East West Bancorp Reports Net Income for Third Quarter 2018 of $171 Million and Diluted Earnings Per Share of $1.17, Both Up By 29% Year-Over-Year

PASADENA, Calif.--(BUSINESS WIRE)-- East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the third quarter of 2018. For the third quarter of 2018, net income was $171 million, or $1.17 per diluted share, up by 29% year-over-year compared to $133 million, or $0.91 per diluted share, for the third quarter of 2017. Third quarter 2018 return on average assets of 1.76%, return on average equity of 16.2% and return on average tangible1 equity of 18.5% were all up significantly year-over-year.

“Total loans grew $968 million, or 13% annualized, to a record $31.2 billion as of September 30, 2018 from $30.2 billion as of June 30, 2018,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Total deposits grew $853 million, or 10% annualized, to a record $33.6 billion as of September 30, 2018 from $32.8 billion as of June 30, 2018.”

“Driven by our sustained loan growth, net interest income reached a record $349 million in the third quarter of 2018, an increase of 2% quarter-over-quarter and 15% year-over-year,” continued Ng. “Our current quarter adjusted2 efficiency ratio of 39.9% was stable compared to the prior quarter. For the third quarter of 2018, our adjusted pre-tax, pre-provision income3 was $238 million, an increase of 1% quarter-over-quarter and an increase of 13% year-over-year.

“In conclusion, with year-to-date results of strong loan growth and an expanding net interest margin, we are on track for another year of record earnings for 2018. Our net interest income continues to reach higher levels quarter after quarter, and our attractive profitability remains a valued proposition for shareholders,” concluded Ng.

____________________________________________

1 See reconciliation of GAAP to non-GAAP financial measures in Table 15.
2 See reconciliation of GAAP to non-GAAP financial measures in Table 13.
3 See reconciliation of GAAP to non-GAAP financial measures in Table 13.

HIGHLIGHTS OF RESULTS

• Quarterly Earnings – Third quarter 2018 net income of $171.3 million and diluted earnings per share (“EPS”) of $1.17 both decreased by 1% compared to second quarter 2018 net income of $172.3 million and diluted EPS of $1.18. Net income and EPS both grew by 29% year-over-year.

• Net Interest Income Growth and Net Interest Margin – Third quarter 2018 net interest income was $348.7 million, a quarterly increase of $7.0 million, or 2%. Net interest income growth primarily reflected loan growth and loan yield expansion, partially offset by growth in time deposits and an increase in the cost of deposits. Third quarter 2018 net interest margin (“NIM”) of 3.76% declined by seven basis points linked quarter. Net interest income grew by 15% year-over-year, and NIM expanded by 24 basis points year-over-year.
• Record Loans – Total loans of $31.2 billion as of September 30, 2018 were up $968.3 million, or 13% linked quarter annualized, from $30.2 billion as of June 30, 2018. The largest increase in loans this quarter was in commercial and industrial loans, followed by single-family mortgages. Total loans grew by 9% year-over-year.

• Record Deposits – Total deposits of $33.6 billion as of September 30, 2018 were up $853.0 million, or 10% linked quarter annualized, from $32.8 billion as of June 30, 2018. The sequential quarter growth was largely from an increase in time deposits. Total deposits grew by 7% year-over-year.
• Asset Quality Metrics – The allowance for loan losses was $310.0 million, or 0.99% of loans held-for-investment (“HFI”), as of September 30, 2018, compared to $301.6 million, or 1.00% of loans HFI, as of June 30, 2018. For the third quarter of 2018, annualized net charge-offs were 0.05% of average loans HFI, compared to annualized net charge-offs of 0.14% of average loans HFI for the previous quarter. Non-purchased credit impaired (“Non-PCI”) nonperforming assets were $114.6 million, or 0.29% of total assets, as of September 30, 2018, compared to $103.5 million, or 0.27% of total assets, as of June 30, 2018.
• Capital Levels – Capital levels for East West continue to be strong. As of September 30, 2018, stockholders’ equity was $4.2 billion, or $29.29 per share. Tangible equity4 per common share was $25.91 as of September 30, 2018, an increase of 4% linked quarter and 14% year-over-year. As of September 30, 2018, the tangible equity to tangible assets ratio4 was 9.73%, the Common Equity Tier 1 (“CET1”) capital ratio was 12.3%, and the total risk-based capital ratio was 13.8%.

____________________________________________

4 See reconciliation of GAAP to non-GAAP financial measures in Table 15.

QUARTERLY RESULTS SUMMARY
				Quarter Ended
($ in millions, except per share data)				September 30, 2018						June 30, 2018						September 30, 2017
Net income				$	171.3					$	172.3					$	132.7
Adjusted net income (1)				$	171.3					$	172.3					$	130.5
Earnings per share (diluted)				$	1.17					$	1.18					$	0.91
Adjusted earnings per share (diluted) (1)				$	1.17					$	1.18					$	0.89
Book value per common share				$	29.29					$	28.39					$	26.17
Tangible equity (1) per common share				$	25.91					$	25.01					$	22.71
Tangible equity to tangible assets ratio (1)				9.73		%				9.64		%				9.17		%
Return on average assets (2)				1.76		%				1.84		%				1.46		%
Return on average equity (2)				16.2		%				17.0		%				14.0		%
Return on average tangible equity (1)(2)				18.5		%				19.5		%				16.3		%
Adjusted return on average assets (1)(2)				1.76		%				1.84		%				1.44		%
Adjusted return on average equity (1)(2)				16.2		%				17.0		%				13.8		%
Adjusted return on average tangible equity (1)(2)				18.5		%				19.5		%				16.1		%
Adjusted pre-tax, pre-provision profitability ratio (1)(2)				2.44		%				2.50		%				2.32		%
Net interest income				$	348.7					$	341.7					$	303.2
Net interest margin (2)				3.76		%				3.83		%				3.52		%
Cost of deposits (2)				0.78		%				0.64		%				0.40		%
Efficiency ratio				45.5		%				45.5		%				46.6		%
Adjusted efficiency ratio (1)				39.9		%				39.9		%				39.8		%
(1) See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, and 15.
(2) Annualized.

MANAGEMENT OUTLOOK FOR 2018

We have updated our outlook for the full year 2018. We are lowering our anticipated provision for credit losses, narrowing our expected expense growth range, and adjusting the tax rate.

The revised items are as follows:

• Provision for credit losses to range from $60 million to $65 million (lowered from a range of $70 million to $80 million, previously).
• Noninterest expense, excluding amortization of tax credit investments and core deposit intangibles, to increase by approximately 9% year-over-year (narrowed from a percentage rate change in the high single digits, previously).
• Projecting full year effective tax rate of approximately 14% (versus 13%, previously). Other tax items are unchanged: investment in tax-advantaged credits, excluding low income housing tax credits, of $115 million and associated tax credit amortization expense of $100 million for the full year.

We continue to expect end-of-period loans to increase by approximately 10% year-over-year; and anticipate full year net interest margin, excluding the impact of ASC 310-30 discount accretion income, to be approximately 3.75%.

OPERATING RESULTS SUMMARY

Third Quarter 2018 Compared to Second Quarter 2018

Net Interest Income and Net Interest Margin

Net interest income totaled $348.7 million, a 2% increase from $341.7 million. Net interest margin decreased by seven basis points to 3.76% from 3.83%.

