Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

Mark One

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2014

 

or

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                  to              

 

Commission file number 000-24939

 

EAST WEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-4703316

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

135 N. Los Robles Ave, 7th Floor, Pasadena, California 91101

(Address of principal executive offices) (Zip Code)

 

(626) 768-6000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer and accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 143,388,292 shares of common stock as of July 31, 2014.

 



Table of Contents

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

5

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

5

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

10

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

66

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

96

 

 

 

 

 

Item 4.

Controls and Procedures

96

 

 

 

 

PART II - OTHER INFORMATION

96

 

 

 

Item 1.

Legal Proceedings

96

 

 

 

 

 

Item 1A.

Risk Factors

96

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

97

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

97

 

 

 

 

 

Item 4.

Mine Safety Disclosures

97

 

 

 

 

 

Item 5.

Other Information

97

 

 

 

 

 

Item 6.

Exhibits

98

 

 

 

 

SIGNATURE

98

 

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Forward-Looking Statements

 

Certain matters discussed in this Quarterly Report contain or incorporate statements that we believe are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 3b-6 promulgated thereunder. These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language, such as “will likely result,” “may,” “are expected to,” “is anticipated,” “estimate,” “forecast,” “projected,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continue,” “remain,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements we may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to us.

 

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

·                                          our ability to achieve the projected synergies of MetroCorp Bancshares, Inc. (“MetroCorp”) 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;

·                                          effect of additional provision for loan losses;

·                                          effect of government budget cuts and government shut down;

·                                          fluctuations of our stock price;

·                                          success and timing of our business strategies;

·                                          impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity;

·                                          impact of potential federal tax increases and spending cuts;

·                                          impact of adverse judgments or settlements in litigation against the Company;

·                                          changes in our ability to receive dividends from our subsidiaries; and

·                                          political developments, wars or other hostilities may disrupt or increase volatility in securities or otherwise affect economic conditions.

 

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Table of Contents

 

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission on March 3, 2014 (the “2013 Annual Report”), under the heading “ITEM 1A. RISK FACTORS” and the information set forth under “RISK FACTORS” in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

 

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Table of Contents

 

PART I — FINANCIAL INFORMATION

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

1,246,044

 

$

895,820

 

Short-term investments

 

286,130

 

257,473

 

Securities purchased under resale agreements

 

1,275,000

 

1,300,000

 

Investment securities available-for-sale, at fair value (with amortized cost of $2,534,163 in 2014 and $2,786,490 in 2013)

 

2,529,652

 

2,733,797

 

Loans held for sale

 

450,864

 

204,970

 

Loans receivable, excluding covered loans (net of allowance for loan losses of $246,468 in 2014 and $241,930 in 2013)

 

18,025,711

 

15,412,715

 

Covered loans (net of allowance for loan losses of $4,880 in 2014 and $7,745 in 2013)

 

1,803,090

 

2,187,898

 

Total loans receivable, net

 

19,828,801

 

17,600,613

 

FDIC indemnification asset, net

 

 

74,708

 

Other real estate owned, net

 

42,458

 

18,900

 

Other real estate owned covered, net

 

24,779

 

21,373

 

Total other real estate owned

 

67,237

 

40,273

 

Investment in Federal Home Loan Bank stock, at cost

 

37,731

 

62,330

 

Investment in Federal Reserve Bank stock, at cost

 

54,217

 

48,333

 

Investment in affordable housing partnerships

 

181,943

 

164,776

 

Premises and equipment, net

 

183,498

 

177,710

 

Accrued interest receivable

 

100,323

 

116,314

 

Due from customers on acceptances

 

27,237

 

21,236

 

Premiums on deposits acquired, net

 

50,389

 

46,920

 

Goodwill

 

458,467

 

337,438

 

Cash surrender value of life insurance policies

 

99,817

 

112,650

 

Other assets

 

679,755

 

534,707

 

TOTAL

 

$

27,557,105

 

$

24,730,068

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Customer deposit accounts:

 

 

 

 

 

Noninterest-bearing

 

$

6,889,950

 

$

5,821,899

 

Interest-bearing

 

15,985,139

 

14,591,019

 

Total deposits

 

22,875,089

 

20,412,918

 

Federal Home Loan Bank advances

 

316,156

 

315,092

 

Securities sold under repurchase agreements

 

1,005,211

 

995,000

 

Payable to FDIC, net

 

24,337

 

 

Bank acceptances outstanding

 

27,237

 

21,236

 

Long-term debt

 

235,732

 

226,868

 

Accrued expenses and other liabilities

 

372,319

 

394,729

 

Total liabilities

 

24,856,081

 

22,365,843

 

COMMITMENTS AND CONTINGENCIES (Note 12)

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

Common stock, $0.001 par value, 200,000,000 shares authorized; 163,488,203 and 163,098,008 shares issued in 2014 and 2013, respectively; 143,389,155 and 137,630,896 shares outstanding in 2014 and 2013, respectively

 

163

 

163

 

Additional paid in capital

 

1,661,549

 

1,571,670

 

Retained earnings

 

1,468,889

 

1,360,130

 

Treasury stock, at cost – 20,099,048 shares in 2014 and 25,467,112 shares in 2013

 

(427,042

)

(537,279

)

Accumulated other comprehensive loss, net of tax

 

(2,535

)

(30,459

)

Total stockholders’ equity

 

2,701,024

 

2,364,225

 

TOTAL

 

$

27,557,105

 

$

24,730,068

 

 

See accompanying notes to consolidated financial statements.

