Regulatory Requirements and Matters

12 Months Ended

Dec. 31, 2022

Banking and Thrift, Interest [Abstract]

Regulatory Requirements and Matters

Regulatory Requirements and Matters

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. As standardized approaches institutions, the Basel III Capital Rules require that banking organizations, such as the Company and the Bank, to 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 Company and the Bank are also subject to maintain a capital conservation buffer of 2.5% above the minimum risk-based capital ratios under the Basel III Capital Rules. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but which does not exceed the capital conservation buffer will face constraints on dividends, share repurchases and executive compensation based on the amount of the shortfall.

The Federal Deposit Insurance Corporation 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. Under the agencies’ Prompt Corrective Action regulations, failure of a bank to be well capitalized results in an escalating series of adverse regulatory consequences.

Effective January 1, 2020, the Company adopted the ASU 2016-13 Financial Instruments — Credit Losses (Topic 326) Measurement of Credit Losses on Financial instrument that introduced the CECL methodology. In March 2020, the federal banking agencies issued the Interim Final Rule that provided banking organizations that adopted the CECL with the phase-in option to delay the estimated impact of CECL on regulatory capital. The Bank and the Company have elected the CECL phase-in option in 2020 and delayed the impact of CECL on regulatory capital through 2021, after which the effects are being phased in over a three-year period from January 1, 2022 through December 31, 2024.

As of both December 31, 2022 and 2021, 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, 2022, 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, 2022 and 2021:

($ in thousands)	Basel III
	December 31, 2022				December 31, 2021				Minimum Capital  Ratios		Fully Phased-in Minimum Capital  Ratios (2)		Well- Capitalized Requirement
	Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)
Company	$	7,003,299	14.0	%	$	6,124,827	14.1	%	8.0	%	10.5	%	10.0	%
East West Bank	$	6,760,612	13.5	%	$	5,766,734	13.2	%	8.0	%	10.5	%	10.0	%
Tier 1 capital (to risk-weighted assets)
Company	$	6,347,108	12.7	%	$	5,559,357	12.8	%	6.0	%	8.5	%	6.0	%
East West Bank	$	6,252,421	12.5	%	$	5,349,264	12.3	%	6.0	%	8.5	%	8.0	%
CET1 capital (to risk-weighted assets)
Company	$	6,347,108	12.7	%	$	5,559,357	12.8	%	4.5	%	7.0	%	6.5	%
East West Bank	$	6,252,421	12.5	%	$	5,349,264	12.3	%	4.5	%	7.0	%	6.5	%
Tier 1 leverage capital (to adjusted average assets)
Company (1)	$	6,347,108	9.8	%	$	5,559,357	9.0	%	4.0	%	4.0	%	N/A
East West Bank	$	6,252,421	9.7	%	$	5,349,264	8.6	%	4.0	%	4.0	%	5.0	%
Risk-weighted assets
Company	$	50,036,719	N/A		$	43,585,105	N/A		N/A		N/A		N/A
East West Bank	$	50,024,772	N/A		$	43,572,086	N/A		N/A		N/A		N/A
Adjusted quarterly average total assets
Company	$	65,221,597	N/A		$	62,387,003	N/A		N/A		N/A		N/A
East West Bank	$	65,198,267	N/A		$	62,366,514	N/A		N/A		N/A		N/A

N/A — Not applicable.

(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)Includes a 2.5% capital conservation buffer requirement above the minimum risk-based capital ratios.