EAST WEST BANCORP INC

The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Treasury and Other. These segments are defined by the type of customers served, and the related products and services provided. For a description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 17 — Business Segments to the Consolidated Financial Statements in this Form 10-K.

Segment net interest income represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process.

During 2024, the Company refined its segment allocation methodology and reclassified certain deposits and their related income or expenses from the “Consumer and Business Banking” segment to the “Commercial Banking” or “Treasury and Other” segments, and certain loan balances and their related income or expenses from the “Commercial Banking” segment to the “Treasury and Other” segment. Prior years’ balances have been reclassified for comparability.

Consumer and Business Banking

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking platforms. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises through the Company’s branch network. Other products and services provided by this segment include wealth management, private banking, treasury management, interest rate risk hedging and foreign exchange services.

The following table presents financial information for the Consumer and Business Banking segment for the periods indicated:

Consumer and Business Banking segment net income decreased $32 million or 5% to $563 million in 2024, primarily due to a decrease in net interest income and higher compensation and employee benefits, partially offset by lower other noninterest expense and provision for credit losses. The decrease in net interest income before provision for credit losses was primarily driven by a higher cost of interest-bearing deposits and a continued shift to interest-bearing products in the deposit mix. The decrease in provision for credit losses was primarily driven by the improvement in the macroeconomic outlook in the residential mortgage loan sector. The increase in compensation and employee benefits was primarily driven by annual merit increases and staffing growth. The decrease in other noninterest expense was primarily driven by lower deposit insurance premiums and regulatory assessments compared with the higher FDIC special assessment charge recognizedin 2023.

Commercial Banking

The Commercial Banking segment primarily generates domestic commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity risk hedging.

The following table presents financial information for the Commercial Banking segment for the periods indicated:

Commercial Banking segment net income decreased $35 million or 6% to $536 million in 2024, primarily driven by increases in provision for credit losses and compensation and employee benefits, partially offset by higher noninterest income. The increase in noninterest income was primarily driven by higher lending and deposit account fees. The increase in provision for credit losses was primarily driven by higher net charge-offs in the C&I portfolio. The increase in compensation and employee benefits was primarily driven by annual merit increases and staffing growth.

Treasury and Other

Centralized functions, including the corporate treasury activities of the Company, eliminations of inter-segment amounts, and centrally managed departments, have been aggregated and included in the Treasury and Other segment. Tax credit investment amortization is recorded in the Treasury and Other segment.

The following table presents financial information for the Treasury and Other segment for the periods indicated:

NM — Not meaningful.

Treasury and Other segment loss before income taxes decreased $112 million in 2024, primarily driven by lower noninterest expense and higher net interest income. The increase in net interest income was primarily driven by higher interest income from AFS debt securities. The decrease in noninterest expense was primarily due to lower amortization of tax credit and CRA investments resulting from the expanded application of PAM since the adoption of ASU 2023-02 on January 1, 2024, where the amortization of tax credit and CRA investments were recorded as a component of income tax benefit in this segment.

Income tax expense is allocated to the Consumer and Business Banking and the Commercial Banking segments by applying statutory income tax rates to the respective segment income before income taxes. The income tax expense or benefit in the Treasury and Other segment consists of the remaining unallocated income tax expense or benefit after allocating income tax expense to the two core segments, and the impact of tax credit investment activity.