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 based on customer type, the channels where customers are served, and the products and services provided. For a description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 14 — Business Segments to the Consolidated Financial Statements in this Form 10-Q.

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 the third quarter of 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. The impacted 2024 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 tables present financial information for the Consumer and Business Banking segment for the periods indicated:

Consumer and Business Banking segment net income decreased $22 million or 15% year-over-year to $128 million for the second quarter of 2025, primarily driven by a $20 million decrease in net interest income, a $10 million increase in provision for credit losses and a $4 million increase in compensation and employee benefits. The decrease in net interest income was primarily due to the year-over-year decrease in interest rates. The increase in provision for credit losses was driven by loan growth and the worsening macroeconomic outlook in the residential mortgage loan sector in the second quarter of 2025. The compensation and employee benefits increase was primarily due to staffing growth.

Consumer and Business Banking segment net income decreased $42 million or 14% year-over-year to $251 million for the first half of 2025, primarily driven by a $47 million decrease in net interest income, a $15 million increase in provision for credit losses, and a $12 million increase in compensation and employee benefits, partially offset by an $8 million increase in noninterest income and a $4 million decrease in other noninterest expense. The decrease in net interest income was primarily due to the year-over-year decrease in interest rates. The noninterest income increase was primarily due to increases in wealth management fees and foreign exchange income. The increase in provision for credit losses was driven by loan growth and the worsening macroeconomic outlook in the residential mortgage loan sector in the second quarter of 2025. The compensation and employee benefits increase was primarily due to staffing growth and increased wealth management commissions. The decrease in other noninterest expense was primarily driven by decreased deposit insurance premiums and regulatory assessments, from lower FDIC charges.

Commercial Banking

The Commercial Banking segment primarily generates 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 tables present financial information for the Commercial Banking segment for the periods indicated:

Commercial Banking segment net income decreased $12 million or 9% year-over-year to $123 million for the second quarter of 2025, primarily driven by a $24 million decrease in net interest income, partially offset by a $4 million decrease in other noninterest expense. The net interest income decrease was primarily due to the year-over-year decline in interest rates. The decrease in other noninterest expense was primarily driven by the decreases in deposit account expense and other real estate owned (“OREO”) expense.

Commercial Banking segment net income decreased $43 million or 15% year-over-year to $237 million for the first half of 2025, primarily driven by a $60 million decrease in net interest income and a $16 million increase in provision for credit losses, partially offset by a $7 million increase in noninterest income and a $6 million decrease in other noninterest expense. The net interest income decrease was primarily driven by the year-over-year decline in interest rates, while the noninterest income increase was primarily due to increases in lending and loan servicing fees, commercial deposit-related fees and foreign exchange income. The increase in provision for credit losses was primarily driven by C&I loan growth and the worsening macroeconomic outlook. The decrease in other noninterest expense was primarily driven by the decreases in deposit account expense and deposit insurance premiums and regulatory assessments, partially offset by increased loan related expenses.

Treasury and Other

Centralized functions, including the corporate treasury activities of the Company, tax credit investment activity, 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 tables present financial information for the Treasury and Other segment for the periods indicated:

The Treasury and Other segment income before income taxes increased $94 million for the second quarter of 2025, compared with the second quarter of 2024, primarily driven by a $108 million increase in net interest income, partially offset by a $10 million increase in other noninterest expense and a $6 million increase in compensation and employee benefits. The net interest income increase was mainly driven by higher average balances of AFS debt securities and higher loan interest income. The increase in other noninterest expense was primarily driven by higher amortization of tax credit and CRA investments, while the increase in compensation and employee benefits was primarily driven by staffing growth.

The Treasury and Other segment income before income taxes increased $183 million for the first half of 2025, primarily driven by a $205 million increase in net interest income, partially offset by a $20 million increase in other noninterest expense. The net interest income increase was mainly driven by higher interest income from AFS debt securities due to higher average balances, and higher loan interest income. The increase in other noninterest expense was primarily driven by higher amortization of tax credit and CRA investments and corporate overhead expenses.

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 reflects the impact of tax credit investment activity.