East West Bancorp(EWBC) - 2024 Q4 - Annual Report

Employee Compensation and Development - The Bank's compensation and employee benefits expense was $551 million in 2024, comprising 57% of total noninterest expense, compared to$ 509 million and 50% in 2023[29]. - In 2024, the Bank achieved 16% of employees advancing their careers through over 510 internal promotions, highlighting its commitment to employee development[27]. - The Bank granted over 650 thousand restricted stock units (RSUs) as part of its stock compensation programs in 2024[30]. - The Bank's employee compensation packages include a competitive base salary and may include annual cash and/or stock incentive bonuses based on performance[29]. Regulatory Compliance and Capital Requirements - The Bank's operations are subject to regulation and supervision by the Federal Reserve, California DFPI, and other regulatory bodies, ensuring compliance and stability[35]. - As of December 31, 2024, the Company and the Bank's capital ratios exceeded the minimum capital adequacy requirements, including the capital conservation buffer, and were classified as "well capitalized"[42]. - The Company is required to maintain a minimum CET1 capital ratio of at least 4.5% to risk-weighted assets, with additional capital conservation buffer of 2.5%[42]. - The proposed "Basel III Endgame" rule could lead to increased capital requirements for large banking organizations, but the Company, with total consolidated assets under $100 billion, would not be subject to these changes[45]. - The Company conducts annual capital and quarterly liquidity stress tests as part of its risk management processes, despite not being required to do so under current regulations[49]. - The Bank is subject to additional capital requirements under the Prompt Corrective Action regulations, which classify institutions into five capital tiers based on their capital levels[46]. Community Engagement and Social Responsibility - The Bank is committed to community engagement through programs that promote homeownership, affordable housing, and access to banking services[32]. - The Bank was rated "outstanding" in its most recent Community Reinvestment Act examination as of March 8, 2021, indicating strong performance in serving community credit needs[58]. Financial Performance and Metrics - Total assets increased to$ 75.98 billion in 2024, up from $69.61 billion in 2023, representing an increase of approximately 9.4%[360]. - Net interest income after provision for credit losses was$ 2.10 billion in 2024, compared to $2.19 billion in 2023, a decrease of about 4.0%[362]. - Total deposits rose to$ 63.18 billion in 2024, up from $56.09 billion in 2023, reflecting an increase of approximately 12.4%[360]. - Net income for 2024 was$ 1.17 billion, slightly up from $1.16 billion in 2023, indicating a growth of about 0.4%[362]. - Earnings per share (EPS) increased to$ 8.39 in 2024 from $8.23 in 2023, a rise of approximately 1.9%[362]. - Noninterest income totaled$ 335.22 million in 2024, compared to $295.26 million in 2023, marking an increase of about 13.5%[362]. Risk Factors - A significant portion of the loan portfolio is secured by real estate, which is at higher risk due to potential downturns in real estate markets[88]. - The company is exposed to interest rate risk, with net interest income being significantly affected by changes in interest rates[89]. - Inflation poses a risk to the company's profitability and may negatively impact customers' ability to repay loans[90]. - The Federal Reserve's monetary policies could materially affect the company's earnings and asset values[91]. - The company is subject to fluctuations in foreign currency exchange rates, particularly from its operations in China[93]. - Geopolitical uncertainties and trade tensions, especially between the U.S. and China, may adversely impact the company's business[84]. - Natural disasters and climate change could lead to increased nonperforming assets and credit losses[86]. - The company may experience a decrease in demand for loans and financial products due to adverse economic conditions[84]. Legal and Compliance Risks - The Consumer Financial Protection Bureau (CFPB) has implemented a final rule requiring financial institutions to provide certain consumer data upon request, which the Bank must comply with by April 1, 2027[51]. - Federal law limits the Bank's ability to pay dividends, requiring regulatory approval if total dividends exceed the sum of net income for the year and retained earnings for the preceding two years[55]. - The Federal Reserve's policy discourages bank holding companies from maintaining dividend levels that undermine their ability to support their banking subsidiaries[55]. - The Company is subject to various federal and state regulations regarding privacy and cybersecurity, which may impact operational costs and compliance efforts[66][68]. - The company faces significant financial and reputational risks from lawsuits and legal proceedings, which could adversely affect its operations[124]. Technological and Competitive Challenges - The company faces intense competition in the financial services industry, which may lead to margin declines and loss of business[112]. - The company may face challenges in keeping pace with technological changes, which could adversely affect its competitive position[106]. - Cybersecurity risks have increased, potentially impacting the company's operations and financial condition[105]. Accounting and Financial Reporting - The Company adheres to U.S. GAAP for its financial reporting, requiring management to make estimates that could materially affect reported amounts[378]. - Changes in accounting standards could materially impact the company's financial statements and reporting[125]. - The Company’s financial statements have been audited and present fairly its financial position as of December 31, 2024, in conformity with U.S. generally accepted accounting principles[347]. Environmental and Regulatory Changes - California's Climate Corporate Data Accountability Act requires entities with annual revenue over$ 1 billion to disclose greenhouse gas emissions starting in 2026[72]. - The Company may incur compliance costs related to the Climate-Related Financial Risk Act, which mandates biennial climate risk disclosures for entities with revenues over $500 million, starting January 1, 2026[72]. - Evolving expectations regarding environmental, social, and governance (ESG) considerations may expose the Company to additional costs and reputational harm[132].