BUSINESS COMBINATION

12 Months Ended

Dec. 31, 2014

BUSINESS COMBINATION

BUSINESS COMBINATION

NOTE 2 — BUSINESS COMBINATION

On January 17, 2014, the Company completed the acquisition of MetroCorp Bancshares, Inc. (“MetroCorp”), parent of MetroBank, N.A. and Metro United Bank. MetroCorp, headquartered in Houston, Texas, operated 19 branch locations within Texas and California under its two banks. The Company acquired MetroCorp to further expand its presence, primarily in Texas, within the markets of Houston and Dallas, and in California, within the San Diego market. The purchase consideration was satisfied with two thirds in East West stock and one third in cash. The fair value of the consideration transferred in the acquisition of MetroCorp was $291.4 million, which consisted of 5,583,093 shares of East West common stock fair valued at $190.8 million at the date of acquisition and $89.4 million in cash, $2.4 million of additional cash to MetroCorp stock option holders and a MetroCorp warrant, fair valued at $8.8 million, assumed by the Company.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. At the acquisition date, the Company recorded total fair value of assets acquired of $1.70 billion, which included $230.3 million in cash and due from banks, $64.3 million in investment securities available for sale, $2.7 million in FHLB stock, $1.19 billion in loans receivable, $8.6 million in fixed assets, $8.6 million in premiums on deposits acquired, $9.4 million in OREO, $30.0 million in bank owned life insurance (BOLI), $13.0 million in deferred tax assets and $16.7 million in other assets. The total fair value of liabilities acquired was $1.41 billion, which included $1.32 billion in deposits, $10.0 million in FHLB advances, $25.9 million in repurchase agreements, $29.1 million in junior subordinated debt and $22.7 million in other liabilities. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the January 17, 2014 acquisition date. Goodwill from the acquisition represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and is not deductible for tax purposes. The Company recorded $121.0 million of goodwill at the acquisition date. During the fourth quarter of 2014, the Company recorded additional tax and BOLI adjustments of $10.3 million and $0.7 million, respectively related to the MetroCorp acquisition, resulting in an increase to goodwill to $132.0 million.

The Company has included the financial results of this business combination in the consolidated statements of income beginning on the acquisition date. Supplemental financial information regarding the former MetroCorp operations included in the consolidated statement of income from the date of acquisition through December 31, 2014 has not been separately presented as the operations of MetroCorp have been fully integrated into the Company’s operations and separate records for MetroCorp as a stand-alone business have not been maintained.

The following table presents the Company's unaudited pro forma results of operations for the periods presented as if the MetroCorp acquisition had been completed on January 1, 2014 and January 1, 2013, respectively. The 2014 unaudited pro forma information combines MetroCorp's 2014 historical results with the Company's 2014 consolidated historical results and includes MetroCorp's results of operations prior to acquisition date, January 17, 2014. The 2013 unaudited pro forma information combines MetroCorp's 2013 historical results with the Company's 2013 consolidated historical results and includes the estimated impact of certain fair value adjustments for the assets acquired and liabilities assumed and merger and acquisition integration costs. The unaudited pro forma information is not necessarily indicative of the Company's future operating results or operating results that would have occurred had the acquisition been completed at the beginning of 2014 and 2013, respectively. No assumptions have been applied to the pro forma results of operations regarding possible revenue enhancements, expense efficiencies or asset dispositions. As a result, actual results will differ from the unaudited pro forma information presented.

	Pro forma
	Year Ended December 31,
	2014		2013
	(In thousands)
Net interest income and noninterest loss	$	1,028,796	$	934,207
Net income after tax	$	338,730	$	299,625