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 $53.3 billion and $52.2 billion as of September 30, 2024 and December 31, 2023, respectively. The composition of the loan portfolio was similar as of both September 30, 2024 and December 31, 2023.

The following table presents the composition of the Company’s total loan portfolio by loan type as of September 30, 2024 and December 31, 2023:

(1)Includes $52 million and $71 million of net deferred loan fees and net unamortized premiums as of September 30, 2024 and December 31, 2023, respectively.

(2)Consists of a single-family residential loan as of December 31, 2023.

Commercial

The commercial loan portfolio comprised 70% and 71% of total loans as of September 30, 2024 and December 31, 2023, 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 $25.3 billion and $24.6 billion as of September 30, 2024 and December 31, 2023, respectively, with a utilization rate of 67% as of both September 30, 2024 and December 31, 2023. Total C&I loans were $17.1 billion as of September 30, 2024, an increase of $487 million or 3% from $16.6 billion as of December 31, 2023. Total C&I loans made up 32% of total loans held-for-investment as of both September 30, 2024 and December 31, 2023. 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 $760 million and $645 million as of September 30, 2024 and December 31, 2023, respectively. The majority of the C&I loans had variable interest rates as of both September 30, 2024 and December 31, 2023.

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 September 30, 2024 and December 31, 2023:

(1)Revised segmentation to conform with the current presentation.

Commercial — Total Commercial Real Estate Loans. Total CRE loans totaled $20.4 billion and $20.5 billion, and accounted for 38% and 39% of total loans held-for-investment as of September 30, 2024 and December 31, 2023, respectively. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. 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 Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of $3 million as of both September 30, 2024 and December 31, 2023. The following table summarizes the Company’s total CRE loans by property type as of September 30, 2024 and December 31, 2023:

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

The weighted-average LTV ratio of the total CRE loan portfolio was 50% as of both September 30, 2024 and December 31, 2023. Weighted-average LTV is based on the most recent LTV, which considers the latest available appraisal and current loan commitment. Approximately 91% of total CRE loan commitments had an LTV ratio of 65% or lower as of both September 30, 2024 and December 31, 2023.

The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of September 30, 2024 and December 31, 2023. The distribution of the total CRE loan portfolio largely reflects the Company’s geographical branch footprint, which is primarily concentrated in California.

As of both September 30, 2024 and December 31, 2023, 69% 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 economic and real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertaintiesto the Company’s 2023 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 $14.6 billion or 27% of total loans held-for-investment as of September 30, 2024, compared with $14.8 billion or 28% of total loans held-for-investment as of December 31, 2023. Interest rates on CRE loans may be fixed, variable or hybrid. As of September 30, 2024, 57% of our CRE portfolio had variable rates, of which 52% 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 exposure remained variable rate. In comparison, as of December 31, 2023, 58% of our CRE portfolio had variable rates, of which 50% had customer-level interest rate derivative contracts in place. The Company seeks to underwrite loans with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 20% of the CRE loans as of both September 30, 2024 and December 31, 2023. 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 $5.1 billion and $5.0 billion as of September 30, 2024 and December 31, 2023, respectively, and accounted for 10% of total loans held-for-investment as of both dates. 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 September 30, 2024, 50% of our multifamily residential portfolio had variable rates, of which 45% had customer-level interest rate derivative contracts in place. In comparison, as of December 31, 2023, 48% of our multifamily residential portfolio had variable rates, 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.

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 $694 million as of September 30, 2024, compared with $664 million as of December 31, 2023, and accounted for 1% of total loans held-for-investment as of both dates. Construction loan exposure was made up of $540 million in loans outstanding, plus $466 million in unfunded commitments as of September 30, 2024, compared with $526 million in loans outstanding, plus $672 million in unfunded commitments as of December 31, 2023. Land loans totaled $154 million as of September 30, 2024, compared with $138 million as of December 31, 2023.

Consumer

Residential mortgage loans are primarily originated through the Bank’s branch network. The average total residential loan size was $437 thousand and $436 thousand as of September 30, 2024 and December 31, 2023, respectively. The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of September 30, 2024 and December 31, 2023:

Consumer — Single-Family Residential Loans. Single-family residential loans totaled $14.0 billion as of September 30, 2024, compared with $13.4 billion as of December 31, 2023, and accounted for 26% of total loans held-for-investment as of both dates. The Company was in a first lien position for all of its single-family residential loans as of both September 30, 2024 and December 31, 2023. 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 52% and 53% as of September 30, 2024 and December 31, 2023, respectively. 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 $5.3 billion and $5.2 billion as of September 30, 2024 and December 31, 2023, respectively, with a utilization rate of 33% as of both dates. Substantially all of the Company’s unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $1.8 billion as of September 30, 2024, compared with $1.7 billion as of December 31, 2023, and accounted for 4% and 3% of total loans held-for-investment as of September 30, 2024 and December 31, 2023, respectively. The Company was in a first lien position for 75% and 77% of total outstanding HELOCs as of September 30, 2024 and December 31, 2023, respectively. First lien HELOC LTV ratios are obtained by dividing the first lien HELOC against the value of the property securing the HELOC. Junior lien HELOCs are evaluated using combined LTV, which measures the carrying value of the Bank’s loan and available line of credit combined with any outstanding senior liens against the value of the property securing the loan. The weighted-average LTV ratio was 47% and 48% as of September 30, 2024 and December 31, 2023, respectively. Many of these loans are reduced documentation loans, 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 September 30, 2024 and December 31, 2023.

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 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.