Certain matters discussed in thisThis Annual Report contain or incorporateon Form 10-K contains certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”, “we”, or “EWBC”) believes are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 3b-6 promulgated thereunder.not historical facts. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs.verbs, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. 

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to:

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”, “we”, or “EWBC”) is a bank holding company incorporated in Delaware on August 26, 1998 and is registered under the Bank Holding Company Act of 1956, as amended (“BHCA”BHC Act”). The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of East West Bank (the “Bank”), which became its principal asset. In addition to the Bank, East West has six subsidiaries as of December 31, 20172018 that were established as statutory business trusts for the purpose of issuing junior subordinated debt to third party investors. East West also owns East West Insurance Services, Inc. (“EWIS”). In the third quarter of 2017, the Company sold the insurance brokerage business of EWIS for $4.3 million, and recorded a pre-tax gain of $3.8 million. EWIS remains a subsidiary of East West and continues to maintain its insurance broker license.

East West’s principal business is to serve as a holding company for the Bank and other banking or banking-related subsidiaries that East West may establish or acquire. As a legal entity separate and distinct from its subsidiaries, East West’s principal source of funds is, and will continue to be, dividends that may be paid by its subsidiaries. East West’s other sources of funds include proceeds from the issuance of its common stock in connection with stock option and employee stock purchase plans. As of December 31, 2017,2018, the Company had $37.15$41.04 billion in total assets, $28.69$32.07 billion in total loans (net(including loans held-for-sale, net of allowance), $32.22$35.44 billion (includingin deposits held-for-sale)and $4.42 billion in total deposits and $3.84 billion in stockholders’ equity.

As of December 31, 2017,2018, the Bank has three wholly ownedwholly-owned subsidiaries. The first subsidiary, E-W Services, Inc., is a California corporation organized by the Bank in 1977 to hold properties used by the Bank in its operations. The second subsidiary, East-West Investment, Inc., primarily acts as a trustee in connection with real estate secured loans. The remaining subsidiary is East West Bank (China) Limited.Limited, a banking subsidiary in China.

The Bank continues to develop its international banking presence with its network of overseas branches and representative offices. The Bank’s international presence includesoffices that include five full-service branches in Greater China, located in Hong Kong, Shanghai, Shantou and Shenzhen. ShanghaiThe Bank has two branches includingin Shanghai with one in the Shanghai Pilot Free Trade Zone. The Bank also has five representative offices in Greater China, located in Beijing, Chongqing, Guangzhou, Taipei and Xiamen. In addition to facilitating traditional letters of credit and trade financefinancing to businesses, these representative offices allow the Bank to assist existing clients and to develop new business relationships. Through these branches and offices, the Bank is focused on growing its cross-border client base between the U.S. and Greater China, helping U.S. based businesses expand in Greater China and Chinacompanies based companiesin Greater China pursue business opportunities in the U.S. The assets, revenues and earnings attributable to activities in the foreign locations were not material for the years ended December 31, 2017, 2016 and 2015.

The Bank continues to explore opportunities to establish other foreign offices, subsidiaries, strategic investments and partnerships to expand its international banking capabilities and to capitalize on long-term cross-border businessesbusiness opportunities between the U.S. and Greater China.

The Bank’s three operating segments: Retailsegments, Consumer and Business Banking, Commercial Banking and Other, are based on the Bank’s core strategy. The RetailConsumer and Business Banking segment focuses primarily on retail operations including consumers,provides financial service products and smallservices to consumer and medium-sized enterprisescommercial customers through the Bank’sCompany’s branch network.network in the U.S. The Commercial Banking segment primarily generates commercial and industrial loans and commercial real estate (“CRE”) loansdeposits through domestic commercial lending offices located in California, New York, Texas, Washington, Massachusetts, Nevadathe U.S. and Georgia, and through foreign commercial lending offices located in China and Hong Kong. Furthermore, the Commercial Banking segment also offers a wide variety of international finance, and trade services and products, and generates commercial deposits.Greater China. The remaining centralized functions, including the Company’s treasury operationsactivities of the Company and intersegment amount eliminationselimination of inter-segment amounts are aggregated and included in the Other segment. For complete discussion and disclosure, see the information in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Operating Segment Results and Note 1920 — Business Segments to the Consolidated Financial Statements for additional information.Statements.

