EAST WEST BANCORP INC

The Company maintains a portfolio of high quality and liquid debt securities with a moderate duration profile. It closely manages the overall portfolio credit, interest rate and liquidity risks. The Company’s debt securities provide:

•interest income for earnings and yield enhancement;

•funding availability for needs arising during the normal course of business;

•the ability to execute interest rate risk management strategies in response to changes in economic or market conditions; and

•collateral to support pledging agreements as required and/or to enhance the Company’s borrowing capacity.

While the Company does not intend to sell its debt securities, it may sell AFS debt securities in response to changes in the balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.

The following table presents the distribution of the Company’s AFS and HTM debt securities portfolio as of June 30, 2024 and December 31, 2023, and by credit ratings as of June 30, 2024:

(1)Credit ratings express opinions about the credit quality of a debt security. The Company determines the credit rating of a security according to the lowest credit rating made available by nationally recognized statistical rating organizations (“NRSROs”). Debt securities rated investment grade, which are those with ratings similar to BBB- or above (as defined by NRSROs), are generally considered by the rating agencies and market participants to be low credit risk. Ratings percentages are allocated based on fair value.

(2)For debt securities not rated by NRSROs, the Company uses other factors which include but are not limited to the priority in collections within the securitization structure, and whether the contractual payments have historically been on time.

(3)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $5.2 billion of both amortized cost and fair value as of June 30, 2024, and $1.3 billion of amortized cost and $1.2 billion of fair value as of December 31, 2023.

(4)Includes GNMA HTM debt securities totaling $89 million of amortized cost and $71 million of fair value as of June 30, 2024, and $92 million of amortized cost and $75 million of fair value of as of December 31, 2023.

As of June 30, 2024, the Company’s AFS and HTM debt securities portfolios had an effective duration (defined as the sensitivity of the value of the portfolio to interest rate changes) of 2.8 and 7.2, respectively, compared with 3.6 and 7.5, respectively, as of December 31, 2023. The decrease in the AFS effective duration was primarily due to the purchases of floating rate GNMA securities. The decrease in the HTM effective duration was due to the portfolio seasoning. The Company estimated that the effective duration of its AFS debt securities was 3.4 for an instantaneous 100 bps parallel increase and 2.4 for an instantaneous 100 bps parallel decrease as of June 30, 2024.

Available-for-Sale Debt Securities

The fair value of AFS debt securities totaled $8.9 billion as of June 30, 2024, an increase of $2.7 billion or 44% from $6.2 billion as of December 31, 2023. The increase was primarily due to the purchases of GNMA securities, which were mainly funded by an increase in deposits. The Company’s AFS debt securities are carried at fair value with non-credit related unrealized gains and losses, net of tax, reported in Other comprehensive income (loss)on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were $721 million as of June 30, 2024, compared with $728 million as of December 31, 2023.

As of June 30, 2024 and December 31, 2023, 99% and 97%, respectively, of the carrying value of the AFS debt securities portfolio was rated investment grade by NRSROs. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of both June 30, 2024 and December 31, 2023. There was no allowance for credit losses provided against the AFS debt securities as of each of June 30, 2024 and December 31, 2023. Additionally, there were no credit losses recognized in earnings for the three and six months ended June 30, 2024 and 2023.

Held-to-Maturity Debt Securities

All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of both June 30, 2024 and December 31, 2023.

For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policiesto the Consolidated Financial Statements in the Company’s 2023 Form 10-K and Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.