabilities
152,018 2,314 2.04 % 807,599
(4)
4,913 0.81 %
Total interest-bearing liabilities
31,099,675 70,152 0.30 % 28,506,736 183,082 0.86 %
Noninterest-bearing liabilities and stockholders' equity:
Demand deposits
20,345,370 12,987,813
Accrued expenses and other liabilities
1,335,252 1,230,359
Stockholders' equity
5,482,705 5,028,122
Total liabilities and stockholders' equity
$ 58,263,002 $ 47,753,030
Interest rate spread
2.59 % 2.74 %
Net interest income and net interest margin
$ 1,125,874 2.72 % $ 1,030,612 3.05 %
Adjusted net interest income and adjusted net interest margin (5)
$ 1,080,268 2.69 % $ 1,003,267 3.05 %
(1)Annualized.
(2)Average balances of resale and repurchase agreements for the nine months ended September 30, 2020 have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale and gross repurchase agreements for the nine months ended September 30, 2020 were 2.09% and 3.48%, respectively.
(3)Includes loans HFS.
(4)Primarily includes average balances of PPPLF, which was repaid in full during the fourth quarter of 2020.
(5)Net interest income and net interest margin for the nine months ended September 30, 2021 and September 30, 2020 have been adjusted for the impact of PPP loans. Net interest margin for the nine months ended September 30, 2020 has been adjusted for advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 14.

14

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
Three Months Ended (1)
September 30, 2021
Basis Point Change
September 30,
2021 		June 30,
2021 		September 30,
2020 		Qtr-o-Qtr Yr-o-Yr
Return on average assets
1.46 % 1.56 % 1.26 % (10) bps 20 bps
Return on average equity
15.75 % 16.61 % 12.50 % (86) 325
Return on average tangible equity (2)
17.25 % 18.28 % 13.88 % (103) 337
Interest rate spread
2.58 % 2.63 % 2.51 % (5) 7
Net interest margin
2.70 % 2.75 % 2.72 % (5) (2)
Adjusted net interest margin (2)
2.64 % 2.73 % 2.77 % (9) (13)
Average loan yield
3.61 % 3.57 % 3.60 % 4 1
Adjusted average loan yield (2)
3.56 % 3.58 % 3.70 % (2) (14)
Yield on average interest-earning assets
2.83 % 2.92 % 3.07 % (9) (24)
Average cost of interest-bearing deposits
0.21 % 0.24 % 0.50 % (3) (29)
Average cost of deposits
0.12 % 0.14 % 0.33 % (2) (21)
Average cost of funds
0.14 % 0.18 % 0.38 % (4) (24)
Adjusted pre-tax, pre-provision profitability ratio (2)
1.95 % 1.97 % 1.78 % (2) 17
Adjusted noninterest expense/average assets (2)
1.08 % 1.12 % 1.22 % (4) (14)
Efficiency ratio
43.81 % 42.60 % 45.58 % 121 (177)
Adjusted efficiency ratio (2)
35.55 % 36.30 % 40.79 % (75) bps (524) bps
Nine Months Ended (1)
September 30, 2021
Basis Point Change
September 30,
2021 		September 30,
2020 		Yr-o-Yr
Return on average assets
1.50 % 1.13 % 37 bps
Return on average equity
15.98 % 10.73 % 525
Return on average tangible equity (2)
17.56 % 11.95 % 561
Interest rate spread
2.59 % 2.74 % (15)
Net interest margin
2.72 % 3.05 % (33)
Adjusted net interest margin (2)
2.69 % 3.05 % (36)
Average loan yield
3.59 % 4.08 % (49)
Adjusted average loan yield (2)
3.58 % 4.10 % (52)
Yield on average interest-earning assets
2.89 % 3.60 % (71)
Average cost of interest-bearing deposits
0.25 % 0.79 % (54)
Average cost of deposits
0.15 % 0.53 % (38)
Average cost of funds
0.18 % 0.59 % (41)
Adjusted pre-tax, pre-provision profitability ratio (2)
1.94 % 2.04 % (10)
Adjusted noninterest expense/average assets (2)
1.13 % 1.31 % (18)
Efficiency ratio
43.72 % 44.94 % (122)
Adjusted efficiency ratio (2)
36.80 % 39.14 % (234) bps
(1)Annualized except for efficiency ratio.
(2)See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13 and 14.
15

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

Three Months Ended June 30, 2021
Commercial Consumer
C&I Total CRE Total Residential Mortgage Other Consumer Total
Allowance for loan losses, March 31, 2021 $ 394,084 $ 192,895 $ 18,509 $ 2,018 $ 607,506
(Reversal of) provision for credit losses on loans (a) (22,586) 10,747 859 2,209 (8,771)
Gross charge-offs (10,572) (4,456) - (32) (15,060)
Gross recoveries 1,338 344 100 3 1,785
Total net (charge-offs) recoveries (9,234) (4,112) 100 (29) (13,275)
Foreign currency translation adjustment 264 - - - 264
Allowance for loan losses, June 30, 2021 $ 362,528 $ 199,530 $ 19,468 $ 4,198 $ 585,724

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

16

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES
($ in thousands)
(unaudited)
Table 10 (continued)
Nine Months Ended September 30, 2021
Commercial Consumer
C&I Total CRE Total Residential Mortgage Other Consumer Total
Allowance for loan losses, December 31, 2020 $ 398,040 $ 201,603 $ 18,210 $ 2,130 $ 619,983
(Reversal of) provision for credit losses on loans (a) (42,112) 16,198 4,229 2,226 (19,459)
Gross charge-offs (20,162) (28,642) (1,091) (43) (49,938)
Gross recoveries 6,301 3,101 336 5 9,743
Total net charge-offs (13,861) (25,541) (755) (38) (40,195)
Foreign currency translation adjustment 75 - - - 75
Allowance for loan losses, September 30, 2021 $ 342,142 $ 192,260 $ 21,684 $ 4,318 $ 560,404

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

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

17

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

18

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 12
Adjusted efficiency ratio represents adjusted noninterest expense divided by revenue. Adjusted pre-tax, pre-provision profitability ratio represents revenue less adjusted noninterest expense, divided by average total assets. Adjusted noninterest expense excludes the amortization of tax credit and other investments, the amortization of core deposit intangibles and the extinguishment cost on repurchase agreements. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods.
Three Months Ended
September 30, 2021 June 30, 2021 September 30, 2020
Net interest income before provision for credit losses (a) $ 395,706 $ 376,473 $ 324,130
Total noninterest income (1)
73,109 68,431 54,503
Total revenue (b) $ 468,815 $ 444,904 $ 378,633
Total noninterest expense (1)
(c) $ 205,384 $ 189,523 $ 172,573
Less: Amortization of tax credit and other investments (1)
(38,008) (27,291) (17,209)
Amortization of core deposit intangibles (705) (710) (927)
Adjusted noninterest expense (d) $ 166,671 $ 161,522 $ 154,437
Efficiency ratio (c)/(b) 43.81 % 42.60 % 45.58 %
Adjusted efficiency ratio (d)/(b) 35.55 % 36.30 % 40.79 %
Adjusted pre-tax, pre-provision income (b)-(d) = (e) $ 302,144 $ 283,382 $ 224,196
Average total assets (f) $ 61,359,533 $ 57,771,837 $ 50,247,259
Adjusted pre-tax, pre-provision profitability ratio (2)
(e)/(f) 1.95 % 1.97 % 1.78 %
Adjusted noninterest expense/average assets (2)
(d)/(f) 1.08 % 1.12 % 1.22 %
Nine Months Ended
September 30, 2021 September 30, 2020
Net interest income before provision for credit losses (g) $ 1,125,874 $ 1,030,612
Total noninterest income (1)
214,406 165,715
Total revenue (h) $ 1,340,280 $ 1,196,327
Total noninterest expense (1)
(i) $ 585,984 $ 537,671
Less: Amortization of tax credit and other investments (1)
(90,657) (57,819)
Amortization of core deposit intangibles (2,147) (2,811)
Repurchase agreements' extinguishment cost - (8,740)
Adjusted noninterest expense (j) $ 493,180 $ 468,301
Efficiency ratio (i)/(h) 43.72 % 44.94 %
Adjusted efficiency ratio (j)/(h) 36.80 % 39.14 %
Adjusted pre-tax, pre-provision income (h)-(j) = (k) $ 847,100 $ 728,026
Average total assets (l) $ 58,263,002 $ 47,753,030
Adjusted pre-tax, pre-provision profitability ratio (2)
(k)/(l) 1.94 % 2.04 %
Adjusted noninterest expense/average assets (2)
(j)/(l) 1.13 % 1.31 %
(1)Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from Amortization of tax credit and other investments to Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.
(2)Annualized.

19

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 13
The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company's performance. Tangible equity and tangible equity to tangible assets ratio are non-GAAP financial measures. Tangible equity and tangible assets represent stockholders' equity and total assets, respectively, which have been reduced by goodwill and other intangible assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.
September 30, 2021 June 30, 2021 September 30, 2020
Stockholders' equity (a) $ 5,690,201 $ 5,547,548 $ 5,126,106
Less: Goodwill (465,697) (465,697) (465,697)
Other intangible assets (1)
(9,849) (10,309) (12,369)
Tangible equity (b) $ 5,214,655 $ 5,071,542 $ 4,648,040
Total assets (c) $ 60,959,110 $ 59,854,876 $ 50,371,477
Less: Goodwill (465,697) (465,697) (465,697)
Other intangible assets (1)
(9,849) (10,309) (12,369)
Tangible assets (d) $ 60,483,564 $ 59,378,870 $ 49,893,411
Total stockholders' equity to total assets ratio (a)/(c) 9.33 % 9.27 % 10.18 %
Tangible equity to tangible assets ratio (b)/(d) 8.62 % 8.54 % 9.32 %
Return on average tangible equity represents tangible net income divided by average tangible equity. Tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets. Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion.
Three Months Ended Nine Months Ended
September 30,
2021 		June 30,
2021 		September 30,
2020 		September 30,
2021 		September 30,
2020
Net Income $ 225,449 $ 224,742 $ 159,537 $ 655,185 $ 403,713
Add: Amortization of core deposit intangibles
705 710 927 2,147 2,811
Amortization of mortgage servicing assets
430 420 450 1,264 1,492
Tax effect of amortization adjustments (2)
(322) (321) (390) (968) (1,220)
Tangible net income (e) $ 226,262 $ 225,551 $ 160,524 $ 657,628 $ 406,796
Average stockholders' equity $ 5,680,306 $ 5,425,952 $ 5,079,351 $ 5,482,705 $ 5,028,122
Less: Average goodwill (465,697) (465,697) (465,697) (465,697) (465,697)
Average other intangible assets (1)
(10,135) (10,827) (13,083) (10,847) (14,302)
Average tangible equity (f) $ 5,204,474 $ 4,949,428 $ 4,600,571 $ 5,006,161 $ 4,548,123
Return on average tangible equity (3)
(e)/(f) 17.25 % 18.28 % 13.88 % 17.56 % 11.95 %
(1)Includes core deposit intangibles and mortgage servicing assets.
(2)Applied statutory tax rate of 28.37% for the three and nine months ended September 30, 2021, and the three months ended June 30, 2021. Applied statutory tax rate of 28.35% for the three and nine months ended September 30, 2020.
(3)Annualized.

20

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 14
In April 2020, the Company started accepting applications under the PPP administered by the Small Business Administration ("SBA") under the Coronavirus Aid, Relief, and Economic Security Act and began to originate loans to qualified small businesses. In January 2021, the Company began processing applications under the second round of the SBA's PPP in response to the Consolidated Appropriations Act, 2021 signed by the President on December 27, 2020. The PPP ended on May 31, 2021.
These loans are included in the Company's C&I portfolio, have an interest rate of one percent and are 100% guaranteed by the SBA. Loan processing fees paid to the Company from the SBA are accounted for as loan origination fees, where net deferred fees are recognized on a straight line basis over the estimated life of the loan as a yield adjustment on the loans. If a loan is paid off or forgiven by the SBA prior to its projected estimated life, the remaining unamortized deferred fees will be recognized as interest income in that period. The Company drew down $1.44 billion from the PPPLF during the second quarter of 2020. The remaining balance of $1.43 billion as of September 2020 was repaid in full during the fourth quarter of 2020.
Adjusted loan yield and adjusted net interest margin for the three and nine months ended September 30, 2021 and 2020, and three months ended June 30, 2020 exclude the impact of PPP loans. Net interest margin for the three and nine months ended September 30, 2020 has also been adjusted for advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provide comparability to prior periods and these non-GAAP financial measures provide supplemental information regarding the Company's performance.
Three Months Ended Nine Months Ended
Yield on Average Loans September 30,
2021 		June 30,
2021 		September 30,
2020 		September 30,
2021 		September 30,
2020
Interest income on loans (a) $ 363,503 $ 352,453 $ 336,542 $ 1,057,964 $ 1,115,804
Less: Interest income on PPP loans
(15,212) (15,377) (7,778) (45,606) (29,067)
Adjusted interest income on loans (b) $ 348,291 $ 337,076 $ 328,764 $ 1,012,358 $ 1,086,737
Average loans (c) $ 39,960,151 $ 39,622,270 $ 37,160,445 $ 39,441,751 $ 36,487,859
Less: Average PPP loans (1,111,404) (1,870,385) (1,764,411) (1,634,617) (1,078,985)
Adjusted average loans (d) $ 38,848,747 $ 37,751,885 $ 35,396,034 $ 37,807,134 $ 35,408,874
Average loan yield (1)
(a)/(c) 3.61 % 3.57 % 3.60 % 3.59 % 4.08 %
Adjusted average loan yield (1)
(b)/(d) 3.56 % 3.58 % 3.70 % 3.58 % 4.10 %
Net Interest Margin
Net interest income before provision for credit losses (e) $ 395,706 $ 376,473 $ 324,130 $ 1,125,874 $ 1,030,612
Less: Interest income on PPP loans
(15,212) (15,377) (7,778) (45,606) (29,067)
Add: Interest expense on advances from the PPPLF - - 1,259 - 1,722
Adjusted net interest income (f) $ 380,494 $ 361,096 $ 317,611 $ 1,080,268 $ 1,003,267
Average interest-earning assets (g) $ 58,239,480 $ 54,901,209 $ 47,428,586 $ 55,350,645 $ 45,076,734
Less: Average PPP loans (1,111,404) (1,870,385) (1,764,411) (1,634,617) (1,078,985)
Adjusted average interest-earning assets
(h) $ 57,128,076 $ 53,030,824 $ 45,664,175 $ 53,716,028 $ 43,997,749
Net interest margin (1)
(e)/(g) 2.70 % 2.75 % 2.72 % 2.72 % 3.05 %
Adjusted net interest margin (1)
(f)/(h) 2.64 % 2.73 % 2.77 % 2.69 % 3.05 %
(1)Annualized.
21