EAST WEST BANCORP INC (EWBC) FY 2024 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

TABLE OF CONTENTS

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Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of the Company, including its subsidiary bank, East West Bank. This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this Form 10-K. For information on our business, see Item 1. Business in this Form 10-K.

Current Economic Developments

The Board of Governors of the Federal Reserve System (“Federal Reserve”) cut the Federal Funds Rate by a total of 100 bps through three consecutive cuts in September, November, and December of 2024 in response to the slower pace of inflation demonstrated by external data in the second half of 2024. The Federal Reserve indicated at its December 2024 meeting that the interest rate cuts in 2025 would likely continue at a slower pace than previously anticipated, which was in line with the January 2025 decision to hold rates steady. However, concerns over persistent inflation, labor market trends, and the potential impact of the Trump administration’s economic policies may influence the Federal Reserve’s response in 2025. Elevated interest rates created affordability challenges for many borrowers in 2024. The CRE market remained under pressure during 2024, primarily from decreased demand for office space, which affected the demand for CRE loans and loan performance. It is uncertain whether such trends will continue or whether potential U.S. economic growth in 2025 will include a moderate recovery in real estate investment activity. The Company monitors changes in economic and industry conditions and their impacts on the Company’s business, customers, employees, communities and markets.

Further discussion of the potential impacts on the Company’s business due to the economic environment has been provided in Item 1A. — Risk Factors — Risks Related to Financial Matters in this Form 10-K.

Financial Review

Our MD&A analyzes the financial condition and results of operations of the Company for 2024 and 2023. Some tables include additional periods to comply with disclosure requirements or to illustrate trends in greater depth. The page locations of specific sections that we refer to are presented in the table of contents. To review our financial condition and results of operations for 2023 and a comparison between 2023 and 2022 results, see Item 7. MD&A of our 2023 Form 10-K, which was filed with the SEC on February 29, 2024.

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(1)For additional information regarding the reconciliation of these non-U.S. GAAP financial measures, refer to Item 7. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-K.

(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.

The Company’s 2024 net income was $1.2 billion, a $4 million or 0.4% increase from 2023. The increase was primarily due to a decrease in noninterest expense and an increase in noninterest income, partially offset by higher provision for credit losses, lower net interest income before provision for credit losses, and higher income tax expense. Noteworthy items about the Company’s performance for 2024 included:

•Net interest income and net interest margin. Year-over-year net interest income before provision for credit losses decreased $34 million or 1% to $2.3 billion in 2024. Full year 2024 net interest margin was 3.27%, a 34 bp decrease year-over-year.

•Earnings per share growth. Full year 2024 basic and diluted EPS each expanded 2% to $8.39 and $8.33, respectively.

•Efficiency ratio improvement. The efficiency ratio was 36.65% in 2024, a 257 bp improvement compared with 2023. The improvement in the efficiency ratio primarily reflected a year-over-year decrease in the amortization of tax credit and CRA investments due to the expanded application of the proportional amortization method (“PAM”) since the adoption of Accounting Standards Update (“ASU”) 2023-02, Investments — Equity Method and Joint Ventures on January 1, 2024, and a decrease in the FDIC charge.

•Asset growth. Total assets reached $76.0 billion as of December 31, 2024, an increase of $6.4 billion or 9% year-over-year, primarily driven by an increase in AFS debt securities of $4.7 billion or 75%, and loan growth of $1.5 billion or 3%.

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•Deposit growth. Total deposits were $63.2 billion as of December 31, 2024, an increase of $7.1 billion or 13% year-over-year, primarily reflecting growth across the Consumer and Business Banking, and Commercial Banking segments.

•Strong capital levels. Stockholders’ equity was $7.7 billion as of December 31, 2024, up from $7.0 billion as of December 31, 2023. Book value per share of $55.79 as of December 31, 2024, increased $6.15 or 12% from December 31, 2023. Tangible book value per share of $52.39 as of December 31, 2024, increased $6.12 or 13% from December 31, 2023. Tangible book value per share is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 7. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-K.

