East West Bancorp(EWBC) - 2022 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS This section presents the Company's unaudited consolidated financial statements, including the balance sheet, income statement, comprehensive income statement, changes in stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, accounting policies, fair value measurements, and specific financial instrument details Consolidated Balance Sheet (Unaudited) The Consolidated Balance Sheet presents the Company's financial position as of September 30, 2022, and December 31, 2021, detailing its assets, liabilities, and stockholders' equity Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2022 ($ in thousands) | December 31, 2021 ($ in thousands) | | :--------------------- | :---------------------------------- | :--------------------------------- | | Total Assets | $62,576,061 | $60,870,701 | | Total Liabilities | $56,915,393 | $55,033,483 | | Total Stockholders' Equity | $5,660,668 | $5,837,218 | Consolidated Statement of Income (Unaudited) The Consolidated Statement of Income outlines the Company's financial performance, including interest income and expense, noninterest income and expense, provision for credit losses, and net income for the three and nine months ended September 30, 2022 and 2021 Consolidated Statement of Income Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2022 ($ in thousands) | Three Months Ended Sep 30, 2021 ($ in thousands) | Nine Months Ended Sep 30, 2022 ($ in thousands) | Nine Months Ended Sep 30, 2021 ($ in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total Interest and Dividend Income | $415,307 | $415,307 | $1,560,019 | $1,196,026 | | Total Interest Expense | $19,601 | $19,601 | $119,645 | $70,152 | | Net Interest Income before Provision for Credit Losses | $395,706 | $395,706 | $1,440,374 | $1,125,874 | | Provision for (reversal of) Credit Losses | $(10,000) | $(10,000) | $48,500 | $(25,000) | | Total Noninterest Income | $73,109 | $73,109 | $233,739 | $214,406 | | Total Noninterest Expense | $205,384 | $205,384 | $602,283 | $585,984 | | Net Income | $225,449 | $225,449 | $791,320 | $655,185 | | Basic EPS | $1.59 | $1.59 | $5.59 | $4.62 | | Diluted EPS | $1.57 | $1.57 | $5.55 | $4.58 | Consolidated Statement of Comprehensive Income (Unaudited) The Consolidated Statement of Comprehensive Income reports the Company's net income and other comprehensive income (loss) components, such as unrealized gains/losses on AFS debt securities and cash flow hedges, for the three and nine months ended September 30, 2022 and 2021 Consolidated Statement of Comprehensive Income Highlights (Unaudited) | Metric | Three Months Ended Sep 30, 2022 ($ in thousands) | Three Months Ended Sep 30, 2021 ($ in thousands) | Nine Months Ended Sep 30, 2022 ($ in thousands) | Nine Months Ended Sep 30, 2021 ($ in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Income | $295,339 | $225,449 | $791,320 | $655,185 | | Other Comprehensive Loss | $(199,384) | $(42,879) | $(709,651) | $(101,893) | | Comprehensive Income | $95,955 | $182,570 | $81,669 | $553,292 | Consolidated Statement of Changes in Stockholders' Equity (Unaudited) The Consolidated Statement of Changes in Stockholders' Equity details the movements in the Company's equity accounts, including net income, other comprehensive loss, stock issuances, repurchases, and cash dividends, for the periods presented Changes in Stockholders' Equity Highlights (Unaudited) | Metric | Balance, July 1, 2022 ($ in thousands) | Net Income ($ in thousands) | Other Comprehensive Loss ($ in thousands) | Cash Dividends ($ in thousands) | Balance, September 30, 2022 ($ in thousands) | | :-------------------------------- | :----------------------------------- | :-------------------------- | :---------------------------------------- | :------------------------------ | :------------------------------------------- | | Total Stockholders' Equity | $5,609,482 | $295,339 | $(199,384) | $(57,092) | $5,660,668 | Consolidated Statement of Cash Flows (Unaudited) The Consolidated Statement of Cash Flows categorizes the Company's cash flows into operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021, showing the net change in cash and cash equivalents Consolidated Statement of Cash Flows Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2022 ($ in thousands) | Nine Months Ended Sep 30, 2021 ($ in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net Cash Provided by Operating Activities | $1,616,419 | $745,831 | | Net Cash Used in Investing Activities | $(4,250,330) | $(7,817,886) | | Net Cash Provided by Financing Activities | $919,586 | $7,903,443 | | Net (Decrease) Increase in Cash and Cash Equivalents | $(1,749,582) | $834,930 | | Cash and Cash Equivalents, End of Period | $2,163,353 | $4,852,901 | Notes to Consolidated Financial Statements (Unaudited) This section provides detailed notes to the consolidated financial statements, offering explanations on the basis of presentation, significant accounting policies, fair value measurements, specific financial instruments like securities and derivatives, loan portfolio details, and other key financial areas Note 1 — Basis of Presentation This note explains that the unaudited interim consolidated financial statements are prepared in accordance with U.S. GAAP and regulatory guidelines, consolidating East West Bancorp, Inc. and its subsidiaries, and should be read in conjunction with the Company's 2021 Form 10-K - The unaudited interim Consolidated Financial Statements include the accounts of East West Bancorp, Inc., East West Bank, and East West's subsidiaries, with intercompany transactions eliminated[28] - Statements are presented in accordance with U.S. GAAP and applicable regulatory guidelines, and should be read with the Company's 2021 Form 10-K[29] - Management makes estimates and assumptions that affect reported amounts, and actual results could materially differ from these estimates[30] Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies This note discusses recent accounting pronouncements, ASU 2022-02 and ASU 2022-03, and updates to significant accounting policies, particularly regarding the transfer of debt securities from Available-for-Sale (AFS) to Held-to-Maturity (HTM) and the related allowance for credit losses - ASU 2022-02 (Troubled Debt Restructurings and Vintage Disclosures) eliminates the TDR accounting model for creditors and introduces new disclosure requirements, with adoption expected on January 1, 2023, and no material impact anticipated[32] - ASU 2022-03 (Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions) clarifies that contractual sale restrictions are not considered in fair value measurement and requires new disclosures, with adoption expected on January 1, 2024, and no impact anticipated[32] - During Q1 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM, resetting their amortized