EX-99.1 2 ewbc9918k9302020.htm EX-99.1

| Exhibit 99.1
| East West Bancorp, Inc.
| 135 N. Los Robles Ave., 7th Fl.
| Pasadena, CA 91101
| Tel. 626.768.6000

NEWS RELEASE |  |  |

FOR INVESTOR INQUIRIES, CONTACT: |
Irene Oh | Julianna Balicka
Chief Financial Officer | Director of Strategy and Corporate Development
T: (626) 768-6360 | T: (626) 768-6985
E: irene.oh@eastwestbank.com | E: julianna.balicka@eastwestbank.com

EAST WEST BANCORP REPORTS NET INCOME FOR THIRD QUARTER 2020
OF $159.5 MILLION AND DILUTED EARNINGS PER SHARE OF $1.12
Pasadena, California — October 22, 2020 – 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 2020. For the third quarter of 2020, net income was $159.5 million or $1.12 per diluted share. Third quarter 2020 return on average assets was 1.26% and return on average equity was 12.5%.
“Total deposits grew to a record $41.7 billion as of September 30, 2020, driven by 28% annualized growth in noninterest-bearing demand deposits,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “As of September 30, 2020, demand deposits reached a record $14.9 billion. We are pleased with the strength and quality of the deposit growth.”
“During the third quarter, East West’s positive loan growth was led by residential mortgage and commercial real estate loans. Total loans reached a record $37.4 billion as of September 30, 2020,” continued Ng. “We are cautiously optimistic. Although current economic indicators are weak, business activity is resuming and trending positive, reflecting the resilience of our customers and the communities we operate in.”
“We are encouraged that active COVID-19 related payment deferrals for our customers have declined by close to 50% since June 30, 2020, and full payment deferrals are down to 2.7% of total loans as of September 30, 2020. The macroeconomic outlook has improved and we modestly decreased our allowance for loan losses as of September 30, 2020. This resulted in a low provision for credit losses of $10 million in the third quarter of 2020. The reduction in the provision was the primary driver of the quarter-over-quarter increase in our net income, which was up by 61% to $159.5 million.”
“East West Bank is operating from a position of strength. We are prudently growing our balance sheet and capital so that we can continue to assist our customers with their personal and business banking needs as they rebuild from the impact of the pandemic. I am confident that our customers will deftly emerge from these unprecedented times and be positioned to take advantage of future opportunities, with East West Bank as a valued partner,” concluded Ng.
1

BALANCE SHEET
•Record Total Assets — Total assets of $50.4 billion as of September 30, 2020 grew by $964 million, or 8% annualized, from $49.4 billion as of June 30, 2020.
Third quarter 2020 average interest-earning assets of $47.4 billion grew $2.0 billion, or 18% linked quarter annualized. Growth was primarily from interest-bearing cash and deposits with banks, which grew $1.5 billion quarter-over-quarter. Interest-bearing cash and deposits with banks made up 10% of average interest-earning assets in the third quarter of 2020, up from 8% in the second quarter of 2020.
•Record Loans — Total loans of $37.4 billion as of September 30, 2020 grew by $208 million, or 2% annualized, from $37.2 billion as of June 30, 2020. As of September 30, 2020, Paycheck Protection Program (“PPP”) loans were $1.8 billion, unchanged from June 30, 2020.
Third quarter 2020 average loans of $37.2 billion increased by $19 million quarter-over-quarter. Growth in total commercial real estate (“CRE”) and residential mortgage was offset by decreases in commercial and industrial (“C&I”) and other consumer loans.
•Record Deposits — Total deposits of $41.7 billion as of September 30, 2020 increased by $1.0 billion, or 10% annualized, from $40.7 billion as of June 30, 2020. Noninterest-bearing demand deposits reached a record $14.9 billion, and made up 36% of total deposits as of September 30, 2020, up from 34% as of June 30, 2020.
Third quarter 2020 average deposits of $41.2 billion grew $1.3 billion, or 13% linked quarter annualized. Strong growth in demand and checking accounts, from both commercial and consumer customers, was partially offset by a reduction in higher-cost time deposits. Average interest-bearing deposits of $26.9 billion grew $0.5 billion, or 8% linked quarter annualized. Average noninterest-bearing deposits of $14.3 billion grew $0.8 billion, or 22% linked quarter annualized.
•Capital Levels – Capital levels for East West are strong. As of September 30, 2020, stockholders’ equity was $5.1 billion, or $36.22 per share. Tangible equity1 per common share was $32.85 as of September 30, 2020, an increase of 3% from $31.86 as of June 30, 2020. As of September 30, 2020, the tangible equity to tangible assets ratio1 was 9.3%, the common equity tier 1 (“CET1”) capital ratio was 12.8%, and the total risk-based capital ratio was 14.5%. All of the Company’s capital ratios increased quarter-over-quarter.

1 See reconciliation of GAAP to non-GAAP financial measures in Table 14. |  |  |

2

OPERATING RESULTS
Third Quarter Earnings – Third quarter 2020 net income was $159.5 million and diluted earnings per share (“EPS”) were $1.12, an increase in net income of 61% and in EPS of 60%, compared to second quarter 2020 net income of $99.4 million and diluted EPS of $0.70.
Third Quarter 2020 Compared to Second Quarter 2020
Net Interest Income and Net Interest Margin
Net interest income (“NII”) totaled $324.1 million, a decrease of 6% from $343.8 million. Net interest margin (“NIM”) of 2.72% compressed by 32 basis points from 3.04%.
•Adjusted2 NII totaled $317.6 million, a decrease of 2% from $322.9 million. Adjusted2 NIM of 2.77% contracted by 19 basis points from 2.96%. Adjusted NII and NIM excluded the impact of PPP loans and the related PPP Liquidity Facility (“PPPLF”).
•The quarter-over-quarter changes in the NII and the NIM reflected downward repricing of earning asset yields, a decrease in PPP loan fee income, and inflow of interest-bearing cash and deposits with banks, partially offset by a lower cost of deposits.
•The average loan yield of 3.60% contracted by 38 basis points from 3.98%, reflecting downward repricing of variable-rate loans to benchmark interest rates, as well as a lower amount of deferred fee income accreted on PPP loans. Excluding the impact of PPP loans, the adjusted2 average loan yield of 3.70% contracted by 20 basis points quarter-over-quarter.
•Interest and fees earned on PPP loans contributed $7.8 million to interest income in the third quarter of 2020, and interest expense paid on the PPPLF was $1.3 million. Third quarter 2020 average balance of PPP loans was $1.8 billion and the average balance of the PPPLF, classified as long-term debt, was $1.4 billion.
•The yield on average interest-earning assets of 3.07% contracted by 46 basis points from 3.53%. This primarily reflects the change in the average loan yield, downward repricing of the securities portfolio, and inflow of lower-yielding assets in the earning asset mix.
•The average cost of interest-bearing deposits decreased by 21 basis points to 0.50%, down from 0.71%. The average cost of deposits decreased by 14 basis points to 0.33%, down from 0.47%.
Noninterest Income
Noninterest income totaled $49.6 million, a 15% decrease from $58.6 million.
•Gains on sales of available-for-sale (“AFS”) debt securities were $0.7 million, compared to $9.6 million in the second quarter, during which the Company sold $131.6 million of municipal bonds.
•Lending fees of $18.7 million decreased by $3.2 million. Third quarter lending fees included $3.6 million from an increase in the valuation of warrants received as part of lending relationships, which decreased from $8.1 million in the second quarter. Included in lending fees are letters of credit fees of $10.1 million for the third quarter, which increased $0.9 million quarter-over-quarter with increased customer activity.
•Reflecting an increase in customer-driven transactions, deposit account fees of $12.6 million increased by $1.7 million, and wealth management fees of $4.6 million increased by $1.5 million.
•
•Foreign exchange income of $3.3 million decreased by $1.3 million, reflecting downward revaluations of foreign currency-denominated balance sheet items, partially offset by an increase in customer-driven transactions.
Noninterest Expense
Noninterest expense totaled $167.7 million, an 11% decrease from $187.7 million.
•Third quarter noninterest expense consisted of $154.4 million of adjusted3 noninterest expense, $12.3 million in amortization of tax credit and other investments, and $0.9 million in amortization of core deposit intangibles.
•Total noninterest expense decreased by $20.0 million, largely due to a $12.5 million decrease in amortization of tax credit and other investments, as well as an $8.7 million decrease in debt extinguishment costs. During the second quarter, the Company prepaid $150.0 million of repurchase agreements and incurred $8.7 million in debt extinguishment cost.

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

3

•Adjusted noninterest expense of $154.4 million increased by $1.2 million, or 1%, from $153.3 million. The largest linked-quarter changes were a $2.8 million increase in compensation and employee benefits expense, a $1.2 million increase in computer software expense, and a $2.1 million decrease in other operating expenses.
•Compensation expense of $99.8 million increased by $2.8 million, or 3%, from $97.0 million. During the second quarter, $7.4 million of compensation expense associated with the origination of $1.8 billion in PPP loans was deferred. Excluding this item, third quarter compensation expense decreased by $4.6 million, or 4%, quarter-over-quarter from $104.3 million in the second quarter.
•The adjusted3 efficiency ratio was 41.3% in the third quarter, compared to 38.1% in the second quarter.
TAX RELATED ITEMS
Third quarter 2020 income tax expense was $36.5 million and the effective tax rate was 19%, compared to income tax expense of $12.9 million and an effective tax rate of 12% for the second quarter of 2020. As of September 30, 2020, the Company expects that the full-year effective tax rate will be 15%.
The quarter-over-quarter change in the income tax expense and effective tax rate reflects growth in income before income taxes and the updated estimate for the full-year effective tax rate. Third quarter 2020 income before income taxes was $196.1 million, a 75% increase from $112.3 million in the second quarter of 2020. The third quarter increase in the income before income taxes reset the run-rate for the full year, increasing the Company’s estimate of the full-year effective tax rate.
ASSET QUALITY
The allowance for loan losses totaled $618.3 million, or 1.65% of loans HFI, as of September 30, 2020, compared to $632.1 million, or 1.70% of loans HFI, as of June 30, 2020.
1
•Quarter-over-quarter, the ALLL decreased by $13.8 million. This decrease was primarily driven by an improved macroeconomic forecast as of September 30, 2020 compared to June 30, 2020, which decreased the expected lifetime loan losses for the loan portfolio.
•Third quarter 2020 net charge-offs were $24.2 million, or annualized 0.26% of average loans HFI, compared to $19.2 million, or annualized 0.21% of average loans HFI in the second quarter of 2020. Charge-offs of loans in the oil and gas industry totaled $22.1 million during the third quarter of 2020, and were 91% of net charge-offs.
•Third quarter 2020 provision for credit losses was $10.0 million, compared to $102.4 million for the second quarter of 2020 and $73.9 million for the first quarter of 2020. The quarter-over-quarter decrease in the provision expense reflects the quarter-over-quarter net change in the allowance, which required less provision expense.
•Nonperforming assets were $259.9 million, or 0.52% of total assets, as of September 30, 2020, compared to nonperforming assets of $202.2 million, or 0.41% of total assets, as of June 30, 2020. The quarter-over-quarter increase in nonperforming assets was largely due to inflows to nonaccrual status of oil and gas related loans, partially offset by charge-offs. Oil and gas related loans made up 50% of nonperforming assets as of September 30, 2020.

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

4

CAPITAL STRENGTH
Capital levels for East West are strong. The following table presents the regulatory capital ratios as of September 30, 2020, June 30, 2020, and September 30, 2019.