• Excluding the impact of ASC 310-30 discount accretion, adjusted5 net interest income of $345.9 million increased by 3% and adjusted5 NIM of 3.72% declined by 4 basis points. ASC 310-30 discount accretion income was $2.9 million, a decline from $6.3 million last quarter.
• Average loans of $30.5 billion grew by $851.3 million, or 11% linked quarter annualized.
• Average deposits of $33.2 billion grew by $864.8 million, or 11% linked quarter annualized.
• The yield on loans expanded by seven basis points to 5.02% from 4.95%.
• The yield on earning assets expanded by six basis points to 4.55% from 4.49%.
• The cost of deposits increased by 14 basis points to 0.78% from 0.64%.
• The cost of funds increased by 15 basis points to 0.86% from 0.71%.

Noninterest Income

Noninterest income totaled $46.5 million, a decrease of $1.8 million or 4% from $48.3 million. Excluding the impact of all gains on sales, total fees and other operating income of $41.9 million in the third quarter of 2018 decreased by 6% from $44.6 million.

• Decrease in derivative fees and other income reflected a lower volume of customer transactions, which was partially offset by an increase in the fair value of interest rate swaps.
• Decrease in letters of credit fees and foreign exchange income reflected a decline in mark-to-market revaluations for foreign currency balance sheet items.

The following table presents total fees and other operating income for the three months ended September 30, 2018, June 30, 2018, and September 30, 2017.

				Quarter Ended
($ in thousands)				September 30, 2018						June 30, 2018						September 30, 2017
Branch fees				$	9,777					$	10,140					$	10,393
Letters of credit fees and foreign exchange income				14,649						15,673						10,564
Ancillary loan fees and other income				6,795						5,841						5,987
Wealth management fees				3,535						4,501						3,461
Derivative fees and other income				4,595						6,570						6,663
Other fees and operating income				2,569						1,865						3,653
Total fees and other operating income				$	41,920					$	44,590					$	40,721

Noninterest Expense

Noninterest expense of $179.8 million included $157.7 million of adjusted6 noninterest expense, $20.8 million in amortization of tax credit and other investments, and $1.4 million in amortization of core deposit intangibles.

• Adjusted noninterest expense of $157.7 million increased by $2.1 million, or 1%, linked quarter. The increase in noninterest expense compared to the prior quarter was mostly due to an increase in compensation and employee benefits, as well as an increase in other operating expenses, partially offset by decreases in consulting and legal expenses.
• The adjusted efficiency ratio was unchanged at 39.9% in the third quarter compared to the prior quarter.

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5 See reconciliation of GAAP to non-GAAP financial measures in Table 14.
6 See reconciliation of GAAP to non-GAAP financial measures in Table 13.

TAX RELATED ITEMS

Tax expense in the third quarter of 2018 was $33.6 million and the effective tax rate was 16%, compared to a tax expense of $24.6 million and an effective tax rate of 13% in the second quarter of 2018.

• Currently, we are projecting a full year 2018 effective tax rate of approximately 14%, an increase from a projected rate of 13% previously.

CREDIT QUALITY

The allowance for loan losses totaled $310.0 million, or 0.99% of loans HFI, as of September 30, 2018, compared to $301.6 million, or 1.00% of loans HFI, as of June 30, 2018, and $285.9 million, or 1.00% of loans HFI, as of September 30, 2017.

• The provision for credit losses recorded for the current quarter was $10.5 million, compared to $15.5 million for the second quarter of 2018, and $13.0 million for the third quarter of 2017.
• Net charge-offs for the current quarter were $3.7 million, or annualized 0.05% of average loans HFI. This compares to net charge-offs of $10.6 million, or annualized 0.14% of average loans HFI, for the second quarter of 2018, and net charge-offs of $4.0 million, or annualized 0.06% of average loans HFI, for the third quarter of 2017.
• Non-PCI nonperforming assets of $114.6 million, or 0.29% of total assets, as of September 30, 2018, increased from $103.5 million, or 0.27% of total assets, as of June 30, 2018, and decreased from $117.0 million, or 0.32% of total assets, as of September 30, 2017.

CAPITAL STRENGTH

Capital levels for East West continue to be strong. As of September 30, 2018, stockholders’ equity was $4.2 billion, or $29.29 per share. Tangible equity per common share was $25.91 as of September 30, 2018, an increase of 4% linked quarter and 14% year-over-year. The following table presents the regulatory capital ratios for the quarters ended September 30, 2018, June 30, 2018, and September 30, 2017.

EWBC Regulatory Capital Metrics									Basel III
($ in millions)									September 30, 2018 (a)				June 30, 2018				September 30, 2017				Minimum Regulatory Requirements			Well Capitalized Regulatory Requirements			Fully Phased- in Minimum Regulatory Requirements
CET1 capital ratio									12.3		%		12.2		%		11.4		%		4.5	%		6.5	%		7.0	%
Tier 1 risk-based capital ratio									12.3		%		12.2		%		11.4		%		6.0	%		8.0	%		8.5	%
Total risk-based capital ratio									13.8		%		13.7		%		12.9		%		8.0	%		10.0	%		10.5	%
Tier 1 leverage capital ratio									10.0		%		10.0		%		9.4		%		4.0	%		5.0	%		4.0	%
Risk-Weighted Assets (“RWA”) (b)									$	31,209			$	30,415			$	29,178			N/A			N/A			N/A
N/A Not applicable.

(a)		The Company’s September 30, 2018 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 2018 dividends for the Company’s common stock. The common stock cash dividend of $0.23 per share is payable on November 15, 2018 to stockholders of record on November 1, 2018.

Conference Call

East West will host a conference call to discuss third quarter 2018 earnings with the public on Thursday, October 18, 2018 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 2018 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 18, 2018 at 11:30 a.m. Pacific Time through November 18, 2018. 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: 10124728.

About East West

East West Bancorp, Inc. is a publicly owned company with total assets of $39.1 billion that trades on the Nasdaq Global Select Market under the symbol “EWBC.” The Company’s wholly-owned subsidiary, East West Bank, is the premier bank exclusively focused on the United States and Greater China markets, and is one of the largest independent banks headquartered in California. With over 130 locations worldwide, East West operates in California, Georgia, Massachusetts, Nevada, New York, Texas and Washington in the United States. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen. For more information about East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to, our ability to compete effectively against other financial institutions in our banking markets; success and timing of our business strategies; the Company’s ability to retain key officers and employees; changes in interest rates on our net interest income and net interest margin; the effect of changes in the deposit mix on our funding costs and net interest margin; changes in our costs of operation, compliance and expansion; our ability to adopt and successfully integrate new technologies into our business in a strategic manner; impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused; adequacy of our risk management framework, disclosure controls and procedures and internal control over financial reporting; future credit quality and performance, including our expectations regarding future credit losses and allowance levels; impact of adverse changes to our credit ratings from the major credit rating agencies; impact of adverse judgments or settlements in litigation; changes in the commercial and consumer real estate markets; changes in the United States (“U.S.”) economy, including inflation, employment levels, rate of growth and general business conditions; changes in government interest rate policies; impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions; impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on our business, business practices and cost of operations; 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; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions; changes in income tax laws and regulations and the impact of the Tax Cuts and Jobs Act; impact of other potential federal tax changes and spending cuts; our capital requirements and our ability to generate capital internally or raise capital on favorable terms; changes in our ability to receive dividends from our subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; fluctuations of our stock price; fluctuations in foreign currency exchange rates; a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment on securities held in our available-for-sale investment securities portfolio; changes in the economy of and monetary policy in the People’s Republic of China; impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance; and other factors set forth in the Company’s public reports including its Annual Report on Form 10-K for the year ended December 31, 2017, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, the Company’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. The Company assumes no obligation to update such forward-looking statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ and shares in thousands, except per share data)
(unaudited)
Table 1
																							September 30, 2018 % Change
					September 30, 2018						June 30, 2018						September 30, 2017						Qtr-o-Qtr					Yr-o-Yr
Assets
	Cash and due from banks				$	408,049					$	415,653					$	364,328					(1.8	)%				12.0	%
	Interest-bearing cash with banks				1,810,738						1,881,818						1,372,421						(3.8	)				31.9
	Cash and cash equivalents				2,218,787						2,297,471						1,736,749						(3.4	)				27.8
	Interest-bearing deposits with banks				400,900						360,900						404,946						11.1					(1.0	)
	Securities purchased under resale agreements (“resale agreements”) (1)				1,035,000						975,000						1,250,000						6.2					(17.2	)
	Investment securities				2,676,510						2,707,444						2,956,776						(1.1	)				(9.5	)
	Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock				73,729						73,524						73,322						0.3					0.6
	Loans held-for-sale (“HFS”)				3,114						14,658						178						(78.8	)				NM
	Loans held-for-investment (net of allowance for loan losses of $310,041, $301,550 and $285,926)				30,900,144						29,928,829						28,239,431						3.2					9.4
	Investments in qualified affordable housing partnerships, net				148,097						152,556						178,344						(2.9	)				(17.0	)
	Investments in tax credit and other investments, net				232,194						242,595						203,758						(4.3	)				14.0
	Goodwill				465,547						465,547						469,433						—					(0.8	)
	Other assets				919,084						854,430						795,029						7.6					15.6
	Total assets				$	39,073,106					$	38,072,954					$	36,307,966					2.6	%				7.6	%
Liabilities and Stockholders’ Equity
	Deposits				$	33,629,124					$	32,776,132					$	31,311,662					2.6	%				7.4	%
	Short-term borrowings				56,411						58,523						24,813						(3.6	)				127.3
	FHLB advances				325,596						325,020						323,323						0.2					0.7
	Securities sold under repurchase agreements (“repurchase agreements”) (1)				50,000						50,000						50,000						—					—
	Long-term debt				156,770						161,704						176,513						(3.1	)				(11.2	)
	Accrued expenses and other liabilities				610,355						587,291						639,759						3.9					(4.6	)
	Total liabilities				34,828,256						33,958,670						32,526,070						2.6					7.1
	Stockholders’ equity				4,244,850						4,114,284						3,781,896						3.2					12.2
	Total liabilities and stockholders’ equity				$	39,073,106					$	38,072,954					$	36,307,966					2.6	%				7.6	%
	Book value per common share				$	29.29					$	28.39					$	26.17					3.2	%				11.9	%
	Tangible equity (2) per common share				$	25.91					$	25.01					$	22.71					3.6					14.1
	Tangible equity to tangible assets ratio (2)				9.73		%				9.64		%				9.17		%				1.0					6.2
	Number of common shares at period-end				144,929						144,905						144,511						0.0					0.3

NM Not Meaningful
(1)		Resale and repurchase agreements have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45, Balance Sheet Offsetting. As of each of September 30, 2018, June 30, 2018 and September 30, 2017, $400.0 million out of $450.0 million of gross repurchase agreements were eligible for netting against gross resale agreements.
(2)		See reconciliation of GAAP to non-GAAP financial measures in Table 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
TOTAL LOANS AND DEPOSITS DETAIL
($ in thousands)
(unaudited)
Table 2
																							September 30, 2018 % Change
					September 30, 2018						June 30, 2018						September 30, 2017						Qtr-o-Qtr					Yr-o-Yr
Loans:
Commercial lending:
	Commercial and industrial (“C&I”)				$	11,517,054					$	11,059,019					$	10,645,156					4.1	%				8.2	%
	Commercial real estate (“CRE”)				9,262,327						9,054,567						8,843,776						2.3					4.7
	Multifamily residential				2,090,563						2,032,522						1,876,956						2.9					11.4
	Construction and land				605,033						623,837						683,404						(3.0	)				(11.5	)
Consumer lending:
	Single-family residential				5,684,587						5,316,895						4,356,009						6.9					30.5
	Home equity lines of credit (“HELOCs”)				1,717,440						1,769,511						1,767,420						(2.9	)				(2.8	)
	Other consumer				333,181						374,028						352,636						(10.9	)				(5.5	)
	Total loans held-for-investment (1)(2)				31,210,185						30,230,379						28,525,357						3.2					9.4
Loans HFS					3,114						14,658						178						(78.8	)				NM
	Total loans (1)(2)				31,213,299						30,245,037						28,525,535						3.2					9.4
Allowance for loan losses					(310,041		)				(301,550		)				(285,926		)				2.8					8.4
	Net loans (1)(2)				$	30,903,258					$	29,943,487					$	28,239,609					3.2	%				9.4	%
Deposits:
	Noninterest-bearing demand				$	10,794,370					$	10,739,333					$	10,992,674					0.5	%				(1.8	)%
	Interest-bearing checking				4,383,672						4,323,698						4,108,859						1.4					6.7
	Money market				7,608,191						7,634,850						7,939,031						(0.3	)				(4.2	)
	Savings				2,100,958						2,218,228						2,476,557						(5.3	)				(15.2	)
	Total core deposits				24,887,191						24,916,109						25,517,121						(0.1	)				(2.5	)
	Time deposits				8,741,933						7,860,023						5,794,541						11.2					50.9
	Total deposits				$	33,629,124					$	32,776,132					$	31,311,662					2.6	%				7.4	%

NM Not Meaningful
(1)			Includes $(42.4) million, $(40.4) million and $(29.2) million as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively, of net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts.
(2)			Includes ASC 310-30 discount of $24.5 million, $26.8 million and $39.1 million as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
($ and shares in thousands, except per share data)
(unaudited)
Table 3
					Three Months Ended																		September 30, 2018 % Change
					September 30, 2018						June 30, 2018						September 30, 2017						Qtr-o-Qtr					Yr-o-Yr
Interest and dividend income					$	422,185					$	400,311					$	339,910					5.5	%				24.2	%
Interest expense					73,465						58,632						36,755						25.3					99.9
Net interest income before provision for credit losses					348,720						341,679						303,155						2.1					15.0
Provision for credit losses					10,542						15,536						12,996						(32.1	)				(18.9	)
Net interest income after provision for credit losses					338,178						326,143						290,159						3.7					16.5
Noninterest income					46,502						48,268						49,470						(3.7	)				(6.0	)
Noninterest expense					179,815						177,419						164,345						1.4					9.4
Income before income taxes					204,865						196,992						175,284						4.0					16.9
Income tax expense					33,563						24,643						42,624						36.2					(21.3	)
Net income					$	171,302					$	172,349					$	132,660					(0.6	)%				29.1	%
Earnings per share (“EPS”)
- Basic					$	1.18					$	1.19					$	0.92					(0.6	)%				28.8	%
- Diluted					$	1.17					$	1.18					$	0.91					(0.7	)				28.9
Weighted average number of shares outstanding
- Basic					144,921						144,899						144,498						0.0	%				0.3	%
- Diluted					146,173						146,091						145,882						0.1					0.2
					Three Months Ended																		September 30, 2018 % Change
					September 30, 2018						June 30, 2018						September 30, 2017						Qtr-o-Qtr					Yr-o-Yr
Noninterest income:
	Branch fees				$	9,777					$	10,140					$	10,393					(3.6	)%				(5.9	)%
	Letters of credit fees and foreign exchange income				14,649						15,673						10,564						(6.5	)				38.7
	Ancillary loan fees and other income				6,795						5,841						5,987						16.3					13.5
	Wealth management fees				3,535						4,501						3,461						(21.5	)				2.1
	Derivative fees and other income				4,595						6,570						6,663						(30.1	)				(31.0	)
	Net gains on sales of loans				1,145						2,354						2,360						(51.4	)				(51.5	)
	Net gains on sales of available-for-sale investment securities				35						210						1,539						(83.3	)				(97.7	)
	Net gains on sales of fixed assets				3,402						1,114						1,043						205.4					226.2
	Net gain on sale of business				—						—						3,807						—					(100.0	)
	Other fees and operating income				2,569						1,865						3,653						37.7					(29.7	)
Total noninterest income					$	46,502					$	48,268					$	49,470					(3.7	)%				(6.0	)%
Noninterest expense:
	Compensation and employee benefits				$	96,733					$	93,865					$	79,583					3.1	%				21.5	%
	Occupancy and equipment expense				17,292						16,707						16,635						3.5					3.9
	Deposit insurance premiums and regulatory assessments				6,013						5,832						5,676						3.1					5.9
	Legal expense				1,544						2,837						3,316						(45.6	)				(53.4	)
	Data processing				3,289						3,327						3,004						(1.1	)				9.5
	Consulting expense				2,683						5,120						4,087						(47.6	)				(34.4	)
	Deposit related expense				2,600						2,922						2,413						(11.0	)				7.7
	Computer software expense				5,478						5,549						4,393						(1.3	)				24.7
	Other operating expense				23,394						20,779						21,411						12.6					9.3
	Amortization of tax credit and other investments				20,789						20,481						23,827						1.5					(12.8	)
Total noninterest expense					$	179,815					$	177,419					$	164,345					1.4	%				9.4	%

