REGULATORY REQUIREMENTS

12 Months Ended

Dec. 31, 2014

REGULATORY REQUIREMENTS

REGULATORY REQUIREMENTS

NOTE 19 — REGULATORY REQUIREMENTS

Capital Adequacy — The Bank is a member bank of the Federal Reserve System and the Federal Reserve Bank is the Bank’s primary regulator. The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. These requirements are based upon the 1988 capital accord (“Basel I”) of the Basel Committee on Banking Supervision. The Federal Deposit Insurance Corporation Improvement Act of 1991 requires that the federal regulatory agencies adopt regulations defining capital tiers for banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company and the Bank's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

As of December 31, 2014 and 2013, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain specific Basel I total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. The Company believes that no changes in conditions or events have occurred since December 31, 2014, which would result in changes that would cause the Company or the Bank to fall below the well capitalized level.

The following table presents the regulatory capital information of the Company and the Bank as of December 31, 2014 and 2013:

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
					($ in thousands)
As of December 31, 2014
Total Capital (to Risk-Weighted Assets)
Company	$	2,753,598	12.6	%	$	1,754,519	8.0	%	N/A		N/A
East West Bank	$	2,590,174	11.8	%	$	1,750,006	8.0	%	$	2,187,508	10.0	%
Tier I Capital (to Risk-Weighted Assets)
Company	$	2,405,452	11.0	%	$	877,259	4.0	%	N/A		N/A
East West Bank	$	2,316,615	10.6	%	$	875,003	4.0	%	$	1,312,505	6.0	%
Tier I Capital (to Average Assets)
Company	$	2,405,452	8.4	%	$	1,140,045	4.0	%	N/A		N/A
East West Bank	$	2,316,615	8.2	%	$	1,136,734	4.0	%	$	1,420,917	5.0	%
As of December 31, 2013
Total Capital (to Risk-Weighted Assets)
Company	$	2,395,109	13.5	%	$	1,416,203	8.0	%	N/A		N/A
East West Bank	$	2,262,494	12.9	%	$	1,407,944	8.0	%	$	1,759,931	10.0	%
Tier I Capital (to Risk-Weighted Assets)
Company	$	2,102,476	11.9	%	$	708,102	4.0	%	N/A		N/A
East West Bank	$	2,041,894	11.6	%	$	703,972	4.0	%	$	1,055,958	6.0	%
Tier I Capital (to Average Assets)
Company	$	2,102,476	8.6	%	$	976,596	4.0	%	N/A		N/A
East West Bank	$	2,041,894	8.4	%	$	973,958	4.0	%	$	1,217,448	5.0	%

Under the Dodd-Frank Act, bank holding companies with more than $15 billion in total consolidated assets are no longer able to include trust preferred securities as Tier I regulatory capital which commenced in 2013 with phase-out complete in 2016. As of December 31, 2014 and 2013, trust preferred securities comprised 3.1% and 4.4%, respectively, of the Company’s Basel I Tier I capital.

In July 2013, the FRB published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The final rules apply to all depository institutions and top-tier bank holding companies with assets of $500 million or more. The Basel III Capital Rules are effective for the Company and the Bank on January 1, 2015 (subject to phase-in periods for certain of their components).

Reserve Requirement — The Bank is required to maintain a percentage of its deposits as reserves at the Federal Reserve Bank. The daily average reserve requirement was approximately $325.7 million and $218.5 million as of December 31, 2014 and 2013, respectively.