ewbc-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-24939

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

95-4703316

(I.R.S. Employer Identification No.)

135 North Los Robles Ave., 7th Floor, Pasadena, California 91101

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(626) 768-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.001 per share

EWBC

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 141,908,444 shares as of April 30, 2022.

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3

	Item 1.	Consolidated Financial Statements	3
		Consolidated Balance Sheet (Unaudited)	3
		Consolidated Statement of Income (Unaudited)	4
		Consolidated Statement of Comprehensive Income (Unaudited)	5
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	6
		Consolidated Statement of Cash Flows (Unaudited)	7
		Notes to Consolidated Financial Statements (Unaudited)	9
		1 — Basis of Presentation	9
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	9
		3 — Fair Value Measurement and Fair Value of Financial Instruments	10
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	20
		5 — Securities	22
		6 — Derivatives	28
		7 — Loans Receivable and Allowance for Credit Losses	35
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	45
		9 — Goodwill	47
		10 — Commitments and Contingencies	47


		11 — Stock Compensation Plans	49
		12 — Stockholders’ Equity and Earnings Per Share	51
		13 — Accumulated Other Comprehensive Income (Loss)	51
		14 — Business Segments	52


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	97

	Item 4.	Controls and Procedures	97


PART II — OTHER INFORMATION			98

	Item 1.	Legal Proceedings	98
	Item 1A.	Risk Factors	98
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98



	Item 6.	Exhibits	99

GLOSSARY OF ACRONYMS			100

SIGNATURE			101

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($ in thousands, except shares)

(Unaudited)



	March 31, 2022		December 31, 2021
	(Unaudited)
ASSETS
Cash and due from banks	$	571,571	$	527,317
Interest-bearing cash with banks	3,277,129		3,385,618
Cash and cash equivalents	3,848,700		3,912,935
Interest-bearing deposits with banks	816,125		736,492
Assets purchased under resale agreements (“resale agreements”)	1,956,822		2,353,503
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $7,091,581 and $10,087,179)	6,729,431		9,965,353
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,815,968)	2,997,702		—

Loans held-for-sale	631		635
Loans held-for-investment (net of allowance for loan losses of $545,685 and $541,579)	42,944,997		41,152,202
Investments in qualified affordable housing partnerships, tax credit and other investments, net	607,985		628,263

Premises and equipment (net of accumulated depreciation of $141,422 and $139,358)	95,898		97,302
Goodwill	465,697		465,697
Operating lease right-of-use assets	102,491		98,632
Other assets	1,674,977		1,459,687
TOTAL	$	62,241,456	$	60,870,701
LIABILITIES
Deposits:
Noninterest-bearing	$	24,927,768	$	22,845,464
Interest-bearing	30,010,593		30,505,068
Total deposits	54,938,361		53,350,532


Federal Home Loan Bank (“FHLB”) advances	74,619		249,331
Assets sold under repurchase agreements (“repurchase agreements”)	300,000		300,000
Long-term debt and finance lease liabilities	152,227		151,997
Operating lease liabilities	109,656		105,534
Accrued expenses and other liabilities	963,137		876,089
Total liabilities	56,538,000		55,033,483
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,375,288 and 167,790,645 shares issued	168		168
Additional paid-in capital	1,902,874		1,893,557
Retained earnings	4,863,721		4,683,659
Treasury stock, at cost 26,118,768 and 25,882,691 shares	(668,382)		(649,785)
Accumulated other comprehensive loss (“AOCI”), net of tax	(394,925)		(90,381)
Total stockholders’ equity	5,703,456		5,837,218
TOTAL	$	62,241,456	$	60,870,701

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

($ and shares in thousands, except per share data)

(Unaudited)



	Three Months Ended March 31,
	2022		2021
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	377,110	$	342,008
Debt securities	42,667		29,100

Resale agreements	8,383		6,099
Restricted equity securities	609		547
Interest-bearing cash and deposits with banks	3,260		3,632
Total interest and dividend income	432,029		381,386
INTEREST EXPENSE
Deposits	12,989		21,822
Short-term borrowings	9		42
FHLB advances	578		3,069
Repurchase agreements	2,016		1,978
Long-term debt and finance lease liabilities	824		780
Total interest expense	16,416		27,691
Net interest income before provision for credit losses	415,613		353,695
Provision for credit losses	8,000		—
Net interest income after provision for credit losses	407,613		353,695
NONINTEREST INCOME
Lending fees	19,438		18,357
Deposit account fees	20,315		15,383
Interest rate contracts and other derivative income	11,133		16,997
Foreign exchange income	12,699		9,526
Wealth management fees	6,052		6,911
Net gains on sales of loans	2,922		1,781
Gains on sales of AFS debt securities	1,278		192


Other investment income	1,627		925
Other income	4,279		2,794
Total noninterest income	79,743		72,866
NONINTEREST EXPENSE
Compensation and employee benefits	116,269		107,808
Occupancy and equipment expense	15,464		15,922
Deposit insurance premiums and regulatory assessments	4,717		3,876
Deposit account expense	4,693		3,892
Data processing	3,665		4,478
Computer software expense	7,294		7,159
Consulting expense	1,833		1,475
Legal expense	718		1,502
Other operating expense	20,897		19,607
Amortization of tax credit and other investments	13,900		25,358

Total noninterest expense	189,450		191,077
INCOME BEFORE INCOME TAXES	297,906		235,484
INCOME TAX EXPENSE	60,254		30,490
NET INCOME	$	237,652	$	204,994
EARNINGS PER SHARE (“EPS”)
BASIC	$	1.67	$	1.45
DILUTED	$	1.66	$	1.44
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	142,025		141,646
DILUTED	143,223		142,844

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)



	Three Months Ended March 31,
	2022		2021
Net income	$	237,652	$	204,994
Other comprehensive (loss) income, net of tax:
Net changes in unrealized losses on AFS debt securities	(169,270)		(133,448)
Net changes in unrealized losses on securities transferred from AFS to HTM	(110,680)		—
Net changes in unrealized (losses) gains on cash flow hedges	(24,723)		432
Foreign currency translation adjustments	129		(1,349)
Other comprehensive loss	(304,544)		(134,365)
COMPREHENSIVE (LOSS) INCOME	$	(66,892)	$	70,629

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except shares)

(Unaudited)



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
BALANCE, JANUARY 1, 2021	141,565,229	$	1,858,519	$	4,000,414	$	(634,083)	$	44,325	$	5,269,175

Net income	—	—		204,994		—		—		204,994
Other comprehensive loss	—	—		—		—		(134,365)		(134,365)



Issuance of common stock pursuant to various stock compensation plans and agreements	475,733	7,582		—		—		—		7,582
Repurchase of common stock pursuant to various stock compensation plans and agreements	(197,926)	—		—		(14,983)		—		(14,983)

Cash dividends on common stock ($0.33 per share)	—	—		(47,376)		—		—		(47,376)
BALANCE, MARCH 31, 2021	141,843,036	$	1,866,101	$	4,158,032	$	(649,066)	$	(90,040)	$	5,285,027
BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725	$	4,683,659	$	(649,785)	$	(90,381)	$	5,837,218

Net income	—	—		237,652		—		—		237,652
Other comprehensive loss	—	—		—		—		(304,544)		(304,544)



Issuance of common stock pursuant to various stock compensation plans and agreements	588,114	9,317		—		—		—		9,317
Repurchase of common stock pursuant to various stock compensation plans and agreements	(239,548)	—		—		(18,597)		—		(18,597)

Cash dividends on common stock ($0.40 per share)	—	—		(57,590)		—		—		(57,590)
BALANCE, MARCH 31, 2022	142,256,520	$	1,903,042	$	4,863,721	$	(668,382)	$	(394,925)	$	5,703,456

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)



	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	237,652	$	204,994
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	26,555		37,490
Amortization of premiums and accretion of discount, net	11,824		5,770
Stock compensation costs	8,433		7,817
Deferred income tax (expense) benefit	(7,083)		224
Provision for credit losses	8,000		—
Net gains on sales of loans	(2,922)		(1,781)
Gains on sales of AFS debt securities	(1,278)		(192)


Loans held-for-sale:
Originations and purchases	(447)		(5,718)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	461		7,644


Proceeds from distributions received from equity method investees	3,227		2,505
Net change in accrued interest receivable and other assets	(81,628)		185,503
Net change in accrued expenses and other liabilities	83,042		(101,574)
Other net operating activities	49		20
Total adjustments	48,233		137,708
Net cash provided by operating activities	285,885		342,702
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in:
Investments in qualified affordable housing partnerships, tax credit and other investments	(32,853)		(52,756)
Interest-bearing deposits with banks	(79,633)		67,793
Resale agreements:
Proceeds from paydowns and maturities	554,932		223,952
Purchases	(158,251)		(923,990)
AFS debt securities:
Proceeds from sales	103,945		46,397
Proceeds from repayments, maturities and redemptions	446,301		473,808
Purchases	(746,855)		(2,969,640)
HTM debt securities:
Proceeds from repayments, maturities and redemptions	15,448		—
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	135,517		147,115
Purchases	(225,065)		(311,030)
Other changes in loans held-for-investment, net	(1,697,590)		(1,047,557)







Proceeds from distributions received from equity method investees	4,348		2,832

Other net investing activities	(2,758)		(2,870)
Net cash used in investing activities	(1,682,514)		(4,345,946)

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)



	Three Months Ended March 31,
	2022	2021



















































CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	1,584,344	4,690,658
Net decrease in short-term borrowings	(31)	(21,143)

FHLB advances:
Proceeds	100	—
Repayment	(175,100)	—




Long-term debt and lease liabilities:

Repayment of long-term debt and lease liabilities	(229)	(315)
Common stock:


Stocks tendered for payment of withholding taxes	(18,597)	(14,983)
Cash dividends paid	(58,900)	(