Exhibit 99.1

 

East West Bancorp, Inc. 135 N. Los Robles Ave., 7th Fl. Pasadena, CA 91101 Tel. 626.768.6800 Fax 626.817.8838

FOR FURTHER INFORMATION AT THE COMPANY:

Irene Oh

Chief Financial Officer

(626) 768-6360

EAST WEST BANCORP REPORTS PROFITABILITY FOR FULL YEAR 2009

Pasadena, CA – January 26, 2010 – East West Bancorp, Inc. (NASDAQ: EWBC), parent company of East West Bank, one of the nation’s premier community banks, today reported financial results for the fourth quarter and full year 2009.

“East West reported a return to profitability with net earnings for full year 2009 of $76.6 million. The return to profitability for 2009 follows a single loss year for 2008 – the only loss year for East West in nearly 30 years,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “Previous to 2008, East West achieved record earnings every year for over a decade, with net income of $161.2 million in 2007 and $143.4 million in 2006. Our core business remains strong and we are back on track to deliver solid profitability and create long-term value for our shareholders in 2010 and beyond.”

For the fourth quarter 2009, net income was $259.7 million, an increase of $328.3 million over a loss reported in third quarter. For the full year 2009, net income was $76.6 million, an increase of $126.3 million over a loss reported in 2008. Our fourth quarter earnings include a pre-tax gain of $471.0 million from the FDIC-assisted acquisition of United Commercial Bank (UCB), offset by a $140.0 million provision for loan losses and a $45.8 million impairment loss on investment securities.

Ng stated, “Throughout 2009 and from the onset of the economic downturn, East West successfully executed on all strategic actions. We believe that for East West, the credit cycle peaked in the third quarter of 2009 and that as we enter the new year, the worst is behind us. Since January 1, 2008, we actively reduced our exposure to land and construction loans by over $2.2 billion. Our capital position is strong and continues to grow – during 2009 we raised a total of $607.8 million in new capital and generated $76.6 million additional capital from net income.”

“Further, our swift and decisive actions during this challenging operating environment to improve our balance sheet have allowed us to take the exceptional opportunity to acquire the assets and deposit franchise of UCB, nearly doubling our size to $20.6 billion. The acquisition of UCB has expedited our return to profitability and serves as an immediate catalyst to further our growth and profitability in 2010,” concluded Ng.

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FDIC-Assisted Acquisition of UCB

On November 6, 2009, East West acquired substantially all of the assets and assumed substantially all of the liabilities of UCB from the Federal Deposit Insurance Corporation (FDIC) in an FDIC-assisted transaction.

As the market leader in the Asian-American banking sector, East West has positive brand recognition. UCB customers and the Asian-American community have responded positively to our acquisition of the banking operations of UCB. As widely reported in the Asian-American media, our acquisition of UCB served to stabilize deposits and strengthen customer confidence in the entire Asian-American banking sector. Additionally, East West’s proven asset resolution process, coupled with our expertise in the market niche of UCB will result in a higher recovery and lower potential losses to the FDIC insurance fund. Further, because East West has an existing presence and expertise in Hong Kong and Greater China, we are better able to assist the FDIC in managing the overseas operations of UCB, also reducing any potential exposure to the FDIC insurance fund.

The integration of United Commercial Bank is progressing smoothly and we are on target for full integration of all systems in April 2010.

East West entered into loss sharing agreements with the FDIC that covers future losses incurred on nearly all the UCB legacy loans and all real estate owned assets that existed at November 6, 2009. Under the terms of the agreement, the FDIC will absorb 80 percent of losses and share in 80 percent of recoveries on the first $2.05 billion and absorb 95 percent of losses and share in 95 percent of recoveries exceeding $2.05 billion. The term for the loss share agreement is ten years for single family loans. For all other loans, the term is five years for losses and eight years for recoveries.

East West recorded a FDIC indemnification asset as of November 6, 2009 of $1.1 billion, which represents the present value of the estimated losses on covered loans to be reimbursed to East West by the FDIC. East West also recorded a $174.0 million receivable from the FDIC.

The UCB legacy loans guaranteed under loss sharing agreements with the FDIC will be defined as “covered loans” and the UCB legacy loans and real estate owned assets guaranteed under loss sharing agreements with the FDIC will be defined as “covered assets” throughout this press release. Further, any references to nonaccrual loans and nonperforming assets will consist of East West legacy loans and assets only as all covered assets are subject to loss share agreements with the FDIC.

In accordance with U.S. GAAP, all the UCB legacy loans were accounted for at fair value and recorded at a discount to book value. Accordingly, any share of losses East West expects to incur have already been written off and factored into the fair value as of November 6, 2009.

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A summary of the net assets received from the FDIC is as follows:

 

		November 6, 2009
		(In thousands)
Assets
Cash and cash equivalents		$	599,036
FDIC receivable			173,995
Investment securities			1,561,446
Loans covered by FDIC loss sharing, (gross balance $7,299,303 and shown net of discount of $1,638,871)			5,660,432
Loans not covered by FDIC loss sharing, (gross balance $306,477 and shown net of discount of $69,973)			236,504
FDIC indemnification asset			1,143,989
Other assets			486,555
Total assets acquired		$	9,861,957
Liabilities
Deposits		$	6,529,864
Federal Home Loan Bank advances			1,837,593
Securities sold under repurchase agreements			858,244
Other liabilities			344,788
Total liabilities			9,570,489
Net assets acquired		$	291,468

Further information on the acquisition of UCB can be found in the Form 8-K, filed by East West with the SEC on January 22, 2010.

East West recorded an after tax gain of $291.5 million from the acquisition of UCB on November 6, 2009. Further, the Company recorded additional net revenue of $51.1 million during the period from November 6, 2009 to December 31, 2009 as a result of early prepayments on covered loans during the quarter. This additional net revenue is comprised of $74.4 million discount accretion on early payoffs on covered loans as a yield adjustment offset by a corresponding $23.3 million net reduction in the FDIC indemnification asset and FDIC receivable as noninterest income (loss).

Preliminary Forecast

The Company is providing a forecast for the first quarter of 2010. Management currently estimates that fully diluted earnings per share for the first quarter of 2010 will range from $0.04 to $0.08. This EPS guidance is based on the following assumptions:

 

•

Net interest margin between 3.80% and 3.90%

 

•

Provision for loan losses of approximately $70.0 million to $80.0 million for the quarter

 

•

Noninterest expense flat from the fourth quarter of 2009

Full Year 2009 Highlights

 

•

Increase in Balance Sheet – Total asset increased to a record $20.6 billion at year-end, an increase of $8.2 billion or 66% year over year. Total deposits increased to $15.0 billion, an increase of $6.8 billion or 84% year over year. Year-to-date, East West grew deposits organically by $744.1

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million or 9%, excluding the impact of the UCB acquisition. Total gross loans receivable increased to $14.1 billion, an increase of $5.9 billion or 71% year over year. These increases in the balance sheet are primarily due to the acquisition of UCB.

 

•

Capital Strengthened – During the full year 2009, we raised a total of $607.8 million in capital. We issued $107.8 million of common stock in July 2009 and $165.0 million of common stock and $335.0 million of mandatory convertible preferred stock in November 2009. As of December 31, 2009, East West’s Tier 1 risk-based and total risk-based capital ratios were 17.9% and 19.9%, respectively, significantly higher than the well capitalized requirement of 6% and 10%, respectively.

 

•

Loan to Deposit Ratio – Throughout 2009, East West continued to further strengthen the balance sheet and decrease the loan to deposit ratio. As of December 31, 2009, the loan to deposit ratio was 94.3%, compared to 101.3% as of December 31, 2008.

 

•

Allowance for Loan Losses Strengthened – The allowance for loan loss was increased to $238.8 million or a 34% increase year over year. The allowance for loan losses to gross non-covered loans was 2.80% at December 31, 2009 compared to 2.16% as of December 31, 2008. The allowance to nonaccrual loans ratio improved to 137.9% as of December 31, 2009, compared to 83.0% as of December 31, 2008.

 

•

Reduced Exposures to Problem Credits – Total land loans decreased $206.2 million or 36% and total commitments on construction loans decreased $1.0 billion or 63% year to date. As of December 31, 2009, outstanding balances on land and construction loans totaled only 5.9% of total gross loans receivable.

Fourth Quarter Summary

 

•

Credit Quality Improved – Total nonperforming assets have improved to $187.0 million, a decrease of $43.2 million or 19% from prior quarter. Total nonperforming assets to total assets improved to 0.91% as of December 31, 2009, from 1.84% as of September 30, 2009. The decrease in nonperforming assets from the prior quarter is largely a result of a reduction in nonaccrual residential construction loans.

 

•

Net Interest Margin Improved – Net interest income for the fourth quarter increased to $219.5 million, a $123.6 million increase over third quarter of 2009. The net interest margin for the fourth quarter increased to 5.46%, compared to 3.20% in the prior quarter. Excluding the impact of the yield adjustment to covered loans of $74.4 million, net interest income increased to $145.1 million and the net interest margin increased to 3.61% for the fourth quarter. See reconciliation of the GAAP financial measure to this non-GAAP financial measure in the tables attached.

 

•

Deposits Increased – Total deposits increased to a record $15.0 billion at year-end 2009. In fourth quarter of 2009, deposits increased $6.3 billion or 73% over prior quarter due primarily to the UCB acquisition. East West grew deposits organically by $217.5 million for the quarter, excluding the impact of the UCB acquisition.

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Capital Strength

 

(Dollars in milions)		December 31, 2009			Well Capitalized Regulatory Requirement			Total Excess Above Well Capitalized Requirement
Tier 1 leverage capital ratio		11.7	%		5.00	%		$	1,150.2
Tier 1 risk-based capital ratio		17.9	%		6.00	%		$	1,337.9
Total risk-based capital ratio		19.9	%		10.00	%		$	1,106.1
Proforma tangible common equity to risk weighted assets ratio		13.2	%		4.00	%		$	1,028.2

 

*

The tangible common equity to risk weighted asset ratio is a non-GAAP disclosure. The Mandatory Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series, C issued in November 2009 has been included as a proforma tangible common equity ratio. The Series C shares will automatically convert to common shares if an affirmative shareholder vote is obtained. See reconciliation of the GAAP financial measure to this non-GAAP financial measure in the tables attached. As there is no stated regulatory guideline for this ratio, the Supervisory Capital Assessment Program (SCAP) guideline of 4.00% has been used.

East West has always been committed to maintaining strong capital levels and has been well capitalized throughout this economic cycle. As of the end of the fourth quarter, our Tier 1 leverage capital ratio increased to 11.7%, Tier 1 risk-based capital ratio increased to 17.9% and total risk-based capital ratio increased to 19.9%. East West exceeds well capitalized requirements for all regulatory guidelines by over $1 billion. Furthermore, East West’s proforma tangible common equity to risk weighted assets ratio totaled 13.2% as of December 31, 2009.

During the fourth quarter, we issued $165 million in common stock and $335 million in Mandatory Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series C (Series C preferred stock). The newly issued capital, along with the net income for the quarter resulted in an increase to total shareholders’ equity to $2.3 billion at December 31, 2009. The special shareholders’ meeting to vote to approve the conversion of the Series C preferred stock to common stock has been set for March 18, 2010. The Series C preferred stock converts to common stock automatically three days after the receipt of an affirmative shareholder vote. No Series C dividend has been declared by the Board of Directors. Under the terms of the Series C preferred stock, the May 1 dividend payment or any portion thereof will not be earned or paid should an affirmative shareholder vote to convert be obtained on the March 18, 2010 meeting date. Since management fully expects that the Series C preferred dividend will not be earned or paid, income available to common shareholders has not been adjusted for purposes of computing basic and diluted per share amounts.

Further, during the fourth quarter, we received a 50% reduction in the warrant we issued to the U.S. Treasury in conjunction with the TARP capital we received in December 2008. As of December 31, 2009, the new share count of the warrant is 1,517,555. This adjustment to the warrant was due to the fact that within one year of issuance, we raised new capital in excess of the TARP capital issued in December 2008. Management intends to repay the $306.5 million TARP capital in full later this year.

Credit Management

Total nonperforming assets as of December 31, 2009 totaled $187.0 million or 0.91% of total assets, compared to $230.2 million or 1.84% of total assets at September 30, 2009. Nonperforming assets as of December 31, 2009 included nonaccrual loans totaling $173.2 million and REO assets totaling $13.8 million.

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The legacy UCB covered loans that were nonaccrual as of December 31, 2009 totaled $675.6 million, net of a $466.3 million discount. All loans acquired from UCB were recorded at estimated fair value as of the acquisition date.

Throughout this challenging economic cycle, we have taken strong measures to reduce our exposure to problem credits – largely comprised of our construction and land portfolios. The outstanding balances for the land and construction portfolios totaled $828.7 million as of December 31, 2009, or 5.9% of total gross loans receivable.

Further, with the addition of $5.6 billion in covered loans from the UCB acquisition, concentrations within our loan portfolio have been reduced. Total exposure to commercial real estate loans is 26% of total loans as of December 31, 2009, down from 43% as of September 30, 2009.

As previously discussed by management, both the provision for loan losses and the net chargeoffs peaked in the third quarter of 2009. Given the trends we are seeing in the loan portfolio, it is expected that provision for loan losses and net chargeoffs will continue to decrease throughout 2010. Provision for loan losses was $140.0 million for the fourth quarter of 2009, a decrease 12% from $159.2 million in the third quarter.

For the fourth quarter of 2009, net charge-offs were $130.7 million, a decrease of 14% or $20.6 million compared to $151.2 million during the third quarter of 2009. The net chargeoffs for the quarter were largely related to construction and land loans.

At December 31, 2009, the allowance for loan losses increased to $238.8 million or 2.80% of non-covered loans receivable, compared to $230.7 million or 2.74% of outstanding loans at September 30, 2009. Based on management's evaluation and analysis of portfolio credit quality and prevailing economic conditions, we believe the allowance for loan losses is adequate for losses inherent in the loan portfolio as of December 31, 2009.

Fourth Quarter 2009 Operating Results

Net interest income for the fourth quarter increased to $219.5 million, a $123.6 million or 129% increase over third quarter of 2009. The net interest margin for the fourth quarter increased to 5.46%, up 226 basis points from 3.20% in the prior quarter. Excluding the impact of the yield adjustment to covered loans of $74.4 million, net interest income increased to $145.1 million and the net interest margin increased to 3.61% for the fourth quarter. During the quarter, East West paid down $200 million in FHLB advances at an average cost of 4.43%. Additionally, East West sold approximately $1.3 billion in lower yielding investment securities obtained from UCB, shortly after the acquisition. These actions improved the net interest margin for the fourth quarter and will continue to do so in coming quarters.

Currently, we estimate that the net interest margin, without yield adjustments to covered loans, will be approximately 3.80% to 3.90% for the first quarter of 2010.

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Excluding the impact of the gain on the acquisition of UCB, the decrease in the FDIC indemnification asset, impairment charges on investment securities and gains on sales of investment securities, noninterest income for the fourth quarter totaled $14.4 million, compared to $10.2 million in the third quarter of 2009. The increase was primarily due to increased fee and other income from the acquisition of UCB. See reconciliation of the GAAP financial measure to this non-GAAP financial measure in the tables attached.

Noninterest expense for the fourth quarter totaled $91.1 million, compared to $46.1 million in the third quarter of 2009. The increase in the noninterest expense quarter over quarter was due to additional expenditures from the acquisition of UCB on November 6, 2009. We anticipate that noninterest expense will decrease starting the second quarter of 2010, after the systems integration of UCB is completed.

Investment Securities

During the fourth quarter, we recorded other than temporary impairment on investment securities of $45.8 million related primarily to pooled trust preferred securities. Year to date, total impairment on the pooled trust preferred securities totaled $106.6 million and the remaining book balance of these securities has decreased to $18.1 million. These securities are available for sale and recorded on the balance sheet at fair value and any difference in the book balance and the fair value is reflected in the other comprehensive income section of stockholders’ equity. As of December 31, 2009, the fair value of these securities was written down to $2.9 million.

Deposit Summary

Total deposits as of December 31, 2009 increased to $15.0 billion, up $6.3 billion or 72.9% from $8.7 billion at September 30, 2009. Quarter over quarter, core deposits increased $2.7 billion or 60.1% and time deposits increased $3.7 billion or 86.3%. The average cost of deposits for the fourth quarter of 2009 decreased to 1.11%, a 13 basis point decrease from the third quarter of 2009. East West grew deposits organically by $217.5 million for the quarter, excluding the impact of the UCB acquisition.

Dividend Payout

East West Bank’s Board of Directors has declared first quarter dividends on the common stock and Series A Preferred Stock. The common stock cash dividend of $0.01 is payable on or about February 24, 2010 to shareholders of record on February 10, 2010. The dividend on the Series A Preferred Stock of $20.00 per share is payable on February 1, 2010 to shareholders of record on January 15, 2010.

About East West

East West Bancorp is a publicly owned company with $20.6 billion in assets and is traded on the NASDAQ Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is the third largest independent commercial bank headquartered in California with 135 branches worldwide; including 111 branches in California, eight branches in New York, five branches in Georgia, three branches in Massachusetts, two branches in Texas, and two branches in Washington. In Greater China, East West's presence includes four full-service branches, including two in Hong Kong, one in Shanghai, and one in Shantou. The Bank also has representative offices in Beijing, Guangzhou, Shanghai and Shenzhen, China, and Taipei, Taiwan. For more information on East West Bancorp, visit the Company’s website at www.eastwestbank.com.

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Forward-Looking Statements

This release may contain forward-looking statements, which are included in accordance with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and accordingly, the cautionary statements contained in East West Bancorp’s Annual Report on Form 10-K for the year ended Dec. 31, 2008 (See Item I — Business, and Item 7 — Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations), and other filings with the Securities and Exchange Commission are incorporated herein by reference. These factors include, but are not limited to: the effect of interest rate and currency exchange fluctuations; competition in the financial services market for both deposits and loans; EWBC’s ability to efficiently incorporate acquisitions into its operations; the ability of borrowers to perform as required under the terms of their loans; effect of additional provisions for loan losses; effect of any goodwill impairment, the ability of EWBC and its subsidiaries to increase its customer base; the effect of regulatory and legislative action, including California tax legislation and an announcement by the state’s Franchise Tax Board regarding the taxation of Registered Investment Companies; and regional and general economic conditions. Actual results and performance in future periods may be materially different from any future results or performance suggested by the forward-looking statements in this release. Such forward-looking statements speak only as of the date of this release. East West expressly disclaims any obligation to update or revise any forward-looking statements found herein to reflect any changes in the Bank’s expectations of results or any change in event.

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EAST WEST BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(unaudited)

 

		December 31, 2009				September 30, 2009				December 31, 2008
Assets
Cash and due from banks		$	585,024			$	132,569			$	144,486
Short-term investments			262,329				460,665				734,367
Interest-bearing deposits in other banks			498,565				320,860				228,441
Securities purchased under resale agreements			227,444				75,000				50,000
Investment securities			2,564,081				2,238,354				2,162,511
Loans receivable, excluding covered loans (net of allowance for loan losses of $238,833, $230,650, and $178,027)			8,246,685				8,156,838				8,069,377
Covered loans			5,598,155				—				—
Total loans receivable, net			13,844,840				8,156,838				8,069,377
Federal Home Loan Bank and Federal Reserve stock			217,002				123,514				114,317
FDIC indemnification asset			1,091,814				—				—
Other real estate owned, net			13,832				24,185				38,302
Other real estate owned covered, net			44,273				—				—
Premiums on deposits acquired, net			89,735				17,904				21,190
Goodwill			337,438				337,438				337,438
Other assets			806,533				598,603				522,387
Total assets		$	20,582,910			$	12,485,930			$	12,422,816
Liabilities and Stockholders’ Equity
Deposits		$	14,987,613				8,668,557			$	8,141,959
Federal Home Loan Bank advances			1,805,387				923,216				1,353,307
Securities sold under repurchase agreements			1,026,870				1,019,450				998,430
Subordinated debt and trust preferred securities			235,570				235,570				235,570
Other borrowings			67,040				3,022				28,022
Accrued expenses and other liabilities			175,771				114,333				114,762
Total liabilities			18,298,251				10,964,148				10,872,050
Stockholders’ equity			2,284,659				1,521,782				1,550,766
Total liabilities and stockholders’ equity		$	20,582,910				12,485,930			$	12,422,816
Book value per common share		$	14.37			$	12.58			$	16.92
Number of common shares at period end			109,963				91,694				63,746
Ending Balances
		December 31, 2009				September 30, 2009				December 31, 2008
Loans receivable
Real estate - single family		$	930,840			$	912,391			$	491,315
Real estate - multifamily			1,025,849				1,036,932				677,989
Real estate - commercial			3,606,179				3,624,469				3,472,000
Real estate - land			370,394				415,228				576,564
Real estate - construction			458,292				654,115				1,260,724
Commercial			1,512,709				1,343,496				1,554,219
Consumer			624,784				432,844				216,642
Total loans receivable, excluding covered loans			8,529,047				8,419,475				8,249,453
Unearned fees, premiums and discounts			(43,529	)			(31,987	)			(2,049	)
Allowance for loan losses			(238,833	)			(230,650	)			(178,027	)
Net loans receivable, excluding covered loans			8,246,685				8,156,838				8,069,377
Covered loans			5,598,155				—				—
Net loans receivable		$	13,844,840			$	8,156,838			$	8,069,377
Deposits
Noninterest-bearing demand		$	2,291,259			$	1,397,217			$	1,292,997
Interest-bearing checking			667,177				347,745				363,285
Money market			3,138,866				2,263,319				1,323,402
Savings			991,520				420,365				420,133
Total core deposits			7,088,822				4,428,646				3,399,817
Time deposits less than $100,000			3,240,094				1,062,575				1,521,988
Time deposits $100,000 or greater			4,658,697				3,177,336				3,220,154
Total time deposits			7,898,791				4,239,911				4,742,142
Total deposits		$	14,987,613			$	8,668,557			$	8,141,959

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EAST WEST BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(unaudited)

 

		Quarter Ended
		December 31, 2009				September 30, 2009				December 31, 2008
Interest and dividend income		$	283,646			$	147,924			$	149,907
Interest expense			(64,147	)			(52,044	)			(73,053	)
Net interest income before provision for loan losses			219,499				95,880				76,854
Provision for loan losses			(140,000	)			(159,244	)			(43,000	)
Net interest income (loss) after provision for loan losses			79,499				(63,364	)			33,854
Noninterest income (loss)			420,820				(11,880	)			(863	)
Noninterest expense			(91,085	)			(46,064	)			(44,199	)
Income (loss) before provision (benefit) for income taxes			409,234				(121,308	)			(11,208	)
Provision (benefit) for income taxes			149,504				(52,777	)			(13,574	)
Net income (loss)		$	259,730			$	(68,531	)		$	2,366
Preferred stock dividend, inducement, and amortization of preferred stock discount (1)			(6,129	)			(10,620	)			(5,385	)
Net income (loss) available to common stockholders (1)		$	253,601			$	(79,151	)		$	(3,019	)
Net income (loss) per share, basic		$	2.49			$	(0.91	)		$	(0.05	)
Net income (loss) per share, diluted		$	1.96			$	(0.91	)		$	(0.05	)
Shares used to compute per share net income (loss):
- Basic			101,924			$	86,538				62,932
- Diluted			130,346			$	86,538				62,932
		Quarter Ended
		December 31, 2009				September 30, 2009				December 31, 2008
Noninterest income (loss):
Gain on acquisition of UCB		$	471,009			$	—			$	—
Impairment loss on investment securities			(45,775	)			(24,249	)			(9,653	)
Decrease in FDIC indemnification asset and FDIC receivable			(23,338	)			—				—
Branch fees			7,846				4,679				4,247
Net gain on sale of investment securities			4,545				2,177				1,238
Letters of credit fees and commissions			2,570				1,984				2,267
Ancillary loan fees			1,474				1,227				738
Other operating income			2,489				2,302				300
Total noninterest income (loss)		$	420,820			$	(11,880	)		$	(863	)
Noninterest expense:
Compensation and employee benefits		$	29,983			$	15,875			$	15,658
Occupancy and equipment expense			10,268				6,262				6,627
Deposit insurance premiums and regulatory assessments			9,123				6,057				2,032
Consulting expense			6,256				759				610
Legal expense			3,168				1,323				1,687
Other real estate owned expense			2,624				767				2,493
Amortization and impairment loss of premiums on deposits acquired			2,609				1,069				1,125
Amortization of investments in affordable housing partnerships			2,329				1,709				1,751
Data processing			2,279				1,079				1,108
Other operating expense			22,446				11,164				11,108
Total noninterest expense		$	91,085			$	46,064			$	44,199

 

(1)

The special shareholders’ meeting to vote to approve the conversion of the Mandatory Convertible Cumulative Preferred Stock, Series C (Series C preferred stock) to common stock has been set for March 18, 2010. The Series C preferred stock converts to common stock automatically three days after the receipt of an affirmative shareholder vote. No Series C dividend has been declared by the Board of Directors. Under the terms of the Series C preferred stock, the May 1 dividend payment or any portion thereof will not be earned or paid should an affirmative shareholder vote to convert be obtained on the March 18, 2010 meeting date. Since management fully expects that the Series C preferred dividend will not be earned or paid, income available to common shareholders has not been adjusted for purposes of computing basis and diluted per share amounts.

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EAST WEST BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(unaudited)

 

		Year Ended								% Change
		December 31, 2009				December 31, 2008
Interest and dividend income		$	722,826			$	664,858			9
Interest expense			(239,506	)			(309,694	)		(23	)
Net interest income before provision for loan losses			483,320				355,164			36
Provision for loan losses			(528,666	)			(226,000	)		134
Net interest (loss) income after provision for loan losses			(45,346	)			129,164			(135	)
Noninterest income (loss)			396,535				(25,062	)		1,682
Noninterest expense			(246,467	)			(201,270	)		22
Income (loss) before provision (benefit) for income taxes			104,722				(97,168	)		208
Provision (benefit) for income taxes			22,714				(47,485	)		(148	)
Net income (loss) before extraordinary items		$	82,008			$	(49,683	)		265
Extraordinary item, net of tax		$	(5,366	)		$	—			NA
Net income (loss) after extraordinary item		$	76,642			$	(49,683	)		254
Preferred stock dividend, inducement, and amortization of preferred stock discount (1)			(49,115	)			(9,474	)		418
Net income (loss) available to common stockholders (1)		$	27,527			$	(59,157	)		147
Net income (loss) per share, basic		$	0.35			$	(0.94	)		137
Net income (loss) per share, diluted		$	0.33			$	(0.94	)		135
Shares used to compute per share net loss:
- Basic			78,770				62,673			26
- Diluted			84,553				62,673			35
		Year Ended								% Change
		December 31, 2009				December 31, 2008
Noninterest income (loss):
Gain on acquisition of UCB		$	471,009			$	—			NA
Impairment loss on investment securities			(107,671	)			(73,165	)		47
Decrease in FDIC indemnification asset and FDIC receivable			(23,338	)			—			NA
Branch fees			22,309				16,972			31
Net gain on sale of investment securities			11,923				9,005			32
Letters of credit fees and commissions			8,338				9,739			(14	)
Ancillary loan fees			6,286				4,646			35
Other operating income			7,679				7,741			(1	)
Total noninterest income (loss)		$	396,535			$	(25,062	)		1,682
Noninterest expense:
Compensation and employee benefits		$	79,475			$	82,236			(3	)
Occupancy and equipment expense			30,218				26,991			12
Deposit insurance premiums and regulatory assessments			28,073				7,223			289
Other real estate owned expense			19,104				6,013			218
Consulting expense			8,135				4,398			85
Legal expense			8,024				5,577			44
Amortization of investments in affordable housing partnerships			7,450				7,272			2
Amortization and impairment loss of premiums on deposits acquired			5,895				7,270			(19	)
Data processing			5,641				4,494			26
Other operating expense			54,452				49,796			9
Total noninterest expense		$	246,467			$	201,270			22

 

(1)

The special shareholders’ meeting to vote to approve the conversion of the Mandatory Convertible Cumulative Preferred Stock, Series C (Series C preferred stock) to common stock has been set for March 18, 2010. The Series C preferred stock converts to common stock automatically three days after the receipt of an affirmative shareholder vote. No Series C dividend has been declared by the Board of Directors. Under the terms of the Series C preferred stock, the May 1 dividend payment or any portion thereof will not be earned or paid should an affirmative shareholder vote to convert be obtained on the March 18, 2010 meeting date. Since management fully expects that the Series C preferred dividend will not be earned or paid, income available to common shareholders has not been adjusted for purposes of computing basis and diluted per share amounts.

---

EAST WEST BANCORP, INC.

QUARTERLY ALLOWANCE FOR LOAN LOSSES RECAP

(In thousands)

(unaudited)

 

		Quarter Ended
		12/31/2009				9/30/2009				6/30/2009				3/31/2009				12/31/2008
LOANS
Allowance balance, beginning of period		$	230,650			$	223,700			$	195,450			$	178,027			$	177,155
Allowance for unfunded loan commitments and letters of credit			(1,161	)			(1,051	)			1,442				(1,008	)			(625	)
Provision for loan losses			140,000				159,244				151,422				78,000				43,000
Impact of desecuritization			—				—				9,262				—				—
Net Charge-offs:
Real estate - single family			7,083				8,034				14,058				3,832				1,756
Real estate - multifamily			8,425				7,231				2,256				1,624				524
Real estate - commercial			13,305				23,105				12,472				2,790				750
Real estate - land			20,390				39,988				33,183				12,523				9,039
Real estate - residential construction			48,919				32,535				30,634				16,347				17,127
Real estate - commercial construction			21,355				23,051				28,602				1,977				—
Commercial			5,789				14,956				11,577				18,146				8,054
Trade finance			2,569				2,256				774				1,032				4,026
Consumer			2,821				87				320				1,298				227
Total net charge-offs			130,656				151,243				133,876				59,569				41,503
Allowance balance, end of period		$	238,833			$	230,650			$	223,700			$	195,450			$	178,027
UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT:
Allowance balance, beginning of period		$	6,958			$	5,907			$	7,349			$	6,341			$	5,716
Provision for unfunded loan commitments and letters of credit			1,161				1,051				(1,442	)			1,008				625
Allowance balance, end of period		$	8,119			$	6,958			$	5,907			$	7,349			$	6,341
GRAND TOTAL, END OF PERIOD		$	246,952			$	237,608			$	229,607			$	202,799			$	184,368
Nonperforming assets to total assets			0.91	%			1.84	%			1.49	%			2.28	%			2.04	%
Allowance for loan losses to total gross non-covered loans at end of period			2.80	%			2.74	%			2.62	%			2.42	%			2.16	%
Allowance for loan losses and unfunded loan commitments to total gross non-covered loans at end of period			2.90	%			2.82	%			2.69	%			2.51	%			2.23	%
Allowance to non-covered nonaccrual loans at end of period			137.91	%			112.82	%			137.94	%			78.81	%			82.95	%
Nonaccrual loans to total loans			1.23	%			2.43	%			1.90	%			3.08	%			2.60	%

---

EAST WEST BANCORP, INC

TOTAL NON-COVERED NON-PERFORMING ASSETS

(in thousands)

(unaudited)

AS OF DECEMBER 31, 2009
		Total Nonaccrual Loans
		90+ Days Delinquent			Under 90+ Days Delinquent			Total Nonaccrual Loans			90+ Days Delinquent Not On Nonaccrual			Total Non- performing Loans			REO Assets			Total Non-Performing Assets
Loan Type
Real estate - single family		$	3,262		$	—		$	3,262		$	—		$	3,262		$	264		$	3,526
Real estate - multifamily			10,631			—			10,631			—			10,631			2,118			12,749
Real estate - commercial			11,654			18,450			30,104			—			30,104			5,687			35,791
Real estate - land			27,179			42,666			69,845			—			69,845			4,393			74,238
Real estate - residential construction			17,179			—			17,179			—			17,179			540			17,719
Real estate - commercial construction			—			17,132			17,132			—			17,132			830			17,962
Commercial			8,002			16,765			24,767			—			24,767			—			24,767
Trade Finance			—			—			—			—			—			—			—
Consumer			114			146			260			—			260			—			260
Total		$	78,021		$	95,159		$	173,180		$	—		$	173,180		$	13,832		$	187,012
AS OF SEPTEMBER 30, 2009
		Total Nonaccrual Loans
		90+ Days Delinquent			Under 90+ Days Delinquent			Total Nonaccrual Loans			90+ Days Delinquent Not On Nonaccrual			Total Non- performing Loans			REO Assets			Total Non-Performing Assets
Loan Type
Real estate - single family		$	6,189		$	—		$	6,189		$	—		$	6,189		$	648		$	6,837
Real estate - multifamily			11,211			652			11,863			—			11,863			1,147			13,010
Real estate - commercial			17,381			16,040			33,421			—			33,421			2,330			35,751
Real estate - land			23,568			33,610			57,178			—			57,178			4,020			61,198
Real estate - residential construction			55,130			—			55,130			—			55,130			12,238			67,368
Real estate - commercial construction			10,784			—			10,784			—			10,784			3,680			14,464
Commercial			11,783			13,227			25,010			—			25,010			122			25,132
Trade Finance			2,110			1,785			3,895			1,556			5,451			—			5,451
Consumer			293			676			969			—			969			—			969
Total		$	138,449		$	65,990		$	204,439		$	1,556		$	205,995		$	24,185		$	230,180
AS OF JUNE 30, 2009
		Total Nonaccrual Loans
		90+ Days Delinquent			Under 90+ Days Delinquent			Total Nonaccrual Loans			90+ Days Delinquent Not On Nonaccrual			Total Non- performing Loans			REO Assets			Total Non-Performing Assets
Loan Type
Real estate - single family		$	5,181		$	—		$	5,181		$	—		$	5,181		$	4,921		$	10,102
Real estate - multifamily			7,938			—			7,938			—			7,938			281			8,219
Real estate - commercial			19,786			4,590			24,376			—			24,376			2,887			27,263
Real estate - land			35,660			1,656			37,316			—			37,316			13,307			50,623
Real estate - residential construction			46,176			—			46,176			—			46,176			4,154			50,330
Real estate - commercial construction			20,629			—			20,629			—			20,629			—			20,629
Commercial			8,034			8,067			16,101			—			16,101			626			16,727
Trade Finance			3,706			—			3,706			—			3,706			211			3,917
Consumer			339			412			751			—			751			801			1,552
Total		$	147,449		$	14,725		$	162,174		$	—		$	162,174		$	27,188		$	189,362
AS OF MARCH 31, 2009
		Total Nonaccrual Loans
		90+ Days Delinquent			Under 90+ Days Delinquent			Total Nonaccrual Loans			90+ Days Delinquent Not On Nonaccrual			Total Non- performing Loans			REO Assets			Total Non-Performing Assets
Loan Type
Real estate - single family		$	18,515		$	634		$	19,149		$	—		$	19,149		$	671		$	19,820
Real estate - multifamily			9,863			—			9,863			—			9,863			887			10,750
Real estate - commercial			12,465			42,724			55,189			—			55,189			4,240			59,429
Real estate - land			63,052			6,233			69,285			—			69,285			17,934			87,219
Real estate - residential construction			28,433			14,196			42,629			—			42,629			13,278			55,907
Real estate - commercial construction			28,604			—			28,604			—			28,604			—			28,604
Commercial			16,798			5,000			21,798			—			21,798			1,236			23,034
Trade Finance			177			—			177			—			177			270			447
Consumer			839			482			1,321			—			1,321			118			1,439
Total		$	178,746		$	69,269		$	248,015		$	—		$	248,015		$	38,634		$	286,649
AS OF DECEMBER 31, 2008
		Total Nonaccrual Loans
		90+ Days Delinquent			Under 90+ Days Delinquent			Total Nonaccrual Loans			90+ Days Delinquent Not On Nonaccrual			Total Non- performing Loans			REO Assets			Total Non-Performing Assets
Loan Type
Real estate - single family		$	13,519		$	—		$	13,519		$	—		$	13,519		$	419		$	13,938
Real estate - multifamily			11,845			—			11,845			—			11,845			1,136			12,981
Real estate - commercial			24,680			—			24,680			—			24,680			4,882			29,562
Real estate - land			66,185			12,892			79,077			—			79,077			10,307			89,384
Real estate - residential construction			27,052			8,766			35,818			—			35,818			21,146			56,964
Real estate - commercial construction			30,581			—			30,581			—			30,581			—			30,581
Commercial			6,570			10,604			17,174			—			17,174			142			17,316
Trade Finance			65			—			65			—			65			270			335
Consumer			1,654			194			1,848			—			1,848			—			1,848
Total		$	182,151		$	32,456		$	214,607		$	—		$	214,607		$	38,302		$	252,909

---

EAST WEST BANCORP, INC.

QUARTER TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID

(In thousands)

(unaudited)

 

		Quarter Ended
		December 31, 2009										September 30, 2009
		Average Volume				Interest			Yield (1)			Average Volume				Interest			Yield (1)
ASSETS
Interest-earning assets:
Short-term investments and interest bearing deposits in other banks		$	978,967			$	1,635		0.66	%		$	897,527			$	1,856		0.82	%
Securities purchased under resale agreements			165,839				3,290		7.76	%			91,033				2,153		9.25	%
Investment securities
Taxable			2,616,485				27,966		4.24	%			2,304,619				28,311		4.87	%
Tax-exempt (2)			22,458				316		5.63	%			22,727				256		4.51	%
Loans receivable			8,504,833				116,278		5.42	%			8,471,766				114,512		5.36	%
Loans receivable - covered (3)			3,479,519				133,966		15.27	%			—				—		—
Federal Home Loan Bank and Federal Reserve Bank stocks			180,420				368		0.82	%			123,514				918		2.97	%
Total interest-earning assets			15,948,521				283,819		7.06	%			11,911,186				148,006		4.93	%
Noninterest-earning assets:
Cash and due from banks			266,287										124,708
Allowance for loan losses			(236,858	)									(244,542	)
Other assets			1,585,379										843,925
Total assets		$	17,563,329									$	12,635,277
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking accounts			523,519				504		0.38	%			342,922				286		0.33	%
Money market accounts			2,671,917				6,919		1.03	%			2,160,722				6,830		1.25	%
Savings deposits			775,834				1,353		0.69	%			421,844				608		0.57	%
Time deposits less than $100,000			2,403,331				9,936		1.64	%			1,090,647				5,572		2.03	%
Time deposits $100,000 or greater			3,972,588				15,761		1.57	%			3,308,057				13,674		1.64	%
Federal funds purchased			1,158				1		0.34	%			1,385				2		0.57	%
Federal Home Loan Bank advances			1,731,525				14,119		3.24	%			1,046,056				11,172		4.24	%
Securities sold under repurchase agreements			1,086,279				13,709		4.94	%			1,018,321				12,140		4.66	%
Subordinated debt and trust preferred securities			235,570				1,605		2.67	%			235,570				1,760		2.92	%
Other borrowings			48,842				240		1.97	%			—				—		—
Total interest-bearing liabilities			13,450,563				64,147		1.89	%			9,625,524				52,044		2.15	%
Noninterest-bearing liabilities:
Demand deposits			1,953,781										1,335,131
Other liabilities			237,394										130,800
Stockholders’ equity			1,921,591										1,543,822
Total liabilities and stockholders’ equity		$	17,563,329									$	12,635,277
Interest rate spread									5.17	%									2.78	%
Net interest income and net interest margin (3)						$	219,672		5.46	%						$	95,962		3.20	%
Net interest income and net interest margin, excluding purchase accounting discount accretion (3)						$	145,233		3.61	%

 

(1)	Annualized

(2)	Amounts calculated on a fully taxable basis using the current statutory federal tax rate.

(3)	Amounts include yield adjustment of $74,439 from discount accretion on early prepayments.

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EAST WEST BANCORP, INC.

YEAR TO DATE AVERAGE BALANCES, YIELDS AND RATES PAID

(In thousands)

(unaudited)

 

		Year To Date December 31,
		2009										2008
		Average Volume				Interest			Yield			Average Volume				Interest			Yield
ASSETS
Interest-earning assets:
Short-term investments and interest bearing deposits in other banks		$	881,282			$	8,976		1.02	%		$	286,650			$	7,029		2.45	%
Securities purchased under resale agreements			89,883				7,985		8.76	%			70,246				6,811		9.67	%
Investment securities
Taxable			2,542,124				115,531		4.54	%			2,001,089				98,217		4.89	%
Tax-exempt (1)			27,668				1,223		4.42	%			44,708				3,256		7.28	%
Loans receivable			8,355,825				453,275		5.42	%			8,601,825				545,260		6.32	%
Loans receivable - covered (2)			877,029				133,966		15.27	%			—				—		—
Federal Home Loan Bank and Federal Reserve Bank stocks			137,001				2,337		1.71	%			115,370				5,175		4.47	%
Total interest-earning assets			12,910,812				723,293		5.60	%			11,119,888				665,748		5.97	%
Noninterest-earning assets:
Cash and due from banks			147,694										137,730
Allowance for loan losses			(216,775	)									(144,154	)
Other assets			997,214										689,323
Total assets		$	13,838,945									$	11,802,787
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking accounts			398,619				1,507		0.38	%			404,404				3,226		0.80	%
Money market accounts			2,035,821				25,583		1.26	%			1,099,576				25,805		2.34	%
Savings deposits			506,706				3,322		0.66	%			452,259				4,148		0.91	%
Time deposits less than $100,000			1,499,076				32,073		2.14	%			1,164,622				35,061		3.00	%
Time deposits $100,000 or greater			3,538,046				66,921		1.89	%			3,018,876				109,820		3.63	%
Federal funds purchased			2,379				9		0.37	%			89,309				2,217		2.48	%
Federal Home Loan Bank advances			1,333,846				52,310		3.92	%			1,592,125				70,661		4.43	%
Securities sold under repurchase agreements			1,027,665				49,725		4.77	%			1,000,332				46,062		4.59	%
Subordinated debt and trust preferred securities			235,570				7,816		3.27	%			235,570				12,694		5.37	%
Other borrowings			12,311				240		1.95	%			—				—		—
Total interest-bearing liabilities			10,590,039				239,506		2.26	%			9,057,073				309,694		3.41	%
Noninterest-bearing liabilities:
Demand deposits			1,459,871										1,362,617
Other liabilities			154,138										137,320
Stockholders’ equity			1,634,897										1,245,777
Total liabilities and stockholders’ equity		$	13,838,945									$	11,802,787
Interest rate spread									3.34	%									2.56	%
Net interest income and net interest margin (2)						$	483,787		3.75	%						$	356,054		3.19	%
Net interest income and net interest margin, excluding purchase accounting discount accretion (2)						$	409,348		3.17	%

 

(1)	Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate.

(2)	Amounts include yield adjustment of $74,439 from discount accretion on early prepayments.

---

EAST WEST BANCORP, INC.

SELECTED FINANCIAL INFORMATION

(In thousands)

(unaudited)

 

Average Balances
		December 31, 2009				Quarter Ended September 30, 2009				December 31, 2008
Loans receivable
Real estate - single family		$	908,095			$	888,106			$	493,415
Real estate - multifamily			1,037,460				1,036,080				682,455
Real estate - commercial			3,610,640				3,552,897				3,407,697
Real estate - land			398,109				460,256				579,335
Real estate - construction			586,883				855,446				1,311,622
Commercial			1,446,695				1,360,223				1,548,231
Consumer			516,951				318,758				210,448
Total loans receivable, excluding covered loans			8,504,833				8,471,766				8,233,203
Covered loans			3,479,519				—				—
Total loans receivable			11,984,352				8,471,766				8,233,203
Investment securities			2,638,943				2,327,346				2,223,842
Earning assets			15,948,521				11,911,186				11,219,272
Total assets			17,563,329				12,635,277				11,949,168
Deposits
Noninterest-bearing demand		$	1,953,781			$	1,335,131			$	1,311,283
Interest-bearing checking			523,519				342,922				367,792
Money market			2,671,917				2,160,722				1,153,171
Savings			775,834				421,844				419,757
Total core deposits			5,925,051				4,260,619				3,252,003
Time deposits less than $100,000			2,403,331				1,090,647				1,599,486
Time deposits $100,000 or greater			3,972,588				3,308,057				2,855,376
Total time deposits			6,375,919				4,398,704				4,454,862
Total deposits			12,300,970				8,659,323				7,706,865
Interest-bearing liabilities			13,450,563				9,625,524				9,143,800
Stockholders’ equity			1,921,591				1,543,822				1,363,161
Selected Ratios
		December 31, 2009				Quarter Ended September 30, 2009				December 31, 2008
For The Period
Return on average assets			5.92	%			-2.17	%			0.08	%
Return on average common equity			75.27	%			-27.12	%			-1.12	%
Interest rate spread (2)			5.17	%			2.78	%			2.13	%
Net interest margin (2)			5.46	%			3.20	%			2.72	%
Yield on earning assets (2)			7.06	%			4.93	%			5.30	%
Cost of deposits			1.11	%			1.24	%			2.14	%
Cost of funds			1.65	%			1.88	%			2.77	%
Noninterest expense/average assets (1)			1.96	%			1.37	%			1.38	%
Efficiency ratio (3)			52.53	%			39.99	%			47.52	%

 

(1)	Excludes the amortization of intangibles, amortization and impairment loss of premiums on deposits acquired, impairment loss on goodwill, and amortization of investments in affordable housing partnerships.

(2)	Yields on certain securities have been adjusted upward to a “fully taxable equivalent” basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

(3)

Represents noninterest expense, excluding the amortization of intangibles, amortization and impairment loss of premiums on deposits acquired, impairment loss on goodwill, and investments in affordable housing partnerships, divided by the aggregate of net interest income excluding the yield adjustment, before provision for loan losses and noninterest income, excluding impairment loss on investment securities, gain on acquisition and the decrease in FDIC indemnification asset.

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EAST WEST BANCORP, INC.

SELECTED FINANCIAL INFORMATION

(In thousands)

(unaudited)

 

Average Balances
		Year To Date December 31,								%
		2009				2008				Change
Loans receivable
Real estate - single family		$	748,713			$	467,739			60
Real estate - multifamily			898,927				707,621			27
Real estate - commercial			3,536,846				3,483,258			2
Real estate - land			490,546				631,951			(22	)
Real estate - construction			934,729				1,481,248			(37	)
Commercial			1,420,453				1,628,732			(13	)
Consumer			325,611				201,276			62
Total loans receivable, excluding covered loans			8,355,825				8,601,825			(3	)
Covered loans			877,029				—			NA
Total loans receivable			9,232,854				8,601,825			7
Investment securities			2,569,792				2,045,797			26
Earning assets			12,910,812				11,119,888			16
Total assets			13,838,945				11,802,787			17
Deposits
Noninterest-bearing demand		$	1,459,871			$	1,362,617			7
Interest-bearing checking			398,619				404,404			(1	)
Money market			2,035,821				1,099,576			85
Savings			506,706				452,259			12
Total core deposits			4,401,017				3,318,856			33
Time deposits less than $100,000			1,499,076				1,164,622			29
Time deposits $100,000 or greater			3,538,046				3,018,876			17
Total time deposits			5,037,122				4,183,498			20
Total deposits			9,438,139				7,502,354			26
Interest-bearing liabilities			10,590,039				9,057,073			17
Stockholders’ equity			1,634,897				1,245,777			31
Selected Ratios
		Year To Date December 31,								%
		2009				2008				Change
For The Period
Return on average assets			0.55	%			-0.42	%		(231	)
Return on average common equity			2.37	%			-5.41	%		(144	)
Interest rate spread (2)			3.34	%			2.56	%		30
Net interest margin (2)			3.75	%			3.19	%		17
Yield on earning assets (2)			5.60	%			5.97	%		(6	)
Cost of deposits			1.37	%			2.37	%		(42	)
Cost of funds			1.99	%			2.96	%		(33	)
Noninterest expense/average assets (1)			1.68	%			1.57	%		7
Efficiency ratio (3)			50.09	%			45.94	%		9
Period End
Tier 1 risk-based capital ratio			17.9	%			13.9	%		29
Total risk-based capital ratio			19.9	%			15.8	%		26
Tier 1 leverage capital ratio			11.7	%			12.4	%		(5	)

 

(1)	Excludes the amortization of intangibles, amortization and impairment loss of premiums on deposits acquired, impairment loss on goodwill, and amortization of investments in affordable housing partnerships.

(2)	Yields on certain securities have been adjusted upward to a “fully taxable equivalent” basis in order to reflect the effect of income which is exempt from federal income taxation at the current statutory tax rate.

(3)

Represents noninterest expense, excluding the amortization of intangibles, amortization and impairment loss of premiums on deposits acquired, impairment loss on goodwill, and investments in affordable housing partnerships, divided by the aggregate of net interest income excluding the yield adjustment, before provision for loan losses and noninterest income, excluding impairment loss on investment securities, gain on acquisition and the decrease in FDIC indemnification asset.

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EAST WEST BANCORP, INC.

GAAP TO NON-GAAP RECONCILIATION

(In thousands)

(Unaudited)

The tangible common equity to risk weighted asset ratio is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance to provide additional disclosure. As the use of tangible common equity is more prevalent in the banking industry and with banking regulators and analysts, we have included the tangible common equity to risk-weighted assets ratio.

 

		As of December 31, 2009
Stockholders’ Equity		$	2,284,659
Less:
Preferred equity excluding the Mandatory Convertible Preferred Stock			(379,129	) *
Goodwill and other intangible assets			(428,524	)
Tangible common equity		$	1,477,006
Risk-weighted assets		$	11,218,644
Tangible Common Equity to risk-weighted assets			13.2	%

 

*	The Mandatory Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series, C issued in November 2009 has been included as a proforma tangible common equity ratio. The Series C shares will automatically convert to common shares after the shareholder vote on March 18, 2010.

Operating noninterest income is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance to provide additional disclosure. There are noninterest income line items that are non-core in nature. Operating noninterest income excludes such non-core noninterest income line items. The Company believes that presenting the operating noninterest income provides more clarity to the users of financial statements regarding the core noninterest income amounts.

 

		Quarter Ended December 31, 2009
Noninterest income (loss)		$	420,820
Add:
Impairment loss on investment securities			45,775
Net gain on sale of investment securities			(4,545	)
Gain on acquisition of UCB			(471,009	)
Decrease in FDIC indemnification asset and FDIC receivable			23,338
Operating noninterest income (non-GAAP)		$	14,379

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EAST WEST BANCORP, INC.

GAAP TO NON-GAAP RECONCILIATION

(In thousands)

(Unaudited)

The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance to provide additional disclosure. The fourth quater of 2009 and the 2009 year to date net interest income and net interest margin include a yield adjustment of $74,439 from discount accretion on covered loans. Although there may be additional yield adjustments in future quarters, this amount is nonrecurring in nature. As such, the Company believes that presenting the net interest income and net interest margin excluding the yield adjustment provides additional clarity to the users of financial statements regarding the core net interest income and net interest margin.

 

		Quarter to Date December 31, 2009
		Average Volume			Interest			Yield
Total interest-earning assets		$	15,948,521		$	283,819		7.06	%
Net interest income and net interest margin					$	219,499		5.46	%
Less:
Yield adjustment to interest income from discount accretion						74,439
Net interest income and net interest margin, excluding yield adjustment					$	145,060		3.61	%