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, 2018 % Change
					September 30, 2018						September 30, 2017						Yr-o-Yr
Interest and dividend income					$	1,194,369					$	965,354					23.7	%
Interest expense					177,277						99,986						77.3
Net interest income before provision for credit losses					1,017,092						865,368						17.5
Provision for credit losses					46,296						30,749						50.6
Net interest income after provision for credit losses					970,796						834,619						16.3
Noninterest income					169,214						212,542						(20.4	)
Noninterest expense					526,369						486,188						8.3
Income before income taxes					613,641						560,973						9.4
Income tax expense					82,958						140,247						(40.8	)
Net income					$	530,683					$	420,726					26.1	%
EPS
- Basic					$	3.66					$	2.91					25.8	%
- Diluted					$	3.63					$	2.88					25.9
Weighted average number of shares outstanding
- Basic					144,829						144,412						0.3	%
- Diluted					146,158						145,849						0.2
					Nine Months Ended												September 30, 2018 % Change
					September 30, 2018						September 30, 2017						Yr-o-Yr
Noninterest income:
	Branch fees				$	30,347					$	30,638					(0.9	)%
	Letters of credit fees and foreign exchange income				39,924						34,370						16.2
	Ancillary loan fees and other income				18,217						16,876						7.9
	Wealth management fees				10,989						11,177						(1.7	)
	Derivative fees and other income				17,855						12,934						38.0
	Net gains on sales of loans				5,081						6,660						(23.7	)
	Net gains on sales of available-for-sale investment securities				2,374						6,733						(64.7	)
	Net gains on sales of fixed assets				5,602						74,092						(92.4	)
	Net gain on sale of business				31,470						3,807						NM
	Other fees and operating income				7,355						15,255						(51.8	)
Total noninterest income					$	169,214					$	212,542					(20.4	)%
Noninterest expense:
	Compensation and employee benefits				$	285,832					$	244,930					16.7	%
	Occupancy and equipment expense				50,879						47,829						6.4
	Deposit insurance premiums and regulatory assessments				18,118						17,384						4.2
	Legal expense				6,636						8,930						(25.7	)
	Data processing				10,017						9,009						11.2
	Consulting expense				10,155						10,775						(5.8	)
	Deposit related expense				8,201						7,283						12.6
	Computer software expense				16,081						13,823						16.3
	Other operating expense				61,780						60,166						2.7
	Amortization of tax credit and other investments				58,670						66,059						(11.2	)
Total noninterest expense					$	526,369					$	486,188					8.3	%
NM Not Meaningful

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED AVERAGE BALANCES
($ in thousands)
(unaudited)
Table 5
					Three Months Ended																		September 30, 2018 % Change										Nine Months Ended												September 30, 2018 % Change
					September 30, 2018						June 30, 2018						September 30, 2017						Qtr-o-Qtr					Yr-o-Yr					September 30, 2018						September 30, 2017						Yr-o-Yr
Loans:
Commercial lending:
	C&I				$	11,127,338					$	10,747,074					$	10,259,807					3.5	%				8.5	%				$	10,863,851					$	10,066,832					7.9	%
	CRE				9,134,784						9,038,228						8,518,461						1.1					7.2					9,060,338						8,339,620						8.6
	Multifamily residential				2,056,456						1,970,538						1,808,236						4.4					13.7					1,990,913						1,743,179						14.2
	Construction and land				622,272						667,997						672,875						(6.8	)				(7.5	)				649,150						667,299						(2.7	)
Consumer lending:
	Single-family residential				5,495,824						5,103,008						4,163,900						7.7					32.0					5,126,073						3,850,221						33.1
	HELOCs				1,741,890						1,787,036						1,768,952						(2.5	)				(1.5	)				1,769,253						1,779,236						(0.6	)
	Other consumer				319,473						332,885						337,548						(4.0	)				(5.4	)				330,703						336,695						(1.8	)
	Total loans (1)(2)				$	30,498,037					$	29,646,766					$	27,529,779					2.9	%				10.8	%				$	29,790,281					$	26,783,082					11.2	%
Investment securities					$	2,727,219					$	2,735,023					$	2,963,122					(0.3	)%				(8.0	)%				$	2,771,727					$	3,060,688					(9.4	)%
Interest-earning assets					$	36,822,293					$	35,767,808					$	34,208,533					2.9	%				7.6	%				$	36,039,382					$	33,542,941					7.4	%
Total assets					$	38,659,262					$	37,568,895					$	35,937,567					2.9	%				7.6	%				$	37,874,434					$	35,290,542					7.3	%
Deposits:
	Noninterest-bearing demand				$	10,639,554					$	10,984,950					$	10,655,860					(3.1	)%				(0.2	)%				$	10,968,958					$	10,323,254					6.3	%
	Interest-bearing checking				4,515,256						4,387,479						4,014,290						2.9					12.5					4,487,314						3,830,004						17.2
	Money market				7,613,030						7,880,601						7,997,648						(3.4	)				(4.8	)				7,919,845						7,968,457						(0.6	)
	Savings				2,194,792						2,214,793						2,423,312						(0.9	)				(9.4	)				2,286,402						2,334,752						(2.1	)
	Total core deposits				24,962,632						25,467,823						25,091,110						(2.0	)				(0.5	)				25,662,519						24,456,467						4.9
	Time deposits				8,277,129						6,907,174						5,974,793						19.8					38.5					6,976,359						5,873,217						18.8
	Total deposits				$	33,239,761					$	32,374,997					$	31,065,903					2.7	%				7.0	%				$	32,638,878					$	30,329,684					7.6	%
Interest-bearing liabilities					$	23,190,465					$	21,938,134					$	20,989,149					5.7	%				10.5	%				$	22,233,394					$	20,813,224					6.8	%
Stockholders’ equity					$	4,197,675					$	4,062,311					$	3,756,207					3.3	%				11.8	%				$	4,061,977					$	3,630,062					11.9	%

