East West Bancorp
Annual Report 2014

Plain-text annual report

INFINITE POSSIBILITIES TWO MARKETS. ONE FOCUS. East West Bancorp | 2014 Annual Report INFINITE POSSIBILITIES FROM OUR STRONGER NETWORK Global trade today is defined by the financial and trade relationships between the United States and Greater China, the two largest economies in the world. East West Bank is committed to providing the vital geographic connections, specialized skills and cross-border infrastructure to assist our customers in achieving their business objectives in both the United States and Greater China. In 2014, East West Bank continued to make investments to increase our footprint and strengthen our network to facilitate more efficient trade and investment activities for our customers. As the premier financial bridge between the United States and Greater China, we are connecting these two markets and creating infinite possibilities. TOTAL ASSETS in billions $8.3 2005 $10.8 2006 $11.9 2007 $12.4 2008 $20.6 2009 $20.7 2010 $22.0 2011 $22.5 2012 $24.7 2013 $28.7 2014 A message from our CHAIRMAN AND CEO 2014 was another record year for East West. Our strong financial performance would not have been possible without the hard work and contributions of our talented associates. Dominic Ng “We believe our strong financial performance in 2014 is a result of the growth opportunities in the markets we serve.” In the U.S. and in Greater China, 2014, or $2.38 per diluted share, an we are in markets with thriving East West Bank is esteemed for increase of 13% per diluted share business opportunities. With its relationship-driven approach from 2013. Not only did we achieve our collaborative, team-based to cross-border banking. Our our fifth consecutive year of record approach, our dedicated associates emphasis on creative solutions earnings in 2014, we also formulate creative solutions to to exceed customer expectations outperformed many of our peers, exceed customer expectations. is sustained by the seasoned increasing both net interest income expertise and professionalism of and fee income from the prior year, In the five years since we acquired our employees, and backed by our and resulting in a return on assets values, chief among them absolute of 1.24% and a return on equity integrity, respect and fairness in of 12.61%. United Commercial Bank, East West Bank has built a stronger and more diversified balance sheet. In 2014, we acquired and all our business decisions. These strengths combined provide Infinite Possibilities for our customers, employees and shareholders — We believe our strong financial integrated MetroCorp Bancshares, performance in 2014 is a result a $1.6 billion asset bank based in of the growth opportunities in Houston, adding $1.2 billion to our 02 Annual Report 2014 the theme of this year’s annual report. the markets we serve. From Los loan portfolio and $1.3 billion to Angeles to New York City in the our deposit portfolio. East West Bank achieved record net United States, to Hong Kong income of $342.5 million for the year and Shanghai in Greater China, 03 Annual Report 2014 “Our strong financial results for 2014 are built upon years of planning, strategy and successful execution.” In 2014, our full-service banking Our strong financial results for 2014 infrastructure further expanded are built upon years of planning, in China to meet the growing strategy and successful execution. cross-border banking needs of our I believe that our strong foundation, customers. Additionally, we grew our along with the growth opportunities wealth management team in both in the markets we serve and the the U.S. and Hong Kong to better tireless efforts of our dedicated serve the demands of this growing employees, will provide positive customer base. returns to customers, shareholders and the communities we serve for many years to come. Sincerely, Dominic Ng Chairman and Chief Executive Officer 04 Annual Report 2014 Highlights of 2014 BUILDING A STRONGER BRIDGE 2014 was an exceptional year of progress for East West Bank, paving the way for our continued success in the future. Along with our outstanding financial results — double-digit increases in both net income and earnings per share — we strengthened our position as the leading financial bridge between the United States and Greater China. Throughout 2014, East West Bank continued to support the growth potential of our customers. In all sectors where we have specialized industry expertise, including: agriculture, aviation, entertainment and media, life sciences, high tech and real estate — our comprehensive knowledge, combined with our seasoned cross-border experience, provides invaluable support for our customers. Further, throughout 2014, we continued to make investments to enhance our product offerings and capabilities, including wealth management and foreign exchange services. Our focus on cross-border collaborations and teamwork allows us to more effectively serve our customers’ needs and differentiate the value we provide. HERE ARE A FEW HIGHLIGHTS IN WHAT WAS A STELLAR YEAR. FACILITATING ENTERTAINMENT AND MEDIA PARTNERSHIPS Over the years, East West Bank has cultivated strong ties in the entertainment industry in both the U.S. and China, facilitating co- productions and partnerships in these two countries. China’s film market is the world’s second largest next to the U.S. Our prospects could not be brighter for serving the cross-border financial needs in this industry and transforming today’s new business opportunities into tomorrow’s blockbuster movies. Le Vision Pictures is a leading film production and distribution company in China. In 2014, the company released numerous box office hits in China, including The Expendables 3 and Coming Home, and generated total box office revenues of approximately US$380 million. When Le Vision strategically expanded overseas by opening a new Los Angeles office, East West Bank, with our cross-border and entertainment industry expertise, was the perfect banking partner. We provided financing for Le Vision’s exclusive distribution in China of the upcoming Lionsgate film Gods of Egypt. East West Bank’s cross-border expertise and market presence made it easy for Le Vision to conduct financial transactions in both USD and RMB currencies. We also helped Le Vision’s executives to connect with top Hollywood production and distribution companies. The efficient collaboration and coordination between our banking experts in the U.S. and China resulted in East West Bank becoming an indispensable partner to Le Vision as it continues to expand in the global market. PROVIDING VITAL CONNECTIONS New business opportunities are the fuel that accelerates a company’s growth engine. At East West Bank, we help our customers seize new business opportunities not only through our cross- border knowledge, infrastructure, and expertise, but also through introductions to vital cross-border connections that open doors to international growth and culminate in business success. This was the case with our customer Ray Franscioni, owner of a U.S.- 08 Annual Report 2014 based agribusiness growing over 8,000 acres of row crop vegetables and cultivating over 2,000 acres of vineyards in the Monterey and San Benito counties of California. Historically, Ray sold grapes to major wineries in the region. Aware of China’s growing demand for wine imports, Ray perceived a new business opportunity. He had long wanted to create his own private label and distribute estate-grown wine in the United States and key overseas markets, in particular China. Opportunity knocked at last. East West Bank provided Ray with a line of credit and equipment financing to support the existing farming and vineyard operations, as well as the development of his new winery. East West Bank also introduced Ray to a customer of the bank, who was interested in exporting Ray’s wine to China. Today, Ray’s “Puma Road” wine is distributed in China. Having established a trusting partnership, Ray and his new partner are now in discussion about future expansion opportunities. This success story is just another example of East West Bank’s acute focus on relationship-driven banking. EXPANDING OUR CROSS- BORDER NETWORK As our bridge extends geographically, we are able to reach more customers with our products and capabilities in both the U.S. and Greater China. In 2014, we acquired MetroCorp Bancshares, a $1.6 billion asset bank based in Houston, extending our market reach throughout Texas and Southern California. In Greater China, our representative office in Shenzhen was converted into a full-service branch to help our customers facilitate trade activities between mainland China, Hong Kong and the U.S. In Shanghai, we opened a branch in the Shanghai Pilot Free Trade Zone (FTZ), giving us the opportunity to assist customers with their complex financial needs. The FTZ exemplifies China’s growing commitment to liberalize trade and investment, positioning East West Bank at the forefront of these economic reforms. BEIJING BOSTON NEW YORK SEATTLE SHANGHAI Opened a branch in the Shanghai Pilot Free Trade Zone, giving us the opportunity to assist customers with their complex financial needs. CHONGQING SAN FRANCISCO LOS ANGELES LAS VEGAS SAN DIEGO XIAMEN SHANTOU TAIPEI GUANGZHOU SHENZHEN HONG KONG 2ND LARGEST INDEPENDENT BANK HEADQUARTERED IN SOUTHERN CALIFORNIA 5 Full-Service Branches: Hong Kong, Shanghai, Shanghai FTZ, Shantou, Shenzhen 5 Representative Offices: Beijing, Chongqing, Guangzhou, Taipei, Xiamen Converted our representative office in Shenzhen into a full-service branch to help our customers facilitate trade activities between mainland China, Hong Kong and the U.S. IN CALIFORNIA 93 BRANCHES 130+ LOCATIONS 2,700+ EMPLOYEES THROUGHOUT THE U.S. AND GREATER CHINA ATLANTA DALLAS HOUSTON Acquired MetroCorp Bancshares, a $1.6 billion asset bank based in Houston, extending our market reach throughout Texas and Southern California. IMPROVING OUR PRODUCTS AND SERVICES At East West Bank, we are continually broadening our services and products. Our mobile banking apps enable customers to check their account balances, deposit checks and pay bills on the go, among other capabilities. We take great satisfaction in making banking convenient for our customers. services is increasing, we continued to grow our bilingual and bicultural wealth management teams in the U.S. and Hong Kong. Whether we are providing guidance for first- time investors or estate planning for established customers seeking to bestow their legacy to future generations, our investment professionals will construct a personalized plan to help them reach their goals. Recognizing that the demand for wealth management products and Further, we continued to develop our foreign exchange capabilities and increase the number of team members, deepening our ability to provide our cross-border customers with currency risk management best practices from a trusted partner. We are constantly seeking ways to optimize the customer experience through the products and services we provide. We have been making great strides, and we are pleased to be acknowledged by Hurun Report as the “Best Bank for Global Chinese in the USA” in its Best of the Best Awards 2015. A SECURE INFRASTRUCTURE customers from fraudulent activity both on and offline. With data breaches increasingly a concern for companies in all industry sectors, we have further strengthened our traditional, online and mobile banking security infrastructure to ensure the safety and security of our customers’ personal data. Our multilayered security strategy mitigates attacks across our network down to the system and application levels, protecting our TALENT AND LEADERSHIP DEVELOPMENT At East West Bank, our most valuable asset is our people. With that in mind, we have created programs to fill leadership and managerial roles internally through associate development and career planning, improving the level of associate engagement, productivity and retention. Examples of the programs we have created include a leadership development program to hone the strategic thinking and business skills of our managers, and a high-potential program whereby tomorrow’s leaders are identified, and their skills are cultivated to prepare them for greater responsibilities ahead. Together, these continuous improvements in our products, processes and people provide our customers with consistently superior service as they endeavor to achieve infinite possibilities. 10 Annual Report 2014 11 Annual Report 2014 LONG-STANDING COMMITMENT TO OUR COMMUNITIES East West Bank is privileged to serve as the premier financial bridge between the U.S. and Greater China, but our commitment to building connections doesn’t stop there. Equally important to us is our ability to help make the communities we serve more vibrant places to live and work. In 2014, we continued in our efforts to help provide more affordable housing, improve financial literacy and assist the underprivileged. We’re more than a bank; we strive to be a conduit for change. We stand as an institution devoted to improving the lives of people and businesses by applying our knowledge, expertise and resources to help a wide base of customers, including underserved populations. — Operation HOPE “Operation HOPE truly values our partnership with East West Bank that has lasted for many years. Thanks to the generous support of East West Bank, we are able to continue Dr. Martin Luther King’s work by taking the step from Civil Rights to Silver Rights, providing financial and economic empowerment tools and services to youth, adults and families who need it most.” – Lance Triggs, CEO, Los Angeles and Division President, HOPE Financial Dignity Centers Operation HOPE, Inc. AFFORDABLE HOUSING In 2014, we continued to finance low-income housing in the communities we serve. Since 1996, we have provided more than $1.44 billion in financing for affordable housing projects. We financed the development of the Alhambra, a 160-unit multifamily housing complex in Davis, California. The apartments are restricted to tenants with a maximum income of 80% of the median income for the area. Rental rates are approximately 20% to 35% less than the current market. Additionally, we financed the development of Kitts Corner, a 216-unit multifamily project in Federal Way, Washington. Tenancy is restricted to those earning no more than 60% of the median income for the area. Rental rates for Kitts Corner average approximately 20% less than the current market for apartments as large as five bedrooms with top-notch amenities. The project increases the availability of homes to lower-income families in the area by 500%. These are just two examples of the many vital affordable housing projects we have financed through the years in the communities we serve. For the past two decades, providing financing for low-income housing has been a focus of our community development program. We are proud to state that many of the projects we have financed over the years have contributed to making the communities we serve more vibrant places to live and work. FINANCIAL LITERACY The foundation of East West Bank’s community efforts is financial literacy. In 2014, we deepened this commitment through our partnership with Operation HOPE in two programs: “Banking on Our Future” and “HOPE Business in a Box Academy.” We also continued our financial literacy partnerships with other organizations, such as Junior Achievement and the FDIC, through its Money Smart program. The Banking on Our Future program is focused on keeping the most at-risk youths free from repeating the cycles of poverty and despair that have trapped their families and communities. The program’s mission is to empower youth by teaching financial literacy and providing them with tools for success. The HOPE Business in a Box Academy program, cosponsored by Operation HOPE and Gallup, seeks to nurture the talents of young people through role modeling and instruction to become future entrepreneurs and business leaders. Similarly, our long-standing partnerships with Junior Achievement and the FDIC, support education initiatives across the country to improve financial literacy, help people set personal financial goals, and learn the tools of financial management. Other projects in 2014 included our partnership with the Houston Rockets basketball team in the “Save Smart, Score Big” financial literacy program. Through this program, our employees volunteered and taught financial management and responsibility to students at two schools in Houston — Henry F. MacGregor Elementary 13 Annual Report 2014 and Harmony School of Ingenuity. East West Bank also made financial contributions to these schools, which went toward a new state- of-the-art computer lab for the students at Henry F. MacGregor Elementary, and new facilities for the students at Harmony School of Ingenuity. We also continue our partnership with the U.S. Small Business Administration and provide small business and minority loans, and multilingual workshops. GIVING BACK TO OUR COMMUNITY In 2014, we teamed up for the seventh year in a row with the Lakers Youth Foundation to kick off its annual “Season of Giving.” This program provides families in need with financial assistance, helping them share in the joy of the holiday season. Among the series of events funded by this program in 2014 was a Thanksgiving Feast at the Downtown Women’s Center in Los Angeles. At this event, our employees volunteered to prepare dinner for homeless and low-income women. We also participated in the turkey and pie giveaway event at the Salvation Army in Inglewood, California, distributing full Thanksgiving dinners to families. The Season of Giving also included the Holiday Party for Kids event at the Toyota Sports Center in El Segundo, California. The event brought together 100 children from a local public school, members of the Lakers basketball team and our East West Bank employees who “The Real Change Movement is an innovative program that leverages public goodwill to make a lasting improvement in the lives of our homeless population in Pasadena. This collaborative effort is made possible by our network of community partners and the foundational financial support of East West Bank.” – Bill Bogaard, Mayor of Pasadena — Julia S. Gouw, President and COO of East West Bank, showing support for the Real Change Movement 300 East West Bank participants at the 2014 United Way HomeWalk — “We truly value our partnership with East West Bank. Thanks to their generous support, United Way can continue its mission to break the cycle of poverty, ensuring our neighbors have a place to call home, our students graduate on time ready for college and a career, and families are financially secure.” – Elise Buik, President and CEO, United Way of Greater Los Angeles volunteered to help celebrate the holiday season. In addition, we also partnered with the Lakers to join the U.S. Marine Corps annual Toys for Tots program, providing toys and gifts for 50 children from the Boys and Girls Clubs of Whittier and East Los Angeles. At East West, we have been a supporter of the United Way for the past 18 years. Our companywide commitment to this organization has raised millions of dollars for those in greatest need. Last year, our contributions supported the United Way of Greater Los Angeles’ “Creating Pathways Out of Poverty” initiative, whose mission statement is to break the cycle of poverty for our most vulnerable neighbors, which include families, students, veterans and the homeless. this event, 300 East West Bank employees participated to help raise money to provide permanent housing for the homeless. Further, in 2014, East West Bank was a partner in the Real Change Movement, an initiative focused on raising awareness and raising funds for the issues of homelessness. In 2014, we also entered our eighth annual United Way HomeWalk. At Together, we are building a stronger community. East West Bank volunteers lent a hand to prepare dinner for homeless and low-income women at the Downtown Women’s Center in Los Angeles — — Jeremy Lin spent time and played games with underserved youth at the Lakers Youth Foundation’s “Season of Giving” kick off event with East West Bank NET INCOME in millions 2014 2013 2012 $ 3 $ 4 2 $ 2 9 2 . 5 5 8 . 0 1 . 7 Julia S. Gouw “We remain committed to maintaining strong capital levels that support our balance sheet growth, while providing a strong return to shareholders.” A message from our PRESIDENT AND COO For the fifth year in a row, East West Bank has generated record earnings. We earned $342.5 million, or $2.38 per diluted share for 2014, an increase in diluted earnings per share of 13% from 2013. For the full year 2014, our return on assets was 1.24%, and our return on equity was 12.61%. Our corporate goal is to be one of the best performing banks and consistently outperform peer banks. In 2014, East West Bank was ranked in the top 20 of the 100 best banks in America by Forbes for the fifth consecutive year. We believe our financial results for 2014 reflect a strong achievement of our goal. Our ability to prudently and profitably increase our loans and deposits, while maintaining strong credit quality and operating efficiency, underpins our robust financial performance year after year. In 2014, total loans increased to a record $21.8 billion, an increase of $3.7 billion or 20% year-over- year. Excluding the impact of the MetroCorp acquisition, which closed in January 2014, loan growth during the year was $2.5 billion, or 14%. We experienced strong organic growth across the loan portfolio, including commercial and industrial loans, commercial real estate and residential real estate loans. East West Bank also continues to actively grow low-cost core deposits from our retail and commercial customers. Core deposits reached a record $17.9 billion in 2014, of which $7.4 billion were noninterest-bearing demand deposits. Our total deposits reached a record $24.0 billion as of December 31, 2014. Excluding the impact of $1.3 billion in deposits added from the MetroCorp acquisition, the year-over-year deposit growth was $2.3 billion, or 11%. The increasing diversification of both loans and deposits over the past five years has transformed our balance sheet. Total fee income for 2014 was $134.3 million, an increase of $19.0 million, or 16% from 2013. Although our fee income as a percentage of total revenue is lower than many of our peers, we are making great progress toward increasing these noncapital-intensive business lines. We continued to maintain strong asset quality and operating efficiency. As of December 31, 2014, noncovered, nonperforming assets were 0.45% of total assets, an improvement of 8 basis points from December 31, 2013. Additionally, our efficiency ratio for the full year 2014 was 45.28%, up slightly from 43.76% for the full year 2013, but still lower than many of our peers. 16 Annual Report 2014 17 Annual Report 2014 LOAN GROWTH in billions TOTAL LOANS 25TOP LARGEST PUBLIC BANKS in the U.S. by market capitalization $6.8 2005 $8.3 2006 $8.8 2007 $8.2 2008 $14.1 2009 $13.7 2010 $14.5 2011 $15.1 2012 $18.1 2013 $21.8 2014 DEPOSIT GROWTH in billions TOTAL DEPOSITS We ended 2014 with total stockholders’ equity of $2.9 billion and tangible equity of $2.3 billion. 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. Effective January 1, 2015, the risk weighting of many of our assets will change due to the impact of Basel III risk weighting requirements and the end of the UCB commercial loss share agreement. If these risk weighting changes had been applied effective December 31, 2014, our capital levels would still be substantially higher than the well-capitalized regulatory requirements. We remain committed to maintaining strong capital levels that support our balance sheet growth, while providing a strong return to shareholders. In early 2015, the board of directors approved an increase in the annual dividend rate from $0.72 to $0.80 per share, an increase of 11%. Looking back on another great year of record achievement for East West Bank, we are confident in the value of our strategy to be the bridge between the East and the West. We will continue to dedicate resources to improve our capabilities, build our infrastructure and ensure strong risk management to provide infinite possibilities to our customers and our shareholders for many more years to come. Sincerely, Julia S. Gouw President and Chief Operating Officer $6.3 2005 $7.2 2006 $7.3 2007 $8.1 2008 $15.0 2009 $15.6 2010 $17.5 2011 $18.3 2012 $20.4 2013 $24.0 2014 19 Annual Report 2014 INVESTOR INFORMATION COMMON STOCK AND DIVIDENDS East West Bancorp, Inc. common stock trades on the NASDAQ Global Select market under the symbol EWBC. As of December 31, 2014, there were 143,582,229 shares of common stock outstanding. The following table sets forth the range of closing prices for the company’s common stock for each of the quarters in the years ended December 31, 2014 and 2013. YEAR ENDED DECEMBER 31: 2014 2013 First quarter Second quarter Third quarter Fourth quarter HIGH LOW HIGH LOW $38.10 $31.73 $25.78 $22.29 36.79 32.69 27.50 22.67 36.72 33.27 3 1 .95 27.98 39.31 31.65 35.15 32.1 8 East West Bancorp quarterly cash dividends on common stock, when and if declared by the board of directors, are distributed in February, May, August and November. ANNUAL MEETING The 2015 Annual Meeting of Stockholders will be held at 2:00 p.m. Pacific Daylight Time on Tuesday, May 5, 2015, at: East West Bank Corporate Headquarters 135 N. Los Robles Avenue, 6th Floor Pasadena, CA 91101 20 Annual Report 2014 Formal notice of the meeting with a proxy card and proxy statement is being mailed to all stockholders of record as of March 9, 2015. The proxy statement, annual report on Form 10-K and proxy card are available at: eastwestbank.com/annual. STOCK TRANSFER STATEMENT Shareholders with inquiries about accounts, lost stock certificates or changes of address may contact the Computershare customer service department by calling 877.254.8651, available 24 hours a day. Written correspondence may be sent to the following address: Computershare 250 Royall Street Canton, Massachusetts 02021 FINANCIAL INFORMATION AND MAILINGS You may obtain the company’s annual reports on Form 10-K, quarterly financial results and other financial information by writing or calling: East West Bancorp, Inc. Investor Relations 135 N. Los Robles Avenue, 7th Floor Pasadena, California 91101 626.768.6000 Alternatively, company information and news releases are also available at www.eastwestbank.com. To receive company news releases via e-mail, please contact Investor Relations at the telephone number or address above or sign up at www.eastwestbank.com/investors. East West Bancorp, Inc. and Subsidiaries FIVE-YEAR SUMMARY OF SELECTED FINANCIAL INFORMATION (in thousands, except per share data) Summary of Operations Interest and dividend income Interest expense Net interest income before provision for loan losses Provision for loan losses on non-covered loans Provision for loan losses on covered loans Net interest income after provision for loan losses Noninterest (loss) income (1) Noninterest expense Income before provision for income taxes Provision for income taxes Net income Preferred stock dividends, amortization of preferred stock discount, and inducement of preferred stock conversion Net income available to common stockholders Per Common Share Basic earnings Diluted earnings Dividends declared Book value 2014 2013 2012 2011 2010 $ 1,153,698 112,820 1,040,878 44,125 5,033 991,720 (11,714) 564,551 415,455 72,972 342,483 — 342,483 2.39 2.38 0.72 19.85 $ $ $ $ $ $ 1,068,685 112,492 956,193 18,336 4,028 933,829 (92,468) 415,511 425,850 130,805 295,045 $ 1,051,095 132,168 918,927 60,168 5,016 853,743 (5,618) 422,533 425,592 143,942 281,650 $ 1,080,448 177,422 903,026 92,584 2,422 808,020 10,924 435,610 383,334 138,100 245,234 3,428 291,617 2.11 2.10 0.60 17.18 $ $ $ $ $ $ $ $ $ $ 6,857 274,793 6,857 238,377 $ 1.92 1.89 0.40 16.39 $ $ $ $ 1.62 1.60 0.16 14.92 $ 1,095,831 201,117 894,714 195,934 4,225 694,555 39,270 477,916 255,909 91,345 164,564 43,126 121,438 0.88 0.83 0.04 13.67 $ $ $ $ $ Average Common Shares Outstanding: Basic Diluted Common shares outstanding at period-end 142,952 143,563 143,582 137,342 139,574 137,631 141,457 147,175 140,294 147,093 153,467 149,328 137,478 147,102 148,543 At Year End: Total assets Non-covered loans, net of allowance Covered loans, net of allowance Investment securities Customer deposits Long-term debt Federal Home Loan Bank advances Stockholders’ equity Financial Ratios: Return on average assets Return on average equity Common dividend payout ratio Average stockholders’ equity to average assets Net interest margin Asset Quality Ratios: Net charge-offs on non-covered loans to average total non-covered loans Nonperforming assets to total assets Allowance for loan losses on non-covered loans to total gross non-covered loans $ 28,738,049 19,994,081 1,474,189 2,626,365 24,008,774 225,848 317,241 2,850,568 $ 24,730,068 15,412,715 2,187,898 2,733,797 20,412,918 226,868 315,092 2,364,225 $ 22,536,110 11,710,190 2,935,595 2,607,029 18,309,354 137,178 312,975 2,382,122 $ 21,968,667 10,061,788 3,923,142 3,072,578 17,453,002 212,178 455,251 2,311,743 $ 20,700,537 8,430,199 4,800,876 2,875,941 15,641,259 235,570 1,214,148 2,113,931 % 1.24 12.61 30.37 9.83 4.03 % 0.14 0.45 1.27 % 1.25 12.59 28.57 9.95 4.38 % 0.03 0.53 1.54 % 1.29 12.14 20.96 10.62 4.63 % 0.38 0.63 1.92 % 1.14 10.98 10.02 10.36 4.66 % 1.16 0.80 2.04 % 0.82 7.02 4.57 11.62 5.05 % 2.35 0.94 2.64 (1) Changes in FDIC indemnification asset and receivable/payable was a charge of $201.4 million, $228.6 million, $122.3 million, $100.1 million and $83.2 million in 2014, 2013, 2012, 2011 and 2010, respectively. There were no other-than-temporary impairment (“OTTI”) charges related to investment securities in 2014 and 2013. 2012, 2011 and 2010 include OTTI charges related to investment securities of $99 thousand, $633 thousand and $16.7 million, respectively. Pre-tax gain on acquisition was $22.9 million in 2010. East West Bancorp, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) East West Bancorp, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) December 31, 2014 2013 Year Ended December 31, 2014 2013 2012 Assets Cash and cash equivalents Short-term investments Securities purchased under resale agreements Investment securities available-for-sale, at fair value Loans held for sale Non-covered loans (net of allowance for loan losses of $258,174 in 2014 and $241,930 in 2013) Covered loans (net of allowance for loan losses of $3,505 in 2014 and $7,745 in 2013) Total loans receivable, net FDIC indemnification asset, net Other real estate owned, net Other real estate owned covered, net Total other real estate owned Investment in Federal Home Loan Bank stock, at cost Investment in Federal Reserve Bank stock, at cost Investment in affordable housing partnerships, net Premises and equipment (net of accumulated depreciation of $85,409 in 2014 and $69,768 in 2013) Premiums on deposits acquired, net Goodwill Other assets Total Liabilities and Stockholders’ Equity Customer deposit accounts: Noninterest-bearing Interest-bearing Total deposits Securities sold under repurchase agreements Payable to FDIC, net Federal Home Loan Bank advances Long-term debt Accrued expenses and other liabilities Total liabilities STOCKHOLDERS’ EQUITY Common stock, $0.001 par value, 200,000,000 shares authorized; 163,772,218 and 163,098,008 shares issued in 2014 and 2013, respectively; 143,582,229 and 137,630,896 shares outstanding in 2014 and 2013, respectively. Additional paid in capital Retained earnings Treasury stock, at cost — 20,189,989 shares in 2014 and 25,467,112 shares in 2013. Accumulated other comprehensive income (loss), net of tax Total stockholders’ equity Total $ 1,039,885 338,714 1,225,000 2,626,365 45,950 $ 895,820 257,473 1,300,000 2,733,797 204,970 19,994,081 15,412,715 1,474,189 21,468,270 — 27,612 4,499 32,111 31,239 54,451 178,652 180,900 45,309 469,433 1,001,770 2,187,898 17,600,613 74,708 18,900 21,373 40,273 62,330 48,333 164,776 177,710 46,920 337,438 784,907 $ 28,738,049 $ 24,730,068 $ 7,381,030 16,627,744 24,008,774 795,000 96,106 317,241 225,848 444,512 25,887,481 $ 5,821,899 14,591,019 20,412,918 995,000 — 315,092 226,868 415,965 22,365,843 164 1,677,767 1,598,598 (430,198) 4,237 2,850,568 163 1,571,670 1,360,130 (537,279) (30,459) 2,364,225 $28,738,049 $24,730,068 Interest and Dividend Income Loans receivable, including fees Investment securities Securities purchased under resale agreements Investment in Federal Home Loan Bank and Federal Reserve Bank stock Due from banks and short-term investments Total interest and dividend income Interest Expense Customer deposit accounts Federal Home Loan Bank advances Securities sold under repurchase agreements Long-term debt Other borrowings Total interest expense Net interest income before provision for loan losses Provision for loan losses on non-covered loans Provision for loan losses on covered loans Net interest income after provision for loan losses Noninterest (Loss) Income Impairment loss on investment securities Less: Noncredit-related impairment loss recorded in other comprehensive income Net impairment loss on investment securities recognized in earnings Changes in FDIC indemnification asset and receivable/payable Branch fees Net gains on sales of investment securities Letters of credit fees and commissions Ancillary loan fees Foreign exchange income Net gains on sales of loans Dividend and other investment income Other commission and fee income Other operating income Total noninterest loss Noninterest Expense Compensation and employee benefits Occupancy and equipment expense Amortization of investments in affordable housing partnerships and other tax credit investments Amortization of premiums on deposits acquired Deposit insurance premiums and regulatory assessments Loan related expenses Other real estate owned (income) expense Legal expense Data processing Other operating expenses Total noninterest expense Income Before Taxes Provision For Income Taxes Net Income Preferred Stock Dividends $1,059,205 44,684 20,323 6,272 23,214 1,153,698 65,486 4,116 38,395 4,823 — 112,820 1,040,878 44,125 5,033 991,720 — — — (201,417) 37,866 10,851 25,941 10,616 11,381 39,132 5,464 29,419 19,033 (11,714) 231,838 63,815 75,660 10,204 21,922 3,438 (3,591) 53,018 15,888 92,359 564,551 415,455 72,972 342,483 — $979,394 43,846 21,236 6,869 17,340 1,068,685 63,496 4,173 41,381 3,436 6 112,492 956,193 18,336 4,028 933,829 — — — (228,585) 32,036 12,089 22,116 9,368 12,658 7,750 993 20,400 18,707 (92,468) 175,906 56,641 27,268 9,365 16,550 12,520 (1,128) 31,718 9,095 77,576 415,511 425,850 130,805 295,045 3,428 $945,530 58,184 20,392 4,673 22,316 1,051,095 75,895 6,248 46,166 3,855 4 132,168 918,927 60,168 5,016 853,743 (5,165) 5,066 (99) (122,251) 30,906 757 19,104 8,831 7,166 17,045 (439) 16,349 17,013 (5,618) 171,374 55,475 18,058 10,906 14,130 14,987 22,349 25,441 9,231 80,582 422,533 425,592 143,942 281,650 6,857 Net Income Available to Common Stockholders $ 342,483 $ 291,617 $ 274,793 Earnings Per Share Available to Common Stockholders Basic Diluted Weighted Average Number of Shares Outstanding Basic Diluted $ $ 2.39 2.38 $ $ 2.11 2.10 $ $ 1.92 1.89 142,952 143,563 137,342 139,574 141,457 147,175 Dividends Declared Per Common Share $ 0.72 $ 0.60 $ 0.40 23 Annual Report 2014 BOARD OF DIRECTORS Molly Campbell Director, Financial Management Systems Los Angeles World Airports John Lee Vice Chair East West Bank Herman Y. Li Chairman C&L Restaurant Group, Inc. Jack C. Liu, Esq. Alliance International Law Offices Dominic Ng Chairman and CEO East West Bank Keith W. Renken Managing Partner Renken Enterprises Iris S. Chan Chief Executive Officer Ameriway, Inc. Rudolph I. Estrada President and CEO Estradagy Business Advisors Julia S. Gouw President and COO East West Bank Paul H. Irving Chairman Milken Institute Center for the Future of Aging Tak-Chuen Clarence Kwan Retired Senior Partner Deloitte LLP 24 Annual Report 2014 At East West Bank, we strive to create infinite possibilities for our customers, employees and shareholders. Our financial bridge between the United States and Greater China is more than just a fundamental means of conducting business; it’s also a way to connect cultures, communities and people. East West Bancorp 2014 Annual Report Corporate Headquarters 135 N. Los Robles Avenue Pasadena, CA 91101 626.768.6000 eastwestbank.com 

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