The Bank operates in a highly competitive environment. The Company faces competition from domestic and foreign lending institutions and numerous other providers of financial services. Competition is based on a number of factors including, among others, customer service, quality and range of products and services offered, reputation, interest rates on loans and deposits, lending limits and customer convenience. Competition also varies based on the types of customers and locations served. The Company has the leading banking market share among the Chinese-American community, and maintains a strongdifferentiated presence within selectselected markets throughby providing cross-border expertise to customers acrossin a number of industry specializations between the U.S and Greater China.

While the Company believes it is well positioned within a highly competitive industry, the industry could become even more competitive as a result of legislative, regulatory, economic, and technological changes, as well as continuedcontinuing consolidation.

East West and the Bank are extensively regulated under U.S. federal and state laws, as well as the applicable laws of certain jurisdictions outside the U.S. in which we conduct business.laws. Regulation and supervision by the federal and state banking agencies are intended primarily for the protection of depositors, the Deposit Insurance Fund (“DIF”) administered by the FDIC, consumers and the banking system as a whole, and not for the protection of our investors. 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.BHC Act. In addition, the CompanyBank is also subject to regulationregulations by certain foreign regulatory agencies in international jurisdictions where we conduct, or may in the future wish to conduct business, including Greater China and Hong Kong.

The Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), both 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 are material elements of selected laws and regulations applicable to 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 statutes, regulations or regulatory policypolicies may have a material effect on the Company’s business.

As a bank holding company and pursuant to its election of the financial holding company status, East West is subject to regulationregulations and examinationexaminations by the Federal Reserve under the BHCABHC Act and its authority to, among other things:

East West Bank 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 inspection, periodic examination, and supervision by the Consumer Financial Protection Bureau (the “CFPB”),CFPB, the DBO, and the Federal Reserve (the Bank’s primary federal regulator). The FDIC, which insures the Bank’s deposits, also has examination authority over the Bank. The Bank’s foreign operations are regulated and supervised by the Federal Reserve and the DBO, as well as by regulatory authorities in the host countries in which the Bank’s overseas offices reside. Specific federal and state laws and regulations that 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 to impose various restrictions on management or operations and to issue policies and guidance in connection with their supervisory and enforcement activities and examination policies. 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 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”).CRA.

The Bank’s foreign-based subsidiary, East West Bank (China) Limited, is subject to applicable foreign laws and regulations, such as those implemented by the China Banking and Insurance Regulatory Commission. Nonbank subsidiaries are subject to additional or separate regulation and supervision by other state, federal and self-regulatory bodies. The East West Bank Hong Kong branch is subject to applicable foreign laws and regulations, such as those implemented by the Hong Kong Monetary Authority.Authority and the Securities and Futures Commission of Hong Kong. The Bank’s representative office in Taiwan is subject to the regulation of the Taiwan Financial Supervisory Commission.

The federal banking agencies haveimposed risk-based capital adequacy guidelines intended to provide a measure ofensure that banking organizations maintain capital adequacy that reflectsis commensurate with the degree of risk associated with a banking organization’s operations, both for transactions reported on the balance sheet as assets and for transactions, such as letters of credit and recourse arrangements, that are recorded as off-balance sheet items.operations. In July 2013, the Federal Reserve, FDIC, and Office of the Comptroller of the Currency issuedfederal banking agencies adopted final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implemented the Basel Committee’s December 2010 framework for strengthening international capital standards, commonly referred to as Basel III, for strengthening international capital standards and implemented certain provisions of the Dodd-Frank Act. Some of the Basel III Capital Rules have phase-in periods through 2018, and they will take full effect on January 1, 2019.

The Basel III Capital Rules became effective forrevised the Companydefinitions and the Bank on January 1, 2015 (subject to phase-in periods for somecomponents of their components). The Basel III Capital Rules, among other things, (i) introducedregulatory capital, in part through the introduction of a new capital measure called Common Equity Tier 1 (“CET1”) capital requirement and a related regulatory capital ratio of CET1 to risk-weighted assets; (ii) specifiedassets, restricted the type of instruments that may be recognized in Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments, which were treated as Tier 1 instruments under the prior2 capital rules that meet certain revised requirements; (iii) mandated that most deductions or adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; (iv) expanded the scope of the deductions from and adjustments to capital, as compared to existing regulations; (v) required banking organizations with $15 billion or more in assets (including the Company) to phase-outphase out of trust preferred securities from Tier 1 regulatory capital; and (vi) provided 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, the option to make a one-time permanent election to exclude the effects of certain accumulated other comprehensive income or loss items.capital for bank holding companies). The Basel III Capital Rules also provided 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 nonconsolidated 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 is being phased-in over several years in order to give banking organizations time to adjust and adapt to the new requirements. The Basel III Capital Rules also prescribeprescribed a new standardized approach for risk weighting assets and expandexpanded the risk weighting categories to a larger and more risk-sensitive number of categories.categories affecting the denominator in banking institutions’ regulatory capital ratios.

Under the Basel III Capital Rules, to be considered adequately capitalized, the Company and the Bank are required to maintain minimum capital ratios of 4.5% CET1 to risk-weighted assets, 6.0% Tier 1 capital to risk-weighted assets, 8.0% total capital (Tier 1 plus Tier 2) to risk-weighted assets, and a minimum4.0% Tier 1 leverage ratio of 4.0%.ratio. The Basel III Capital Rules also introduced a “capital conservation buffer,”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 began on January 1, 2016 at 0.625% and is being 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).

In September 2017, the federal banking agencies issued a proposed rule intended to reduce regulatory burden by simplifying certain requirements for 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) (the “Simplification Capital Proposal”), including the Company and the Bank. The Simplification Capital Proposal would amend the existing Basel III Capital Rules by: (1) replacing the definition of high volatility commercial real estate (“HVCRE”) exposures with a simpler and narrower definition of high volatility acquisition, development or construction (“HVADC”) exposures, where the proposed risk weight for HVADC exposures would be 130 percent, a reduction from the 150 percent risk weight that currently applies to HVCRE; (2) simplifying the threshold deductions from CET1 for mortgage servicing assets, certain deferred tax assets arising from temporary differences, investments in the capital of unconsolidated financial institutions, together with revisions to the risk-weight treatment for investments in the capital of unconsolidated financial institutions; and (3) simplifying the limits on the amount of a third-party minority interest in a consolidated subsidiary that could be included in regulatory capital. If the Simplification Capital Proposal is adopted in its current form, the impacts on the Company and the Bank are not expected to be significant.

In December 2017, the Basel Committee on Banking Supervision released the finalization of the reforms to the Basel III Capital Rules, also revisedknown as Basel IV. The reforms to the Prompt Corrective Actionregulatory framework are intended to restore credibility in the calculation of risk weighted assets (“PCA”RWA”) regulations pursuant to Section 38by: (1) enhancing the robustness and risk sensitivity of the Federal Deposit Insurance Act, as discussed below understandardized approaches for credit risk, credit valuation adjustment, and operational risk, which will facilitate the comparability of banks’ capital ratios; (2) constraining the use of internally modeled approaches; and (3) complementing the risk-weighted capital ratio with a finalized leverage ratio and a revised and robust capital floor. These standards will become effective on January 1, 2022, with an aggregate output floor phasing in through January 1, 2027. The federal banking agencies announced their support for the Basel Committee’s efforts, and that they will consider appropriate application of these revisions to the regulatory capital rules. Any changes to Basel III Capital Rules that are based on the Basel Committee’s reforms must go through the federal banking agencies’ standard notice-and-comment rulemaking process. The agencies have not begun the process and have not indicated when they may do so.

The Federal Deposit Insurance Act,FDIA, as amended, (“FDIA”), requires federal banking agencies to take PCA with respect to depository institutions that do not meet minimum capital requirements. The FDIA includes the following five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,”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 Basel III Capital Rules revised the PCA requirements effective January 1, 2015. Under the revised PCA provisions of the FDIA, an insured depository institution generally will beis classified in the following categories based on the capital measures indicated:

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 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 any 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 capital restoration plans. 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/or cessation of receipt of deposits from correspondent banks.banks, and/or restrictions on interest rates paid on deposits. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

The Dodd-Frank Act centralized responsibility for consumer financial protection by giving the CFPB the authority for implementing, examiningto implement, examine and enforcingenforce 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:

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 customersconsumers when taking deposits, making loans, collecting payments on loans and providing other services. In addition, the Department of Justice enforces the Servicemembers Civil Relief Act, which provides certain protections for military service members and their families, who have utilized a financial product or service, 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.

