EAST WEST BANCORP INC

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of 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”) and its subsidiaries, including its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), and the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 29, 2024 (the “Company’s 2023 Form 10-K”).

Organization and Strategy

East West 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. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of the Bank, which became its principal asset. The Bank is an independent commercial bank headquartered in California that focuses on the financial service needs of individuals and businesses that operate in both the U.S. and Asia. Through 120 locations in the U.S. and Asia, the Company provides a full range of consumer and commercial products and services through the following three business segments: (1) Consumer and Business Banking and (2) Commercial Banking, with the remaining operations recorded in (3) Other. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. We are committed to enhancing long-term shareholder value by growing loans, deposits and revenue, improving profitability, and investing for the future while managing risks, expenses and capital. Our business model is built on customer loyalty and engagement, understanding our customers’ financial goals, and meeting our customers’ financial needs through our diverse products and services. We expect our relationship-focused business model to continue generating organic growth from existing customers and to expand our targeted customer bases. As of March 31, 2024, the Company had $70.9 billion in total assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategyand Banking Servicesin the Company’s 2023 Form 10-K.

Current Developments

Economic Developments

Recent external data indicate that inflation has not progressed closer to the Board of Governors of the Federal Reserve System’s (“Federal Reserve”) 2% target. In response to the persistent inflation, the Federal Reserve has communicated the appropriateness of its current restrictive policy, which has lowered expectations of rate cuts by midyear 2024. The higher interest rate environment continues to negatively impact the market value of banking organizations’ investment securities, while the commercial real estate (“CRE”) market remains under pressure from tighter credit conditions and decreased demand. Factors such as the economic impacts of unrest, wars, and acts of terrorism could lead to higher oil prices and increased inflationary pressures, along with the likelihood that the Federal Reserve will cut interest rates slower than anticipated. The Company monitors changes in economic and industry conditions and their impacts on the Company’s business, customers, employees, communities and markets.

Further discussion of the potential impacts on the Company’s business due to the higher interest rate environment has been provided in Item 1A. — Risk Factors — Risks Related to Financial Mattersin the Company’s 2023 Form 10-K.

Federal Deposit Insurance Corporation Special Assessment

In November 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule to implement a special deposit insurance assessment to recover losses to the Deposit Insurance Fund (“DIF”) arising from the protection of uninsured depositors following the receiverships of failed institutions in the spring of 2023. Under the final rule, the assessment base for the special assessment is equal to an insured depository institution’s estimated uninsured deposits, reported for the quarter ended December 31, 2022, minus the first $5 billion in estimated uninsured deposits. The FDIC will collect the special assessment over eight quarterly assessment periods starting with the first quarter of 2024, at a quarterly rate of 3.36 basis points (“bps”). The Company recognized the entire assessment expense of approximately $70 million in the fourth quarter of 2023. However, depending on future adjustments to the DIF’s estimated loss, the FDIC retained the ability to cease collection early, extend the special assessment collection period, or impose a final shortfall special assessment.

As of the publication of the final rule, the FDIC estimated that losses to the DIF totaled $16.3 billion. In February 2024, the FDIC updated its estimate of the DIF’s losses to $20.4 billion before the $1.7 billion residual interest in the Silicon Valley Bridge Bank, N.A. receivership’s trust. In the first quarter of 2024, the Company updated its estimate to recognize an anticipated additional FDIC special assessment charge (“FDIC charge”) of $10 million, which represents the proportional increase in the FDIC’s estimated loss.

Climate Accountability

On March 6, 2024, the SEC adopted final rules requiring registrants to disclose certain climate-related information in registration statements and annual reports. The final rules include disclosures related to climate-related risks and risk management as well as the board and management’s governance of such risks. The rules also incorporate requirements to disclose the financial effects of certain severe weather events and other natural conditions in the audited financial statements. Larger registrants will also be required to disclose information about greenhouse gas emissions, to the extent material, which will be subject to a phased-in third-party assurance requirement.

On April 4, 2024, the SEC voluntarily stayed implementation of the rules pending the completion of judicial review of consolidated legal challenges to the rules by the United States Court of Appeals for the Eighth Circuit. The Company is evaluating the impact of the climate disclosure rules and monitoring the outcome of the litigation regarding their adoption.

Financial Review

(1)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Reconciliation of GAAP to Non-GAAP Financial Measuresin this Form 10-Q.

(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.

The Company’s first quarter 2024 net income was $285 million, a decrease of $37 million or 12%, compared with first quarter 2023 net income of $322 million. The decrease was primarily due to lower net interest income and higher noninterest expense, partially offset by higher noninterest income and lower income tax expense during the quarter. Noteworthy items about the Company’s performance for the first quarter of 2024 included:

•Asset growth. Total assets reached $70.9 billion as of March 31, 2024, an increase of $1.3 billion or 2% from December 31, 2023, primarily driven by a $2.2 billion or 36% increase in available-for-sale (“AFS”) debt securities mainly funded by a $2.5 billion increase in deposits, partially offset by decreases in cash and cash equivalents and securities purchased under resale agreements (“resale agreements”).

•Deposit growth. Total deposits were $58.6 billion as of March 31, 2024, an increase of $2.5 billion or 4%, from $56.1 billion as of December 31, 2023, primarily reflecting an increase in customer deposits related to a successful branch-based certificates of deposit (“CD”) campaign for the Lunar New Year.

•Borrowings. Total borrowings and long-term debt decreased $1.1 billion to $3.6 billion as of March 31, 2024, compared with December 31, 2023. The net decrease was primarily driven by the $4.5 billion payoff of Bank Term Funding Program (“BTFP”) borrowings and the $117 million redemption of East West Capital Trust securities, partially offset by a $3.5 billion increase in Federal Home Loan Bank (“FHLB”) advances.

•Strong capital levels. Stockholders’ equity was $7.0 billion as of March 31, 2024, up 1% compared with December 31, 2023. Book value and tangible book value per share of $50.48 and $47.09, respectively, as of March 31, 2024, were both up 2% compared with December 31, 2023. Tangible book value per share is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A - Reconciliation of GAAP to non-GAAP Financial Measures in this Form 10-Q.

•Net interest income and net interest margin. First quarter 2024 net interest income before provision for credit losses was $565 million, a decrease of $35 million or 6%from the first quarter of 2023. First quarter 2024 net interest margin of 3.34% was down 62 basis points (“bps”) year-over-year.

•Profitability ratios. First quarter 2024 ROA, ROE and the return on average TCE were 1.60%, 16.40% and 17.60%, respectively. Return on average TCE is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.