Second Quarter 2016 INVESTOR PRESENTATION September 2016 Safe - - PowerPoint PPT Presentation

Second Quarter 2016 INVESTOR PRESENTATION

September 2016

Safe Harbor Statement

2

This presentation may include forward-looking statements that involve inherent risks and uncertainties. East West Bancorp, Inc. cautions readers that a number of important factors could cause actual results to differ materially from those in any forward-looking statements. These factors include economic conditions and competition in the geographic and business areas in which East West Bancorp and its subsidiaries operate, inflation or deflation, fluctuation in interest rates, legislation and governmental regulations, investigation of acquired banks and other factors discussed in the Company’s filings with the SEC.

East West Profile

GREATER CHINA

10 Locations

5 Full-service branches 5 Representative offices 3 Seattle Las Vegas Los Angeles San Diego Houston Dallas Atlanta New York Boston Across 60+ cities in 10 metropolitan areas

UNITED STATES

120+ Locations 89 U.S. branches in California

Chongqing Beijing Taipei Guangzhou Xiamen Shanghai & Shanghai FTZ Hong Kong Shantou Shenzhen

East West Bank is the largest independent bank based in Los Angeles, CA.

With $33 billion in total assets, 43 years of operating history, and 2,800 associates, East West Bank is the leading bank serving the Asian community in the U.S.

130+ LOCATIONS

THROUGHOUT

San Francisco

East West Bank Milestones

4

1973

First EWB Branch

• pens for business.

First S&L bank serving the Asian American market in Southern California.

1999

EWBC begins to trade on Nasdaq.

2009

Acquired $10 billion United Commercial Bank and doubled asset size to over $20 billion. Acquired China banking license.

2016

6-months net income: $210.8 million and assets of $33.0 billion.

1991

Assets exceed $1 billion.

1995

Converted to state chartered commercial Bank.

1998

Initiated management- led buyout.

2005

Annual net income exceeds $100 million.

2007

First full-service branch in Greater China opened in Hong Kong.

2014

Presence expanded in TX and CA with acquisition of $2 billion in assets MetroCorp. Opened new branches in Shanghai FTZ and Shenzhen.

2013

New branch in Las Vegas.

1980s

Branch network expanded in CA.

The Beginning Going Public Size Doubles Expansion in TX and CA Today

East West Bank’s Advantage

• China is the 2nd largest

world economy.

• Foreign direct investment in

the U.S. continues to rise.

• Cross-border trade between

U.S. and Greater China companies is strong.

• EWB is one of the few U.S.

banks with a banking license in China.

• 10 locations in Greater

China.

• Largest U.S. bank serving

the Asian community.

• Among the top 30 largest

public banks.

• Bank of choice for new

Chinese-American immigrants.

• Ranked by Forbes as top

15 of America’s best banks (2010-2015).

• Knowledge and

experience in:

• Culture
• Geography
• Economics
• Business practices
• Well-connected with

business leaders and service professionals.

• Cross-border products

and services.

• Long-term relationship

building.

THE U.S. FACTOR THE CHINA FACTOR BRIDGE BANKING EXPERTISE VALUE FOR CUSTOMERS

5

• Help navigate complicated

business transactions.

• Broaden opportunities with
• ur partners and resources.
• Customized solutions meet

the unique financial needs across various industries.

• Beyond banking approach

helps customers assimilate seamlessly into a new country.

Bank Rankings by Total Assets and Market Cap

6 Rank Total Assets (as of 06.30.16) $ Billion Rank Market Cap (as of 08.31.16) $ Billion 1 JPMorgan Chase & Co. 2,466.1 1 Wells Fargo & Company 256.3 2 Bank of America Corporation 2,186.6 2 JPMorgan Chase & Co. 243.8 3 Wells Fargo & Company 1,889.2 3 Bank of America Corporation 164.7 4 Citigroup Inc. 1,818.8 4 Citigroup Inc. 138.7 5 U.S. Bancorp 438.5 5 U.S. Bancorp 75.6 6 Bank of New York Mellon Corporation 372.4 6 Bank of New York Mellon Corporation 44.5 7 PNC Financial Services Group, Inc. 361.3 7 PNC Financial Services Group, Inc. 44.3 8 Capital One Financial Corporation 339.1 8 Capital One Financial Corporation 36.2 9 State Street Corporation 255.4 9 BB&T Corporation 31.4 10 BB&T Corporation 221.9 10 State Street Corporation 27.4 11 SunTrust Banks, Inc. 199.1 11 SunTrust Banks, Inc. 21.8 12 Citizens Financial Group, Inc. 145.2 12 M&T Bank Corporation 18.6 13 Fifth Third Bancorp 143.6 13 Northern Trust Corporation 16.0 14 Regions Financial Corporation 126.2 14 Fifth Third Bancorp 15.5 15 M&T Bank Corporation 123.8 15 KeyCorp 13.6 16 Northern Trust Corporation 121.5 16 Citizens Financial Group, Inc. 12.9 17 KeyCorp 101.2 17 Regions Financial Corporation 12.5 18 Huntington Bancshares Incorporated 74.0 18 First Republic Bank 11.5 19 Comerica Incorporated 71.3 19 Huntington Bancshares Incorporated 10.9 20 First Republic Bank 64.7 20 Comerica Incorporated 8.2 21 Zions Bancorporation 59.6 21 Signature Bank 6.7 22 SVB Financial Group 43.1 22 Zions Bancorporation 6.3 23 People's United Financial, Inc. 40.2 23 SVB Financial Group 5.8 24 First Niagara Financial Group, Inc. 40.0 24 East West Bancorp, Inc. 5.4 25 Popular, Inc. 37.6 25 PacWest Bancorp 5.2 26 Signature Bank 36.5 26 People's United Financial, Inc. 5.1 27 East West Bancorp, Inc. 33.0 27 Commerce Bancshares, Inc. 4.9 28 First Citizens BancShares, Inc. 32.2 28 Bank of the Ozarks, Inc. 4.7 29 BOK Financial Corporation 32.0 29 BOK Financial Corporation 4.5 30 Synovus Financial Corp. 29.5 30 Cullen/Frost Bankers, Inc. 4.5

Source: S&P Global Market Intelligence.

Strong Growth and Performance

7

$10.8 $11.9 $12.4 $20.6 $20.7 $22.0 $22.5 $24.7 $28.7 $32.4

$33.0

06 07 08 09 10 11 12 13 14 15 2Q16 QTD

Total Assets** Stockholders' Equity** Total Loans

* CAGR from December 31, 2006 – June 30, 2016. ** 2010-2014 were restated to reflect the adoption of new accounting guidance related to the Company's investments in qualified affordable housing projects, Accounting Standards Update (“ASU”) 2014-01. $8.3 $8.8 $8.2 $14.1 $13.7 $14.5 $15.1 $18.1 $21.8 $23.7

$24.3

06 07 08 09 10 11 12 13 14 15 2Q16 QTD $7.2 $7.3 $8.1 $15.0 $15.6 $17.5 $18.3 $20.4 $24.0 $27.5

$28.2

06 07 08 09 10 11 12 13 14 15 2Q16 QTD $1.0 $1.2 $1.6 $2.3 $2.1 $2.3 $2.4 $2.4 $2.9 $3.1

$3.3

06 07 08 09 10 11 12 13 14 15 2Q16 QTD

Total Deposits

($ in billions)

$76.6 $164.6 $242.8 $277.7 $293.3 $345.9 $384.7 $210.8 2009 2010 2011 2012 2013 2014 2015 2016 YTD $0.33 $0.83 $1.58 $1.87 $2.09 $2.41 $2.66 $1.45 2009 2010 2011 2012 2013 2014 2015 2016 YTD

Six Consecutive Years of Strong Earnings Growth

8

Note: 2010-2014 were restated to reflect the adoption of new accounting guidance related to the Company's investments in qualified affordable housing projects, Accounting Standards Update (“ASU”) 2014-01.

UCBH acquisition

• Nov. 2009

doubles bank size

19% CAGR for Net Earnings 26% CAGR for Net Earnings per share

($ in millions)

Second Quarter 2016 Highlights

9 ($ in millions, except per share data)

2Q16 1Q16 QoQ Change 2Q15 YoY Change

Net income $ 103.3 $ 107.5

• 4%

$ 98.7 +5% Earnings per share (diluted) $ 0.71 $ 0.74

• 4%

$ 0.68 +4% At period-end Total loans Total deposits Total assets $ 24,287.5 28,217.2 32,952.2 $ 23,796.7 28,596.2 33,109.2 +2%

• 1%
• <1%

$ 22,160.0 25,528.2 30,064.1 +10% +11% +10% $ $ $ $ $ $ Selected ratios Return on average assets 1.27% 1.33%

• 6 bps

1.34%

• 7 bps

Return on average equity 12.71% 13.59%

• 88 bps

13.25%

• 54 bps

Net interest margin 3.31% 3.32%

• 1 bp

3.31% unchanged Cost of deposits 0.29% 0.28% +1 bp 0.29% unchanged Cost of funds 0.35% 0.34% +1 bp 0.43%

• 8 bps

Adjusted efficiency ratio1 44.59% 44.53% +6 bps 40.36% +4.23%

1 Represents noninterest expense, excluding repurchase agreements’ extinguishment costs, amortization of tax credit and other investments and amortization of premiums on deposits acquired,

divided by the aggregate of net interest income before provision for credit losses, and noninterest income.

Second Quarter Net Interest Income and Margin

10

$227.5 $240.3 $246.9 $252.2 $253.6 3.31% 3.32% 3.26% 3.32% 3.31%

2Q15 3Q15 4Q15 1Q16 2Q16

Net Interest Income Net Interest Margin

Net Interest Income $253.6 million

2Q16 Net Interest Income

+$1.4 million or +1%

From 1Q16 Net Interest Income Due to loan portfolio growth

($ in millions)

Net Interest Margin 3.31%

2Q16 Net Interest Margin

• 1 basis point

From 1Q16 Net Interest Margin

Full Year 2016 Outlook

EPS guidance for the remainder of 2016 assumes:

• No Fed Funds target rate increases in 2016.
• NIM range of 3.21% to 3.24% for 3Q16 and 4Q16, reflecting a decrease in SOP discount

accretion ($27mm in 1H16, decreasing to $18mm in 2H16). Ex. SOP, NIM forecast at 3.11% compared to 3.14% in 2Q.

• Quarterly organic loan growth of ~$365mm or 6.00% annualized, moderating from 8%

annualized pace in 2Q based on intentionally slower CRE growth and conservative commercial loan growth expectations.

• Quarterly provision for loan losses of $5mm, compared to $6mm in 2Q or $1.4mm in 1Q.

Outlook is for stable asset quality.

• Quarterly core noninterest expense of ~$138mm, compared to $134mm in in 2Q, reflecting

continued bank infrastructure investment and higher compensation expense, partially offset by lower consulting expenses.

• Quarterly amortization of tax credits and other investments of ~$17 million; effective tax rate
• f 26% for the remainder of 2016.

11

2013A 2014A 2015A 2016 Guidance EPS $2.09 $2.41 $2.66 $2.83-$2.87 Growth 12% 15% 10% 6% - 8%

3.35% 3.31% 3.52% 2015 Full-Year 2Q16 Industry Average Net Interest Margin 41.8% 44.6% 54.8% 2015 Full-Year 2Q16 Industry Average Adjusted Efficiency Ratio 1.27% 1.27% 1.12% 2015 Full-Year 2Q16 Industry Average Return on Average Assets

Solid Performance Metrics Relative to Peers

12

Note: Industry average based on FDIC’s 2Q16 Quarterly Banking Profile for FDIC Insured Banks with Asset size $10bn to $250 bn.

12.7% 12.7% 9.2% 2015 Full-Year 2Q16 Industry Average Return on Average Equity

1 Represents noninterest expense, excluding repurchase agreements’ extinguishment costs, amortization of tax credit and other investments and amortization of premiums on deposits acquired,

divided by the aggregate of net interest income before provision for credit losses, and noninterest income.

1% 10% 3% 50%

1 1

Diversified Loan Portfolio

13

Loan Distribution (as of 06.30.16)

($ in billions)

$22.2 $23.0 $23.7 $23.8 06.30.15 09.30.15 12.31.15 03.31.16 06.30.16 $24.3

$24.3 billion loans as of June 30, 2016

+$490.8mm or 2% Q-o-Q increase

• C&I: +4% q-o-q
• CRE: +0% q-o-q
• SFR: +3% q-o-q
• Consumer: +1% q-o-q
• MRF: -0.1% q-o-q
• Land/Construction: +5% q-o-q

+$2.1bn or 10% Y-o-Y increase

• C&I: +12% y-o-y
• CRE: +16% y-o-y
• SFR: -4% y-o-y
• Consumer: +19% y-o-y
• MRF: -9% y-o-y
• Land/Construction: +16% y-o-y

Managing loan growth to maintain balanced portfolio distribution. 2Q16 average loan yield was 4.28%, compared to 4.29% in 2Q15

Land/Construction 3% MFR 6% Consumer 8% SFR 13% CRE 32% Commercial 38%

Specialized Industry Verticals: Cross-Border Growth

14 Entertainment, 21% Private Equity, 21% Technology & Life Science, 17% Health Care, 14% Aviation, 7% Other *, 19%

Total Loans $24.3 bn C&I loans $9.2 bn or 38% Specialized Industry $3.0 bn or 33%

Comprised of Comprised of

Specialized Industry Lending 33% Traditional C&I (including Trade Finance) 67%

Portfolio distribution data as of June 30, 2016. * Other Specialized Lending comprises Structured & Specialty Finance, Energy, Agriculture, and Equipment Leasing.

• Specialized Industry lending verticals have grown

to $3.0bn, or 12% YTD, from $2.7bn as of 12/31/15. Growth in these niches is driven by Bridge Banking, EWBC’s strategy of facilitating cross-border commercial opportunities.

61% to 65%

20%

66% to 70%

8%

71% to 75%

3%

15

Retail 29% Industrial 18% Hotel 15%

Mixed Use 14%

Office 13% Other 8%

Diversified Commercial Real Estate Portfolio

Medical 3%

1 LTV based on current loan balance and appraisal value at origination or renewal.

Over 75%

3%

$7.8 billion

CRE loan portfolio

CRE Distribution (as of 6/30/16) CRE LTV Distribution (as of 6/30/16) $2.1 million

Average outstanding CRE loan size

47%

Average LTV1

• Targeted loan sales of multi-family loans and selected CRE in 1H 2016 reduced CRE exposure (under FFIEC

guidelines) to 265% of risk-based capital, down from 274% as of 12/31/15.

• Intentional curtailment of originations to maintain growth of CRE within FFIEC exposure guidelines.

Less than 50%

37%

50% to 55%

15%

56% to 60%

15%

$25.5 $26.8 $27.5 $28.6 $28.2 06.30.15 09.30.15 12.31.15 03.31.16 06.30.16

Strong Deposit Growth

16 ($ in billions)

$28.2 billion deposits as of June 30, 2016

• $379.0 million or -1% QoQ

change +$2.7 billion or 11% YoY increase 2Q16 core deposits up to $22.5 billion or 80% of total deposits, compared to 74% core deposits in 2Q15 2Q16 cost of deposits was 29 bps, unchanged from 29 bps in 2Q15 Deposit Distribution (as of June 30, 2016)

DDA 34% MMDA 26% Checking 13% Savings 7% CD 20%

17

Strong Capital Levels East West Bank’s capital levels exceed well-capitalized regulatory requirements

6.5% 8% 10% 5% 10.7% 10.7% 12.4% 8.7%

CET1 capital ratio Tier 1 risk-based capital ratio Total risk-based capital ratio Tier 1 leverage capital ratio Well-capitalized regulatory requirements EWBC 06.30.16

CET1 capital ratio Tier 1 risk-based capital ratio Total risk-based capital ratio Tier 1 leverage capital ratio

Providing a Healthy Dividend to Shareholders

18

400% or $0.64 per share increase in dividends since 2011

Note: Annualized based on dividends for the first and second quarters of 2016.

$0.06 $0.06 $0.06 $0.14 $0.20 $0.20 $0.20 $0.20 $0.40 $0.40 $0.05 $0.04 $0.16 $0.40 $0.60 $0.72 $0.80 $0.80 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16*

EWBC has paid an annual dividend on its common stock every year since going public in 1999

Interest Rate Sensitivity

19

The increase in EWBC’s interest rate sensitivity between 6/30/16 and 12/31/15 was primarily due to growth in core deposits, which now make up 80% of total deposits.

• Brokered deposits are 6% of total deposits, and institutional deposits are 10% of total, both essentially stable relative to

the year-ago quarter.

• Due to the growth in core deposits, a surge deposit study was conducted to identify the amount of volatile deposits and

to estimate the likelihood of run-off in various interest rate environments.

• Betas: Retail Money Market – 49%; Commercial MMA – 65%; NOW – 28%; and Savings – 16%.

Net Interest Income Volatility: 30-Jun-2016 31-Dec-2015 Change in Interest Rates : % change $ in mm in EPS % change $ in mm in EPS + 200 bps 22.1% $223.6 + $ 1.13 18.5% $175.8 + $ 0.81 + 100 bps 11.0% $111.3 + $ 0.56 9.6% $91.2 + $ 0.42

• 100 bps
• 3.8%

($38.4)

• $ (0.19)
• 4.0%

($38.0)

• $ (0.17)
• 200 bps
• 4.1%

($41.5)

• $ (0.21)
• 4.6%

($43.7)

• $ (0.20)

Net Interest Income Volatility as of 6/30/16 Given a 12-Month Demand Deposit Migration of: $1.0 billion $2.0 billion $3.0 billion Change in Interest Rates : % change $ in mm in EPS % change $ in mm in EPS % change $ in mm in EPS +200 bps 19.1% $193.2 + $ 0.98 16.10% $162.9 + $ 0.82 13.10% $132.5 + $ 0.67 +100 bps 9.1% $92.1 + $ 0.47 7.20% $72.8 + $ 0.37 5.20% $52.6 + $ 0.27

EWBC’s Net Interest Income Sensitivity to Selected Interest Rate Scenarios

Note: NII sensitivity translated into $ and EPS using annualized 1H16 NII and FY 2015 NII, and the effective tax rate in each period.

Loan Portfolio: Underlying Interest Rate Detail

20

EWBC’s loan portfolio is predominantly linked to Prime Rate and short-term LIBOR, a profile that has been consistent

• ver time.
• Over 70% of EWBC’s loan

portfolio is variable rate, and <10% is fixed rate.

• Only $3.0bn, or 12%, of loans

have a fully indexed rate (FIR) below floors. 32% of these would cross above floor rates with only a 25bps move in interest rates, and 73% of would cross above floor rates with a 75bps move.

• Weighted avg. next

repricing/maturity date of the total loan portfolio is <1.25 years. The weighted avg. date of repricing for loans with FIRs below floors is 7 months. EWBC’s Loan Portfolio Breakdown: Fixed, Variable, & Fully Indexed Rate Loans

% of % of $ in mm. total loans $ in mm. category True fixed rate loans 2,101.5 8.6% Loans without floors 12,180.5 50.0% Of which, linked to Prime 5,308 44% Of which, linked to 1M Libor 3,388 28% Of which, linked to Other Libor 1,415 12% Interest rate above floors 5,430.6 22.3% Of which, linked to Prime 2,495 46% Of which, linked to 1M Libor 741 14% Of which, linked to Other Libor 415 8% Interest rate below floors 51.2 0.2% Subtotal: variable rate loans 17,662.3 72.5% Fully indexed rate: at floor 557.4 2.3% Fully indexed rate: above floors 837.5 3.4% Fully indexed rate: below floors 2,982.1 12.2% Of which, linked to Prime 1,449 49% Of which, linked to 1M Libor 619 21% Of which, linked to Other Libor 723 24% Subtotal: fully indexed rate loans 4,377.0 18.0% Non-performing loans 211.0 0.9% Total gross loans 24,351.9 100.0%

Note: Loans gross of deferred fees, premiums, or discounts.

BSA / AML Update

21

• The Bank entered into a consent order with the Federal Reserve Bank in

November 2015 regarding its BSA/AML procedures and process.

• The Bank enacted a plan for remediation which includes:
• Replacing the former BSA transactional tracking system with a more sophisticated

system, Actimize (projected implementation by YE 2016), and installing an online customer due diligence system, Dynamic Customer Insight, to collect information on new customers (already implemented).

• Brought in a new BSA Officer with strong prior BSA experience to run the department,

and expanded senior manager ranks in the group.

• Increased headcount and overall resources in the BSA department: current FTE

headcount is approximately 100, plus a similar number of temporary consultants as part of the remediation plan, up from 39 FTEs at the beginning of 2015.

• Projected timeline: Bank’s remediation work to be complete by YE 2016;

independent consultant verification & look-back review planned for 1Q17.

• Costs: $20mm in 2015, estimated $39mm in 2016.

Key Focus Areas

22

Expand

MARKET OPPORTUNITY

LONG-TERM SHAREHOLDER VALUE

Grow

CORE DEPOSITS

Maintain good

ASSET QUALITY

Maintain solid

NII* & NIM*

Enhance

RISK MANAGEMENT

Build

FEE-BASED

businesses Focus on

BRIDGE BANKING

*NII = Net Interest Income. NIM = Net Interest Margin

Control

EXPENSES

Deliver

HIGH PROFITABILITY