~~Legislation and Regulatory Developments~~

~~The Dodd-Frank Wall Street Reform and Consumer Protection Act~~

The Dodd-Frank Wall Street Reform and Consumer Protection Act financial reform legislation (“Dodd-Frank”), significantly revised and expanded the rulemaking, supervisory and enforcement authority of the federal bank regulatory agencies. The Dodd-Frank followed the Emergency Economic Stabilization Act of 2008 and the American Recovery and Reinvestment Act of 2009 in response to the economic downturn and financial industry instability. Dodd-Frank authorized the creation of the Consumer Financial Protection Bureau (“CFPB”) responsible for consumer protection in the financial services industry. Additional initiatives may be proposed or introduced before Congress, the California Legislature and other government bodies in the future. Such proposals, if enacted, may further alter the structure, regulation and competitive relationship among financial institutions and may subject us to increased supervision, disclosure and reporting requirements. In addition, the various bank regulatory agencies often adopt new rules, regulations and policies to implement and enforce existing legislation. It cannot be predicted whether, or in what form, any such legislation or regulatory changes in policy may be enacted or the extent to which the business of the Bank would be affected thereby. In addition, the outcome of examinations, any litigation, or any investigations initiated by state or federal authorities may result in necessary changes to our operations and increased compliance costs.

Dodd-Frank impacts many aspects of the financial industry and will impact larger and smaller financial institutions and community banks differently over time. Many of the key provisions of the Dodd-Frank affecting the financial industry are now either effective or are in the proposed rule or implementation stages.

Supervision and Regulation

General

East West and the Bank are extensively regulated under both federal and state laws. Regulation and supervision by the federal and state banking agencies are intended primarily for the protection of depositors and the Deposit Insurance Fund (“DIF”) administered by the FDIC and not for the ~~benefit~~protection of our stockholders. ~~Set forth~~As a bank holding company, East West is subject to primary inspection, supervision, regulation and examination by the Board of Governors of the Federal Reserve under the BHCA. The Bank, as a California state-chartered bank and a member of the Federal Reserve System, is subject to primary supervision and examination by the Federal Reserve, as well as the California Department of Business Oversight (“DBO”) - Division of Financial Institutions. The Company is also subject to regulation by certain foreign regulatory agencies where we conduct business.

The Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Exchange Act as administered by the SEC. Our common stock is listed on the NASDAQ Global Select Market (“NASDAQ”) under the trading symbol “EWBC” and is subject to NASDAQ rules for listed companies. The Company is also subject to the accounting oversight and corporate governance of the Sarbanes-Oxley Act of 2002.

Described below ~~is a brief description~~are material elements of ~~key~~selected laws and regulations ~~which relate~~applicable to ~~our operations. These~~East West and the Bank. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described. A change in applicable ~~laws and regulations. The federal and state agencies regulating~~statutes, regulations or regulatory policy may have a material effect on the ~~financial services industry also frequently adopt changes to their regulations.~~Company’s business.

East West

~~As a bank holding company, and pursuant to its election of financial holding company status,~~ East West is subject to regulation and examination by the Federal Reserve ~~Board (“FRB”)~~ under the BHCA and its authority ~~to:~~to, among other things:

require periodic reports and such additional information as the ~~FRB~~Federal Reserve may require;

require the Company to maintain certain levels of capital ~~(see “ITEM~~and, under the Dodd-Frank Act, limit the ability of bank holding companies to pay dividends or bonuses unless their capital levels exceed the capital conservation buffer (please see Item 1. ~~BUSINESS~~Business — Supervision and Regulation — Capital ~~Requirements”~~Requirements);

require ~~that~~ bank holding companies ~~such as the Company,~~to serve as a source of financial and managerial strength to subsidiary banks and commit resources, as necessary, to support each subsidiary bank. A bank holding company’s failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the ~~FRB~~Federal Reserve to be an unsafe and unsound banking practice or a violation of ~~FRB~~Federal Reserve regulations or both;

restrict the receipt and the payment of dividends;

terminate an activity or terminate control of or liquidate or divest certain subsidiaries, affiliates or investments if the ~~FRB~~Federal Reserve believes that the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any bank subsidiary;

regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt and require prior approval to purchase or redeem ~~our~~the Company’s securities in certain situations;

require the prior approval of senior executive officer or director changes and prohibit golden parachute payments, including change in control agreements, or new employment agreements with such payment terms, which are contingent upon termination;

approve acquisitions and mergers with banks and consider certain competitive, management, financial and other factors in granting these approvals. DBO approvals may also be required for certain mergers and acquisitions.

East West may engage in certain nonbanking activities and broader securities, insurance, merchant banking and other activities that are determined to be “financial in nature” or are incidental or complementary to activities that are financial in nature without prior FRB approval pursuant to its election to become a financial holding company. As a bank holding company within the meaning of the California Financial Code, East West is subject to examination by, and may be required to file reports with the ~~Department of Business Oversight (“DBO”). DBO approvals may also be required for certain mergers~~DBO.

The Bank and ~~acquisitions.~~its subsidiaries

~~The~~East West Bank

As is a California state-chartered bank, a member and stockholder of the Federal Reserve and a member of the FDIC. The Bank is subject to primary supervision, periodic examination, and regulation by the CFPB, DBO, and by the ~~FRB~~Federal Reserve, as the Bank’s primary federal regulator. The ~~FRB~~Federal Reserve and the DBO also regulate the Bank’s foreign operations. These operations are subject to the supervisory authorities of the host countries in which the Bank’s overseas offices reside. Specific federal and state laws and regulations which are applicable to banks regulate, among other things, the scope of their business, their investments, their reserves against deposits, the timing of the availability of deposited funds, and the nature and amount of collateral for certain loans. The regulatory structure also gives the bank regulatory agencies extensive discretion in connection with their supervisory and enforcement activities and examination policies.

~~Permissible Activities and Subsidiaries~~

California law permits state chartered commercial banks to engage in any activity permissible for national banks, unless such activity is expressly prohibited by state law. Therefore, the Bank may form subsidiaries to engage in the many so-called “closely related to banking” or “nonbanking” activities commonly conducted by national banks in operating subsidiaries, and further, pursuant to the Gramm Leach Bliley Act, ~~(“GLBA”),~~ the Bank may conduct certain “financial” activities in a subsidiary to the same extent ~~as may~~permitted for a national bank, provided the Bank is and remains “well-capitalized,” “well-managed” and in satisfactory compliance with the Community Reinvestment Act (“CRA”). ~~Presently, none~~

Regulation of Subsidiaries/Branches

Foreign-based subsidiaries, including East West Bank China (Limited), are subject to applicable foreign laws and regulations, such as those implemented by the China Banking Regulatory Commission. Nonbank subsidiaries are subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies. The Agency is subject to the licensing and supervisory authority of the ~~Bank’s subsidiaries~~California Department of Insurance. The East West Hong Kong branch is subject to applicable foreign laws and regulations, such as those implemented by the Hong Kong Monetary Authority.

Dodd-Frank Act

The Dodd-Frank Act, which was enacted in July 2010, comprehensively reformed the regulation of financial institutions and their products and services. The Dodd-Frank Act also significantly revised and expanded the rulemaking, supervisory and enforcement authority of the federal bank regulatory agencies. Among other things, the Dodd-Frank Act established the CFPB to be responsible for consumer protection in the financial services industry; provided for new capital standards that eliminate the treatment of trust preferred securities as Tier 1 regulatory capital; required that deposit insurance assessments be calculated based on an insured depository institution’s assets rather than its insured deposits; raised the minimum Designated Reserve Ratio to 1.35%; established a comprehensive regulatory regime for the derivatives activities of financial institutions; established new compensation restrictions and standards regarding the time, manner and form of compensation given to key executives and other personnel receiving incentive compensation; prohibited banking entities, after a transition period, from engaging in certain types of proprietary trading, as well as having investments in, sponsoring, and maintaining certain types of relationships with hedge funds and private equity funds (through provisions commonly referred to as the “Volcker Rule”); placed limitations on the interchange fees charged for debit card transactions; and established new minimum mortgage underwriting standards for residential mortgages.

The Dodd-Frank Act impacts many aspects of the financial industry and will impact larger and smaller financial institutions and community banks differently over time. Many of the key provisions of the Dodd-Frank Act affecting the financial industry are either in effect or are in the proposed rules or implementation stages.

CFPB Supervision

The Dodd-Frank Act centralized responsibility for consumer financial ~~subsidiaries.~~protection by creating a new agency, the CFPB, and giving it responsibility for implementing, examining and enforcing compliance with federal consumer financial laws. Depository institutions with assets exceeding $10 billion (such as the Bank), their affiliates, and certain non-banks in the markets for consumer financial services (as determined by the CFPB) are subject to direct supervision by the CFPB, including any applicable examination, enforcement and reporting requirements the CFPB may establish. The CFPB is focused on:

~~FHLB~~

risks to consumers and compliance with the Federal consumer financial laws, when it evaluates the policies and practices of a financial institution;

unfair, deceptive, or abusive acts on practices, which the Dodd-Frank Act empowers the agency to prevent through rulemaking, enforcement and examination;

rulemaking to implement various federal consumer statutes such as the Home Mortgage Disclosure Act, Truth in Lending Act, Real Estate Settlement Procedures Act and Electronic Fund Transfer Act;

the markets in which firms operate and risks to consumers posed by activities in those markets; and

with respect to the indirect auto business, holding lenders accountable for discriminatory dealer markups.

The statutes and regulations that the CFPB enforces mandate certain disclosure and other requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services. In addition, the Department of Justice enforces the Servicemembers Civil Relief Act, which provides protection for military servicemembers and their family including a limitation on the ability to retake collateral in the event of default and a statutory interest rate cap for certain debts. Failure to comply with these laws can subject the Bank to various penalties, including, but not limited, to enforcement actions, injunctions, fines or criminal penalties, punitive damages or restitution to consumers, and the loss of certain contractual rights. The Bank and the Company are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.

Federal Home Loan Bank (“FHLB”) and Federal Reserve ~~System~~

The Bank is a member of the FHLB of San Francisco. As an FHLB member, the Bank is required to own a certain amount of capital stock in the FHLB. The Bank may also access FHLB for both short-term and long-term secured borrowing sources. The ~~FRB~~Federal Reserve requires all depository institutions to maintain ~~interest-bearing~~interest-earning reserves at specified levels against their transaction accounts. As of December 31, ~~2014,~~2015, the Bank was in compliance with these requirements. As a member bank, the Bank is also required to own capital stock in the Federal ~~Reserve Bank.~~Reserve.

Dividends and Other Transfers of Funds

Dividends from the Bank constitute the principal source of income to East West. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends. In addition, the banking agencies have the authority to prohibit or limit the Bank from paying dividends, depending upon the Bank’s financial condition, if such payment is deemed to constitute an unsafe or unsound practice. Furthermore, under the federal prompt corrective action (“PCA”) regulations, the ~~FRB~~Federal Reserve or FDIC may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.” For more information, please see ~~“Capital Requirements”~~Capital Requirements below.

It is ~~FRB’s~~the Federal Reserve’s policy that bank holding companies should generally pay dividends on common stock only out of income available over the past ~~year,~~years and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also ~~FRB’s~~the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine the company’s ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the ~~FRB~~Federal Reserve has stated that bank holding companies should carefully review their dividend policy and has discouraged payment ratios that are at maximum allowable levels, unless both asset quality and capital are very strong.

~~Capital Requirements~~

Transactions with Affiliates

Federal laws strictly limit the ability of banks to engage in transactions with their affiliates, including their bank holding companies. Regulations promulgated by the Federal Reserve limit the types and amounts of these transactions that may take place and generally require those transactions to be on an arm's length basis. In general, these regulations require that “covered transactions” between a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company are limited to 10% of the bank subsidiary's capital and surplus and, with respect to such parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary's capital and surplus. Further, these restrictions, contained in the Federal Reserve’s Regulation W, prevent East West and other affiliates from borrowing from, or entering into other credit transactions with, the Bank or its operating subsidiaries, unless the loans or other credit transactions are secured by specified amounts of collateral. Federal law also limits a bank's authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons. Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons. The terms of such extensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the bank's capital. The Dodd-Frank Act treats derivative transactions resulting in credit exposure to an affiliate as covered transactions. It expands the transactions for which collateral is required to be maintained, and for all such transactions, it requires collateral to be maintained at all times. In addition, the Volcker Rule under the Dodd-Frank Act establishes certain prohibitions, restrictions and requirements (known as “Super 23A” and “Super 23B”) on transactions between a covered fund and a banking entity that serves as an investment manager, investment adviser, organizer and offeror, or sponsor with respect to that covered fund, regardless of whether the banking entity has an ownership interest in the fund.

Stress Testing for Banks with Assets of $10 Billion to $50 Billion

The Dodd-Frank Act requires stress testing of bank holding companies and banks that have more than $10 billion but less than $50 billion of consolidated assets (“$10 - $50 billion companies”). Additional stress testing is required for banking organizations having $50 billion or more of assets. $10 - $50 billion companies, including the Company and the Bank, are ~~subject~~required to ~~various~~conduct annual company-run stress tests under rules the federal bank regulatory agencies issued in October 2012. Stress tests assess the potential impact of scenarios on the consolidated earnings, balance sheet and capital ~~requirements administered by state~~of a bank holding company or bank over a designated planning horizon of nine quarters, taking into account the organization’s current condition, risks, exposures, strategies, activities and such factors as the regulators may request of a specific organization. Each banking organization’s Board and senior management are required to review and approve the policies and procedures of their stress testing processes as frequently as economic conditions or the condition of the organization may warrant, and at least annually. They are also required to consider the results of the stress test in the normal course of business, including the banking organization’s capital planning (including dividends and share buybacks), assessment of capital adequacy and maintaining capital consistent with its risks, and risk management practices. The results of the stress tests are provided to the applicable federal banking agencies. The ~~regulatory agencies’ risk-based capital guidelines are based upon the 1988 capital accord (“Basel I”)~~final rule requirement for public disclosure of a summary of the ~~International Basel Committee~~stress testing results for the $10 - $50 billion companies has been implemented starting with the 2014 stress test, with the disclosure requirements effective in June 2015.

CRA

Under the CRA as implemented by FDIC regulations, an institution has a continuing and affirmative obligation to help serve the credit needs of its communities, including extending credit to low- and moderate-income neighborhoods. The CRA requires public disclosure of the Bank’s CRA rating. Should the Bank fail to serve the community adequately, potential penalties may include regulatory denials of applications to expand branches, relocate, add subsidiaries and affiliates, expand into new financial activities and merge with or purchase other financial institutions.

FDIC Deposit Insurance Assessments

The FDIC insures the Bank’s customer deposits through the DIF of the FDIC up to prescribed limits for each depositor. The Bank is subject to deposit insurance assessments as determined by the FDIC. The Dodd-Frank Act increased the minimum target DIF ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more, such as the Bank are responsible for funding the increase. For additional information regarding deposit insurance, see Item 1A. Risk Factors. The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices that pose a risk to the DIF or that may prejudice the interest of the bank’s depositors. The termination of deposit insurance for the Bank would also result in the revocation of the Bank’s charter by the DBO.

Anti-Money Laundering (“AML”) and Office of Foreign Assets Control (“OFAC”) Regulation

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The Bank ~~Supervision~~Secrecy Act (“~~Basel Committee”~~BSA”)~~. This~~ and its implementing regulations and parallel requirements of the federal banking regulators require the Bank to maintain a risk-based AML program reasonably designed to prevent and detect money laundering and terrorist financing and to comply with the recordkeeping and reporting requirements of the BSA, including the requirement to report suspicious activity. There is an expectation by the Bank’s regulators that there will be an effective governance structure for the program which includes effective oversight by our Board and management. The program must include, at a ~~committee~~minimum, a designated compliance officer, written policies, procedures and internal controls, training of ~~central~~appropriate personnel and independent testing of the program, and a customer identification program. The United States Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) and the federal banking agencies continue to issue regulations and guidance with respect to the application and requirements of the BSA and their expectations for effective AML programs. Banking regulators also examine banks for compliance with the economic sanctions regulations administered by the OFAC. Failure of a financial institution to maintain and ~~bank supervisors/regulators from~~implement adequate BSA/AML and OFAC programs, or to comply with all of the ~~major industrialized countries that develops broad policy guidelines that each country’s supervisors can use to determine~~relevant laws or regulations, could have serious legal and reputational consequences for the ~~supervisory policies they apply to their home jurisdiction.~~ institution.

Capital Requirements

The federal banking agencies have ~~adopted~~ risk-based ~~minimum~~ capital adequacy guidelines ~~for bank holding companies and banks, which are~~ intended to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization’s operations both for ~~both~~ transactions reported on the balance sheet as assets and for transactions, ~~which~~such as letters of credit and recourse arrangements, that are recorded as off-balance sheet items. The risk-based capital ratio is determined by classifying assets and certain off-balance sheet financial instruments into weighted categories, with higher levels of capital being required for those categories perceived as representing greater risk. Bank holding companies and banks engaged in significant trading activity may also be subjectPrior to ~~the market risk capital guidelines and be required to incorporate additional market and interest rate risk components into their risk-based capital standards.~~

Under the current Basel I capital adequacy guidelines, a banking organization’s total capital is divided into tiers. “Tier I capital” currently includes common equity and trust preferred securities, is subject to certain criteria and quantitative limits. Under Dodd-Frank, depository institution holding companies, such as the Company, with more than $15 billion in total consolidated assets as of December 31, 2009, will no longer be able to include trust preferred securities as Tier I regulatory capital at the end of a three-year phase-out period in 2016, and may be obligated to replace any outstanding trust preferred securities issued prior to May 19, 2010, with qualifying Tier I regulatory capital during the phase-out period. Tier II capital includes hybrid capital instruments, other qualifying debt instruments, a limited amount of the allowance for loan and lease losses and a limited amount of unrealized holding gains on equity securities. Following the phase-out period under Dodd-Frank, trust preferred securities will be treated as Tier II capital, subject to certain limits and qualifications. The risk-based capital guidelines require a minimum ratio of qualifying total risk-based capital of 8.0% and a minimum ratio of Tier I risk-based capital of 4.0%. An institution is defined as well capitalized if its total risk-based capital ratio is 10.0% or more; its Tier 1 risk-based capital ratio is 6.0% or more; and its Tier 1 leverage ratio is 5.0% or more. Bank holding companies and banks are also required to comply with minimum leverage ratio requirements. The leverage ratio is the ratio of the bank holding company or banking organization’s Tier I capital to its total adjusted quarterly average assets (as defined for regulatory purposes). Holding companies and banks are required to maintain a minimum Tier 1 leverage ratio of 4.0%, unless a different minimum is specified by an appropriate regulatory authority. For a depository institution to be considered “well capitalized” under the regulatory framework for prompt corrective action, its Tier 1 leverage ratio must be at least 5.0%. Basel I was replaced by the Basel Committee’s new Basel III capital framework effective January 1, 2015, ~~as described in~~these guidelines were based upon the ~~next section.~~

As1988 capital accord (“Basel I”) of December 31, 2014, the Company’s and the Bank’s capital ratios exceeded the minimum capital adequacy guideline percentage requirements of the federal banking agencies for “well capitalized” institutions. For complete discussion and disclosure see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk-Based Capital” and Note 19 to the Company’s consolidated financial statements presented elsewhere in this report.

~~In December 2010,~~ the Basel Committee ~~released its final framework for strengthening international capital and liquidity regulation, now officially identified as~~on Banking Supervision (the “Basel ~~III.” Basel III is designed to significantly enhance the original regulatory capital framework under Basel I.~~Committee”). In ~~July~~ 2013, the ~~FRB approved final rules implementing Basel III~~Federal Reserve, FDIC, and ~~certain changes required by the Dodd Frank Act, effective on January 1, 2015 (subject to a phase-in period). On July 9, 2013, the~~ Office of the Comptroller of the Currency (“OCC”) adopted the same rules for national banks and federal savings associations, and the FDIC approved the same provisions, as an interim final rule, for state nonmember banks and state savings associations. Theissued final rules ~~apply~~(the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implement the Basel Committee’s December 2010 framework, commonly referred to ~~all depository institutions and top-tier bank holding companies with assets~~as Basel III, for strengthening international capital standards, as well as implementing certain provisions of ~~$500 million or more.~~the Dodd-Frank Act.

The Basel III Capital Rules substantially revise the risk-based capital ~~rules:~~requirements applicable to bank holding companies and depository institutions, including the Company and the Bank, compared to the previous U.S. risk-based capital rules. The Basel III Capital Rules became effective for the Company and the Bank on January 1, 2015 (subject to phase-in periods for some of their components). The Basel III Capital Rules: (i) introduce a new capital measure called ~~“Common~~Common Equity Tier 1”1 (“CET1”) and a related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments, ~~meeting~~which are instruments treated as Tier 1 instruments under the prior capital rules that meet certain revised requirements; (iii) mandate that most ~~deductions/~~deductions or adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions from and adjustments to capital, as compared to existing regulations. Under the Basel III ~~capital rules,~~Capital Rules, for most banking organizations, the most common form of Additional Tier 1 capital is noncumulative perpetual preferred stock and the most common form of Tier 2 capital is subordinated notes and a portion of the allowance for loan and lease losses, ~~which~~ in each case, ~~are~~ subject to the Basel III ~~capital rules’~~Capital Rules’ specific requirements.

Under the Basel III ~~capital rules,~~Capital Rules, the following are the initial minimum capital ratios applicable to the Company and the Bank as of January 1, 2015:

4.5% CET1 to risk-weighted assets;

6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

8.0% total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

4.0% Tier 1 leverage ratio.

The Basel III ~~capital rules~~Capital Rules also introduce a new “capital conservation buffer,” composed entirely of CET1, on top of these minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress. 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 implementation of the capital conservation buffer ~~will begin~~began on January 1, 2016 at 0.625% and will be phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019). Thus, when fully phased-in on January 1, 2019, the Company and the Bank will be required to maintain this additional capital conservation buffer of 2.5% of CET1, resulting in the following minimum capital ratios:

4.5% CET1 to risk-weighted assets, plus the capital conservation buffer, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7%;

6.0% Tier 1 capital to risk-weighted assets, plus the capital conservation buffer, effectively resulting in a minimum Tier 1 capital ratio of at least 8.5%;

8.0% total capital to risk-weighted assets, plus the capital conservation buffer, effectively resulting in a minimum total capital ratio of at least 10.5%; and

4.0% Tier 1 leverage ratio.

The Basel III ~~capital rules~~Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that (i) mortgage servicing rights, , (ii) deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and (iii) significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1. Implementation of the deductions and other adjustments to CET1 began on January 1, 2015 and will be phased-in over a four-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter). ~~In addition, under~~Under the ~~current capital standards,~~Basel III Capital Rules, the effects of certain accumulated other comprehensive income or loss ~~(“AOCI”)~~ items ~~included in stockholders’ equity (for example, unrealized gains or losses on securities held in the available-for-sale portfolio) under U.S. GAAP~~ are not excluded for the purposes of determining regulatory capital ~~ratios. Under the Basel III capital rules, the effects of certain AOCI items are not excluded;~~ratios; however, ~~nonadvanced~~non-advanced approaches banking organizations (i.e., banking organizations with less than $250 billion in total consolidated assets or with less than $10 billion of on-balance sheet foreign exposures), including the Company and the Bank, may make a one-time permanent election ~~to continue~~ to exclude these items. This election must be made concurrently with the first filing of certain of the Company and the Bank’s periodic regulatory reports in the beginning of 2015. ~~At this time, the~~The Company and the Bank ~~expect to make~~have made this election in order to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of its available-for-sale securities portfolio.

912

The Basel III ~~capital rules~~Capital Rules prescribe a new standardized approach for risk weightings that expand the risk weighting categories from the ~~current~~previous four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, generally ranging from 0% for U.S. Government and agency securities, to 600% for certain equity exposures, depending on the nature of the assets. The new capital rules generally result in higher risk weights for a variety of asset classes, including certain CRE mortgages. Additional aspects of the Basel III ~~capital rules~~Capital Rules that are ~~more~~ relevant to the Company and the Bank include:

consistent with the ~~current~~Basel I risk-based capital rules, assigning exposures secured by single family residential properties to either a 50% risk weight for first-lien mortgages that meet prudential underwriting standards or a 100% risk weight category for all other mortgages;

providing for a 20% credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable ~~(currently set~~(set at 0%) under the Basel I risk based capital rules);

assigning a 150% risk weight to all exposures that are nonaccrual or 90 days or more past due ~~(currently set~~(set at 100%) under the Basel I risk-based capital rules), except for those secured by single family residential properties, which will be assigned a 100% risk weight, consistent with the ~~current~~Basel I risk-based capital rules;

applying a 150% risk weight instead of a 100% risk weight for certain high volatility CRE acquisition, development and construction loans; and

applying a 250% risk weight to the portion of ~~MSRs~~mortgage servicing rights and ~~DTAs~~deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks that are not deducted from CET1 capital ~~(currently set~~(set at 100%) under the Basel I risk-based capital rules).

~~Based on our current interpretation~~As of December 31, 2015, the Company’s and the Bank’s capital ratios exceeded the minimum capital adequacy guideline percentage requirements of the ~~Basel III capital rules, the Company believes that both the Company and the Bank would have met all capital adequacy requirements~~federal banking agencies for “well capitalized” institutions under the Basel III capital rules on a fully phased-in ~~basis as if such requirements were effective as of December 31, 2014.~~basis. For complete discussion and disclosure please see Item 7. MD&A — Regulatory Capital and Ratios and Note 19 — Regulatory Requirementsand Matters to the Consolidated Financial Statements for additional information.

With respect to the Bank, the Basel III ~~capital rules~~Capital Rules also revise the ~~“prompt corrective action”~~PCA regulations pursuant to Section 38 of the Federal Deposit Insurance Act, as discussed below under ~~“Prompt Corrective Action.~~“PCA.”

PCA

~~Prompt Corrective Action~~

The Federal Deposit Insurance Act, as amended (“FDIA”), requires federal banking agencies to take ~~“prompt corrective action”~~PCA in respect of depository institutions that do not meet minimum capital requirements. The FDIA includes the following five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation. The ~~current relevant capital measures are~~Basel III Capital Rules, as promulgated by the ~~total capital ratio,~~Federal Reserve, revised the ~~Tier~~PCA requirements effective January 1, ~~capital ratio and the leverage ratio.~~2015. Under the ~~current prompt corrective action~~revised PCA provisions of the FDIA, an insured depository institution generally will be classified in the following categories based on the capital measures indicated:



~~“Well capitalized”~~		~~“Adequately capitalized”~~
~~Tier 1 leverage ratio of 5% or greater~~		~~Tier 1 leverage ratio of at least 4%~~
~~Tier 1 risk-based capital of 6% or greater~~		~~Tier 1 risk-based capital of at least 4%, or~~
~~Total risk-based capital of 10% or greater, and~~		~~Total risk-based capital of at least 8%.~~
~~Not subject to a written agreement, order, capital directive or prompt corrective action directive requiring a specific capital level.~~

~~“Undercapitalized”~~		~~“Significantly undercapitalized”~~
~~Tier 1 leverage ratio less than 4%~~		~~Tier 1 leverage ratio less than 3%~~
~~Tier 1 risk-based capital of 4%, or~~		~~Tier 1 risk-based capital of 3%, or~~
~~Total risk-based capital less than 8%.~~		~~Total risk-based capital less than 6%.~~

~~“Critically undercapitalized”~~
~~Tangible equity to total assets less than 2%.~~




PCA Category	Total risk-based capital ratio	Tier 1 risk-based capital ratio	CET1 risk-based ratio	Tier 1 leverage ratio
Well capitalized	10%	8%	6.5%	5%
Adequately capitalized	8%	6%	4.5%	4%
Undercapitalized	< 8%	< 6%	< 4.5%	< 4%
Significantly undercapitalized	< 6%	< 4%	< 3%	< 3%
Critically undercapitalized	Tangible Equity/Total Assets ≤ 2%

The Basel III capital rules, as promulgated by the FRB, revise the current prompt corrective action requirements effective January 1, 2015. Under the new rules, a bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, common equity Tier 1 capital ratio of 6.5% or greater, and a leverage ratio of 5.0% or greater, and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, common equity Tier 1 capital ratio of 4.5% or greater, and a leverage ratio of 4.0% or greater; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, common equity Tier 1 capital ratio of less than 4.5%, or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, common equity Tier 1 capital ratio of less than 3.0%, or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity (defined as Tier 1 capital plus non-Tier 1 perpetual preferred stock) is equal to or less than 2.0% of average quarterly tangible assets.

An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios, if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank’s capital category is determined solely for the purpose of applying ~~prompt corrective action~~PCA regulations and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.

The FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company, if the depository institution would thereafter be “undercapitalized.” “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

11Future Legislation and Regulation

~~Stress Testing~~

~~The Dodd-Frank Act requires stress testing of bank holding companies~~Considering the recent conditions in the global financial markets and ~~banks that~~economy, legislators, presidential candidates and regulators have more than $10 billion but less than $50 billion of consolidated assets (“$10 - $50 billion companies”). Additional stress testing is required for banking organizations having $50 billion or more of assets. $10 - $50 billion companies, including the Company and the Bank, are requiredcontinued to ~~conduct annual company-run stress tests under rules the federal bank regulatory agencies issued in October 2012. Stress tests assess the potential impact of scenarios~~increase their focus on the consolidated earnings, balance sheet and capital of a bank holding company or bank over a designated planning horizon of nine quarters, taking into account the organization’s current condition, risks, exposures, strategies, activities and such factors as the regulators may request of a specific organization. Each banking organization’s board of directors and senior management are required to approve and review the policies and procedures of their stress testing processes as frequently as economic conditions or the conditionregulation of the ~~organization may warrant, and at least annually. They are also required~~financial services industry. Proposals to ~~consider the results~~further increase regulation of the ~~stress test~~financial services industry have been and are expected to continue to be introduced in the ~~normal course of business, including the banking organization’s capital planning (including dividends~~U.S. Congress, in state legislatures and share buybacks), assessment of capital adequacy and maintaining capital consistent with its risks, and risk management practices. The results of the stress tests are provided to the applicable federal banking agencies. Public disclosure of stress test results for $10 - $50 billion companies is required beginning in 2015. The Company is in the process of preparing its stress tests.

~~FDIC Deposit Insurance~~

The FDIC insures our customer deposits through the Deposit Insurance Fund of the FDIC up to prescribed limits for each depositor. The Bank is subject to deposit insurance assessments as determined by the FDIC. The FDIC established a minimum ratio of deposit insurance reserves in the Deposit Insurance Fund (“DIF”) to estimated insured deposits of 1.15% until September 2020 and 1.35% thereafter. At least semi-annually, the FDIC will update its loss and income projections for the DIF and, if needed, will increase or decrease assessment rates, following notice-and-comment rulemaking, if required.

The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices that pose a risk to the Deposit Insurance Fund or that may prejudice the interest of the bank’s depositors. The termination of deposit insurance for the Bank would also result in the revocation of the Bank’s charter by the DBO.

~~Federal Banking Agency Compensation Guidelines~~

Guidelines adopted by the federal banking agencies pursuant to the FDIA prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder. In June 2010, the federal banking agencies issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

abroad. In addition, ~~the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint~~not all regulations authorized or guidelines prohibiting certain incentive-based payment arrangements. These regulators must establish regulations or guidelines requiring enhanced disclosure to regulators of incentive-based compensation arrangements. The agencies proposed such regulations in April 2011, but the regulations have not been finalized.

The scope, content and application of the U.S. banking regulators’ policies on incentive compensation continue to evolve. It cannot be determined at this time whether compliance with such policies will adversely affect the ability of the Company and the Bank to hire, retain and motivate key employees.

~~Operations and Consumer Compliance Laws~~

The Bank must comply with numerous federal anti-money laundering and consumer privacy and protection statutes and regulations. The CFPB is directed to prevent unfair, deceptive and abusive practices and ensure that all consumers have access to markets for consumer financial products and services, and that such markets are fair, transparent and competitive. The CFPB has authorityrequired under the Dodd-Frank Act ~~to enforce~~have been proposed or finalized by federal regulators. Further legislative changes and ~~issue rules~~additional regulations may change our operating environment in substantial and unpredictable ways. Such legislation and regulations could increase the cost of conducting the Company’s business, affect the Company’s compensation structure and restrict or expand the activities in which the Company may engage among other financial institutions. The Company cannot predict whether future legislative proposals will be enacted and, if enacted, the effect from implementing ~~existing consumer protection laws and responsibility for all~~ such ~~existing regulations. Depository institutions~~regulations would have on the Company’s business, results of operations or financial condition. The same uncertainty exists with ~~assets exceeding $10 billion (such as the Bank), their affiliates, and other “larger participants” in the markets for consumer financial services (as determined by the CFPB) are subject~~respect to ~~direct supervision by the CFPB, including any applicable examination, enforcement and reporting requirements the CFPB may establish.~~

~~Under~~regulations authorized or required under the Dodd-Frank Act regulators were required to mandate specific underwriting criteria to support a reasonable, good faith determination by lenders of a consumer’s ability to repay a mortgage. The CFPB by amendment to Regulation Z, which implements the Truth in Lending Act and took effect on January 10, 2014, has defined what would be considered a “qualified mortgage.” Another Dodd-Frank provision requires banks and other mortgage lenders to retain a minimum 5% economic interest in mortgage loans sold through securitizations unless the loans meet a definition of a “qualified residential mortgage.” but that have not yet been proposed or finalized.

These laws and regulations mandate certain disclosure and other requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services. Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to enforcement actions, injunctions, fines or criminal penalties, punitive damages to consumers, and the loss of certain contractual rights. The Bank and the Company are also subject to federal and state laws prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.

~~Regulation of Subsidiaries/Branches~~

Foreign-based subsidiaries, including East West Bank China (Limited) are subject to applicable foreign laws and regulations, such as those implemented by the China Banking Regulatory Commission. Nonbank subsidiaries are subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies. East West Insurance Services, Inc. is subject to the licensing and supervisory authority of the California Commissioner of Insurance. The East West Hong Kong branch is subject to applicable foreign laws and regulations, such as those implemented by the Hong Kong Monetary Authority.

Employees

~~East West does not have any employees other than officers who are also officers of the Bank. Such employees are not separately compensated for their employment with the Company. As of~~At December 31, ~~2014,~~2015, the ~~Bank~~Company had ~~a total of 2,618 full-time employees and 72 part-time employees and East West Insurance had a total of 19 full-time~~approximately 2,833 employees. None of the Company’s employees are ~~represented by a union or~~subject to any collective bargaining ~~group. The management of the Bank and East West Insurance each believe that their respective employee relations are satisfactory.~~agreements.

Available Information

~~We file reports with the SEC, including our proxy statements,~~The Company’s annual reports on Form 10-K, the proxy statements, quarterly reports on Form 10-Q, ~~and~~ current reports on Form ~~8-K.~~8-K, and amendments to those reports filed or furnished pursuant to Section 13 (a) or 15 (d) of the Exchange Act are available for free at www.eastwestbank.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to SEC. These reports ~~and other information~~are also available for free on ~~file~~the SEC’s website at http://www.sec.gov. Also, these reports can be ~~inspected~~found and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549, ~~on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room~~or by calling the SEC at 1-800-SEC-0330. ~~The Commission maintains a website that contains the reports, proxy and information statements and other information we file with them. The address of the site is~~ ~~http://www.sec.gov~~.

~~The Company also maintains an internet website at~~ ~~www.eastwestbank.com. The Company makes its website content available for information purposes only. It should not be relied upon for investment purposes.~~

We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements for our annual stockholders meetings, as well as any amendments to those reports, as soon as reasonably practicable after the Company files such reports with the SEC. The Company’s SEC reports can be accessed through the investor information page of its website. None of the information contained in or hyperlinked from our website is incorporated into this Form 10-K.

~~Executive Officers of the Registrant~~

The following table presents the executive officers of the Company, their positions, and their ages. Each officer is appointed by the Board of Directors of the Company or the Bank and serves at their pleasure.



~~Name~~	~~Age~~ ⁽¹⁾	~~Position with Company or Bank and Prior Positions~~
~~Dominic Ng~~	56	~~Chairman and Chief Executive Officer of the Company and the Bank~~ ~~since 1992.~~
~~Julia S. Gouw~~	55	~~President and Chief Operating Officer of the Company and the Bank since 2009;~~ ~~1994 - 2008: Executive Vice President and Chief Financial Officer of the Company and the Bank.~~
~~Wendy Cai-Lee~~	40	~~Executive Vice President and Head of U.S. Eastern and Texas Regions since 2014;~~ ~~2011 - 2014: Senior Managing Director and Head of U.S. Eastern and Texas Regions;~~ ~~2009 - 2011: Managing Director at Deloitte & Touche LLP.~~
~~Ming Lin Chen~~	54	~~Executive Vice President and Head of Retail and Banking Operations of the Bank since 2009.~~
~~William H. Fong~~	67	~~Executive Vice President and Head of Northern California Commercial Lending Division of the Bank since 2006.~~
~~Karen A. Fukumura~~	50	~~Executive Vice President and Head of Change Execution of the Bank since 2013; 2008 - 2012: Executive Vice President and Head of Retail Banking of the Bank.~~
~~John R. Hall~~	59	~~Executive Vice President and Chief Credit Officer of the Bank since 2010;~~ ~~2004 - 2010: Regional Vice President of Commercial Banking Office in Los Angeles at Wells Fargo Bank.~~
~~Douglas P. Krause~~	58	~~Executive Vice President, Chief Risk Officer, General Counsel, and Secretary of the Company and the Bank since 1996.~~
~~Robert Lo~~	50	Executive Vice President and Head of Commercial Real Estate Banking of the Bank since 2014; 2013 - 2014: Senior Vice President and Head of Commercial Real Estate Banking of the Bank; 2007 - 2013: Senior Vice President and Manager of Corporate Banking Division of the Bank.
~~Irene H. Oh~~	37	~~Executive Vice President and Chief Financial Officer of the Company and the Bank since 2010; 2008 - 2010: Senior Vice President and Director of Corporate Finance.~~
~~Bennett Pozil~~	53	~~Executive Vice President and Head of Corporate Banking of the Bank since 2011; 2008 - 2011: President of Match Point Holdings, LLC.~~
~~Andy Yen~~	57	Executive Vice President and Head of International Banking and the Business Banking Division of the Bank since 2013; 2005 - 2013: Executive Vice President and Director of the Business Banking Division of the Bank.

~~(1) As of March 2, 2015.~~

ITEM 1A. RISK FACTORS

~~Risk Factors That May Affect Future Results~~

~~Together with~~In the ~~other information on~~course of conducting the Company’s business, the Company is exposed to a variety of risks, some of which are inherent in the financial services industry and others of which are more specific to the Company’s business. The following discussion sets forth what management currently believes could be the most significant factors, of which we ~~face~~are currently aware that could affect our businesses, results of operations and financial condition. Additional factors that could affect our ~~management~~businesses, results of ~~risk contained~~operations and financial condition are discussed in Forward-Looking Statements. Other factors not discussed below or elsewhere in this Annual Report ~~or in other SEC filings, the following presents significant risks which may affect us. Events or circumstances arising from one or more of these risks~~on Form 10-K could also adversely affect ~~our business,~~the Company’s businesses, results of operations and financial ~~condition, operating results, cash flows and prospects, and~~condition. Therefore, the ~~value and price of our common stock could decline. The risks identified~~risk factors below ~~are~~should not ~~intended to~~ be considered a ~~comprehensive list~~complete discussion of all ~~risks we face~~of the risk and ~~additional risks that we~~uncertainties the Company may ~~currently view as not material may also impair our business operations~~face.

Regulatory, Compliance and ~~results.~~Legal Risks

~~Recent changes~~Changes in ~~banking~~law, regulation or oversight may adversely affect the Company’s operations. EWBC is subject to extensive regulation under federal and state laws, as well as supervision and examination by the DBO, FDIC, Federal Reserve, SEC, the CFPB, and other regulatory bodies. Congress and federal agencies have significantly increased their focus on the regulation of the financial services industry. The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes, many parts of which are now in effect. The Federal Reserve has adopted regulations implementing the Basel III framework on bank capital adequacy, stress testing, and market liquidity risk in the U.S. These regulations affect our ~~business.~~lending practices, capital structure, investment practices, dividend policy and growth, among other things. Regulation of the financial services industry continues to undergo major changes. ~~Dodd-Frank significantly revises~~Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies could affect EWBC in substantial and ~~expands~~unpredictable ways. In addition, such changes could also subject us to additional costs and limit the ~~rulemaking, supervisory~~types of financial services and ~~enforcement authority~~products we may offer. Failure to comply with laws, regulations or policies could result in civil or criminal sanctions by state and federal agencies, the loss of ~~federal bank regulators. Dodd-Frank addresses many areas~~FDIC insurance, the revocation of our banking charter, civil money penalties and/or reputation damage, which ~~may affect our~~could have a material adverse impact on the Company’s businesses, results of operations and ~~costs immediately or in~~financial condition. The effects of such legislation and regulatory actions on EWBC cannot be reliably determined at this time. See Item 1. Business — Supervision and Regulation for more information about the ~~future. Among other provisions, Dodd-Frank:~~

~~imposes new capital requirements on bank holding companies and eliminates certain trust preferred securities from Tier 1 capital;~~

~~revises the FDIC’s insurance assessment methodology so that premiums are assessed based upon the average consolidated total assets of a bank less tangible equity capital;~~

~~expands the FDIC’s authority to raise insurance premiums and permanently raises the current standard deposit insurance limit to $250,000;~~

~~allows financial institutions to pay interest on business checking accounts;~~

~~authorizes nationwide interstate de novo branching for banks;~~

~~limits interchange fees payable on debit card transactions;~~

~~establishes the CFPB to promulgate and enforce consumer protection~~ regulations ~~relating to financial products and services offered by banks and nonbank finance companies;~~

~~contains provisions that affect corporate governance and executive compensation;~~

~~restricts proprietary trading by financial institutions, their owning or sponsoring hedge and private equity funds, and regulates the derivatives activities of banks and their affiliates.~~

The CFPB has adopted revisions to Regulation Z, which implements the Truth in Lending Act, pursuant to Dodd-Frank. The revisions went into effect on January 10, 2014 and apply to all consumer mortgages, except home equity lines of credit (“HELOCs”), timeshare plans, reverse mortgages and temporary loans. The revisions mandate specific underwriting criteria for home loans in order for creditors to make a reasonable, good faith determination of a consumer’s ability to repay and establish certain protections from liability under this requirement for “qualified mortgages” meeting certain standards. This may impact our underwriting of single family residential loans and the resulting unknown effect on potential delinquencies. In particular, the revisions prevent us from making “no documentation” and “low documentation” home loans, because the rules require determining a consumer’s ability to pay based in part on verified and documented information. Low documentation loans represent a substantial portion of our single family residential loan portfolio. Accordingly, these new provisions may adversely affect the growth in the residential loan portfolio.

Additionally, on December 10, 2013, five financial regulatory agencies, including our primary federal regulator, the FRB, adopted final rules implementing the Volcker Rule embodied in Section 13 of the Bank Holding Company Act, which was added by Section 619 of Dodd-Frank. The final rules prohibit banking entities from, among other things, (1) engaging in short-term proprietary trading for their own accounts, and (2) having certain ownership interests in and relationships with hedge funds or private equity funds. The final rules are intended to provide greater clarity with respect to both the extent of those primary prohibitions and of the related exemptions and exclusions. The final rules also require each regulated entity to establish an internal compliance program that is consistent with the extent to which it engages in activities covered by the Volcker Rule, which must include (for the largest entities) making regular reports about those activities to regulators. The final rules were effective April 1, 2014, but the conformance period was extended from its statutory date of July 21, 2014 until July 21, 2016.

In addition to the enactment of Dodd-Frank, the federal regulatory agencies recently have begun to take stronger supervisory actions against financial institutions that have experienced increased loan losses and other weaknesses as a result of the recent economic crisis. These actions include the entering into of written agreements and cease and desist orders that place certain limitations on their operations. Federal bank regulators recently have also been using with more frequency their ability to impose individual minimal capital requirements on banks, which requirements may be higher than those imposed under Dodd-Frank or which would otherwise qualify the bank as being “well capitalized” under the Office of the Comptroller of the Currency’s prompt corrective action regulations. If we were to become subject to a supervisory agreement or higher individual capital requirements, such action may have a negative impact on our ability to execute our business plans, as well as our ability to grow, pay dividends, repurchase stock or engage in mergers and acquisitions and may result in restrictions in our operations.are subject.

The CFPB ~~may reshape~~is in the process of reshaping the consumer financial laws through rulemaking and enforcement of ~~the prohibitions~~such laws against unfair, deceptive and abusive ~~business~~acts or practices. Compliance with any such change may impact the business operations of depository institutions offering consumer financial products or services, including the Bank. The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to financial institutions that offer covered financial products and services to consumers. The CFPB has also been directed to write rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The ~~concept~~prohibition on “abusive” acts or practices was created by the Dodd-Frank Act and did not previously exist in federal law. The meaning of ~~what may be considered to be an “abusive” practice~~the prohibition is ~~relatively new under the law.~~being clarified each year by CFPB enforcement actions and opinions from courts and administrative proceedings. Moreover, the Bank will be ~~supervised and~~ examined by the CFPB for compliance with the CFPB’s ~~regulations~~laws and policies. The CFPB has further issued a series of final rules to implement provisions in the Dodd-Frank Act related to mortgage origination and servicing that may increase the cost of originating and servicing residential mortgage loans, which went into effect in January 2014. While it is difficult to quantify the increase in our regulatory compliance burden, we do believe that costs associated with regulatory compliance, including the need to hire additional compliance personnel, may continue to increase.

We face risk of noncompliance and enforcement actions under the BSA and other AML statutes and regulations. The BSA requires banks and other financial institutions to, among other things, develop and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The FinCEN has delegated examination authority for compliance by banks with the BSA to the federal bank regulators, including to the Board of Governors of the Federal Reserve (the “Board of Governors”) for state licensed member banks. Under parallel authority of the bank regulators, the federal bank regulators and certain state regulators have authority to bring enforcement actions related to BSA compliance which may include compliance undertakings, a written agreement, a cease and desist order, and/or civil money penalties. FinCEN may also impose civil money penalties based on BSA violations that are deemed willful, and willful violations also could result in criminal BSA fine or forfeitures. The banking regulators also examine compliance with the rules enforced by the OFAC. Banks are under enhanced scrutiny for both BSA and OFAC compliance. Consequently, if our policies, procedures and internal controls are deemed deficient, we could face money penalties as well as serious reputational consequences that could materially and adversely affect our business, financial condition or operations.

The Bank is subject to supervision pursuant to a written agreement with the Federal Reserve Bank of San Francisco(the “FRB”) and a memorandum of understanding with the DBO, which could result in additional actions taken against the Bank and will increase the Bank’s operating costs and ~~limitations related~~could adversely affect the Bank’s results of operations.

Our good standing with our regulators is of fundamental importance to ~~this additional regulatory reporting regimen have yet~~the continuation and growth of our business given that banks operate in an extensively regulated environment under state and federal law. The Bank is subject to ~~be fully determined, although they may be material~~supervision and regulation by regulators, including the FRB and the ~~limitations~~DBO. Federal and ~~restrictions~~state regulators, in the performance of their supervisory and enforcement duties, have significant discretion and power to initiate enforcement actions for violations of laws and regulations and unsafe and unsound practices. The enforcement powers available to federal banking regulators include, among others, the ability to assess civil monetary penalties, to issue cease and desist or removal orders, to require written agreements and to initiate injunctive actions. The Bank entered into a Written Agreement, dated November 9, 2015 with the FRB (the “Written Agreement”), and a related memorandum of understanding (“MOU”) with the DBO, relating to certain deficiencies identified in the Bank’s BSA/AML compliance program, as described in further detail in Item 7. MD&A — Regulatory Matters. If additional compliance issues are identified or if the regulators conclude that ~~will be placed upon~~ the Bank has not satisfactorily complied with the Written Agreement, the DBO or the FRB could take further action with respect to ~~its consumer product offering~~the Bank, and ~~services may produce~~if any such further action were taken, such action could have a material adverse effect on our business, financial condition or operations. The operating and other conditions of the Written Agreement could lead to an increased risk of being subject to additional regulatory actions by the DBO and FRB or other government agencies, as well as additional actions resulting from future regular annual soundness and compliance examinations by federal and state regulators.

We anticipate that we will need to continue to dedicate significant ~~material effects on~~resources to our efforts to comply with the Written Agreement and related MOU, which are expected to increase our operational costs and adversely affect the amount of time our management has to conduct our business. The additional operating costs to comply with, and the restrictions under, the Written Agreement and MOU will adversely affect the Bank’s ~~(and~~results of operations.

Increased deposit insurance costs and changes in deposit regulation may adversely affect the ~~Company’s) profitability.~~Company’s results of operations.

~~We may~~ The FDIC insures deposit accounts at insured banks and financial institutions, including East West Bank. The FDIC charges the insured financial institutions premiums to maintain the DIF at a certain level. During 2008 and 2009, there were higher levels of bank failures, which dramatically increased resolution costs of the FDIC and depleted the DIF. The FDIC collected a special assessment in 2009 to replenish the DIF and also required a prepayment of an estimated amount of future deposit insurance premiums. In accordance with the Dodd-Frank Act, the FDIC adopted new rules that redefined how deposit insurance assessments are calculated. The new rate schedule and other revisions to the assessment rules became effective April 1, 2011, and had the effect of reducing the assessment that we would otherwise pay. As the new assessment rules currently stand, we expect the rules will have a continued positive impact on our future FDIC deposit insurance assessment fees compared to the assessment rules in effect prior to the changes. However, the FDIC’s rules could be subject to ~~more stringent capital requirements.~~ ~~Dodd-Frank phases out over a prescribed period~~future changes, especially if there are additional bank or financial institution failures or the government or FDIC develop new regulatory goals with respect to the banking sector. Increases in assessment fees or required prepayments of ~~time certain trust preferred securities from Tier 1 capital and allows~~FDIC insurance premiums may have an adverse effect on our results of operations.

The Company’s interest expense may increase following the repeal of the federal ~~banking agencies~~prohibition on payment of interest on demand deposits. The federal prohibition on the ability of financial institutions to ~~establish minimum leverage~~pay interest on demand deposit accounts was repealed as part of the Dodd-Frank Act beginning on July 21, 2011. As a result, financial institutions could commence offering interest on demand deposits to compete for clients. Currently, market interest rates are low. We cannot predict what interest rates other banks may offer as market interest rates increase in the future. The Bank has started offering interest on demand deposits to attract additional customers or to maintain current customers. If market interest rates increase, the Company’s interest expense will increase and ~~risk-based capital requirements that~~net interest margin will ~~apply to both insured banks~~decrease which could have a material adverse effect on the Company’s financial condition, results of operations and their holding companies. In the case of certain trust preferred securities issued prior to May 19, 2010 by bank holding companies with total consolidated assets of $15 billion or more as of December 31, 2009, these “regulatory capital deductions” are being implemented incrementally over a period of three years which commenced in January 2013. Dodd-Frank also requires the federal banking agencies to establish minimum leverage and risk-based capital requirements that will apply to both insured banks and their holding companies.cash flows.

~~On July 2, 2013,~~Changes in accounting standards or inaccurate estimates or assumptions in applying accounting policies could materially impact the ~~FRB approved~~Company’s financial statements. From time to time, the ~~final rules implementing Basel III capital adequacy. The rules include~~FASB or the SEC may change the financial accounting and reporting standards that govern the preparation of the Company’s financial statements. In addition, the FASB, SEC, banking regulators and the Company’s independent registered public accounting firm may also amend or even reverse their previous interpretations or positions on how various standards should be applied. These changes may be difficult to predict and could impact how we prepare and report the Company’s financial statements. In some cases, we could be required to apply a new common equity Tier 1 capital to risk-weighted assets ratio of 4.5% and a common equity Tier 1 capital conservation buffer of 2.5% of risk-weighted assets. The final rules also raise the minimum ratio of Tier 1 capital to risk-weighted assets to 6.0%. On July 9, 2013, the OCC adopted the same rules for national banks and federal savings associations, and the FDIC approved the same provisions, as an interim final rule, for state nonmember banks and state savings associations. The phase-in period for the final rules began for us on January 1, 2015, with full compliance with all of the final rule’s requirements phasedor revised standard retroactively, resulting in ~~over a multi-year schedule. Based on our current interpretation of the Basel III capital rules,~~ the Company ~~believes that both the Company~~revising and ~~the Bank would have met all capital adequacy requirements under the Basel III capital rules on a fully phased-in basis as if such requirements were effective as of December 31, 2014.~~

republishing prior-period financial statements.

Capital and Liquidity Risks

~~Difficult~~As a regulated entity, we are subject to capital and liquidity requirements, and a failure to meet these standards could affect our financial condition. The Company and the Bank are subject to certain capital and liquidity guidelines, qualitative judgments by regulators about components, risk weightings and other factors. New regulatory capital and liquidity requirements may limit or otherwise restrict how we utilize our capital, including common stock dividends and stock repurchases, and may require us to increase our regulatory capital, or increase regulatory capital ratios or liquidity. The capital requirements applicable to the Company and the Bank under the recently adopted Basel III rules are in the process of being phased-in by the Federal Reserve. We are required to satisfy more stringent capital adequacy and liquidity standards than we have in the past. In addition, we may be required to increase our capital levels, even in the absence of actual adverse economic conditions or forecasts, as a result of stress testing and capital planning based on the hypothetical future adverse economic scenarios. We expect to meet the requirements of the Basel III rules, including the capital conservation buffer, as phased in by the Federal Reserve. Compliance with these capital requirements, including leverage ratios, may limit operations that require intensive use of capital. This could adversely affect our ability to expand or maintain present business levels, which may adversely affect our financial results. Additional information on the regulatory capital requirements applicable to the Company and the Bank is set forth in Item 1. Business — Supervision and Regulation — Capital Requirements.

The Company’s ability to pay dividends. East West is dependent on the Bank for dividends, distributions and other payments. Our principal source of cash flow, including cash flow to pay dividends to our stockholders and principal and interest on our outstanding debt, is dividends from the Bank. The ability of the Bank to pay dividends to East West is limited by Federal and California law. Subject to the Bank meeting or exceeding regulatory capital requirements, the primary approval of the Federal Reserve is required, if the total of all dividends declared by the Bank in any calendar year would exceed the sum of the Bank’s net profits for that year and its retained net profits for the preceding two years. Federal law also prohibits the Bank from paying dividends that would be greater than its undivided profits. In addition, Federal Reserve guidance sets forth the supervisory expectation that bank holding companies will inform and consult with the Federal Reserve in advance of issuing a dividend that exceeds earnings for the quarter and should not pay dividends in a rolling four quarter period in an amount that exceeds net income for the period.

The Company is subject to liquidity risk, which could negatively affect the Company’s funding levels. Market conditions or other events could negatively affect the level of or cost of funding, which in turn could affect the Company’s ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, or fund asset growth and new business initiatives at a reasonable cost, in a timely manner and without adverse consequences. Although the Company has implemented strategies to maintain sufficient and diverse sources of funding to accommodate planned, as well as unanticipated changes in assets, liabilities, and off-balance sheet commitments under various economic conditions, a substantial, unexpected or prolonged change in the level or cost of liquidity could have a material adverse effect on the Company. If the cost effectiveness or the availability of supply in the credit markets is reduced for a prolonged period of time, the Company’s funding needs may require the Company to access funding and manage liquidity by other means. These alternatives may include generating client deposits, securitizing or selling loans and further managing loan growth and investment opportunities. These alternative means of funding may not be available under stressed conditions.

Market Risks

General economic, political or industry conditions may be less favorable than expected. Our businesses and results of operations are affected by the financial markets and general economic conditions in the U.S. and China, including factors such as the level and volatility of short term and long-term interest rates, inflation, home prices, unemployment and under-employment levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets and currencies, liquidity of the global financial markets, the availability and cost of capital and credit, investor sentiment and confidence in the financial markets, the sustainability of economic growth in the U.S. and China. The deterioration of any of these conditions could adversely affect our consumer and commercial businesses, our securities and derivatives portfolios, our level of charge-offs and provision for credit losses, the carrying value of our deferred tax assets, our capital levels and liquidity and our results of operations. Because the Company’s operations and the collateral securing its loan portfolio are concentrated primarily in Northern and Southern California, the Company may be particularly susceptible to the adverse economic conditions in the state of California.

Despite improving labor markets and declines in energy costs, an elevated level of underemployment and household debt and prolonged low interest rates pose challenges for the domestic economic performance and the financial services industry. Home sales continue to show signs of improvement but the improvement in the housing market remains modest in certain areas. Mortgage delinquency and foreclosure rates continue to decline. Any unfavorable changes in the economic and market conditions ~~have adversely affected our industry.~~ Since 2007, negative developments in the housing market, including decreased home prices and increased delinquencies and foreclosures by comparison with pre-recession levels, have negatively impacted the credit performance of mortgage and construction loans and have resulted in significant write-downs of assets by many financial institutions, including the Bank. In addition, the values of real estate collateral supporting many loans declined and may continuewould lead to decline. The impact on the Bank of the negative credit cycle has shown signs of stabilization. However, the overall economic environment remains problematic with high unemployment rates, reduced general spending, and decreased lending by financial institutions to their customers and to each other. Also, competition among depository institutions for deposits has continued to remain at heightened levels as compared to pre-recession times. Bank and bank holding company stock prices have been negatively affected as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets compared to past years. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial institutions industry. In particular, we may face the following ~~risks in connection with these events:~~

We face increased regulation of our industry including heightened legal standards and regulatory requirements or expectations imposed in connection with Dodd-Frank. Compliance with such regulation may increase our costs and limit our ability to pursue business opportunities.risks:

The process ~~we use~~the Company uses to estimate losses inherent in ~~our~~the Company’s credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of ~~our~~the borrowers to repay their loans. The level of uncertainty concerning economic conditions may adversely affect the accuracy of ~~our~~the Company’s estimates which may, in turn, impact the reliability of the process.

The Company’s commercial and residential borrowers may be unable to make timely repayments of their loans, or the decrease in value of real estate collateral securing the payment of such loans could result in ~~significant~~ credit losses, ~~increased~~ delinquencies, foreclosures and customer bankruptcies, any of which could have a material adverse effect on the Company’s operating results.

A decrease in the demand for loans and other products and services offered by us.

A decrease in deposit balances due to overall reductions in customers’ accounts.

The value of the portfolio of available-for-sale investment securities that ~~we hold~~the Company holds may be adversely affected by ~~increasing interest rates and~~ defaults by debtors.

Future disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in an inability to borrow on favorable terms or at all from other financial institutions.

Increased competition among financial services companies due to the recent consolidation of certain competing financial institutions and the conversion of certain investment banks to bank holding companies may adversely affect the Company’s ability to market its products and services.

~~Adverse conditions in Asia could adversely affect our business.~~ A substantial number of our customers have economic and cultural ties to Asia. The Bank’s presence includes five full-service branches in Greater China, located in Hong Kong, two in Shanghai including one in the Shanghai Pilot Free Trade Zone, Shantou and Shenzhen. The Bank also has five representative offices in Greater China located in Beijing, Chongqing, Guangzhou, Xiamen and Taiwan. As a result, our business and results of operations may be impacted by adverse economic and political conditions in Asia and, in particular, in China. Volatility in the Shanghai and Hong Kong stock exchanges and/or a potential dramatic fall in real estate prices in China, among other things, may negatively impact asset values and the profitability and liquidity of our customers who operate in this region. Pandemics and other public health crises or concerns over the possibility of such crises could create economic and financial disruptions in the region. United States and global economic policies, military tensions, and unfavorable global economic conditions may also adversely impact the Asian economies. Transfer risk may result when an entity is unable to obtain the foreign exchange needed to meet its obligations or to provide liquidity. This may adversely impact the recoverability of investments with or loans made to such entities.

~~Increased deposit insurance costs and changes in deposit regulation may adversely affect our results of operations.~~ As a result of recent economic conditions and the enactment of Dodd-Frank, the FDIC has increased the deposit insurance assessment rates in recent years and thus raised deposit premiums for insured depository institutions. If these increases are insufficient for the Deposit Insurance Fund to meet its funding requirements, further special assessments or increases in deposit insurance premiums may be required which we may be required to pay. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums than the recently increased levels. Any future additional assessments, increases or required prepayments in FDIC insurance premiums may materially adversely affect our results of operations.

~~United States and international financial markets and economic conditions, particularly in California, could adversely affect our liquidity, results of operations and financial condition.~~ Our business, earnings and profitability are highly sensitive to general economic, political and industry conditions. While the United States is slowly recovering from the recent economic crisis, the pace of recovery is slow and there can be no assurance that these conditions will continue to improve or worsen. Business activity across a wide range of industries and regions in the U.S. remains reduced and local governments and many businesses continue to experience financial difficulty. Although the Company and the Bank remain well capitalized and have not suffered any significant liquidity issues as a result of the most recent economic downturn, the cost and availability of funds may be adversely impacted by illiquid credit markets and the demand for our products and services may be impacted as our borrowers and customers may continue to experience the impact of the recession, and the economic pressure and uncertainty regarding continuing economic improvement may adversely impact their business activities. In view of the concentration of our operations and the collateral securing our loan portfolio primarily in Northern and Southern California, we may be particularly susceptible to the adverse economic conditions in the state of California, where our business is concentrated. In addition, the duration of the current economic conditions is unknown and may exacerbate the Company’s exposure to credit risk and adversely affect the ability of borrowers to perform under the terms of their lending arrangements with us. Any turbulence in the United States and international markets and economy may adversely affect our liquidity, financial condition, results of operations and profitability.

~~We may be required to make additional provisions for loan losses and charge off additional loans in the future, which could adversely affect our results of operations.~~ During the year ended December 31, 2014, we recorded a $44.1 million provision for loan losses on non-covered loans and charged off $39.8 million, gross of $13.5 million in recoveries on non-covered loans. The Bank has a concentration of real estate loans in California, including the areas of Los Angeles, Riverside, San Bernardino and Orange counties. Potential further deterioration in the real estate market generally and residential homes in particular could result in additional loan charge-offs and provisions for loan losses in the future, which could have a material adverse effect on the Company’s financial condition, net income and capital.

~~Our allowance for loan losses may not be adequate to cover actual losses.~~ A significant source of risk arises from the possibility that we could sustain losses because borrowers, guarantors, and related parties may fail to perform in accordance with the terms of their loans. The underwriting and credit monitoring policies and procedures that we have adopted to address this risk may not prevent unexpected losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We maintain an allowance for loan losses to provide for loan defaults and nonperformance. The allowance is also appropriately increased for new loan growth. While we believe that our allowance for loan losses is adequate to cover current losses, we cannot assure you that we will not increase the allowance for loan losses further.

~~Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.~~ Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us. Our ability to acquire deposits or borrow could also be impaired by factors that are not specific to us, such as a severe disruption of the financial markets or negative views and expectations about the prospects for the financial services industry as a whole as a result of conditions faced by banking organizations in the domestic and worldwide credit markets.

~~The actions and commercial soundness of other financial institutions could affect the Company’s ability to engage in routine funding transactions.~~ Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. The Company has exposure to different industries and counterparties, and executes transactions with various counterparties in the financial industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. Defaults by financial services institutions, and even questions about one or more financial services institutions or the financial services industry in general, have led to market wide liquidity problems and could lead to losses or defaults by the Company or by other institutions. Many of these transactions expose the Company to credit risk in the event of default of its counterparty or client. In addition, the Company’s credit risk may increase when the underlying collateral held cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to the Company. Any such losses could materially and adversely affect the Company’s results of operations.

A portion of ~~our~~the Company’s loan portfolio is secured by real estate and thus ~~we have~~the Company has a higher degree of risk from a downturn in ~~our~~ real estate markets. AAs discussed in the “General economic, political or industry conditions may be less favorable than expected” section above, a decline in ~~our~~ real estate markets could hurt ~~our~~the Company’s business because many of ~~our~~the Company’s loans are secured by real estate. Real estate values and real estate markets are generally affected by changes in national, regional or local economic conditions, fluctuations in interest rates and the availability of loans to potential purchasers, changes in tax laws and other governmental statutes, regulations and policies and acts of nature and national disasters, such as earthquakes ~~and national disasters~~which are particular to California. A significant portion of ~~our~~the Company’s real estate collateral is located in California. If real estate values decline, the value of real estate collateral securing ~~our~~the Company’s loans could be significantly reduced. ~~Our~~The Company’s ability to recover on defaulted loans by foreclosing and selling the real estate collateral would then be diminished and wethe Company would be more likely to suffer losses on defaulted loans. Furthermore, ~~a significant portion of our loan portfolio is comprised of CRE.~~ CRE and multifamily loans typically involve large balances to single borrowers or groups of related borrowers. Since payments on these loans are often dependent on the successful operation or management of the properties, as well as the business and financial condition of the borrower, repayment of such loans may be subject to adverse conditions in the real estate market, adverse economic conditions or changes in applicable government regulations. Borrowers’ inability to repay such loans may have an adverse effect on ~~our~~the Company’s business.

~~Our~~The Company’s business is subject to interest rate risk and variations in interest rates may negatively affect ~~our~~the Company’s financial performance. ~~A substantial portion of our~~Our financial results depend substantially on net interest income, which is ~~derived from~~ the ~~differential or “spread”~~difference between the interest ~~earned~~income we earn on ~~loans, investment securities and other~~ interest-earning assets and the interest ~~paid~~expense we pay on ~~deposits, borrowings and other~~ interest-bearing liabilities. ~~Because~~Interest-earning assets primarily include loans extended, securities held in our investment portfolio and excess cash held to manage short-term liquidity. We fund our assets using deposits and borrowings. While we offer interest-bearing deposit products, a portion of our deposit balances are from noninterest-bearing products. Overall, the interest rates we receive on our interest-earning assets and pay on our interest-bearing liabilities could be affected by a variety of factors, including market interest rate changes, competition, regulatory requirements and a change in the product mix. Changes in key variable market interest rates such as the Federal Funds, National Prime, the London Interbank Offered Rate (“LIBOR”) or Treasury rates generally impact our interest rate spread. In addition, changes in interest rates could also affect the average life of our loans and mortgage related securities where decreases in interest rates resulting from actions taken by the Federal Reserve has caused an increase in prepayments of loans and mortgage related securities, as borrowers refinance to reduce borrowing costs. In addition, because of the differences in the maturities and repricing characteristics of ~~our~~the Company’s interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. ~~Significant fluctuations in market~~Overall, interest rates ~~could materially~~have been at historically low levels for an unprecedented long period of time. Continued low interest rates, possibly compounded by a flat yield curve, may challenge the bank’s interest margin.

We face risks associated with international operations. A substantial number of our customers have economic and ~~adversely affect not only~~cultural ties to Asia and China. The Bank’s presence includes five full-service branches in Greater China, located in Hong Kong, two in Shanghai including one in the Shanghai Free Trade Zone, Shantou and Shenzhen. The Bank also has five representative offices in Greater China located in Beijing, Chongqing, Guangzhou, Xiamen and Taipei, Taiwan. Our efforts to expand our ~~net interest spread, but also our asset quality~~business in Asia and ~~loan origination volume.~~

~~We are subject to extensive government regulation that could limit or restrict our activities, which, in turn, may hamper~~China carry certain risks, including risks arising from the uncertainty regarding our ability to ~~increase our assets~~generate revenues from foreign operations, risks associated with leveraging and ~~earnings.~~ ~~Our operations are subject to extensive regulation by federal, state~~business on an international basis, including among others, legal, regulatory and ~~local governmental authorities and are subject to various laws and judicial and administrative decisions imposing~~tax requirements and restrictions, ~~on part~~ uncertainties regarding liability, trade barriers, difficulties in staffing and managing foreign operations, political and economic risks, financial risks including currency and payment risks. Further, volatility in the Shanghai and Hong Kong stock exchanges and/or ~~all~~a potential dramatic fall in real estate prices in China, among other things, may negatively impact asset values and the profitability and liquidity of the Company’s customers who operate in this region. These risks could adversely affect the success of our ~~operations. Because~~international operations and could have a material adverse effect on our overall business, ~~is highly regulated, the~~results of operations and financial condition. In addition, we face risks that our employees and affiliates may fail to comply with applicable laws ~~rules, regulations and supervisory guidance and policies applicable to us are subject to regular modification and change. From time to time, various laws, rules~~ and regulations ~~are proposed, which, if adopted, could impact~~governing our international operations, ~~by making compliance much more difficult or expensive, restricting our ability to originate or sell loans or further restricting~~including the ~~amount of interest or~~U.S. Foreign Corrupt Practices Act, anti-corruption laws, and other ~~charges or fees earned on loans or other products.~~

foreign laws and regulations. Failure to ~~manage our growth may adversely affect our performance.~~ ~~Our financial performance~~comply with such laws and ~~profitability depend~~regulations could, among other things, result in enforcement actions and fines against us, as well as limitations on our ~~ability to manage our possible future growth. Future acquisitions and our continued growth may present operating, integration and other issues that~~conduct, any of which could have a material adverse effect on our business and results of operations.

The Company is subject to fluctuations in foreign currency exchange rates. The Company’s foreign translation exposure relates to its China subsidiary that has its functional currency denominated in Chinese Renminbi (RMB). In addition, as the Company continues to expand its business in China and Hong Kong, certain transactions are conducted in currencies other than the U.S. Dollar (“USD”). Although the Company has entered into derivative instruments to offset the impact the foreign exchange fluctuations, given the volatility of exchange rates, there is no assurance that the Company will be able to effectively manage foreign currency translation risk. Fluctuations in foreign currency exchange rates could have a material adverse effect on the Company’s results of operations and financial condition.

Credit Risks

The Company’s allowance for credit losses level may not be adequate to cover actual losses. In accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”), we maintain an allowance for loan losses to provide for loan defaults and non-performance, and an allowance for unfunded credit reserves, which, when combined, are referred to as the allowance for credit losses. Our allowance for loan losses is based on our evaluation of risks associated with our loan held for investment portfolio, including historical loss experience, expected loss calculations, delinquencies, performing status, the size and composition of the loan portfolio, economic conditions, and concentrations within the portfolio. The allowance estimation process requires subjective and complex judgments, including analysis of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans. Current economic conditions in the U.S. and in international markets could deteriorate, which could result in, among other things, greater than expected deterioration in credit quality of our loan portfolio or in the value of collateral securing these loans. Our allowance for loan losses may not be adequate to cover probable loan losses, and future provisions for loan losses could materially and adversely affect our financial condition and results of operations. Additionally, in order to maximize the collection of loan balances, we sometimes modify loan terms when there is a reasonable chance that an appropriate modification would allow our client to continue servicing the debt. If such modifications ultimately are less effective at mitigating loan losses than we expect, we may incur losses in excess of the specific amount of allowance for loan losses associated with a modified loan, and this would result in additional provision for loan losses. In addition, we establish a reserve for losses associated with our unfunded credit reserves. The level of the allowance for unfunded credit reserves is determined by following a methodology similar to that used to establish our allowance for loan losses in our loan held for investment portfolio. There can be no assurance that our allowance for unfunded credit reserves will be adequate to provide for the actual losses associated with our unfunded credit commitments. An increase in the allowance for unfunded credit reserves in any period may result in a charge to earnings.

In 2012, the FASB issued for public comment a proposed Accounting Standard Update, Financial Instruments Credit Losses (Subtopic 825-15), that would substantially change the accounting for credit losses under U.S. GAAP. Under U.S. GAAP's current standards, credit losses are not reflected in the financial statements until it is probable that the credit loss has been incurred. Under the Credit Loss Proposal, an entity would reflect in its financial statements its current estimate of credit losses on financial assets over the expected life of each financial asset. The Credit Loss Proposal, if adopted as proposed, may have a negative impact on our reported earnings, capital, regulatory capital ratios, as well as on regulatory limits which are based on capital, since it would accelerate the recognition of estimated credit losses.

We may be subject to increased credit risk and higher credit losses to the extent that our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral. Our credit risk and credit losses can increase if our loans are concentrated in borrowers engaged in the same or similar economic conditions in those markets or elsewhere, which could result in materially higher credit losses. A deterioration in economic conditions, housing conditions, or real estate values in the markets in which we operate could result in materially higher credit losses. The Bank has a concentration of real estate loans in California. Potential deterioration in the real estate market could result in additional loan charge-offs and provision for loan losses, which could have a material adverse effect on the Company’s financial condition, results of operations and ~~cash flows.~~capital.

Operational Risks

A failure in or breach of our operational or security systems or infrastructure, or those of third parties, could disrupt our businesses, and adversely impact our results of operations, cash flows, liquidity and financial condition, as well as cause reputational harm. The potential for operational risk exposure exists throughout our organization and from our interactions with third parties. Our operational and security systems, infrastructure, including our computer systems, network infrastructure, data management and internal processes, as well as those of third parties, are integral to our performance. In addition, we rely on our employees and third parties in our ongoing operations, who may, as a result of human error or malfeasance or failure or breach of third-party systems or infrastructure, expose us to risk. We have taken measures to implement backup systems and safeguards to support our operations, but our ability to conduct business may be adversely affected by any significant disruptions to us or to the third parties with whom we interact. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. Our financial, accounting, data processing, backup or other operating or security systems and infrastructure may fail to operate properly or may become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control which could adversely affect our ability to process these transactions or provide certain services. There could be ~~liable for breaches~~electrical, telecommunications or other major physical infrastructure outages, natural disasters such as earthquakes, tornadoes, hurricanes and floods, disease pandemics, and events arising from local or larger scale political or social matters, including terrorist acts. We continuously update these systems to support our operations and growth and this entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones. Operational risk exposures could adversely impact our results of operations, cash flows, liquidity and financial condition, loss of confidence, significant litigation exposure and harm to our reputation.

A cyber attack, information or security breach, or a technology failure of ours or of a third party could adversely affect our ability to conduct our business, manage our exposure to risk or expand our businesses, result in the disclosure or misuse of confidential or proprietary information, increase our ~~online banking services. Fear~~costs to maintain and update our operational and security systems and infrastructure, and adversely impact our results of ~~security breaches could limit thegrowth of our online services.~~operations, cash flows, liquidity and financial condition, as well as cause reputational harm. ~~We offer~~The Company offers various Internet-based services to ~~our~~its clients, including online banking services. The secure transmission of confidential information over the Internet is essential to maintain ~~our~~the clients’ confidence in ~~our~~the Company’s online services. ~~Advances~~In addition, our business is highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact. Cyber security risks for financial institutions have significantly increased in ~~computer capabilities, new discoveries or other developments could result~~recent years in ~~a compromise or breach~~part because of the ~~technology we~~proliferation of new technologies, the use of the Internet and telecommunications technologies to ~~protect client transaction data. In addition, individuals may seek to intentionally disrupt~~conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. Our business relies on the secure processing, transmission, storage and retrieval of confidential, proprietary and other information in our ~~online banking services or compromise~~computer and data management systems and networks, and in the ~~confidentiality~~computer and data management systems and networks of ~~customer information with criminal intent.~~third parties. We rely on digital technologies, computer, database and email systems, software and networks. Although ~~we have~~the Company has developed systems and processes that are designed to prevent security breaches and periodically test ~~our~~the Company’s security, failure to mitigate breaches of security could adversely affect ~~our~~the Company’s ability to offer and grow ~~our~~the online services, result in violations of applicable privacy and other laws, costly litigation and loss of customer relationships and could have an adverse effect on ~~our~~the Company’s business.

~~Our~~Failure to keep pace with technological change could adversely affect the Company’s business. The Company may face risks associated with the ability to utilize information technology systems to support our operations effectively. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. Many of the Company’ competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on the Company’s business and, in turn, the Company’s financial condition and results of operations. In addition, if we do not implement systems effectively or if our outsourcing business partners do not perform their functions properly, there could be an adverse effect on us. There can be no assurance that we will be able to effectively maintain or improve our systems and processes, or utilize outsourced talent, to meet our business needs efficiently. Any failure of such could adversely affect our operations, financial condition, and results of operations or reputation.

Natural disasters and geopolitical events beyond the Company’s control could adversely affect the Company. Natural disasters such as earthquakes, wildfires, extreme weather conditions, hurricanes, floods, and other acts of nature and geopolitical events involving terrorism or military conflict could adversely affect the Company’s business operations and those of the Company’s customers and cause substantial damage and loss to real and personal property. These natural disasters and geopolitical events could impair the borrowers’ ability to service their loans, decrease the level and duration of deposits by customers, erode the value of loan collateral, and result in an increase in the amount of the nonperforming loans and a higher level of nonperforming assets (including real estate owned), net charge-offs, and provision for loan losses, which could adversely affect the Company’s earnings.

The actions and soundness of other financial institutions could affect the Company. Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. The Company executes transactions with various counterparties in the financial industry, including brokers and dealers, commercial banks and investment banks. Defaults by financial services institutions and uncertainty in the financial services industry in general could lead to market wide liquidity problems and may expose the Company to credit risk in the event of default of its counterparty or client. Further, the Company’s credit risk may increase when the underlying collateral held cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to the Company. Any such losses could materially and adversely affect the Company’s results of operations.

The Company’s controls and procedures could fail or be circumvented. Management regularly reviews and updates ~~our~~the Company’s internal controls, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, but not absolute, assurances of the effectiveness of these systems and controls, and that the objectives of these controls have been met. Any failure or circumvention of ~~our~~the Company’s controls and procedures, and any failure to comply with regulations related to controls and procedures could adversely affect ~~our~~the Company’s business, results of operations and financial condition.

The Company is dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect the Company’s prospects. Competition for qualified employees and personnel in the banking industry is intense and there is a limited number of qualified persons with knowledge of, and experience in, the regional banking industry, especially in the West Coast market. The process of recruiting personnel with the combination of skills and attributes required to carry out the Company’s strategies is often lengthy. The Company’s success depends, to a significant degree, upon its ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel, as well as upon the continued contributions of its management and personnel. In particular, the Company’s success has been and continues to be highly dependent upon the abilities of certain key executives.

1921

We face strong competition ~~from~~in the financial services industry and we could lose business or suffer margin declines as a result. The Company’s financial performance and profitability also depend on the Company’s ability to compete with financial services companies and other companies that offer banking services. ~~We conduct~~ The Company conducts the majority of ~~our~~its operations in California. The banking and financial services businesses in California are highly competitive and increased competition in ~~our~~the Company’s primary market area may adversely impact the level of ~~our~~ loans and deposits. Ultimately, wethe Company may not be able to compete successfully against current and future competitors. These competitors include national banks, regional banks and other community banks. WeThe Company also ~~face~~faces competition from many other types of financial institutions, including savings and loan associations, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, ~~our~~the Company’s competitors include major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous locations and mount extensive promotional and advertising campaigns. Areas of competition include interest rates for loans and deposits, efforts to obtain loan and deposit customers and a range in quality of products and services provided, including new technology-driven products and services. If ~~we are~~the Company is unable to attract and retain banking customers, wethe Company may be unable to continue ~~our~~its loan growth and level of deposits.

~~If we cannot attract deposits, our growth may be inhibited.~~ Our ability to increase our deposit base depends in large part on our ability to attract additional deposits at favorable rates. We seek additional deposits by offering deposit products that are competitive with those offered by other financial institutions in our markets.

~~We rely on communications, information, operating and financial control systems technology from third party service providers, and we may suffer an interruption in those systems.~~ We rely heavily on third party service providers for much of our communications, information, operating and financial control systems technology, including our online banking services and data processing systems. Any failure or interruption of these services or systems or breaches in security of these systems could result in failures or interruptions in our customer relationship management, general ledger, deposit, servicing, and/or loan origination systems. The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as found in our existing systems without the need to expend substantial resources, if at all.

~~We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.~~ Competition for qualified employees and personnel in the banking industry is intense and there is a limited number of qualified persons with knowledge of, and experience in, the regional banking industry, specially the West Coast market. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing, and technical personnel, and upon the continued contributions of our management and personnel. In particular, our successCompany has ~~been and continues to be highly dependent upon the abilities of key executives, including our Chief Executive Officer and our President/Chief Operating Officer, and certain other employees.~~

~~Managing reputational risk is important to attracting and maintaining customers, investors and employees.~~ Threats to the Company’s reputation can come from many sources, including unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers. We have policies and procedures in place to protect our reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation.

~~Laws may restrict our ability to pay dividends.~~ The ability of the Bank to pay dividends to the Company is limited by California law and the FRB. The Company’s ability to pay dividends on its outstanding stock is limited by Delaware law. The FRB and the DBO have authority to prohibit the Bank from engaging in business practices which are considered to be unsafe or unsound. Depending upon the financial condition of the Bank and upon other factors, the FRB or DBO could assert that payments of dividends or other payments by the Bank might be such an unsafe or unsound practice.

~~The price of our common stock may be volatile or may decline.~~ The trading price of our common stock may fluctuate as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations could adversely affect the market price of our common stock. Among the factors that could affect our stock price are:

~~actual or anticipated quarterly fluctuations in our operating results and financial condition;~~

~~changes in revenue or earnings estimates or publication of research reports and recommendations by financial analysts;~~

~~failure to meet analysts’ revenue or earnings estimates;~~

~~speculation in the press or investment community;~~

~~strategic actions by us or our competitors, such as acquisitions or restructurings;~~

~~actions by institutional stockholders;~~

~~fluctuations in the stock price and operating results of our competitors;~~

~~general market conditions and, in particular, developments related to market conditions for the financial services industry;~~

~~proposed or adopted regulatory changes or developments;~~

~~anticipated or pending investigations, proceedings or litigation that involve or affect us; or~~

~~domestic and international economic factors unrelated to our performance.~~

The stock market and, in particular, the market for financial institution stocks, has experienced significant volatility during the past couple of years. As a result, the market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate more than usual and cause significant price variations to occur. The trading price of the shares of our common stock and the value of our other securities will depend on many factors, which may change from time to time, including, without limitation, our financial condition, performance, creditworthiness and prospects, and future sales of our equity or equity-related securities. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. A significant decline in our stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation.

~~Anti-takeover provisions could negatively impact our stockholders.~~ Provisions of Delaware law and of our certificate of incorporation, as amended, and bylaws could make it more difficult for a third party to acquire control of us or have the effect of discouraging a third party from attempting to acquire control of us. For example, our certificate of incorporation requires the approval of the holders of at least two-thirds of our outstanding shares of voting stock to approve certain business combinations. We are subject to Section 203 of the Delaware General Corporation Law, which would make it more difficult for another party to acquire us without the approval of our Board of Directors. Additionally, our certificate of incorporation, as amended, authorizes our Board of Directors to issue preferred stock and preferred stock could be issued as a defensive measure in response to a takeover proposal. These and other provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interest of our stockholders.

~~Natural disasters and geopolitical events beyond our control could adversely affect us.~~ Natural disasters such as earthquakes, wildfires, extreme weather conditions, hurricanes, floods, and other acts of nature and geopolitical events involving terrorism or military conflict could adversely affect our business operations and those of our customers and cause substantial damage and loss to real and personal property. These natural disasters and geopolitical events could impair our borrowers’ ability to service their loans, decrease the level and duration of deposits by customers, erode the value of loan collateral, and result in an increase in the amount of our nonperforming loans and a higher level of nonperforming assets (including real estate owned), net charge-offs, and provision for loan losses, which could adversely affect our earnings.

~~Our interest expense may increase following the repeal of the federal prohibition on payment of interest on demand deposits.~~ The federal prohibition on the ability of financial institutions to pay interest on demand deposit accounts was repealed as part of Dodd-Frank. As a result, beginning on July 21, 2011, financial institutions could commence offering interest on demand deposits to compete for clients. Our interest expense will increase and our net interest margin will decrease if the Bank begins offering interest on demand deposits to attract additional customers or maintain current customers, which could have a material adverse effect on our financial condition, net income and results of operations.

~~We have~~ engaged in and may continue to engage in further expansion through acquisitions, which could negatively affect ~~our~~the Company’s business and earnings. There are risks associated with expansion through acquisitions. These risks include, among others, incorrectly assessing the asset quality of a bank acquired in a particular transaction, encountering greater than anticipated costs in integrating acquired businesses, facing resistance from customers or employees, and being unable to profitably deploy assets acquired in the transaction. Additional country- and region-specific risks are associated with transactions outside the United States, including in China. To the extent ~~we issue~~the Company issues capital stock in connection with additional transactions, these transactions and related stock issuances may have a dilutive effect on earnings per share and share ownership.