(1)		Includes ASC 310-30 discount of $25.9 million, $30.0 million and $41.9 million for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively, and $29.9 million and $45.3 million for the nine months ended September 30, 2018 and 2017, respectively.
(2)		Includes loans HFS.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 6
					Three Months Ended
					September 30, 2018																	June 30, 2018
					Average												Average					Average												Average
					Balance						Interest						Yield/Rate (1)					Balance						Interest						Yield/Rate (1)
Assets
Interest-earning assets:
	Interest-bearing cash and deposits with banks				$	2,521,002					$	13,353					2.10	%				$	2,316,194					$	11,715					2.03	%
	Resale agreements (2)				1,002,500						7,393						2.93	%				996,154						7,182						2.89	%
	Investment securities				2,727,219						15,180						2.21	%				2,735,023						15,059						2.21	%
	Loans (3)				30,498,037						385,538						5.02	%				29,646,766						365,555						4.95	%
	FHLB and FRB stock				73,535						721						3.89	%				73,671						800						4.36	%
	Total interest-earning assets				36,822,293						422,185						4.55	%				35,767,808						400,311						4.49	%
Noninterest-earning assets:
	Cash and due from banks				424,350																	432,401
	Allowance for loan losses				(301,557		)															(292,645		)
	Other assets				1,714,176																	1,661,331
	Total assets				$	38,659,262																$	37,568,895
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
	Checking deposits				$	4,515,256					$	9,551					0.84	%				$	4,387,479					$	8,416					0.77	%
	Money market deposits				7,613,030						21,411						1.12	%				7,880,601						18,805						0.96	%
	Savings deposits				2,194,792						2,308						0.42	%				2,214,793						2,035						0.37	%
	Time deposits				8,277,129						31,762						1.52	%				6,907,174						22,009						1.28	%
	Federal funds purchased and other short-term borrowings				58,218						643						4.38	%				11,695						124						4.25	%
	FHLB advances				325,246						2,732						3.33	%				324,665						2,552						3.15	%
	Repurchase agreements (2)				50,000						3,366						26.71	%				50,000						3,042						24.40	%
	Long-term debt				156,794						1,692						4.28	%				161,727						1,649						4.09	%
	Total interest-bearing liabilities				23,190,465						73,465						1.26	%				21,938,134						58,632						1.07	%
Noninterest-bearing liabilities and stockholders’ equity:
	Demand deposits				10,639,554																	10,984,950
	Accrued expenses and other liabilities				631,568																	583,500
	Stockholders’ equity				4,197,675																	4,062,311
	Total liabilities and stockholders’ equity				$	38,659,262																$	37,568,895
Interest rate spread																	3.29	%																3.42	%
Net interest income and net interest margin											$	348,720					3.76	%										$	341,679					3.83	%
Adjusted net interest income and adjusted net interest margin (4)											$	345,857					3.72	%										$	335,380					3.76	%

(1)		Annualized.
(2)		Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting. The weighted-average yields of gross resale agreements were 2.63% and 2.60% for the three months ended September 30, 2018 and June 30, 2018, respectively. The weighted-average rates of gross repurchase agreements were 4.65% and 4.43% for the three months ended September 30, 2018 and June 30, 2018, respectively.
(3)		Includes loans HFS and ASC 310-30 discount of $25.9 million and $30.0 million for the three months ended September 30, 2018 and June 30, 2018, respectively.
(4)		See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 7
					Three Months Ended
					September 30, 2018																	September 30, 2017
					Average												Average					Average												Average
					Balance						Interest						Yield/Rate (1)					Balance						Interest						Yield/Rate (1)
Assets
Interest-earning assets:
	Interest-bearing cash and deposits with banks				$	2,521,002					$	13,353					2.10	%				$	2,344,561					$	9,630					1.63	%
	Resale agreements (2)				1,002,500						7,393						2.93	%				1,297,826						7,901						2.42	%
	Investment securities				2,727,219						15,180						2.21	%				2,963,122						14,828						1.99	%
	Loans (3)				30,498,037						385,538						5.02	%				27,529,779						306,939						4.42	%
	FHLB and FRB stock				73,535						721						3.89	%				73,245						612						3.31	%
	Total interest-earning assets				36,822,293						422,185						4.55	%				34,208,533						339,910						3.94	%
Noninterest-earning assets:
	Cash and due from banks				424,350																	387,705
	Allowance for loan losses				(301,557		)															(276,467		)
	Other assets				1,714,176																	1,617,796
	Total assets				$	38,659,262																$	35,937,567
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
	Checking deposits				$	4,515,256					$	9,551					0.84	%				$	4,014,290					$	4,768					0.47	%
	Money market deposits				7,613,030						21,411						1.12	%				7,997,648						11,828						0.59	%
	Savings deposits				2,194,792						2,308						0.42	%				2,423,312						1,810						0.30	%
	Time deposits				8,277,129						31,762						1.52	%				5,974,793						12,680						0.84	%
	Federal funds purchased and other short-term borrowings				58,218						643						4.38	%				29,661						212						2.84	%
	FHLB advances				325,246						2,732						3.33	%				322,973						1,947						2.39	%
	Repurchase agreements (2)				50,000						3,366						26.71	%				50,000						2,122						16.84	%
	Long-term debt				156,794						1,692						4.28	%				176,472						1,388						3.12	%
	Total interest-bearing liabilities				23,190,465						73,465						1.26	%				20,989,149						36,755						0.69	%
Noninterest-bearing liabilities and stockholders’ equity:
	Demand deposits				10,639,554																	10,655,860
	Accrued expenses and other liabilities				631,568																	536,351
	Stockholders’ equity				4,197,675																	3,756,207
	Total liabilities and stockholders’ equity				$	38,659,262																$	35,937,567
Interest rate spread																	3.29	%																3.25	%
Net interest income and net interest margin											$	348,720					3.76	%										$	303,155					3.52	%
Adjusted net interest income and adjusted net interest margin (4)											$	345,857					3.72	%										$	298,620					3.46	%

(1)		Annualized.
(2)		Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting. The weighted-average yields of gross resale agreements are 2.63% and 2.29% for the three months ended September 30, 2018 and 2017, respectively. The weighted-average rates of gross repurchase agreements are 4.65% and 3.56% for the three months ended September 30, 2018 and 2017, respectively.
(3)		Includes loans HFS and ASC 310-30 discount of $25.9 million and $41.9 million for the three months ended September 30, 2018 and 2017, respectively.
(4)		See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
YEAR-TO-DATE AVERAGE BALANCES, YIELDS AND RATES
($ in thousands)
(unaudited)
Table 8
					Nine Months Ended
					September 30, 2018																	September 30, 2017
					Average												Average					Average												Average
					Balance						Interest						Yield/Rate (1)					Balance						Interest						Yield/Rate (1)
Assets
Interest-earning assets:
	Interest-bearing cash and deposits with banks				$	2,387,712					$	36,013					2.02	%				$	2,073,322					$	22,298					1.44	%
	Resale agreements (2)				1,016,044						21,509						2.83	%				1,552,198						25,222						2.17	%
	Investment securities				2,771,727						45,695						2.20	%				3,060,688						43,936						1.92	%
	Loans (3)				29,790,281						1,088,997						4.89	%				26,783,082						872,039						4.35	%
	FHLB and FRB stock				73,618						2,155						3.91	%				73,651						1,859						3.37	%
	Total interest-earning assets				36,039,382						1,194,369						4.43	%				33,542,941						965,354						3.85	%
Noninterest-earning assets:
	Cash and due from banks				433,299																	387,440
	Allowance for loan losses				(293,403		)															(268,477		)
	Other assets				1,695,156																	1,628,638
	Total assets				$	37,874,434																$	35,290,542
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
	Checking deposits				$	4,487,314					$	24,694					0.74	%				$	3,830,004					$	12,538					0.44	%
	Money market deposits				7,919,845						56,056						0.95	%				7,968,457						30,409						0.51	%
	Savings deposits				2,286,402						6,364						0.37	%				2,334,752						4,525						0.26	%
	Time deposits				6,976,359						68,319						1.31	%				5,873,217						34,331						0.78	%
	Federal funds purchased and other short-term borrowings				23,805						774						4.35	%				40,772						877						2.88	%
	FHLB advances				327,978						7,544						3.08	%				414,355						5,738						1.85	%
	Repurchase agreements (2)				50,000						8,714						23.30	%				170,330						7,538						5.92	%
	Long-term debt				161,691						4,812						3.98	%				181,337						4,030						2.97	%
	Total interest-bearing liabilities				22,233,394						177,277						1.07	%				20,813,224						99,986						0.64	%
Noninterest-bearing liabilities and stockholders’ equity:
	Demand deposits				10,968,958																	10,323,254
	Accrued expenses and other liabilities				610,105																	524,002
	Stockholders’ equity				4,061,977																	3,630,062
	Total liabilities and stockholders’ equity				$	37,874,434																$	35,290,542
Interest rate spread																	3.36	%																3.21	%
Net interest income and net interest margin											$	1,017,092					3.77	%										$	865,368					3.45	%
Adjusted net interest income and net interest margin (4)											$	1,002,730					3.72	%										$	851,339					3.39	%

(1)		Annualized
(2)		Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45, Balance Sheet Offsetting. The weighted-average yields of gross resale agreements are 2.59% and 2.13% for the nine months ended September 30, 2018 and 2017, respectively. The weighted-average rates of gross repurchase agreements are 4.36% and 3.42% for the nine months ended September 30, 2018 and 2017, respectively.
(3)		Includes loans HFS and ASC 310-30 discount of $29.9 million and $45.3 million for the nine months ended September 30, 2018 and 2017, respectively.
(4)		See reconciliation of GAAP to non-GAAP financial measures in Table 14.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
SELECTED RATIOS
(unaudited)
Table 9
					Three Months Ended (1)															September 30, 2018 Basis Point Change
					September 30, 2018					June 30, 2018					September 30, 2017					Qtr-o-Qtr					Yr-o-Yr
	Return on average assets				1.76	%				1.84	%				1.46	%				(8	)	bps			30		bps
	Adjusted return on average assets (2)				1.76	%				1.84	%				1.44	%				(8	)				32
	Return on average equity				16.19	%				17.02	%				14.01	%				(83	)				218
	Adjusted return on average equity (2)				16.19	%				17.02	%				13.78	%				(83	)				241
	Return on average tangible equity (2)				18.47	%				19.50	%				16.33	%				(103	)				214
	Adjusted return on average tangible equity (2)				18.47	%				19.50	%				16.06	%				(103	)				241
	Interest rate spread				3.29	%				3.42	%				3.25	%				(13	)				4
	Net interest margin				3.76	%				3.83	%				3.52	%				(7	)				24
	Adjusted net interest margin (2)				3.72	%				3.76	%				3.46	%				(4	)				26
	Average loan yield				5.02	%				4.95	%				4.42	%				7					60
	Adjusted average loan yield (2)				4.97	%				4.86	%				4.35	%				11					62
	Yield on average interest-earning assets				4.55	%				4.49	%				3.94	%				6					61
	Cost of interest-bearing deposits				1.14	%				0.96	%				0.60	%				18					54
	Cost of deposits				0.78	%				0.64	%				0.40	%				14					38
	Cost of funds				0.86	%				0.71	%				0.46	%				15					40
	Adjusted pre-tax, pre-provision profitability ratio (2)				2.44	%				2.50	%				2.32	%				(6	)				12
	Adjusted noninterest expense/average assets (2)				1.62	%				1.66	%				1.53	%				(4	)				9
	Efficiency ratio				45.50	%				45.50	%				46.61	%				0					(111	)
	Adjusted efficiency ratio (2)				39.89	%				39.89	%				39.79	%				0		bps			10		bps
					Nine Months Ended (1)										September 30, 2018 Basis Point Change
					September 30, 2018					September 30, 2017					Yr-o-Yr
	Return on average assets				1.87	%				1.59	%				28		bps
	Adjusted return on average assets (2)				1.80	%				1.43	%				37
	Return on average equity				17.47	%				15.50	%				197
	Adjusted return on average equity (2)				16.74	%				13.89	%				285
	Return on average tangible equity (2)				20.03	%				18.15	%				188
	Adjusted return on average tangible equity (2)				19.20	%				16.28	%				292
	Interest rate spread				3.36	%				3.21	%				15
	Net interest margin				3.77	%				3.45	%				32
	Adjusted net interest margin (2)				3.72	%				3.39	%				33
	Average loan yield				4.89	%				4.35	%				54
	Adjusted average loan yield (2)				4.82	%				4.28	%				54
	Yield on average interest-earning assets				4.43	%				3.85	%				58
	Cost of interest-bearing deposits				0.96	%				0.55	%				41
	Cost of deposits				0.64	%				0.36	%				28
	Cost of funds				0.71	%				0.43	%				28
	Adjusted pre-tax, pre-provision profitability ratio (2)				2.44	%				2.23	%				21
	Adjusted noninterest expense/average assets (2)				1.64	%				1.57	%				7
	Efficiency ratio				44.37	%				45.10	%				(73	)
	Adjusted efficiency ratio (2)				40.13	%				41.38	%				(125	)	bps

(1)		Annualized except for efficiency ratio.
(2)		See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
ALLOWANCE FOR CREDIT LOSSES
($ in thousands)
(unaudited)
Table 10
					Three Months Ended																		Nine Months Ended
					September 30, 2018						June 30, 2018						September 30, 2017						September 30, 2018						September 30, 2017
Non-Purchased Credit Impaired (“Non-PCI”) Loans
	Allowance for non-PCI loans, beginning of period				$	301,511					$	297,607					$	276,238					$	287,070					$	260,402
	Provision for loan losses on non-PCI loans				12,650						15,139						13,458						47,722						32,184
	Net (charge-offs) recoveries:
	Commercial lending:
	C&I				(4,051		)				(12,383		)				(5,397		)				(27,600		)				(10,597		)
	CRE				2						2						549						431						1,541
	Multifamily residential				77						1,061						634						1,471						1,329
	Construction and land				23						258						61						716						24
	Consumer lending:
	Single-family residential				295						629						175						1,107						428
	HELOCs				—						—						(55		)				—						(31		)
	Other consumer				(5		)				(162		)				(8		)				(183		)				125
	Total net charge-offs				(3,659		)				(10,595		)				(4,041		)				(24,058		)				(7,181		)
	Foreign currency translation adjustments				(492		)				(640		)				203						(724		)				453
	Allowance for non-PCI loans, end of period				310,010						301,511						285,858						310,010						285,858
Purchased Credit Impaired (“PCI”) Loans
	Allowance for PCI loans, beginning of period				39						47						78						58						118
	Reversal of loan losses on PCI loans				(8		)				(8		)				(10		)				(27		)				(50		)
	Allowance for PCI loans, end of period				31						39						68						31						68
	Allowance for loan losses				310,041						301,550						285,926						310,041						285,926
Unfunded Credit Facilities
	Allowance for unfunded credit reserves, beginning of period				14,019						13,614						15,188						13,318						16,121
	(Reversal of) provision for unfunded credit reserves				(2,100		)				405						(452		)				(1,399		)				(1,385		)
	Allowance for unfunded credit reserves, end of period				11,919						14,019						14,736						11,919						14,736
	Allowance for credit losses				$	321,960					$	315,569					$	300,662					$	321,960					$	300,662

	EAST WEST BANCORP, INC. AND SUBSIDIARIES
	CREDIT QUALITY
	($ in thousands)
	(unaudited)
Table 11
Non-PCI Nonperforming Assets					September 30, 2018						June 30, 2018						September 30, 2017
Nonaccrual loans:
Commercial lending:
	C&I				$	72,797					$	57,097					$	73,384
	CRE				24,752						25,748						24,802
	Multifamily residential				1,761						1,727						2,620
	Construction and land				—						—						4,183
Consumer lending:
	Single-family residential				5,222						7,625						6,639
	HELOCs				6,872						8,135						3,097
	Other consumer				2,491						2,491						—
	Total nonaccrual loans				113,895						102,823						114,725
Other real estate owned, net					748						709						2,289
	Total nonperforming assets				$	114,643					$	103,532					$	117,014
Credit Quality Ratios					September 30, 2018						June 30, 2018						September 30, 2017
Non-PCI nonperforming assets to total assets (1)					0.29		%				0.27		%				0.32		%
Non-PCI nonaccrual loans to loans held-for-investment (1)					0.36		%				0.34		%				0.40		%
Allowance for loan losses to loans held-for-investment (1)					0.99		%				1.00		%				1.00		%
Allowance for loan losses to non-PCI nonaccrual loans					272.22		%				293.27		%				249.23		%
Annualized quarterly net charge-offs to average loans held-for-investment					0.05		%				0.14		%				0.06		%

(1)		Total assets and loans held-for-investment include PCI loans of $345.0 million, $383.7 million and $532.3 million as of September 30, 2018, June 30, 2018 and September 30, 2017, respectively.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ and shares in thousands, except for per share data)
(unaudited)
Table 12
During the first quarter of 2017, the Company consummated a sale and leaseback transaction on a commercial property and recognized a pre-tax gain on sale of $71.7 million. During the third quarter of 2017, the Company sold its insurance brokerage business, East West Insurance Services, Inc. (“EWIS”) and recognized a pre-tax gain on sale of $3.8 million. During the first quarter of 2018, the Company sold its Desert Community Bank (“DCB”) branches and recognized a pre-tax gain on sale of $31.5 million. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that exclude the impact of after-tax gains on the sales of the commercial property, EWIS business and DCB branches (where applicable) provides clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods.
								Three Months Ended
								September 30, 2018						June 30, 2018						September 30, 2017
Net income				(a)				$	171,302					$	172,349					$	132,660
Less: Gain on sale of business, net of tax (1)				(b)				—						—						(2,206		)
Adjusted net income				(c)				$	171,302					$	172,349					$	130,454
Diluted weighted average number of shares outstanding				(d)				146,173						146,091						145,882
Diluted EPS				(a)/(d)				$	1.17					$	1.18					$	0.91
Diluted EPS impact of gain on sale of business, net of tax				(b)/(d)				—						—						(0.02		)
Adjusted diluted EPS								$	1.17					$	1.18					$	0.89
Average total assets				(e)				$	38,659,262					$	37,568,895					$	35,937,567
Average stockholders’ equity				(f)				$	4,197,675					$	4,062,311					$	3,756,207
Return on average assets (2)				(a)/(e)				1.76		%				1.84		%				1.46		%
Adjusted return on average assets (2)				(c)/(e)				1.76		%				1.84		%				1.44		%
Return on average equity (2)				(a)/(f)				16.19		%				17.02		%				14.01		%
Adjusted return on average equity (2)				(c)/(f)				16.19		%				17.02		%				13.78		%
								Nine Months Ended
								September 30, 2018						September 30, 2017
Net income				(g)				$	530,683					$	420,726
Less: Gain on sale of the commercial property, net of tax (1)				(h)				—						(41,526		)
Gain on sale of business, net of tax (1)				(i)				(22,167		)				(2,206		)
Adjusted net income				(j)				$	508,516					$	376,994
Diluted weighted average number of shares outstanding				(k)				146,158						145,849
Diluted EPS				(g)/(k)				$	3.63					$	2.88
Diluted EPS impact of gain on sale of the commercial property, net of tax				(h)/(k)				—						(0.28		)
Diluted EPS impact of gain on sale of business, net of tax				(i)/(k)				(0.15		)				(0.02		)
Adjusted diluted EPS								$	3.48					$	2.58
Average total assets				(l)				$	37,874,434					$	35,290,542
Average stockholders’ equity				(m)				$	4,061,977					$	3,630,062
Return on average assets (2)				(g)/(l)				1.87		%				1.59		%
Adjusted return on average assets (2)				(j)/(l)				1.80		%				1.43		%
Return on average equity (2)				(g)/(m)				17.47		%				15.50		%
Adjusted return on average equity (2)				(j)/(m)				16.74		%				13.89		%

(1)			Statutory rate of 29.56% was applied for the three months ended June 30, 2018, and the three and nine months ended September 30, 2018. Statutory rate of 42.05% was applied for the three and nine months ended September 30, 2017.
(2)			Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 13
Adjusted efficiency ratio represents adjusted noninterest expense divided by adjusted revenue. Adjusted pre-tax, pre-provision profitability ratio represents the aggregate of adjusted revenue less adjusted noninterest expense, divided by average total assets. Adjusted revenue represents the aggregate of net interest income and adjusted noninterest income, where adjusted noninterest income excludes the gains on the sales of the commercial property, EWIS business and DCB branches that were sold in the first quarter of 2017, third quarter of 2017 and first quarter of 2018, respectively (where applicable). Adjusted noninterest expense excludes the amortization of tax credit and other investments and the amortization of core deposit intangibles. Management believes that the measures and ratios presented below provide clarity to financial statement users regarding the ongoing performance of the Company and allow comparability to prior periods.
								Three Months Ended
								September 30, 2018						June 30, 2018						September 30, 2017
Net interest income before provision for credit losses				(a)				$	348,720					$	341,679					$	303,155
Total noninterest income								46,502						48,268						49,470
Total revenue				(b)				395,222						389,947						352,625
Noninterest income								46,502						48,268						49,470
Less: Gain on sale of business								—						—						(3,807		)
Adjusted noninterest income				(c)				$	46,502					$	48,268					$	45,663
Adjusted revenue				(a)+(c) = (d)				$	395,222					$	389,947					$	348,818
Total noninterest expense				(e)				$	179,815					$	177,419					$	164,345
Less: Amortization of tax credit and other investments								(20,789		)				(20,481		)				(23,827		)
Amortization of core deposit intangibles								(1,369		)				(1,373		)				(1,735		)
Adjusted noninterest expense				(f)				$	157,657					$	155,565					$	138,783
Efficiency ratio				(e)/(b)				45.50		%				45.50		%				46.61		%
Adjusted efficiency ratio				(f)/(d)				39.89		%				39.89		%				39.79		%
Adjusted pre-tax, pre-provision income				(d)-(f) = (g)				$	237,565					$	234,382					$	210,035
Average total assets				(h)				$	38,659,262					$	37,568,895					$	35,937,567
Adjusted pre-tax, pre-provision profitability ratio (1)				(g)/(h)				2.44		%				2.50		%				2.32		%
Adjusted noninterest expense (1)/average assets				(f)/(h)				1.62		%				1.66		%				1.53		%
								Nine Months Ended
								September 30, 2018						September 30, 2017
Net interest income before provision for credit losses				(i)				$	1,017,092					$	865,368
Total noninterest income								169,214						212,542
Total revenue				(j)				1,186,306						1,077,910
Noninterest income								169,214						212,542
Less: Gain on sale of the commercial property								—						(71,654		)
Gain on sale of business								(31,470		)				(3,807		)
Adjusted noninterest income				(k)				$	137,744					$	137,081
Adjusted revenue				(i)+(k) = (l)				$	1,154,836					$	1,002,449
Total noninterest expense				(m)				$	526,369					$	486,188
Less: Amortization of tax credit and other investments								(58,670		)				(66,059		)
Amortization of core deposit intangibles								(4,227		)				(5,314		)
Adjusted noninterest expense				(n)				$	463,472					$	414,815
Efficiency ratio				(m)/(j)				44.37		%				45.10		%
Adjusted efficiency ratio				(n)/(l)				40.13		%				41.38		%
Adjusted pre-tax, pre-provision income				(l)-(n) = (o)				$	691,364					$	587,634
Average total assets				(p)				$	37,874,434					$	35,290,542
Adjusted pre-tax, pre-provision profitability ratio (1)				(o)/(p)				2.44		%				2.23		%
Adjusted noninterest expense (1)/average assets				(n)/(p)				1.64		%				1.57		%

(1)		Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 14
Management believes that presenting the adjusted average loan yield and adjusted net interest margin that exclude the ASC 310-30 discount accretion impact provides clarity to financial statement users regarding the change in loan contractual yields and allows comparability to prior periods.
									Three Months Ended																		Nine Months Ended
Yield on Average Loans									September 30, 2018						June 30, 2018						September 30, 2017						September 30, 2018						September 30, 2017
Interest income on loans				(a)					$	385,538					$	365,555					$	306,939					$	1,088,997					$	872,039
Less: ASC 310-30 discount accretion income									(2,863		)				(6,299		)				(4,535		)				(14,362		)				(14,029		)
Adjusted interest income on loans				(b)					$	382,675					$	359,256					$	302,404					$	1,074,635					$	858,010
Average loans				(c)					$	30,498,037					$	29,646,766					$	27,529,779					$	29,790,281					$	26,783,082
Add: ASC 310-30 discount									25,852						29,997						41,875						29,939						45,255
Adjusted average loans				(d)					$	30,523,889					$	29,676,763					$	27,571,654					$	29,820,220					$	26,828,337
Average loan yield (1)				(a)/(c)					5.02		%				4.95		%				4.42		%				4.89		%				4.35		%
Adjusted average loan yield (1)				(b)/(d)					4.97		%				4.86		%				4.35		%				4.82		%				4.28		%
Net Interest Margin
Net interest income				(e)					$	348,720					$	341,679					$	303,155					$	1,017,092					$	865,368
Less: ASC 310-30 discount accretion income									(2,863		)				(6,299		)				(4,535		)				(14,362		)				(14,029		)
Adjusted net interest income				(f)					$	345,857					$	335,380					$	298,620					$	1,002,730					$	851,339
Average interest-earning assets				(g)					$	36,822,293					$	35,767,808					$	34,208,533					$	36,039,382					$	33,542,941
Add: ASC 310-30 discount									25,852						29,997						41,875						29,939						45,255
Adjusted average interest-earning assets				(h)					$	36,848,145					$	35,797,805					$	34,250,408					$	36,069,321					$	33,588,196
Net interest margin (1)				(e)/(g)					3.76		%				3.83		%				3.52		%				3.77		%				3.45		%
Adjusted net interest margin (1)				(f)/(h)					3.72		%				3.76		%				3.46		%				3.72		%				3.39		%

(1)			Annualized.

EAST WEST BANCORP, INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
($ in thousands)
(unaudited)
Table 15
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, 2018						June 30, 2018						September 30, 2017
Stockholders’ equity				(a)				$	4,244,850					$	4,114,284					$	3,781,896
Less: Goodwill								(465,547		)				(465,547		)				(469,433		)
Other intangible assets (1)								(23,656		)				(25,029		)				(30,245		)
Tangible equity				(b)				$	3,755,647					$	3,623,708					$	3,282,218
Total assets				(c)				$	39,073,106					$	38,072,954					$	36,307,966
Less: Goodwill								(465,547		)				(465,547		)				(469,433		)
Other intangible assets (1)								(23,656		)				(25,029		)				(30,245		)
Tangible assets				(d)				$	38,583,903					$	37,582,378					$	35,808,288
Total stockholders’ equity to total assets ratio				(a)/(c)				10.86		%				10.81		%				10.42		%
Tangible equity to tangible assets ratio				(b)/(d)				9.73		%				9.64		%				9.17		%
Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax effects of the amortization of core deposit intangibles and mortgage servicing assets and the after-tax gains on the sales of the commercial property, EWIS business and DCB branches (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
								September 30, 2018						June 30, 2018						September 30, 2017
Net Income								$	171,302					$	172,349					$	132,660
Add: Amortization of core deposit intangibles, net of tax (2)								964						967						1,006
Amortization of mortgage servicing assets, net of tax (2)								324						305						307
Tangible net income				(e)				$	172,590					$	173,621					$	133,973
Less: Gain on sale of business, net of tax (2)								—						—						(2,206		)
Adjusted tangible net income				(f)				$	172,590					$	173,621					$	131,767
Average stockholders’ equity								$	4,197,675					$	4,062,311					$	3,756,207
Less: Average goodwill								(465,547		)				(465,547		)				(469,433		)
Average other intangible assets (1)								(24,530		)				(25,648		)				(31,408		)
Average tangible equity				(g)				$	3,707,598					$	3,571,116					$	3,255,366
Return on average tangible equity (3)				(e)/(g)				18.47		%				19.50		%				16.33		%
Adjusted return on average tangible equity (3)				(f)/(g)				18.47		%				19.50		%				16.06		%
								Nine Months Ended
								September 30, 2018						September 30, 2017
Net Income								$	530,683					$	420,726
Add: Amortization of core deposit intangibles, net of tax (2)								2,977						3,080
Amortization of mortgage servicing assets, net of tax (2)								962						814
Tangible net income				(h)				$	534,622					$	424,620
Less: Gain on sale of the commercial property, net of tax (2)								—						(41,526		)
Gain on sale of business, net of tax (2)								(22,167		)				(2,206		)
Adjusted tangible net income				(i)				$	512,455					$	380,888
Average stockholders’ equity								$	4,061,977					$	3,630,062
Less: Average goodwill								(466,615		)				(469,433		)
Average other intangible assets (1)								(26,080		)				(33,152		)
Average tangible equity				(j)				$	3,569,282					$	3,127,477
Return on average tangible equity (3)				(h)/(j)				20.03		%				18.15		%
Adjusted return on average tangible equity (3)				(i)/(j)				19.20		%				16.28		%

(1)		Includes core deposit intangibles and mortgage servicing assets.
(2)		Statutory rate of 29.56% was applied for the three months ended June 30, 2018, and the three and nine months ended September 30, 2018. Statutory rate of 42.05% was applied for the three and nine months ended September 30, 2017.
(3)		Annualized.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181018005290/en/

For Investor Inquiries:
East West Bancorp, Inc.
Irene Oh
Chief Financial Officer
T: (626) 768-6360
E: [email protected]
or
Julianna Balicka
Director of Strategy and Corporate Development
T: (626) 768-6985
E: [email protected]

Source: East West Bancorp, Inc.