UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
Mark One
x |
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2012 |
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or | |
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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to . |
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Commission file number 000-24939 | |
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A. Full title of the plan and address of the plan, if different from that of the issuer named below: |
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EAST WEST BANK Financial Statements | |
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B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
EAST WEST BANCORP, INC.
135 North Los Robles Ave., 7th Floor
Pasadena, California 91101
EAST WEST BANK EMPLOYEES 401(k) SAVINGS PLAN
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Page |
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1 | |
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FINANCIAL STATEMENTS: |
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Statements of Net Assets Available for Benefits as of December 31, 2012 and 2011 |
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2 |
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3 | |
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4-13 | |
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14 | |
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15 | |
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16 |
NOTE: All other schedules required by Section 2520.103-10 of the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and 401(k) Committee of
East West Bank Employees 401(k) Savings Plan
Pasadena, California
We have audited the accompanying statements of net assets available for benefits of East West Employees 401(k) Savings Plan as of December 31, 2012 and 2011, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2012 and 2011, and the changes in net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Form 5500, Schedule H, Part IV, Line 4a Schedule of Delinquent Participant Contributions and Form 5500, Schedule H, Part IV, Line 4i Schedule of Assets (Held at End of Year) are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plans management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic 2012 financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic 2012 financial statements taken as a whole.
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Crowe Horwath LLP |
South Bend, Indiana
June 14, 2013
EAST WEST BANK EMPLOYEES 401(k) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2012 AND 2011
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2012 |
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2011 |
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ASSETS |
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Investments: |
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Participantdirected investments at fair value (Notes 1, 2, 3 and 4) |
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$ |
98,841,662 |
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$ |
81,172,967 |
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Total investments |
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98,841,662 |
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81,172,967 |
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Receivables: |
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Notes receivable from participants |
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1,746,318 |
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1,475,090 |
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Participant contributions |
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320,566 |
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303,580 |
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Employer contributions |
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126,844 |
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88,359 |
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Total receivables |
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2,193,728 |
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1,867,029 |
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Total assets |
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101,035,390 |
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83,039,996 |
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LIABILITIES |
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NET ASSETS, REFLECTING ALL INVESTMENTS AT FAIR VALUE |
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101,035,390 |
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83,039,996 |
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ADJUSTMENT FROM FAIR VALUE TO CONTRACT VALUE FOR FULLY BENEFITRESPONSIVE INVESTMENT CONTRACTS |
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(383,276 |
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NET ASSETS AVAILABLE FOR BENEFITS |
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$ |
101,035,390 |
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$ |
82,656,720 |
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See notes to financial statements.
EAST WEST BANK EMPLOYEES 401(k) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
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2012 |
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2011 |
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ADDITIONS (REDUCTIONS) TO NET ASSETS ATTRIBUTED TO |
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Investment income: |
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Net appreciation / (depreciation) in fair value of investments (Notes 3 and 4) |
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$ |
8,300,239 |
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$ |
(1,823,517 |
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Dividend and interest income |
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1,519,784 |
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873,814 |
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Net investment income / (loss) |
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9,820,023 |
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(949,703 |
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Other income: |
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Interest income on notes receivable from participants |
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69,923 |
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59,358 |
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Other income |
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69,923 |
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59,358 |
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Contributions: |
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Participant |
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10,193,371 |
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9,397,392 |
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Participant rollover |
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1,050,034 |
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542,998 |
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Employer, net of forfeitures |
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2,798,280 |
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2,435,509 |
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Total contributions |
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14,041,685 |
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12,375,899 |
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Total additions |
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23,931,631 |
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11,485,554 |
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DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO |
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Benefits paid |
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5,529,875 |
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3,839,395 |
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Administrative expenses |
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23,086 |
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3,278 |
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Total deductions |
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5,552,961 |
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3,842,673 |
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NET INCREASE IN NET ASSETS AVAILABLE FOR BENEFITS |
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18,378,670 |
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7,642,881 |
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NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of year |
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82,656,720 |
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75,013,839 |
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End of year |
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$ |
101,035,390 |
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$ |
82,656,720 |
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See notes to financial statements.
EAST WEST BANK EMPLOYEES 401(k) SAVINGS PLAN
1. DESCRIPTION OF THE PLAN
The following description of the East West Bank Employees 401(k) Savings Plan (the Plan) provides only general information. Participants should refer to the plan document for more complete information.
General The Plan is a defined contribution plan designed to provide retirement benefits financed by participants tax deferred contributions and contributions from East West Bank, the Plans sponsor (the Bank or the Plan Sponsor) and a participating related entity (the Company). The Plan is administered by an administrative committee appointed by the Board of Directors of East West Bank. Prudential Trust Company (the Trustee) serves as the trustee for the Plan. The Plan became effective January 1, 1986. The Plan is subject to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA).
Eligibility Under the terms of the Plan, employees become eligible to participate in the Plan as of the first day of the first calendar month beginning after the date the employee attains the age of 18 years and completes three months of service with the Company. Effective February 1, 2011, eligible employees are automatically enrolled in the Plan at a 3% contribution rate unless the participant elects another rate, including 0%. All deferred compensation of automatically enrolled employees will be invested in an age appropriate Goal Maker Age Migration Fund until such time as the participant changes their investment election. In addition, a Roth 401(k) investment option is available to participants as of June 1, 2011.
Contributions Eligible employees may elect to defer up to 80% of their compensation before taxes (limited to $17,000 in 2012 and $16,500 in 2011). Participants are also able to designate part or all of their contributions as Roth 401(k) contributions, which are made on an after-tax basis. The Bank matches 50% of the first 6% of a participants deferred compensation. Plan participants age 50 or older may also contribute an additional $5,500 to the Plan in both 2012 and 2011. Participants may also contribute amounts representing rollover eligible distributions from other tax-qualified plans into the Plan.
Investments Participants direct the investments of their contributions and match into various investment options offered by the Plan.
Vesting, Benefits, and Benefits Payable Participants are fully vested in the portion of their accounts which resulted from their contributions and earnings on their voluntary contributions. Participants become vested in the matching contributions received from the Plan Sponsor at the rate of 20% per year for each full year of service after the first year so that the participants become 100% vested after five years of credited service.
Benefits are recorded when paid. On termination of service for any reason, a participant may elect to (1) receive a lump-sum distribution in an amount equal to the value of the participants vested interest in his or her account, or (2) elect a rollover distribution to an eligible retirement plan or eligible individual retirement account (IRA) in an amount equal to the value of the participants vested interest in his or her account. If a participants account is less than $1,000 and an election is not made, the Trustee will distribute the vested interest in the participants account to the participant in the form of a lump-sum payment. If a participant with an account balance greater than $1,000 and not exceeding $5,000, does not elect either to receive or to rollover the distribution, then the participants vested interest in the account will be rolled over to an IRA. At December 31, 2012 and 2011, no amounts were owed to terminated participants who had elected to withdraw their benefits.
Forfeited Accounts At December 31, 2012 and 2011, forfeited nonvested accounts totaled $87,155 and $12,727 respectively. These accounts will be used to reduce future employer contributions, pay some plan expenses and, at the discretion of the Plan Administrator, be allocated to participants. During the years ended December 31, 2012 and 2011, employer contributions were reduced by $89,656 and $130,968, respectively from forfeited nonvested accounts. During the years ended December 31, 2012 and 2011, plan expenses of $19,478 and $2,729 were paid with funds from forfeited nonvested accounts. No discretionary allocations were made during the year ended December 31, 2012 and 2011.
Participant Accounts Each participants account is credited with the participants contribution, the Banks contribution, the Plans earnings or losses, and if applicable, rollovers from plans of prior employers. Allocations of earnings or losses are based on participant account balances as defined in the plan document. The benefit to which a participant is entitled is the benefit that can be provided from the participants account.
Notes Receivable from Participants Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan transactions are treated as transfers to (from) the investment fund from (to) the participant loan fund. Loan terms range from one to five years or up to 20 years for the purchase of a primary residence. The loans are secured by the vested balances in the participants accounts and bear interest at rates commensurate with local prevailing rates as determined by the plan administrator at the time the loan is approved. At December 31, 2012, interest rates on outstanding loans to participants ranged from 4.25% to 9.25% and mature through 2031. Principal and interest are paid ratably through payroll deductions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting The accompanying financial statements have been prepared using the accrual basis in accordance with accounting principles generally accepted in the United States of America.
Fair Value Disclosures In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 addresses convergence between GAAP and International Financial Reporting Standards (IFRS) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entitys net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition currently applies only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. The amendments in ASU 2011-04 were effective for interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have a material effect on the Plans financial statements.
Valuation of Investments The Plans investments are stated at their fair value. Shares of mutual funds are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year-end. Common stock is valued at quoted market prices. Investment in the collective trust fund is stated at fair value, based on the net asset value, after adjustments to reflect all fund investments at fair value, as reported in the audited financial statements of the fund. In the fourth quarter of 2011, management made the decision to liquidate the collective trust fund and transferred assets into the guaranteed income fund. Investment in the guaranteed income fund is valued based on the Plans investment contract with Prudential Retirement Insurance and Annuity Company (PRIAC) which is reported at contract value. Contract value is the value determined by the insurance company in accordance with the terms of the contract.
Fully BenefitResponsive Investment Contracts Fully benefitresponsive investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefitresponsive investment contracts because the contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plans Stable Value Fund, which was fully liquidated in 2012, invested in investment contracts through participation in the Wells Fargo Stable Return Fund (Stable Return Fund), a collective trust. The Plans guaranteed income fund invests in an investment contract through PRIAC, an unallocated investment contract. Investments in the accompanying Statements of Net Assets Available for Benefits presents the fair value of the Plans investment in investment contract, which approximates contract value.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein and disclosures of contingent assets and liabilities. Actual results could materially differ from those estimates.
Risk Management The Plan utilizes various investment instruments, including mutual funds that invest in the securities of foreign countries. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. In addition, investments that include securities of foreign companies involve special risks and considerations not typically associated with investing in U.S. companies. These risks include devaluation of currencies, less reliable information about issuers, different securities transaction clearance and settlement practices, and possible adverse political and economic developments. Moreover, securities of many foreign companies and their markets may be less liquid and their prices may be more volatile than those of securities of comparable U.S. companies. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and those changes could materially affect the amounts reported in the financial statements and participants account balances.
Administrative Expenses Investment transaction expenses are offset against the related investment income. In 2011, management fees incurred by the collective trust of the Plan are borne by the Plan participants through the Wells Fargo Stable Value Fund and are included in the net appreciation in fair value of investments on the Statement of Changes in Net Assets Available for Benefits. The investment managers of the Wells Fargo Stable Value Fund charge asset-based management fees, which amount to, on an annualized basis, 65 basis points of the dollar value of the Plans investments in the Wells Fargo Stable Value Fund. Certain loan fees are deducted directly from participants account. In the fourth quarter of 2011, management made the decision to liquidate the collective trust fund. Other administrative and non-investment expenses of the Plan are paid by the Plan Sponsor which is a party-in-interest. These expenses, which are not reflected in the accompanying financial statements, constitute exempt party-in-interest transactions under ERISA.
Investment Income The Plan presents in the Statements of Changes in Net Assets Available for Benefits the net appreciation in the fair value of investments, which consists of realized gains or losses and unrealized appreciation or depreciation on those investments. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Notes Receivable from Participants Notes receivable from participants are reported at their unpaid principal balance plus any accrued but unpaid interest, with no allowance for credit losses, as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participants account balances.
3. FAIR VALUE MEASUREMENTS
ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Plan considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
ASC 820 also establishes a fair value hierarchy that requires the Plan to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value:
· Level 1: quoted prices in active markets for identical assets or liabilities;
· Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
· Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Investments measured at fair value on a recurring basis consisted of the following types of instruments as of December 31, 2012 and 2011:
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Assets (Liabilities) Measured at Fair Value on a Recurring Basis as of December 31, 2012 |
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Fair Value |
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Quoted Prices in |
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Significant Other |
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Significant |
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Common stock |
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East West Bancorp, Inc. Company Stock |
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$ |
18,117,757 |
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$ |
18,117,757 |
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$ |
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$ |
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Total common stocks |
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18,117,757 |
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18,117,757 |
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Mutual funds |
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Fixed income - intermediate bond funds |
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10,153,389 |
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10,153,389 |
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Balanced - value funds |
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5,975,253 |
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5,975,253 |
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Large cap stock - value funds |
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4,131,321 |
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4,131,321 |
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Large cap stock - blend funds |
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9,935,581 |
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9,935,581 |
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Large cap stock - growth funds |
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12,902,745 |
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12,902,745 |
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Mid cap stock - value funds |
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3,066,204 |
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3,066,204 |
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Mid cap stock - blend funds |
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2,598,404 |
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2,598,404 |
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Mid cap stock - growth funds |
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2,140,761 |
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2,140,761 |
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Small cap stock - value funds |
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740,751 |
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740,751 |
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Small cap stock - blend funds |
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2,131,616 |
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2,131,616 |
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Small cap stock - growth funds |
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1,865,763 |
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1,865,763 |
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International stock - blend funds |
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8,295,012 |
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8,295,012 |
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Total mutual funds |
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63,936,800 |
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63,936,800 |
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Unallocated investment contract |
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Guaranteed income fund |
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16,787,105 |
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16,787,105 |
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Total unallocated investment contract |
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16,787,105 |
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16,787,105 |
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Total investments measured at fair value |
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$ |
98,841,662 |
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$ |
82,054,557 |
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$ |
|
|
$ |
16,787,105 |
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Assets (Liabilities) Measured at Fair Value on a Recurring Basis as of December 31, 2011 |
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Fair Value |
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Quoted Prices in |
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Significant Other |
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Significant |
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Common stock |
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|
|
|
|
|
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East West Bancorp, Inc. Company Stock |
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$ |
16,671,216 |
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$ |
16,671,216 |
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$ |
|
|
$ |
|
|
Total common stocks |
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16,671,216 |
|
16,671,216 |
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|
|
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|
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|
|
| ||||
Mutual funds |
|
|
|
|
|
|
|
|
| ||||
Fixed income - intermediate bond funds |
|
7,082,507 |
|
7,082,507 |
|
|
|
|
| ||||
Balanced - value funds |
|
5,178,766 |
|
5,178,766 |
|
|
|
|
| ||||
Large cap stock - value funds |
|
2,927,861 |
|
2,927,861 |
|
|
|
|
| ||||
Large cap stock - blend funds |
|
7,677,496 |
|
7,677,496 |
|
|
|
|
| ||||
Large cap stock - growth funds |
|
10,599,824 |
|
10,599,824 |
|
|
|
|
| ||||
Mid cap stock - value funds |
|
2,202,183 |
|
2,202,183 |
|
|
|
|
| ||||
Mid cap stock - blend funds |
|
1,858,545 |
|
1,858,545 |
|
|
|
|
| ||||
Mid cap stock - growth funds |
|
1,590,558 |
|
1,590,558 |
|
|
|
|
| ||||
Small cap stock - value funds |
|
587,864 |
|
587,864 |
|
|
|
|
| ||||
Small cap stock - blend funds |
|
1,479,666 |
|
1,479,666 |
|
|
|
|
| ||||
Small cap stock - growth funds |
|
1,383,713 |
|
1,383,713 |
|
|
|
|
| ||||
International stock - blend funds |
|
6,558,831 |
|
6,558,831 |
|
|
|
|
| ||||
Total mutual funds |
|
49,127,814 |
|
49,127,814 |
|
|
|
|
| ||||
|
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|
|
|
|
|
|
|
| ||||
Collective trust fund |
|
|
|
|
|
|
|
|
| ||||
Stable value fund |
|
15,124,654 |
|
|
|
15,124,654 |
|
|
| ||||
Total collective trust funds |
|
15,124,654 |
|
|
|
15,124,654 |
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Unallocated investment contract |
|
|
|
|
|
|
|
|
| ||||
Guaranteed income fund |
|
249,283 |
|
|
|
|
|
249,283 |
| ||||
Total unallocated investment contract |
|
249,283 |
|
|
|
|
|
249,283 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total investments measured at fair value |
|
$ |
81,172,967 |
|
$ |
65,799,030 |
|
$ |
15,124,654 |
|
$ |
249,283 |
|
There were no transfers between Level 1, Level 2 and Level 3 during 2012 and 2011.
The following table sets forth the summary of changes in the fair value of Level 3 investments for the years ended December 31, 2012 and 2011:
|
|
Guaranteed |
| |
|
|
Income Fund |
| |
|
|
|
| |
Balance at December 31, 2010 |
|
$ |
|
|
Interest income |
|
315 |
| |
Purchases |
|
259,662 |
| |
Issues |
|
|
| |
Sales |
|
(10,694 |
) | |
Settlements |
|
|
| |
Balance at December 31, 2011 |
|
249,283 |
| |
Interest income |
|
185,484 |
| |
Purchases |
|
19,000,309 |
| |
Issues |
|
|
| |
Sales |
|
(2,647,971 |
) | |
Settlements |
|
|
| |
Balance at December 31, 2012 |
|
$ |
16,787,105 |
|
Common Stock
East West Bancorp, Inc. common stock held in participant directed brokerage accounts are stated at fair value as quoted on a recognized securities exchange and are valued at the last reported sales price on the last business day of the Plan year and are classified as Level 1 investments.
Mutual Funds
The mutual funds are stated at fair value as quoted on a recognized securities exchange and are valued at the last reported sales price on the last business day of the Plan year, and are classified as Level 1 investments.
Collective Trust Fund
The fair values of participation units in the stable value collective trust are based upon the net asset values of such fund, after adjustments to reflect all fund investments at fair value, including direct and indirect interests in fully benefit-responsive contracts, as reported in the audited financial statements of the fund. The stable value fund is classified as a Level 2 investment.
The fund invests in conventional and synthetic investment contracts issued by life insurance companies, banks, and other financial institutions, and a synthetic stable value fund, with the objective of providing a higher rate of return than shorter maturity investments, such as money market funds or certificates of deposit. The fund generally provides for daily redemptions by the Plan at reported net asset value per share, with written redemption instructions, and redemption proceeds will generally be paid to the account within one business day after receipt of the request, and in all cases, within six business days after such receipt. Withdrawals needed for benefit payments and loan advances of participating employee benefit plans are generally permitted daily.
In the fourth quarter of 2011, management made the decision to liquidate the stable value fund and transfer assets into a guaranteed income fund. No fees are associated with this transaction. All participants were given a written notice of the transaction, as any plan sponsor initiated withdrawal from the fund requires a 12 month written notice of intent to withdraw assets from the fund. During this period, no restrictions were set on the participants.
Unallocated Investment Contracts
In December 2011, the Plan invested in a guaranteed income fund offered by the Trustee. The fair values of the Plans investment contracts have been determined to approximate contract values, as the terms of the contracts prohibit transfer or assignment of rights under the contracts and provide for all distributions at contract value, frequent re-setting of contractual interest rates based upon market conditions, no significant liquidity restrictions and no defined maturities. Generally, there are no events that could limit the ability of the plan to transact at contract value and there are no events that allow the issuer to terminate the contract and which require the Plan to settle at an amount different than contract value. In addition, management has determined that no adjustment from contract values is required for credit quality considerations.
Contract value represents contributions made to the contract, plus earnings at guaranteed crediting rates, less withdrawals and fees. The average yield earned by the Plan, based on actual earnings, was 2.85% as of December 31, 2012 and 2011. The average yield earned, based on the interest rate credited to participants, was 2.85% as of December 31, 2012 and 2011. No adjustment is required to mediate between the average earnings credited to the Plan and the average earnings credited to the participants. The same crediting interest rate is applied to the entire contract value and is reviewed on a semi-annual basis for resetting. The factors considered in establishing the crediting interest rate include, current economic and market conditions, the general interest rate environment and both actual and expected experience of a reference portfolio within the general account. The guaranteed minimum interest rate is 1.50%. The guaranteed income fund is classified as a Level 3 investment given the unobservable inputs used to determine contract value.
The valuation methodologies described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plans valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair values of certain financial instruments could result in a different fair value measurement at the reporting date.
