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, 2023

or

☐ 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: 141,460,241 shares as of April 30, 2023.

TABLE OF CONTENTS

			Page
FORWARD-LOOKING STATEMENTS			3
PART I — FINANCIAL INFORMATION			5
	Item 1.	Consolidated Financial Statements	5
		Consolidated Balance Sheet (Unaudited)	5
		Consolidated Statement of Income (Unaudited)	6
		Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	7
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	8
		Consolidated Statement of Cash Flows (Unaudited)	9
		Notes to Consolidated Financial Statements (Unaudited)	11
		1 — Basis of Presentation	11
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	12
		3 — Fair Value Measurement and Fair Value of Financial Instruments	13
		4 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	22
		5 — Securities	24
		6 — Derivatives	30
		7 — Loans Receivable and Allowance for Credit Losses	37
		8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	49
		9 — Goodwill	50
		10 — Short-Term Borrowings and Long-Term Debt	50
		11 — Commitments and Contingencies	51
		12 — Stock Compensation Plans	52
		13 — Stockholders’ Equity and Earnings Per Share	54
		14 — Accumulated Other Comprehensive Income (Loss)	54
		15 — Business Segments	55
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	93
	Item 4.	Controls and Procedures	93
PART II — OTHER INFORMATION			94
	Item 1.	Legal Proceedings	94
	Item 1A.	Risk Factors	94
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	95
	Item 6.	Exhibits	95
GLOSSARY OF ACRONYMS			96
SIGNATURE			97

2

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (this “Form 10-Q”) contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company,” “we” or “EWBC”) may make forward-looking statements in other documents that it files with, or furnishes to, the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or industry, and usually can be identified by the use of forward-looking words, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions or variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such statements. You should not place undue reliance on forward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make.

There are various important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:

•changes in the global economy, including an economic slowdown, capital or financial market disruption, supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions, which could result in, among other things, reduced demand for loans, reduced availability of funding or increased funding costs, declines in asset values and/or recognition of allowance for credit losses;

•changes in local, regional and global business, economic and political conditions and geopolitical events, such as Russia’s invasion of Ukraine;

•the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and impacts on macroeconomic conditions, losses in the value of our investment portfolio, deposit withdrawals, or other adverse consequences of negative market perceptions of the banking industry or the Company;

•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation (“FDIC”), the SEC, the Consumer Financial Protection Bureau (“CFPB”), the California Department of Financial Protection and Innovation — Division of Financial Institutions, the China Banking and Insurance Regulatory Commission, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore;

•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade, economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve;

•changes in the commercial and consumer real estate markets;

•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;

•the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs;

•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;

•the Company’s ability to compete effectively against financial institutions and other entities, including as a result of emerging technologies;

•the soundness of other financial institutions;

•the success and timing of the Company’s business strategies;

•the Company’s ability to retain key officers and employees;

•the impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix;

•changes in the Company’s costs of operation, compliance and expansion;

•the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner;

3

•the impact of the benchmark interest rate reform in the U.S. including the transition away from the U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) to alternative reference rates;

•the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which 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;

•the 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;

•the impact of adverse changes to the Company’s credit ratings from major credit rating agencies;

•the impact of adverse judgments or settlements in litigation;

•the impact on the Company’s operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions;

•heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;

•the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties;

•the impact of regulatory investigations and enforcement actions;

•changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on the Company’s critical accounting policies and assumptions;

•the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;

•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries;

•any strategic acquisitions or divestitures;

•changes in the equity and debt securities markets;

•fluctuations in the Company’s stock price;

•fluctuations in foreign currency exchange rates;

•the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly; and

•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts, hurricanes, flooding and earthquakes or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

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, 2022, filed with the SEC on February 27, 2023 (the “Company’s 2022 Form 10-K”) under the heading Item 1A. Risk Factors. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the Company. 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.