 

5



Table of Contents

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

 

Loans receivable, including fees

 

$

269,484

 

$

234,290

 

$

531,055

 

$

451,449

 

Investment securities

 

12,490

 

9,594

 

24,766

 

19,804

 

Securities purchased under resale agreements

 

4,559

 

5,435

 

9,412

 

10,964

 

Investment in Federal Home Loan Bank stock

 

773

 

1,021

 

1,896

 

1,550

 

Investment in Federal Reserve Bank stock

 

782

 

721

 

1,530

 

1,441

 

Due from banks and short-term investments

 

6,354

 

4,292

 

11,956

 

8,568

 

Total interest and dividend income

 

294,442

 

255,353

 

580,615

 

493,776

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Customer deposit accounts

 

15,569

 

15,738

 

31,451

 

32,592

 

Federal Home Loan Bank advances

 

1,015

 

1,047

 

2,060

 

2,086

 

Securities sold under repurchase agreements

 

10,189

 

10,217

 

20,267

 

20,746

 

Long-term debt

 

1,219

 

707

 

2,421

 

1,417

 

Total interest expense

 

27,992

 

27,709

 

56,199

 

56,841

 

Net interest income before provision for loan losses

 

266,450

 

227,644

 

524,416

 

436,935

 

Provision for loan losses, excluding covered loans

 

8,944

 

8,277

 

16,898

 

7,515

 

(Reversal of) provision for loan losses on covered loans

 

(944

)

723

 

(1,965

)

5,812

 

Net interest income after provision for loan losses

 

258,450

 

218,644

 

509,483

 

423,608

 

NONINTEREST INCOME (LOSS)

 

 

 

 

 

 

 

 

 

Changes in FDIC indemnification asset and receivable/payable

 

(57,558

)

(47,905

)

(111,192

)

(79,804

)

Branch fees

 

9,519

 

8,119

 

18,965

 

15,773

 

Net gains on sales of investment securities

 

671

 

5,345

 

4,089

 

10,922

 

Net gains on sales of fixed assets

 

180

 

228

 

360

 

352

 

Letters of credit fees and commissions

 

6,099

 

5,426

 

12,266

 

10,488

 

Foreign exchange income

 

2,841

 

3,649

 

3,530

 

5,985

 

Ancillary loan fees

 

2,521

 

2,634

 

4,993

 

4,686

 

Income from life insurance policies

 

881

 

900

 

2,032

 

1,868

 

Net gains (losses) on sales of loans

 

6,793

 

(354

)

12,989

 

(260

)

Other operating income

 

13,108

 

9,604

 

22,107

 

15,537

 

Total noninterest loss

 

(14,945

)

(12,354

)

(29,861

)

(14,453

)

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

55,081

 

42,026

 

114,358

 

87,757

 

Occupancy and equipment expense

 

16,534

 

13,706

 

32,385

 

27,514

 

Amortization of investments in affordable housing partnerships and other investments

 

12,851

 

5,064

 

18,815

 

9,347

 

Amortization of premiums on deposits acquired

 

2,624

 

2,375

 

5,124

 

4,784

 

Deposit insurance premiums and regulatory assessments

 

5,812

 

3,875

 

11,514

 

7,657

 

Loan related (income) expenses

 

(1,098

)

3,573

 

1,477

 

7,157

 

Other real estate owned expense (gains on sale)

 

783

 

(1,188

)

2,117

 

(2,172

)

Legal expense

 

9,104

 

5,467

 

12,903

 

9,911

 

Data processing

 

2,940

 

2,200

 

11,140

 

4,637

 

Deposit related expenses

 

1,956

 

1,516

 

3,660

 

3,090

 

Consulting expense

 

2,328

 

1,003

 

3,377

 

1,457

 

Other operating expenses

 

18,984

 

14,803

 

35,456

 

29,636

 

Total noninterest expense

 

127,899

 

94,420

 

252,326

 

190,775

 

INCOME BEFORE PROVISION FOR INCOME TAXES

 

115,606

 

111,870

 

227,296

 

218,380

 

PROVISION FOR INCOME TAXES

 

31,618

 

37,855

 

66,567

 

72,274

 

NET INCOME

 

$

83,988

 

$

74,015

 

$

160,729

 

$

146,106

 

PREFERRED STOCK DIVIDENDS

 

 

1,714

 

 

3,428

 

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

 

$

83,988

 

$

72,301

 

$

160,729

 

$

142,678

 

EARNINGS PER SHARE AVAILABLE TO COMMON STOCKHOLDERS

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.59

 

$

0.52

 

$

1.13

 

$

1.03

 

DILUTED

 

$

0.58

 

$

0.52

 

$

1.12

 

$

1.03

 

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

BASIC

 

143,187

 

137,536

 

142,578

 

137,592

 

DILUTED

 

143,689

 

137,816

 

143,158

 

141,573

 

DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.18

 

$

0.15

 

$

0.36

 

$

0.30

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net income

 

$

83,988

 

$

74,015

 

$

160,729

 

$

146,106

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

Unrealized gains on investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

Net unrealized holding gains (losses) arising during period

 

14,895

 

(24,770

)

30,317

 

(20,029

)

Reclassification adjustment for net gains included in net income

 

(389

)

(3,100

)

(2,372

)

(6,335

)

Net unrealized (losses) gains on other investments

 

(4

)

7

 

(21

)

17

 

Reclassification adjustment for net gains included in net income

 

 

 

 

 

Other comprehensive income (loss)

 

14,502

 

(27,863

)

27,924

 

(26,347

)

COMPREHENSIVE INCOME

 

$

98,490

 

$

46,152

 

$

188,653

 

$

119,759

 

 

See accompanying notes to consolidated financial statements.

 

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EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

Additional

 

 

 

Additional

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Paid In

 

 

 

Paid In

 

 

 

 

 

Other

 

 

 

 

 

 

 

Capital

 

 

 

Capital

 

 

 

 

 

Comprehensive

 

Total

 

 

 

Preferred

 

Preferred

 

Common

 

Common

 

Retained

 

Treasury

 

Income (Loss),

 

Stockholders’

 

 

 

Stock

 

Stock

 

Stock

 

Stock

 

Earnings

 

Stock

 

Net of Tax

 

Equity

 

BALANCE, JANAURY 1, 2013

 

$

 

$

83,027

 

$

157

 

$

1,464,739

 

$

1,151,828

 

$

(322,298

)

$

4,669

 

$

2,382,122

 

Net income

 

 

 

 

 

 

 

 

 

146,106

 

 

 

 

 

146,106

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,347

)

(26,347

)

Stock compensation costs

 

 

 

 

 

 

 

5,898

 

 

 

 

 

 

 

5,898

 

Tax benefit from stock compensation plans, net

 

 

 

 

 

 

 

2,803

 

 

 

 

 

 

 

2,803

 

Issuance of 245,261 shares of common stock pursuant to various stock compensation plans and agreements

 

 

 

 

 

 

 

1,150

 

 

 

 

 

 

 

1,150

 

Cancellation of 44,793 shares of common stock due to forfeitures of issued restricted stock

 

 

 

 

 

 

 

804

 

 

 

(804

)

 

 

 

356,426 shares of restricted stock surrendered due to employee tax liability

 

 

 

 

 

 

 

 

 

 

 

(8,667

)

 

 

(8,667

)

Preferred stock dividends

 

 

 

 

 

 

 

 

 

(3,428

)

 

 

 

 

(3,428

)

Common stock dividends

 

 

 

 

 

 

 

 

 

(41,694

)

 

 

 

 

(41,694

)

Conversion of 85,710 shares of Series A preferred stock into 5,594,080 shares of common stock

 

 

 

(83,027

)

6

 

83,021

 

 

 

 

 

 

 

 

Purchase of 8,026,807 shares of treasury stock pursuant to the Stock Repurchase Program

 

 

 

 

 

 

 

 

 

 

 

(199,992

)

 

 

(199,992

)

BALANCE, JUNE 30, 2013

 

$

 

$

 

$

163

 

$

1,558,415

 

$

1,252,812

 

$

(531,761

)

$

(21,678

)

$

2,257,951

 

BALANCE, JANAURY 1, 2014

 

$

 

$

 

$

163

 

$

1,571,670

 

$

1,360,130

 

$

(537,279

)

$

(30,459

)

$

2,364,225

 

Net income

 

 

 

 

 

 

 

 

 

160,729

 

 

 

 

 

160,729

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

27,924

 

27,924

 

Stock compensation costs

 

 

 

 

 

 

 

6,745

 

 

 

 

 

 

 

6,745

 

Tax benefit from stock compensation plans, net

 

 

 

 

 

 

 

3,787

 

 

 

 

 

 

 

3,787

 

Issuance of 390,195 shares of common stock pursuant to various stock compensation plans and agreements

 

 

 

 

 

 

 

1,207

 

 

 

 

 

 

 

1,207

 