EWBC Regulatory Capital Metrics |  |  |  | Basel III |  |  |  |  |  |  |  |  |  |
($ in millions) |  |  |  | September 30, 2020 (a) |  | June 30, 2020 (a) |  | September 30, 2019 |  | Minimum Capital Ratio |  | Well Capitalized Ratio |  | Minimum Capital Ratio + Conservation Buffer (b)
Risk-Based Capital Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CET 1 capital ratio |  |  |  | 12.8 | % |  | 12.7 | % |  | 12.8 | % |  | 4.5 | % |  | 6.5 | % |  | 7.0 | %
Tier 1 capital ratio |  |  |  | 12.8 | % |  | 12.7 | % |  | 12.8 | % |  | 6.0 | % |  | 8.0 | % |  | 8.5 | %
Total capital ratios |  |  |  | 14.5 | % |  | 14.4 | % |  | 14.2 | % |  | 8.0 | % |  | 10.0 | % |  | 10.5 | %
Leverage ratio |  |  |  | 9.8 | % |  | 9.7 | % |  | 10.3 | % |  | 4.0 | % |  | 5.0 | % |  | 4.0 | %
Risk-Weighted Assets (“RWA”) (c) |  |  |  | $ | 36,922 |  |  | $ | 36,199 |  |  | $ | 34,424 |  |  | N/A |  | N/A |  | N/A

N/A Not applicable.
(a)The Company has elected to use the 2020 CECL transition provision in the calculation of its September 30, 2020 and June 30, 2020 regulatory capital ratios. The Company’s September 30, 2020 regulatory capital ratios and RWA are preliminary.
(b)An additional 2.5% capital conservation buffer above the minimum capital ratios are required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.
(c)Under regulatory guidelines, on-balance sheet assets and credit equivalent amounts of derivatives and off-balance sheet items are assigned to one of several broad risk categories based on the nature of the obligor, or, if relevant, the guarantor or the nature of any collateral. The aggregate dollar value in each risk category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are aggregated for determining total RWA.
5

DIVIDEND PAYOUT AND CAPITAL ACTIONS
East West’s Board of Directors has declared fourth quarter 2020 dividends for the Company’s common stock. The common stock cash dividend of $0.275 per share is payable on November 16, 2020 to shareholders of record on November 2, 2020.
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 2020 under this authorization.
Conference Call
East West will host a conference call to discuss third quarter 2020 earnings with the public on Thursday, October 22, 2020 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 2020 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 22, 2020 at 11:30 a.m. Pacific Time through November 22, 2020. 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: 10147892.
About East West
East West Bancorp, Inc. is a publicly owned company with total assets of $50.4 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 125 locations in the United States and Greater China. U.S. markets include California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. 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, and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.
6

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 our 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,” “assumes,” 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, and the negative thereof. 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, the impact of disease pandemics, such as the worldwide spread and any resurgence of COVID-19, on the Company, its operations and its customers, employees and the markets in which the Company operates and in which its loans are concentrated; and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the below-mentioned and/or other risks, and significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period; changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, such as the Small Business Administration’s Payment Protection Program, the CARES Act and any similar or related rules and regulations of the Federal Reserve efforts to provide liquidity to the U.S. financial system, including changes in government interest rate policies, and to provide credit to private commercial and municipal borrowers, and other programs designed to address the effects of the COVID-19 pandemic, as well as the resulting effect of all such items on the Company’s operations, liquidity and capital position, and on the financial condition of the Company’s borrowers and other customers; changes in the U.S. economy, including an economic slowdown or recession, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions; the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the United States (“U.S.”) and the People’s Republic of China; changes in the commercial and consumer real estate markets; fluctuations in the Company’s stock price; changes in income tax laws and regulations; the Company’s ability to compete effectively against other financial institutions in its banking markets; success and timing of our business strategies; our ability to retain key officers and employees; impact on our funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and our product mix; 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 benchmark interest rate reform in the U.S. that resulted in the Secured Overnight Financing Rate selected as the preferred alternative reference rate to the London Interbank Offered Rate; 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; changes in consumer spending and savings habits; impact on the Company’s international operations due to political developments, disease pandemics, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions; 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 U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau, the California Department of Business Oversight — Division of Financial Institutions, and SBA; impact of the Dodd-Frank Act on the Company’s business, business practices, cost of operations and executive compensation; heightened regulatory and governmental oversight and scrutiny of our business practices, including dealings with consumers; impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions and from the Company’s interactions with business partners, counterparties, service providers and other third parties; impact of regulatory enforcement actions; changes in accounting standards as may be required by the Financial Accounting Standards Board 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 receive dividends from its subsidiaries; any future strategic acquisitions or divestitures; continuing consolidation in the financial services industry; changes in the equity and debt securities markets; 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 increases in funding costs, a reduction in 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 debt securities portfolio; and impact of natural or man-made disasters or calamities, such as wildfires and earthquakes, which are particular to California, or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance. In addition to the risk factors enumerated above, the economic impact of the COVID-19 pandemic could cause actual outcome to differ, possibly materially, from the Company’s forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Company’s control. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on the Company’s business. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments that are uncertain and unpredictable, including the scope, severity and duration of the pandemic and its impact on the Company’s customers, the actions taken by governmental authorities in response to the pandemic as well as its impact on global and regional economies, and the pace of recovery when the COVID-19 pandemic subsides, among others. For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 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.
7

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |
CONDENSED CONSOLIDATED BALANCE SHEET |  |  |  |  |  |  |  |  |  |  |  |
($ and shares in thousands, except per share data) |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |
Table 1 |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  | September 30, 2020 % or Basis Point Change |  |  |
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | Qtr-o-Qtr |  | Yr-o-Yr |
Assets |  |  |  |  |  |  |  |  |  |  |  |
| Cash and due from banks |  | $ | 503,376 |  |  | $ | 602,974 |  |  | $ | 475,291 |  |  | (16.5) | % |  | 5.9 | % |
| Interest-bearing cash with banks |  | 4,003,565 |  |  | 3,930,528 |  |  | 2,566,990 |  |  | 1.9 |  |  | 56.0 |  |
| Cash and cash equivalents |  | 4,506,941 |  |  | 4,533,502 |  |  | 3,042,281 |  |  | (0.6) |  |  | 48.1 |  |
| Interest-bearing deposits with banks |  | 699,465 |  |  | 531,591 |  |  | 160,423 |  |  | 31.6 |  |  | 336.0 |  |
| Securities purchased under resale agreements (“resale agreements”) (1) |  | 1,210,000 |  |  | 1,260,000 |  |  | 860,000 |  |  | (4.0) |  |  | 40.7 |  |
| Available-for-sale (“AFS”) debt securities (amortized cost of $4,471,694, $3,823,714 and $3,259,784 as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively) |  | 4,539,160 |  |  | 3,884,574 |  |  | 3,284,034 |  |  | 16.9 |  |  | 38.2 |  |
| Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock |  | 79,172 |  |  | 78,963 |  |  | 78,334 |  |  | 0.3 |  |  | 1.1 |  |
| Loans held-for-sale (“HFS”) |  | 4,148 |  |  | 3,875 |  |  | 294 |  |  | 7.0 |  |  | NM |
| Loans held-for-investment (''HFI'') (net of allowance (2) for loan losses of $618,252, $632,071 and $345,576) |  | 36,818,877 |  |  | 36,597,341 |  |  | 33,679,400 |  |  | 0.6 |  |  | 9.3 |  |
| Investments in qualified affordable housing partnerships, net |  | 192,913 |  |  | 201,888 |  |  | 190,000 |  |  | (4.4) |  |  | 1.5 |  |
| Investments in tax credit and other investments, net |  | 254,512 |  |  | 251,318 |  |  | 211,603 |  |  | 1.3 |  |  | 20.3 |  |
| Goodwill |  | 465,697 |  |  | 465,697 |  |  | 465,697 |  |  | — |  |  | — |  |
| Operating lease right-of-use assets |  | 96,092 |  |  | 94,898 |  |  | 103,894 |  |  | 1.3 |  |  | (7.5) |  |
| Other assets |  | 1,504,500 |  |  | 1,503,946 |  |  | 1,198,699 |  |  | 0.0 |  |  | 25.5 |  |
| Total assets |  | $ | 50,371,477 |  |  | $ | 49,407,593 |  |  | $ | 43,274,659 |  |  | 2.0 | % |  | 16.4 | % |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |
| Deposits |  | $ | 41,680,555 |  |  | $ | 40,672,678 |  |  | $ | 36,659,526 |  |  | 2.5 | % |  | 13.7 | % |
| Short-term borrowings |  | 59,613 |  |  | 252,851 |  |  | 47,689 |  |  | (76.4) |  |  | 25.0 |  |
| FHLB advances |  | 657,185 |  |  | 656,759 |  |  | 745,494 |  |  | 0.1 |  |  | (11.8) |  |
| Securities sold under repurchase agreements (“repurchase agreements”) (1) |  | 348,063 |  |  | 300,000 |  |  | 50,000 |  |  | 16.0 |  |  | 596.1 |  |
| Long-term debt and finance lease liabilities (3) |  | 1,579,317 |  |  | 1,580,442 |  |  | 152,390 |  |  | (0.1) |  |  | 936.4 |  |
| Operating lease liabilities |  | 103,673 |  |  | 102,708 |  |  | 112,142 |  |  | 0.9 |  |  | (7.6) |  |
| Accrued expenses and other liabilities |  | 816,965 |  |  | 854,912 |  |  | 624,754 |  |  | (4.4) |  |  | 30.8 |  |
| Total liabilities |  | 45,245,371 |  |  | 44,420,350 |  |  | 38,391,995 |  |  | 1.9 |  |  | 17.9 |  |
| Stockholders’ equity (2) |  | 5,126,106 |  |  | 4,987,243 |  |  | 4,882,664 |  |  | 2.8 |  |  | 5.0 |  |
| Total liabilities and stockholders’ equity |  | $ | 50,371,477 |  |  | $ | 49,407,593 |  |  | $ | 43,274,659 |  |  | 2.0 | % |  | 16.4 | % |
| Book value per common share |  | $ | 36.22 |  |  | $ | 35.25 |  |  | $ | 33.54 |  |  | 2.8 | % |  | 8.0 | % |
| Tangible equity (4) per common share |  | $ | 32.85 |  |  | $ | 31.86 |  |  | $ | 30.22 |  |  | 3.1 |  |  | 8.7 |  |
| Number of common shares at period-end |  | 141,507 |  |  | 141,486 |  |  | 145,568 |  |  | 0.0 |  |  | (2.8) |  |
| Tangible equity to tangible assets ratio (4) |  | 9.32 | % |  | 9.21 | % |  | 10.28 | % |  | 11 |  | bps | (96) |  | bps

NM - Not meaningful.
(1)Resale and repurchase agreements are reported net when the transactions are eligible for netting under Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. There was no netting of repurchase agreements against resale agreements as of September 30, 2020 and June 30, 2020. $400 million of gross repurchase agreements were eligible for netting against gross resale agreements as of September 30, 2019.
(2)On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using the modified retrospective approach. We recorded $125.2 million increase to allowance for loan losses and $98.0 million after-tax decrease to opening retained earnings as of January 1, 2020.
(3)Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) as of September 30, 2020 and June 30, 2020.
(4)See reconciliation of GAAP to non-GAAP financial measures in Table 14.
8

