EAST WEST BANCORP INC

The Company’s primary source of revenue is net interest income, which is the interest income earned on interest-earning assets less interest expense paid on interest-bearing liabilities. Net interest margin is the ratio of net interest income to average interest-earning assets. Net interest income and net interest margin are impacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds and asset quality.

Net interest income and net interest margin for the first quarter of 2025 increased $35 million and one bp, respectively, year-over-year. These year-over-year increases primarily reflected an increase in AFS debt securities and yield increases, decreases in Bank Term Funding Program (“BTFP”) and short-term borrowings, and lower deposit funding costs. However, these year-over-year increases were partially offset by decreases in interest-bearing cash and deposits with banks and the related yields, a decrease in loan yields that outpaced loan growth, in addition to an increase in Federal Home Loan Bank (“FHLB”) advances during the first quarter of 2025.

Average interest-earning assets were $72.7 billion for the first quarter of 2025, an increase of $4.6 billion or 7% from the first quarter of 2024. The year-over-year increase in average interest-earning assets primarily reflected increases in $5.2 billion or 79% in AFS debt securities and $1.4 billion or 3% of loan growth, partially offset by a $1.8 billion or 30% decrease in interest-bearing cash and deposits with banks.

The yield on average interest-earning assets for the first quarter of 2025 was 5.76%, a decrease of 28 bps from the first quarter of 2024. The year-over-year decrease in the yield on average interest-earning assets primarily reflected the impact of lower interest rates on the loan portfolio.

The average loan yield for the first quarter of 2025 was 6.39%, a decrease of 32 bps from the first quarter of 2024. The year-over-year decrease in the average loan yield reflected the loan portfolio’s sensitivity to lower benchmark interest rates, compared with the first quarter of 2024. Approximately 58% and 57% of loans held-for-investment were variable rateas of March 31, 2025 and 2024, respectively.

Deposits are an important source of funding for the Company. Average deposits were $62.6 billion for the first quarter of 2025, which increased $5.2 billion or 9% from the first quarter of 2024. Average noninterest-bearing deposits were $15.1 billion for the first quarter of 2025, an increase of $149 million or 1% from the first quarter of 2024. Average noninterest-bearing deposits made up 24% and 26% of average deposits for the first quarters of 2025 and 2024, respectively.

During the first quarter of 2025, the average cost of deposits decreased 30 bps, compared with the first quarter of 2024; while the average cost of interest-bearing deposits decreased 51 bps over the same period. These year-over-year decreases primarily reflected lower benchmark interest rates and the Company’s efforts to reduce deposit costs.

The average cost of funds calculation includes deposits, short-term borrowings, FHLB advances, securities sold under repurchase agreements (“repurchase agreements”), and long-term debt. For the first quarter of 2025, the average cost of funds was 2.64%, a 33 bp decrease from the first quarter of 2024. The year-over-year decrease was mainly driven by the decreased cost of deposits as discussed above.

The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 2. MD&A — Risk Management — Market Risk Managementin this Form 10-Q.

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the first quarters of 2025 and 2024:

(1)Annualized.

(2)Yields on tax-exempt securities and loans are not presented on a tax-equivalent basis.

(3)Includes the amortization of net premiums on AFS debt securities of $8 million and $7 million for the first quarters of 2025 and 2024, respectively.

(4)Average balances include nonperforming loans and loans held-for-sale.

(5)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $12 million and $14 million for the first quarters of 2025 and 2024, respectively.

The following table summarizes the extent to which changes in (1) interest rates, and (2) volume of average interest-earning assets and average interest-bearing liabilities affected the Company’s net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.