Cancellation of 12,959 shares of common stock due to forfeitures of issued restricted stock

 

 

 

 

 

 

 

241

 

 

 

(241

)

 

 

 

202,070 shares of restricted stock surrendered due to employee tax liability

 

 

 

 

 

 

 

 

 

 

 

(7,308

)

 

 

(7,308

)

Common stock dividends

 

 

 

 

 

 

 

 

 

(51,970

)

 

 

 

 

(51,970

)

Issuance of 5,583,093 shares pursuant to MetroCorp acquisition

 

 

 

 

 

 

 

73,044

 

 

 

117,786

 

 

 

190,830

 

Warrant acquired pursuant to MetroCorp acquisition

 

 

 

 

 

 

 

4,855

 

 

 

 

 

 

 

4,855

 

BALANCE, JUNE 30, 2014

 

$

 

$

 

$

163

 

$

1,661,549

 

$

1,468,889

 

$

(427,042

)

$

(2,535

)

$

2,701,024

 

 

See accompanying notes to consolidated financial statements.

 

8



Table of Contents

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2014

 

2013

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net income

 

$

160,729

 

$

146,106

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

50,135

 

46,785

 

(Accretion) of discount and amortization of premiums, net

 

(113,327

)

(104,247

)

Changes in FDIC indemnification asset and receivable/payable

 

111,192

 

79,804

 

Stock compensation costs

 

6,745

 

5,898

 

Tax benefit from stock compensation plans, net

 

(3,787

)

(2,803

)

Provision for loan losses

 

14,933

 

13,327

 

Impairment on other real estate owned

 

539

 

2,153

 

Net gain on sales of investment securities, loans and other assets

 

(20,941

)

(16,512

)

Originations and purchases of loans held for sale

 

(86,312

)

(71,572

)

Proceeds from sales and net changes in loans held for sale

 

109,241

 

11,155

 

Net proceeds from FDIC shared-loss agreements

 

2,367

 

42,494

 

Net change in accrued interest receivable and other assets

 

(11,754

)

50,275

 

Net change in accrued expenses and other liabilities

 

(171,084

)

(43,579

)

Other net operating activities

 

(1,165

)

(1,548

)

Total adjustments

 

(113,218

)

11,630

 

Net cash provided by operating activities

 

47,511

 

157,736

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Acquisitions, net of cash paid

 

138,465

 

 

Net (increase) decrease in:

 

 

 

 

 

Loans

 

(1,581,763

)

(679,359

)

Short-term investments

 

(28,657

)

35,940

 

Purchases of:

 

 

 

 

 

Securities purchased under resale agreements

 

(475,000

)

(300,000

)

Investment securities available-for-sale

 

(250,607

)

(699,650

)

Loans receivable

 

(1,817

)

(466,715

)

Premises and equipment

 

(5,859

)

(10,328

)

Investments in affordable housing partnerships and other investments

 

(43,195

)

(16,683

)

Proceeds from sale of:

 

 

 

 

 

Investment securities available-for-sale

 

351,842

 

325,721

 

Loans receivable

 

149,409

 

55,129

 

Loans held for sale originated for investment

 

206,569

 

 

Other real estate owned

 

20,943

 

38,677

 

Repayments, maturities and redemptions of investment securities available-for-sale

 

207,746

 

262,074

 

Paydowns, maturities and termination of securities purchased under resale agreements

 

500,000

 

300,000

 

Redemption of Federal Home Loan Bank stock

 

27,309

 

21,136

 

Surrender of life insurance policies

 

49,111

 

 

Other net investing activities

 

(5,525

)

244

 

Net cash used in investing activities

 

(741,029

)

(1,133,814

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Net increase (decrease) in:

 

 

 

 

 

Deposits

 

1,143,322

 

972,853

 

Short-term borrowings

 

 

(20,000

)

Proceeds from:

 

 

 

 

 

Issuance of common stock pursuant to various stock plans and agreements

 

1,207

 

1,150

 

Payment for:

 

 

 

 

 

Termination of securities purchased under resale agreements

 

(15,000

)

 

Repayment of FHLB advances

 

(10,000

)

 

Repayment of long-term debt

 

(20,310

)

 

Repurchase of vested shares due to employee tax liability

 

(7,308

)

(8,667

)

Repurchase of shares of treasury stock pursuant to the Stock Repurchase Plan

 

 

(199,992

)

Cash dividends

 

(51,956

)

(44,961

)

Tax benefit from stock compensation plans, net

 

3,787

 

2,803

 

Net cash provided by financing activities

 

1,043,742

 

703,186

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

350,224

 

(272,892

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

895,820

 

1,323,106

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

1,246,044

 

$

1,050,214

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

 

$

56,357

 

$

58,336

 

Income tax payments, net of refunds

 

221,355

 

92,096

 

Noncash investing and financing activities:

 

 

 

 

 

Loans transferred to loans held for sale, net

 

460,828

 

19,125

 

Transfers to other real estate owned

 

38,048

 

29,782

 

Issuance of stock related to acquisition

 

190,830

 

 

Conversion of preferred stock to common stock

 

 

83,027

 

Loans to facilitate sales of other real estate owned

 

 

139

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 — BASIS OF PRESENTATION

 

The consolidated financial statements include the accounts of East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) and its wholly-owned subsidiaries, East West Bank and subsidiaries (“East West Bank” or the “Bank”) and East West Insurance Services, Inc. Intercompany transactions and accounts have been eliminated in consolidation. East West also has six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”), one of which was the result of the acquisition of MetroCorp Bancshares, Inc. during the first quarter of 2014 as discussed in Note 3 to the Company’s consolidated financial statements. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, the Trusts are not consolidated into East West Bancorp, Inc.

 

The interim consolidated financial statements, presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), are unaudited and reflect all adjustments that, in the opinion of management, are necessary for a fair statement of financial condition and results of operations for the interim periods. All adjustments are of a normal and recurring nature. Results for the three and six months ended June 30, 2014 are not necessarily indicative of results that may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Events subsequent to the consolidated balance sheet date have been evaluated through the date the financial statements are issued for inclusion in the accompanying financial statements. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s 2013 Annual Report.

 

Certain prior year balances and notes have been reclassified to conform to current year presentation.

 

NOTE 2 — RECENT ACCOUNTING STANDARDS

 

In January 2014, the FASB issued ASU 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. ASU 2014-10 permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the amortization in the income statement as a component of income tax expense.  ASU 2014-01 is effective for interim and annual periods beginning after December 15, 2014 and if elected, should be applied retrospectively to all periods presented. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

 

In January 2014, the FASB issued ASU 2014-04, Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. ASU 2014-04 clarifies when an in—substance repossession or foreclosure occurs that would require a transfer of mortgage loans collateralized by residential real estate properties to other real estate owned. The standard permits the use of either a modified retrospective or prospective transition method.  ASU 2014-04 is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material effect on its consolidated financial statements.

 

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Table of Contents

 

NOTE 3 — BUSINESS COMBINATION

 

On January 17, 2014, the Company completed the acquisition of MetroCorp Bancshares, Inc. (“MetroCorp”) parent of MetroBank, N.A. and Metro United Bank. MetroCorp, headquartered in Houston, Texas, operated 19 branch locations within Texas and California under its two banks. The Company acquired MetroCorp to further expand its presence, primarily in Texas, within the markets of Houston and Dallas, and in California, within the San Diego market. The purchase consideration was satisfied two thirds in East West Bancorp stock and one third in cash. The fair value of the consideration transferred in the acquisition of MetroCorp was $291.4 million, which consisted of 5,583,093 shares of East West Bancorp common stock fair valued at $190.8 million at the date of acquisition and $89.4 million in cash, $2.4 million of additional cash to MetroCorp stock option holders and a MetroCorp warrant, fair valued at $8.8 million, assumed by the Bank.

 

Goodwill from the acquisition represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and is not deductible for tax purposes. As a result of the business combination, the Company recorded goodwill of $121.0 million.

 

The total fair value of assets acquired was $1.70 billion, which included $230.3 million in cash and due from banks, $64.3 million in investment securities available for sale, $2.7 million in Federal Home Loan Bank (“FHLB”) stock, $1.19 billion in loans receivable, $8.6 million in fixed assets, $8.6 million in premiums on deposits acquired, $9.4 million in other real estate owned (“OREO”), $30.0 million in bank owned life insurance, $13.0 million in deferred tax assets and $16.7 million in other assets. The total fair value of liabilities acquired was $1.41 billion, which included $1.32 billion in deposits, $10.0 million in FHLB advances, $25.9 million in repurchase agreements, $29.1 million in junior subordinated debt and $22.7 million in other liabilities. The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the January 17, 2014 acquisition date. The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. We have included the financial results of the business combinations in the consolidated statement of income beginning on the acquisition date.

 

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Table of Contents

 

NOTE 4 — FAIR VALUE

 

Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing the asset or liability. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy noted below. The hierarchy is based on the quality and reliability of the information used to determine fair values. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to data lacking transparency. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

 

·                                          Level 1 — Quoted prices for identical instruments that are highly liquid, observable and actively traded in over-the-counter markets. Level 1 financial instruments typically include U.S. Treasury securities.

 

·                                          Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data. Level 2 financial instruments typically include U.S. government debt and agency mortgage-backed securities, municipal securities, corporate debt securities, single issuer trust preferred securities, foreign exchange options, foreign exchange contracts and interest rate swaps and caps.

 

·                                          Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value is not solely based on observable market inputs and requires management judgment or estimation. This category typically includes pooled trust preferred securities, loans with a fair value adjustment, OREO and derivatives payable.