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |
TOTAL LOANS AND DEPOSITS DETAIL |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |
Table 2 |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  | September 30, 2020 % Change |  |
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | Qtr-o-Qtr |  | Yr-o-Yr
Loans: |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |
| Commercial and industrial (“C&I”) (1) |  | $ | 13,305,024 |  |  | $ | 13,422,691 |  |  | $ | 12,301,002 |  |  | (0.9) | % |  | 8.2 | %
| Commercial real estate (“CRE”): |  |  |  |  |  |  |  |  |  |
| CRE |  | 11,037,987 |  |  | 10,902,114 |  |  | 9,749,583 |  |  | 1.2 |  |  | 13.2 |
| Multifamily residential |  | 3,057,274 |  |  | 3,032,385 |  |  | 2,589,203 |  |  | 0.8 |  |  | 18.1 |
| Construction and land |  | 578,407 |  |  | 567,716 |  |  | 719,900 |  |  | 1.9 |  |  | (19.7) |
| Total CRE |  | 14,673,668 |  |  | 14,502,215 |  |  | 13,058,686 |  |  | 1.2 |  |  | 12.4 |
Consumer: |  |  |  |  |  |  |  |  |  |  |
| Residential mortgage: |  |  |  |  |  |  |  |  |  |
| Single-family residential |  | 7,785,759 |  |  | 7,660,094 |  |  | 6,811,014 |  |  | 1.6 |  |  | 14.3 |
| Home equity lines of credit (“HELOCs”) |  | 1,514,388 |  |  | 1,461,951 |  |  | 1,540,121 |  |  | 3.6 |  |  | (1.7) |
| Total residential mortgage |  | 9,300,147 |  |  | 9,122,045 |  |  | 8,351,135 |  |  | 2.0 |  |  | 11.4 |
| Other consumer |  | 158,290 |  |  | 182,461 |  |  | 314,153 |  |  | (13.2) |  |  | (49.6) |
Total loans HFI (2) |  |  | 37,437,129 |  |  | 37,229,412 |  |  | 34,024,976 |  |  | 0.6 |  |  | 10.0 |
Loans HFS |  |  | 4,148 |  |  | 3,875 |  |  | 294 |  |  | 7.0 |  |  | NM
| Total loans (2) |  | 37,441,277 |  |  | 37,233,287 |  |  | 34,025,270 |  |  | 0.6 |  |  | 10.0 |
Allowance for loan losses |  |  | (618,252) |  |  | (632,071) |  |  | (345,576) |  |  | (2.2) |  |  | 78.9 |
| Net loans (2) |  | $ | 36,823,025 |  |  | $ | 36,601,216 |  |  | $ | 33,679,694 |  |  | 0.6 |  |  | 9.3 |
Deposits: |  |  |  |  |  |  |  |  |  |  |
| Noninterest-bearing demand |  | $ | 14,924,917 |  |  | $ | 13,940,420 |  |  | $ | 10,806,937 |  |  | 7.1 | % |  | 38.1 | %
| Interest-bearing checking |  | 5,731,573 |  |  | 5,280,887 |  |  | 4,837,391 |  |  | 8.5 |  |  | 18.5 |
| Money market |  | 9,553,574 |  |  | 10,002,624 |  |  | 8,400,353 |  |  | (4.5) |  |  | 13.7 |
| Savings |  | 2,401,318 |  |  | 2,186,199 |  |  | 2,094,638 |  |  | 9.8 |  |  | 14.6 |
| Time deposits |  | 9,069,173 |  |  | 9,262,548 |  |  | 10,520,207 |  |  | (2.1) |  |  | (13.8) |
| Total deposits |  | $ | 41,680,555 |  |  | $ | 40,672,678 |  |  | $ | 36,659,526 |  |  | 2.5 | % |  | 13.7 | %

NM - Not meaningful.
(1)Includes $1.77 billion and $1.75 billion of Paycheck Protection Program (“PPP”) loans as of September 30, 2020 and June 30, 2020, respectively.
(2)Includes net deferred loan fees, unearned fees, unamortized premiums and unaccreted discounts of $(67.0) million, $(72.1) million, and $(39.8) million as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively. Net origination fees related to PPP loans were $(22.6) million and $(25.4) million as of September 30, 2020 and June 30, 2020, respectively.
9

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, 2020 % Change |  |
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | Qtr-o-Qtr |  | Yr-o-Yr
Interest and dividend income (1) |  |  | $ | 365,728 |  |  | $ | 398,776 |  |  | $ | 476,912 |  |  | (8.3) | % |  | (23.3) | %
Interest expense |  |  | 41,598 |  |  | 55,001 |  |  | 107,105 |  |  | (24.4) |  |  | (61.2) |
Net interest income before provision for credit losses |  |  | 324,130 |  |  | 343,775 |  |  | 369,807 |  |  | (5.7) |  |  | (12.4) |
Provision for credit losses |  |  | 10,000 |  |  | 102,443 |  |  | 38,284 |  |  | (90.2) |  |  | (73.9) |
Net interest income after provision for credit losses |  |  | 314,130 |  |  | 241,332 |  |  | 331,523 |  |  | 30.2 |  |  | (5.2) |
Noninterest income |  |  | 49,580 |  |  | 58,637 |  |  | 51,474 |  |  | (15.4) |  |  | (3.7) |
Noninterest expense |  |  | 167,650 |  |  | 187,696 |  |  | 176,630 |  |  | (10.7) |  |  | (5.1) |
Income before income taxes |  |  | 196,060 |  |  | 112,273 |  |  | 206,367 |  |  | 74.6 |  |  | (5.0) |
Income tax expense |  |  | 36,523 |  |  | 12,921 |  |  | 34,951 |  |  | 182.7 |  |  | 4.5 |
Net income |  |  | $ | 159,537 |  |  | $ | 99,352 |  |  | $ | 171,416 |  |  | 60.6 | % |  | (6.9) | %
Earnings per share (“EPS”) |  |  |  |  |  |  |  |  |  |  |
- Basic |  |  | $ | 1.13 |  |  | $ | 0.70 |  |  | $ | 1.18 |  |  | 60.6 | % |  | (4.3) | %
- Diluted |  |  | $ | 1.12 |  |  | $ | 0.70 |  |  | $ | 1.17 |  |  | 60.3 |  |  | (4.3) |
Weighted-average number of shares outstanding |  |  |  |  |  |  |  |  |  |  |
- Basic |  |  | 141,498 |  |  | 141,486 |  |  | 145,559 |  |  | 0.0 | % |  | (2.8) | %
- Diluted |  |  | 142,043 |  |  | 141,827 |  |  | 146,120 |  |  | 0.2 |  |  | (2.8) |
|  |  | Three Months Ended |  |  |  |  |  | September 30, 2020 % Change |  |
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | Qtr-o-Qtr |  | Yr-o-Yr
Noninterest income: |  |  |  |  |  |  |  |  |  |  |
| Lending fees |  | $ | 18,736 |  |  | $ | 21,946 |  |  | $ | 15,035 |  |  | (14.6) | % |  | 24.6 | %
| Deposit account fees |  | 12,573 |  |  | 10,872 |  |  | 9,729 |  |  | 15.6 |  |  | 29.2 |
| Foreign exchange income |  | 3,310 |  |  | 4,562 |  |  | 8,065 |  |  | (27.4) |  |  | (59.0) |
| Wealth management fees |  | 4,553 |  |  | 3,091 |  |  | 4,841 |  |  | 47.3 |  |  | (5.9) |
| Interest rate contracts and other derivative income |  | 5,538 |  |  | 6,107 |  |  | 8,423 |  |  | (9.3) |  |  | (34.3) |
| Net gains on sales of loans |  | 361 |  |  | 132 |  |  | 2,037 |  |  | 173.5 |  |  | (82.3) |
| Gains on sales of AFS debt securities |  | 698 |  |  | 9,640 |  |  | 58 |  |  | (92.8) |  |  | NM
| Other investment income |  | 316 |  |  | 966 |  |  | 663 |  |  | (67.3) |  |  | (52.3) |
| Other income |  | 3,495 |  |  | 1,321 |  |  | 2,623 |  |  | 164.6 |  |  | 33.2 |
Total noninterest income |  |  | $ | 49,580 |  |  | $ | 58,637 |  |  | $ | 51,474 |  |  | (15.4) | % |  | (3.7) | %
Noninterest expense: |  |  |  |  |  |  |  |  |  |  |
| Compensation and employee benefits |  | $ | 99,756 |  |  | $ | 96,955 |  |  | $ | 97,819 |  |  | 2.9% |  |  | 2.0 | %
| Occupancy and equipment expense |  | 16,648 |  |  | 16,217 |  |  | 17,912 |  |  | 2.7 |  |  | (7.1) |
| Deposit insurance premiums and regulatory assessments |  | 4,006 |  |  | 3,700 |  |  | 3,550 |  |  | 8.3 |  | 12.8
| Legal expense |  | 1,366 |  |  | 1,530 |  |  | 1,720 |  |  | (10.7) |  |  | (20.6) |
| Data processing |  | 3,590 |  |  | 4,480 |  |  | 3,328 |  |  | (19.9) |  |  | 7.9 |
| Consulting expense |  | 1,224 |  |  | 1,413 |  |  | 2,559 |  |  | (13.4) |  |  | (52.2) |
| Deposit related expense |  | 3,113 |  |  | 3,353 |  |  | 3,584 |  |  | (7.2) |  |  | (13.1) |
| Computer software expense |  | 8,539 |  |  | 7,301 |  |  | 6,556 |  |  | 17.0 |  |  | 30.2 |
| Other operating expense |  | 17,122 |  |  | 19,248 |  |  | 22,769 |  |  | (11.0) |  |  | (24.8) |
| Amortization of tax credit and other investments |  | 12,286 |  |  | 24,759 |  |  | 16,833 |  |  | (50.4) |  |  | (27.0) |
| Repurchase agreements’ extinguishment cost |  | — |  |  | 8,740 |  |  | — |  |  | (100.0) |  |  | — |
Total noninterest expense |  |  | $ | 167,650 |  |  | $ | 187,696 |  |  | $ | 176,630 |  |  | (10.7) | % |  | (5.1) | %

NM - Not meaningful.
(1)Includes $7.8 million and $21.3 million of interest income related to PPP loans for the three months ended September 30, 2020 and June 30, 2020, respectively.
10

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, 2020 % Change
|  |  | September 30, 2020 |  | September 30, 2019 |  | Yr-o-Yr
Interest and dividend income (1) |  |  | $ | 1,213,694 |  |  | $ | 1,415,067 |  |  | (14.2) | %
Interest expense |  |  | 183,082 |  |  | 315,473 |  |  | (42.0) |
Net interest income before provision for credit losses |  |  | 1,030,612 |  |  | 1,099,594 |  |  | (6.3) |
Provision for credit losses |  |  | 186,313 |  |  | 80,108 |  |  | 132.6 |
Net interest income after provision for credit losses |  |  | 844,299 |  |  | 1,019,486 |  |  | (17.2) |
Noninterest income |  |  | 162,266 |  |  | 146,364 |  |  | 10.9 |
Noninterest expense |  |  | 534,222 |  |  | 541,215 |  |  | (1.3) |
Income before income taxes |  |  | 472,343 |  |  | 624,635 |  |  | (24.4) |
Income tax expense |  |  | 68,630 |  |  | 138,815 |  |  | (50.6) |
Net income |  |  | $ | 403,713 |  |  | $ | 485,820 |  |  | (16.9) | %
EPS |  |  |  |  |  |  |
- Basic |  |  | $ | 2.83 |  |  | $ | 3.34 |  |  | (15.2) | %
- Diluted |  |  | $ | 2.82 |  |  | $ | 3.33 |  |  | (15.2) |
Weighted-average number of shares outstanding |  |  |  |  |  |  |
- Basic |  |  | 142,595 |  |  | 145,455 |  |  | (2.0) | %
- Diluted |  |  | 143,082 |  |  | 146,088 |  |  | (2.1) |
|  |  | Nine Months Ended |  |  |  | September 30, 2020 % Change
|  |  | September 30, 2020 |  | September 30, 2019 |  | Yr-o-Yr
Noninterest income: |  |  |  |  |  |  |
| Lending fees |  | $ | 56,455 |  |  | $ | 46,427 |  |  | 21.6 | %
| Deposit account fees |  | 33,892 |  |  | 28,804 |  |  | 17.7 |
| Foreign exchange income |  | 15,691 |  |  | 20,366 |  |  | (23.0) |
| Wealth management fees |  | 12,997 |  |  | 12,415 |  |  | 4.7 |
| Interest rate contracts and other derivative income |  | 18,718 |  |  | 22,037 |  |  | (15.1) |
| Net gains on sales of loans |  | 1,443 |  |  | 2,967 |  |  | (51.4) |
| Gains on sales of AFS debt securities |  | 11,867 |  |  | 3,066 |  |  | 287.1 |
| Other investment income |  | 3,203 |  |  | 2,571 |  |  | 24.6 |
| Other income |  | 8,000 |  |  | 7,711 |  |  | 3.7 |
Total noninterest income |  |  | $ | 162,266 |  |  | $ | 146,364 |  |  | 10.9 | %
Noninterest expense: |  |  |  |  |  |  |
| Compensation and employee benefits |  | $ | 298,671 |  |  | $ | 300,649 |  |  | (0.7) | %
| Occupancy and equipment expense |  | 49,941 |  |  | 52,592 |  |  | (5.0) |
| Deposit insurance premiums and regulatory assessments |  | 11,133 |  |  | 9,557 |  |  | 16.5 |
| Legal expense |  | 6,093 |  |  | 6,300 |  |  | (3.3) |
| Data processing |  | 11,896 |  |  | 9,945 |  |  | 19.6 |
| Consulting expense |  | 3,854 |  |  | 6,687 |  |  | (42.4) |
| Deposit related expense |  | 10,029 |  |  | 10,426 |  |  | (3.8) |
| Computer software expense |  | 22,006 |  |  | 18,845 |  |  | 16.8 |
| Other operating expense |  | 57,489 |  |  | 67,737 |  |  | (15.1) |
| Amortization of tax credit and other investments |  | 54,370 |  |  | 58,477 |  |  | (7.0) |
| Repurchase agreements’ extinguishment cost |  | 8,740 |  |  | — |  |  | 100.0 |
Total noninterest expense |  |  | $ | 534,222 |  |  | $ | 541,215 |  |  | (1.3) | %

(1)Includes $29.1 million of interest income related to PPP loans for the nine months ended September 30, 2020.
11

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SELECTED AVERAGE BALANCES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Table 5 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  |  |  |  |  | September 30, 2020 % Change |  |  |  | Nine Months Ended |  |  |  | September 30, 2020 % Change
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | Qtr-o-Qtr |  | Yr-o-Yr |  | September 30, 2020 |  | September 30, 2019 |  | Yr-o-Yr
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| C&I (1) |  | $ | 13,235,845 |  |  | $ | 13,560,719 |  |  | $ | 12,203,341 |  |  | (2.4) | % |  | 8.5 | % |  | $ | 12,988,486 |  |  | $ | 12,018,802 |  |  | 8.1 | %
| CRE: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| CRE |  | 10,942,780 |  |  | 10,812,399 |  |  | 9,685,092 |  |  | 1.2 |  |  | 13.0 |  |  | 10,747,669 |  |  | 9,522,238 |  |  | 12.9 |
| Multifamily residential |  | 3,107,294 |  |  | 2,987,311 |  |  | 2,561,648 |  |  | 4.0 |  |  | 21.3 |  |  | 2,995,227 |  |  | 2,523,962 |  |  | 18.7 |
| Construction and land |  | 564,219 |  |  | 594,965 |  |  | 694,665 |  |  | (5.2) |  |  | (18.8) |  |  | 599,957 |  |  | 652,096 |  |  | (8.0) |
| Total CRE |  | 14,614,293 |  |  | 14,394,675 |  |  | 12,941,405 |  |  | 1.5 |  |  | 12.9 |  |  | 14,342,853 |  |  | 12,698,296 |  |  | 13.0 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Residential mortgage: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Single-family residential |  | 7,695,838 |  |  | 7,506,546 |  |  | 6,636,227 |  |  | 2.5 |  |  | 16.0 |  |  | 7,487,347 |  |  | 6,388,939 |  |  | 17.2 |
| HELOCs |  | 1,475,098 |  |  | 1,444,933 |  |  | 1,557,358 |  |  | 2.1 |  |  | (5.3) |  |  | 1,454,237 |  |  | 1,605,279 |  |  | (9.4) |
| Total residential mortgage |  | 9,170,936 |  |  | 8,951,479 |  |  | 8,193,585 |  |  | 2.5 |  |  | 11.9 |  |  | 8,941,584 |  |  | 7,994,218 |  |  | 11.9 |
| Other consumer |  | 139,371 |  |  | 234,900 |  |  | 322,951 |  |  | (40.7) |  |  | (56.8) |  |  | 214,936 |  |  | 312,397 |  |  | (31.2) |
| Total loans (2) |  | $ | 37,160,445 |  |  | $ | 37,141,773 |  |  | $ | 33,661,282 |  |  | 0.1 | % |  | 10.4 | % |  | $ | 36,487,859 |  |  | $ | 33,023,713 |  |  | 10.5 | %
Interest-earning assets |  |  | $ | 47,428,586 |  |  | $ | 45,413,242 |  |  | $ | 40,919,386 |  |  | 4.4 | % |  | 15.9 | % |  | $ | 45,076,734 |  |  | $ | 39,716,462 |  |  | 13.5 | %
Total assets |  |  | $ | 50,247,259 |  |  | $ | 48,228,914 |  |  | $ | 43,136,273 |  |  | 4.2 | % |  | 16.5 | % |  | $ | 47,753,030 |  |  | $ | 41,815,490 |  |  | 14.2 | %
Deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Noninterest-bearing demand |  | $ | 14,296,475 |  |  | $ | 13,534,873 |  |  | $ | 10,712,612 |  |  | 5.6 | % |  | 33.5 | % |  | $ | 12,987,813 |  |  | $ | 10,342,966 |  |  | 25.6 | %
| Interest-bearing checking |  | 5,663,873 |  |  | 4,687,178 |  |  | 4,947,511 |  |  | 20.8 |  |  | 14.5 |  |  | 5,119,568 |  |  | 5,145,308 |  |  | (0.5) |
| Money market |  | 9,981,704 |  |  | 9,893,816 |  |  | 8,344,993 |  |  | 0.9 |  |  | 19.6 |  |  | 9,630,918 |  |  | 8,094,933 |  |  | 19.0 |
| Savings |  | 2,259,788 |  |  | 2,149,965 |  |  | 2,154,592 |  |  | 5.1 |  |  | 4.9 |  |  | 2,162,365 |  |  | 2,117,773 |  |  | 2.1 |
| Time deposits |  | 9,008,907 |  |  | 9,634,696 |  |  | 10,337,990 |  |  | (6.5) |  |  | (12.9) |  |  | 9,633,582 |  |  | 9,887,274 |  |  | (2.6) |
| Total deposits |  | $ | 41,210,747 |  |  | $ | 39,900,528 |  |  | $ | 36,497,698 |  |  | 3.3 | % |  | 12.9 | % |  | $ | 39,534,246 |  |  | $ | 35,588,254 |  |  | 11.1 | %
Interest-bearing liabilities |  |  | $ | 29,552,756 |  |  | $ | 28,362,618 |  |  | $ | 26,773,253 |  |  | 4.2 | % |  | 10.4 | % |  | $ | 28,506,736 |  |  | $ | 26,033,713 |  |  | 9.5 | %
Stockholders’ equity |  |  | $ | 5,079,351 |  |  | $ | 4,982,446 |  |  | $ | 4,838,281 |  |  | 1.9 | % |  | 5.0 | % |  | $ | 5,028,122 |  |  | $ | 4,687,746 |  |  | 7.3 | %

(1)Includes average balance of PPP loans of $1.76 billion and $1.47 billion for the three months ended September 30, 2020 and June 30, 2020, respectively, and $1.08 billion for the nine months ended September 30, 2020.
(2)Includes loans HFS.
12

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Table 6 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  |  |  |  |  |  |  |  |  |  |  |
|  |  | September 30, 2020 |  |  |  |  |  | June 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 |  | $ | 4,904,394 |  |  | $ | 5,045 |  |  | 0.41 | % |  | $ | 3,435,920 |  |  | $ | 4,564 |  |  | 0.53 | % |  |
| Resale agreements (2) |  | 1,225,217 |  |  | 5,295 |  |  | 1.72 | % |  | 1,037,473 |  |  | 5,514 |  |  | 2.14 | % |  |
| AFS debt securities |  | 4,059,456 |  |  | 18,493 |  |  | 1.81 | % |  | 3,719,209 |  |  | 21,004 |  |  | 2.27 | % |  |
| Loans (3) |  | 37,160,445 |  |  | 336,542 |  |  | 3.60 | % |  | 37,141,773 |  |  | 367,393 |  |  | 3.98 | % |  |
| FHLB and FRB stock |  | 79,074 |  |  | 353 |  |  | 1.78 | % |  | 78,867 |  |  | 301 |  |  | 1.54 | % |  |
| Total interest-earning assets |  | 47,428,586 |  |  | 365,728 |  |  | 3.07 | % |  | 45,413,242 |  |  | 398,776 |  |  | 3.53 | % |  |
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash and due from banks |  | 522,699 |  |  |  |  |  |  | 498,908 |  |  |  |  |  |  |
| Allowance for loan losses |  | (632,216) |  |  |  |  |  |  | (566,473) |  |  |  |  |  |  |
| Other assets |  | 2,928,190 |  |  |  |  |  |  | 2,883,237 |  |  |  |  |  |  |
| Total assets |  | $ | 50,247,259 |  |  |  |  |  |  | $ | 48,228,914 |  |  |  |  |  |  |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Checking deposits |  | $ | 5,663,873 |  |  | $ | 4,345 |  |  | 0.31 | % |  | $ | 4,687,178 |  |  | $ | 5,404 |  |  | 0.46 | % |  |
| Money market deposits |  | 9,981,704 |  |  | 6,837 |  |  | 0.27 | % |  | 9,893,816 |  |  | 8,093 |  |  | 0.33 | % |  |
| Savings deposits |  | 2,259,788 |  |  | 1,481 |  |  | 0.26 | % |  | 2,149,965 |  |  | 1,445 |  |  | 0.27 | % |  |
| Time deposits |  | 9,008,907 |  |  | 21,135 |  |  | 0.93 | % |  | 9,634,696 |  |  | 31,457 |  |  | 1.31 | % |  |
| Federal funds purchased and other short-term borrowings |  | 84,858 |  |  | 407 |  |  | 1.91 | % |  | 242,185 |  |  | 265 |  |  | 0.44 | % |  |
| FHLB advances |  | 656,906 |  |  | 3,146 |  |  | 1.91 | % |  | 653,665 |  |  | 3,343 |  |  | 2.06 | % |  |
| Repurchase agreements (2) |  | 317,097 |  |  | 2,155 |  |  | 2.70 | % |  | 418,681 |  |  | 3,540 |  |  | 3.40 | % |  |
| Long-term debt and finance lease liabilities |  | 1,579,623 |  |  | 2,092 |  |  | 0.53 | % |  | 682,432 |  |  | 1,454 |  |  | 0.86 | % |  |
| Total interest-bearing liabilities |  | 29,552,756 |  |  | 41,598 |  |  | 0.56 | % |  | 28,362,618 |  |  | 55,001 |  |  | 0.78 | % |  |
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Demand deposits |  | 14,296,475 |  |  |  |  |  |  | 13,534,873 |  |  |  |  |  |  |
| Accrued expenses and other liabilities |  | 1,318,677 |  |  |  |  |  |  | 1,348,977 |  |  |  |  |  |  |
| Stockholders’ equity |  | 5,079,351 |  |  |  |  |  |  | 4,982,446 |  |  |  |  |  |  |
| Total liabilities and stockholders’ equity |  | $ | 50,247,259 |  |  |  |  |  |  | $ | 48,228,914 |  |  |  |  |  |  |
Interest rate spread |  |  |  |  |  |  | 2.51 | % |  |  |  |  |  | 2.75 | % |  |
Net interest income and net interest margin |  |  |  |  | $ | 324,130 |  |  | 2.72 | % |  |  |  | $ | 343,775 |  |  | 3.04 | % |  |
Adjusted net interest income and adjusted net interest margin (4) |  |  |  |  | $ | 317,611 |  |  | 2.77 | % |  |  |  | $ | 322,949 |  |  | 2.96 | % |  |

(1)Annualized.
(2)There was no netting of repurchase agreements against resale agreements for the three months ended September 30, 2020 and June 30, 2020.
(3)Includes loans HFS.
(4)Net interest income and net interest margin have been adjusted for the impacts of PPP loans and advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 15.
13

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
QUARTER-TO-DATE AVERAGE BALANCES, YIELDS AND RATES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Table 7 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  |  |  |  |  |  |  |  |  |  |  |
|  |  | September 30, 2020 |  |  |  |  |  | September 30, 2019 |  |  |  |  |  |
|  |  | 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 |  | $ | 4,904,394 |  |  | $ | 5,045 |  |  | 0.41 | % |  | $ | 3,547,626 |  |  | $ | 19,710 |  |  | 2.20 | % |  |
| Resale agreements (2) |  | 1,225,217 |  |  | 5,295 |  |  | 1.72 | % |  | 981,196 |  |  | 6,943 |  |  | 2.81 | % |  |
| AFS debt securities |  | 4,059,456 |  |  | 18,493 |  |  | 1.81 | % |  | 2,651,069 |  |  | 15,945 |  |  | 2.39 | % |  |
| Loans (3) |  | 37,160,445 |  |  | 336,542 |  |  | 3.60 | % |  | 33,661,282 |  |  | 433,658 |  |  | 5.11 | % |  |
| FHLB and FRB stock |  | 79,074 |  |  | 353 |  |  | 1.78 | % |  | 78,213 |  |  | 656 |  |  | 3.33 | % |  |
| Total interest-earning assets |  | 47,428,586 |  |  | 365,728 |  |  | 3.07 | % |  | 40,919,386 |  |  | 476,912 |  |  | 4.62 | % |  |
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash and due from banks |  | 522,699 |  |  |  |  |  |  | 441,898 |  |  |  |  |  |  |
| Allowance for loan losses |  | (632,216) |  |  |  |  |  |  | (328,523) |  |  |  |  |  |  |
| Other assets |  | 2,928,190 |  |  |  |  |  |  | 2,103,512 |  |  |  |  |  |  |
| Total assets |  | $ | 50,247,259 |  |  |  |  |  |  | $ | 43,136,273 |  |  |  |  |  |  |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Checking deposits |  | $ | 5,663,873 |  |  | $ | 4,345 |  |  | 0.31 | % |  | $ | 4,947,511 |  |  | $ | 14,488 |  |  | 1.16 | % |  |
| Money market deposits |  | 9,981,704 |  |  | 6,837 |  |  | 0.27 | % |  | 8,344,993 |  |  | 26,943 |  |  | 1.28 | % |  |
| Savings deposits |  | 2,259,788 |  |  | 1,481 |  |  | 0.26 | % |  | 2,154,592 |  |  | 2,656 |  |  | 0.49 | % |  |
| Time deposits |  | 9,008,907 |  |  | 21,135 |  |  | 0.93 | % |  | 10,337,990 |  |  | 52,733 |  |  | 2.02 | % |  |
| Federal funds purchased and other short-term borrowings |  | 84,858 |  |  | 407 |  |  | 1.91 | % |  | 40,433 |  |  | 382 |  |  | 3.75 | % |  |
| FHLB advances |  | 656,906 |  |  | 3,146 |  |  | 1.91 | % |  | 745,263 |  |  | 5,021 |  |  | 2.67 | % |  |
| Repurchase agreements (2) |  | 317,097 |  |  | 2,155 |  |  | 2.70 | % |  | 50,000 |  |  | 3,239 |  |  | 25.70 | % |  |
| Long-term debt and finance lease liabilities |  | 1,579,623 |  |  | 2,092 |  |  | 0.53 | % |  | 152,471 |  |  | 1,643 |  |  | 4.28 | % |  |
| Total interest-bearing liabilities |  | 29,552,756 |  |  | 41,598 |  |  | 0.56 | % |  | 26,773,253 |  |  | 107,105 |  |  | 1.59 | % |  |
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Demand deposits |  | 14,296,475 |  |  |  |  |  |  | 10,712,612 |  |  |  |  |  |  |
| Accrued expenses and other liabilities |  | 1,318,677 |  |  |  |  |  |  | 812,127 |  |  |  |  |  |  |
| Stockholders’ equity |  | 5,079,351 |  |  |  |  |  |  | 4,838,281 |  |  |  |  |  |  |
| Total liabilities and stockholders’ equity |  | $ | 50,247,259 |  |  |  |  |  |  | $ | 43,136,273 |  |  |  |  |  |  |
Interest rate spread |  |  |  |  |  |  | 2.51 | % |  |  |  |  |  | 3.03 | % |  |
Net interest income and net interest margin |  |  |  |  | $ | 324,130 |  |  | 2.72 | % |  |  |  | $ | 369,807 |  |  | 3.59 | % |  |
Adjusted net interest income and adjusted net interest margin (4) |  |  |  |  | $ | 317,611 |  |  | 2.77 | % |  |  |  | $ | 369,807 |  |  | 3.59 | % |  |

(1)Annualized.
(2)There was no netting of repurchase agreements against resale agreements for the three months ended September 30, 2020. Average balances of resale and repurchase agreements for the three months ended September 30, 2019 have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 1.72% and 2.59% for the three months ended September 30, 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 2.70% and 4.68% for the three months ended September 30, 2020 and 2019, respectively.
(3)Includes loans HFS.
(4)Net interest income and net interest margin have been adjusted for the impacts of PPP loans and advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 15.
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, 2020 |  |  |  |  |  | September 30, 2019 |  |  |  |  |  |
|  |  | 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 |  | $ | 3,775,242 |  |  | $ | 20,717 |  |  | 0.73 | % |  | $ | 2,996,340 |  |  | $ | 51,920 |  |  | 2.32 | % |  |
| Resale agreements (2) |  | 1,048,923 |  |  | 16,434 |  |  | 2.09 | % |  | 1,005,147 |  |  | 22,253 |  |  | 2.96 | % |  |
| AFS debt securities |  | 3,685,837 |  |  | 59,639 |  |  | 2.16 | % |  | 2,614,949 |  |  | 47,378 |  |  | 2.42 | % |  |
| Loans (3) |  | 36,487,859 |  |  | 1,115,804 |  |  | 4.08 | % |  | 33,023,713 |  |  | 1,291,642 |  |  | 5.23 | % |  |
| FHLB and FRB stock |  | 78,873 |  |  | 1,100 |  |  | 1.86 | % |  | 76,313 |  |  | 1,874 |  |  | 3.28 | % |  |
| Total interest-earning assets |  | 45,076,734 |  |  | 1,213,694 |  |  | 3.60 | % |  | 39,716,462 |  |  | 1,415,067 |  |  | 4.76 | % |  |
Noninterest-earning assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cash and due from banks |  | 510,750 |  |  |  |  |  |  | 449,739 |  |  |  |  |  |  |
| Allowance for loan losses |  | (563,912) |  |  |  |  |  |  | (321,486) |  |  |  |  |  |  |
| Other assets |  | 2,729,458 |  |  |  |  |  |  | 1,970,775 |  |  |  |  |  |  |
| Total assets |  | $ | 47,753,030 |  |  |  |  |  |  | $ | 41,815,490 |  |  |  |  |  |  |
Liabilities and Stockholders’ Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Checking deposits |  | $ | 5,119,568 |  |  | $ | 19,995 |  |  | 0.52 | % |  | $ | 5,145,308 |  |  | $ | 44,579 |  |  | 1.16 | % |  |
| Money market deposits |  | 9,630,918 |  |  | 37,178 |  |  | 0.52 | % |  | 8,094,933 |  |  | 85,858 |  |  | 1.42 | % |  |
| Savings deposits |  | 2,162,365 |  |  | 4,743 |  |  | 0.29 | % |  | 2,117,773 |  |  | 7,360 |  |  | 0.46 | % |  |
| Time deposits |  | 9,633,582 |  |  | 94,684 |  |  | 1.31 | % |  | 9,887,274 |  |  | 148,992 |  |  | 2.01 | % |  |
| Federal funds purchased and other short-term borrowings |  | 128,846 |  |  | 1,228 |  |  | 1.27 | % |  | 45,410 |  |  | 1,359 |  |  | 4.00 | % |  |
| FHLB advances |  | 667,935 |  |  | 10,655 |  |  | 2.13 | % |  | 540,535 |  |  | 12,011 |  |  | 2.97 | % |  |
| Repurchase agreements (2) |  | 355,923 |  |  | 9,686 |  |  | 3.64 | % |  | 50,000 |  |  | 10,200 |  |  | 27.27 | % |  |
| Long-term debt and finance lease liabilities |  | 807,599 |  |  | 4,913 |  |  | 0.81 | % |  | 152,480 |  |  | 5,114 |  |  | 4.48 | % |  |
| Total interest-bearing liabilities |  | 28,506,736 |  |  | 183,082 |  |  | 0.86 | % |  | 26,033,713 |  |  | 315,473 |  |  | 1.62 | % |  |
Noninterest-bearing liabilities and stockholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Demand deposits |  | 12,987,813 |  |  |  |  |  |  | 10,342,966 |  |  |  |  |  |  |
| Accrued expenses and other liabilities |  | 1,230,359 |  |  |  |  |  |  | 751,065 |  |  |  |  |  |  |
| Stockholders’ equity |  | 5,028,122 |  |  |  |  |  |  | 4,687,746 |  |  |  |  |  |  |
| Total liabilities and stockholders’ equity |  | $ | 47,753,030 |  |  |  |  |  |  | $ | 41,815,490 |  |  |  |  |  |  |
Interest rate spread |  |  |  |  |  |  | 2.74 | % |  |  |  |  |  | 3.14 | % |  |
Net interest income and net interest margin |  |  |  |  | $ | 1,030,612 |  |  | 3.05 | % |  |  |  | $ | 1,099,594 |  |  | 3.70 | % |  |
Adjusted net interest income and adjusted net interest margin (4) |  |  |  |  | $ | 1,003,267 |  |  | 3.05 | % |  |  |  | $ | 1,099,594 |  |  | 3.70 | % |  |

(1)Annualized
(2)Average balances of resale and repurchase agreements have been reported net, pursuant to ASC 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale agreements were 2.09% and 2.71% for the nine months ended September 30, 2020 and 2019, respectively. The weighted-average interest rates of gross repurchase agreements were 3.48% and 4.87% for the nine months ended September 30, 2020 and 2019, respectively.
(3)Includes loans HFS.
(4)Net interest income and net interest margin have been adjusted for the impact of PPP loans and advances from the PPPLF. See reconciliation of GAAP to non-GAAP financial measures in Table 15.
15

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |
SELECTED RATIOS |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |
Table 9 |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended (1) |  |  |  |  |  | September 30, 2020 Basis Point Change |  |  |
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | Qtr-o-Qtr |  | Yr-o-Yr |
| Return on average assets |  | 1.26 | % |  | 0.83 | % |  | 1.58 | % |  | 43 |  | bps | (32) |  | bps
| Return on average equity |  | 12.50 | % |  | 8.02 | % |  | 14.06 | % |  | 448 |  |  | (156) |  |
| Return on average tangible equity (2) |  | 13.88 | % |  | 8.96 | % |  | 15.75 | % |  | 492 |  |  | (187) |  |
| Interest rate spread |  | 2.51 | % |  | 2.75 | % |  | 3.03 | % |  | (24) |  |  | (52) |  |
| Net interest margin |  | 2.72 | % |  | 3.04 | % |  | 3.59 | % |  | (32) |  |  | (87) |  |
| Adjusted net interest margin (2) |  | 2.77 | % |  | 2.96 | % |  | 3.59 | % |  | (19) |  |  | (82) |  |
| Average loan yield |  | 3.60 | % |  | 3.98 | % |  | 5.11 | % |  | (38) |  |  | (151) |  |
| Adjusted average loan yield (2) |  | 3.70 | % |  | 3.90 | % |  | 5.11 | % |  | (20) |  |  | (141) |  |
| Yield on average interest-earning assets |  | 3.07 | % |  | 3.53 | % |  | 4.62 | % |  | (46) |  |  | (155) |  |
| Average cost of interest-bearing deposits |  | 0.50 | % |  | 0.71 | % |  | 1.49 | % |  | (21) |  |  | (99) |  |
| Average cost of deposits |  | 0.33 | % |  | 0.47 | % |  | 1.05 | % |  | (14) |  |  | (72) |  |
| Average cost of funds |  | 0.38 | % |  | 0.53 | % |  | 1.13 | % |  | (15) |  |  | (75) |  |
| Adjusted pre-tax, pre-provision profitability ratio (2) |  | 1.74 | % |  | 2.08 | % |  | 2.42 | % |  | (34) |  |  | (68) |  |
| Adjusted noninterest expense/average assets (2) |  | 1.22 | % |  | 1.28 | % |  | 1.46 | % |  | (6) |  |  | (24) |  |
| Efficiency ratio |  | 44.86 | % |  | 46.64 | % |  | 41.93 | % |  | (178) |  |  | 293 |  |
| Adjusted efficiency ratio (2) |  | 41.33 | % |  | 38.09 | % |  | 37.66 | % |  | 324 |  | bps | 367 |  | bps
|  |  | Nine Months Ended (1) |  |  |  | September 30, 2020 Basis Point Change |  |  |  |  |
|  |  | September 30, 2020 |  | September 30, 2019 |  | Yr-o-Yr |  |  |  |  |
| Return on average assets |  | 1.13 | % |  | 1.55 | % |  | (42) |  | bps |  |  |  |
| Adjusted return on average assets (2) |  | 1.13 | % |  | 1.67 | % |  | (54) |  |  |  |  |  |
| Return on average equity |  | 10.73 | % |  | 13.86 | % |  | (313) |  |  |  |  |  |
| Adjusted return on average equity (2) |  | 10.73 | % |  | 14.85 | % |  | (412) |  |  |  |  |  |
| Return on average tangible equity (2) |  | 11.95 | % |  | 15.58 | % |  | (363) |  |  |  |  |  |
| Adjusted return on average tangible equity (2) |  | 11.95 | % |  | 16.70 | % |  | (475) |  |  |  |  |  |
| Interest rate spread |  | 2.74 | % |  | 3.14 | % |  | (40) |  |  |  |  |  |
| Net interest margin |  | 3.05 | % |  | 3.70 | % |  | (65) |  |  |  |  |  |
| Adjusted net interest margin (2) |  | 3.05 | % |  | 3.70 | % |  | (65) |  |  |  |  |  |
| Average loan yield |  | 4.08 | % |  | 5.23 | % |  | (115) |  |  |  |  |  |
| Adjusted average loan yield (2) |  | 4.10 | % |  | 5.23 | % |  | (113) |  |  |  |  |  |
| Yield on average interest-earning assets |  | 3.60 | % |  | 4.76 | % |  | (116) |  |  |  |  |  |
| Average cost of interest-bearing deposits |  | 0.79 | % |  | 1.52 | % |  | (73) |  |  |  |  |  |
| Average cost of deposits |  | 0.53 | % |  | 1.08 | % |  | (55) |  |  |  |  |  |
| Average cost of funds |  | 0.59 | % |  | 1.16 | % |  | (57) |  |  |  |  |  |
| Adjusted pre-tax, pre-provision profitability ratio (2) |  | 2.03 | % |  | 2.45 | % |  | (42) |  |  |  |  |  |
| Adjusted noninterest expense/average assets (2) |  | 1.31 | % |  | 1.53 | % |  | (22) |  |  |  |  |  |
| Efficiency ratio |  | 44.78 | % |  | 43.44 | % |  | 134 |  |  |  |  |  |
| Adjusted efficiency ratio (2) |  | 39.26 | % |  | 38.47 | % |  | 79 |  | bps |  |  |  |

(1)Annualized except for efficiency ratio.
(2)See reconciliation of GAAP to non-GAAP financial measures in Tables 12, 13, 14 and 15. Note that there were no non-recurring adjustments during 2020.
16

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALLOWANCE FOR LOAN LOSSES & OFF-BALANCE-SHEET CREDIT EXPOSURES |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Table 10 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ASU 2016-13 replaced the incurred loss methodology used in calculating the allowance for loan losses with a current expected credit loss model (“CECL”). The Company adopted ASU 2016-13 using the modified retrospective approach on January 1, 2020. As a result, prior comparative periods have not been adjusted for the CECL model. In addition, ASU 2016-13 introduces the concept of Purchased Credit Deteriorated (“PCD”) financial assets, which replaces purchased credit-impaired (“PCI”) assets. For PCD assets, the initial allowance for loan losses is added to the purchase price and is considered to be part of the PCD loan amortized cost basis, hence, there is no income statement impact on acquisition. This contrasts with PCI loans where allowance for loan losses only reflects losses that are incurred by the Company after the acquisition. The allowance for loan losses is evaluated each quarter and adjusted as necessary by recognizing or reversing loan loss expense. There were no PCD loans during the three and nine months ended September 30, 2020. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Commercial |  |  |  |  |  |  |  | Consumer |  |  |  |  |  | Total
|  |  |  |  | CRE |  |  |  |  |  | Residential Mortgage |  |  |  |  |  |
|  |  | C&I |  | CRE |  | Multi-Family Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  |
Allowance for loan losses, June 30, 2020 |  |  | $ | 380,723 |  |  | $ | 176,040 |  |  | $ | 25,058 |  |  | $ | 18,551 |  |  | $ | 25,314 |  |  | $ | 3,867 |  |  | $ | 2,518 |  |  | $ | 632,071 |
Provision for (reversal of) credit losses on loans | (a) |  | 31,691 |  |  | (8,301) |  |  | (1,916) |  |  | (8,180) |  |  | (2,692) |  |  | (637) |  |  | (76) |  |  | 9,889 |
Gross charge-offs |  |  | (25,111) |  |  | (1,414) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (32) |  |  | (26,557) |
Gross recoveries |  |  | 1,218 |  |  | 485 |  |  | 665 |  |  | 30 |  |  | — |  |  | 43 |  |  | (92) |  |  | 2,349 |
Total net (charge-offs) recoveries |  |  | (23,893) |  |  | (929) |  |  | 665 |  |  | 30 |  |  | — |  |  | 43 |  |  | (124) |  |  | (24,208) |
Foreign currency translation adjustment |  |  | 500 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 500 |
Allowance for loan losses, September 30, 2020 |  |  | $ | 389,021 |  |  | $ | 166,810 |  |  | $ | 23,807 |  |  | $ | 10,401 |  |  | $ | 22,622 |  |  | $ | 3,273 |  |  | $ | 2,318 |  |  | $ | 618,252 |

|  |  | Three Months Ended June 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Commercial |  |  |  |  |  |  |  | Consumer |  |  |  |  |  | Total
|  |  |  |  | CRE |  |  |  |  |  | Residential Mortgage |  |  |  |  |  |
|  |  | C&I |  | CRE |  | Multi-Family Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  |
Allowance for loan losses, March 31, 2020 |  |  | $ | 362,629 |  |  | $ | 132,819 |  |  | $ | 16,530 |  |  | $ | 11,018 |  |  | $ | 26,822 |  |  | $ | 3,881 |  |  | $ | 3,304 |  |  | $ | 557,003 |
Provision for (reversal of) credit losses on loans | (a) |  | 37,862 |  |  | 43,315 |  |  | 7,908 |  |  | 7,526 |  |  | (1,667) |  |  | 205 |  |  | (849) |  |  | 94,300 |
Gross charge-offs |  |  | (20,378) |  |  | (320) |  |  | — |  |  | — |  |  | — |  |  | (221) |  |  | (30) |  |  | (20,949) |
Gross recoveries |  |  | 602 |  |  | 226 |  |  | 620 |  |  | 7 |  |  | 159 |  |  | 2 |  |  | 93 |  |  | 1,709 |
Total net (charge-offs) recoveries |  |  | (19,776) |  |  | (94) |  |  | 620 |  |  | 7 |  |  | 159 |  |  | (219) |  |  | 63 |  |  | (19,240)
Foreign currency translation adjustment |  |  | 8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8
Allowance for loan losses, June 30, 2020 |  |  | $ | 380,723 |  |  | $ | 176,040 |  |  | $ | 25,058 |  |  | $ | 18,551 |  |  | $ | 25,314 |  |  | $ | 3,867 |  |  | $ | 2,518 |  |  | $ | 632,071 |

|  |  | Three Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Commercial |  |  |  |  |  |  |  | Consumer |  |  |  |  |  | Total |
|  |  |  |  | CRE |  |  |  |  |  | Residential Mortgage |  |  |  |  |  |  |
|  |  | C&I |  | CRE |  | Multi-Family Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  |  |
Allowance for loan losses, June 30, 2019 |  |  | $ | 205,503 |  |  | $ | 39,811 |  |  | $ | 19,280 |  |  | $ | 22,961 |  |  | $ | 32,763 |  |  | $ | 6,177 |  |  | $ | 4,130 |  |  | $ | 330,625 |  |
Provision for (reversal of) credit losses on loans | (a) |  | 37,281 |  |  | (3,213) |  |  | 985 |  |  | 6,189 |  |  | (2,877) |  |  | (326) |  |  | (160) |  |  | 37,879 |  |
Gross charge-offs |  |  | (25,098) |  |  | (1,021) |  |  | — |  |  | — |  |  | (11) |  |  | — |  |  | (12) |  |  | (26,142) |  |
Gross recoveries |  |  | 1,648 |  |  | 1,896 |  |  | 42 |  |  | 21 |  |  | 60 |  |  | 5 |  |  | 7 |  |  | 3,679 |  |
Total net (charge-offs) recoveries |  |  | (23,450) |  |  | 875 |  |  | 42 |  |  | 21 |  |  | 49 |  |  | 5 |  |  | (5) |  |  | (22,463) |  |
Foreign currency translation adjustment |  |  | (465) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (465) |  |
Allowance for loan losses, September 30, 2019 |  |  | $ | 218,869 |  |  | $ | 37,473 |  |  | $ | 20,307 |  |  | $ | 29,171 |  |  | $ | 29,935 |  |  | $ | 5,856 |  |  | $ | 3,965 |  |  | $ | 345,576 |  |

17

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, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Commercial |  |  |  |  |  |  |  | Consumer |  |  |  |  |  | Total
|  |  |  |  | CRE |  |  |  |  |  | Residential Mortgage |  |  |  |  |  |
|  |  | C&I |  | CRE |  | Multi-Family Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  |
Allowance for loan losses, December 31, 2019 |  |  | $ | 238,376 |  |  | $ | 40,509 |  |  | $ | 22,826 |  |  | $ | 19,404 |  |  | $ | 28,527 |  |  | $ | 5,265 |  |  | $ | 3,380 |  |  | $ | 358,287 |
Impact of ASU 2016-13 adoption |  |  | 74,237 |  |  | 72,169 |  |  | (8,112) |  |  | (9,889) |  |  | (3,670) |  |  | (1,798) |  |  | 2,221 |  |  | 125,158 |
Allowance for loan losses, January 1, 2020 |  |  | $ | 312,613 |  |  | $ | 112,678 |  |  | $ | 14,714 |  |  | $ | 9,515 |  |  | $ | 24,857 |  |  | $ | 3,467 |  |  | $ | 5,601 |  |  | $ | 483,445 |
Provision for (reversal of) credit losses on loans | (a) |  | 130,171 |  |  | 46,449 |  |  | 7,273 |  |  | 828 |  |  | (2,659) |  |  | (20) |  |  | (3,197) |  |  | 178,845 |
Gross charge-offs |  |  | (57,466) |  |  | (2,688) |  |  | — |  |  | — |  |  | — |  |  | (221) |  |  | (88) |  |  | (60,463) |
Gross recoveries |  |  | 3,395 |  |  | 10,371 |  |  | 1,820 |  |  | 58 |  |  | 424 |  |  | 47 |  |  | 2 |  |  | 16,117 |
Total net (charge-offs) recoveries |  |  | (54,071) |  |  | 7,683 |  |  | 1,820 |  |  | 58 |  |  | 424 |  |  | (174) |  |  | (86) |  |  | (44,346) |
Foreign currency translation adjustment |  |  | 308 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 308 |
Allowance for loan losses, September 30, 2020 |  |  | $ | 389,021 |  |  | $ | 166,810 |  |  | $ | 23,807 |  |  | $ | 10,401 |  |  | $ | 22,622 |  |  | $ | 3,273 |  |  | $ | 2,318 |  |  | $ | 618,252 |

|  |  | Nine Months Ended September 30, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Commercial |  |  |  |  |  |  |  | Consumer |  |  |  |  |  | Total |  |
|  |  |  |  | CRE |  |  |  |  |  | Residential Mortgage |  |  |  |  |  |  |  |
|  |  | C&I |  | CRE |  | Multi-Family Residential |  | Construction and Land |  | Single-Family Residential |  | HELOCs |  | Other Consumer |  |  |  |
Allowance for loan losses, December 31. 2018 |  |  | $ | 189,117 |  |  | $ | 40,666 |  |  | $ | 19,885 |  |  | $ | 20,290 |  |  | $ | 31,340 |  |  | $ | 5,774 |  |  | $ | 4,250 |  |  | $ | 311,322 |  |  |
Provision for (reversal of) credit losses on loans | (a) |  | 78,685 |  |  | (6,127) |  |  | 46 |  |  | 8,358 |  |  | (1,528) |  |  | 75 |  |  | (259) |  |  | 79,250 |  |  |
Gross charge-offs |  |  | (54,087) |  |  | (1,021) |  |  | — |  |  | — |  |  | (11) |  |  | — |  |  | (40) |  |  | (55,159) |  |  |
Gross recoveries |  |  | 5,612 |  |  | 3,955 |  |  | 376 |  |  | 523 |  |  | 134 |  |  | 7 |  |  | 14 |  |  | 10,621 |  |  |
Total net (charge-offs) recoveries |  |  | (48,475) |  |  | 2,934 |  |  | 376 |  |  | 523 |  |  | 123 |  |  | 7 |  |  | (26) |  |  | (44,538) |  |  |
Foreign currency translation adjustment |  |  | (458) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (458) |  |  |
Allowance for loan losses, September 30, 2019 |  |  | $ | 218,869 |  |  | $ | 37,473 |  |  | $ | 20,307 |  |  | $ | 29,171 |  |  | $ | 29,935 |  |  | $ | 5,856 |  |  | $ | 3,965 |  |  | $ | 345,576 |  |  |

|  |  | Three Months Ended |  |  |  |  |  | Nine Months Ended |  |
|  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
Unfunded Credit Facilities |  |  |  |  |  |  |  |  |  |  |
Allowance for unfunded credit commitments, beginning of period (1) |  |  | $ | 28,972 |  |  | $ | 20,829 |  |  | $ | 13,019 |  |  | $ | 11,158 |  |  | $ | 12,566 |
Impact of ASU 2016-13 adoption |  |  | — |  |  | — |  |  | — |  |  | 10,457 |  |  | — |
Provision for credit losses on unfunded credit commitments | (b) |  | 111 |  |  | 8,143 |  |  | 405 |  |  | 7,468 |  |  | 858 |
Allowance for unfunded credit commitments, end of period (1) |  |  | $ | 29,083 |  |  | $ | 28,972 |  |  | $ | 13,424 |  |  | $ | 29,083 |  |  | $ | 13,424 |
Provision for credit losses | (a)+(b) |  | $ | 10,000 |  |  | $ | 102,443 |  |  | $ | 38,284 |  |  | $ | 186,313 |  |  | $ | 80,108 |

(1)Included in Accrued expense and other liabilities on the Consolidated Balance Sheet.
18

| EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |
| CREDIT QUALITY |  |  |  |  |  |  |
| ($ in thousands) |  |  |  |  |  |  |
| (unaudited) |  |  |  |  |  |  |
Table 11 |  |  |  |  |  |  |  |
The Company adopted ASU 2016-13 using the modified retrospective approach on January 1, 2020. As a result, prior comparative periods have not been adjusted. PCI loans prior to the adoption of ASU 2016-13 were classified as PCD loans as of January 1, 2020. Nonaccrual loans as of September 30, 2020 and June 30, 2020 include all loans that are 90 or more days past due, unless the loan is well-collateralized or guaranteed by government agencies, and in the process of collection. Nonaccrual loans presented as of September 30, 2019 include only non-PCI nonaccrual loans. |  |  |  |  |  |  |  |
Nonperforming Assets |  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |
|  |  | Total Nonaccrual loans |  | Total Nonaccrual loans |  | Non-PCI Nonaccrual Loans |
Commercial: |  |  |  |  |  |  |  |
| C&I |  | $ | 145,986 |  |  | $ | 84,823 |  |  | $ | 90,830 |  |
| CRE: |  |  |  |  |  |  |
| CRE |  | 55,996 |  |  | 56,577 |  |  | 18,942 |  |
| Multifamily residential |  | 3,728 |  |  | 774 |  |  | 551 |  |
| Total CRE |  | 59,724 |  |  | 57,351 |  |  | 19,493 |  |
Consumer: |  |  |  |  |  |  |  |
| Residential mortgage: |  |  |  |  |  |  |
| Single-family residential |  | 15,894 |  |  | 20,070 |  |  | 9,484 |  |
| HELOCs |  | 12,395 |  |  | 14,068 |  |  | 9,924 |  |
| Total residential mortgage |  | 28,289 |  |  | 34,138 |  |  | 19,408 |  |
| Other consumer |  | 2,495 |  |  | 2,508 |  |  | 2,495 |  |
| Total nonaccrual loans |  | 236,494 |  |  | 178,820 |  |  | 132,226 |  |
Other real estate owned, net |  |  | 19,504 |  |  | 19,504 |  |  | 1,122 |  |
Other nonperforming assets |  |  | 3,890 |  |  | 3,890 |  |  | 1,167 |  |
| Total nonperforming assets |  | $ | 259,888 |  |  | $ | 202,214 |  |  | $ | 134,515 |  |
Credit Quality Ratios |  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |
Nonperforming assets to total assets |  |  | 0.52 | % |  | 0.41 | % |  | 0.31 | % |
Nonaccrual loans to loans HFI |  |  | 0.63 | % |  | 0.48 | % |  | 0.39 | % |
Allowance for loan losses to loans HFI |  |  | 1.65 | % |  | 1.70 | % |  | 1.02 | % |
Allowance for loan losses to nonaccrual loans |  |  | 261.42 | % |  | 353.47 | % |  | 261.35 | % |
Annualized quarterly net charge-offs to average loans HFI |  |  | 0.26 | % |  | 0.21 | % |  | 0.26 | % |

19

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |
GAAP TO NON-GAAP RECONCILIATION |  |  |  |  |  |  |  |
($ and shares in thousands, except for per share data) |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |
Table 12 |  |  |  |  |  |  |  |
The Company recorded a $7.0 million pre-tax impairment charge and reversed $30.1 million of certain previously claimed tax credits related to DC Solar during the first and second quarters of 2019, respectively. There were no non-recurring adjustments during 2020. Management believes that presenting the computations of the adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity that adjust for the above discussed non-recurring items provide clarity to financial statement users regarding the ongoing performance of the Company and allows comparability to prior periods. |  |  |  |  |  |  |  |
|  |  |  | Three Months Ended |  |  |  |
|  |  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019
Net income |  | (a) |  | $ | 159,537 |  |  | $ | 99,352 |  |  | $ | 171,416 |
Diluted weighted-average number of shares outstanding |  |  |  | 142,043 |  |  | 141,827 |  |  | 146,120 |
Diluted EPS |  |  |  | $ | 1.12 |  |  | $ | 0.70 |  |  | $ | 1.17 |
Average total assets |  | (b) |  | $ | 50,247,259 |  |  | $ | 48,228,914 |  |  | $ | 43,136,273 |
Average stockholders’ equity |  | (c) |  | $ | 5,079,351 |  |  | $ | 4,982,446 |  |  | $ | 4,838,281 |
Return on average assets (1) |  | (a)/(b) |  | 1.26 | % |  | 0.83 | % |  | 1.58 | %
Return on average equity (1) |  | (a)/(c) |  | 12.50 | % |  | 8.02 | % |  | 14.06 | %
|  |  |  | Nine Months Ended |  |  |  |
|  |  |  | September 30, 2020 |  | September 30, 2019 |  |
Net income |  | (d) |  | $ | 403,713 |  |  | $ | 485,820 |  |  |
Add: Impairment charge related to DC Solar (2) |  |  |  | — |  |  | 6,978 |  |  |
Tax effect of adjustments (3) |  |  |  | — |  |  | (2,063) |  |  |
Add: Reversal of certain previously claimed tax credits related to DC Solar |  |  |  | — |  |  | 30,104 |  |  |
Adjusted net income |  | (e) |  | $ | 403,713 |  |  | $ | 520,839 |  |  |
Diluted weighted-average number of shares outstanding |  |  |  | 143,082 |  |  | 146,088 |  |  |
Diluted EPS |  |  |  | $ | 2.82 |  |  | $ | 3.33 |  |  |
Diluted EPS impact of impairment charge related to DC Solar, net of tax |  |  |  | — |  |  | 0.03 |  |  |
Diluted EPS impact of reversal of certain previously claimed tax credits related to DC Solar |  |  |  | — |  |  | 0.21 |  |  |
Adjusted diluted EPS |  |  |  | $ | 2.82 |  |  | $ | 3.57 |  |  |
Average total assets |  | (f) |  | $ | 47,753,030 |  |  | $ | 41,815,490 |  |  |
Average stockholders’ equity |  | (g) |  | $ | 5,028,122 |  |  | $ | 4,687,746 |  |  |
Return on average assets (1) |  | (d)/(f) |  | 1.13 | % |  | 1.55 | % |  |
Adjusted return on average assets (1) |  | (e)/(f) |  | 1.13 | % |  | 1.67 | % |  |
Return on average equity (1) |  | (d)/(g) |  | 10.73 | % |  | 13.86 | % |  |
Adjusted return on average equity (1) |  | (e)/(g) |  | 10.73 | % |  | 14.85 | % |  |

(1)Annualized.
(2)Included in Amortization of tax credit and other investments on the Consolidated Statement of Income.
(3)Applied statutory rate of 29.56% for the nine months ended September 30, 2019.
20

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 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, 2020 |  | June 30, 2020 |  | September 30, 2019
Net interest income before provision for credit losses |  | (a) |  | $ | 324,130 |  |  | $ | 343,775 |  |  | $ | 369,807 |
Total noninterest income |  |  |  | 49,580 |  |  | 58,637 |  |  | 51,474 |
Total revenue |  | (b) |  | $ | 373,710 |  |  | $ | 402,412 |  |  | $ | 421,281 |
Total noninterest expense |  | (c) |  | $ | 167,650 |  |  | $ | 187,696 |  |  | $ | 176,630 |
Less: Amortization of tax credit and other investments |  |  |  | (12,286) |  |  | (24,759) |  |  | (16,833) |
Amortization of core deposit intangibles |  |  |  | (927) |  |  | (931) |  |  | (1,148) |
Repurchase agreements’ extinguishment cost |  |  |  | — |  |  | (8,740) |  |  | — |
Adjusted noninterest expense |  | (d) |  | $ | 154,437 |  |  | $ | 153,266 |  |  | $ | 158,649 |
Efficiency ratio |  | (c)/(b) |  | 44.86 | % |  | 46.64 | % |  | 41.93 | %
Adjusted efficiency ratio |  | (d)/(b) |  | 41.33 | % |  | 38.09 | % |  | 37.66 | %
Adjusted pre-tax, pre-provision income |  | (b)-(d) = (e) |  | $ | 219,273 |  |  | $ | 249,146 |  |  | $ | 262,632 |
Average total assets |  | (f) |  | $ | 50,247,259 |  |  | $ | 48,228,914 |  |  | $ | 43,136,273 |
Adjusted pre-tax, pre-provision profitability ratio (1) |  | (e)/(f) |  | 1.74 | % |  | 2.08 | % |  | 2.42 | %
Adjusted noninterest expense/average assets (1) |  | (d)/(f) |  | 1.22 | % |  | 1.28 | % |  | 1.46 | %
|  |  |  | Nine Months Ended |  |  |  |
|  |  |  | September 30, 2020 |  | September 30, 2019 |  |
Net interest income before provision for credit losses |  | (g) |  | $ | 1,030,612 |  |  | $ | 1,099,594 |  |  |
Total noninterest income |  |  |  | 162,266 |  |  | 146,364 |  |  |
Total revenue |  | (h) |  | 1,192,878 |  |  | 1,245,958 |  |  |
Total noninterest expense |  | (i) |  | $ | 534,222 |  |  | $ | 541,215 |  |  |
Less: Amortization of tax credit and other investments |  |  |  | (54,370) |  |  | (58,477) |  |  |
Amortization of core deposit intangibles |  |  |  | (2,811) |  |  | (3,474) |  |  |
Repurchase agreements’ extinguishment cost |  |  |  | (8,740) |  |  | — |  |  |
Adjusted noninterest expense |  | (j) |  | $ | 468,301 |  |  | $ | 479,264 |  |  |
Efficiency ratio |  | (i)/(h) |  | 44.78 | % |  | 43.44 | % |  |
Adjusted efficiency ratio |  | (j)/(h) |  | 39.26 | % |  | 38.47 | % |  |
Adjusted pre-tax, pre-provision income |  | (h)-(j) = (k) |  | $ | 724,577 |  |  | $ | 766,694 |  |  |
Average total assets |  | (l) |  | $ | 47,753,030 |  |  | $ | 41,815,490 |  |  |
Adjusted pre-tax, pre-provision profitability ratio (1) |  | (k)/(l) |  | 2.03 | % |  | 2.45 | % |  |
Adjusted noninterest expense/average assets (1) |  | (j)/(l) |  | 1.31 | % |  | 1.53 | % |  |

(1)Annualized
21

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |
GAAP TO NON-GAAP RECONCILIATION |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |
Table 14 |  |  |  |  |  |  |  |
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, 2020 |  | June 30, 2020 |  | September 30, 2019
Stockholders’ equity |  | (a) |  | $ | 5,126,106 |  |  | $ | 4,987,243 |  |  | $ | 4,882,664 |
Less: Goodwill |  |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |
Other intangible assets (1) |  |  |  | (12,369) |  |  | (13,490) |  |  | (17,435) |
Tangible equity |  | (b) |  | $ | 4,648,040 |  |  | $ | 4,508,056 |  |  | $ | 4,399,532 |
Total assets |  | (c) |  | $ | 50,371,477 |  |  | $ | 49,407,593 |  |  | $ | 43,274,659 |
Less: Goodwill |  |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |
Other intangible assets (1) |  |  |  | (12,369) |  |  | (13,490) |  |  | (17,435) |
Tangible assets |  | (d) |  | $ | 49,893,411 |  |  | $ | 48,928,406 |  |  | $ | 42,791,527 |
Total stockholders’ equity to total assets ratio |  | (a)/(c) |  | 10.18 | % |  | 10.09 | % |  | 11.28 | %
Tangible equity to tangible assets ratio |  | (b)/(d) |  | 9.32 | % |  | 9.21 | % |  | 10.28 | %

Adjusted return on average tangible equity represents adjusted tangible net income divided by average tangible equity. Adjusted tangible net income excludes the after-tax impacts of the amortization of core deposit intangibles and mortgage servicing assets, impairment charge and the reversal of certain previously claimed tax credits related to DC Solar (where applicable). Given that the use of such measures and ratios is more prevalent in the banking industry, and such measures and ratios are used by banking regulators and analysts, the Company has included them below for discussion. |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | Three Months Ended |  |  |  |  |  | Nine Months Ended |  |
|  |  |  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
Net Income |  |  |  | $ | 159,537 |  |  | $ | 99,352 |  |  | $ | 171,416 |  |  | $ | 403,713 |  |  | $ | 485,820 |
Add: Amortization of core deposit intangibles |  |  |  | 927 |  |  | 931 |  |  | 1,148 |  |  | 2,811 |  |  | 3,474 |
Amortization of mortgage servicing assets |  |  |  | 450 |  |  | 458 |  |  | 834 |  |  | 1,492 |  |  | 2,171 |
Tax effect of adjustments (2) |  |  |  | (390) |  |  | (394) |  |  | (586) |  |  | (1,220) |  |  | (1,669) |
Tangible net income |  | (e) |  | $ | 160,524 |  |  | $ | 100,347 |  |  | $ | 172,812 |  |  | $ | 406,796 |  |  | $ | 489,796 |
Add: Impairment charge related to DC Solar (3) |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6,978 |
Tax effect of adjustment (2) |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,063) |
Add: Reversal of certain previously claimed tax credits related to DC Solar |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 30,104 |
Adjusted tangible net income |  | (f) |  | $ | 160,524 |  |  | $ | 100,347 |  |  | $ | 172,812 |  |  | $ | 406,796 |  |  | $ | 524,815 |
Average stockholders’ equity |  |  |  | $ | 5,079,351 |  |  | $ | 4,982,446 |  |  | $ | 4,838,281 |  |  | $ | 5,028,122 |  |  | $ | 4,687,746 |
Less: Average goodwill |  |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |  |  | (465,697) |  |  | (465,652) |
Average other intangible assets (1) |  |  |  | (13,083) |  |  | (14,247) |  |  | (18,391) |  |  | (14,302) |  |  | (20,198) |
Average tangible equity |  | (g) |  | $ | 4,600,571 |  |  | $ | 4,502,502 |  |  | $ | 4,354,193 |  |  | $ | 4,548,123 |  |  | $ | 4,201,896 |
Return on average tangible equity (4) |  | (e)/(g) |  | 13.88 | % |  | 8.96 | % |  | 15.75 | % |  | 11.95 | % |  | 15.58 | %
Adjusted return on average tangible equity (4) |  | (f)/(g) |  | 13.88 | % |  | 8.96 | % |  | 15.75 | % |  | 11.95 | % |  | 16.70 | %

(1)Includes core deposit intangibles and mortgage servicing assets.
(2)Applied statutory rate of 28.35% for the three and nine months ended September 30, 2020, and the three months ended June 30, 2020. Applied statutory rate of 29.56% for the three and nine months ended September 30, 2019.
(3)Included in Amortization of tax credit and other investments on the Consolidated Statement of Income.
(4)Annualized.
22

EAST WEST BANCORP, INC. AND SUBSIDIARIES |  |  |  |  |  |  |  |  |  |  |  |
GAAP TO NON-GAAP RECONCILIATION |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  |  |  |  |  |  |  |  |  |  |
(unaudited) |  |  |  |  |  |  |  |  |  |  |  |
Table 15 |  |  |  |  |  |  |  |  |  |  |  |
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. 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. As of September 30, 2020, the majority of the Company’s PPP loans have a contractual term of two years. The SBA pays the Company fees for processing PPP loans in the following amounts: (i) five percent for loans of not more than $350,000; (ii) three percent for loans of more than $350,000 and less than $2,000,000; and (iii) one percent for loans of at least $2,000,000. 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. As of September 30, 2020, the Company has drawn down $1.43 billion from the PPPLF and pledged the same amount in PPP loans as collateral. Adjusted loan yield for the three months ended September 30, 2020 and June 30, 2020, and nine months ended September 30, 2020 excludes the impact of PPP loans. Adjusted net interest margin for the three months ended September 30, 2020 and June 30, 2020, and nine months ended September 30, 2020 excludes the impact of PPP loans and advances from the PPPLF. Management believes that presenting the adjusted average loan yield and adjusted net interest margin provides 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, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
Interest income on loans |  | (a) |  | $ | 336,542 |  |  | $ | 367,393 |  |  | $ | 433,658 |  |  | $ | 1,115,804 |  |  | $ | 1,291,642 |
Less: Interest income on PPP loans |  |  |  | (7,778) |  |  | (21,289) |  |  | — |  |  | (29,067) |  |  | — |
Adjusted interest income on loans |  | (b) |  | $ | 328,764 |  |  | $ | 346,104 |  |  | $ | 433,658 |  |  | $ | 1,086,737 |  |  | $ | 1,291,642 |
Average loans |  | (c) |  | $ | 37,160,445 |  |  | $ | 37,141,773 |  |  | $ | 33,661,282 |  |  | $ | 36,487,859 |  |  | $ | 33,023,713 |
Less: Average PPP loans |  |  |  | (1,764,411) |  |  | (1,465,013) |  |  | — |  |  | (1,078,985) |  |  | — |
Adjusted average loans |  | (d) |  | $ | 35,396,034 |  |  | $ | 35,676,760 |  |  | $ | 33,661,282 |  |  | $ | 35,408,874 |  |  | $ | 33,023,713 |
Average loan yield (1) |  | (a)/(c) |  | 3.60 | % |  | 3.98 | % |  | 5.11 | % |  | 4.08 | % |  | 5.23 | %
Adjusted average loan yield (1) |  | (b)/(d) |  | 3.70 | % |  | 3.90 | % |  | 5.11 | % |  | 4.10 | % |  | 5.23 | %
Net Interest Margin |  |  |  |  |  |  |  |  |  |  |  |
Net interest income |  | (e) |  | $ | 324,130 |  |  | $ | 343,775 |  |  | $ | 369,807 |  |  | $ | 1,030,612 |  |  | $ | 1,099,594 |
Less: Interest income on PPP loans |  |  |  | (7,778) |  |  | (21,289) |  |  | — |  |  | (29,067) |  |  | — |
Add: Interest expense on advances from the PPPLF |  |  |  | 1,259 |  |  | 463 |  |  | — |  |  | 1,722 |  |  | — |
Adjusted net interest income |  | (f) |  | $ | 317,611 |  |  | $ | 322,949 |  |  | $ | 369,807 |  |  | $ | 1,003,267 |  |  | $ | 1,099,594 |
Average interest-earning assets |  | (g) |  | $ | 47,428,586 |  |  | $ | 45,413,242 |  |  | $ | 40,919,386 |  |  | $ | 45,076,734 |  |  | $ | 39,716,462 |
Less: Average PPP loans |  |  |  | (1,764,411) |  |  | (1,465,013) |  |  | — |  |  | (1,078,985) |  |  | — |
Adjusted average interest-earning assets |  | (h) |  | $ | 45,664,175 |  |  | $ | 43,948,229 |  |  | $ | 40,919,386 |  |  | $ | 43,997,749 |  |  | $ | 39,716,462 |
Net interest margin (1) |  | (e)/(g) |  | 2.72 | % |  | 3.04 | % |  | 3.59 | % |  | 3.05 | % |  | 3.70 | %
Adjusted net interest margin (1) |  | (f)/(h) |  | 2.77 | % |  | 2.96 | % |  | 3.59 | % |  | 3.05 | % |  | 3.70 | %

(1)Annualized.
23