Other Risks

Anti-takeover provisions could negatively impact the Company’s stockholders. Provisions of Delaware law and of the Company’s certificate of incorporation, as amended, and bylaws could make it more difficult for a third party to acquire control of the Company or could have the effect of discouraging a third party from attempting to acquire control of the Company, even if an acquisition might be in the best interest of the stockholders. For example, the Company’s certificate of incorporation requires the approval of the holders of at least two-thirds of the outstanding shares of voting stock to approve certain business combinations. The Company is also subject to Section 203 of the Delaware General Corporation Law, which would make it more difficult for another party to acquire the Company without the approval of the Board. Additionally, the Company’s certificate of incorporation, as amended, authorizes the Board to issue preferred stock and preferred stock could be issued as a defensive measure in response to a takeover proposal. These and other provisions could make it more difficult for a third party to acquire the Company, even if an acquisition might be in the best interest of the stockholders.

Managing reputational risk is important to attracting and maintaining customers, investors and employees. Threats to the Company’s reputation can come from many sources, including unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of the Company’s customers. The Company has policies and procedures in place to protect its reputation and promote ethical conduct, but these policies and procedures may not be fully effective. Negative publicity regarding the Company’s business, employees or customers, with or without merit, may result in the loss of customers, investors and employees, costly litigation, a decline in revenues and increased governmental regulation.

2122

The price of the Company’s common stock may be volatile or may decline. The trading price of the Company’s common stock may fluctuate as a result of a number of ~~delinquencies and defaults in residential mortgages have created a backlog in U.S. courts and may lead~~factors, many of which are outside the Company’s control. In addition, the stock market is subject to ~~an increase~~fluctuations in the ~~amount of legislative action~~share prices and trading volumes that ~~might restrict or delay our ability to foreclose and, therefore, delay~~affect the ~~collection of payments for single-family residential loans.~~ Collateral-based loans on which the Bank forecloses could be delayed by an extended foreclosure process, including delays resulting from a court backlog, local or national foreclosure moratoriums or other delays, and these delays could negatively impact our results of operations. Homeowner protection laws may also delay the initiation or completion of foreclosure proceedings on specified types of residential mortgage loans. Any such limitations are likely to cause delayed or reduced collections. Significant restrictions on our ability to foreclose on loans, requirements that we forgo a portionmarket prices of the ~~amount otherwise due on a loan or requirements that we modify a significant number~~shares of ~~original loan terms could negatively impact our business, financial condition, liquidity and results of operations.~~

~~We are subject to environmental liability risk associated with lending activities.~~ A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses which may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our financial condition and results of operations.

~~Failure to keep pace with technological change~~many companies. These broad market fluctuations could adversely affect ~~our business.~~the market price of the Company’s common stock. Among the factors that could affect the Company’s stock price are: ~~The~~

actual or anticipated quarterly fluctuations in the Company’s operating results and financial ~~services industry is continually undergoing rapid technological change with frequent introductions~~condition;

changes in revenue or earnings estimates or publication of ~~new technology-driven products~~research reports and ~~services. The effective use~~recommendations by financial analysts;

failure to meet analysts’ revenue or earnings estimates;

speculation in the press or investment community;

strategic actions by the Company or its competitors, such as acquisitions or restructurings;

actions by institutional stockholders;

fluctuations in the stock price and operating results of ~~technology increases efficiency~~the Company’s competitors;

general market conditions and, ~~enables financial institutions~~in particular, developments related to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affectingmarket conditions for the financial services ~~industry could have a material adverse impact on our business~~industry;

proposed or adopted regulatory changes or developments;

anticipated or pending investigations, proceedings or litigation that involve or affect the Company; or

domestic and international economic factors unrelated to the Company’s performance.

The stock market and, in ~~turn, our~~particular, the market for financial institution stocks, has experienced significant volatility in the previous years. As a result, the market price of the Company’s common stock may be volatile. In addition, the trading volume in the Company’s common stock may fluctuate more than usual and cause significant price variations to occur. The trading price of the shares of the Company’s common stock and the value of other securities will depend on many factors, which may change from time to time, including, without limitation, the financial condition, performance, creditworthiness and ~~results~~prospects, and future sales of ~~operations.~~the equity or equity-related securities. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. A significant decline in the Company’s stock price could result in substantial losses for individual stockholders and could lead to costly and disruptive securities litigation.

If ~~our~~the Company’s goodwill were determined to be impaired, it would result in a charge against earnings and thus a reduction in ~~our~~ stockholders’ equity. ~~We test~~The Company tests goodwill for impairment on an annual basis, or more frequently, if necessary. Quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for measuring impairment, when available. Other acceptable valuation methods include present-value measurements based on multiples of earnings or revenues, or similar performance measures. If wethe Company were to determine that the carrying amount of ~~our~~the goodwill exceeded its implied fair value, wethe Company would be required to write down the value of the goodwill on ~~our~~the balance sheet, adversely affecting ~~our~~ earnings as well as ~~our~~ capital.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company operates over 130 locations worldwide, including in the United States’ markets of California, Georgia, Massachusetts, Nevada, New York, Texas and Washington. In Greater China, East West’s presence includes full service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen.

East West currently neither owns nor leases any real or personal property. ~~The Company~~East West uses the premises, equipment, and furniture of the Bank. The Agency also currently conducts its operations in one of the administrative offices of the ~~Bank. The Company is currently reimbursing~~Bank and reimburses the Bank for ~~the Agency’s~~its use of this facility. East West’s headquarters is located at 135 North Los Robles Avenue, Pasadena, California, an eight-story office building owned by the Bank.

~~The~~As of December 31, 2015, the Bank owns the buildings and land at 33approximately 35 of its retail branches and ~~offices. Four of these retail branch locations are either attached or adjacent to~~ offices ~~that are being used by~~located in the ~~Bank to house various administrative departments.~~United States. All international and other domestic branch and administrative locations are leased by the Bank, with lease expiration dates ranging from ~~2015~~2016 to 2032, exclusive of renewal options. All properties occupied by the Bank are used across all business segments and for corporate purposes. Please see Note 20 - Business Segments to the Consolidated Financial Statements for details on each segment. The Bank also owns leasehold improvements, equipment, furniture, and fixtures at our offices, all of which are used in our business activities.

The Company believes that its existing facilities are ~~adequate~~in good condition and suitable for the conduct of its business and operations. On an ongoing basis, the Company evaluates its current and planned projected space requirements and, from time to time, it may determine that certain premises or facilities are no longer necessary for its ~~present purposes.~~operations. The Company believes that, if necessary, it could secure alternative facilities on similar terms without adversely affecting its operations.

As of December 31, 2014, the Bank’s consolidated investment in premises and equipment, net of accumulated depreciation and amortization, totaled $180.9 million. Total occupancy expense, inclusive of rental payments and furniture and equipment expense, for the year ended December 31, 2014 was $63.8 million. Total annual rental expense (exclusive of operating charges and real property taxes) was approximately $26.2 million during 2014.

ITEM 3. LEGAL PROCEEDINGS

~~See~~Please see Litigation in Note 14—Commitments, Contingencies and ~~Regulatory Matters in Note 15 – Commitments and Contingencies~~Related Party Transactions to the Consolidated Financial Statements, which is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

2324

PART II



ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s common stock is traded on the NASDAQ ~~Global Select Market~~ under the symbol “EWBC.” The following tables ~~presents~~sets forth, for the ~~range of closing~~periods indicated, the high and low sales prices ~~and dividend information for~~of the Company’s common stock ~~for the years ended December 31, 2014 and 2013.~~ as reported on NASDAQ, as well as dividend information.



	2014					2015
	High		Low		Dividends	High		Low		Cash dividends
First quarter	$	38.26	$	31.62	$0.18 cash dividend	$	41.48	$	35.68	$0.20
Second quarter	$	36.98	$	32.19	$0.18 cash dividend	$	46.50	$	39.88	$0.20
Third quarter	$	36.95	$	33.04	$0.18 cash dividend	$	45.91	$	37.19	$0.20
Fourth quarter	$	39.71	$	30.50	$0.18 cash dividend	$	43.94	$	36.40	$0.20



	2013					2014
	High		Low		Dividends	High		Low		Cash dividends
First quarter	$	25.78	$	22.11	$0.15 cash dividend	$	38.26	$	31.62	$0.18
Second quarter	$	27.68	$	22.56	$0.15 cash dividend	$	36.98	$	32.19	$0.18
Third quarter	$	31.98	$	27.55	$0.15 cash dividend	$	36.95	$	33.04	$0.18
Fourth quarter	$	35.43	$	31.89	$0.15 cash dividend	$	39.71	$	30.50	$0.18

On January 21, 2015, dividends for the Company’s common stock were declared for the first quarter of 2015 in the amount of $0.20 payable on or about February 17, 2015 to stockholders of record on February 2, 2015. This represents an increase of $0.02 per share, or an 11% increase from the prior quarterly dividend of $0.18 per share.

~~The closing price of our common stock on January 31, 2015 was $36.18 per share, as reported by the NASDAQ Global Select Market.~~ As of January 31, ~~2015, 143,583,710~~2016, 143,917,846 shares of the Company’s common stock were held by ~~806~~773 stockholders of record and by approximately ~~76,400 of~~49,000 additional stockholders whose shares were held for them in street name or nominee accounts.

On January 27, 2016, dividends for the Company’s common stock were declared for the first quarter of 2016 in the amount of $0.20, payable on or about February 16, 2016 to stockholders of record on February 1, 2016. This remains the same, at $0.20 per share, as the prior year’s quarterly dividend. For information on the statutory and regulatory limitations on the ability of the Company to pay dividends to its stockholders and on the Bank to pay dividends to East West, please see ~~“Item~~Item 1. ~~BUSINESS –~~Business — Supervision and ~~Regulation—~~Regulation — Dividends and Other Transfers of ~~Funds” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Asset Liability and Market Risk Management - Liquidity”~~Funds presented elsewhere in this report. For information regarding securities authorized for issuance under the Company’s equity compensation plans, please see Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters of Part III presented elsewhere in this report, which are incorporated herein by reference.

2425

Stock Performance Graph

The following graph and table ~~and graph~~ compare ~~yearly percentage change in~~ the Company’s cumulative total return on its common stock with the cumulative total ~~returns~~return of the Standard & Poor’s 500 (“S&P 500”) Index ~~SNL Western~~and the KBW Regional Bank Index ~~and~~(“KRX”) over the five-year period through December 31, 2015. In 2015, the Company changed its stock performance graph indices from the SNL Bank and Thrift and SNL Western Bank Indices to the S&P 500 and KRX. The KRX was used to further align EWBC with those companies of a relatively similar size. The S&P 500 was utilized as a benchmark against performance. The S&P 500 Index ~~over~~is a commonly referenced U.S. equity benchmark consisting of leading companies from different economic sectors. The KBW Regional Bank Index seeks to reflect the ~~five-year period ended~~performance of banks and thrifts that are publicly traded in the U.S. and is composed of approximately 50 companies. The graph and table below assume that on December 31, ~~2014. The graph below assumes that~~2010, $100 was invested in EWBC’s common stock, the S&P 500 Index and ~~in each index at the beginning of the five-year period shown~~KRX Index, and that all dividends were reinvested. Historical stock price performance shown on the graph is not necessarily indicative of future price performance. The information set forth under the heading “Stock Performance Graph” shall not be deemed “soliciting material” or to be “filed” with the Commission, except to the extent wethe Company specifically ~~request~~requests that such information be treated as soliciting material or specifically ~~incorporate~~incorporates it by reference into a filing under the ~~Securities~~ Exchange Act, ~~of 1934, as amended,~~ or the Securities Act of 1933, as amended.



	December 31,						December 31,
Index	2009	2010	2011	2012	2013	2014	2010		2011		2012		2013		2014		2015
East West Bancorp, Inc.	100.00	124.03	126.36	140.04	232.90	263.18	$	100.00	$	101.92	$	112.90	$	187.48	$	211.71	$	231.75
SNL Western Bank Index	100.00	113.31	102.37	129.18	181.76	218.14
SNL Bank and Thrift	100.00	111.64	86.81	116.57	159.61	178.18
KBW Regional Bank Index (KRX)							$	100.00	$	94.86	$	107.42	$	157.75	$	161.57	$	171.13
S&P 500	100.00	115.06	117.49	136.30	180.44	205.14	$	100.00	$	102.11	$	118.45	$	156.82	$	178.28	$	180.75
Source: SNL Financial LC, Charlottesville, VA, (434) 977-1600, www.snl.com

Indices used in the prior year
SNL Western U.S. Bank Index							$	100.00	$	90.34	$	114.01	$	160.41	$	192.51	$	199.46
SNL U.S. Bank and Thrift Index							$	100.00	$	77.76	$	104.42	$	142.97	$	159.60	$	162.83

Source: SNL Financial LC

Keefe, Bruyette & Woods

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On July 17, 2013, the Company’s Board ~~of Directors~~ authorized a stock repurchase program to buy back up to $100.0 million of the Company’s common stock. The Company did not repurchase any shares under this program during ~~2013~~2014 and ~~2014.~~2015. Although this program has no stated expiration date, the Company does not intend to repurchase any stock pursuant to this program absent further action of the Company’s Board.

ITEM 6. SELECTED FINANCIAL DATA

For selected financial data information, please see Item 7. MD&A — Overview — Selected Financial Data , which is incorporated herein by reference.

2527

ITEM ~~6. SELECTED FINANCIAL DATA~~

The following selected financial data should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes presented elsewhere in this report. Certain items in the consolidated balance sheet and the consolidated statements of income were reclassified for prior years to conform to the 2014 presentation. These reclassifications did not affect previously reported net income.

2014 2013 2012 2011 2010
(In thousands, except per share data)
Summary of Operations:
Interest and dividend income $ 1,153,698
$ 1,068,685
$ 1,051,095
$ 1,080,448
$ 1,095,831
Interest expense 112,820
112,492
132,168
177,422
201,117
Net interest income before provision for loan losses 1,040,878
956,193
918,927
903,026
894,714
Provision for loan losses on non-covered loans 44,125
18,336
60,168
92,584
195,934
Provision for loan losses on covered loans 5,033
4,028
5,016
2,422
4,225
Net interest income after provision for loan losses 991,720
933,829
853,743
808,020
694,555
Noninterest (loss) income ⁽¹⁾
(11,714 ) (92,468 ) (5,618 ) 10,924
39,270
Noninterest expense 564,551
415,511
422,533
435,610
477,916
Income before provision for income taxes 415,455
425,850
425,592
383,334
255,909
Provision for income taxes 72,972
130,805
143,942
138,100
91,345
Net income 342,483
295,045
281,650
245,234
164,564
Preferred stock dividends, amortization of preferred stock discount, and inducement of preferred stock conversion —
3,428
6,857
6,857
43,126
Net income available to common stockholders $ 342,483
$ 291,617
$ 274,793
$ 238,377
$ 121,438

Per Common Share:
Basic earnings $ 2.39
$ 2.11
$ 1.92
$ 1.62
$ 0.88
Diluted earnings $ 2.38
$ 2.10
$ 1.89
$ 1.60
$ 0.83
Dividends declared $ 0.72
$ 0.60
$ 0.40
$ 0.16
$ 0.04
Book value $ 19.85
$ 17.18
$ 16.39
$ 14.92
$ 13.67

Average Common Shares Outstanding:
Basic 142,952
137,342
141,457
147,093
137,478
Diluted 143,563
139,574
147,175
153,467
147,102
Common shares outstanding at period-end 143,582
137,631
140,294
149,328
148,543

At Year End:
Total assets $ 28,738,049
$ 24,730,068
$ 22,536,110
$ 21,968,667
$ 20,700,537
Non-covered loans, net of allowance $ 19,994,081
$ 15,412,715
$ 11,710,190
$ 10,061,788
$ 8,430,199
Covered loans, net of allowance $ 1,474,189
$ 2,187,898
$ 2,935,595
$ 3,923,142
$ 4,800,876
Investment securities $ 2,626,365
$ 2,733,797
$ 2,607,029
$ 3,072,578
$ 2,875,941
Customer deposits $ 24,008,774
$ 20,412,918
$ 18,309,354
$ 17,453,002
$ 15,641,259
Long-term debt $ 225,848
$ 226,868
$ 137,178
$ 212,178
$ 235,570
Federal Home Loan Bank advances $ 317,241
$ 315,092
$ 312,975
$ 455,251
$ 1,214,148
Stockholders’ equity $ 2,850,568
$ 2,364,225
$ 2,382,122
$ 2,311,743
$ 2,113,931

Financial Ratios:
Return on average assets 1.24 % 1.25 % 1.29 % 1.14 % 0.82 %
Return on average equity 12.61
12.59
12.14
10.98
7.02
Common dividend payout ratio 30.37
28.57
20.96
10.02
4.57
Average stockholders’ equity to average assets 9.83
9.95
10.62
10.36
11.62
Net interest margin 4.03
4.38
4.63
4.66
5.05

Asset Quality Ratios:
Net charge-offs on non-covered loans to average total non-covered loans 0.14 % 0.03 % 0.38 % 1.16 % 2.35 %
Nonperforming assets to total assets 0.45
0.53
0.63
0.80
0.94
Allowance for loan losses on non-covered loans to total gross non-covered loans 1.27
1.54
1.92
2.04
2.64

~~(1)~~

Changes in FDIC indemnification asset and receivable/payable was a charge of $201.4 million, $228.6 million, $122.3 million, $100.1 million and $83.2 million in 2014, 2013, 2012, 2011 and 2010, respectively. There were no other-than-temporary impairment (“OTTI”) charges related to investment securities in 2014 and 2013. ~~2012, 2011 and 2010 include OTTI charges related to investment securities of $99 thousand, $633 thousand and $16.7 million, respectively. Pre-tax gain on acquisition was $22.9 million in 2010.~~



~~ITEM~~ 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources 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 ~~subsidiaries.~~wholly-owned subsidiaries, East West Bank and subsidiaries (referred to herein as “East West Bank” or the “Bank”) and East West Insurance Services, Inc. This information is intended to facilitate the understanding and assessment of significant changes and trends related to ~~our~~the Company’s financial condition and the results of ~~our~~ operations. Prior periods were restated to reflect the retrospective application of adopting Accounting Standards Update (“ASU”) 2014-01, the new accounting guidance related to the Company’s investments in qualified affordable housing projects. Please see Note 9 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements for additional information. This discussion and analysis should be read in conjunction with ~~our consolidated financial statements~~the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report.

~~Critical Accounting Policies~~Overview

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and general practices within the banking industry. The financial information contained within these statements is, to a significant extent, financial information that is based on approximate measures of the financial effects of transactions and events that have already occurred. All of our significant accounting policies are described in Note 1 to our consolidated financial statements presented elsewhere in this report and are essential to understanding Management’s Discussion and Analysis of Financial Condition and Results of Operations. Some of our accounting policies, by their nature, are inherently subject to estimates, valuation assumptions and other subjective assessments. In addition, certain accounting policies require significant judgment in applying complex accounting principles to individual transactions to determine the most appropriate treatment. We have established procedures and processes to facilitate making the necessary judgments to prepare the consolidated financial statements.

The following is a summary of the more judgmental and complex accounting estimates and principles. In each area, we have identified the variables most important in the estimation process. We have used the best information available to make the estimations necessary to value the related assets and liabilities. Actual performance that differs from our estimates and future changes in the key variables could change future valuations and impact the results of operations.

~~Fair Value of Financial Instruments~~

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and, in many cases, requires management to make a number of significant judgments. Based on the observability of the inputs used in the valuation techniques, the Company classifies its assets and liabilities measured and disclosed at fair value in accordance with a three-level hierarchy (e.g., Level 1, Level 2 and Level 3) established under Accounting Standards Codification (“ASC”) 820, ~~Fair Value Measurements~~. In determining the fair value of financial instruments, the Company uses market prices of the same or similar instruments whenever such prices are available. The Company does not use prices involving distressed sellers in determining fair value. If observable market prices are unavailable or impracticable to obtain, then fair value is estimated using modeling techniques such as discounted cash flow analysis. These modeling techniques incorporate management’s assessments regarding assumptions that market participants would use in pricing the asset or the liability, including assumptions about the risks inherent in a particular valuation technique and the risk of nonperformance.

The Company records certain financial instruments such as investment securities available-for-sale, derivative assets and liabilities at fair value on a recurring basis. Certain financial statement line items such as impaired loans, other real estate owned are recorded at fair value on a nonrecurring basis. Nonrecurring fair value measurements generally involve assets that are periodically evaluated for impairment.

For a complete discussion on our fair value valuation of financial instruments, our related measurement techniques, and the impact to our consolidated financial statements, see Note 3 to the Company’s consolidated financial statements presented elsewhere in this report.

~~Investment Securities~~

The accounting for investment securities are discussed in detail in Note 1 to the Company’s consolidated financial statements presented elsewhere in this report. The fair values of the investment securities are generally determined by independent external pricing service providers who have experience in valuing these securities and by comparison to and/or average of quoted market prices obtained from independent external brokers. In obtaining such valuation information from third parties, the Company has evaluated the methodologies used to develop the resulting fair values. The Company performs a monthly analysis on the broker quotes and pricing service values received from third parties to ensure that the prices represent a reasonable estimate of the fair value. The procedures include, but are not limited to, initial and on-going review of third party pricing methodologies, review of pricing trends, and monitoring of trading volumes. The Company ensures prices received from independent brokers represent a reasonable estimate of the fair value through the use of observable market inputs including comparable trades, yield curve, spreads and, when available, market indices. As a result of this analysis, if the Company determines that there is a more appropriate fair value based upon the available market data, the price received from the third party is adjusted accordingly. Prices from third party pricing services are often unavailable for securities that are rarely traded or are traded only in privately negotiated transactions. As a result, certain securities are priced via independent broker quotations which utilize proprietary models that include observable market based inputs. Additionally, the majority of these independent broker quotations are non-binding.

