EAST WEST BANCORP INC

The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of C&I, CRE, multifamily residential, and construction and land loans, as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”) and other consumer loans. Loans held-for-investment totaled $52.2 billion as of December 31, 2023, an increase of $4.0 billion, or 8%, from $48.2 billion as of December 31, 2022. This increase was primarily driven by increases of $1.8 billion or 13% in total residential mortgage loans, $1.4 billion or 7% in total CRE loans, and $870 million or 6% in C&I loans. The composition of the loan portfolio as of December 31, 2023 was similar to the composition as of December 31, 2022.

The following table presents the composition of the Company’s total loan portfolio by loan type as of December 31, 2023 and 2022:

(1)Includes $71 million and $70 million of net deferred loan fees and net unamortized premiums as of December 31, 2023, and 2022, respectively.

(2)Consists of a single-family residential loan as of December 31, 2023 and C&I loans as of December 31, 2022.

Commercial

The commercial loan portfolio comprised 71% and 72% of total loans as of December 31, 2023 and 2022, respectively. The Company actively monitors the commercial lending portfolio for credit risk and reviews credit exposures for sensitivity to changing economic conditions.

Commercial — Commercial and Industrial Loans. Total C&I loan commitments were $24.6 billion as of December 31, 2023, an increase of $1.8 billion or 8% from $22.8 billion as of December 31, 2022, with a utilization rate of 67% as of December 31, 2023, compared with 69% as of December 31, 2022. Total C&I loans were $16.6 billion as of December 31, 2023, an increase of $870 million or 6% from $15.7 billion as of December 31, 2022. Total C&I loans made up 32% and 33% of total loans held-for-investment as of December 31, 2023 and 2022, respectively. The C&I loan portfolio includes loans and financing for businesses across a wide spectrum of industries. The Company offers a variety of C&I products, including commercial business lending, working capital lines of credit, trade finance, letters of credit, asset-based lending, asset-backed finance, project finance and equipment financing. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled $645 million and $856 million as of December 31, 2023 and 2022, respectively. The majority of the C&I loans had variable interest rates as of both December 31, 2023, and 2022.

The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by industry and customer exposure, and has exposure limits by industry and loan product. The following table presents the industry mix within the Company’s C&I loan portfolio as of December 31, 2023, and 2022:

Commercial — Total Commercial Real Estate Loans. Total CRE loans totaled $20.5 billion as of December 31, 2023, which grew by $1.4 billion, or 7%, from $19.1 billion as of December 31, 2022, and accounted for 39% of total loans held-for-investment as of both December 31, 2023 and 2022. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. The increase in total CRE loans was driven by well-diversified growth across our major property types, partially offset by a decrease in office CRE loans. The Company’s underwriting parameters for CRE loans are established in compliance with supervisory guidance, including: property type, geography and loan-to-value (“LTV”). The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses.

The Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of $3 million as of both December 31, 2023 and 2022. The following table summarizes the Company’s total CRE loans by property type as of December 31, 2023 and 2022:

(1)Included in CRE loans, which are a subset of Total CRE loans.

The weighted-average LTV ratio of the total CRE loan portfolio was 50% as of December 31, 2023, compared with 51% as of December 31, 2022. Weighted average LTV is based on the most recent LTV, which is based on the latest available appraisal and current loan commitment. Approximately 91% and 90% of total CRE loans had an LTV ratio of 65% or lower as of December 31, 2023 and 2022, respectively.

The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of December 31, 2023 and 2022. The distribution of the total CRE loan portfolio largely reflects the Company’s geographical branch footprint, which is primarily concentrated in California:

As of December 31, 2023 and 2022, 69% and 71%, respectively, of total CRE loans were concentrated in California. Changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk from a downturn in the California real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertaintiesin this Form 10-K.

Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. CRE loans totaled $14.8 billion as of December 31, 2023, compared with $13.9 billion as of December 31, 2022, and accounted for 28% and 29% of total loans held-for-investment as of December 31, 2023 and 2022, respectively. Interest rates on CRE loans may be fixed, variable or hybrid. As of December 31, 2023, 58% of our CRE portfolio was variable rate, of which 50% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s own exposure remained variable rate. In comparison, as of December 31, 2022, 65% of our CRE portfolio was variable rate, of which 47% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 20% of the CRE loans as of both December 31, 2023 and 2022. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.

Commercial — Multifamily Residential Loans. The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled $5.0 billion as of December 31, 2023, compared with $4.6 billion as of December 31, 2022, and accounted for 10% and 9% of total loans held-for-investment as of December 31, 2023 and 2022, respectively. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of December 31, 2023, 48% of our multifamily residential portfolio was variable rate, of which 40% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s own exposure remained variable rate. In comparison, as of December 31, 2022, 57% of our multifamily residential loan portfolio was variable rate, of which 34% had customer-level interest rate derivative contracts in place.

Commercial — Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction and land loans totaled $664 million as of December 31, 2023, compared with $638 million as of December 31, 2022, and accounted for 1% of total loans held-for-investment as of both dates. Construction loan exposure was made up of $526 million in loans outstanding and $672 million in unfunded commitments, as of December 31, 2023, compared with $537 million in loans outstanding and $611 million in unfunded commitments as of December 31, 2022. Land loans totaled $138 million as of December 31, 2023, compared with $102 million as of December 31, 2022.

Consumer

Residential mortgage loans are primarily originated through the Bank’s branch network. The average total residential loan size was $436 thousand and $434 thousand as of December 31, 2023 and 2022, respectively. The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of December 31, 2023 and 2022:

Consumer — Single-Family Residential Loans. Single-family residential loans totaled $13.4 billion or 26% of total loans held-for-investment as of December 31, 2023, compared with $11.2 billion or 23% of total loans held-for-investment as of December 31, 2022. Year-over-year, single-family residential loans increased $2.2 billion or 19%, primarily driven by organic growth in mortgages and residential properties in California and New York. The Company was in a first lien position for all of its single-family residential loans as of both December 31, 2023 and 2022. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. The weighted-average LTV ratio was 53% as of both December 31, 2023 and 2022. These loans have historically experienced low delinquency and loss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically annually, after an initial fixed-rate period.

Consumer — Home Equity Lines of Credit. Total HELOC commitments were $5.2 billion as of December 31, 2023, which decreased by $274 million or 5% from $5.5 billion as of December 31, 2022, with a utilization rate of 33% as of December 31, 2023, compared with 39% as of December 31, 2022. Substantially all of the Company’s unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $1.7 billion as of December 31, 2023, compared with $2.1 billion as of December 31, 2022, and accounted for 3% and 5% of total loans held-for-investment as of December 31, 2023 and 2022, respectively. Year-over-year, HELOCs outstanding decreased $400 million, or 19%. The Company was in a first lien position for 77% and 83% of total outstanding HELOCs as of December 31, 2023 and 2022, respectively. The weighted-average LTV ratio was 48% on HELOC commitments as of December 31, 2023, compared with 49% as of December 31, 2022. Weighted-average LTV ratio represents the loan’s balance divided by the estimated current property value. Combined LTV ratios are used for junior lien home equity loans. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. As a result, these loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both December 31, 2023 and 2022.

All originated commercial and consumer loans are subject to the Company’s conservative underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts a variety of quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.

The following table presents the contractual loan maturities by loan category and the contractual distribution of loans to changes in interest rates as of December 31, 2023: