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. At acquisition, the rights of the warrant holder were converted into the right to acquire 230,282 shares of East West’s common stock. No warrants have been exercised as of September 30, 2014.

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 nine months ended September 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 September 30, 2013 under the previous repurchase program authorized on January 23, 2013.

Quarterly Dividends — In July 2014, the Company’s Board of Directors declared quarterly common stock cash dividends of $0.18 per share payable on or about August 15, 2014 to shareholders of record on August 1, 2014. Cash dividends totaling $26.0 million and $78.0 million were paid to the Company’s common shareholders during the three and nine months ended September 30, 2014.

Earnings Per Share (“EPS”) — The number of shares outstanding at September 30, 2014 was 143,405,133. 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 tables present earnings per share calculations for the three and nine months ended September 30, 2014 and 2013:

	Three Months Ended September 30, 2014
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	88,756
Less:
Preferred stock dividends	—
Earnings allocated to participating securities	(118		)
Basic EPS — income allocated to common stockholders	$	88,638		143,210	$	0.62
Effect of dilutive securities:
Stock options	—			75
Restricted stock units	69			381
Convertible preferred stock	—			—
Warrants	—			144
Diluted EPS — income allocated to common stockholders	$	88,707		143,810	$	0.62

	Three Months Ended September 30, 2013
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	73,157
Less:
Preferred stock dividends	—
Earnings allocated to participating securities	(372		)
Basic EPS — income allocated to common stockholders	$	72,785		137,036	$	0.53
Effect of dilutive securities:
Stock options	—			71
Restricted stock units	54			360
Convertible preferred stock	—			—
Warrants	—			—
Diluted EPS — income allocated to common stockholders	$	72,839		137,467	$	0.53

	Nine Months Ended September 30, 2014
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	249,485
Less:
Preferred stock dividends	—
Earnings allocated to participating securities	(407		)
Basic EPS — income allocated to common stockholders	$	249,078		142,791	$	1.74
Effect of dilutive securities:
Stock options	—			76
Restricted stock units	197			365
Convertible preferred stock	—			—
Warrants	—			145
Diluted EPS — income allocated to common stockholders	$	249,275		143,377	$	1.74

	Nine Months Ended September 30, 2013
	Net Income			Number of Shares	Per Share Amounts
	(In thousands, except per share data)
Net income	$	219,263
Less:
Preferred stock dividends	(3,428		)
Earnings allocated to participating securities	(1,361		)
Basic EPS — income allocated to common stockholders	$	214,474		137,404	$	1.56
Effect of dilutive securities:
Stock options	—			66
Restricted stock units	124			276
Convertible preferred stock	3,428			2,453
Warrants	—			—
Diluted EPS — income allocated to common stockholders	$	218,026		140,199	$	1.56

The following table presents the weighted-average stock options outstanding and restricted stock units to purchase shares of common stock that were anti-dilutive, and therefore not included in the computation of diluted EPS:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2014	2013	2014	2013
	(In thousands)
Stock options	—	145	27	191
Restricted stock units	4	3	5	10

Accumulated Other Comprehensive (Loss) Income — As of September 30, 2014, total accumulated other comprehensive loss was $2.4 million which includes the following components: net unrealized loss on securities available for sale of $2.4 million and unrealized loss on other investments of $41 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 (loss) income balances were as follows:


	2014									2013
							Cumulative								Cumulative
	Investment						Other			Investment					Other
	Securities			Other			Comprehensive			Securities			Other		Comprehensive
	Available-for-Sale			Investments			(Loss) Income			Available-for-Sale			Investments		(Loss) Income
	(In thousands)									(In thousands)
Three Months Ended September 30,
Balance, beginning of the period	$	(2,593	)	$	58		$	(2,535	)	$	(21,721	)	$	43	$	(21,678	)
Net unrealized gains (losses) arising during period	1,663			(99		)	1,564			(2,876		)	5		(2,871		)
Less: reclassification adjustment for losses included in net income	(1,457		)	—			(1,457		)	(629		)	—		(629		)
Net unrealized gains (losses)	206			(99		)	107			(3,505		)	5		(3,500		)
Balance, end of the period	$	(2,387	)	$	(41	)	$	(2,428	)	$	(25,226	)	$	48	$	(25,178	)
Nine Months Ended September 30,
Balance, beginning of the period	$	(30,538	)	$	79		$	(30,459	)	$	4,643		$	26	$	4,669
Net unrealized gains (losses) arising during period	31,980			(120		)	31,860			(22,905		)	22		(22,883		)
Less: reclassification adjustment for losses included in net income	(3,829		)	—			(3,829		)	(6,964		)	—		(6,964		)
Net unrealized gains (losses)	28,151			(120		)	28,031			(29,869		)	22		(29,847		)
Balance, end of the period	$	(2,387	)	$	(41	)	$	(2,428	)	$	(25,226	)	$	48	$	(25,178	)

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 September 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	$	2,867		$	(1,204	)	$	1,663		$	(4,959	)	$	2,083		$	(2,876	)
Less: reclassification adjustment for gains included in net income *(1)*	(2,512		)	1,055			(1,457		)	(1,084		)	455			(629		)
Net unrealized gains (losses)	355			(149		)	206			(6,043		)	2,538			(3,505		)
Unrealized gains (losses) on other investments:
Net unrealized (losses) gains arising during period	(171		)	72			(99		)	9			(4		)	5
Less: reclassification adjustment for (gains) losses included in income	—			—			—			—			—			—
Other comprehensive income (loss)	$	184		$	(77	)	$	107		$	(6,034	)	$	2,534		$	(3,500	)

				Tax									Tax
	Before-Tax			Expense			Net-of-Tax			Before-Tax			Expense			Net-of-Tax
Nine Months Ended September 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	$	55,138		$	(23,158	)	$	31,980		$	(39,491	)	$	16,586		$	(22,905	)
Less: reclassification adjustment for gains included in net income *(1)*	(6,601		)	2,772			(3,829		)	(12,006		)	5,042			(6,964		)
Net unrealized gains (losses)	48,537			(20,386		)	28,151			(51,497		)	21,628			(29,869		)
Unrealized gains (losses) on other investments:
Net unrealized (losses) gains arising during period	(207		)	87			(120		)	38			(16		)	22
Less: reclassification adjustment for (gains) losses included in income	—			—			—			—			—			—
Other comprehensive income (loss)	$	48,330		$	(20,299	)	$	28,031		$	(51,459	)	$	21,612		$	(29,847	)

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