 

The Company records investment securities available-for-sale, derivative liabilities, foreign exchange options, interest rate swaps and caps and foreign exchange contracts at fair value on a recurring basis. Certain other assets such as loans with a fair value adjustment, other real estate owned, loans held for sale, goodwill, premiums on acquired deposits and other investments are recorded at fair value on a nonrecurring basis. Nonrecurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the remeasurement is performed.

 

In determining the appropriate hierarchy levels, the Company performs a detailed analysis of assets and liabilities that are subject to fair value disclosure. The following tables present both financial and nonfinancial assets and liabilities that are measured at fair value on a recurring and nonrecurring basis. These assets and liabilities are reported on the consolidated balance sheets at their fair values as of June 30, 2014 and December 31, 2013. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. There were no transfers for assets measured on a recurring basis in and out of Level 1, Level 2 or Level 3 during the first six months of 2014 and 2013.

 

12



Table of Contents

 

 

 

Assets (Liabilities) Measured at Fair Value on a Recurring Basis

 

 

 

as of June 30, 2014

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

 

 

Fair Value

 

Active Markets

 

Other

 

Significant

 

 

 

Measurements

 

for Identical

 

Observable

 

Unobservable

 

 

 

June 30,

 

Assets

 

Inputs

 

Inputs

 

 

 

2014

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(In thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

449,312

 

$

449,312

 

$

 

$

 

U.S. government agency and U.S. government sponsored enterprise debt securities

 

438,599

 

 

438,599

 

 

U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Commercial mortgage-backed securities

 

111,757

 

 

111,757

 

 

Residential mortgage-backed securities

 

797,966

 

 

797,966

 

 

Municipal securities

 

289,479

 

 

289,479

 

 

Other residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Investment grade

 

57,206

 

 

57,206

 

 

Other commercial mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Investment grade

 

51,463

 

 

51,463

 

 

Corporate debt securities:

 

 

 

 

 

 

 

 

 

Investment grade

 

210,870

 

 

210,870

 

 

Non-investment grade

 

16,579

 

 

8,662

 

7,917

 

Other securities

 

106,421

 

 

106,421

 

 

Total investment securities available-for-sale

 

$

2,529,652

 

$

449,312

 

$

2,072,423

 

$

7,917

 

Foreign exchange options

 

$

6,049

 

$

 

$

6,049

 

$

 

Interest rate swaps and caps

 

30,233

 

 

30,233

 

 

Foreign exchange contracts

 

4,499

 

 

4,499

 

 

Derivative liabilities

 

(48,388

)

 

(45,026

)

(3,362

)

 

 

 

Assets (Liabilities) Measured at Fair Value on a Recurring Basis

 

 

 

as of December 31, 2013

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

 

 

Fair Value

 

Active Markets

 

Other

 

Significant

 

 

 

Measurements

 

for Identical

 

Observable

 

Unobservable

 

 

 

December 31,

 

Assets

 

Inputs

 

Inputs

 

 

 

2013

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(In thousands)

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

491,632

 

$

491,632

 

$

 

$

 

U.S. government agency and U.S. government sponsored enterprise debt securities

 

394,323

 

 

394,323

 

 

U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Commercial mortgage-backed securities

 

178,870

 

 

178,870

 

 

Residential mortgage-backed securities

 

885,237

 

 

885,237

 

 

Municipal securities

 

280,979

 

 

280,979

 

 

Other residential mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Investment grade

 

46,327

 

 

46,327

 

 

Other commercial mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Investment grade

 

51,617

 

 

51,617

 

 

Corporate debt securities:

 

 

 

 

 

 

 

 

 

Investment grade

 

309,995

 

 

309,995

 

 

Non-investment grade

 

15,101

 

 

8,730

 

6,371

 

Other securities

 

79,716

 

 

79,716

 

 

Total investment securities available-for-sale

 

$

2,733,797

 

$

491,632

 

$

2,235,794

 

$

6,371

 

Foreign exchange options

 

$

6,290

 

$

 

$

6,290

 

$

 

Interest rate swaps and caps

 

28,078

 

 

28,078

 

 

Foreign exchange contracts

 

6,181

 

 

6,181

 

 

Derivative liabilities

 

(50,262

)

 

(46,607

)

(3,655

)

 

13



Table of Contents

 

Assets measured at fair value on a nonrecurring basis using significant unobservable inputs include certain loans and OREO. The inputs and assumptions for nonrecurring Level 3 fair value measurements for certain loans and OREO include adjustments to external and internal appraisals for changes in the market, assumptions by appraiser embedded into appraisals, probability weighting of broker price opinions, and management’s adjustments for other relevant factors and market trends.

 

 

 

Assets Measured at Fair Value on a Non-Recurring Basis

 

 

 

as of and for the Three Months Ended June 30, 2014

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

Total Gains

 

 

 

Fair Value

 

Active Markets

 

Other

 

Significant

 

(Losses) for the

 

 

 

Measurements

 

for Identical

 

Observable

 

Unobservable

 

Three Months Ended

 

 

 

June 30,

 

Assets

 

Inputs

 

Inputs

 

June 30,

 

 

 

2014

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

2014

 

 

 

(In thousands)

 

Non-covered loans:

 

 

 

 

 

 

 

 

 

 

 

Total residential

 

$

17,908

 

$

 

$

 

$

17,908

 

$

413

 

Total commercial real estate

 

22,758

 

 

 

22,758

 

1,865

 

Total commercial and industrial

 

9,837

 

 

 

9,837

 

(9,642

)

Total consumer

 

 

 

 

 

 

Total non-covered loans

 

$

50,503

 

$

 

$

 

$

50,503

 

$

(7,364

)

Non-covered OREO

 

$

676

 

$

 

$

 

$

676

 

$

 

Covered OREO (1)

 

$

4,009

 

$

 

$

 

$

4,009

 

$

(69

)

 

 

 

Assets Measured at Fair Value on a Non-Recurring Basis

 

 

 

as of and for the Three Months Ended June 30, 2013

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

Total Gains

 

 

 

Fair Value

 

Active Markets

 

Other

 

Significant

 

(Losses) for the

 

 

 

Measurements

 

for Identical

 

Observable

 

Unobservable

 

Three Months Ended

 

 

 

June 30,

 

Assets

 

Inputs

 

Inputs

 

June 30,

 

 

 

2013

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

2013

 

 

 

(In thousands)

 

Non-covered loans:

 

 

 

 

 

 

 

 

 

 

 

Total residential

 

$

22,012

 

$

 

$

 

$

22,012

 

$

(838

)

Total commercial real estate

 

35,349

 

 

 

35,349

 

(1,320

)

Total commercial and industrial

 

9,203

 

 

 

9,203

 

674

 

Total consumer

 

372

 

 

 

372

 

4

 

Total non-covered loans

 

$

66,936

 

$

 

$

 

$

66,936

 

$

(1,480

)

Non-covered OREO

 

$

435

 

$

 

$

 

$

435

 

$

(18

)

Covered OREO (1)

 

$

7,500

 

$

 

$

 

$

7,500

 

$

(1,000

)

 


(1)             Covered OREO results from the WFIB and UCB FDIC-assisted acquisitions for which the Company entered into shared-loss agreements with the FDIC whereby the FDIC will reimburse the Company for 80% of eligible losses. As such, the Company’s liability for losses is 20% of the $69 thousand in losses, or $14 thousand, and 20% of the $1.0 million in losses, or $200 thousand, for the three months ended June 30, 2014 and 2013, respectively.

 

14



Table of Contents

 

 

 

Assets Measured at Fair Value on a Non-Recurring Basis

 

 

 

as of and for the Six Months Ended June 30, 2014

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

Total Gains

 

 

 

Fair Value

 

Active Markets

 

Other

 

Significant

 

(Losses) for the

 

 

 

Measurements

 

for Identical

 

Observable

 

Unobservable

 

Six Months Ended

 

 

 

June 30,

 

Assets

 

Inputs

 

Inputs

 

June 30,

 

 

 

2014

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

2014

 

 

 

(In thousands)

 

Non-covered loans:

 

 

 

 

 

 

 

 

 

 

 

Total residential

 

$

9,800

 

$

 

$

 

$

9,800

 

$

27

 

Total commercial real estate

 

22,333

 

 

 

22,333

 

1,376

 

Total commercial and industrial

 

8,941

 

 

 

8,941

 

(11,705

)

Total consumer

 

 

 

 

 

 

Total non-covered loans

 

$

41,074

 

$

 

$

 

$

41,074

 

$

(10,302

)

Non-covered OREO

 

$

676

 

$

 

$

 

$

676

 

$

(74

)

Covered OREO (1)

 

$

4,009

 

$

 

$

 

$

4,009

 

$

(521

)

 

 

 

Assets Measured at Fair Value on a Non-Recurring Basis

 

 

 

as of and for the Six Months Ended June 30, 2013

 

 

 

 

 

Quoted Prices in

 

Significant

 

 

 

Total Gains

 

 

 

Fair Value

 

Active Markets

 

Other

 

Significant

 

(Losses) for the

 

 

 

Measurements

 

for Identical

 

Observable

 

Unobservable

 

Six Months Ended

 

 

 

June 30,

 

Assets

 

Inputs

 

Inputs

 

June 30,

 

 

 

2013

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

2013

 

 

 

(In thousands)

 

Non-covered loans:

 

 

 

 

 

 

 

 

 

 

 

Total residential

 

$

19,971

 

$

 

$

 

$

19,971

 

$

(1,274

)

Total commercial real estate

 

30,397

 

 

 

30,397

 

(3,422

)

Total commercial and industrial

 

9,723

 

 

 

9,723

 

(1,492

)

Total consumer

 

293

 

 

 

293

 

(112

)

Total non-covered loans

 

$

60,384

 

$

 

$

 

$

60,384

 

$

(6,300

)

Non-covered OREO

 

$

13,238

 

$

 

$

 

$

13,238

 

$

(1,403

)

Covered OREO (1)

 

$

11,030

 

$

 

$

 

$

11,030

 

$

(1,126

)

 


(1)             Covered OREO results from the WFIB and UCB FDIC-assisted acquisitions for which the Company entered into shared-loss agreements with the FDIC whereby the FDIC will reimburse the Company for 80% of eligible losses. As such, the Company’s liability for losses is 20% of the $521 thousand in losses, or $104 thousand, and 20% of the $1.1 million in losses, or $225 thousand, for the six months ended June 30, 2014 and 2013, respectively

 

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Table of Contents

 

At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. The following tables provide a reconciliation of the beginning and ending balances for major asset and liability categories measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2014 and 2013:

 

 

 

Investment Securities
Available-for-Sale

 

 

 

 

 

Corporate Debt
Securities

 

 

 

 

 

Non-Investment Grade

 

Derivatives Payable

 

 

 

(In thousands)

 

Opening balance, April 1, 2014

 

$

6,717

 

$

(3,398

)

Total gains or (losses) for the period: (1)

 

 

 

 

 

Included in earnings

 

 

36

 

Included in other comprehensive income (unrealized) (2)

 

1,209

 

 

Purchases, issues, sales, settlements (3)

 

 

 

 

 

Purchases

 

 

 

Issues

 

 

 

Sales

 

 

 

Settlements

 

(9

)

 

Transfer from investment grade to non-investment grade

 

 

 

Transfers in and/or out of Level 3

 

 

 

Closing balance, June 30, 2014

 

$

7,917

 

$

(3,362

)

Changes in unrealized gains included in earnings relating to assets and liabilities held at the end of June 30, 2014

 

$

 

$

(36

)

 

 

 

Investment Securities
Available-for-Sale

 

 

 

 

 

Corporate Debt
Securities

 

 

 

 

 

Non-Investment Grade

 

Derivatives Payable

 

 

 

(In thousands)

 

Opening balance, April 1, 2013

 

$

5,284

 

$

(3,233

)

Total gains or (losses) for the period: (1)

 

 

 

 

 

Included in earnings

 

 

(24

)

Included in other comprehensive income (unrealized) (2)

 

239

 

 

Purchases, issues, sales, settlements (3)

 

 

 

 

 

Purchases

 

 

 

Issues

 

 

 

Sales

 

 

 

Settlements

 

(6

)

 

Transfer from investment grade to non-investment grade

 

 

 

Transfers in and/or out of Level 3

 

 

 

Closing balance, June 30, 2013

 

$

5,517

 

$

(3,257

)

Changes in unrealized losses included in earnings relating to assets and liabilities held at the end of June 30, 2013

 

$

 

$

24

 

 


(1)             Total gains or losses represent the total realized and unrealized gains and losses recorded for Level 3 assets and liabilities. Realized gains or losses are reported in the consolidated statements of income.

(2)             Unrealized gains or losses on investment securities are reported in accumulated other comprehensive income (loss), net of tax, in the consolidated statements of comprehensive income.

(3)             Purchases, issuances, sales, and settlements represent Level 3 assets and liabilities that were either purchased, issued, sold, or settled during the period. The amounts are recorded at their end of period fair values.

 

16



Table of Contents

 

 

 

Investment Securities 
Available-for-Sale

 

 

 

 

 

Corporate Debt 
Securities

 

 

 

 

 

Non-Investment Grade

 

Derivatives Payable

 

 

 

(In thousands)

 

Beginning balance, January 1, 2014

 

$

6,371

 

$

(3,655

)

Total gains or (losses) for the period: (1)

 

 

 

 

 

Included in earnings

 

 

293

 

Included in other comprehensive income (unrealized) (2)

 

1,643

 

 

Purchases, issues, sales, settlements (3)

 

 

 

 

 

Purchases

 

 

 

Issues

 

 

 

Sales

 

 

 

Settlements

 

(97

)

 

Transfer from investment grade to non-investment grade

 

 

 

Transfers in and/or out of Level 3

 

 

 

Closing balance, June 30, 2014

 

$

7,917

 

$

(3,362

)

Changes in unrealized gains included in earnings relating to assets and liabilities held at the end of June 30, 2014

 

$

 

$

(293

)

 

 

 

Investment Securities 
Available-for-Sale

 

 

 

 

 

Corporate Debt 
Securities

 

 

 

 

 

Non-Investment Grade

 

Derivatives Payable