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of San Francisco. As aan FHLB member, the Bank is required to own a certain amount of capital stock in the FHLB. The Bank may also access the FHLB for both short-term and long-term secured borrowing sources. The Bank is also a member bank and stockholder of the Federal Reserve.Reserve Bank of San Francisco (“FRB”). The Federal Reserve requires all depository institutions to maintain reserves at specified levels against their transaction accounts either in the form of vault cash, an interest-bearing account at the Federal Reserve Bank, or a pass-through account as defined by the Federal Reserve. As of December 31, 2017,2018, the Bank was in compliance with these requirements.

Pursuant to SectionSections 23A and 23B of the Federal Reserve Act, as implemented by the Federal Reserve’s Regulation W, the Bank isbanks are subject to restrictions that strictly limit thetheir ability of banks to engage in transactions with their affiliates, including their parent bank holding companies. Regulations promulgated by the Federal Reserve limit the types, terms and amounts of these transactions that may take place and generally require thosethe transactions to be on an arm's-length basis. In general, these regulations require that “covered transactions”, typically transactions that create credit risk for a bank between a subsidiary bank and any one affiliate (e.g., its parent company or the non-bank subsidiaries of the bank holding company) are limited to 10% of the bank subsidiary'ssubsidiary bank's capital and surplus and, with respect to such subsidiary bank subsidiary and all such affiliates, to an aggregate of 20% of the bank subsidiary'ssubsidiary bank'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. 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. 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.

Under the terms of the CRA as implemented by FDICFederal Reserve regulations, an insured depository institution has a continuing and affirmative obligation to help serve the credit needs of its communities, including the extension of credit to low to moderate-income neighborhoods. ShouldThe Federal Reserve periodically evaluates the Bank fail to serve the community adequately, potential penalties may include regulatory denialsCRA performance of state member banks and takes this performance into account when reviewing applications to expand branches, relocate, add subsidiaries and affiliates, expand into new financial activities and merge with or purchase other financial institutions. Unsatisfactory CRA performance may result in the denial of such applications.

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. The Bank Secrecy Act (“BSA”) and its implementing regulations and parallel requirements of the federal banking regulators require the Bank to maintain a risk-based Anti-Money Laundering (“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 activities. There is an expectation byThe Federal Reserve expects that the Bank’s regulators that thereBank will behave an effective governance structure for the program which includes effective oversight by our Board of Directors and management. The program must include, at a minimum, a designated compliance officer, written policies, procedures and internal controls, training of appropriate personnel, and independent testing of the program and risk-based customer due diligence procedures. The United StatesU.S. 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 regulations administered by the Office of Foreign Assets Control (“OFAC”) for economic sanctions against targeted foreign countries, nationals and others. Failure of a financial institution to maintain and implement adequate BSA/AML and OFAC programs, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

Legislators,From time to time, legislators, presidential administrations and regulators may enact rules, laws, and policies to regulate the financial services industry and public companies from time to time.companies. Further legislative changes and additional regulations may change the Company’s operating environment in substantial and unpredictable ways. Such legislation and regulations could increase the cost of conducting business, impede the efficiency of the internal business processes, and restrict or expand the activities in which the Company may engage. The Company cannot predict whether future legislative proposals will be enacted and, if enacted, the effectimpact they would have on the business strategy, results of operations or financial condition of the Company. The same uncertainty exists with respect to regulations authorized or required under the Dodd-Frank Act that have not yet been proposed or finalized. Members of the current U.S. federal government administration have indicated that the Dodd-Frank Act will be evaluated and that some of the provisions of the Dodd-Frank Act and rules promulgated thereunder, including those provisions establishing the CFPB and the rules and regulations proposed and enacted by the CFPB, may be revised, repealed, or amended. It is unclear if this evaluation of the rules and regulations will result in material changes to the current laws and rules, or those that are in process, applicable to financial institutions like us and financial services or products like ours. It also is not clear what the impact from any such changes, whether positive or negative, would be on our business or the markets and industries in which we compete and any such changes could have a material adverse impact on our business and prospects. There can be no assurance that these or future reforms will not significantly impact our businesses, results of operations and financial condition.

As of December 31, 2017,2018, the Company had approximately 3,0003,200 full-time equivalent employees. None of the Company’s employees are subject to anya collective bargaining agreements.agreement.

Shareholders may request a copy of any of the above-referenced reports can be found and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549,corporate governance documents without charge by writing to: Investor Relations, East West Bancorp, Inc., 135 N. Los Robles Avenue, 7th Floor, Pasadena, California 91101; by calling (626) 768-6000; or by calling the SEC at 1-800-SEC-0330.sending an e-mail to InvestorRelations@eastwestbank.com.

Good standing with our regulators is of fundamental importanceFurther, the trade conflict between the U.S. and China could impose damage to the continuationglobal economy, in terms of lower GDP growth, job displacements, diminishing investments to both the U.S. and growth of our businesses given thatChina economies and long-term damage to the world trading system. In addition, U.S. banks operate in an extensively regulated environment under stateexposed to the sectors most sensitive to the tariffs, and federal law. The Bank is subject to supervisionChinese companies and regulation by regulators, including the Federal Reserve, the DBO and financial regulators in China, Hong Kong and Taiwan. Federal, state and non-U.S. regulators,borrowers may experience a decrease in the performancedemand for loans and other products and services and a deterioration in the credit quality of their supervisory and enforcement duties, have significant discretion and powerthe loans to initiate enforcement actions for violations of laws and regulations, and unsafe and unsound practices. The enforcement powers available to 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. Further, regulators and bank supervisors continue to exercise qualitative supervision and regulation of our industry and specific business operations and related matters. Any failure to satisfy regulators' substantive and qualitative expectations may adversely affect our business and operations. Violations of laws and regulations or deemed deficiencies in risk management or other qualitative practices also may be incorporated into the Company’s bank supervisory ratings. A downgrade in these ratings, or other regulatory actions and settlements could limit the Company’s ability to pursue acquisitions or conduct other expansionary activities and require new or additional regulatory approvals before engaging in certain other business activities.borrowers.

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 the borrower 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 loans 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.

East West’s corporate headquarters is located at 135 North Los Robles Avenue, Pasadena, California, in an eight-story office building.building that it owns. The Company operates over 130in more than 120 locations worldwide including its headquarters, main administrative offices, branchesin the U.S. and representative offices.10 locations in Greater China. In the U.S., the Bank’s corporate headquarters and main administrative offices are located in California, and branches are located in California, Texas, New York, Washington, Georgia, Massachusetts and Nevada. In the 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 uses the premises, equipment, and furniture of the Bank and does not currently own or lease any real or personal property. The Company believes that its existing facilities are 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 operations. The Company believes that, if necessary, it could secure alternative facilitiesproperties on similar terms without adversely affecting its operations.

Not applicable.

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

The Company’s common stock is traded on the NASDAQ under the symbol “EWBC.” The following tables set forth the high and low closing sales prices per share of the Company’s common stock as reported on the NASDAQ, as well as the quarterly dividends the Company declared, for the periods indicated:

The following graph and table compare the Company’s cumulative total return on its common stock with the cumulative total return of the Standard & Poor’s (“S&P”) 500 Index and the Keefe, Bruyette and Woods (“KBW”) NASDAQ Regional Banking Index (“KRX”) over the five-year period through December 31, 2017.2018. The S&P 500 Index is utilized as a benchmark against performance and is a commonly referenced U.S. equity benchmark consisting of leading companies from different economic sectors. The KRX is used to align EWBC with those companies of a relatively similar size. This index seeks to reflect the performance of publicly traded U.S. companies that do business as regional banks or thrifts, and is composed of 50 companies. The graph and table below assume that on December 31, 2012,2013, $100 was invested in EWBC’s common stock, the S&P 500 Index and the KRX, 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 “Five-Year Stock Performance” shall not be deemed to be “soliciting material��material” or to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information to be treated as soliciting material or specifically incorporates itto be incorporated by reference into a filing under the Securities Act or the Exchange Act.

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 thereafter, including during 20172018 and 2016.2017. 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 of Directors.

