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STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE | 9 Months Ended
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Sep. 30, 2015
STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE |
STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE | NOTE 13 — STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE MetroCorp Warrant — The Company completed the acquisition of MetroCorp on January 17, 2014. Prior to the acquisition, MetroCorp had an outstanding warrant to purchase 771,429 shares of its common stock. Upon the acquisition, the rights of the warrant holder were converted into the right to acquire 230,282 shares of East West’s common stock until January 16, 2019. The warrant has not been exercised as of September 30, 2015. Stock Repurchase Program — On July 17, 2013, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $100.0 million of the Company’s common stock. The Company has not repurchased any shares under this program. Quarterly Dividends — On July 15, 2015, dividends for the Company’s common stock were declared for the three months ended September 30, 2015 in the amount of $0.20 per share and paid on August 17, 2015 to stockholders of record on August 3, 2015. Cash dividends totaling $29.1 million and $26.0 million were paid to the Company’s common shareholders during the three months ended September 30, 2015 and 2014, respectively. Cash dividends totaling $87.1 million and $78.0 million were paid to the Company’s common shareholders during the nine months ended September 30, 2015 and 2014, respectively. Earnings Per Share (“EPS”) — EPS is calculated using the two-class method. Certain Company instruments containing rights to nonforfeitable dividends granted in stock-based payment transactions are considered participating securities prior to vesting and, therefore, have been included in the earnings allocations to compute basic and diluted EPS. The following table presents EPS calculations for the three and nine months ended September 30, 2015 and 2014:
|  | Three months ended September 30, |  | Nine months ended September 30,
($ in thousands, except per share data, shares in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Basic |  |  |  |  |  |  |  |
Net income (1) |  | $ | 94,097 |  |  | $ | 91,900 |  |  | $ | 292,872 |  |  | $ | 250,376 |
Less: Earnings allocated to participating securities |  | — |  |  | 122 |  |  | 3 |  |  | 408 |
Net income allocated to common stockholders (1) |  | $ | 94,097 |  |  | $ | 91,778 |  |  | $ | 292,869 |  |  | $ | 249,968 |
Basic weighted-average common shares outstanding |  | 143,861 |  |  | 143,210 |  |  | 143,788 |  |  | 142,791 |
Basic EPS |  | $ | 0.65 |  |  | $ | 0.64 |  |  | $ | 2.04 |  |  | $ | 1.75 |
Diluted |  |  |  |  |  |  |  |
Net income allocated to common stockholders (1) |  | $ | 94,097 |  |  | $ | 91,778 |  |  | $ | 292,869 |  |  | $ | 249,968 |
Add: Restricted stock dividends |  | 113 |  |  | 69 |  |  | 309 |  |  | 197 |
Net income allocated to diluted common stockholders (1) |  | $ | 94,210 |  |  | $ | 91,847 |  |  | $ | 293,178 |  |  | $ | 250,165 |
Basic weighted-average common shares outstanding |  | 143,861 |  |  | 143,210 |  |  | 143,788 |  |  | 142,791 |
Dilutive potential common shares (2) |  | 729 |  |  | 600 |  |  | 680 |  |  | 586 |
Dilutive weighted-average common shares outstanding |  | 144,590 |  |  | 143,810 |  |  | 144,468 |  |  | 143,377 |
Diluted EPS |  | $ | 0.65 |  |  | $ | 0.64 |  |  | $ | 2.03 |  |  | $ | 1.74 |
(1) Prior year periods were restated to reflect the retrospective application of adopting the new accounting guidance related to the Company’s investments in qualified affordable housing projects ASU 2014-01. See Note 10 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements for additional information. (2) Included dilutive shares from stock options, restricted stock units and warrants for the three and nine months ended September 30, 2015 and 2014. For the three and nine months ended September 30, 2015, approximately 23 thousand and 13 thousand weighted average anti-dilutive shares, respectively, comprised of restricted stock units, were excluded from the diluted EPS computation. For the three months ended September 30, 2014, approximately four thousand weighted average anti-dilutive shares, comprised of restricted stock units, were excluded from the diluted EPS computation. For the nine months ended September 30, 2014, approximately 32 thousand weighted average anti-dilutive shares, comprised of stock options and restricted stock units, were excluded from the diluted EPS computation. Accumulated Other Comprehensive Income (Loss) — The balance of total accumulated other comprehensive income decrease d $2.4 million to $1.8 million as of September 30, 2015 from $4.2 million as of December 31, 2014. Presented in the following tables are the changes in the components of accumulated other comprehensive income (loss) balances for the three and nine months ended September 30, 2015 and 2014:
|  | Three Months Ended September 30,
|  | 2015 |  | 2014
($ in thousands) |  | Available-for-Sale Investment Securities |  | Foreign Currency Translation Adjustments (1) |  | Accumulated Other Comprehensive Income |  | Available-for-Sale Investment Securities |  | Accumulated Other Comprehensive (Loss) Income
Beginning balance |  | $ | 5,430 |  |  | $ | — |  |  | $ | 5,430 |  |  | $ | (2,535 | ) |  | $ | (2,535 | )
Net unrealized gains (losses) arising during the period |  | 13,127 |  |  | (6,846 | ) |  | 6,281 |  |  | 1,565 |  |  | 1,565 |
Amounts reclassified from accumulated other comprehensive income |  | (9,881 | ) |  | — |  |  | (9,881 | ) |  | (1,458 | ) |  | (1,458 | )
Changes, net of taxes |  | 3,246 |  |  | (6,846 | ) |  | (3,600 | ) |  | 107 |  |  | 107 |
Ending balance |  | $ | 8,676 |  |  | $ | (6,846 | ) |  | $ | 1,830 |  |  | $ | (2,428 | ) |  | $ | (2,428 | )
|  | Nine Months Ended September 30,
|  | 2015 |  | 2014
($ in thousands) |  | Available-for-Sale Investment Securities |  | Foreign Currency Translation Adjustments (1) |  | Accumulated Other Comprehensive Income |  | Available-for-Sale Investment Securities |  | Accumulated Other Comprehensive (Loss) Income
Beginning balance |  | $ | 4,237 |  |  | $ | — |  |  | $ | 4,237 |  |  | $ | (30,459 | ) |  | $ | (30,459 | )
Net unrealized gains (losses) arising during the period |  | 20,096 |  |  | (6,846 | ) |  | 13,250 |  |  | 31,861 |  |  | 31,861 |
Amounts reclassified from accumulated other comprehensive income |  | (15,657 | ) |  | — |  |  | (15,657 | ) |  | (3,830 | ) |  | (3,830 | )
Changes, net of taxes |  | 4,439 |  |  | (6,846 | ) |  | (2,407 | ) |  | 28,031 |  |  | 28,031 |
Ending balance |  | $ | 8,676 |  |  | $ | (6,846 | ) |  | $ | 1,830 |  |  | $ | (2,428 | ) |  | $ | (2,428 | )
(1) Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations. In the third quarter of 2015, there was a change in functional currency from USD to the local currency of the Company’s foreign subsidiary. The following tables present the components of other comprehensive income (OCI), reclassifications to net income by income statement line item, and the related tax effects for the three and nine months ended September 30, 2015 and 2014:
|  | Three Months Ended September 30,
|  | 2015 |  | 2014
($ in thousands) |  | Before-Tax Amount |  | Tax (Expense) Benefit |  | Net-of-Tax Amount |  | Before-Tax Amount |  | Tax (Expense) Benefit |  | Net-of-Tax Amount
Available-for-sale investment securities : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains arising during the period |  | $ | 22,634 |  |  | $ | (9,507 | ) |  | $ | 13,127 |  |  | $ | 2,698 |  |  | $ | (1,133 | ) |  | $ | 1,565 |
Reclassification adjustment for realized gains included in net income (1) |  | (17,036 | ) |  | 7,155 |  |  | (9,881 | ) |  | (2,514 | ) |  | 1,056 |  |  | (1,458 | )
Net change |  | 5,598 |  |  | (2,352 | ) |  | 3,246 |  |  | 184 |  |  | (77 | ) |  | 107 |
Foreign currency translation adjustments : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses arising during the period |  | (6,846 | ) |  | — |  |  | (6,846 | ) |  | — |  |  | — |  |  | — |
Net change |  | (6,846 | ) |  | — |  |  | (6,846 | ) |  | — |  |  | — |  |  | — |
Other comprehensive (loss) income |  | $ | (1,248 | ) |  | $ | (2,352 | ) |  | $ | (3,600 | ) |  | $ | 184 |  |  | $ | (77 | ) |  | $ | 107 |
|  | Nine Months Ended September 30,
|  | 2015 |  | 2014
($ in thousands) |  | Before-Tax Amount |  | Tax (Expense) Benefit |  | Net-of-Tax Amount |  | Before-Tax Amount |  | Tax (Expense) Benefit |  | Net-of-Tax Amount
Available-for-sale investment securities : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized gains arising during the period |  | $ | 34,648 |  |  | $ | (14,552 | ) |  | $ | 20,096 |  |  | $ | 54,933 |  |  | $ | (23,072 | ) |  | $ | 31,861 |
Reclassification adjustment for realized gains included in net income (1) |  | (26,994 | ) |  | 11,337 |  |  | (15,657 | ) |  | (6,603 | ) |  | 2,773 |  |  | (3,830 | )
Net change |  | 7,654 |  |  | (3,215 | ) |  | 4,439 |  |  | 48,330 |  |  | (20,299 | ) |  | 28,031 |
Foreign currency translation adjustments : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net unrealized losses arising during the period |  | (6,846 | ) |  | — |  |  | (6,846 | ) |  | — |  |  | — |  |  | — |
Net change |  | (6,846 | ) |  | — |  |  | (6,846 | ) |  | — |  |  | — |  |  | — |
Other comprehensive (loss) income |  | $ | 808 |  |  | $ | (3,215 | ) |  | $ | (2,407 | ) |  | $ | 48,330 |  |  | $ | (20,299 | ) |  | $ | 28,031 |
(1) | The pretax amount is reported in net gains on sales of available-for-sale investment securities in the Consolidated Statements of Income.

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