East West Bancorp Reports Record Net Income for Full Year 2014 of $342.5 Million and Full Year 2014 Diluted Earnings Per Share of $2.38

East West Bancorp, Inc. (“East West” or the “Company”) (Nasdaq: EWBC), parent company of East West Bank, the financial bridge between the United States and Greater China, today reported its financial results for the fourth quarter and full year 2014. For the fourth quarter of 2014, net income was $93.0 million or $0.65 per diluted share. For the full year 2014, net income available to common stockholders was $342.5 million or $2.38 per diluted share.

“East West is pleased to report strong earnings of $342.5 million or $2.38 per diluted share for the full year 2014, an increase in diluted earnings per share of 13% from 2013,” stated Dominic Ng, Chairman and Chief Executive Officer of East West. “2014 marks the fifth consecutive year East West has generated record earnings. 2014 was a year of many accomplishments for East West. At the end of 2014, total loans reached a record $21.8 billion, an increase of 20% from the prior year, and total deposits were a record $24.0 billion, an 18% increase from the prior year.”

Ng continued, “Our fourth quarter net income of $93.0 million or $0.65 per diluted share, an increase of $17.2 million or 23% from the prior year period, reflects consecutive increases in both net income and earnings per share throughout the year. At East West, our corporate goal is to be one of the best performing banks and consistently outperform peer banks. We believe our financial results for the fourth quarter and full year 2014 reflect strong achievement of our goal.”

“In the past five years since we acquired United Commercial Bank, we have built a stronger, more diversified balance sheet, made investments in people and infrastructure to expand our capabilities and product offerings, and increased our physical footprint to better serve our customers. I am pleased to state that these actions have been achieved without sacrifice to profitability and return levels, despite a challenging interest rate environment. Our growth and profitability would not have been possible without the hard work and dedication of all our associates,” continued Ng.

“As we grow our business, we are able to reach more customers with our cross-border products and capabilities and provide a bridge between the U.S. and Greater China. Our knowledge, experience and capabilities in both the U.S. and Greater China markets continue to give us a competitive advantage over our peers. We look forward to 2015 with optimism and excitement as we continue to serve our customers and generate strong long-term value for our shareholders,” concluded Ng.

Full Year 2014 Highlights

• Record Earnings – For the full year 2014, net income totaled a record $342.5 million, an increase of $47.4 million or 16% from $295.0 million in 2013. For the full year 2014, earnings per diluted share available to common stockholders totaled $2.38, an increase of $0.28 or 13% from $2.10 in 2013.
• MetroCorp Bancshares – During the year, East West successfully acquired and completed the integration of MetroCorp Bancshares (“MetroCorp”), a $1.6 billion bank headquartered in Houston, Texas. With the MetroCorp acquisition, East West substantially increased its presence in Houston and entered the markets of Dallas and San Diego.
• Strong Loan Growth – Total loans receivable (including covered and non-covered loans) increased to a record $21.8 billion as of December 31, 2014, an increase of $3.7 billion or 20% from December 31, 2013. The MetroCorp acquisition earlier in the year added $1.2 billion of loans that were largely comprised of commercial real estate loans. Excluding the impact of the MetroCorp acquisition, the year over year loan growth was $2.5 billion or 14%, largely driven by growth in commercial and industrial loans.
• Strong Deposit Growth – Total deposits increased to a record $24.0 billion as of December 31, 2014, an increase of $3.6 billion or 18% from December 31, 2013. Excluding the impact of the $1.3 billion in deposits added from the MetroCorp acquisition in early 2014, the year over year deposit growth was $2.3 billion or 11%, largely driven by growth in core deposits.
• Strong Capital Levels – Capital levels for East West remain high. As of December 31, 2014, East West’s Tier 1 risk-based capital and total risk-based ratios were 11.0% and 12.6%, respectively, compared to the well capitalized requirements of 6% and 10%, respectively.
• Improvement in Nonperforming Assets – Nonperforming assets as of December 31, 2014 totaled $128.7 million or 0.45% of total assets, an improvement of $1.9 million or eight basis points from $130.6 million or 0.53% as of December 31, 2013.

Quarterly Results Summary

Fourth Quarter Highlights

• Strong Fourth Quarter Earnings – For the fourth quarter of 2014, net income increased to $93.0 million or $0.65 per diluted share. Net income increased $4.2 million or 5% from the third quarter of 2014 and $17.2 million or 23% from the fourth quarter of 2013. Earnings per diluted share increased $0.03 or 5% from the third quarter of 2014 and increased $0.10 or 18% from the fourth quarter of 2013.
• Strong Loan Growth – Total loans receivable (including covered and non-covered loans) increased to a record $21.8 billion as of December 31, 2014, an increase of $541.6 million or 3% from September 30, 2014. This increase was largely due to increases in non-covered loans comprised of $554.4 million in commercial and industrial loans, $170.3 million in single family loans and $148.3 million in commercial real estate loans, partially offset by decreases in loans held for sale of $193.7 million and covered loans of $162.6 million.
• Solid Deposit Growth – Total deposits as of December 31, 2014 were a record $24.0 billion, an increase of $196.5 million or 1% from September 30, 2014. This increase was primarily due to increases in interest-bearing checking deposits which grew $235.6 million or 10% and noninterest-bearing demand deposits which grew $110.6 million or 2%, partially offset by a decrease in money market deposit accounts by $173.6 million or 3%.

Management Guidance

The Company is providing guidance for the first quarter and full year of 2015. Management currently estimates that fully diluted earnings per share for the full year of 2015 will range from $2.60 to $2.64, an increase of $0.22 to $0.26 or 9% to 11% from $2.38 for the full year of 2014.

This EPS guidance for the full year of 2015 assumes:

• Federal funds target rate increases by 25 basis points at the end of the third quarter of 2015
• A net interest margin ranging from 3.35% to 3.40%
• Loan growth of approximately 8.00%
• Provision for loan losses of approximately $30 to $40 million
• Noninterest expense of approximately $540 to $560 million
• An effective tax rate of 28.50%

Management currently estimates that fully diluted earnings per share for the first quarter of 2015 will range from $0.63 to $0.65, based on the assumptions stated above.

Balance Sheet Summary

Total assets as of December 31, 2014 were $28.7 billion, an increase of $256.9 million or 1% from $28.5 billion as of September 30, 2014. Correspondingly, average interest-earning assets increased $816.4 million or 3% from September 30, 2014 to $27.1 billion as of December 31, 2014. The increases in total assets and average interest-earning assets were largely attributable to a $737.2 million increase in average non-covered loan balances, partially offset by a $149.0 million decrease in average covered loan balances.

Year over year, total assets increased $4.0 billion or 16% from $24.7 billion as of December 31, 2013. This increase was largely due to growth in the non-covered loan portfolio and the MetroCorp acquisition which closed in January 2014.

Total Loans

Total loans receivable as of December 31, 2014 was $21.8 billion, an increase of $541.6 million or 3% compared to $21.2 billion as of September 30, 2014, and an increase of $3.7 billion or 20% compared to $18.1 billion as of December 31, 2013. In January 2014, the Company closed the MetroCorp acquisition which added $1.2 billion of loans. Excluding the MetroCorp acquisition, loan growth for the full year 2014 was $2.5 billion or 14%, largely driven by growth in commercial and industrial loans. The $541.6 million increase in loans from September 30, 2014 to December 31, 2014 stemmed from an $897.9 million increase in non-covered loans held for investment, partially offset by decreases in loans held for sale and covered loan balances. The majority of loans sold during the fourth quarter of 2014 were comprised of student loans. As of December 31, 2014, the Company had $46.0 million of student loans remaining, which were classified as held for sale.

Covered Loans

Covered loans, net of discount and allowance for loan losses as of December 31, 2014 totaled $1.5 billion, a decrease of $162.6 million or 10% from September 30, 2014. The decrease in the covered loan portfolio was primarily due to payoff and paydown activities.

The covered loan portfolio, which is comprised of loans acquired from the Federal Deposit Insurance Corporation (“FDIC”)-assisted acquisitions of United Commercial Bank (“UCB”) on November 6, 2009 and Washington First International Bank (“WFIB”) on June 11, 2010, are covered under shared-loss agreements with the FDIC. The shared-loss coverage periods under the agreements for both the UCB and WFIB acquisitions were for a period of five years for commercial loans and ten years for single family loans. Shared-loss coverage for commercial loans extends through the end of the quarter in which the fifth anniversary of the acquisition occurred. The shared-loss coverage period for the UCB commercial loans was extended to December 31, 2014, while the shared-loss coverage period for the WFIB commercial loan portfolio will extend through June 30, 2015. The balance of the UCB commercial loans, net of discount, was $1.1 billion as of December 31, 2014.

During the fourth quarter of 2014, in the noninterest income line item “Changes in FDIC indemnification asset and receivable/payable”, the Company recorded a reduction of $50.6 million, largely attributable to the continued payoffs and improved credit performance of the UCB portfolio, as compared to our original estimate. Under the shared-loss agreements with the FDIC, the Company is required to pay the FDIC a calculated amount if specific thresholds of losses are not reached. Included in the “Changes in FDIC indemnification asset and receivable/payable” noninterest income line item for the fourth quarter of 2014 is an expense of $14.0 million for this liability due to the continuing strong credit performance of the covered portfolios. The net payable to the FDIC increased from $64.5 million as of September 30, 2014 to $96.1 million as of December 31, 2014, primarily due to the items discussed above.

Deposits and Other Liabilities

Throughout the fourth quarter and full year 2014, we continued to execute our strategy to grow low-cost commercial deposits, while reducing our reliance on time deposits. Total deposits as of December 31, 2014 reached a record $24.0 billion, an increase of $196.5 million or 1% from $23.8 billion as of September 30, 2014, and an increase of $3.6 billion or 18% from $20.4 billion as of December 31, 2013. Excluding the MetroCorp acquisition, deposit growth for the full year 2014 was $2.3 billion or 11%.

Core deposits totaled $17.9 billion as of December 31, 2014, an increase of $219.6 million or 1% from September 30, 2014 and an increase of $3.3 billion or 23% from December 31, 2013. Compared to the previous quarter-end, this increase in core deposits was largely due to increases of $235.6 million or 10% in interest-bearing checking accounts and $110.6 million or 2% in noninterest-bearing demand accounts, partially offset by a decrease in $173.6 million or 3% in money market accounts.

Securities sold under repurchase agreements were $795.0 million as of December 31, 2014, compared to $805.1 million as of September 30, 2014. Long-term debt totaled $225.8 million as of December 31, 2014, a decrease of $4.9 million or 2% from September 30, 2014, due to the ongoing paydown of the Company’s unsecured debt.

FOURTH QUARTER 2014 OPERATING RESULTS

Net Interest Income

Net interest income adjusted for the net impact of covered loan activity and amortization of the FDIC indemnification asset totaled $231.5 million1 for the fourth quarter of 2014, an increase of $6.2 million or 3% from the third quarter of 2014 and an increase of $33.3 million or 17% from the fourth quarter of 2013. The core net interest margin for the fourth quarter of 2014 totaled 3.39%1, taking into consideration the net impact of $28.0 million to the FDIC indemnification asset due to covered loan activity and amortization of the FDIC indemnification asset. This compares to a core net interest margin of 3.41%1 for both the third quarter of 2014 and fourth quarter of 2013, considering the net impact of $31.6 million and $66.8 million to the FDIC indemnification asset due to covered loan activity and amortization of the FDIC indemnification asset, for the third quarter of 2014 and fourth quarter of 2013, respectively.

Noninterest Income & Expense

Noninterest Income (Loss)

Noninterest income for the fourth quarter of 2014 was $7.8 million, compared to noninterest income of $10.3 million for the third quarter of 2014 and noninterest loss of $36.6 million for the fourth quarter of 2013. The decrease in noninterest income for the fourth quarter of 2014 compared to the prior quarter was largely due to an increase in expenses related to changes in the FDIC indemnification asset and receivable/payable and a decrease in dividend and other investment income, partially offset by an increase in net gains on sales of loans. Compared to the prior year period, the increase in noninterest income was largely due to a decrease in expenses related to changes in the FDIC indemnification asset and receivable/payable and an increase in net gains on sales of loans.

Total fees and other operating income totaled $35.6 million for the fourth and third quarter of 2014. Total fees and other operating income for the fourth quarter of 2014 increased $2.7 million from $32.9 million for the fourth quarter of 2013. Also included in noninterest income for the fourth quarter of 2014 were net gains on sales of loans of $18.4 million, largely from the sale of government guaranteed student loans and net gains on the sales of investment securities of $4.2 million.

The following table presents total fees and other operating income for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013:

Noninterest Expense

Noninterest expense for the fourth quarter of 2014 totaled $135.2 million, $41.7 million or 24% lower than $177.0 million for the third quarter of 2014. The decrease in noninterest expense in the fourth quarter of 2014 compared to the prior quarter was largely due to decreases in legal expense and amortization of investments in affordable housing partnerships and other tax credit investments. In the third quarter of 2014, the Company had accrued for an unfavorable jury verdict. The Company has filed notice to appeal the verdict.

Amortization of investments in affordable housing partnerships and other tax credit investments was $19.9 million for the fourth quarter of 2014, a decrease of $17.0 million compared to the third quarter of 2014. The Company had purchased additional tax credit investments in the third quarter of 2014 that resulted in increased amortization expense during the third quarter and a reduction in the effective tax rate for the full year 2014 to 17.56%.

Noninterest expense increased $10.9 million or 9% from $124.4 million for the fourth quarter of 2013 to $135.2 million for the fourth quarter of 2014. This increase was mainly due to $12.7 million increase in compensation and employee benefits, $6.7 million increase in amortization of investments in affordable housing partnerships and other tax credit investments and $3.1 million increase in other operating expense. The $12.7 million increase in compensation and employee benefits compared to the prior year quarter primarily resulted from the organic growth we have experienced and the impact of the MetroCorp acquisition.

The following table presents noninterest expense, excluding the impact of reimbursable amounts from the FDIC on covered assets, and integration and merger related expenses for the MetroCorp acquisition for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013:

Noninterest expense excluding the impact of reimbursable amounts from the FDIC on covered assets and integration and merger related expenses related to the MetroCorp acquisition, decreased $40.1 million or 22% on a sequential quarterly basis, due to the decreases in legal expenses and amortization of investments in affordable housing partnerships and other tax credit investments mentioned previously.

Credit Quality

Non-covered Loans

Provision for loan losses on non-covered loans was $19.7 million for the fourth quarter of 2014, an increase of $12.1 million compared to $7.6 million for the third quarter of 2014 and an increase of $13.4 million compared to the fourth quarter of 2013. Net charge-offs totaled $9.6 million in the fourth quarter of 2014, compared to $5.4 million in the third quarter of 2014 and net recoveries of $1.3 million in the fourth quarter of 2013. Net charge-offs for the fourth quarter of 2014 included a $5.2 million write-down for student loans transferred to loans held for sale as of December 31, 2014.

Nonperforming assets, excluding covered assets, as of December 31, 2014, totaled $128.7 million, a decrease of $30.4 million from $159.1 million as of September 30, 2014 and a decrease of $1.9 million from $130.6 million as of December 31, 2013. The nonperforming assets to total assets ratio was 0.45% as of December 31, 2014, down 11 basis points and down eight basis points from 0.56% and 0.53% as of September 30, 2014 and December 31, 2013, respectively. The decrease in nonperforming assets, excluding covered assets during the fourth quarter was mainly due to decreases in non-covered nonaccrual loans resulting mainly from payoffs and paydowns.

The allowance for non-covered loan losses as of December 31, 2014 was $258.2 million or 1.27% of non-covered loans. This compares to an allowance for non-covered loan losses of $249.3 million or 1.29% of non-covered loans as of September 30, 2014 and $241.9 million or 1.54% of non-covered loans as of December 31, 2013.

For the fourth quarter of 2014, the Company recorded a $1.2 million provision for unfunded commitments and letters of credit. The allowance for unfunded commitments and letters of credit was $12.7 million as of December 31, 2014, compared to $11.6 million and $11.3 million as of September 30, 2014 and December 31, 2013, respectively.

Covered Loans

The allowance for covered loans as of December 31, 2014 was $3.5 million, compared to $3.9 million and $7.7 million as of September 30, 2014 and December 31, 2013, respectively. During the fourth quarter of 2014, the Company recorded a reversal of provision for loan losses on covered loans of $671 thousand and net recoveries of $266 thousand. As these loans are covered under FDIC shared-loss agreements, the Company records 80% of the charge-off amounts in noninterest income and as a net increase in FDIC receivable, resulting in a net impact to earnings of 20% of the charge-off amounts. The Company also shares 80% of any recovered amounts with the FDIC. As noted earlier in this press release, shared-loss coverage for the UCB commercial loan portfolio was extended until December 31, 2014.

Capital Strength

Our capital ratios remain very strong. As of December 31, 2014, our Tier 1 leverage capital ratio totaled 8.4%, our Tier 1 risk-based capital ratio totaled 11.0% and our total risk-based capital ratio totaled 12.6%.

The Company is focused on active capital management and is committed to maintaining strong capital levels that exceed regulatory requirements while also supporting balance sheet growth and providing a strong return to our shareholders.

Dividend Payout and Capital Actions

East West’s Board of Directors has declared first quarter dividends for the common stock. The common stock cash dividend of $0.20 is payable on or about February 17, 2015 to shareholders of record on February 2, 2015. This represents an increase of $0.02 per share, or an 11% increase from the prior quarterly dividend of $0.18 per share.

Conference Call

East West will host a conference call to discuss fourth quarter and full year 2014 earnings with the public on Thursday, January 22, 2015 at 8:30 a.m. PST/11:30 a.m. EST. The public and investment community are invited to listen as management discusses fourth quarter and full year 2014 results and operating developments. The following dial-in information is provided for participation in the conference call: Calls within the U.S. – (877) 506-6399; Calls within Canada – (855) 669-9657; International calls – (412) 902-6699. A listen-only live broadcast of the call also will be available on the Investor Relations page of the Company’s website at www.eastwestbank.com.

About East West

East West Bancorp is a publicly owned company with total assets of $28.7 billion and is traded on the Nasdaq Global Select Market under the symbol “EWBC”. The Company’s wholly owned subsidiary, East West Bank, is one of the largest independent banks headquartered in California. East West is a premier bank focused exclusively on the United States and Greater China markets and operates over 130 locations worldwide, including in the United States markets of California, Georgia, Nevada, New York, Massachusetts, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen. For more information on East West, visit the Company’s website at www.eastwestbank.com.

Forward-Looking Statements

Certain matters set forth herein (including any exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations regarding future operating results. Forward-looking statements may include, but are not limited to, the use of forward-looking language, such as “likely result in,” “expects ,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remain,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, our ability to achieve the projected synergies of the MetroCorp BancShares, Inc. acquisition; our ability to manage the loan portfolios acquired from Federal Deposit Insurance Corporation (FDIC)-assisted acquisitions within the limits of the loss protection provided by the FDIC; changes in our borrowers’ performance on loans; changes in the commercial and consumer real estate markets; changes in our costs of operation, compliance and expansion; changes in the U.S. economy, including inflation; changes in government interest rate policies; changes in laws or the regulatory environment; changes in the economy of and monetary policy in the People’s Republic of China; changes in critical accounting policies and judgments; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies; changes in the equity and debt securities markets; changes in competitive pressures on financial institutions; the effect of additional provision for loan losses; the effect of government budget cuts and government shut down; fluctuations of our stock price; the success and timing of our business strategies; the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity; the impact of potential federal tax increases and spending cuts; the impact of adverse judgments or settlements in litigation against the Company; changes in our ability to receive dividends from our subsidiaries; impact of political developments, wars or other hostilities which may disrupt or increase volatility in securities or otherwise affect economic conditions; and other factors set forth in the Company’s public reports including its Annual Report on Form 10-K for the year ended December 31, 2013, and particularly the discussion of risk factors within that document. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, East West’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. East West assumes no obligation to update such forward-looking statements.

1 See reconciliation of the GAAP financial measure to the non-GAAP financial measure in the tables that follow.