The Company’s primary source of revenue is net interest income, which is the difference between interest income earned on loans, investment securities, resale agreements and other interest-earning assets less interest expense paid on deposits, securities sold under repurchase agreements (“repurchase agreements”), borrowings and other interest-bearing liabilities. Net interest margin is calculated by dividingthe ratio of net interest income byto average interest-earning assets. Net interest income and net interest margin are affectedimpacted 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 2018 was $1.39 billion, an increase of $201.4 million or 17%, compared to $1.19 billion in 2017. The increase in net interest income for 2018 was primarily due to the year ended December 31,expansion of loan yields and loan growth, partially offset by a higher cost of funds. Net interest income for 2017 was $1.19 billion, an increase of $152.4 million or 15%, compared to the same period$1.03 billion in 2016. The notable increase in net interest income infor 2017 was primarily due to strong loan growth and higher yields from interest-earning assets, partially offset by a higher cost of funds. The higher cost of funds

Net interest margin for 2018 was primarily due to3.78%, a 1430 basis point increase in the cost of interest-bearing deposits from 0.44% for the year ended December 31, 2016 to 0.58% for the year ended December 31,3.48% in 2017. Net interest incomemargin for 2017 increased 18 basis points from 3.30% in 2016. The expanding net interest margin reflected the year ended December 31, 2016 was $1.03 billion, an increasebenefits of $82.2 million or 9% comparedhigher interest rates on the Company’s interest rate sensitive assets. Comparing 2018 to $950.4 million for2017, the same period in 2015. Theyear-over-year increase in the average loan yield exceeded the increase in total funding costs, driving net interest incomemargin expansion.

Average loan yield for 2018 was primarily due to strong4.97%, a 57 basis point increase from 4.40% in 2017. Average loan yield in 2017 increased 13 basis points from 4.27% in 2016. The increases in the average loan yield in 2018 and 2017 reflected the favorable impacts of higher interest rates on the Company’s variable rate and hybrid adjustable-rate loan portfolio. Average loans of $30.23 billion in 2018 increased $2.98 billion or 11% from $27.25 billion in 2017. Average loans in 2017 increased $2.99 billion or 12% from $24.26 billion in 2016. Loan growth during 2016.was broad-based across single-family residential, C&I and CRE loan portfolios.

Deposits are an important source of fundingfunds and affectimpact both net interest income and net interest margin. Deposits are comprised of noninterest-bearing demand, interest-bearing checking, money market, savings and time deposits. Average deposits increased $2.31 billion or 8% to $30.81 billion for the year ended December 31, 2017, compared to $28.50 billion for the same period in 2016. In comparison, average deposits increased $2.74 billion or 11% to $28.50 billion for the year ended December 31, 2016, compared to $25.76 billion for the same period in 2015. The average noninterest-bearing demand deposits provide us with zero-cost funding and totaled $11.09 billion in 2018 and $10.63 billion in 2017, an increase of $461.8 million or 4% year-over-year. Average noninterest-bearing demand deposits in 2017 increased $1.26 billion or 13% from $9.37 billion in 2016. Average noninterest-bearing demand deposits made up 33%, 34% and 33% of average total deposits in 2018, 2017 and 2016, respectively. Average interest-bearing deposits of $22.14 billion in 2018 increased $1.95 billion or 10% from $20.19 billion in 2017. Average interest-bearing deposits in 2017 increased $1.06 billion or 6% from $19.13 billion in 2016.

The cost of funds was 0.78%, 0.44% and 0.36% in 2018, 2017 and 2016, respectively. The year-over-year increases in the cost of funds were primarily due to total average deposits ratio increased to 34% forincreases in the year ended December 31, 2017, from 33% and 31% for the same periods in 2016 and 2015, respectively. Costcost of deposits was 0.38%, 0.30% and 0.29% for the years ended December 31, 2017, 2016 and 2015, respectively. Costinterest-bearing deposits. The cost of interest-bearing deposits wasincreased 48 basis points to 1.06% in 2018, and 14 basis points to 0.58%, in 2017, up from 0.44% and 0.41% for the years ended December 31, 2017, 2016 and 2015, respectively. The average loans to average deposits ratio increased to 88% for the year ended December 31, 2017 from 85% and 86% for the same periods in 2016 and 2015, respectively.2016.

Other than deposits, other sources of funding primarily include FHLB advances, long-term debt and securities sold under repurchase agreements. Cost of funds was 0.44% for the year ended December 31, 2017, compared to 0.36% and 0.39% for the same periods in 2016 and 2015, respectively.agreements (“repurchase agreements”).

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the years ended December 31,in 2018, 2017 2016 and 2015:2016: