Regulatory Requirements and Matters

12 Months Ended

Dec. 31, 2020

Banking and Thrift, Interest [Abstract]

Regulatory Requirements and Matters

Regulatory Requirements and Matters

Capital Adequacy — The Company and the Bank are subject to regulatory capital adequacy requirements administered by the federal banking agencies. The Bank is a member bank of the Federal Reserve System and is primarily regulated by the Federal Reserve and the California Department of Financial Protection and Innovation. The Company and the Bank are required to comply with the Basel III Capital Rules adopted by the federal banking agencies. Both the Company and the Bank are standardized approaches institutions under Basel III Capital Rules. The Basel III Capital Rule requires that banking organizations maintain a minimum Common Equity Tier 1 (“CET1”) capital ratio of at least 4.5%, a Tier 1 capital ratio of at least 6.0%, a total capital ratio of at least 8.0%, and a Tier 1 leverage ratio of a least 4.0% to be considered adequately capitalized. Failure to meet the minimum capital requirements can result in certain mandatory actions and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the Company’s Consolidated Financial Statements. The Basel III Capital Rules also requires the Company and the Bank to maintain a capital conservation buffer of 2.5% above the minimum risk-based capital ratios in order to absorb losses during periods of economic stress, effective January 1, 2019. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

The FDIC Improvement Act of 1991 requires that the federal regulatory agencies adopt regulations defining capital categories for banks: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Consistent with the Basel III Capital Rules, the capital categories were augmented by including the CET1 capital measure, and revised risk-based capital measures to reflect the rule changes to the minimum risk-based capital ratios.

As of December 31, 2020 and 2019, the Company and the Bank were both categorized as well capitalized based on applicable U.S. regulatory capital ratio requirements in accordance with Basel III standardized approaches, as set forth in the table below. The Company believes that no changes in conditions or events have occurred since December 31, 2020, 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, 2020 and 2019:

($ in thousands)	Basel III
	December 31, 2020				December 31, 2019				Minimum Capital Ratios		Fully Phased-in Minimum Capital    Ratios (3)		Well- Capitalized Requirement
	Actual				Actual
	Amount		Ratio		Amount		Ratio		Ratio		Ratio		Ratio
Total capital (to risk-weighted assets)
Company	$	5,510,640	14.3	%	$	5,064,037	14.4	%	8.0	%	10.5	%	10.0	%
East West Bank	$	5,143,246	13.4	%	$	4,886,237	13.9	%	8.0	%	10.5	%	10.0	%
Tier 1 capital (to risk-weighted assets)
Company	$	4,882,555	12.7	%	$	4,546,592	12.9	%	6.0	%	8.5	%	8.0	%
East West Bank	$	4,662,426	12.1	%	$	4,516,792	12.9	%	6.0	%	8.5	%	8.0	%
CET1 capital (to risk-weighted assets)
Company	$	4,882,555	12.7	%	$	4,546,592	12.9	%	4.5	%	7.0	%	6.5	%
East West Bank	$	4,662,426	12.1	%	$	4,516,792	12.9	%	4.5	%	7.0	%	6.5	%
Tier 1 leverage capital (to adjusted average assets)
Company (1)	$	4,882,555	9.4	%	$	4,546,592	10.3	%	4.0	%	4.0	%	N/A
East West Bank	$	4,662,426	9.0	%	$	4,516,792	10.3	%	4.0	%	4.0	%	5.0	%
Risk-weighted assets
Company	$	38,406,071	N/A		$	35,136,427	N/A		N/A		N/A		N/A
East West Bank	$	38,481,275	N/A		$	35,127,920	N/A		N/A		N/A		N/A
Adjusted quarterly average total assets (2)
Company	$	52,540,964	N/A		$	44,449,802	N/A		N/A		N/A		N/A
East West Bank	$	52,594,313	N/A		$	44,419,308	N/A		N/A		N/A		N/A

(1)The Tier 1 leverage capital well-capitalized requirement applies only to the Bank since there is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.

(2)Reflects adjusted quarterly average total assets for the years ended December 31, 2020 and 2019.

(3)As of January 1, 2019, the 2.5% capital conservation buffer above the minimum risk-based capital ratios was required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.

N/A — Not applicable.

Reserve Requirement — The Bank is required to maintain a percentage of its deposits as reserves at the Federal Reserve. In an effort to provide monetary stimulus to counteract the economic disruption caused by the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratio to zero percent. The daily average reserve requirements were zero as of December 31, 2020 and $829.0 million as of December 31, 2019.