NOTE 13 — STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE

Series A Preferred Stock Offering — In April 2008, the Company issued 200,000 shares of 8% Non-Cumulative Perpetual Convertible Preferred Stock, Series A (“Series A”), with a liquidation preference of $1,000 per share. The Company received $194.1 million of additional Tier 1 qualifying capital, after deducting stock issuance costs. On May 1, 2013, the Company exercised its mandatory conversion right related to all the outstanding shares of its Series A preferred stock. At the conversion date, the remaining 85,710 shares of outstanding Series A Preferred Stock were converted to 5,594,080 shares of common stock.

MetroCorp Acquisition — On January 17, 2014, the Company completed the acquisition of MetroCorp. The final consideration included 5,583,093 shares of East West common stock and $89.4 million of cash. Prior to the acquisition, MetroCorp had an outstanding warrant to purchase 771,429 shares of its common stock. After acquisition and as of June 30, 2014, the rights of the warrant holder were converted into the right to acquire 230,282 shares of the Company’s common stock.

Stock Repurchase Program — On July 17, 2013, the Company’s Board of Directors authorized a new stock repurchase program to buy back up to $100.0 million of its common stock. The Company did not repurchase any shares under this program during the three and six months period ended June 30, 2014. In comparison, the Company repurchased 8,026,807 shares at a weighted average price of $24.89 per share for a total cost of $200.0 million as of June 30, 2013.

Quarterly Dividends — In April 2014, the Company’s Board of Directors declared quarterly common stock cash dividends of $0.18 per share payable on or about May 19, 2014 to shareholders of record on May 2, 2014. Cash dividends totaling $26.0 million and $52.0 million were paid to the Company’s common shareholders during the three and six months ended June 30, 2014.

Earnings Per Share (“EPS”) — The number of shares outstanding at June 30, 2014 was 143,389,155. Certain of the Company’s instruments containing rights to nonforfeitable dividends granted in stock-based payment transactions are considered participating securities prior to vesting and, therefore, have been included in the earnings allocations in computing basic and diluted EPS under the two-class method. Basic EPS was computed by dividing net income, net of income allocated to participating securities, by the weighted-average number of common shares outstanding during each period, net of treasury shares and including vested but unissued shares and share units. The computation of diluted EPS reflects the additional dilutive effect of stock options and unvested stock awards

The following table sets forth earnings per share calculations for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended June 30, 2014
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	83,988
Less:
Preferred stock dividends	—
Earnings allocated to participating securities	(119		)
Basic EPS — income allocated to common stockholders	$	83,869		143,187	$	0.59
Effect of dilutive securities:
Stock options	—			75
Restricted stock units	51			284
Convertible preferred stock	—			—
Warrants	—			143
Diluted EPS — income allocated to common stockholders	$	83,920		143,689	$	0.58

	Three Months Ended June 30, 2013
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	74,015
Less:
Preferred stock dividends	(1,714		)
Earnings allocated to participating securities	(400		)
Basic EPS — income allocated to common stockholders	$	71,901		137,536	$	0.52
Effect of dilutive securities:
Stock options	—			59
Restricted stock units	33			221
Convertible preferred stock	—			—
Warrants	—			—
Diluted EPS — income allocated to common stockholders	$	71,934		137,816	$	0.52

	Six Months Ended June 30, 2014
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	160,729
Less:
Preferred stock dividends	—
Earnings allocated to participating securities	(287		)
Basic EPS — income allocated to common stockholders	$	160,442		142,578	$	1.13
Effect of dilutive securities:
Stock options	—			77
Restricted stock units	129			359
Convertible preferred stock	—			—
Warrants	—			144
Diluted EPS — income allocated to common stockholders	$	160,571		143,158	$	1.12

	Six Months Ended June 30, 2013
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	146,106
Less:
Preferred stock dividends	(3,428		)
Earnings allocated to participating securities	(988		)
Basic EPS — income allocated to common stockholders	$	141,690		137,592	$	1.03
Effect of dilutive securities:
Stock options	—			55
Restricted stock units	68			227
Convertible preferred stock	3,428			3,699
Warrants	—			—
Diluted EPS — income allocated to common stockholders	$	145,186		141,573	$	1.03

The following average outstanding stock options and restricted stock units for the three and six months ended June 30, 2014 and 2013, respectively, were excluded from the computation of diluted EPS because including them would have had an antidilutive effect.

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2014	2013	2014	2013
	(In thousands)
Convertible preferred stock	—	1,841	—	—
Stock options	—	159	40	214
Restricted stock units	2	6	61	4

Accumulated Other Comprehensive (Loss) Income — As of June 30, 2014, total accumulated other comprehensive loss was $2.6 million which includes the following components: net unrealized loss on securities available for sale of $2.6 million and unrealized gain on other investments of $58 thousand. As of December 31, 2013, total accumulated other comprehensive loss was $30.5 million which includes the following components: net unrealized loss on securities available for sale of $30.5 million and unrealized gains on other investments of $79 thousand.

The cumulative other comprehensive income (loss) balances were as follows:

	2014									2013
							Cumulative								Cumulative
	Investment						Other			Investment					Other
	Securities			Other			Comprehensive			Securities			Other		Comprehensive
	Available-for-Sale			Investments			Income			Available-for-Sale			Investments		Income
	(In thousands)									(In thousands)
Three Months Ended June 30,
Balance, beginning of the period	$	(17,099	)	$	62		$	(17,037	)	$	6,149		$	36	$	6,185
Net unrealized gains (losses) arising during period	14,895			(4		)	14,891			(24,770		)	7		(24,763		)
Less: reclassification adjustment for gains included in net income	(389		)	—			$	(389	)	(3,100		)	—		(3,100		)
Net unrealized gains (losses)	14,506			(4		)	14,502			(27,870		)	7		(27,863		)
Balance, end of the period	$	(2,593	)	$	58		$	(2,535	)	$	(21,721	)	$	43	$	(21,678	)

Six Months Ended June 30,
Balance, beginning of the period	$	(30,538	)	79			$	(30,459	)	$	4,643		$	26	$	4,669
Net unrealized gains (losses) arising during period	30,317			(21		)	30,296			(20,029		)	17		(20,012		)
Less: reclassification adjustment for gains included in net income	(2,372		)	—			(2,372		)	(6,335		)	—		(6,335		)
Net unrealized gains (losses)	27,945			(21		)	27,924			(26,364		)	17		(26,347		)
Balance, end of the period	$	(2,593	)	$	58		$	(2,535	)	$	(21,721	)	$	43	$	(21,678	)

The components of other comprehensive income (loss), reclassifications to net income by income statement line item and the related tax effects were as follows:

	2014									2013
				Tax									Tax
	Before-Tax			Expense			Net-of-Tax			Before-Tax			Expense			Net-of-Tax
Three Months Ended June 30,	Amount			or Benefit			Amount			Amount			or Benefit			Amount
	(In thousands)									(In thousands)
Unrealized gains (losses) on investment securities available-for-sale:
Net unrealized gains (losses) arising during period	$	25,681		$	(10,786	)	$	14,895		$	(42,707	)	$	17,937		$	(24,770	)
Less: reclassification adjustment for gains included in net income *(1)*	(671		)	282			(389		)	(5,345		)	2,245			(3,100		)
Net unrealized gains (losses)	25,010			(10,504		)	14,506			(48,052		)	20,182			(27,870		)
Unrealized gains (losses) on other investments
Net unrealized (losses) gains arising during period	(7		)	3			(4		)	12			(5		)	7
Less: reclassification adjustment for (gains) losses included in income	—			—			—			—			—			—
Other comprehensive income (loss)	$	25,003		$	(10,501	)	$	14,502		$	(48,040	)	$	20,177		$	(27,863	)

				Tax									Tax
	Before-Tax			Expense			Net-of-Tax			Before-Tax			Expense			Net-of-Tax
Six Months Ended June 30,	Amount			or Benefit			Amount			Amount			or Benefit			Amount
	(In thousands)									(In thousands)
Unrealized gains (losses) on investment securities available-for-sale:
Net unrealized gains (losses) arising during period	$	52,271		$	(21,954	)	$	30,317		$	(34,533	)	$	14,504		$	(20,029	)
Less: reclassification adjustment for gains included in net income *(1)*	(4,089		)	1,717			(2,372		)	(10,922		)	4,587			(6,335		)
Net unrealized gains (losses)	48,182			(20,237		)	27,945			(45,455		)	19,091			(26,364		)
Unrealized gains (losses) on other investments
Net unrealized (losses) gains arising during period	(36		)	15			(21		)	29			(12		)	17
Less: reclassification adjustment for (gains) losses included in income	—			—			—			—			—			—
Other comprehensive income (loss)	$	48,146		$	(20,222	)	$	27,924		$	(45,426	)	$	19,079		$	(26,347	)

(1) The pretax amount is reported in net gains on sales of investment securities in the consolidated statements of operations.