4. INVESTMENTS
The following presents the Plans investments, as of December 31, 2012 and 2011 that represent 5% or more of the Plans net assets available for benefits:
2012 |
|
|
| |
|
|
|
| |
East West Bancorp, Inc. Common Stock |
|
$ |
18,117,757 |
|
Prudential Guaranteed Income Fund |
|
16,787,105 |
| |
PIMCO Total Return Bond Admin |
|
10,153,389 |
| |
American Funds Growth Fund of America |
|
8,340,119 |
| |
American Funds EuroPacific Growth |
|
8,295,012 |
| |
Vanguard 500 Index Signal |
|
7,348,079 |
| |
MFS Total Return Fund |
|
5,975,253 |
| |
|
|
|
| |
2011 |
|
|
| |
|
|
|
| |
East West Bancorp, Inc. Common Stock |
|
$ |
16,671,216 |
|
Wells Fargo Stable Value Fund, at Contract Value |
|
14,741,378 |
| |
PIMCO Total Return Bond Admin |
|
7,082,507 |
| |
American Funds EuroPacific Growth |
|
6,558,831 |
| |
American Funds Growth Fund of America |
|
6,449,795 |
| |
Vanguard 500 Index Signal |
|
5,439,572 |
| |
MFS Total Return Fund |
|
5,178,766 |
| |
Franklin Flex Cap Growth Fund |
|
4,150,029 |
|
The Plans investments, including gains and losses on investments bought and sold, as well as held during the year (decrease)/increased in value for the years ended December 31, 2012 and 2011, as follows:
|
|
2012 |
|
2011 |
| ||
|
|
|
|
|
| ||
Common stock |
|
$ |
1,390,774 |
|
$ |
62,689 |
|
Mutual funds |
|
6,877,132 |
|
(2,181,657 |
) | ||
Collective trust fund |
|
32,333 |
|
295,451 |
| ||
Unallocated investment contract |
|
|
|
|
| ||
|
|
|
|
|
| ||
Total |
|
$ |
8,300,239 |
|
$ |
(1,823,517 |
) |
5. PARTY-IN-INTEREST TRANSACTIONS
A party-in-interest is defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others. The Plan held a stable value fund and invests in a guaranteed investment contract managed by a custodian, and, therefore, these transactions and the Plans payment of custodian fees qualify as party-in-interest transactions. Notes receivable from participants also reflect party-in-interest transactions. Fees paid by the Bank for administrative expenses amounted to $28,694 and $63,726 for the years ended December 31, 2012 and 2011, respectively. Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan.
At December 31, 2012 and 2011, the Plan held 843,079 and 844,112 shares, respectively, of common stock of East West Bancorp, Inc., the parent company of the Plan Sponsor, with a fair value of $18,117,757 and $16,671,216, respectively. All common stock held by the Plan is common stock of East West Bancorp, Inc. During the years ended December 31, 2012 and 2011, the Plan recorded dividend income from the plans investment in East West Bancorps common stock of $334,326 and $132,973, respectively.
For risks and uncertainties regarding investment in East West Bancorp, Inc. common stock, participants should refer to the East West Bancorp, Inc. Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of the Plans termination, all participant accounts will become 100% vested and will be distributable to participants in accordance with the Plan.
7. FEDERAL INCOME TAX STATUS
The Internal Revenue Service has issued an opinion letter dated March 31, 2008, indicating that the prototype adopted by the Plan, as then designed, was in compliance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since from the original prototype document; however, the Plan Sponsor believes that the Plan is currently being operated in compliance with the applicable requirements of the IRC and the Plan and related Trust continue to be tax-exempt. Therefore, no provision for income taxes has been included in the Plans financial statements.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the plan and recognize a tax liability (or asset) if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The plan administrator has analyzed the tax positions taken by the plan and has concluded that, as of December 31, 2012, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2009.
8. SUBSEQUENT EVENTS
The Plan has evaluated subsequent events through the date of issuance of the financial statements. Such evaluation resulted in no adjustments to the accompanying financial statements.
* * * * * *
EAST WEST BANK EMPLOYEES 401(k) SAVINGS PLAN
EIN 95-2795851 Plan Number: 001
FORM 5500, SCHEDULE H, PART IV, LINE 4a SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
Participant |
|
Total that Constitute Nonexempt Prohibited Transactions |
|
Total Fully |
| |||||||||
Contributions |
|
Contributions |
|
Contributions |
|
Contributions |
|
Corrected Under |
| |||||
Transferred Late to |
|
Not |
|
Corrected Outside |
|
Pending Correction |
|
VFCP and |
| |||||
Plan |
|
Corrected |
|
VFCP |
|
in VFCP |
|
PTE 2002-51 |
| |||||
|
|
|
|
|
|
|
|
|
| |||||
$ |
9,517 |
|
$ |
|
|
$ |
9,517 |
|
$ |
|
|
$ |
|
|
EAST WEST BANK EMPLOYEES 401(k) SAVINGS PLAN
EIN 95-2795851 Plan Number: 001
FORM 5500, SCHEDULE H, PART IV, LINE 4i SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2012
|
|
|
|
(c) Description of Investment, |
|
|
|
|
| |
|
|
(b) Identity of Issuer, |
|
Including Maturity Date, |
|
|
|
|
| |
|
|
Borrower, Lessor, |
|
Rate of Interest, Collateral, |
|
|
|
|
| |
(a) |
|
or Similar Party |
|
Par, or Maturity Value |
|
(d) Cost |
|
(e) Current Value |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Franklin Flex Cap Growth Fund |
|
97,284 shares, Mutual funds |
|
** |
|
$ |
4,562,626 |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Davis NY Venture Fund A |
|
74,396 shares, Mutual funds |
|
** |
|
2,587,502 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Vanguard 500 Index Signal |
|
67,712 shares, Mutual funds |
|
** |
|
7,348,079 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Vanguard Small Cap Index Signal |
|
61,043 shares, Mutual funds |
|
** |
|
2,131,616 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
MFS Total Return Fund |
|
392,850 shares, Mutual funds |
|
** |
|
5,975,253 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
MFS Value Fund A |
|
9,981 shares, Mutual funds |
|
** |
|
253,030 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Goldman Sachs Mid Cap Value |
|
78,040 shares, Mutual funds |
|
** |
|
3,066,204 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Royce Value Plus Fund I |
|
134,907 shares, Mutual funds |
|
** |
|
1,865,763 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Royce Total Return Fund |
|
54,347 shares, Mutual funds |
|
** |
|
740,751 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Pimco Total Return Bond Admin |
|
903,326 shares, Mutual funds |
|
** |
|
10,153,389 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
American Funds Washington Mutual Fund |
|
124,704 shares, Mutual funds |
|
** |
|
3,878,291 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
American Funds Growth Fund of America |
|
244,363 shares, Mutual funds |
|
** |
|
8,340,119 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
American Fund EuroPacific Growth |
|
204,916 shares, Mutual funds |
|
** |
|
8,295,012 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
T Rowe Price Mid Cap Growth |
|
37,910 shares, Mutual funds |
|
** |
|
2,140,761 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Vanguard Mid Cap Index Signal |
|
80,746 shares, Mutual funds |
|
** |
|
2,598,404 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
|
Prudential Guaranteed Income Fund |
|
649,216 units, Unallocated Contract |
|
** |
|
16,787,105 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
|
East West Bancorp, Inc. |
|
843,079 shares, Common stock |
|
** |
|
18,117,757 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Total investments |
|
|
|
|
|
98,841,662 |
| |
|
|
|
|
|
|
|
|
|
| |
* |
|
Loans to participants |
|
Participant loans (maturing 2013 to 2031 with interest rates of 4.25% to 9.25% collateralized by participants account balances) |
|
** |
|
1,746,318 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Total assets |
|
|
|
|
|
$ |
100,587,980 |
|
* Party-in-interest
** Cost information is not required for participant directed investments and therefore is not included.
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: June 14, 2013 |
|
|
|
EAST WEST BANK |
|
|
EMPLOYEES 401(k) SAVINGS |
|
|
PLAN |
|
|
|
|
|
By |
/s/ DOUGLAS P. KRAUSE |
|
|
|
|
|
DOUGLAS P. KRAUSE |
|
|
|
|
|
Executive Vice President and General Counsel |