Results of Operations

Net Interest Income

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 2024 decreased year-over-year, which primarily reflected higher deposit funding costs and shifts in the deposit mix to higher cost time and money market deposits, partially offset by loan growth and higher loan yields, and increases in AFS debt securities’ volume and yield. Although the Federal Reserve cut interest rates three times since September 2024, the impacts of prior interest rate hikes spurred customers to seek high-yielding time deposits, which increased deposit costs at a faster rate than the increase in loan yields, and resulted in slight pressures on the Company’s net interest margin during 2024.

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Average interest-earning assets increased $5.7 billion or 9% to $69.7 billion in 2024. The yield on average interest-earning assets was 6.01% in 2024, an increase of 24 bps from 2023. The increases in both the average balance and yield on interest-earning assets primarily reflected loan growth, an increase in AFS debt securities, and higher benchmark interest rates.

The average loan yield was 6.67% in 2024, an increase of 27 bps from 2023. The year-over-year change in the average loan yield primarily reflected loan growth and the loan portfolio’s sensitivity to higher benchmark interest rates. Approximately 58% of loans held-for-investment were variable-rate as of both December 31, 2024 and 2023.

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Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits of $59.7 billion in 2024, increased $4.7 billion or 9% from 2023. Average noninterest-bearing deposits of $14.8 billion in 2024, decreased $2.4 billion or 14% from 2023. Average noninterest-bearing deposits made up 25% and 31% of average deposits for 2024 and 2023, respectively.

The average cost of deposits was 2.88% in 2024, an increase of 69 bps from 2023. The average cost of interest-bearing deposits was 3.83% in 2024, an increase of 64 bps from 2023. These year-over-year increases primarily reflected shifts in the deposit mix to time and money market deposits, and higher deposit costs in response to the interest rate environment.

The average cost of funds calculation includes deposits, short-term borrowings, FHLB advances, assets sold under repurchase agreements (“repurchase agreements”) and long-term debt. In 2024, the average cost of funds was 3.02%, an increase of 67 bps from 2023. The year-over-year increase was mainly driven by the change in the average cost of deposits discussed above.

The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 7. MD&A — Risk Management — Market Risk Management for details.

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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 in 2024, 2023 and 2022:

(1)Includes the average balances and interest income for securities and loans purchased under resale agreements for 2023. There were no loans purchased under resale agreements for 2024.

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

(3)Includes the amortization of net premiums on AFS debt securities of $35 million, $31 million and $72 million for 2024, 2023 and 2022, respectively.

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

(5)Includes the accretion of net deferred loan fees and amortization of net premiums, which totaled $53 million for each of 2024 and 2023, and $50 million for 2022.

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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.

(1)Includes the impact of securities purchased under resale agreements for 2024, and both securities and loans purchased under resale agreements for 2023 and 2022.

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Noninterest Income

The following table presents the components of noninterest income for the periods indicated:

NM — Not meaningful.

Noninterest income comprised 13% and 11% of total revenue in 2024 and 2023, respectively. Noninterest income for 2024 was $335 million, an increase of $40 million compared with 2023. The increase was primarily due to higher lending, wealth management, and deposit account fees, net gains on AFS debt securities, and foreign exchange income, partially offset by lower customer derivative, other investment income and net gains on sales of loans.

Deposit account fees were $104 million in 2024, an increase of $10 million or 11%, compared with 2023. The year-over-year increase was primarily due to analysis service fees, which reflected fee increases and customer growth.

Lending fees were $98 million in 2024, an increase of $15 million or 17%, compared with 2023. The year-over-year increase was primarily due to higher trade finance and commitment fees driven by customer growth, and higher credit enhancement fee income.

Foreign exchange income was $55 million, an increase of $6 million or 13%, compared with 2023. The year-over-year increase was primarily due to the favorable valuation of certain foreign currency denominated balance sheet items.

Wealth management fees were $39 million in 2024, an increase of $12 million or 43%, compared with 2023. The year-over-year increase primarily reflected customer demand for higher-yielding products in response to the interest rate environment.

Customer derivative income was $16 million, a decrease of $4 million or 19% compared with 2023. The year-over-year decrease primarily reflected lower fee income due to decreased customer activity, partially offset by favorable credit valuation adjustments.

Net gains on sales of loans were $44 thousand, a decrease of $4 million, or 99%, compared with 2023. The 2023 net gain on sales of loans primarily reflected CRE loan sales.

Net gains on AFS debt securities of $2 million in 2024 were due to sales of U.S. government agency residential mortgage-backed securities. In comparison, net losses on AFS debt securities of $7 million in 2023, was due to a $10 million write-off of an impaired subordinated AFS debt security, partially offset by a $3 million gain when the security was subsequently sold.

Other investment income was $6 million in 2024, a decrease of $4 million or 40% compared with 2023. The year-over-year decrease primarily reflected lower earnings from the Company’s equity method CRA investments.

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Noninterest Expense

The following table presents the components of noninterest expense for the periods indicated:

Noninterest expense was $1.0 billion in 2024, a decrease of $65 million or 6%, compared with 2023. The decrease was primarily due to lower amortization of tax credit and CRA investments, and deposit insurance premiums and regulatory assessments, partially offset by higher compensation and employee benefits, and other operating expense.

Compensation and employee benefits were $551 million in 2024, an increase of $42 million or 8%, compared with 2023. The year-over-year increase was primarily driven by annual merit increases and staffing growth.

Deposit insurance premiums and regulatory assessments were $46 million in 2024, a decrease of $58 million or 56%, compared with 2023. The year-over-year decrease was primarily due to a $9 million FDIC charge recorded in 2024, compared with the initial $70 million FDIC charge recorded in 2023. For additional information related to the FDIC charge, see Item 1. Business — Supervision and Regulation — FDIC Deposit Insurance Assessments in this Form 10-K.

Other operating expense was $148 million in 2024, an increase of $8 million or 6%, compared with 2023. The year-over-year increase was primarily due to write-downs of other real estate owned (“OREO”).

Amortization of tax credit and CRA investments was $54 million in 2024, a decrease of $66 million or 55%, compared with 2023. The year-over-year decrease was primarily due to the expanded application of the PAM since the adoption of ASU 2023-02, Investments — Equity Method and Joint Ventures on January 1, 2024, and the timing of tax credit investments that closed in a given period. For additional information on the PAM, see Note 1 — Summary of Significant Accounting Policies and Note 7 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net to the Consolidated Financial Statements in this Form 10-K.

Income Taxes

The following table presents the income before income taxes, income tax expense and effective tax rate for the periods indicated:

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Income tax expense for 2024, compared with 2023, increased $18 million or 6%, primarily due to the impacts from the expanded application of PAM on the Company’s tax credit investments following the adoption of ASU 2023-02 on January 1, 2024, partially offset by an increase in tax credits and prior period adjustments in 2023. The differences between the 2024 and 2023 effective tax rates from the federal statutory rate of 21% were primarily due to state taxes and tax credits associated with renewable energy, historic and new market tax credit related projects as described in Note 11 — Income Taxes to the Consolidated Financial Statements in this Form 10-K.

Operating Segment Results

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:

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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 recognized in 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.

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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.

Balance Sheet Analysis

Debt Securities

The Company maintains a portfolio of high quality and liquid debt securities with a moderate duration profile. It closely manages the overall portfolio credit, interest rate and liquidity risks. The Company’s debt securities provide:

•interest income for earnings and yield enhancement;

•funding availability for needs arising during the normal course of business;

•the ability to execute interest rate risk management strategies in response to changes in economic or market conditions; and

•collateral to support pledging agreements as required and/or to enhance the Company’s borrowing capacity.

While the Company does not intend to sell its debt securities, it may sell AFS debt securities in response to changes in the balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.

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The following table presents the distribution of the Company’s AFS and HTM debt securities portfolio as of December 31, 2024 and 2023, and by credit ratings as of December 31, 2024:

(1)Credit ratings express opinions about the credit quality of a debt security. The Company determines the credit rating of a security according to the lowest credit rating made available by nationally recognized statistical rating organizations (“NRSROs”). Investment grade debt securities are those with ratings similar to BBB- or above (as defined by NRSROs), and are generally considered by the rating agencies and market participants to be low credit risk. Ratings percentages are allocated based on fair values.

(2)For debt securities not rated by NRSROs, the Company uses other factors which include but are not limited to the priority in collections within the securitization structure, and whether the contractual payments have historically been on time.

