EAST WEST BANCORP INC

Note 9 — Commitments and Contingencies

Commitments to Extend Credit — In the ordinary course of business, the Company enters into loan commitments and issues commercial letters of credit and SBLCs to customers on predetermined terms. These commitments represent off-balance sheet arrangements and are not recorded in the accompanying Consolidated Balance Sheet until funded or otherwise required to be recognized.

The following table presents the Company’s credit-related commitments by contractual expiration period as of September 30, 2026 and December 31, 2025:

Loan commitments are agreements to extend credit to customers, subject to conditions specified in the agreements. These commitments generally have fixed expiration dates or other termination provisions and may require commitment fees. Because many commitments are expected to expire without being drawn, the total commitment amounts do not necessarily represent future funding requirements.

Commercial letters of credit facilitate domestic and foreign trade transactions, while SBLCs generally represent contingent obligations of the Company in the event a customer fails to perform under a contract with a third party. Because many SBLCs expire without being funded, the contractual amounts do not necessarily represent future funding requirements. The Company may obtain collateral to support these obligations and monitors the creditworthiness of its customers. Customers are obligated to reimburse the Company for payments made on their behalf. If a customer fails to reimburse the Company, the Company may, as applicable, liquidate the collateral or offset amounts against the customer’s existing accounts. As of September 30, 2026, letters of credit totaled $3.0 billion, including $2.9 billion of SBLCs and $67 million of commercial letters of credit, compared with $3.0 billion as of December 31, 2025, including $2.9 billion of SBLCs and $31 million of commercial letters of credit. As of both September 30, 2026 and December 31, 2025, substantially all letters of credit were graded Pass under the Bank’s internal credit risk rating system.

The Company applies its credit underwriting criteria when extending loans, commitments and conditional obligations to customers. Based on management’s assessment of a customer’s credit risk, the Company may obtain collateral or financial guarantees, including cash, accounts receivable, inventory, personal property, plant and equipment, and real estate.

The allowance for unfunded credit commitments, which represents the Company’s estimate of expected credit losses associated with these commitments, was $48 million and $49 million as of September 30, 2026 and December 31, 2025, respectively. For additional information on the allowance for unfunded credit commitments, see Note 6 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

Guarantees — The Company occasionally sells or securitizes single-family and multifamily residential loans with recourse in the ordinary course of business. Under these agreements, the Company is obligated to repurchase loans, up to the applicable recourse amount, upon borrower default. The Company’s maximum potential future payments under these recourse arrangements were $17 million and $18 million as of September 30, 2026 and December 31, 2025, respectively. The Company has historically incurred minimal losses on single-family and multifamily residential loans sold or securitized with recourse and maintained an immaterial recourse reserve as of both September 30, 2026 and December 31, 2025.

Litigation — The Company is a party to various legal actions arising in the ordinary course of its business. In accordance with ASC 450, Contingencies, the Company accrues a liability when a loss contingency is probable and reasonably estimable. The Company estimates loss contingencies based on currently available information, including the status of legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent uncertainty of legal proceedings, actual losses may differ from amounts accrued and could exceed such amounts.

While it is impossible to ascertain the ultimate resolution or range of financial liability, based on information known to the Company as of September 30, 2026, the Company does not believe that any pending legal proceedings, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company’s financial condition. However, the ultimate resolution of legal proceedings is inherently uncertain, and losses in excess of amounts accrued may occur. The outcome of a particular matter, or a combination of matters, could be material to the Company’s financial condition and results of operations for a particular period, depending on the nature and magnitude of the loss.