4

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, 2023		December 31, 2022
	(Unaudited)
ASSETS
Cash and due from banks	$	760,317	$	534,980
Interest-bearing cash with banks	5,173,877		2,946,804
Cash and cash equivalents	5,934,194		3,481,784
Interest-bearing deposits with banks	10,249		139,021
Assets purchased under resale agreements (“resale agreements”)	654,288		792,192
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $7,072,240 and $6,879,225)	6,300,868		6,034,993
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,502,674 and $2,455,171)	2,993,421		3,001,868
Loans held-for-sale	6,861		25,644
Loans held-for-investment (net of allowance for loan losses of $619,893 and $595,645)	48,298,155		47,606,785
Investments in qualified affordable housing partnerships, tax credit and other investments, net	741,354		763,256
Premises and equipment (net of accumulated depreciation of $150,767 and $148,126)	90,212		89,191
Goodwill	465,697		465,697
Operating lease right-of-use assets	103,114		103,681
Other assets	1,646,485		1,608,038
TOTAL	$	67,244,898	$	64,112,150
LIABILITIES
Deposits:
Noninterest-bearing	$	18,327,320	$	21,051,090
Interest-bearing	36,410,082		34,916,759
Total deposits	54,737,402		55,967,849
Short-term borrowings	4,500,000		—
Assets sold under repurchase agreements (“repurchase agreements”)	—		300,000
Long-term debt and finance lease liabilities	152,467		152,400
Operating lease liabilities	112,676		111,931
Accrued expenses and other liabilities	1,433,022		1,595,358
Total liabilities	60,935,567		58,127,538
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,199,767 and 168,459,045 shares issued	169		168
Additional paid-in capital	1,947,518		1,936,389
Retained earnings	5,832,291		5,582,546
Treasury stock, at cost 27,803,967 and 27,511,199 shares	(790,653)		(768,862)
Accumulated other comprehensive loss (“AOCI”), net of tax	(679,994)		(765,629)
Total stockholders’ equity	6,309,331		5,984,612
TOTAL	$	67,244,898	$	64,112,150

See accompanying Notes to Consolidated Financial Statements.

5

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

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

(Unaudited)

	Three Months Ended March 31,
	2023		2022
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	728,386	$	377,110
Debt securities	65,931		42,667
Resale agreements	4,503		8,383
Restricted equity securities	1,039		609
Interest-bearing cash and deposits with banks	35,647		3,260
Total interest and dividend income	835,506		432,029
INTEREST EXPENSE
Deposits	216,794		12,989
Short-term borrowings	8,825		9
Federal Home Loan Bank (“FHLB”) advances	6,430		578
Repurchase agreements	1,052		2,016
Long-term debt and finance lease liabilities	2,544		824
Total interest expense	235,645		16,416
Net interest income before provision for credit losses	599,861		415,613
Provision for credit losses	20,000		8,000
Net interest income after provision for credit losses	579,861		407,613
NONINTEREST INCOME
Lending fees	20,586		19,438
Deposit account fees	21,703		20,315
Interest rate contracts and other derivative income	2,564		11,133
Foreign exchange income	12,660		12,699
Wealth management fees	6,304		6,052
Net (losses) gains on sales of loans	(22)		2,922
Net realized (losses) gains on AFS debt securities	(10,000)		1,278
Other investment income	1,921		1,627
Other income	4,262		4,279
Total noninterest income	59,978		79,743
NONINTEREST EXPENSE
Compensation and employee benefits	129,654		116,269
Occupancy and equipment expense	15,587		15,464
Deposit insurance premiums and regulatory assessments	7,910		4,717
Deposit account expense	9,609		4,693
Data processing	3,347		3,665
Computer software expense	7,360		7,294
Other operating expense	30,998		23,448
Amortization of tax credit and other investments	10,110		13,900
Repurchase agreements’ extinguishment cost	3,872		—
Total noninterest expense	218,447		189,450
INCOME BEFORE INCOME TAXES	421,392		297,906
INCOME TAX EXPENSE	98,953		60,254
NET INCOME	$	322,439	$	237,652
EARNINGS PER SHARE (“EPS”)
BASIC	$	2.28	$	1.67
DILUTED	$	2.27	$	1.66
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	141,112		142,025
DILUTED	141,913		143,223

See accompanying Notes to Consolidated Financial Statements.

6

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

($ in thousands)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Net income	$	322,439	$	237,652
Other comprehensive income (loss), net of tax:
Net changes in unrealized gains (losses) on AFS debt securities	51,319		(169,270)
Net changes in unrealized gains (losses) on securities transferred from AFS to HTM	2,762		(110,680)
Net changes in unrealized gains (losses) on cash flow hedges	28,613		(24,723)
Foreign currency translation adjustments	2,941		129
Other comprehensive income (loss)	85,635		(304,544)
COMPREHENSIVE INCOME (LOSS)	$	408,074	$	(66,892)

See accompanying Notes to Consolidated Financial Statements.

7

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

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

(Unaudited)

	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
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
BALANCE, JANUARY 1, 2023	140,947,846	$	1,936,557	$	5,582,546	$	(768,862)	$	(765,629)	$	5,984,612
Cumulative-effect of a change in accounting principle (1)	—	—		(4,262)		—		—		(4,262)
Net income	—	—		322,439		—		—		322,439
Other comprehensive income	—	—		—		—		85,635		85,635
Issuance of common stock pursuant to various stock compensation plans and agreements	740,722	11,130		—		—		—		11,130
Repurchase of common stock pursuant to various stock compensation plans and agreements	(292,768)	—		—		(21,791)		—		(21,791)
Cash dividends on common stock ($0.48 per share)	—	—		(68,432)		—		—		(68,432)
BALANCE, MARCH 31, 2023	141,395,800	$	1,947,687	$	5,832,291	$	(790,653)	$	(679,994)	$	6,309,331

(1)Represents the change in the Company’s allowance for loan losses as a result of the adoption of Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures on January 1, 2023. Refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies in this Form 10-Q for additional information.

See accompanying Notes to Consolidated Financial Statements.

8

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	322,439	$	237,652
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,567		26,555
Amortization of premiums and accretion of discount, net	(4,497)		11,824
Stock compensation costs	11,075		8,433
Deferred income tax expense (benefit)	609		(7,083)
Provision for credit losses	20,000		8,000
Net losses (gains) on sales of loans	22		(2,922)
Net realized losses (gains) on AFS debt securities	10,000		(1,278)
Loans held-for-sale:
Originations and purchases	—		(447)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	—		461
Proceeds from distributions received from equity method investees	1,718		3,227
Net change in accrued interest receivable and other assets	(75,163)		(81,628)
Net change in accrued expenses and other liabilities	(93,948)		83,042
Other operating activities, net	(1,921)		49
Total adjustments	(99,538)		48,233
Net cash provided by operating activities	222,901		285,885
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Investments in qualified affordable housing partnerships, tax credit and other investments	(27,358)		(32,853)
Interest-bearing deposits with banks	128,772		(79,633)
Resale agreements:
Proceeds from paydowns and maturities	150,629		554,932
Purchases	(12,725)		(158,251)
AFS debt securities:
Proceeds from sales	—		103,945
Proceeds from repayments, maturities and redemptions	321,913		446,301
Purchases	(532,758)		(746,855)
HTM debt securities:
Proceeds from repayments, maturities and redemptions	12,387		15,448
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	179,237		135,517
Purchases	(155,016)		(225,065)
Other changes in loans held-for-investment, net	(695,646)		(1,697,590)
Proceeds from sales of other real estate owned (“OREO”) and other foreclosed assets	1,976		760
Proceeds from distributions received from equity method investees	2,244		4,348
Other investing activities, net	(6,501)		(3,518)
Net cash used in investing activities	(632,846)		(1,682,514)

See accompanying Notes to Consolidated Financial Statements.

9

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)

Three Months Ended March 31,
2023	2022