(3)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $7.3 billion of amortized cost and $7.2 billion of fair value as of December 31, 2024, and $1.3 billion of amortized cost and $1.2 billion of fair value as of December 31, 2023.

(4)Includes GNMA HTM debt securities totaling $86 million of amortized cost and $68 million of fair value as of December 31, 2024, and $92 million of amortized cost and $75 million of fair value of as of December 31, 2023.

As of December 31, 2024, the Company’s AFS and HTM debt securities portfolios had an effective duration (defined as the sensitivity of the value of the portfolio to interest rate changes) of 2.4 and 7.0, respectively, compared with 3.6 and 7.5, respectively, as of December 31, 2023. The decrease in the AFS effective duration was primarily due to the purchases of floating rate GNMA securities during 2024. The decrease in the HTM effective duration was due to the portfolio seasoning. The Company estimated that the effective duration of its AFS debt securities was 3.1 for an instantaneous 100 bp parallel increase and 2.1 for an instantaneous 100 bp parallel decrease as of December 31, 2024.

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Available-for-Sale Debt Securities

The fair value of AFS debt securities increased $4.7 billion or 75% to $10.8 billion in 2024 from December 31, 2023, primarily due to the purchases of GNMA securities. The Company’s AFS debt securities are carried at fair value with non-credit related unrealized gains and losses, net of tax, reported in Other comprehensive income (loss) on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were $659 million as of December 31, 2024, compared with $728 million as of December 31, 2023.

As of December 31, 2024 and 2023, 99% and 97%, respectively, of the carrying value of the AFS debt securities portfolio was rated investment grade by NRSROs. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of both December 31, 2024 and 2023. There was no allowance for credit losses provided against the AFS debt securities as of both December 31, 2024 and 2023. Additionally, there were no credit losses recognized in earnings for both 2024 and 2023.

Held-to-Maturity Debt Securities

All HTM debt securities were issued, guaranteed, or supported by the U.S. government or government-sponsored enterprises. Accordingly, the Company applied a zero credit loss assumption for these securities and no allowance for credit loss was recorded as of both December 31, 2024 and 2023.

For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policies, Note 2 — Fair Value Measurement and Fair Value of Financial Instruments and Note 4 — Securities to the Consolidated Financial Statements in this Form 10-K.

Loan Portfolio

The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of C&I, CRE, multifamily residential, and construction and land loans, as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”) and other consumer loans. The composition of the loan portfolio as of December 31, 2024 was similar to the composition as of December 31, 2023.

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The following table presents the composition of the Company’s total loan portfolio by loan type as of December 31, 2024 and 2023:

(1)Includes $46 million and $71 million of net deferred loan fees and net unamortized premiums as of December 31, 2024, and 2023, respectively.

Commercial

The Company actively monitors the commercial lending portfolio for credit risk and reviews credit exposures for sensitivity to changing economic conditions.

Commercial — Commercial and Industrial Loans. Total C&I loan commitments were $25.8 billion and $24.6 billion as of December 31, 2024 and 2023, respectively, with a utilization rate of 67% as of both dates. As of December 31, 2024, total C&I loans were $17.4 billion, up $816 million or 5% from December 31, 2023. The C&I loan portfolio includes loans and financing for businesses across a wide spectrum of industries. The Company offers a variety of C&I products, including commercial business lending, working capital lines of credit, trade finance, letters of credit, asset-based lending, asset-backed finance, project finance and equipment financing. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled $845 million and $645 million as of December 31, 2024 and 2023, respectively. The majority of the C&I loans had variable interest rates as of both December 31, 2024, and 2023.

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The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by industry and customer exposure, and has exposure limits by industry and loan product. The following table presents the industry mix within the Company’s C&I loan portfolio as of December 31, 2024, and 2023:

(1) Revised prior year’s segmentation to conform with the current year’s categories.

Commercial — Total Commercial Real Estate Loans. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, and affordable housing lending. The Company’s underwriting parameters for CRE loans are established in compliance with supervisory guidance, including: property type, geography and loan-to-value (“LTV”).

The Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of $3 million as of both December 31, 2024 and 2023. The following table summarizes the Company’s total CRE loans by property type as of December 31, 2024 and 2023:

The weighted-average LTV ratio of the total CRE loan portfolio was 50% as of both December 31, 2024 and 2023. Weighted-average LTV is based on the most recent LTV, which considers the latest available appraisal and current loan commitment. Approximately 91% of total CRE loan commitments had an LTV ratio of 65% or lower as of both December 31, 2024 and 2023.

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The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of December 31, 2024 and 2023. The distribution of the total CRE loan portfolio largely reflects the Company’s geographical branch footprint, which is primarily concentrated in California:

As of both December 31, 2024 and 2023, 69% of total CRE loans were concentrated in California. Changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk from a downturn in the California economic and real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties and Risks Related to Financial Matters in this Form 10-K.

Commercial — Commercial Real Estate Loans. The Company focuses on providing financing to experienced real estate investors and developers who have moderate levels of leverage, many of whom are long-time customers of the Bank. Interest rates on CRE loans may be fixed, variable or hybrid. As of December 31, 2024, 57% of our CRE portfolio had variable rates, of which 52% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s exposure remained variable rate. In comparison, as of December 31, 2023, 58% of our CRE portfolio had variable rates, of which 50% had customer-level interest rate derivative contracts in place. The Company seeks to underwrite loans with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 20% of the CRE loans as of both December 31, 2024 and 2023. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.

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Commercial — Multifamily Residential Loans. The multifamily residential loan portfolio is largely comprised of loans secured by residential properties with five or more units. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of December 31, 2024, 50% of our multifamily residential portfolio had variable rates, of which 45% had customer-level interest rate derivative contracts in place. In comparison, as of December 31, 2023, 48% of our multifamily residential loan portfolio had variable rates, of which 40% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s exposure remained variable rate.

Commercial — Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction loan exposure was made up of $506 million in loans outstanding, plus $391 million in unfunded commitments as of December 31, 2024, compared with $526 million in loans outstanding, plus $672 million in unfunded commitments as of December 31, 2023. Land loans totaled $160 million as of December 31, 2024, compared with $138 million as of December 31, 2023.

Consumer

Residential mortgage loans are primarily originated through the Bank’s branch network. The average total residential loan size was $437 thousand and $436 thousand as of December 31, 2024 and 2023, respectively. The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of December 31, 2024 and 2023:

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Consumer — Single-Family Residential Loans. The Company was in a first lien position for all of its single-family residential loans as of both December 31, 2024 and 2023. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. The weighted-average LTV ratio was 52% and 53% as of December 31, 2024 and 2023, respectively. These loans have historically experienced low delinquency and loss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically annually, after an initial fixed-rate period.

Consumer — Home Equity Lines of Credit. Total HELOC commitments were $5.3 billion and $5.2 billion as of December 31, 2024 and 2023, respectively, with a utilization rate of 34% as of December 31, 2024, compared with 33% as of December 31, 2023. Substantially all of the Company’s unfunded HELOC commitments are unconditionally cancellable. The Company was in a first lien position for 73% and 77% of total outstanding HELOCs as of December 31, 2024 and 2023, respectively. First lien HELOC LTV ratios are obtained by dividing the first lien HELOC against the value of the property at origination. Junior lien HELOCs for which the Bank also holds the first lien loan, are evaluated using combined LTV. The combined LTV measures the carrying value of the Bank’s loan and available line of credit combined with any outstanding senior liens against the value of the property at origination. The weighted-average LTV ratio was 46% and 48% as of December 31, 2024 and 2023, respectively. Many of these loans are reduced documentation loans, resulting in a low LTV ratio at origination, typically 65% or less. As a result, these loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate loans as of both December 31, 2024 and 2023.

All originated commercial and consumer loans are subject to the Company’s conservative underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts quality control procedures and periodic audits, including the review of lending and legal requirements, to ensure that the Company is in compliance with these requirements.

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The following table presents the contractual loan maturities by loan category and the contractual distribution of loans to changes in interest rates as of December 31, 2024:

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Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, economic and political uncertainties, and foreign exchange risks. The following table presents the major financial assets held in the Company’s overseas offices as of December 31, 2024 and 2023: