EAST WEST BANCORP INC

Note 6 —Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment as of September 30, 2026 and December 31, 2025:

(1)Includes net deferred loan fees and net unamortized premiums of $11 million and $26 million as of September 30, 2026 and December 31, 2025, respectively.

Accrued interest receivable on loans held-for-investment was $256 million and $251 million as of September 30, 2026 and December 31, 2025, respectively, and was included in Other assets on the Consolidated Balance Sheet. Interest income recognized and reversed on nonaccrual loans wasimmaterial for the three and nine months ended September 30, 2026. For each of the three and nine months ended September 30, 2025, interest income recognized on nonaccrual loans was $6 million, while interest income reversed was insignificant. For the Company’s accounting policy on accrued interest receivable on loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investmentto the Consolidated Financial Statements in the Company’s 2025 Form 10-K. For the Company’s accounting policy on loans held-for-sale, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s 2025 Form 10-K.

The Company’s FRB and FHLB borrowings are primarily secured by loans held-for-investment. As of September 30, 2026 and December 31, 2025, loans held-for-investment totaling$43.9 billion and $41.8 billion, respectively, were pledged to secure borrowings and provide additional borrowing capacity.

Credit Quality Indicators

All loans are subject to the Company’s credit review and monitoring process. Commercial loans are risk rated based on an assessment of factors including the borrower’s payment performance or delinquency status, repayment sources, financial condition and liquidity, and industry and geographic considerations. For consumer loans, payment performance or delinquency status is generally the primary indicator used in determining risk ratings.

The Company assigns individual loan credit risk ratings ranging from 1 through 10. These ratings are grouped into the following risk categories:

•Pass — Loans assigned risk ratings of 1 through 5 are categorized as Pass. Loans with a risk rating of 1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full in accordance with its contractual terms and conditions.

•Special Mention — Loans assigned a risk rating of 6 have potential weaknesses that warrant closer attention by management and are categorized as Special Mention.

•Substandard — Loans assigned a risk rating of 7 or 8 have well-defined weaknesses that may jeopardize full and timely repayment and are categorized as Substandard.

•Doubtful — Loans assigned a risk rating of 9 have insufficient sources of repayment and a high probability of loss and are categorized as Doubtful.

•Loss — Loans assigned a risk rating of 10 are considered uncollectible and of such little value that they are no longer considered bankable assets and are categorized as Loss.

Criticized loans consist of loans rated Special Mention, Substandard, Doubtful or Loss. The Company regularly reviews the internal risk ratings of its loan portfolio and adjusts the ratings based on changes in the borrowers’ financial condition and the collectability of the loans.

The following tables summarize the Company’s loans held-for-investment and year-to-date gross write-offs by loan portfolio segments, internal risk ratings and vintage year as of the periods presented. Vintage year represents the year of loan origination, renewal or major modification. Gross write-offs reflect activities for the nine months ended September 30, 2026 and the year ended December 31, 2025. Revolving loans converted to term loans are presented separately and excluded from the term loans vintage-year columns.

(1)Excludes gross write-offs associated with loans sold or settled by the Company.

(2)Nonaccrual loans of $1 million with payments guaranteed by the Federal Housing Administration were classified as Pass as of both September 30, 2026 and December 31, 2025.

(3)BTHO loans represented 14%,17%,20%,18% and 7% of total SFR loans originated in 2026, 2025, 2024, 2023 and 2022, respectively, as of September 30, 2026. BTHO loans originated prior to 2022 were immaterial as of September 30, 2026. As of December 31, 2025, BTHO loans represented 15%,16%,16%,6% and 1% of total SFR loans originated in 2025, 2024, 2023, 2022 and 2021, respectively. There wereno BTHO loans originated prior to 2021.

(4)Gross write-offs for the nine months ended September 30, 2026 and the year ended December 31, 2025 related entirely to SFR — Traditional loans.

Nonaccrual and Past Due Loans

Loans that are 90 or more days past due are generally placed on nonaccrual status unless the loan is well-collateralized and in the process of collection. Loans less than 90 days past due may also be placed on nonaccrual status when full collection of principal or interest is uncertain. The following tables present the aging analysis of loans held-for-investment as of September 30, 2026 and December 31, 2025:

The following table presents the amortized cost of nonaccrual loans with no related ALLL as of September 30, 2026 and December 31, 2025. Nonaccrual loans may have no related allowance for credit losses when the loans are adequately secured by collateral values and no credit loss is expected.

Foreclosed Assets

The Company acquires assets through loan restructurings, workouts, or foreclosures. Assets acquired may include real properties (e.g., real estate, land, and buildings) and commercial and personal properties. Foreclosed assets are recognized when the Company obtains control of the assets in satisfaction of a loan, such as through obtaining legal title or physical possession.

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. Foreclosed assets totaled $64 million as of September 30, 2026, compared with $21 million as of December 31, 2025. In accordance with the Consumer Financial Protection Bureau guidelines, the Company generally initiates foreclosure proceedings on consumer mortgage loans when a borrower becomes more than 120 days delinquent. The carrying value of the consumer real estate loans in active or suspended foreclosure process was $23 million and $16 million as of September 30, 2026 and December 31, 2025, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

As part of the Company’s loss mitigation efforts, the Company may modify the contractual terms of a loan to borrowers experiencing financial difficulty. Loan modifications are evaluated on a case-by-case basis and are intended to maximize collectability while addressing the borrower’s financial circumstances. In determining whether a borrower is experiencing financial difficulty, the Company considers various factors. For consumer loans, the primary factor is delinquency status. For commercial loans, factors include credit risk ratings, potential risk rating downgrades, and changes in the borrower’s overall credit risk profile. Modifications may include payment delays, interest rate reductions, term extensions, principal forgiveness, or a combination thereof. Commercial loan modifications that are insignificant, such as minor interest rate changes, short-term extensions of 90 days or less from the original maturity date, or temporary waivers or extensions of financial covenants that do not constitute material credit actions, generally do not indicate that the borrower is experiencing financial difficulty, and are excluded from the disclosure below. Insignificant payment delays of three months or less during the preceding 12 months are also excluded.

The following tables present the amortized cost of loans that were modified during the three and nine months ended September 30, 2026 and 2025, by loan class and type of modification:

The following tables present the financial effects of the loan modifications for the three and nine months ended September 30, 2026 and 2025, by loan class and type of modification:

A modified loan may subsequently become delinquent or default, generally defined as 90 days past due. The following tables present the amortized cost basis of modified loans that experienced a payment default within 12 months of the modification date during the three and nine months ended September 30, 2026 and 2025.

The Company monitors the performance of loans modified for borrowers experiencing financial difficulty to evaluate the effectiveness of such modifications. The following tables present the payment performance of loans modified during the preceding 12 months as of September 30, 2026 and 2025:

As of September 30, 2026 and December 31, 2025, commitments to lend additional funds to borrowers with modified loans totaled $15 million and $14 million, respectively.

Allowance for Credit Losses

The Company maintains an allowance for credit losses for financial assets measured at amortized cost and certain off-balance sheet credit exposures. The allowance for credit losses, which includes the ALLL and the allowance for unfunded credit commitments, reflects management’s best estimate of expected credit losses over the expected lives of the related exposures. The estimate is based on periodic evaluations of the loan portfolio, unfunded credit commitments and other relevant factors.

The allowance for credit losses is deducted from the amortized cost basis of a financial asset or a group of financial assets so that the balance sheet reflects the net amount the Company expects to collect. Amortized cost represents the outstanding principal balance, net of purchase premiums and discounts, deferred fees and costs, and escrow advances. Subsequent changes in expected credit losses are recognized in net income through Provision for credit losses.

The Company estimates expected credit losses by considering the risk characteristics of its portfolio segments. Exposures that share similar risk characteristics are collectively evaluated and include performing loans and unfunded credit commitments. Exposures that do not share similar risk characteristics with other exposures are generally evaluated on an individual basis.

ALLL for Collectively Evaluated Loans

The ALLL for collectively evaluated loans consists of a quantitative component that incorporates risk factors reflected in the Company’s credit loss models and a qualitative component that considers risk factors not fully captured by the models. These components are described below.

Quantitative Component— The Company applies quantitative methods to estimate ALLL by considering factors such as historical loss experience, the current portfolio credit quality, and reasonable and supportable forecasts of economic conditions over the expected lives of the loans. Forward-looking information is incorporated through macroeconomic scenarios that include variables considered to be key drivers of credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach that may include a base scenario reflecting management's view of the most likely outcome, and downside and upside scenarios reflecting less or more favorable economic conditions. The quantitative models incorporate the probability-weighted macroeconomic scenarios over the reasonable and supportable forecast period. For periods beyond the reasonable and supportable forecast period, the Company reverts to historical loss experience or long-term macroeconomic trends, as applicable, for the remaining lives of the loans.

There were no changes to the Company’s reasonable and supportable forecast period or its method of reverting to historical loss experience during the three and nine months ended September 30, 2026 and 2025.

The following table presents the key credit risk characteristics and macroeconomic variables used in estimating the expected credit losses by loan portfolio segment:

Quantitative Component—ALLL for the Commercial Loan Portfolio

The Company uses a lifetime loss rate model to estimate expected credit losses over the life of a C&I loan. The estimated lifetime loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The reasonable and supportable forecast period iseight quarters, after which the model immediately reverts to the historical average loss rate for the remaining life of the loan.

For CRE, multifamily residential, and construction and land loans, the Company estimates expected credit losses at the loan level by applying projected probabilities of default (“PDs”) and losses given default (“LGDs”) to the estimated exposure at default, considering the contractual terms and payment structures of the loans. The forecast of economic conditions reverts to long-run historical trends within the reasonable and supportable forecast period. Under both methodologies, contractual loan terms are adjusted for estimated prepayments based on historical experience.

Quantitative Component—ALLL for the Consumer Loan Portfolio

For SFR and home equity loans, projected PDs and LGDs are applied to estimated exposure at default, considering the contractual terms and payment structure of the loans, to estimate expected credit losses at the loan level. Forecasted economic conditions revert to long-run historical trends after the reasonable and supportable forecast period. To estimate the life of a loan for the SFR and home equity loan portfolios, contractual loan terms are adjusted for estimated prepayments based on historical experience. For other consumer loans, expected credit losses are estimated using a loss rate approach.

Qualitative Component— The Company considers qualitative factors in determining the allowance for collectively evaluated loans to address risks not fully captured by the quantitative models. Such qualitative factors may include, but are not limited to:

•loan growth trends;

•the volume and severity of past due, criticized, or adversely classified financial assets;

•changes in lending policies and procedures, including lending strategies, underwriting standards, collection, write-off and recovery practices;

•knowledge of a borrower’s operations;

•the quality of the Company’s credit review system;

•the experience, ability and depth of the Company’s management and associates;

•external factors including changes in the regulatory and legal environments and technology;

•actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and

•risks associated with certain industry sectors that are not fully captured by the quantitative models.

The impact of qualitative factors on the allowance for credit losses varies from period to period based on management’s assessment of changes in these factors and the extent to which such changes are captured by the quantitative models.

The estimation of expected credit losses is inherently uncertain and may be affected by uncertainty associated with, but not limited to, limitations in available information and differences between expected and actual outcomes. The Company may establish additional qualitative allowance for such risks.

ALLL for Individually Evaluated Loans

When a loan no longer shares similar risk characteristics with other loans, such as certain nonaccrual loans, the Company evaluates the loan individually for expected credit losses. For individually evaluated loans, the ALLL is measured using one of the following methods, as applicable: (1) the fair value of collateral less estimated costs to sell; (2) the present value of expected future cash flows; or (3) the loan's observable market price. For collateral-dependent loans, the Company generally measures the ALLL based on the fair value of the collateral less estimated costs to sell. For loans that are not collateral dependent, the ALLL is generally measured using the present value of expected future cash flows or the loan’s observable market price.

•Collateral-Dependent Loans —The ALLL is measured as the amount by which the loan’s amortized cost basis exceeds the fair value of the underlying collateral, less estimated costs to sell, when applicable. Collateral-dependent commercial and consumer loans totaled $65 million and $15 million, respectively, as of September 30, 2026, compared with $69 million and $10 million, respectively, as of December 31, 2025. The Company's collateral-dependent loans were secured by real estate. As of both September 30, 2026 and December 31, 2025, the fair value of the collateral securing the majority of these loans, net of estimated costs to sell, exceeded the loans’ amortized cost basis.

The following tables summarize activity in the ALLL by portfolio segment for the three and nine months ended September 30, 2026 and 2025:

In addition to the ALLL, the Company maintains an allowance for expected credit losses on unfunded credit commitments, including (1) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. The allowance for unfunded credit commitments reflects management’s estimate of expected credit losses associated with these exposures. See Note 9 — Commitments and Contingenciesto the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table presents the activity in the allowance for unfunded credit commitments for the three and nine months ended September 30, 2026 and 2025:

The allowance for credit losses on loans, leases and unfunded credit commitments was $913 million as of September 30, 2026, an increase of $55 million from $858 million as of December 31, 2025. The increase primarily reflected net loan growth, changes in the qualitative risk assessment, and an economic outlook that continued to reflect uncertainty related to inflation, the high interest rate environment, and rising oil prices.

The Company considers multiple economic scenarios to develop the ALLL, including baseline, downside and upside scenarios. The weighting assigned to each scenario as of September 30, 2026 was unchanged from December 31, 2025. Compared with the December 2025 forecast, the September 2026 baseline forecast reflected minor improvements in GDP growth and unemployment rate for 2026 and 2027. The downside scenario assumed a recession beginning in the fourth quarter of 2026, reflecting elevated oil prices, rising inflation, tariffs, deportations, and continued elevated interest rates. The upside scenario assumed a more favorable economic outlook, including faster resolution of global conflicts, stronger economic growth, stable financial markets, and full employment being realized in the fourth quarter of 2026.

Loan Transfers, Sales and Purchases

The Company’s lending activities primarily consist of directly originated loans. The Company also purchases loans from and participates in loans originated by other financial institutions. In the ordinary course of business, the Company also sells participations in commercial loans it originates to other financial institutions. Purchased loans may subsequently be transferred from held-for-investment to held-for-sale, with any related adjustments to ALLL recognized as appropriate.

The following tables present the carrying value of loans transferred, sold and purchased during the three and nine months ended September 30, 2026 and 2025:

(1)There wereno write-downs to ALLL related to loans transferred from held-for-investment to held-for-sale during the three months ended September 30, 2026 and 2025. Write-downs to ALLL related to such transfers were $5 million and $2 million for the nine months ended September 30, 2026 and 2025, respectively.

(2)Includes originated loans sold of $46 million and $206 million for the three and nine months ended September 30, 2026, respectively, and $37 million and $159 million for the three and nine months ended September 30, 2025, respectively. Originated loans sold primarily consisted of C&I loans for each period presented.

(3)Includes purchased loans sold in the secondary market of $6 million and $73 million for the three and nine months ended September 30, 2026, respectively, and $90 million and $97 million for the three and nine months ended September 30, 2025, respectively.

(4)C&I loan purchases consisted of syndicated C&I term loans.