East West Bancorp : 3Q22 Basel III Regulatory Capital Disclosures Report

EAST WEST BANCORP, INC.

Basel III Regulatory Capital Disclosures

September 30, 2022

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TABLE OF CONTENTS
	Page
Scope of Application	3
Capital Structure	4
Capital Adequacy	5
Capital Conservation Buffer	6
Risk Management	7
Credit Risk: General Disclosures	7
General Disclosure for Counterparty Credit Risk-Related Exposures	11
Credit Risk Mitigation	13
Securitization	14
Equities Not Subject to the Market Risk Rule	14
Interest Rate Risk for Non-trading Activities	15
Appendix 1 - References to the Company's SEC Filings	17
Appendix 2 - Forward-Looking Statements	22

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SCOPE OF APPLICATION

Organization

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as "East West" and on a consolidated basis as the "Company") is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries ("East West Bank" or the "Bank"). The Bank is the Company's principal asset and provides a broad range of consumer and commercial products and services through the Consumer and Business Banking, and Commercial Banking segments, with the remaining operations recorded in the Other segment. As of September 30, 2022, the Company operated in the United States ("U.S.") and China. In the U.S., the Bank's corporate headquarters and main administrative offices are located in California, and its branches and offices are located in California, Texas, New York, Washington, Georgia, Massachusetts, Illinois, and Nevada. In China, the Company's presence includes full- service branches in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou and Xiamen. The Bank has a banking subsidiary based in China - East West Bank (China) Limited. As of September 30, 2022, the Company and the Bank were both classified as "well capitalized" and not subject to any capital distribution restrictions. For additional information on dividend restrictions and transfers of funds, refer to Item 1. Business - Supervision and Regulation - Dividends and Other Transfers of Funds in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC (the "Company's 2021 Form 10-K").

Regulation

As a bank holding company, East West is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System ("Federal Reserve") under the BHC Act. The Company is also subject to the disclosure and regulatory requirements under the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended, both as administered by the U.S. Securities and Exchange Commission ("SEC").

East West Bank is a California state-chartered bank and a member of the Federal Reserve System, and its deposits are insured by the Federal Deposit Insurance Corporation ("FDIC"). The Bank's operations in the U.S. are primarily regulated and supervised by the Federal Reserve and the California Department of Financial Protection and Innovation ("DFPI"), and its activities outside the U.S. are regulated and supervised by its U.S. regulators and the applicable regulatory authority in the host country in which each overseas office is located.

The Bank's foreign 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. East West Bank's Hong Kong branch is subject to applicable foreign laws and regulations, such as those implemented by the Hong Kong Monetary Authority and the Hong Kong Securities and Futures Commission.

In addition to its banking operations, East West has a wholly-owned nonbank subsidiary, East West Markets, LLC ("East West Markets"), which is an SEC-registeredbroker-dealer and a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). East West Markets is subject to regulatory requirements from several regulatory bodies, including the SEC, FINRA, and state securities regulators.

Regulatory Capital Standards and Disclosures

The federal banking agencies have imposed capital adequacy requirements, known as the Basel III Capital Rules, intended to ensure that banking organizations maintain capital that is commensurate with the degree of risk associated with their operations. The Basel III Capital Rules define the components of regulatory capital, including Common Equity Tier 1 ("CET1"), Tier 1 and Tier 2 capital, and set forth minimum capital adequacy ratios of capital to risk-weighted assets and total assets. The Basel III Capital Rules also prescribe a standardized approach for risk-weighting assets and include a number of risk-weighting categories that affect the denominator in banking organizations' regulatory capital ratios.

The Company applies the Basel III Capital Rules as a standardized approach banking organization and is not currently subject to the market risk rules, which apply only to banking organizations with significant trading activities. To be considered adequately capitalized, standardized approach banking organizations are required to maintain minimum capital ratios of at least 4.5% CET1 capital to risk-weighted assets, 6.0% Tier 1 capital to risk-weighted assets, 8.0% total risk-based capital (i.e., Tier 1 plus Tier 2 capital) to risk-weighted assets and a 4.0% Tier 1 leverage ratio of Tier 1 capital to average total consolidated assets.

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The Company produces the Pillar 3 Regulatory Disclosures quarterly to update market participants regarding risk- based capital and risk exposures as required under the U.S. Basel III rules. This report provides information on the Company's capital structure, risk exposures, risk assessment processes, risk-weighted assets ("RWA") and overall capital adequacy, including information on the methodologies used to calculate RWA.

The Company's 2021 Form 10-K and the Company's unaudited interim Consolidated Financial Statements in the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 ("the Company's Third Quarter 2022 Form 10-Q") contain management's discussion and analysis of the overall risk profile of the Company and related management strategies. The information presented herein should be read in conjunction with the Company's 2021 Form 10-K and Third Quarter 2022 Form 10-Q, as well as the Consolidated Financial Statements for Holding Companies - FR Y-9C ("FR Y-9C") dated September 30, 2022. A disclosure index is provided in Appendix 1 of this report, which specifies all disclosures required by the Basel III Capital Rules. These Basel III regulatory capital disclosures have not been audited by our external auditors. This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement, as discussed further in Appendix 2 of this report.

Consolidation

The principles of consolidation used for the Company's Third Quarter 2022 Form 10-Q and for regulatory reporting conform with U.S. Generally Accepted Accounting Principles and include the accounts of East West and its subsidiaries. The Basel III Regulatory Capital Disclosures and East West's regulatory capital ratio calculations are prepared on a fully consolidated basis. All intercompany transactions and balances have been eliminated in consolidation.

CAPITAL STRUCTURE

The Company's qualifying regulatory capital instruments primarily consist of common shareholders' equity and qualifying junior subordinated debt. For additional information on the Company's shareholders' equity, see the "Consolidated Balance Sheets" in the Company's Third Quarter 2022 Form 10-Q. The junior subordinated debt issued in connection with East West's trust preferred securities qualifies as Tier 2 capital under the Basel III Capital Rules. For additional information regarding the terms of East West's outstanding junior subordinated debt, see Note 10 - Federal Home Loan Bank Advances and Long-TermDebt - Long-TermDebt - Junior Subordinated Debt in the Company's 2021 Form 10-K and Item 2. Management's Discussion & Analysis ("MD&A") - Balance Sheet Analysis - Deposits and Other Sources of Funding in the Company's Third Quarter 2022 Form 10-Q.

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The following table presents the Company's capital composition as of September 30, 2022:

($ in thousands)		September 30, 2022
CET1 capital
Common stock and related surplus	$	1,157,803
Effect of CECL transition on retained earnings (1)			85,481
Retained earnings			5,302,897
Accumulated other comprehensive loss			(800,032)
CET1 capital before adjustments and deductions			5,746,149
Adjustments and deductions from CET1 capital
Less: Goodwill, net of related deferred taxes			465,697
Intangible assets, net of related deferred taxes			1,941
Deferred tax assets arising from net operating loss and tax credit carryforwards			8,632
Net unrealized losses on available-for-sale and held-to-maturity securities, net of deferred taxes			(712,970)
Accumulated losses on cash flow hedges, net of deferred taxes			(64,115)
Total CET1 capital			6,046,964
Tier 1 capital
Total Tier 1 capital			6,046,964
Tier 2 capital
Tier 2 capital instruments and related surplus			148,000
Adjusted allowance for credit losses			492,840
Total Tier 2 capital			640,840
Total risk-based capital		$	6,687,804

1. For additional discussion regarding the CECL transition provision, see Item 2. MD&A - Balance Sheet Analysis - Regulatory Capital and Ratios in the Company's Third Quarter 2022 Form 10-Q.

CAPITAL ADEQUACY

The Company's Board of Directors provides the ultimate oversight responsibility and accountability over capital planning. The Board and a Board-level committee, the Risk Oversight Committee ("ROC"), meet on at least a quarterly basis to review the Company's material risks and exposures and to ensure the adequacy of capital under both normal and stressed operating environments.

The Company's senior management and the Board are committed to achieving its capital targets in order to reach its capital goals, which include meeting or exceeding regulatory requirements. To achieve these capital goals the Company has established policies and procedures to continuously monitor the sufficiency of capital levels and to maintain contingency plans and capital buffers. Monitoring activities include evaluation of the Company's on-going capital needs, stress testing results and the impact of stressed conditions under multiple scenarios, maintaining capital buffers, and considering other factors, such as the current credit and interest rate environment. These combined policies and monitoring activities allow the Company to maintain adequate capital composition and levels in order to absorb losses, promote public confidence, provide protection to depositors, and to meet regulatory requirements. The Company's capital policies, goals and targets ensure sufficient capital for current and future activities in both normal and stressed conditions. The Company is committed to remaining above "Well Capitalized" Prompt Corrective Action guidelines.

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