For broker prices obtained on certain investment securities that we believe are based on forced liquidation or distressed sale values in inactive markets, the Company individually examines these securities for the appropriate valuation methodology based on a combination of the market approach reflecting current broker prices and a discounted cash flow approach. In calculating the fair value derived from the income approach, the Company makes assumptions such as constant prepayment rate, constant default rate, loss severity for deferrals/defaults, and discount margin.

Available-for-sale debt and marketable equity securities in unrealized loss positions are analyzed as part of the Company’s ongoing assessment of OTTI. In determining whether an impairment is other than temporary, the Company considers the severity and duration of the decline in fair value, the length of time expected for recovery, the financial condition of the issuer, changes in the securities’ ratings and other qualitative factors, as well as whether the Company either plans to sell the security or it is more-likely-than-not that it will be required to sell the security before recovery of the amortized cost. If the impairment of the available-for-sale debt security is credit-related, an OTTI loss is recorded in earnings. For available-for-sale debt securities, the non-credit-related impairment loss is recognized in accumulated other comprehensive income (“OCI”). If the Company intends to sell an available-for-sale debt security or believes it will more-likely-than-not be required to sell a security, the Company records the full amount of the impairment loss as an OTTI loss. Available-for-sale marketable equity securities are carried at fair value with net unrealized gains and losses included in accumulated OCI on an after-tax basis. If there is an other-than-temporary decline in the fair value of any individual available-for-sale marketable equity security, the cost basis is reduced and the Company reclassifies the associated net unrealized loss out of accumulated OCI with a corresponding charge to the consolidated income statement.

The Company considers available information relevant to the collectability of the security, including information about past events, current conditions, and reasonable and supportable forecasts, when developing the estimate of future cash flows in making its OTTI assessment for its portfolio of trust preferred securities. The Company considers factors such as remaining payment terms of the security, prepayment speeds, expected defaults, the financial condition of the issuer(s), and the value of any underlying collateral.

~~Purchased Credit Impaired Loans~~

~~Acquired loans, in accordance with ASC 805,~~ ~~Business Combinations~~, are recorded at fair value as of their acquisition date. Loans purchased with evidence of credit deterioration since origination, purchased credit impaired (“PCI”) loans, for which it is probable that all contractually required payments will not be collected are accounted for under ASC 310-30, ~~Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality~~.

Under ASC 310-30, loans are recorded at fair value at their acquisition date, factoring in credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over or recorded as of the acquisition date. In situations where loans have similar risk characteristics, loans were aggregated into pools to estimate cash flows under ASC 310-30. A pool is accounted for as a single asset with a single interest rate, cumulative loss rate and cash flow expectation.

The cash flows expected over the life of the pools are estimated using an internal cash flow model that projects cash flows and calculates the carrying values of the pools, book yields, effective interest income and impairment, if any, based on pool level events. Assumptions as to cumulative loss rates, loss curves and prepayment speeds are utilized to calculate the expected cash flows.

At acquisition, the excess of the expected cash flows at acquisition over the recorded investment is considered to be the accretable yield and is recognized as interest income over the life of the loan or pool. The excess of the contractual cash flows over the expected cash flows is considered to be the nonaccretable difference. Subsequent to the acquisition date, any increases in cash flow over those expected at purchase date in excess of the fair value that are probable are recorded as an adjustment to the accretable difference on a prospective basis. Any subsequent decreases in cash flow over those expected at purchase date that are probable and significant are recognized by recording an allowance for loan losses. Any disposals of loans, including sales of loans, payments in full or foreclosures result in the removal of the loan from the ASC 310-30 portfolio at the carrying amount.

Loans acquired in FDIC-assisted acquisitions that are subject to FDIC shared-loss agreements (“shared-loss agreements”) are referred to as covered loans. Covered loans are reported exclusive of the expected cash flow reimbursements expected to be collected from the FDIC. At the date of acquisition, all covered loans were accounted for under ASC 805 and ASC 310-30.

~~FDIC Indemnification Asset/Payable to FDIC, net~~

In conjunction with the FDIC-assisted acquisitions of WFIB and UCB, the Bank entered into shared-loss agreements with the FDIC. At the date of the acquisition, the amounts receivable under the shared-loss agreements with the FDIC related to covered loans and covered other real estate owned (“OREO”). The FDIC indemnification asset is initially recorded at fair value, based on the discounted value of expected future cash flows under the shared-loss agreements. The Company has elected to account for amounts receivable under the shared-loss agreements as an indemnification asset in accordance with ASC 805. The difference between the present value and the undiscounted cash flow the Company expects to collect from the FDIC is accreted into noninterest income over the life of the FDIC indemnification asset. The FDIC indemnification asset is reviewed on a quarterly basis and adjusted for any changes in expected cash flows based on recent performance and expectations for future performance of the covered portfolio. Any increases in cash flow of the loans over those expected will reduce the FDIC indemnification asset and any decreases in cash flow of the loans over those expected will increase the FDIC indemnification asset. Over the life of the FDIC indemnification asset, increases and decreases are recorded as adjustments to noninterest income. Due to continued payoffs and improved credit performance of the covered loan portfolio as compared to our original estimates, the expected reimbursement from the FDIC under the shared-loss agreements has decreased and a payable to FDIC, net has been recorded. Additionally, the FDIC proportionately shares recoveries recognized on previously charged off covered loans.

~~Allowance for Loan Losses~~

Our process for determining the allowance for loan losses is discussed in the “Allowance for Loan Losses” section of Note 1 to the Company’s consolidated financial statements and “Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations - Allowance for Loan Losses” presented elsewhere in this report. The Company’s allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan loss that management believes is appropriate at each reporting date. Quantitative factors include our historical loss experience, delinquency and charge-off trends, collateral values, changes in nonperforming loans, and other factors. Qualitative considerations include, but are not limited to, prevailing economic or market conditions, relative risk profiles of various loan segments, volume concentrations, growth trends, delinquency and nonaccrual status, problem loan trends, and geographic concentrations.

As the Company adds new products, increases the complexity of our loan portfolio, and expands our geographic coverage, the Company will continue to enhance the methodology to keep pace with the size and complexity of the loan portfolio and the changing credit environment. Changes in any of the factors cited above could have a significant impact on the loan loss calculation. The Company believes that our methodologies currently employed continue to be appropriate given our size and level of complexity. This discussion should also be read in conjunction with the Company’s consolidated financial statements and the accompanying notes presented elsewhere in this report. See Note 8 and 9 to the Company’s consolidated financial statements.

~~Goodwill Impairment~~

~~Under ASC 350,~~ ~~Intangibles—Goodwill and Other~~, goodwill must be allocated to reporting units and tested for impairment. The Company tests goodwill for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business, indicate that there may be justification for conducting an interim test. Impairment testing is performed at the reporting-unit level (which is the same level as the Company’s major operating segments identified in Note 20 to the Company’s consolidated financial statements presented elsewhere in this report). The first part of the test is a comparison, at the reporting unit level, of the fair value of each reporting unit to its carrying value, including goodwill. In order to determine the fair value of the reporting units, a combined income approach and market approach was used. Under the income approach, the Company provided a net income projection and a terminal growth rate was used to calculate the discounted cash flows and the present value of the reporting units. Under the market approach, the fair value was calculated using the current fair values of comparable peer banks of similar size, geographic footprint and focus. The market capitalizations and multiples of these peer banks were used to calculate the market price of the Company and each reporting unit. The fair value was also subject to a control premium adjustment, which is the cost savings that a purchase of the reporting unit could achieve by eliminating duplicative costs. Under the combined income and market approach, the value from each approach was weighted based on management’s perceived risk of each approach to determine the fair value. If the fair value is less than the carrying value, then the second part of the test is needed to measure the amount of goodwill impairment. The implied fair value of the reporting unit goodwill is calculated and compared to the actual carrying value of goodwill recorded within the reporting unit. If the carrying value of reporting unit goodwill exceeds the implied fair value of that goodwill, then the Company would recognize an impairment loss for the amount of the difference, which would be recorded as a charge against net income. For complete discussion and disclosure see Note 11 to the Company’s consolidated financial statements presented elsewhere in this report.

~~Income Taxes~~

Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

The Company examines its financial statements, its income tax provision, and its federal and state income tax returns and analyzes its tax positions, including permanent and temporary differences, as well as the major components of income and expense to determine whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. In the event a tax position is not more likely than not to be sustained by the tax authorities, a reserve is established by management. The Company recognizes interest and penalties related to tax positions as part of its provision for income taxes.

~~Share-Based Compensation~~

~~The Company accounts for share-based awards to employees, officers, and directors in accordance with the provisions of ASC 505,~~ ~~Equity, and ASC 718,~~ ~~Compensation—Stock Compensation. Share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period.~~

The Company grants nonqualified stock options and restricted share awards, which include a service condition for vesting. Additionally, some of our stock awards include a company financial performance requirement for vesting. The stock option awards vest in three to four years from the grant date. Restricted share awards vest ratably in three or five years or cliff vest in five years from the date of grant. Compensation expense is amortized on a straight-line basis over the requisite service period for the entire award, which is generally the maximum vesting period of the award.

The Company uses an option-pricing model to determine the grant-date fair value of our stock options which is affected by assumptions regarding a number of complex and subjective variables. The Company makes assumptions regarding expected term, expected volatility, expected dividend yield, and risk-free interest rate in determining the fair value of our stock options. The expected term represents the weighted-average period that stock options are expected to remain outstanding. The expected term assumption is estimated based on the stock options’ vesting terms and remaining contractual life and employees’ historical exercise behavior. The expected volatility is based on the historical volatility of the Company’s common stock over a period of time equal to the expected term of the stock options. The dividend yield assumption is based on the Company’s current dividend payout rate on its common stock. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve in effect at the time of grant appropriate for the term of the employee stock options.

~~For restricted share awards, the grant-date fair value is measured at the fair value of the Company’s common stock as if the restricted share was vested and issued on the date of grant.~~

As share-based compensation expense is based on awards ultimately expected to vest, it is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and are reviewed annually for reasonableness. If the estimated forfeitures are revised, a cumulative effect of a change in estimated forfeitures for current and prior periods are recognized in compensation cost in the period of change. Share-based compensation is discussed in more detail in Note 1 and Note 16 to the Company’s consolidated financial statements presented elsewhere in this report.

~~New Accounting Pronouncements Adopted~~

~~In July 2013, the FASB issued ASU 2013-11,~~ ~~Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.~~ ASU 2013-11 eliminates diversity in practice as it provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The Company adopted this guidance in first quarter 2014 with prospective application to all unrecognized tax benefits that exist at the effective date. ASU 2013-11 did not have a material impact on the Company’s consolidated financial statements.

~~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 net investment performance in the income statement as a component of income tax expense (benefit). ASU 2014-10 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 on the Company’s 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 OREO. 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.

~~In May 2014, The FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~. The new guidance replaces existing revenue recognition guidance for contracts to provide goods or services to customers and amends existing guidance related to recognition of gains and losses on the sale of certain nonfinancial assets such as real estate. ASC 606 establishes a principles-based approach to recognizing revenue that applies to all contracts other than those covered by other authoritative GAAP guidance. Quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows are also required. ASC 606 is effective for interim and annual periods beginning after December 15, 2016 and is applied on either a modified retrospective or full retrospective basis. Early adoption is not permitted. The Company is currently evaluating the impact on its consolidated financial statements.

~~Business Overview and Strategy~~

East West Bancorp, Inc. is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as the holding company for our Pasadena-based wholly-owned subsidiary, East West Bank, which may be referred to as the “Bank”. When we say “we,” “our” or the “Company,” we mean the Company on a consolidated basis with the Bank. When we refer to “East West” or to the holding company, we are referring to the parent company on a stand-alone basis.

The Company’s vision is to serve as the financial bridge between the United States and Greater China. The Company’s primary strategy to achieving this vision is to ~~grow our business so that we are able~~expand the Company’s global network of contacts and resources to ~~reach more customers~~better meet its customers’ diverse financial needs in and between the world’s two largest markets. With over 130 branches in the United States and Greater China, along with ~~our~~the full range of cross-border products and ~~capabilities. During~~services, the ~~fourth quarter of 2014, we opened two new branches in Greater China, in Shenzhen and in the Shanghai Pilot Free Trade Zone. With these additional branches, we will be better~~Company is well positioned to assist ~~our~~its customers with the products and ~~facilitate~~services their ~~financial needs between Greater China and the U.S.~~

On January 17, 2014, the Company completed the acquisition of 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 with two thirds in East West Bank common 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 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 Company. Approximately $1.70 billion of assets were acquired and $1.41 billion of liabilities were assumed.businesses need.

~~For the~~Financial Highlights

The Company successfully completed another year ~~ended December 31, 2014, net~~with strong earnings and financial results in 2015, achieving healthy growth and an increase in revenues. During 2015, noteworthy items included:

Net income ~~totaled a record $342.5 million, a $47.4~~increased $38.8 million or ~~16%~~11% from $345.9 million in 2014 to $384.7 million in 2015. Net income per diluted share for the full year of 2015 totaled $2.66, an increase of $0.25 or 10% from ~~$295.0~~$2.41 in 2014.

Revenue, the sum of net interest income and noninterest income (loss), before provision for credit losses increased $104.7 million or 10% to $1.13 billion for the year ended December 31, ~~2013. Diluted earnings per share~~2015.

The return on average assets and the return on average equity was 1.27% and 12.74%, respectively for the year ended December 31, 2015, both up two basis points year-over-year.

Total assets increased $3.61 billion or 13% from 2014 to a record of $32.35 billion as of December 31, 2015.

Total loans receivable (including loans held for sale) increased $1.92 billion or 9% to a record of $23.69 billion as of December 31, 2015, which was largely attributable to increases of $1.29 billion or 19% in commercial real estate (“CRE”) loans, $925.8 million or 11% in commercial loans and $442.3 million or 29% in consumer loans, partially offset by a decrease of $799.9 million or 21% in single-family residential loans, as a result of loan sales during 2015.

Deposits increased $3.47 billion or 14% from 2014 to a record $27.48 billion as of December 31, 2015, with core deposits amounting to a record $20.86 billion.

Cost of funds decreased from 0.46% in 2014 to 0.39% in 2015.

The allowance for loan losses to loans held-for-investment ratio decreased to 1.12% as of December 31, 2015, from 1.20% as of December 31, 2014. The decrease in the allowance for loan losses to loans held-for-investment ratio was primarily the result of an overall improvement in credit quality.

Nonperforming assets as of December 31, 2015 totaled ~~$2.38~~$128.4 million, an improvement of $4.0 million or 3%, compared to $132.4 million as of December 31, 2014. Nonperforming assets to total assets ratio improved by six basis points to 0.40% as of December 31, 2015. This ratio was below 1.00% for the fourth consecutive year. In addition, year-to-date net charge-offs to average loans held-for-investments improved from 0.18% for the year ended December 31, 2014 ~~an increase of $0.28 or 13% from $2.10 in 2013. Net interest margin, defined as net interest income divided by average earning assets, decreased by 35 basis points~~ to ~~4.03%~~0.01% for the year ended December 31, ~~2014, from 4.38% during~~2015.

The strong balance sheet growth and increased revenues positioned the ~~same period in 2013.~~Company well to focus on the Company’s bridge banking strategy and target future growth opportunities. The ~~$80.8 million or 87% decrease in noninterest loss from $92.5 million~~Company’s cost of funds was 0.39% for the year ended December 31, 2013 to $11.7 million for the year ended December 31, 2014 was mainly due to increases in net gains on loan sales, changes in FDIC indemnification asset and receivable/payable and other commission and fee income. The $149.0 million or 36% increase in noninterest expense from $415.5 million for the year ended December 31, 2013 to $564.6 million for the year ended December 31, 2014 was mainly due to an increases in compensation and employee benefits, amortization of investments in affordable housing partnerships and other tax credit investments, legal expenses and other operating expenses. The effective tax rate was 17.6% for the year ended December 31, 2014,2015 compared to ~~30.7% for the same period in 2013. The lower effective tax rate in 2014 compared to 2013~~0.46% a year ago, which was mainly due to the ~~additional purchases~~extinguishment of ~~affordable housing partnership and other tax credit investments.~~

~~Over the last year, the Company’s total assets have increased $4.01 billion or 16% from $24.73 billion as~~$545.0 million of ~~December 31, 2013 to $28.74 billion as of December 31, 2014. This increase is attributable to our organic growth~~its higher cost securities sold under repurchase agreements (“repurchase agreements”) and the ~~MetroCorp acquisition. Total non-covered gross loans held for investment as of December 31, 2014 was $20.25 billion,~~shift in deposit portfolio mix. During 2015, the Company also reached an increase of $4.57 billion or 29% compared to $15.68 billion as of December 31, 2013. The MetroCorp acquisition added $1.19 billion of loans. Excluding the MetroCorp acquisition, non-covered loan growth for the year ended December 31, 2014 was $3.38 billion or 22%, largely driven by growth in C&I.

Covered loans totaled $1.48 billion as of December 31, 2014, a decrease of $717.9 million or 33% from December 31, 2013. The covered loan portfolio is comprised of loans acquired from the FDIC-assisted acquisitions of UCB and WFIB which are covered under shared-loss agreementsagreement with the ~~FDIC.~~Federal Deposit Insurance Corporation (“FDIC”) to early terminate the United Commercial Bank (“UCB”) and Washington First International (“WFIB”) shared-loss agreements. The ~~decrease in the covered loan portfolio was primarily due to payoffs and paydown activities. For the year ended December 31, 2014, we recorded~~Company made a ~~net decrease in the FDIC indemnification asset receivable/payable included in noninterest loss~~total payment of ~~$201.4 million, largely due to continued payoffs and the continuing improved credit performance of the UCB portfolio, as compared to our original estimate.~~

Loans held for sale decreased $159.0 million or 78% from $205.0 million as of December 31, 2013 to $46.0 million as of December 31, 2014. The majority of loans sold during 2014 were comprised of student loans.

As a result of continued credit quality improvement, non-covered nonperforming assets, as of December 31, 2014, decreased to $128.7 million, a decrease of $1.9 million or 1% from the prior year. The provision for loan losses for non-covered loans of $44.1$125.5 million for the year ended December 31, 2014, as compared to the prior year of $18.3 million was primarily due to the growth in the non-covered loan portfolio. Additionally, non-covered nonaccrual loans comprised $101.0 million or 0.50% of total gross non-covered loans as of December 31, 2014.

Total deposits were $24.01 billion as of December 31, 2014, an increase of a $3.60 billion or 18% from $20.41 billion as of December 31, 2013. Excluding the MetroCorp acquisition, deposit growth for the year ended December 31, 2014 was $2.28 billion or 11%. Core deposits grew to a record $17.90 billion, an increase of $3.31 billion or 23% year-over-year.early terminations. As of December 31, ~~2014,~~2015, all rights and obligations of the Company and the FDIC under the shared-loss agreements have been eliminated.

The Company’s successful year was also highlighted by the increase in the quarterly dividends paid to stockholders, which increased from $0.18 per share to $0.20 per share during 2015. The Company remains focused on its continued growth while still meeting its customers’ financial needs. In January 2016, the Company’s ~~$24.01 billion deposit portfolio~~Board of Directors (the “Board”) declared first quarter dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share was ~~comprised~~paid on February 16, 2016 to stockholders of ~~$7.38 billion or 31% of noninterest-bearing demand deposits, $10.52 billion or 44% of money-market, interest-bearing checking and savings deposits and $6.11 billion or 25% of time deposits.~~

Since the acquisition of the loans and deposits of UCB five years ago, the Company has transformed its balance sheet by increasing diversification in both loans and deposits, while shedding most of the $1.26 billion of nonperforming loans acquired from UCB. Additionally, loan portfolios have been substantially diversified and the Company has reduced its CRE concentration. In anticipation of a rising interest rate environment, core commercial deposits have been strategically increased.record on February 1, 2016.

3229

The Company is focused on active capital management and is committed to maintaining strong capital levels that exceed regulatory requirements, while also supporting balance sheet growth and providing a strong return to stockholders. Capital levels for the Company remained strong. AsFive-Year Summary of December 31, 2014, the Company’s Tier 1 risk-based capital and total risk-based ratios were 11.0% and 12.6%, respectively, greater than the well capitalized requirements of 6.0% and 10.0%, respectively.Selected Financial Data




($ in thousands, except per share data)	2015			2014			2013			2012			2011
Summary of Operations:
Interest and dividend income	$	1,053,815		$	1,153,698		$	1,068,685		$	1,051,095		$	1,080,448
Interest expense	103,376			112,820			112,492			132,168			177,422
Net interest income before provision for credit losses	950,439			1,040,878			956,193			918,927			903,026
Provision for credit losses	14,217			49,158			22,364			65,184			95,006
Net interest income after provision for credit losses	936,222			991,720			933,829			853,743			808,020
Noninterest income (loss) ⁽¹⁾	183,383			(11,714		)	(92,468		)	(5,618		)	10,924
Noninterest expense ⁽²⁾	540,884			532,983			394,215			406,837			424,377
Income before income taxes ⁽²⁾	578,721			447,023			447,146			441,288			394,567
Income tax expense ⁽²⁾	194,044			101,145			153,822			163,552			151,794
Net income ⁽²⁾	384,677			345,878			293,324			277,736			242,773
Preferred stock dividends	—			—			3,428			6,857			6,857
Net income available to common stockholders ⁽²⁾	$	384,677		$	345,878		$	289,896		$	270,879		$	235,916

Per Common Share:
Basic earnings ⁽²⁾	$	2.67		$	2.42		$	2.10		$	1.89		$	1.60
Diluted earnings ⁽²⁾	$	2.66		$	2.41		$	2.09		$	1.87		$	1.58
Dividends declared	$	0.80		$	0.72		$	0.60		$	0.40		$	0.16
Book value ⁽²⁾	$	21.70		$	19.89		$	17.19		$	17.01		$	15.53

Weighted Average Number of Shares Outstanding:
Basic	143,818			142,952			137,342			141,457			147,093
Diluted	144,512			143,563			139,574			147,175			153,467
Common shares outstanding at period-end	143,909			143,582			137,631			140,294			149,328

At Year End:
Total assets ⁽²⁾	$	32,350,922		$	28,743,592		$	24,732,216		$	22,539,744		$	21,976,451
Loans held-for-investment, net	$	23,378,789		$	21,468,270		$	17,600,613		$	14,645,785		$	13,984,930
Available-for-sale investment securities	$	3,773,226		$	2,626,617		$	2,733,797		$	2,607,029		$	3,072,578
Customer deposits	$	27,475,981		$	24,008,774		$	20,412,918		$	18,309,354		$	17,453,002
Long-term debt	$	206,084		$	225,848		$	226,868		$	137,178		$	212,178
Federal Home Loan Bank (“FHLB”) advances	$	1,019,424		$	317,241		$	315,092		$	312,975		$	455,251
Stockholders’ equity ⁽²⁾	$	3,122,950		$	2,856,111		$	2,366,373		$	2,385,991		$	2,319,527

Financial Ratios:
Return on average assets ⁽²⁾	1.27		%	1.25		%	1.24		%	1.27		%	1.13		%
Return on average equity ⁽²⁾	12.74		%	12.72		%	12.50		%	11.94		%	10.82		%
Common dividend payout ratio ⁽²⁾	30.21		%	30.07		%	28.74		%	21.26		%	10.12		%
Net interest margin	3.35		%	4.03		%	4.38		%	4.63		%	4.66		%

(1)

Changes in FDIC indemnification asset and receivable/payable was a charge of $38.0 million, $201.4 million, $228.6 million, $122.3 million and $100.1 million for the years ended December 31, 2015, 2014, 2013, 2012 and 2011, respectively. During the year ended December 31, 2015, the Company terminated the UCB and WFIB shared-loss agreements. Please see Note 8 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements for additional information.


(2)	Prior periods were restated to reflect the retrospective application of adopting the new accounting guidance related to the Company’s investments in qualified affordable housing projects ASU 2014-01. Please see Note 9 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net to the Consolidated Financial Statements for additional information.

Results of Operations

~~Net~~The Company’s net income for the year ended December 31, 2015 was $384.7 million compared to $345.9 million and $293.3 million for the years ended December 31, 2014 and 2013, respectively. The Company has successfully increased net income for six consecutive years. The 2015 earnings performance reflected continued success in executing the Company’s business strategy. Underpinning the operating results in 2015 were sustained loan and deposit growth, stable loan credit quality and fee income from diverse sources.

Revenue, the sum of net interest income and noninterest income (loss), before provision for credit losses was $1.13 billion for the year ended December 31, 2015, an increase of $104.7 million or 10% from $1.03 billion for the year ended December 31, 2014. Revenue for the year ended December 31, 2014, increased ~~$47.5~~by $165.4 million or ~~16% to $342.5 million as compared to net income of $295.0~~19% from $863.7 million for the year ended December 31, 2013. ~~Net income~~The increase in revenue year over year was primarily due to the reduction in expenses related to changes in the FDIC indemnification asset and receivable/payable. This decrease was largely due to the expiration of the UCB non single-family shared-loss agreement in 2014 and the early termination of the remaining shared-loss agreements in 2015.

The Company’s return on average assets increased two basis points to 1.27% for the year ended December 31, ~~2013~~2015, compared to 1.25% for the same period in 2014; and also increased ~~$13.3 million or 5% from $281.7 million~~one basis point to 1.25% for the year ended December 31, ~~2012. These continued increases in net income are largely the result of strong loan growth, maintaining high credit quality, and steady growth in lower cost deposits.~~

~~The Company’s return on average assets was~~ ~~1.24%~~ ~~for the year ended~~ ~~December 31,~~ 2014,, compared to ~~1.25%~~ ~~and 1.29%~~1.24% for the same ~~periods~~period in ~~2013~~ ~~and 2012, respectively.~~2013. The return on average equity ~~was~~ ~~12.61%~~increased two basis points to 12.74% for the year ended December 31, ~~2014~~,2015, compared to ~~12.59%~~ ~~and 12.14%~~12.72% for the same ~~periods~~period in ~~2013~~2014; and ~~2012, respectively. These relatively stable~~climbed 22 basis points to 12.72% for the year ended December 31, 2014, compared to 12.50% for the same period in 2013. The returns on assets and equity ~~reflect~~reflected the Company’s ability to ~~maintain~~achieve increasing levels of profitability while expanding the loan and deposit base.

~~Table 1:~~ ~~Components of Net Income~~

Year Ended December 31,

2014
2013
2012

($ in millions)
Net interest income
$ 1,040.9
$ 956.2
$ 918.9
Provision for loan losses on non-covered loans
(44.1 ) (18.3 ) (60.2 )
Provision for loan losses on covered loans
(5.0 ) (4.0 ) (5.0 )
Noninterest loss
(11.7 ) (92.5 ) (5.6 )
Noninterest expense
(564.6 ) (415.5 ) (422.5 )
Provision for income taxes
(73.0 ) (130.8 ) (143.9 )
Net income
$ 342.5
$ 295.0
$ 281.7
Return on average assets
1.24 % 1.25 % 1.29 %
Return on average equity
12.61 % 12.59 % 12.14 %

Net Interest Income

The Company’s primary source of revenue is net interest income, which is the difference between interest earned on loans, available-for-sale investment securities and other interest-earning assets less ~~the~~ interest expense on customers’ deposits, ~~borrowings~~repurchase agreements, long-term debt and other interest-bearing liabilities. Net interest margin is calculated by dividing gross interest revenue less gross interest expense by average interest-earning assets. Net interest income and net interest margin are affected by several factors, including changes in average balances and composition of interest-earning assets and funding sources, market interest rate fluctuations and slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, volume of noninterest-bearing sources of funds and asset quality.

Net interest income for the year ended December 31, ~~2014 totaled~~2015 was $950.4 million, a decrease of $90.4 million or 9% compared to net interest income of $1.04 billion ~~an increase~~for the same period in 2014. Net interest margin was 3.35% for the year ended December 31, 2015, a decrease of 68 basis points from 4.03% for the year ended December 31, 2014. The decrease in net interest income and net interest margin was primarily due to the decrease in interest income and yield on loans as a result of lower accretion income associated with the loans acquired from the FDIC assisted acquisitions of UCB and WFIB, partially offset by a reduction in interest expense on repurchase agreements that were paid off during 2015.

For the year ended December 31, 2014, net interest income increased by $84.7 million or 9% ~~over~~from $956.2 million, and net interest ~~income of $956.2 million~~margin decreased by 35 basis points from 4.38% for the same period in 2013. The increase in net interest income ~~between~~ ~~2014~~ ~~and 2013~~ was primarily due to ~~the~~an increase in the volume of ~~non-covered loans, partially offset by the~~loans. The 35 basis points decrease in volume of covered loans. In comparison, net interest income for the year ended December 31, 2013 totaled $956.2 million, an increase of $37.3 million or 4% increase over net interest income of $918.9 million for the year ended December 31, 2012. The increase in net interest ~~income between 2013 and 2012~~margin was ~~primarily due to the increase in volume of non-covered loans and yields of covered loans, partially offset by a decrease in the volume of covered loans and yields of non-covered loans.~~

Net interest margin, defined as net interest income divided by average earning assets, decreased by 35 basis points to 4.03% for the year ended December 31, 2014, from 4.38% for the same period in 2013. For the year ended December 31, 2014, net interest margin decreased as compared to the same period in 2013, primarily due to a decrease in discount accretion from ~~covered~~ loans asassociated with the ~~covered loan portfolio continues to payoff~~FDIC assisted acquisitions of UCB and ~~paydown. The interest income on covered loans was $277.1 million and $395.2 million with a resulting yield of 15.31% and 15.55% for~~WFIB.

For the ~~years~~year ended December 31, ~~2014 and 2013, respectively. Net interest margin decreased 25 basis points~~2015, average interest-earning assets increased by $2.59 billion or 10% to $28.39 billion from $25.80 billion for the year ended December 31, ~~2013, from 4.63%~~2014. The increase was primarily due to an increase in average loan balances of $1.92 billion or 9% to $22.28 billion for the year ended December 31, 2015, compared to $20.35 billion for the same period in ~~2012. The decrease was primarily due~~2014. Customer deposits are an important source of low-cost funding and affect both net interest income and net interest margin. Average deposits which consist of noninterest-bearing demand, interest-bearing checking, money market, savings and time deposits, increased by $2.82 billion or 12% to ~~decrease in discount accretion from covered loans similar to~~$25.76 billion for the year ended December 31, 2015, compared to $22.94 billion for the same period in 2014. Average loans were funded 116% by average deposits for the year ended December 31, 2015, consistent with the funding rates of 113% and 119% for the same period in 2014 and 2013, respectively.

3331

The following table presents the interest ~~rate~~ spread, net interest margin, average balances, interest income and expense, and the average ~~yield~~ yield/rates by asset and liability component for the years ended December 31, 2015, 2014 ~~2013~~ and ~~2012:~~

~~Table 2:~~ ~~Summary of Selected Financial Data~~2013:


		Year Ended December 31,
		2014							2013							2012
		Average Balance			Interest		Average Yield Rate		Average Balance			Interest		Average Yield Rate		Average Balance			Interest		Average Yield Rate
		($ in thousands)
($ in thousands)																								Year Ended December 31,
																								2015							2014							2013
																								Average Balance			Interest		Average Yield/ Rate		Average Balance			Interest		Average Yield/ Rate		Average Balance			Interest		Average Yield/ Rate
ASSETS
Interest-earning assets:
Due from banks and short-term investments		$	1,469,200		$	23,214	1.58	%	$	1,184,709		$	17,340	1.46	%	$	1,457,153		$	22,316	1.53	%		$	1,851,604		$	17,939	0.97	%	$	1,469,200		$	23,214	1.58	%	$	1,184,709		$	17,340	1.46	%
Securities purchased under resale agreements		1,340,411			20,323		1.52	%	1,503,014			21,236		1.41	%	1,267,284			20,392		1.61	%
Investment securities available-for-sale^{(1) (2)}		2,540,228			44,684		1.76	%	2,729,019			43,846		1.61	%	2,475,489			58,184		2.35	%
Non-covered loans^{(3) (4)}		18,542,476			782,135		4.22	%	13,734,759			584,164		4.25	%	11,023,745			515,378		4.68	%
Covered loans⁽⁴⁾		1,809,342			277,070		15.31	%	2,541,238			395,230		15.55	%	3,445,693			430,152		12.48	%
Federal Home Loan Bank and Federal Reserve Bank stock		96,921			6,272		6.47	%	134,918			6,869		5.09	%	171,816			4,673		2.72	%
Securities sold under repurchase agreements (“resale agreements”) ⁽¹⁾																								1,337,274			19,799		1.48	%	1,340,411			20,323		1.52	%	1,503,014			21,236		1.41	%
Available-for-sale investment securities ⁽²⁾⁽³⁾																								2,847,655			41,375		1.45	%	2,540,228			44,684		1.76	%	2,729,019			43,846		1.61	%
Loans⁽⁴⁾⁽⁵⁾																								22,276,589			968,625		4.35	%	20,351,818			1,059,205		5.20	%	16,276,031			979,394		6.02	%
FHLB and Federal Reserve Bank stock																								77,460			6,077		7.85	%	96,921			6,272		6.47	%	134,918			6,869		5.09	%
Total interest-earning assets		$	25,798,578		$	1,153,698	4.47	%	$	21,827,657		$	1,068,685	4.90	%	$	19,841,180		$	1,051,095	5.30	%		$	28,390,582		$	1,053,815	3.71	%	$	25,798,578		$	1,153,698	4.47	%	$	21,827,691		$	1,068,685	4.90	%
Noninterest-earning assets:
Cash and cash equivalents		322,581							306,551							255,975								342,606							322,581							306,551
Allowance for loan losses		(254,616		)					(241,049		)					(228,355		)						(263,143		)					(254,616		)					(241,049		)
Other assets		1,785,254							1,667,533							1,961,743
Total assets		$	27,651,797						$	23,560,692						$	21,830,543
Other assets ⁽⁶⁾																								1,858,412							1,786,427							1,670,096
Total assets ⁽⁶⁾																								$	30,328,457						$	27,652,970						$	23,563,289
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY																						LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:																							Interest-bearing liabilities:
Checking deposits		$	2,179,428		$	5,431	0.25	%	$	1,487,844		$	3,556	0.24	%	$	1,059,517		$	3,163	0.30	%		$	2,795,379		$	8,453	0.30	%	$	2,179,428		$	5,431	0.25	%	$	1,487,844		$	3,556	0.24	%
Money market deposits		5,958,461			16,001		0.27	%	5,217,666			15,019		0.29	%	4,883,413			16,984		0.35	%		6,763,979			18,988		0.28	%	5,958,461			16,001		0.27	%	5,217,666			15,019		0.29	%
Savings deposits		1,748,465			2,971		0.17	%	1,546,188			2,961		0.19	%	1,267,059			2,795		0.22	%		1,785,085			3,468		0.19	%	1,748,465			2,971		0.17	%	1,546,188			2,961		0.19	%
Time deposits		6,218,745			41,083		0.66	%	5,964,017			41,960		0.70	%	6,435,102			52,953		0.82	%		6,482,697			42,596		0.66	%	6,218,745			41,083		0.66	%	5,964,017			41,960		0.70	%
Federal funds purchased and other short-term borrowings		888			—		—		155			—		—		2,975			4		0.14	%		4,797			58		1.21	%	888			—		—	%	155			—		—	%
FHLB advances		349,767			4,116		1.18	%	315,867			4,173		1.32	%	385,644			6,248		1.62	%		327,080			4,270		1.31	%	349,767			4,116		1.18	%	315,867			4,173		1.32	%
Securities sold under repurchase agreements		955,147			38,395		4.02	%	995,000			41,381		4.16	%	997,938			46,166		4.63	%
Repurchase agreements ⁽¹⁾																								404,096			20,907		5.17	%	955,147			38,395		4.02	%	995,000			41,381		4.16	%
Long-term debt		237,738			4,823		2.03	%	166,690			3,442		2.06	%	183,285			3,855		2.10	%		218,353			4,636		2.12	%	237,738			4,823		2.03	%	166,690			3,442		2.06	%
Total interest-bearing liabilities		$	17,648,639		$	112,820	0.64	%	$	15,693,427		$	112,492	0.72	%	$	15,214,933		$	132,168	0.87	%		$	18,781,466		$	103,376	0.55	%	$	17,648,639		$	112,820	0.64	%	$	15,693,427		$	112,492	0.72	%
Noninterest-bearing liabilities:																							Noninterest-bearing liabilities:
Demand deposits		6,834,871							5,179,687							3,902,534								7,928,460							6,834,871							5,179,721
Other liabilities		451,287							343,271							393,948								599,436							451,287							343,112
Stockholders’ equity		2,717,000							2,344,307							2,319,128
Total liabilities and stockholders’ equity		$	27,651,797						$	23,560,692						$	21,830,543
Stockholders’ equity ⁽⁶⁾																								3,019,095							2,718,173							2,347,029
Total liabilities and stockholders’ equity ⁽⁶⁾																								$	30,328,457						$	27,652,970						$	23,563,289
Interest rate spread							3.83	%						4.18	%						4.43	%							3.16	%						3.83	%						4.18	%
Net interest income and net interest margin					$	1,040,878	4.03	%				$	956,193	4.38	%				$	918,927	4.63	%					$	950,439	3.35	%				$	1,040,878	4.03	%				$	956,193	4.38	%



Delaware (State or other jurisdiction of incorporation or organization)		95-4703316 (I.R.S. Employer Identification No.)
135 North Los Robles Ave., 7th Floor, Pasadena, California (Address of principal executive offices)		91101 (Zip Code)



Large accelerated filer	x	Non-accelerated filer	¨
Accelerated filer	¨	Smaller reporting company	¨



			Page
PART I			3
	Item 1.	Business	45
	Item 1A.	Risk Factors	15
	Item 1B.	Unresolved Staff Comments	2223
	Item 2.	Properties	2223
	Item 3.	Legal Proceedings	2324
	Item 4.	Mine Safety Disclosures	2324
PART II			2425
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2425
	Item 6.	Selected Financial Data	2627
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	5857
	Item 8.	Financial Statements and Supplementary Data	58
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	58125
	Item 9A.	Controls and Procedures	58125
	Item 9B.	Other Information	61127
PART III			61127
	Item 10.	Directors, Executive Officers and Corporate Governance	61127
	Item 11.	Executive Compensation	61128
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	62128
	Item 13.	Certain Relationships and Related Transactions and Director Independence	62128
	Item 14.	Principal Accountant Fees and Services	62128
PART IV			63129
	Item 15.	Exhibits and Financial Statement Schedules	63129
SIGNATURES			~~136~~130
EXHIBIT INDEX			~~138~~132


	Year Ended December 31,
	2014 vs. 2013											2013 vs. 2012
	Total Change				Changes Due to							Total Change				Changes Due to
				Volume				Rate				Total Change			Volume				Rate
	Total Change	(In thousands)
($ in thousands)																							Year Ended December 31,
																							2015 vs. 2014									2014 vs. 2013
																							Total Change			Changes Due to						Total Change				Changes Due to
																							Total Change			Volume			Yield/Rate						Volume				Yield/Rate
Interest-bearing assets:																																Total Change
Due from banks and short-term investments	$	5,874			$	4,413			$	1,461		$	(4,976	)		$	(4,023	)		$	(953	)	$	(5,275	)	$	5,102		$	(10,377	)	$	5,874			$	4,413			$	1,461
Securities purchased under resale agreements	(913		)		(2,398		)		1,485			844				3,514				(2,670		)
Investment securities available-for-sale	838				(3,155		)		3,993			(14,338		)		5,498				(19,836		)
Non-covered Loans	197,971				202,832				(4,861		)	68,786				118,376				(49,590		)
Covered loans	(118,160		)		(112,166		)		(5,994		)	(34,922		)		(127,243		)		92,321
Federal Home Loan Bank and Federal Reserve Bank stock	(597		)		(2,202		)		1,605			2,196				(1,176		)		3,372
Resale agreements																							(524		)	(47		)	(477		)	(913		)		(2,398		)		1,485
Available-for-sale investment securities																							(3,309		)	5,022			(8,331		)	838				(3,155		)		3,993
Loans																							(90,580		)	94,158			(184,738		)	79,811				223,735				(143,924		)
FHLB and Federal Reserve Bank stock																							(195		)	(1,389		)	1,194			(597		)		(2,202		)		1,605
Total interest and dividend income	$	85,013			$	87,324			$	(2,311	)	$	17,590			$	(5,054	)		$	22,644		$	(99,883	)	$	102,846		$	(202,729	)	$	85,013			$	220,393			$	(135,380	)
Interest-bearing liabilities:
Checking deposits	$	1,875			$	1,717			$	158		$	393			$	1,108			$	(715	)	$	3,022		$	1,722		$	1,300		$	1,875			$	1,717			$	158
Money market deposits	982				2,035				(1,053		)	(1,965		)		1,106				(3,071		)	2,987			2,237			750			982				2,035				(1,053		)
Savings deposits	10				364				(354		)	166				565				(399		)	497			63			434			10				364				(354		)
Time deposits	(877		)		1,747				(2,624		)	(10,993		)		(3,688		)		(7,305		)	1,513			1,735			(222		)	(877		)		1,747				(2,624		)
Federal funds purchased and other short-term borrowings	(6		)		4				(10		)	(4		)		(2		)		(2		)	58			—			58			—				—				—
Federal Home Loan Bank advances	(57		)		424				(481		)	(2,075		)		(1,027		)		(1,048		)
Securities sold under repurchase agreements	(2,986		)		(1,627		)		(1,359		)	(4,785		)		(136		)		(4,649		)
FHLB advances																							154			(278		)	432			(57		)		424				(481		)
Repurchase agreements																							(17,488		)	(26,397		)	8,909			(2,986		)		(1,627		)		(1,359		)
Long-term debt	1,387				1,446				(59		)	(413		)		(344		)		(69		)	(187		)	(405		)	218			1,381				1,442				(61		)
Total interest expense	$	328			$	6,110			$	(5,782	)	$	(19,676	)		$	(2,418	)		$	(17,258	)	$	(9,444	)	$	(21,323	)	$	11,879		$	328			$	6,102			$	(5,774	)
Change in net interest income	$	84,685			$	81,214			$	3,471		$	37,266			$	(2,636	)		$	39,902		$	(90,439	)	$	124,169		$	(214,608	)	$	84,685			$	214,291			$	(129,606	)



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



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


(1)	~~Includes the amortization~~ Average balance of ~~premiums on investment securities of $24.2 million, $34.0 million~~resale and ~~$21.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.~~repurchase agreements are reported net pursuant to Accounting Standard Codification (“ASC”) 210-20-45, Balance Sheet Offsetting.


(2)	~~Average balances exclude unrealized gains or losses~~Yields on ~~available-for-sale securities.~~tax exempt securities are not presented on a tax-equivalent basis.


(4)	Average ~~balances include~~balance includes nonperforming loans.


(5)	Includes the accretion of discount and amortization of net deferred loan costs which totaled $66.2 million, $185.8 million and $232.5 million for the years ended December 31, 2015, 2014 and 2013, respectively.




($ in millions)	Year Ended December 31,
($ in millions)	2015			2014			2013
Branch fees	$	39.5		$	37.9		$	32.0
Letters of credit fees and foreign exchange income	39.0			37.3			34.8
Ancillary loan fees	15.0			10.6			9.4
Wealth management fees	18.3			16.2			10.9
Derivative commission income	16.2			12.8			8.8
Changes in FDIC indemnification asset and receivable/payable	(38.0		)	(201.4		)	(228.6		)
Net gains on sales of loans	24.9			39.1			7.8
Net gains on sales of available-for-sale investment securities	40.4			10.9			12.1
Other fees and other operating income	28.1			24.9			20.3
Total noninterest income (loss)	$	183.4		$	(11.7	)	$	(92.5	)


	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Total
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	($ in thousands)
As of December 31, 2014
Available-for-sale
($ in thousands)																					Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Total
($ in thousands)																					Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
Available-for-sale investment securities
U.S. Treasury securities	$	30,549	0.43	%	$	842,886	1.12	%	$	—	—	%	$	—	—	%	$	873,435	1.10	%	$	110,439	0.50	%	$	785,929	1.17	%	$	102,147	1.78	%	$	—	—	%	$	998,515	1.16	%
U.S. government agency and U.S. government sponsored enterprise debt securities	229,502		1.76	%	56,928		1.52	%	24,594		2.54	%	—		—	%	311,024		1.78	%	537,393		1.03	%	143,057		1.02	%	88,399		1.91	%	—		—	%	768,849		1.13	%
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		—	%	2,572		3.56	%	80,008		3.38	%	58,840		2.38	%	141,420		2.97	%	—		—	%	43,014		1.03	%	162,615		1.88	%	146,033		1.99	%	351,662		1.82	%
Residential mortgage-backed securities	—		—	%	—		—	%	24,291		1.68	%	766,797		1.80	%	791,088		1.80	%	—		—	%	2,366		2.23	%	93,471		2.49	%	901,559		1.69	%	997,396		1.77	%
Municipal securities	3,200		2.84	%	120,180		2.57	%	116,635		2.54	%	10,433		3.73	%	250,448		2.61	%
Municipal securities ⁽¹⁾																					—		—	%	142,780		2.32	%	25,252		2.48	%	7,617		3.94	%	175,649		2.42	%
Other residential mortgage-backed securities:
Investment grade	—		—	%	—		—	%	—		—	%	53,918		3.42	%	53,918		3.42	%
Other commercial mortgage-backed securities:
Investment grade	—		—	%	—		—	%	34,053		2.16	%	—		—	%	34,053		2.16	%	—		—	%	—		—	%	—		—	%	62,393		3.20	%	62,393		3.20	%
Corporate debt securities:
Investment grade	26,263		0.96	%	—		—	%	49,591		1.53	%	39,328		1.41	%	115,182		1.36	%	50,855		1.19	%	35,606		2.22	%	79,096		1.68	%	199,156		1.89	%	364,713		1.78	%
Non-investment grade	9,184		0.86	%	—		—	%	—		—	%	5,497		3.70	%	14,681		1.86	%	9,642		1.03	%	—		—	%	—		—	%	—		—	%	9,642		1.03	%
Other securities	41,116		2.61	%	—		—	%	—		—	%	—		—	%	41,116		2.61	%	44,407		2.45	%	—		—	%	—		—	%	—		—	%	44,407		2.45	%
Total investment securities available-for-sale	$	339,814			$	1,022,566			$	329,172			$	934,813			$	2,626,365
Total available-for-sale investment securities																					$	752,736			$	1,152,752			$	550,980			$	1,316,758			$	3,773,226


(1)	Yields on tax exempt securities are not presented on a tax-equivalent basis.



	Within One Year		After One But Within Five Years		More Than Five Years		Total
	(In thousands)
CRE	$	20,396	$	3,076,058	$	3,037,592	$	6,134,046
C&I	85,967		5,879,236		1,872,891		7,838,094
Residential	6,091		239,788		4,574,789		4,820,668
Consumer	5,884		57,552		1,393,207		1,456,643
Total non-covered loans ⁽¹⁾	$	118,338	$	9,252,634	$	10,878,479	$	20,249,451



	December 31,
	2014					2013					2012					2011					2010
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	($ in thousands)
CRE
Income producing	$	5,611,485		27	%	$	4,301,030		27	%	$	3,644,035		30	%	$	3,487,866		34	%	$	3,392,984		39	%
Construction	313,811			2	%	140,186			1	%	121,589			1	%	171,410			2	%	278,047			3	%
Land	208,750			1	%	143,861			1	%	129,071			1	%	173,089			2	%	235,707			3	%
Total CRE	$	6,134,046		30	%	$	4,585,077		29	%	$	3,894,695		32	%	$	3,832,365		38	%	$	3,906,738		45	%
C&I
Commercial business	$	7,031,350		35	%	$	4,637,056		30	%	$	3,569,388		30	%	$	2,655,917		26	%	$	1,674,698		19	%
Trade finance	806,744			4	%	723,137			5	%	661,877			6	%	486,555			4	%	308,657			3	%
Total C&I	$	7,838,094		39	%	$	5,360,193		35	%	$	4,231,265		36	%	$	3,142,472		30	%	$	1,983,355		22	%
Residential:
Single-family	$	3,642,978		18	%	$	3,192,875		20	%	$	2,187,323		18	%	$	1,796,635		17	%	$	1,119,024		13	%
Multifamily	1,177,690			6	%	992,434			6	%	900,708			8	%	933,168			9	%	974,745			11	%
Total residential	$	4,820,668		24	%	$	4,185,309		26	%	$	3,088,031		26	%	$	2,729,803		26	%	$	2,093,769		24	%
Consumer:
Student loans	$	—		—	%	$	679,220		4	%	$	475,799		4	%	$	306,325		3	%	$	490,314		6	%
Other consumer	1,456,643			7	%	868,518			6	%	269,083			2	%	277,461			3	%	243,212			3	%
Total consumer	$	1,456,643		7	%	$	1,547,738		10	%	$	744,882		6	%	$	583,786		6	%	$	733,526		9	%
Total non-covered loans ⁽¹⁾	$	20,249,451		100	%	$	15,678,317		100	%	$	11,958,873		100	%	$	10,288,426		100	%	$	8,717,388		100	%
Unearned fees, premiums, and discounts, net	2,804					(23,672		)			(19,301		)			(16,762		)			(56,781		)
Allowance for loan losses	(258,174		)			(241,930		)			(229,382		)			(209,876		)			(230,408		)
Loans held for sale, net	45,950					204,970					174,317					278,603					220,055
Non-covered loans receivable, net	$	20,040,031				$	15,617,685				$	11,884,507				$	10,340,391				$	8,650,254




($ in thousands)	December 31,
	2015					2014					2013					2012					2011
	Amount			%		Amount			%		Amount			%		Amount			%		Amount			%
CRE:
Income producing	$	7,478,474		32	%	$	6,256,059		29	%	$	5,265,160		30	%	$	4,743,023		32	%	$	4,904,555		34	%
Construction	438,671			2	%	332,287			1	%	225,068			1	%	394,567			3	%	551,872			4	%
Land	193,604			1	%	231,167			1	%	182,913			1	%	180,117			1	%	256,713			2	%
Total CRE	8,110,749			35	%	6,819,513			31	%	5,673,141			32	%	5,317,707			36	%	5,713,140			40	%
C&I:
Commercial business	8,213,897			35	%	7,181,189			33	%	4,881,809			27	%	3,922,989			26	%	3,148,040			22	%
Trade finance	789,110			3	%	896,012			4	%	875,794			5	%	843,791			6	%	732,563			5	%
Total C&I	9,003,007			38	%	8,077,201			37	%	5,757,603			32	%	4,766,780			32	%	3,880,603			27	%
Residential:
Single-family	3,066,919			13	%	3,866,781			18	%	3,464,383			19	%	2,514,549			17	%	2,200,101			16	%
Multifamily	1,522,995			6	%	1,449,908			7	%	1,364,986			8	%	1,479,346			10	%	1,756,416			12	%
Total residential	4,589,914			19	%	5,316,689			25	%	4,829,369			27	%	3,993,895			27	%	3,956,517			28	%
Consumer:
Student loans	—			—	%	—			—	%	679,220			4	%	475,799			3	%	306,325			2	%
Other consumer	1,956,091			8	%	1,513,742			7	%	934,627			5	%	345,440			2	%	361,630			3	%
Total consumer	1,956,091			8	%	1,513,742			7	%	1,613,847			9	%	821,239			5	%	667,955			5	%
Total loans held-for-investment ⁽¹⁾	$	23,659,761		100	%	$	21,727,145		100	%	$	17,873,960		100	%	$	14,899,621		100	%	$	14,218,215		100	%
Unearned fees, premiums, and discounts, net	(16,013		)			2,804					(23,672		)			(19,301		)			(16,762		)
Allowance for loan losses	(264,959		)			(261,679		)			(249,675		)			(234,535		)			(216,523		)
Loans held for sale, net	31,958					45,950					204,970					174,317					278,603
Total loans, net	$	23,410,747				$	21,514,220				$	17,805,583				$	14,820,102				$	14,263,533


	December 31, 2014				December 31, 2013
	Amount		Percent		Amount		Percent
	($ in thousands)
($ in thousands)									December 31, 2015				December 31, 2014
($ in thousands)									Amount		Percent		Amount		Percent
CRE:
Income producing	$	50,045	33	%	$	65,268	35	%	$	40,067	24	%	$	51,141	31	%
Construction	6,888		4	%	6,888		4	%	14		—	%	6,913		4	%
Land	8,460		5	%	12,280		7	%	1,315		1	%	8,460		5	%
Total CRE impaired loans	$	65,393	42	%	$	84,436	46	%	41,396		25	%	66,514		40	%
C&I:
Commercial business	$	36,269	24	%	$	38,337	21	%	71,156		43	%	38,440		23	%
Trade finance	274		—	%	1,190		1	%	10,675		7	%	6,705		4	%
Total C&I impaired loans	$	36,543	24	%	$	39,527	22	%	81,831		50	%	45,145		27	%
Residential:
Single-family	$	16,535	11	%	$	15,173	8	%	15,012		9	%	17,401		11	%
Multifamily	34,390		22	%	41,114		22	%	23,727		15	%	34,413		21	%
Total residential impaired loans	$	50,925	33	%	$	56,287	30	%	38,739		24	%	51,814		32	%
Consumer:
Student loans	$	—	—	%	$	1,681	1	%
Other consumer	1,259		1	%	1,546		1	%
Total consumer impaired loans	$	1,259	1	%	$	3,227	2	%
Consumer									1,240		1	%	1,259		1	%
Total gross impaired loans	$	154,120	100	%	$	183,477	100	%	$	163,206	100	%	$	164,732	100	%


~~(1)~~	~~Includes allowance of $290 thousand relating to PCI loans acquired from MetroCorp.~~


~~(1)~~	~~Includes charge-off of $523 thousand relating to PCI loans acquired from MetroCorp.~~


~~(2)~~	~~Includes allowance of $290 thousand relating to PCI loans acquired from MetroCorp.~~




December 31, 2015	Basel III Capital Rules
December 31, 2015	East West		East West Bank		Minimum Regulatory Requirements		Well- Capitalized Requirements		Fully Phased-in Minimum Regulatory Requirement
CET1 risk-based capital	10.5	%	11.0	%	4.5	%	6.5	%	7.0	%
Tier 1 risk-based capital	10.7	%	11.0	%	6.0	%	8.0	%	8.5	%
Total risk-based capital	12.2	%	12.1	%	8.0	%	10.0	%	10.5	%
Tier 1 leverage capital	8.5	%	8.8	%	4.0	%	5.0	%	5.0	%




December 31, 2014	Basel I Capital Rules
December 31, 2014	East West		East West Bank		Minimum Regulatory Requirements		Well- Capitalized Requirements		Fully Phased-in Minimum Regulatory Requirement
CET1 risk-based capital	N/A		N/A		N/A		N/A		7.0	%
Tier 1 risk-based capital	11.0	%	10.6	%	4.0	%	6.0	%	8.5	%
Total risk-based capital	12.6	%	11.8	%	8.0	%	10.0	%	10.5	%
Tier 1 leverage capital	8.4	%	8.2	%	4.0	%	5.0	%	5.0	%




($ in thousands)	Commitments Outstanding
Loan commitments	$	3,370,271
Commercial letters of credit and SBLCs	$	1,293,547



	December 31, 2014
	(In thousands)
Undisbursed loan commitments	$	4,066,905
Standby letters of credit	$	1,186,794
Commercial letters of credit	$	66,272


	Payment Due by Period
	Less than 1 year		1-3 years		3-5 years		After 5 years		Indeterminate Maturity		Total
	(In thousands)
($ in thousands)													Payment Due by Period
($ in thousands)													Less than 1 year		1-3 years		3-5 years		After 5 years		Indeterminate Maturity ⁽¹⁾		Total
Contractual Obligations
Deposits(2)	$	4,942,649	$	742,707	$	387,813	$	2,223	$	18,121,047	$	24,196,439	$	5,404,746	$	848,248	$	253,646	$	110,255	$	20,859,086	$	27,475,981
FHLB advances(2)	1,916		3,833		85,543		253,716		—		345,008		700,000		—		80,035		239,389		—		1,019,424
Securities sold under repurchase agreements	31,772		297,554		314,449		268,428		—		912,203
Affordable housing and other tax credit investment commitments	—		—		—		—		114,714		114,714
Gross repurchase agreements⁽²⁾													—		—		—		450,000		—		450,000
Affordable housing partnership and other tax credit investment commitments													84,456		55,128		29,309		5,828		—		174,721
Long-term debt obligations(2)	4,228		7,006		85,556		198,429		—		295,219		20,000		40,000		—		146,084		—		206,084
Operating lease obligations ⁽¹⁾⁽³⁾	24,076		34,196		21,339		30,910		—		110,521		28,042		46,165		32,820		53,320		—		160,347
Unrecognized tax liabilities	—		3,310		3,927		—		—		7,237		—		3,022		5,862		—		—		8,884
Postretirement benefit obligations	292		813		1,037		13,297		—		15,439
Projected cash payments for postretirement benefit plan													2,617		629		668		8,563		—		12,477
Total contractual obligations	$	5,004,933	$	1,089,419	$	899,664	$	767,003	$	18,235,761	$	25,996,780	$	6,239,861	$	993,192	$	402,340	$	1,013,439	$	20,859,086	$	29,507,918


(1)	Includes deposits with no defined maturity, such as noninterest-bearing demand, interest-bearing checking, money-market and savings accounts.


(3)	Represents the Company’s lease obligations for all rental properties.



	East West Bancorp		East West Bank		Minimum Regulatory Requirements		Well Capitalized Requirements
Total Capital (to Risk-Weighted Assets)	12.6	%	11.8	%	8.0	%	10.0	%
Tier 1 Capital (to Risk-Weighted Assets)	11.0	%	10.6	%	4.0	%	6.0	%
Tier 1 Capital (to Average Assets)	8.4	%	8.2	%	4.0	%	5.0	%


	Net Interest Income Volatility ⁽¹⁾				Net Portfolio Value Volatility ⁽²⁾
	December 31,				December 31,
Change in Interest Rates (Basis Points)									Net Interest Income Volatility ⁽¹⁾				EVE Volatility ⁽²⁾
Change in Interest Rates (Basis Points)	2014		2013		2014		2013		December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
+200	15.5	%	11.1	%	9.5	%	13.4	%	18.5	%	15.5	%	9.8	%	9.5	%
+100	7.6	%	4.9	%	4.8	%	6.1	%	9.6	%	7.6	%	5.3	%	4.8	%
-100	(1.1	)%	(0.5	)%	(2.0	)%	(1.8	)%	(4.0	)%	(1.1	)%	(4.2	)%	(2.0	)%
-200	(1.4	)%	(0.6	)%	(3.4	)%	(3.4	)%	(4.6	)%	(1.4	)%	(6.9	)%	(3.4	)%


(1)	The percentage change represents net interest income ~~for twelve~~over 12 months in a stable interest rate environment versus net interest income in the various rate scenarios.


(2)	The percentage change represents net portfolio value of the ~~Bank~~Company in a stable interest rate environment versus net portfolio value in the various rate scenarios.




Change in Interest Rates (Basis Points)	Net Interest Income Volatility
Change in Interest Rates (Basis Points)	$1.00 Billion Migration 12 Months		$2.00 Billion Migration 12 Months
+200	15.6	%	12.8	%
+100	7.8	%	6.0	%



	Expected Maturity or Repricing Date by Year
	Year 1			Year 2			Year 3			Year 4			Year 5			Thereafter			Total
	($ in thousands)
Assets:
CD investments	$	481,969		$	—		$	—		$	—		$	—		$	—		$	481,969
Average yield (fixed rate)	4.13		%	—		%	—		%	—		%	—		%	—		%	4.13		%
Short-term investments	$	532,379		$	—		$	—		$	—		$	—		$	—		$	532,379
Weighted average rate	0.47		%	—		%	—		%	—		%	—		%	—		%	0.47		%
Securities purchased under resale agreements	$	925,000		$	50,000		$	200,000		$	50,000		$	—		$	—		$	1,225,000
Weighted average rate	1.29		%	1.75		%	1.70		%	2.5		%	—		%	—		%	1.42		%
Investment securities	$	766,804		$	267,021		$	365,918		$	556,384		$	238,685		$	431,397		$	2,626,209
Weighted average rate	1.73		%	2.22		%	1.84		%	1.56		%	1.86		%	3.28		%	2.02		%
Total covered gross loans	$	1,387,049		$	69,179		$	62,875		$	39,285		$	17,751		$	28,802		$	1,604,941
Weighted average rate	4.13		%	5.02		%	4.85		%	4.97		%	5.57		%	5.87		%	4.27		%
Total non-covered gross loans	$	16,403,867		$	1,730,498		$	916,312		$	588,982		$	321,565		$	298,446		$	20,259,670
Weighted average rate	3.88		%	4.68		%	4.97		%	4.82		%	5.21		%	5.96		%	4.09		%
Total loans held for sale	$	45,950		$	—		$	—		$	—		$	—		$	—		$	45,950
Weighted average rate	8.25		%	—		%	—		%	—		%	—		%	—		%	8.25		%
Liabilities:
Checking deposits	$	1,997,386		$	—		$	—		$	—		$	—		$	—		$	1,997,386
Weighted average rate	0.28		%	—		%	—		%	—		%	—		%	—		%	0.28		%
Money market deposits	$	6,318,120		$	—		$	—		$	—		$	—		$	—		$	6,318,120
Weighted average rate	0.24		%	—		%	—		%	—		%	—		%	—		%	0.24		%
Savings deposits	$	1,651,267		$	—		$	—		$	—		$	—		$	—		$	1,651,267
Weighted average rate	0.16		%	—		%	—		%	—		%	—		%	—		%	0.16		%
Time certificate deposits	$	4,902,701		$	482,852		$	234,140		$	202,830		$	163,274		$	126,943		$	6,112,740
Weighted average rate	0.63		%	0.86		%	1.23		%	1.23		%	1.16		%	(0.26		)%	0.68		%
FHLB advances	$	332,000		$	—		$	—		$	—		$	—		$	—		$	332,000
Weighted average rate	0.58		%	—		%	—		%	—		%	—		%	—		%	0.58		%
Securities sold under repurchase agreements (fixed rate)	$	495,000		$	—		$	—		$	—		$	—		$	—		$	495,000
Weighted average rate	4.75		%	—		%	—		%	—		%	—		%	—		%	4.75		%
Securities sold under repurchase agreements (variable rate)	$	300,000		$	—		$	—		$	—		$	—		$	—		$	300,000
Weighted average rate	2.77		%	—		%	—		%	—		%	—		%	—		%	2.77		%
Junior subordinated debt (variable rate)	$	152,641		$	—		$	—		$	—		$	—		$	—		$	152,641
Weighted average rate	1.82		%	—		%	—		%	—		%	—		%	—		%	1.82		%
Other long-term borrowing (variable rate)	$	80,000		$	—		$	—		$	—		$	—		$	—		$	80,000
Weighted average rate	1.81		%	—		%	—		%	—		%	—		%	—		%	1.81		%



~~ITEM 9.~~	~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~



~~ITEM 12.~~	~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~



	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in Column (a) (c)
Plan Category
Equity compensation plans approved by security holders	42,116	$	20.75	3,715,327
Equity compensation plans not approved by security holders	—	—		—
Total	42,116	$	20.75	3,715,327

Title of each class

Name of each exchange on which registered

Common Stock, $0.001 Par Value

NASDAQ “Global Select Market”