0001069157us-gaap:RealEstateLoanMemberus-gaap:FinancingReceivables60To89DaysPastDueMemberus-gaap:ConsumerPortfolioSegmentMembersrt:SingleFamilyMember2021-12-31

SECURITIES AND EXCHANGE COMMISSION

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

For the quarterly period ended ~~September~~June 30, ~~2017~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

EAST WEST BANCORP, INC.

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~Forward-Looking Statements~~

Certain matters discussed in this Quarterly Report on Form 10-Q (“Form 10-Q”) contain or incorporate statements that East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) believes are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended, and Rule 3b-6 promulgated thereunder. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” or may include other similar words or phrases, such as “believes,” “plans,” “trend,” “objective,” “continues,” “remains,” or similar expressions, or future or conditional verbs, such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and these forward-looking statements. Factors that might cause such differences, some of which are beyond the Company’s control, include, but are not limited to:

~~the Company’s ability to compete effectively against other financial institutions in its banking markets;~~

~~changes in the commercial and consumer real estate markets;~~

~~changes in the Company’s costs of operation, compliance and expansion;~~

~~changes in the United States (“U.S.”) economy, including inflation, employment levels, rate of growth and general business conditions;~~

~~changes in government interest rate policies;~~

changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Board of Governors of the Federal Reserve Board System, the Federal Deposit Insurance Corporation, the U.S. Securities and Exchange Commission, the Consumer Financial Protection Bureau and the California Department of Business Oversight — Division of Financial Institutions;

~~heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;~~

~~changes in the economy of and monetary policy in the People’s Republic of China;~~

~~changes in income tax laws and regulations;~~

changes in accounting standards as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies and their impact on critical accounting policies and assumptions;

~~changes in the equity and debt securities markets;~~

~~future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;~~

~~fluctuations in the Company’s stock price;~~

~~fluctuations in foreign currency exchange rates;~~

~~success and timing of the Company’s business strategies;~~

~~ability of the Company to adopt and successfully integrate new technologies into its business in a strategic manner;~~

~~impact of reputational risk from negative publicity, fines and penalties and other negative consequences from regulatory violations and legal actions;~~

~~impact of potential federal tax changes and spending cuts;~~

~~impact of adverse judgments or settlements in litigation;~~

~~impact of regulatory enforcement actions;~~

~~changes in the Company’s ability to receive dividends from its subsidiaries;~~

~~impact of political developments, wars or other hostilities that may disrupt or increase volatility in securities or otherwise affect economic conditions;~~

~~impact of natural or man-made disasters or calamities or conflicts or other events that may directly or indirectly result in a negative impact on the Company’s financial performance;~~

~~continuing consolidation in the financial services industry;~~

~~the Company’s capital requirements and its ability to generate capital internally or raise capital on favorable terms;~~

~~impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act on the Company’s business, business practices and cost of operations;~~

~~impact of adverse changes to the Company’s credit ratings from the major credit rating agencies;~~

impact of failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused;

~~adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;~~

~~the effect of the current low interest rate environment or changes in interest rates on the Company’s net interest income and net interest margin;~~

~~the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin; and~~

a recurrence of significant turbulence or disruption in the capital or financial markets, which could result in, among other things, a reduction in the availability of funding or increased funding costs, reduced investor demand for mortgage loans and declines in asset values and/or recognition of other-than-temporary impairment (“OTTI”) on securities held in the Company’s available-for-sale investment securities portfolio.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s annual report on Form 10-K for the year ended December 31, 2016, filed with the U.S. Securities and Exchange Commission on February 27, 2017 (the “Company’s 2016 Form 10-K”), under the heading “ITEM 1A. RISK FACTORS” and the information set forth under “ITEM 1A. RISK FACTORS” in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE ~~SHEETS~~SHEET

($ in thousands, except shares)

(Unaudited)



	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Cash and due from banks	$	688,936	$	527,317
Interest-bearing cash with banks	1,213,117		3,385,618
Cash and cash equivalents	1,902,053		3,912,935
Interest-bearing deposits with banks	712,709		736,492
Assets purchased under resale agreements (“resale agreements”)	1,422,794		2,353,503
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,891,522 and $10,087,179)	6,255,504		9,965,353
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,656,549)	3,028,302		—

Loans held-for-sale	28,464		635
Loans held-for-investment (net of allowance for loan losses of $563,270 and $541,579)	45,938,806		41,152,202
Investments in qualified affordable housing partnerships, tax credit and other investments, net	634,304		628,263

Premises and equipment (net of accumulated depreciation of $143,708 and $139,358)	93,911		97,302
Goodwill	465,697		465,697
Operating lease right-of-use assets	107,588		98,632
Other assets	1,804,151		1,459,687
TOTAL	$	62,394,283	$	60,870,701
LIABILITIES
Deposits:
Noninterest-bearing	$	23,028,831	$	22,845,464
Interest-bearing	31,314,523		30,505,068
Total deposits	54,343,354		53,350,532


Federal Home Loan Bank (“FHLB”) advances	174,776		249,331
Assets sold under repurchase agreements (“repurchase agreements”)	611,785		300,000
Long-term debt and finance lease liabilities	152,663		151,997
Operating lease liabilities	115,387		105,534
Accrued expenses and other liabilities	1,386,836		876,089
Total liabilities	56,784,801		55,033,483
COMMITMENTS AND CONTINGENCIES (Note 10)	0		0
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,021 and 167,790,645 shares issued	168		168
Additional paid-in capital	1,914,064		1,893,557
Retained earnings	5,064,650		4,683,659
Treasury stock, at cost 27,509,632 and 25,882,691 shares	(768,752)		(649,785)
Accumulated other comprehensive loss (“AOCI”), net of tax	(600,648)		(90,381)
Total stockholders’ equity	5,609,482		5,837,218
TOTAL	$	62,394,283	$	60,870,701

September 30,
2017 December 31,
2016
(Unaudited)
ASSETS
Cash and due from banks $ 364,328
$ 460,559
Interest-bearing cash with banks 1,372,421
1,417,944
Cash and cash equivalents 1,736,749
1,878,503
Interest-bearing deposits with banks 404,946
323,148
Securities purchased under resale agreements (“resale agreements”) 1,250,000
2,000,000
Securities :
Available-for-sale investment securities, at fair value (includes assets pledged as collateral of $584,907 in 2017 and $767,437 in 2016) 2,956,776
3,335,795
Held-to-maturity investment security, at cost (fair value of $144,593 in 2016) —
143,971
Restricted equity securities, at cost 73,322
72,775
Loans held-for-sale 178
23,076
Loans held-for-investment (net of allowance for loan losses of $285,926 in 2017 and $260,520 in 2016; includes assets pledged as collateral of $18,182,265 in 2017 and $16,441,068 in 2016) 28,239,431
25,242,619
Investments in qualified affordable housing partnerships, net 178,344
183,917
Investments in tax credit and other investments, net 203,758
173,280
Premises and equipment (net of accumulated depreciation of $109,296 in 2017 and $114,890 in 2016) 131,311
159,923
Goodwill 469,433
469,433
Other assets 663,718
782,400
TOTAL $ 36,307,966
$ 34,788,840
LIABILITIES

Customer deposits:

Noninterest-bearing $ 10,992,674
$ 10,183,946
Interest-bearing 20,318,988
19,707,037
Total deposits 31,311,662
29,890,983
Short-term borrowings 24,813
60,050
Federal Home Loan Bank (“FHLB”) advances 323,323
321,643
Securities sold under repurchase agreements (“repurchase agreements”) 50,000
350,000
Long-term debt 176,513
186,327
Accrued expenses and other liabilities 639,759
552,096
Total liabilities 32,526,070
31,361,099
COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 165,178,075 and 164,604,072 shares issued in 2017 and 2016, respectively 165
164
Additional paid-in capital 1,745,181
1,727,434
Retained earnings 2,520,817
2,187,676
Treasury stock at cost — 20,667,132 shares in 2017 and 20,436,621 shares in 2016 (452,050 ) (439,387 )
Accumulated other comprehensive loss, net of tax (32,217 ) (48,146 )
Total stockholders’ equity 3,781,896
3,427,741
TOTAL $ 36,307,966
$ 34,788,840

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF INCOME

($ and shares in thousands, except per share data)

(Unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016			2022		2021		2022		2021
INTEREST AND DIVIDEND INCOME									INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	306,939	$	255,316	$	872,039	$	763,189	Loans receivable, including fees	$	439,416	$	352,453	$	816,526	$	694,461
Investment securities	14,828		13,388		43,936		37,433
Debt securities									Debt securities	46,176		34,690		88,843		63,790

Resale agreements	7,901		7,834		25,222		22,479		Resale agreements	8,553		8,021		16,936		14,120
Restricted equity securities	612		611		1,859		2,008		Restricted equity securities	822		541		1,431		1,088
Interest-bearing cash and deposits with banks	9,630		3,168		22,298		10,245		Interest-bearing cash and deposits with banks	4,787		3,628		8,047		7,260
Total interest and dividend income	339,910		280,317		965,354		835,354		Total interest and dividend income	499,754		399,333		931,783		780,719
INTEREST EXPENSE									INTEREST EXPENSE
Customer deposits	31,086		21,049		81,803		60,708
Federal funds purchased and other short-term borrowings	212		212		877		390
Deposits									Deposits	22,488		17,998		35,477		39,820
Short-term borrowings									Short-term borrowings	241		—		250		42
FHLB advances	1,947		1,361		5,738		4,153		FHLB advances	559		2,099		1,137		5,168
Repurchase agreements	2,122		2,319		7,538		6,441		Repurchase agreements	2,418		1,991		4,434		3,969
Long-term debt	1,388		1,228		4,030		3,726
Long-term debt and finance lease liabilities									Long-term debt and finance lease liabilities	1,096		772		1,920		1,552
Total interest expense	36,755		26,169		99,986		75,418		Total interest expense	26,802		22,860		43,218		50,551
Net interest income before provision for credit losses	303,155		254,148		865,368		759,936
Provision for credit losses	12,996		9,525		30,749		17,018
Net interest income after provision for credit losses	290,159		244,623		834,619		742,918
Net interest income before provision for (reversal of) credit losses									Net interest income before provision for (reversal of) credit losses	472,952		376,473		888,565		730,168
Provision for (reversal of) credit losses									Provision for (reversal of) credit losses	13,500		(15,000)		21,500		(15,000)
Net interest income after provision for (reversal of) credit losses									Net interest income after provision for (reversal of) credit losses	459,452		391,473		867,065		745,168
NONINTEREST INCOME									NONINTEREST INCOME
Branch fees	10,803		10,408		31,799		30,983
Letters of credit fees and foreign exchange income	10,154		10,908		33,209		31,404
Ancillary loan fees and other income	5,987		6,135		16,876		13,997
Lending fees									Lending fees	20,142		21,092		39,580		39,449
Deposit account fees									Deposit account fees	22,372		17,342		42,687		32,725
Interest rate contracts and other derivative income (loss)									Interest rate contracts and other derivative income (loss)	9,801		(3,172)		20,934		13,825
Foreign exchange income									Foreign exchange income	11,361		13,007		24,060		22,533
Wealth management fees	3,615		4,033		11,682		9,862		Wealth management fees	6,539		7,951		12,591		14,862
Derivative fees and other income	6,663		5,791		12,934		9,778
Net gains on sales of loans	2,361		2,158		6,660		6,965		Net gains on sales of loans	917		1,491		3,839		3,272
Net gains on sales of available-for-sale investment securities	1,539		1,790		6,733		8,468
Net gains on sales of fixed assets	1,043		486		74,092		2,916
Net gain on sale of business	3,807		—		3,807		—
Other fees and operating income	3,652		7,632		15,255		19,745
Gains on sales of AFS debt securities									Gains on sales of AFS debt securities	28		632		1,306		824

Other investment income									Other investment income	4,863		7,596		6,490		8,521
Other income									Other income	2,421		2,492		6,700		5,286
Total noninterest income	49,624		49,341		213,047		134,118		Total noninterest income	78,444		68,431		158,187		141,297
NONINTEREST EXPENSE									NONINTEREST EXPENSE
Compensation and employee benefits	79,583		75,042		244,930		220,166		Compensation and employee benefits	113,364		105,426		229,633		213,234
Occupancy and equipment expense	16,635		15,456		47,829		45,619		Occupancy and equipment expense	15,469		15,377		30,933		31,299
Deposit insurance premiums and regulatory assessments	5,676		6,450		17,384		17,341		Deposit insurance premiums and regulatory assessments	4,927		4,274		9,644		8,150
Deposit account expense									Deposit account expense	5,671		3,817		10,364		7,709
Data processing									Data processing	3,486		4,035		7,151		8,513
Computer software expense									Computer software expense	6,572		7,521		13,866		14,680
Consulting expense									Consulting expense	2,021		1,868		3,854		3,343
Legal expense	3,316		5,361		8,930		12,714		Legal expense	1,047		1,975		1,765		3,477
Data processing	3,004		2,729		9,009		8,712
Consulting expense	4,087		4,594		10,775		19,027
Deposit related expense	2,413		3,082		7,283		7,675
Computer software expense	4,393		3,331		13,823		9,267
Other operating expense	19,830		19,814		55,357		58,508		Other operating expense	29,324		17,939		50,221		37,546
Amortization of tax credit and other investments	23,827		32,618		66,059		60,779		Amortization of tax credit and other investments	14,979		27,291		28,879		52,649
Amortization of core deposit intangibles	1,735		2,023		5,314		6,177

Total noninterest expense	164,499		170,500		486,693		465,985		Total noninterest expense	196,860		189,523		386,310		380,600
INCOME BEFORE INCOME TAXES	175,284		123,464		560,973		411,051		INCOME BEFORE INCOME TAXES	341,036		270,381		638,942		505,865
INCOME TAX EXPENSE	42,624		13,321		140,247		90,108		INCOME TAX EXPENSE	82,707		45,639		142,961		76,129
NET INCOME	$	132,660	$	110,143	$	420,726	$	320,943	NET INCOME	$	258,329	$	224,742	$	495,981	$	429,736
EARNINGS PER SHARE (“EPS”)									EARNINGS PER SHARE (“EPS”)
BASIC	$	0.92	$	0.76	$	2.91	$	2.23	BASIC	$	1.83	$	1.58	$	3.50	$	3.03
DILUTED	$	0.91	$	0.76	$	2.88	$	2.21	DILUTED	$	1.81	$	1.57	$	3.47	$	3.01
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING									WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	144,498		144,122		144,412		144,061		BASIC	141,429		141,868		141,725		141,758
DILUTED	145,882		145,238		145,849		145,086		DILUTED	142,372		143,040		142,838		142,963
DIVIDENDS DECLARED PER COMMON SHARE	$	0.20	$	0.20	$	0.60	$	0.60

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)



	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	258,329	$	224,742	$	495,981	$	429,736
Other comprehensive (loss) income, net of tax:
Net changes in unrealized (losses) gains on AFS debt securities	(192,878)		73,049		(362,148)		(60,399)
Net changes in unrealized gains (losses) on securities transferred from AFS to HTM	3,750		—		(106,930)		—
Net changes in unrealized (losses) gains on cash flow hedges	(6,380)		68		(31,103)		500
Foreign currency translation adjustments	(10,215)		2,234		(10,086)		885
Other comprehensive (loss) income	(205,723)		75,351		(510,267)		(59,014)
COMPREHENSIVE INCOME (LOSS)	$	52,606	$	300,093	$	(14,286)	$	370,722

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 132,660
$ 110,143
$ 420,726
$ 320,943
Other comprehensive income (loss), net of tax:
Net change in unrealized (losses) gains on available-for-sale investment securities (1,906 ) (4,907 ) 7,916
12,993
Foreign currency translation adjustments 3,870
(555 ) 8,013
(5,226 )
Other comprehensive income (loss) 1,964
(5,462 ) 15,929
7,767
COMPREHENSIVE INCOME $ 134,624
$ 104,681
$ 436,655
$ 328,710

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except ~~share data)~~shares)

(Unaudited)

Common Stock and Additional Paid-in Capital
Retained
Earnings

Treasury
Stock
Accumulated Other Comprehensive Loss, Net of Tax
Total
Stockholders’
Equity
Shares Amount
BALANCE, JANUARY 1, 2016 143,909,233
$ 1,701,459
$ 1,872,594
$ (436,162 ) $ (14,941 ) $ 3,122,950
Net income —
—
320,943
—
—
320,943
Other comprehensive income —
—
—
—
7,767
7,767
Stock compensation costs —
13,973
—
—
—
13,973
Net activity of common stock pursuant to various stock compensation plans and agreements, and related tax benefits 224,071
2,981
—
(3,144 ) —
(163 )
Cash dividends on common stock —
—
(87,416 ) —
—
(87,416 )
BALANCE, SEPTEMBER 30, 2016 144,133,304
$ 1,718,413
$ 2,106,121
$ (439,306 ) $ (7,174 ) $ 3,378,054
BALANCE, JANUARY 1, 2017 144,167,451
$ 1,727,598
$ 2,187,676
$ (439,387 ) $ (48,146 ) $ 3,427,741
Net income —
—
420,726
—
—
420,726
Other comprehensive income —
—
—
—
15,929
15,929
Stock compensation costs —
15,780
—
—
—
15,780
Net activity of common stock pursuant to various stock compensation plans and agreements 343,492
1,968
—
(12,663 ) —
(10,695 )
Cash dividends on common stock —
—
(87,585 ) —
—
(87,585 )
BALANCE, SEPTEMBER 30, 2017 144,510,943
$ 1,745,346
$ 2,520,817
$ (452,050 ) $ (32,217 ) $ 3,781,896



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
BALANCE, APRIL 1, 2021	141,843,036	$	1,866,101	$	4,158,032	$	(649,066)	$	(90,040)	$	5,285,027
Net Income	—	—		224,742		—		—		224,742
Other comprehensive income	—	—		—		—		75,351		75,351
Issuance of common stock pursuant to various stock compensation plans and agreements	38,073	10,146		—		—		—		10,146
Repurchase of common stock pursuant to various stock compensation plans and agreements	(3,604)	—		—		(271)		—		(271)
Cash dividends on common stock ($0.33 per share)	—	—		(47,447)		—		—		(47,447)
BALANCE, JUNE 30, 2021	141,877,505	$	1,876,247	$	4,335,327	$	(649,337)	$	(14,689)	$	5,547,548
BALANCE, APRIL 1, 2022	142,256,520	$	1,903,042	$	4,863,721	$	(668,382)	$	(394,925)	$	5,703,456
Net Income	—	—		258,329		—		—		258,329
Other comprehensive loss	—	—		—		—		(205,723)		(205,723)
Issuance of common stock pursuant to various stock compensation plans and agreements	51,733	11,190		—		—		—		11,190
Repurchase of common stock pursuant to various stock compensation plans and agreements	(5,347)	—		—		(380)		—		(380)
Repurchase of common stock pursuant to the Stock Repurchase Plan	(1,385,517)	—		—		(99,990)		—		(99,990)
Cash dividends on common stock ($0.40 per share)	—	—		(57,400)		—		—		(57,400)
BALANCE, JUNE 30, 2022	140,917,389	$	1,914,232	$	5,064,650	$	(768,752)	$	(600,648)	$	5,609,482



	Common Stock and Additional Paid-in Capital			Retained Earnings		Treasury Stock		AOCI, Net of Tax		Total Stockholders’ Equity
	Shares	Amount
BALANCE, JANUARY 1, 2021	141,565,229	$	1,858,519	$	4,000,414	$	(634,083)	$	44,325	$	5,269,175

Net income	—	—		429,736		—		—		429,736
Other comprehensive loss	—	—		—		—		(59,014)		(59,014)



Issuance of common stock pursuant to various stock compensation plans and agreements	513,806	17,728		—		—		—		17,728
Repurchase of common stock pursuant to various stock compensation plans and agreements	(201,530)	—		—		(15,254)		—		(15,254)

Cash dividends on common stock ($0.66 per share)	—	—		(94,823)		—		—		(94,823)
BALANCE, JUNE 30, 2021	141,877,505	$	1,876,247	$	4,335,327	$	(649,337)	$	(14,689)	$	5,547,548
BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725	$	4,683,659	$	(649,785)	$	(90,381)	$	5,837,218

Net income	—	—		495,981		—		—		495,981
Other comprehensive loss	—	—		—		—		(510,267)		(510,267)



Issuance of common stock pursuant to various stock compensation plans and agreements	639,847	20,507		—		—		—		20,507
Repurchase of common stock pursuant to various stock compensation plans and agreements	(244,895)	—		—		(18,977)		—		(18,977)

Repurchase of common stock pursuant to the Stock Repurchase Plan	(1,385,517)	—		—		(99,990)		—		(99,990)
Cash dividends on common stock ($0.80 per share)	—	—		(114,990)		—		—		(114,990)
BALANCE, JUNE 30, 2022	140,917,389	$	1,914,232	$	5,064,650	$	(768,752)	$	(600,648)	$	5,609,482

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)



	Six Months Ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	495,981	$	429,736
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	48,911		70,402
Amortization of premiums and accretion of discount, net	21,519		11,310
Stock compensation costs	17,009		16,025
Deferred income tax (expense) benefit	(7,554)		2,571
Provision for (reversal of) credit losses	21,500		(15,000)
Net gains on sales of loans	(3,839)		(3,272)
Gains on sales of AFS debt securities	(1,306)		(824)


Loans held-for-sale:
Originations and purchases	(447)		(8,703)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	461		10,353


Proceeds from distributions received from equity method investees	4,412		3,564
Net change in accrued interest receivable and other assets	(128,071)		(73,809)
Net change in accrued expenses and other liabilities	457,296		(44,113)
Other net operating activities	3,182		5,571
Total adjustments	433,073		(25,925)
Net cash provided by operating activities	929,054		403,811
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in:
Investments in qualified affordable housing partnerships, tax credit and other investments	(49,545)		(92,780)
Interest-bearing deposits with banks	23,442		(20,534)
Resale agreements:
Proceeds from paydowns and maturities	1,162,172		506,353
Purchases	(231,463)		(1,345,537)
AFS debt securities:
Proceeds from sales	129,181		164,898
Proceeds from repayments, maturities and redemptions	613,244		877,123
Purchases	(767,015)		(4,015,212)
HTM debt securities:
Proceeds from repayments, maturities and redemptions	40,072		—
Purchases	(50,000)		—
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	325,813		248,540
Purchases	(541,997)		(542,839)
Other changes in loans held-for-investment, net	(4,639,384)		(1,389,832)







Proceeds from distributions received from equity method investees	8,717		4,983

Other net investing activities	1,354		2,388
Net cash used in investing activities	(3,975,409)		(5,602,449)

Nine Months Ended September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 420,726
$ 320,943
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 123,008
98,561
Accretion of discount and amortization of premiums, net (19,237 ) (37,881 )
Stock compensation costs 15,780
13,973
Deferred income tax (benefit) expense (14,500 ) 3,730
Provision for credit losses 30,749
17,018
Net gains on sales of loans (6,660 ) (6,965 )
Net gains on sales of available-for-sale investment securities (6,733 ) (8,468 )
Net gains on sales of premises and equipment (74,092 ) (2,916 )
Net gain on sale of business (3,807 ) —
Originations and purchases of loans held-for-sale (15,069 ) (10,901 )
Proceeds from sales and paydowns/payoffs in loans held-for-sale 15,792
15,065
Net change in accrued interest receivable and other assets 105,729
(2,591 )
Net change in accrued expenses and other liabilities 95,432
19,217
Other net operating activities (2,135 ) (1,181 )
Total adjustments 244,257
96,661
Net cash provided by operating activities 664,983
417,604
CASH FLOWS FROM INVESTING ACTIVITIES

Net increase in:

Loans held-for-investment (2,967,873 ) (776,277 )
Interest-bearing deposits with banks (74,254 ) (13,469 )
Investments in qualified affordable housing partnerships, tax credit and other investments, net (121,590 ) (57,742 )
Purchases of:

Resale agreements (550,000 ) (1,150,000 )
Available-for-sale investment securities (501,669 ) (1,330,724 )
Loans held-for-investment (441,141 ) (1,038,083 )
Premises and equipment (11,598 ) (10,412 )
Proceeds from sale of:

Available-for-sale investment securities 676,776
1,008,256
Loans held-for-investment 448,679
545,256
Other real estate owned (“OREO”) 5,431
3,271
Premises and equipment 116,021
8,163
Business, net of cash transferred 3,633
—
Paydowns and maturities of resale agreements 1,000,000
1,450,000
Repayments, maturities and redemptions of available-for-sale investment securities 323,463
870,965
Other net investing activities 27,914
17,527
Net cash used in investing activities (2,066,208 ) (473,269 )
CASH FLOWS FROM FINANCING ACTIVITIES

Net increase (decrease) in:

Customer deposits 1,385,625
1,130,022
Short-term borrowings (36,604 ) 37,699
Proceeds from:
Issuance of common stock pursuant to various stock compensation plans and agreements 1,008
1,962
Payments for:

Repayment of FHLB advances —
(700,000 )
Repayment of long-term debt (10,000 ) (15,000 )
Repurchase of vested shares due to employee tax liability (12,663 ) (3,144 )
Cash dividends on common stock (87,880 ) (86,984 )
Other net financing activities —
1,019
Net cash provided by financing activities 1,239,486
365,574
Effect of exchange rate changes on cash and cash equivalents 19,985
(3,964 )
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (141,754 ) 305,945
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,878,503
1,360,887
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,736,749
$ 1,666,832

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)

Nine Months Ended September 30,
2017 2016
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:

Interest paid $ 98,409
$ 76,750
Income taxes paid $ 11,800
$ 20,652
Noncash investing and financing activities:

Loans transferred from held-for-investment to held-for-sale $ 418,489
$ 720,670
Investment security transferred from held-to-maturity to available-for-sale $ 115,615
$ —
Held-to-maturity investment security retained from securitization of loans $ —
$ 160,135
Loans transferred to OREO $ 456
$ 6,086



	Six Months Ended June 30,
	2022		2021



















































CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	1,046,046		7,708,661
Net decrease in short-term borrowings	(49)		(21,143)

FHLB advances:
Proceeds	3,950,000		—
Repayment	(4,025,000)		(405,000)
Repurchase agreements:
Proceeds from repurchase agreements	311,785		—


Long-term debt and lease liabilities:

Repayment of long-term debt and lease liabilities	(457)		(613)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program	(99,990)		—
Proceeds from issuance pursuant to various stock compensation plans and agreements	1,444		1,180
Stocks tendered for payment of withholding taxes	(18,977)		(15,254)
Cash dividends paid	(115,623)		(95,060)
Net cash provided by financing activities	1,049,179		7,172,771
Effect of exchange rate changes on cash and cash equivalents	(13,706)		5,701
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(2,010,882)		1,979,834
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	3,912,935		4,017,971
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,902,053	$	5,997,805

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	45,057	$	52,228
Income taxes, net	$	188,510	$	114,202
Noncash investing and financing activities:

Securities transferred from AFS to HTM debt securities	$	3,010,003	$	—
Loans transferred from held-for-investment to held-for-sale	$	351,406	$	247,636
Loans transferred from held-for-sale to held-for-investment	$	631	$	—



Loans transferred to other real estate owned (“OREO”) and other foreclosed assets	$	—	$	13,025

See accompanying Notes to Consolidated Financial Statements.

108

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation

East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”) is a registered bank holding company that offers a full range of banking services to individuals and businesses through its subsidiary bank, East West Bank and its subsidiaries (“East West Bank” or the “Bank”). The unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) include the accounts of East West, East West Bank and East West’s ~~various~~ subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of ~~September~~June 30, ~~2017,~~2022, East West also has ~~six~~6 wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with ~~FASB~~Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 810,Consolidation, the Trusts are not included on the Consolidated Financial Statements.

The unaudited interim Consolidated Financial Statements are presented in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“~~U.S.~~ GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking ~~industry,~~industry. While the unaudited interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for fair ~~statement~~presentation, they primarily serve to update the most recently filed annual report on Form 10-K, and may not include all the information and notes necessary to constitute a complete set of financial statements. Accordingly, they should be read in conjunction with the ~~interim period~~audited Consolidated Financial ~~Statements. Certain~~Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on February 28, 2022 (the “Company’s 2021 Form 10-K”). In addition, certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Financial Statements, income and expenses during the reporting period, and the related disclosures. Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual results could be materially different from those estimates. Hence, the current period’s results of operations are not necessarily indicative of results that may be expected for any ~~other~~future interim period or for the year as a whole. Events subsequent to the Consolidated Balance Sheet date have been evaluated through the date the Consolidated Financial Statements are issued for inclusion in the accompanying Consolidated Financial Statements. ~~The unaudited interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto, included in the Company’s 2016 Form 10-K.~~

Note 2— Current Accounting Developments and Summary of Significant Accounting Policies

~~New Accounting Pronouncements Adopted~~

~~In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-05,~~ ~~Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships~~, to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship provided that all other hedge accounting criteria in ASC 815 continue to be met. This clarification applies to both cash flow and fair value hedging relationships. The Company adopted this guidance prospectively in the first quarter of 2017. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

~~In March 2016, the FASB issued ASU 2016-06,~~ ~~Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments,~~ which requires an entity to use a four-step decision model when assessing contingent call (put) options that can accelerate the payment of principal on debt instruments to determine whether they are clearly and closely related to their debt hosts. The Company adopted this guidance on a modified retrospective basis in the first quarter of 2017. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

~~In March 2016, the FASB issued ASU 2016-07,~~ ~~Investments — Equity Method and Joint Ventures (Topic 323):Simplifying the Transition to the Equity Method of Accounting,~~ to eliminate the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting. The amendments in ASU 2016-07 also require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income (loss) (“AOCI”) at the date the investment becomes qualified for use of the equity method. The Company adopted this guidance prospectively in the first quarter of 2017. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,~~ to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification in the statements of cash flows. The Company adopted this guidance in the first quarter of 2017. The changes that impacted the Company included a requirement that excess tax benefits and deficiencies be recognized as a component of ~~Income tax expense~~ ~~on the Consolidated Statements of Income rather than~~ ~~Additional paid-in capital~~ on the Consolidated Statements of Changes in Stockholders’ Equity as required in the previous guidance. The adoption of this guidance results in increased volatility to the Company’s income tax expense, but does not have a material impact on the Consolidated Balance Sheets or the Consolidated Statements of Changes in Stockholders’ Equity. The income tax expense volatility is dependent on the Company’s stock price on the dates the restricted stock units (“RSUs”) vest, which occur primarily in the first quarter of each year. Net excess tax benefits for RSUs of $4.6 million have been recognized by the Company as a component of ~~Income tax expense~~ on the Consolidated Statements of Income during the nine months ended September 30, 2017. The guidance also removes the impact of the excess tax benefits and deficiencies from the calculation of diluted EPS. In addition, ASU 2016-09 no longer requires a presentation of excess tax benefits and deficiencies as both an operating outflow and a financing inflow on the Consolidated Statements of Cash Flows. Instead, excess tax benefits and deficiencies are recorded along with other income tax cash flows as an operating activity. These changes to the guidance were applied on a prospective basis. The Company has also elected to retain its existing accounting policy election to estimate award forfeitures.

Recent Accounting Pronouncements


Standard	Required Date of Adoption	Description	Effect on Financial Statements
Standards Not Yet Adopted
Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Trouble Debt Restructurings and the Vintage Disclosures	January 1, 2023	ASU 2022-02 eliminates the troubled debt restructuring (“TDRs”) accounting model for creditors and instead requires companies to apply the loan refinancing and restructuring guidance to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. In addition, companies are no longer required to use a discounted cash flow method to measure the allowance for credit losses for certain TDRs and instead allows for the use of an expected loss approach for all loans. The guidance also introduces new disclosure requirements related to restructuring of financing receivables made to borrowers experiencing financial difficulty, and amends vintage disclosures to require current-period gross write-off by year of origination. The guidance should be applied on a prospective basis except for amendments related to recognition and measurement of TDRs, where a modified retrospective transition method is optional.	The Company does not expect the adoption of this guidance to have a material impact on the Company’s Consolidated Financial Statements. The Company expects to adopt ASU 2022-02 on January 1, 2023.

~~In May 2014,~~

Significant Accounting Policies Update

During the ~~FASB issued ASU 2014-09,~~ ~~Revenue~~first quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from ~~Contracts~~AFS to HTM.

Transfer between Categories of Debt Securities— Upon transfer of a debt security from the AFS to HTM category, the security’s new amortized cost is reset to fair value, reduced by any previous write-offs but excluding any allowance for credit losses. Unrealized gains or losses at the date of transfer of these securities continue to be reported in AOCI and are amortized into interest income over the remaining life of the securities as effective yield adjustments, in a manner consistent with ~~Customers (Topic 606),~~ ~~which clarifies~~ the ~~principles~~amortization or accretion of the original purchase premium or discount on the associated security. For transfers of securities from the AFS to HTM category, any allowance for ~~recognizing revenue~~credit losses that was previously recorded under the AFS model is reversed and an allowance for ~~contracts to provide goods or services to customers~~credit losses is subsequently recorded under the HTM debt security model. The reversal and ~~will replace most existing revenue recognition guidance~~re-establishment of the allowance for credit losses are recorded in the ~~U.S. GAAP when it becomes effective. Quantitative and qualitative disclosures regarding~~provision for credit losses.

Held-to-Maturity Debt Securities— Debt securities that the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. ASU 2014-09 is effective on January 1, 2018. The guidance should be applied on either a modified retrospective or full retrospective basis. The Company’s revenue is mainly comprised of net interest income and noninterest income. The scope of the guidance explicitly excludes net interest income, as well as other revenues from financial instruments such as loans, leases, securities and derivatives. The Company has ~~completed a comprehensive scoping exercise~~the intent and ability to ~~determine the revenue streams that~~hold until maturity are ~~in the scope~~classified as HTM and are carried at amortized cost, net of ~~the guidance and the review of its contracts~~allowance for credit losses. HTM debt securities are generally placed on nonaccrual status using factors similar to ascertain whether certain noninterest income revenue items are within the scope of the new guidance. Based on the completed contract reviews thus far, the adoption of this guidance is not expected to have a material impact on its Consolidated Balance Sheets or Consolidated Statements of Income.those described for loans. The ~~next phase~~amortized cost of the Company’s ~~implementation work will be to evaluate any changes that may be required to its applicable disclosures.~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,~~HTM debt securities excludes accrued interest, which ~~requires equity investments, except those accounted for under the equity method of accounting or consolidated, to be measured at fair value with changes recognized~~is included in net income, thus eliminating eligibility for the current available-for-sale category. If there is no readily determinable fair value, the guidance allows entities to measure equity investments at cost less impairment, whereby impairment is based on a qualitative assessment. Furthermore, investments in Federal Reserve Bank and FHLB stock are not subject to this guidance and will continue to be presented at cost. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost and changes the presentation of financialOther assets ~~and financial liabilities~~ on the Consolidated Balance Sheets or in the footnotes. If an entity has elected the fair value option to measure liabilities, the guidance requires the portion of the change in the fair value of a liability resulting from credit risk to be presented in ~~Other comprehensive income~~. ASU 2016-01 is effective on January 1, 2018. Early adoption is not permitted except for certain specific changes under the fair value option guidance. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the adoption date.Sheet. The Company does not have a significant amount of equity securities classified as available-for-sale. Additionally, the Company does not have any financial liabilities accounted for under the fair value option. For the guidance that is applicable to us, thehas made an accounting will be implemented on a modified retrospective basis through a cumulative-effect adjustment to the Consolidated Balance Sheets as of January 1, 2018, except for the guidance related to equity securities without readily determinable fair values, which should be applied on a prospective basis. The adoption of this guidance is not expected to have a material impact on the Company’s Consolidated Balance Sheets or Consolidated Statements of Income.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842),~~ which is intended to increase transparency and comparability in the accounting for lease transactions. The guidance requires lessees to recognize right-of-use assets and related lease liabilities for all leases with lease terms of more than 12 months on the Consolidated Balance Sheets, and provide quantitative and qualitative disclosures regarding key information about the leasing arrangements. For short-term leases with a term of 12 months or less, lessees can make a policy election not to recognize ~~lease assets and lease liabilities. Lessor accounting is largely unchanged. ASU 2016-02 is effective~~an allowance for credit losses for accrued interest receivables on January 1, 2019, with early adoption permitted. The guidance should be applied using a modified retrospective transition method through a cumulative-effect adjustment. The Company is currently evaluating the potential impact on its Consolidated Financial Statements by reviewing its existing lease contracts and service contracts that may include embedded leases. The Company expects the adoption of ASU 2016-02 to result in additional assets and liabilities,HTM debt securities, as the Company ~~will be required~~reverses any accrued interest against interest income if a debt security is placed on nonaccrual status. Any cash collected on nonaccrual HTM securities is applied to ~~recognize operating leases on its Consolidated Balance Sheets. The~~reduce the security’s amortized cost basis and not as interest income. Generally, the Company ~~does not expect a material impact~~returns an HTM security to ~~its recognition of operating lease expense on its Consolidated Statements of Income. Upon completion~~accrual status when all delinquent interest and principal become current under the contractual terms of the ~~contract reviews~~security, and ~~consideration~~the collectability of ~~system requirements, the Company will evaluate the impacts of adopting the new accounting guidance on its disclosures.~~remaining principal and interest is no longer doubtful.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments — Credit Losses (Topic 326): Measurement of~~Allowance for Credit Losses on ~~Financial Instruments, to introduce a new approach based on expected losses to estimate credit losses on certain types of financial instruments, which modifies the impairment model for available-for-sale~~Held-to-Maturity Debt Securities—For each major HTM debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new “expected credit loss” impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loan receivables, available-for-sale and held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. For available-for-sale debt securities with unrealized losses, ASU 2016-13 does not change the measurement method of credit losses, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses, and requires disclosure of the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). ASU 2016-13 is effective on January 1, 2020, with early adoption permitted on January 1, 2019. The guidance should be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption. While the Company is still evaluating the impact on its Consolidated Financial Statements, the Company expects that ASU 2016-13 may result in an increase insecurity type, the allowance for credit losses ~~due to~~is estimated collectively for groups of securities with similar risk characteristics. For securities that do not share similar risk characteristics, the ~~following factors: 1)~~losses are estimated individually. Examples of securities for which the Company applies a zero credit loss assumption include debt securities that are either guaranteed or issued by the U.S. government or government-sponsored enterprises, are highly rated by nationally recognized statistical rating organizations (“NRSROs”), and have a long history of no credit losses. Any expected credit loss is recorded through the allowance for credit losses ~~provides for expected credit losses over~~on HTM debt securities and deducted from the ~~remaining expected life~~amortized cost basis of the ~~loan portfolio, and will consider expected future changes in macroeconomic conditions; 2)~~security, so that the ~~nonaccretable difference on~~balance sheet reflects the purchased credit impaired (“PCI”) loans will be recognized as an allowance, offset by an increase in the carrying value of the PCI loans; and 3) an allowance may be established for estimated credit losses on available-for-sale and held-to-maturity debt securities. Thenet amount of the increase will be impacted by the portfolio composition and quality, as well as the economic conditions and forecasts as of the adoption date. The Company has begun its implementation efforts by identifying key interpretive issues, assessing its processes and identifying the system requirements against the new guidance to determine what modifications may be required.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~, to provide guidance on eight specific issues related to classification on the Consolidated Statements of Cash Flows in order to reduce diversity in practice. The specific issues cover cash payments for debt prepayment or debt extinguishment costs; cash outflows for settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments that are not made soon after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests received in securitization transactions; and clarification regarding when no specific U.S. GAAP guidance exists and the sources of the cash flows are not separately identifiable, the classification should be based on the activity that is likely to be the predominant source or use of the cash flows. ASU 2016-15 is effective on January 1, 2018, with early adoption permitted. The guidance should be applied using a retrospective transition method. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash,~~ ~~whichrequires~~ the Company expects to include those amounts that are deemed to be restricted cash and restricted cash equivalents in its cash and cash equivalent balances on the Consolidated Statements of Cash Flows. In addition, the Company is required to explain the changes in the combined total of restricted and unrestricted balances on the Consolidated Statements of Cash Flows. ASU 2016-18 is effective on January 1, 2018, with early adoption permitted. The guidance should be applied using a retrospective transition method to each period presented. The Company does not expect the adoption of this guidance to have a material impact on its Consolidated Financial Statements.collect.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~, to simplify the accounting for goodwill impairment. An entity will no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The guidance also eliminates the requirements for any reporting units with a zero or negative carrying amount to perform a qualitative assessment. ASU 2017-04 is effective on January 1, 2020 and should be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests with measurement dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on the Consolidated Financial Statements.

~~In March 2017, the FASB issued ASU 2017-08,~~ ~~Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~, which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The guidance does not require any accounting changes for debt securities held at a discount; the discount continues to be amortized as an adjustment of yield over the contractual life (to maturity) of the instrument. ASU 2017-08 is effective on January 1, 2019, with early adoption permitted. The guidance should be applied using a modified retrospective transition method, with the cumulative-effect adjustment recognized to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the impact on its Consolidated Financial Statements.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting~~, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective on January 1, 2018, with early adoption permitted. The guidance should be applied prospectively to awards modified on or after the adoption date. The Company plans to adopt this guidance in the first quarter of 2018 prospectively.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~, which better aligns the Company’s risk management activities and financial reporting for hedging relationships through changes to both the description and measurement guidance for qualifying hedging relationships and the presentation of hedge results, expands and refines hedge accounting for both nonfinancial and financial risk components, and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item on the Consolidated Financial Statements. ASU 2017-12 is effective on January 1, 2019, with early adoption permitted. Upon adoption, the guidance should be applied using a retrospective transition method to any existing cash flows or net investment hedges through a cumulative-effect adjustment to AOCI to eliminate the separate measurement of ineffectiveness. The amended presentation and disclosure guidance is applied prospectively. The Company is currently evaluating the impact on its Consolidated Financial Statements.

Note 3 — ~~Dispositions~~

In the first quarter of 2017, the Company completed the sale and leaseback of a commercial property in San Francisco, California for cash consideration of $120.6 million and entered into a leaseback with the buyer for part of the property, consisting of a retail branch and office facilities. The property had a net book value of $31.6 million at the time of sale, resulting in a pre-tax gain of $85.4 million after considering $3.6 million in selling costs. As the leaseback is an operating lease, $71.7 million of the gain was recognized on the closing date, and $13.7 million was deferred and will be recognized over the term of the lease agreement. The first quarter 2017 diluted EPS impact from the sale of the commercial property was $0.28 per share, net of tax.

In the third quarter of 2017, the Company sold its insurance brokerage business, East West Insurance Services, Inc., for $4.3 million, and recorded a pre-tax gain of $3.8 million. The third quarter 2017 diluted EPS impact from the sale of the Company’s insurance brokerage business was $0.02 per share, net of tax.

~~Note 4 —~~Fair Value Measurement and Fair Value of Financial Instruments

Fair Value Determination

Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining the fair value of financial instruments, the Company uses various methods including market and income approaches. Based on these approaches, the Company utilizes certain assumptions that market participants would use in pricing an asset or a liability. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy ~~noted~~described below is based on the quality and reliability of the information used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to prices derived from data lacking transparency. The fair value of the Company’s assets and liabilities is classified and disclosed in one of the following three categories:



•	~~Level 1~~	—	~~Valuation is based on quoted prices for identical instruments traded in active markets.~~
•	~~Level 2~~	—	Valuation is based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.
•	~~Level 3~~	—	•Level 1 — Valuation is based on quoted prices for identical instruments traded in active markets. •Level 2 — Valuation is based on quoted prices for similar instruments traded in active markets; quoted prices for identical or similar instruments traded in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data. •Level 3 — Valuation is based on significant unobservable inputs for ~~determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.~~

In determining the ~~appropriate hierarchy levels,~~fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the ~~Company performs an analysis~~assets or liabilities.

The classification of ~~the~~ assets and liabilities ~~that~~within the hierarchy is based on whether inputs to the valuation methodology used are ~~subject to~~observable or unobservable, and the significance of those inputs in the fair value ~~disclosure.~~measurement. The Company’s assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurements.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following ~~tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016:~~

Assets (Liabilities) Measured at Fair Value on a Recurring Basis
as of September 30, 2017
($ in thousands)
Fair Value
Measurements

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Available-for-sale investment securities:

U.S. Treasury securities $ 526,332
$ 526,332
$ —
$ —

U.S. government agency and U.S. government sponsored enterprise debt securities 189,185
—
189,185
—

U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

Commercial mortgage-backed securities 315,172
—
315,172
—

Residential mortgage-backed securities 1,150,934
—
1,150,934
—

Municipal securities 117,242
—
117,242
—

Non-agency residential mortgage-backed securities:

Investment grade 9,694
—
9,694
—

Corporate debt securities:

Investment grade 2,327
—
2,327
—

Non-investment grade 9,615
—
9,615
—

Foreign bonds:
Investment grade 489,140
—
489,140
—

Other securities 147,135
31,418
102
115,615
⁽¹⁾
Total available-for-sale investment securities $ 2,956,776
$ 557,750
$ 2,283,411
$ 115,615

Derivative assets:
Interest rate swaps and options $ 64,822
$ —
$ 64,822
$ —

Foreign exchange contracts 14,187
—
14,187
—

Credit risk participation agreements (“RPAs”) 2
—
2
—

Warrants 1,455
—
856
599

Total derivative assets $ 80,466
$ —
$ 79,867
$ 599

Derivative liabilities:
Interest rate swaps on certificates of deposit $ (6,648 ) $ —
$ (6,648 ) $ —

Interest rate swaps and options (64,212 ) —
(64,212 ) —

Foreign exchange contracts (20,054 ) —
(20,054 ) —

RPAs (1 ) —
(1 ) —

Total derivative liabilities $ (90,915 ) $ —
$ (90,915 ) $ —


~~(1)~~	~~During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held- to-maturity to available-for-sale.~~

Assets (Liabilities) Measured at Fair Value on a Recurring Basis
as of December 31, 2016
($ in thousands)
Fair Value
Measurements
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Available-for-sale investment securities:

U.S. Treasury securities $ 720,479
$ 720,479
$ —
$ —
U.S. government agency and U.S. government sponsored enterprise debt securities 274,866
—
274,866
—
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

Commercial mortgage-backed securities 266,799
—
266,799
—
Residential mortgage-backed securities 1,258,747
—
1,258,747
—
Municipal securities 147,654
—
147,654
—
Non-agency residential mortgage-backed securities:

Investment grade 11,477
—
11,477
—
Corporate debt securities:

Investment grade 222,377
—
222,377
—
Non-investment grade 9,173
—
9,173
—
Foreign bonds:
Investment grade 383,894
—
383,894
—
Other securities 40,329
30,991
9,338
—
Total available-for-sale investment securities $ 3,335,795
$ 751,470
$ 2,584,325
$ —

Derivative assets:
Foreign currency forward contracts $ 4,325
$ —
$ 4,325
$ —
Interest rate swaps and options 67,578
—
67,578
—
Foreign exchange contracts 11,874
—
11,874
—
RPAs 3
—
3
—
Total derivative assets $ 83,780
$ —
$ 83,780
$ —

Derivative liabilities:
Interest rate swaps on certificates of deposit $ (5,976 ) $ —
$ (5,976 ) $ —
Interest rate swaps and options (65,131 ) —
(65,131 ) —
Foreign exchange contracts (11,213 ) —
(11,213 ) —
RPAs (3 ) —
(3 ) —
Total derivative liabilities $ (82,323 ) $ —
$ (82,323 ) $ —

At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. There were no assets or liabilities measured using significant unobservable inputs (Level 3) on a recurring basis as of December 31, 2016, and during the three and nine months ended September 30, 2016. The following table presents a reconciliation of the beginning and ending balances for other securities and warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2017:

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
($ in thousands) Other securities Warrants Other securities Warrants
Beginning balance $ —
$ —
$ —
$ —
Issuances —
599
—
599
Transfer from held-to-maturity investment security to available-for-sale investment security 115,615
—
115,615
—
Ending balance $ 115,615

$ 599

$ 115,615

$ 599

Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair values of the assets and liabilities become unobservable or observable in the current marketplace. The Company’s policy, with respect to transfers between levels of the fair value hierarchy, is to recognize transfers into and out of each level as of the end of the reporting period. There were no transfers of assets and liabilities measured on a recurring basis into and out of Level 1, Level 2 and Level 3 during the three and nine months ended September 30, 2017 and 2016. During the three and nine months ended September 30, 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale to reflect the Company’s intent to sell the security under active liquidity management.

The following table presents quantitative information about significant unobservable inputs used in the valuation of assets measured on a recurring basis classified as Level 3 as of September 30, 2017. Significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets or liabilities. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets or liabilities would be impacted by a predetermined percentage change.

($ in thousands)
Fair Value
Measurements
(Level 3)

Valuation
Technique

Unobservable
Input(s)

Weighted
Average
Available-for-sale investment securities:

Other securities $ 115,615
Discounted cash flows Discount margin 191 Basis points

Derivative assets:
Warrants $ 599
Black-Scholes option pricing model Volatility 44%
Liquidity discount 47%

Assets measured at fair value on a nonrecurring basis include certain non-purchased credit impaired (“non-PCI”) loans that were impaired, OREO and loans held-for-sale. These fair value adjustments result from impairments recognized during the period on certain non-PCI impaired loans, application of fair value less cost to sell on OREO and application of the lower of cost or fair value on loans held-for-sale.

The following tables present the carrying amounts of assets included on the Consolidated Balance Sheets that had fair value changes measured on a nonrecurring basis as of September 30, 2017 and December 31, 2016:

Assets Measured at Fair Value on a Nonrecurring Basis
as of September 30, 2017
($ in thousands)
Fair Value
Measurements
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Non-PCI impaired loans:

Commercial real estate (“CRE”) $ 9,172
$ —
$ —
$ 9,172
Commercial and industrial (“C&I”) 32,053
—
—
32,053
Residential 6,079
—
—
6,079
Consumer 633
—
—
633
Total non-PCI impaired loans $ 47,937
$ —
$ —
$ 47,937
OREO $ 1,789
$ —
$ —
$ 1,789

Assets Measured at Fair Value on a Nonrecurring Basis
as of December 31, 2016
($ in thousands)
Fair Value
Measurements
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Non-PCI impaired loans:

CRE $ 14,908
$ —
$ —
$ 14,908
C&I 52,172
—
—
52,172
Residential 2,464
—
—
2,464
Consumer 610
—
—
610
Total non-PCI impaired loans $ 70,154
$ —
$ —
$ 70,154
OREO $ 345
$ —
$ —
$ 345
Loans held-for-sale $ 22,703
$ —
$ 22,703
$ —

The following table presents the fair value adjustments of assets measured on a nonrecurring basis recognized during the three and nine months ended and which were included on the Consolidated Balance Sheets as of September 30, 2017 and 2016:

Three Months Ended September 30, Nine Months Ended September 30,
($ in thousands) 2017 2016 2017 2016
Non-PCI impaired loans:

CRE $ 6
$ (282 ) $ (66 ) $ 1,741
C&I (16,954 ) 77
(17,648 ) (5,497 )
Residential (3 ) (14 ) 49
(14 )
Consumer —
—
25
17
Total non-PCI impaired loans $ (16,951 ) $ (219 ) $ (17,640 ) $ (3,753 )
OREO $ (285 ) $ (41 ) $ (286 ) $ (994 )
Loans held-for-sale $ —
$ —
$ —
$ (2,351 )

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of assets measured on a nonrecurring basis classified as Level 3 as of September 30, 2017 and December 31, 2016:

($ in thousands) Fair Value
Measurements
(Level 3) Valuation
Technique(s)
Unobservable
Input(s)

Range of
Input(s)
Weighted
Average
September 30, 2017

Non-PCI impaired loans $ 30,563
Discounted cash flows Discount 0% — 82% 19%
$ 17,374
Market comparables
Discount ⁽¹⁾
0% — 100% 40%
OREO $ 1,789
Appraisal Selling cost 8% 8%
December 31, 2016
Non-PCI impaired loans $ 31,835
Discounted cash flows Discount 0% — 62% 7%
$ 38,319
Market comparables
Discount ⁽¹⁾
0% — 100% 18%
OREO $ 345
Appraisal Selling cost 8% 8%


~~(1)~~	~~Discount is adjusted for factors such as liquidation cost of collateral and selling cost.~~

The following tables present the carrying and fair values per the fair value hierarchy of certain financial instruments, excluding those measured at fair value on a recurring basis, as of September 30, 2017 and December 31, 2016:

($ in thousands) September 30, 2017

Carrying
Amount
Level 1 Level 2 Level 3
Estimated
Fair Value
Financial assets:
Cash and cash equivalents $ 1,736,749
$ 1,736,749
$ —
$ —
$ 1,736,749
Interest-bearing deposits with banks $ 404,946
$ —
$ 404,946
$ —
$ 404,946
Resale agreements ⁽¹⁾
$ 1,250,000
$ —
$ 1,236,413
$ —
$ 1,236,413
Restricted equity securities $ 73,322
$ —
$ 73,322
$ —
$ 73,322
Loans held-for-sale $ 178
$ —
$ 178
$ —
$ 178
Loans held-for-investment, net $ 28,239,431
$ —
$ —
$ 27,635,961
$ 27,635,961
Accrued interest receivable $ 111,710
$ —
$ 111,710
$ —
$ 111,710
Financial liabilities:

Customer deposits:

Demand, checking, savings and money market deposits $ 25,517,121
$ —
$ 25,517,121
$ —
$ 25,517,121
Time deposits $ 5,794,541
$ —
$ 5,787,188
$ —
$ 5,787,188
Short-term borrowings $ 24,813
$ —
$ 24,813
$ —
$ 24,813
FHLB advances $ 323,323
$ —
$ 336,741
$ —
$ 336,741
Repurchase agreements ⁽¹⁾
$ 50,000
$ —
$ 105,269
$ —
$ 105,269
Long-term debt $ 176,513
$ —
$ 139,649
$ —
$ 139,649
Accrued interest payable $ 11,017
$ —
$ 11,017
$ —
$ 11,017


~~(1)~~	~~Resale and repurchase agreements are reported net pursuant to ASC 210-20-45,~~ ~~Balance Sheet Offsetting. As of September 30, 2017, $400.0 millionout of $450.0 millionof repurchase agreements were eligible for netting against resale agreements.~~

($ in thousands) December 31, 2016
Carrying
Amount Level 1 Level 2 Level 3 Estimated
Fair Value
Financial assets:

Cash and cash equivalents $ 1,878,503
$ 1,878,503
$ —
$ —
$ 1,878,503
Interest-bearing deposits with banks $ 323,148
$ —
$ 323,148
$ —
$ 323,148
Resale agreements ⁽¹⁾
$ 2,000,000
$ —
$ 1,980,457
$ —
$ 1,980,457
Held-to-maturity investment security $ 143,971
$ —
$ —
$ 144,593
$ 144,593
Restricted equity securities $ 72,775
$ —
$ 72,775
$ —
$ 72,775
Loans held-for-sale $ 23,076
$ —
$ 23,076
$ —
$ 23,076
Loans held-for-investment, net $ 25,242,619
$ —
$ —
$ 24,915,143
$ 24,915,143
Accrued interest receivable $ 100,524
$ —
$ 100,524
$ —
$ 100,524
Financial liabilities:

Customer deposits:

Demand, checking, savings and money market deposits $ 24,275,714
$ —
$ 24,275,714
$ —
$ 24,275,714
Time deposits $ 5,615,269
$ —
$ 5,611,746
$ —
$ 5,611,746
Short-term borrowings $ 60,050
$ —
$ 60,050
$ —
$ 60,050
FHLB advances $ 321,643
$ —
$ 334,859
$ —
$ 334,859
Repurchase agreements ⁽¹⁾
$ 350,000
$ —
$ 411,368
$ —
$ 411,368
Long-term debt $ 186,327
$ —
$ 186,670
$ —
$ 186,670
Accrued interest payable $ 9,440
$ —
$ 9,440
$ —
$ 9,440


~~(1)~~	~~Resale and repurchase agreements are reported net pursuant to ASC 210-20-45,~~ ~~Balance Sheet Offsetting. As of December 31, 2016, $100.0 millionout of $450.0 millionof repurchase agreements were eligible for netting against resale agreements.~~

~~The following is a description of~~section describes the valuation methodologies ~~and significant assumptions~~ used by the Company to measure financial assets and liabilities ~~at fair value, and~~on a recurring basis, as well as the general classification of these instruments pursuant to ~~estimate fair value for certain financial instruments not recorded at fair value. The description also includes the level of~~ the fair value ~~hierarchy in which the assets or liabilities are classified.~~hierarchy.

~~Cash and Cash Equivalents~~Available-for-SaleDebt Securities — ~~The carrying amount approximates fair value due to the short-term nature of these instruments. As such, the estimated fair value is classified as Level 1.~~

~~Interest-bearing Deposits with Banks~~ — The fair value of interest-bearing deposits with banks generally approximates their book value due to their short maturities. In addition, due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

~~Resale Agreements~~ ~~— The fair value of resale agreements~~AFS debt securities is estimated by discounting the cash flows based on expected maturities or repricing dates utilizing estimated market discount rates. In addition, due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

~~Held-to-Maturity Investment Security —~~ The held-to-maturity investment security as of December 31, 2016 was comprised of a floating rate non-agency commercial mortgage-backed security that was subsequently transferred from held-to-maturity to available-for-sale during the three months ended September 30, 2017. This security was categorized under ~~Available-for-sale investment securities — other securities~~ ~~as of September 30, 2017.~~The fair value of this security is estimated by discounting the future expected cash flows utilizing the underlying index and a discount margin. Other unobservable inputs include conditional prepayment rate, constant default rate and loss severity. Due to the significant unobservable inputs used in estimating the fair value, this security is classified as Level 3.

~~Available-for-SaleInvestment Securities~~ — When available, the Company uses quoted market prices to determine the fair value of available-for-sale investment securities, which are classified as Level 1. Level 1 available-for-sale investment securities are primarily comprised of U.S. Treasury securities. Other than the non-agency commercial mortgage-backed security, the fair value of which is described above, the fair value of other available-for-sale investment securities are generally determined by independent external pricing service providers who have experience in valuing these securities or by taking the average quoted market prices obtained from independent external brokers. The valuations provided by the third-party pricing service providers are based on observable market inputs, which include benchmark yields, reported trades, issuer spreads, benchmark securities, bids, offers, prepayment expectations and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include new issue data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In ~~obtaining such valuation information from third parties,~~valuing securities issued by state and political subdivisions, inputs used by third-party pricing service providers also include material event notices.

On a monthly basis, the Company ~~reviewed~~validates the ~~methodologies~~valuations provided by third-party pricing service providers to ensure that the fair value determination is consistent with the applicable accounting guidance and the financial instruments are properly classified in the fair value hierarchy. To perform this validation, the Company evaluates the fair values of securities by comparing the fair values provided by the third-party pricing service providers to prices from other available independent sources for the same securities. When significant variances in prices are identified, the Company further compares inputs used by different sources to ~~develop~~ascertain the ~~resulting~~reliability of these sources. On a quarterly basis, the Company reviews the valuation inputs and methodology for each security category furnished by third-party pricing service providers.

When available, the Company uses quoted market prices to determine the fair ~~values. The available-for-sale investment~~value of AFS debt securities ~~valued using such methods~~that are classified as Level 2.

~~Loans Held-for-Sale~~ ~~— The Company’s loans held-for-sale~~1. Level 1 AFS debt securities consist of U.S. Treasury securities. When pricing is unavailable from third-party pricing service providers for certain securities, the Company requests market quotes from various independent external brokers and utilizes the average quoted market prices. In addition, the Company obtains market quotes from other official published sources. As these valuations are ~~carried at~~based on observable inputs in the lower of cost or fair value. Loans held-for-sale were comprised of single-family residential loans as of September 30, 2017, and were primarily comprised of consumer loans as of December 31, 2016. The fair value of loans held-for-sale is derived from current ~~market prices and comparative current sales. The Company records any fair value adjustments on a nonrecurring basis. Loans held-for-sale~~marketplace, they are classified as Level 2. The Company periodically communicates with the independent external brokers to validate their pricing methodology. Information such as pricing sources, pricing assumptions, data inputs and valuation techniques are reviewed periodically.

~~Non-PCI Impaired Loans~~Equity Securities — Equity securities consisted of mutual funds as of both June 30, 2022 and December 31, 2021. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of ~~non-PCI impaired loans~~these equity securities. When NAV is ~~measured using~~available periodically and the ~~market comparables or discounted cash flow techniques. For CRE and C&I loans,~~equity securities can be put back to the ~~fair value is based on each loan’s observable market price or~~transfer agents at the publicly available NAV, the fair value of the collateral less cost to sell, if the loan is collateral dependent. The fair value of collateral is generally based on third party appraisals (or internal evaluation if third party appraisal is not required by regulations) which utilize one or more valuation techniques (income, market and/or cost approaches). All third party appraisals and evaluations are reviewed and validated by independent appraisers or the Company’s appraisal department staffed by licensed appraisers and/or experienced real estate reviewers. The third party appraisals are ordered through the appraisal department (except for one-to-four unit residential appraisals which are typically ordered through an approved appraisal management company or an approved residential appraiser) at the inception, renewal or, for all real estate related loans, upon the occurrence of any events causing a downgrade to an adverse grade (i.e., “substandard” or “doubtful”). Updated appraisals and evaluations are generally obtained within the last 12 months. The Company increases the frequency of obtaining updated appraisals for adversely graded credits when declining market conditions exist. All appraisals include an “as is” market value without conditions as of the effective date of the appraisal. For certain impaired loans, the Company utilizes the discounted cash flow approach and applies a discount derived from historical data. The significant unobservable inputs used in the fair value measurement of non-PCI impaired loans are discounts applied based on the liquidation cost of collateral and selling cost. On a quarterly basis, all nonperforming assets are reviewed to assess whether the current carrying value is supported by the collateral or cash flow and to ensure that the current carrying value is appropriate. Non-PCI impaired loans are classified as Level 3.

~~Loans Held-for-Investment, net~~ — The fair value of loans held-for-investment other than non-PCI impaired loans is determined based on a discounted cash flow approach considered for an exit price value. The discount rate is derived from the associated yield curve plus spreads that reflect the rates in the market for loans with similar financial characteristics. No adjustments have been made for changes in credit within any of the loan portfolios. It is management’s opinion that the allowance for loan losses pertaining to performing and nonperforming loans results in a fair value adjustment of credit for such loans. Due to the unobservable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 3.

~~Other Real Estate Owned~~ — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment, which are recorded at estimated fair value less cost to sell at the time of foreclosure and at the lower of cost or estimated fair value less the cost to sell subsequent to acquisition. The fair values of OREO properties are based on third party appraisals or accepted written offers. Refer to the ~~Non-PCI Impaired Loans~~ section above for a detailed discussion on the Company’s policies and procedures related to appraisals and evaluations. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. The significant unobservable input used is the selling cost. OREO properties are classified as Level 3.

~~Restricted Equity Securities~~ ~~— Restricted~~ equity securities are comprised of Federal Reserve Bank stock and FHLB stock. Ownership of these securities is restricted to member banks and these securities do not have a readily determinable fair value. Purchases and sales of these securities are at par value. The carrying amounts of the Company’s restricted equity securities approximate fair value. The valuation of these investments is classified as Level 2.

~~Accrued Interest Receivable~~ ~~— The carrying amount approximates~~1. When NAV is available periodically but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value ~~due to the short-term nature~~ of these ~~instruments. Considering the observable nature of the inputs used in deriving the estimated fair value, these instruments are~~equity securities is classified as Level 2.

Interest Rate ~~Swaps and Options~~Contracts— The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with ~~institutional counterparties to hedge against interest rate swap and option products offered to bank customers. These products allow~~its borrowers to lock in attractive intermediate and long-term interest rates, ~~by entering into an interest rate swap or option contract with the Company,~~ resulting in the customer obtaining a synthetic ~~fixed~~fixed-rate loan. To economically hedge against the interest rate ~~loan.~~risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap or interest rate collar contracts with institutional counterparties to hedge against ~~certificates of deposit issued. This product allows the Company to lock in attractive floating~~certain variable interest rate ~~funding.~~borrowings and variable interest rate loans. These interest rate contracts with institutional counterparties are designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The ~~variable cash receipts (or payments) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. The~~ fair value of the interest rate options, ~~consisting~~which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates ~~fell~~fall below (rise above) the strike rate of the floors (caps). The variable interest rates used in the calculation of projected receipts on the floor (cap) are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. In addition, to comply with the provisions of ASC 820,Fair Value Measurement, the Company incorporates credit valuation adjustments to appropriately reflect both its own ~~nonperformance risk~~ and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives. The credit valuation adjustments associated with the Company’s derivatives utilize model-derived credit spreads, which are Level 3 inputs. Considering the observable nature of all other significant inputs model-derived credit spreads. As of September 30, 2017, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of these interest rate contracts and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivative portfolios. As a result,utilized, the Company classifies these derivative instruments as Level ~~2 of the fair value hierarchy due to the observable nature of the significant inputs utilized.~~2.

Foreign Exchange Contracts— The Company enters into ~~short-term~~ foreign exchange contracts to ~~purchase/sell foreign currencies at set rates in~~accommodate the ~~future. These contracts economically hedge against~~business needs of its customers. For a majority of the foreign exchange ~~rate fluctuations.~~contracts entered with its customers, the Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its exposure. The Company also ~~enters into contracts with institutional counterparties to hedge against~~utilizes foreign exchange ~~products offered~~contracts that are not designated as hedging instruments to ~~bank~~mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. ~~These products allow customers to hedge the~~The fair value of foreign exchange ~~risk of their deposits and loans denominated in foreign currencies. The Company assumes minimal foreign exchange rate risk because the~~ contracts ~~with the customer and the institutional party mirror each other. The fair value~~ is determined at each reporting period based on changes in the foreign exchange ~~rate.~~rates. These are over-the-counter contracts where quoted market prices are not readily available. Valuation is measured using conventional valuation methodologies with observable market data. Valuation depends on the type of derivative, and the nature of the underlying rate and contractual terms including period of maturity, price and index upon which the derivative’s value is based. Key inputs include foreign exchange rates (spot and/or forward rates), volatility of currencies and the correlation of such inputs. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and ~~resulted~~result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts is classified as Level 2. As of ~~September~~June 30, 2017, foreign exchange forward contracts used to economically hedge the Company’s net investment in East West Bank (China) Limited, a non-U.S. Dollar (“USD”) functional currency subsidiary in China, are included in this caption. See ~~Foreign Currency Forward Contracts~~ ~~in the section below for details on valuation methodologies~~2022 and ~~significant assumptions.~~

~~Customer Deposits~~ — The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking, savings and money market deposits, approximates the carrying amount as these deposits are payable on demand at the measurement date. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2. For time deposits, the fair value is based on the discounted value of contractual cash flows using current market rates for instruments with similar maturities. Due to the observable nature of the inputs used in deriving the estimated fair value, time deposits are classified as Level 2.

~~Federal Home Loan Bank Advances~~ — The fair value of FHLB advances is estimated based on the discounted value of contractual cash flows, using rates currently offered by the FHLB of San Francisco for advances with similar remaining maturities at each reporting date. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

~~Repurchase Agreements~~ — The fair value of the repurchase agreements is calculated by discounting future cash flows based on expected maturities or repricing dates, utilizing estimated market discount rates and taking into consideration the call features of each instrument. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

~~Accrued Interest Payable~~ — The carrying amount approximates fair value due to the short-term nature of these instruments. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

~~Long-Term Debt~~ — The fair value of long-term debt is estimated by discounting the cash flows through maturity based on current market rates the Company would pay for new issuances. Due to the observable nature of the inputs used in deriving the estimated fair value, long-term debt is classified as Level 2.

~~Foreign Currency Forward Contracts~~ ~~— During the three months ended~~ December 31, ~~2015,~~2021, the ~~Company began entering into~~Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) ~~Limited. Previously, the~~Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were eligible for hedge accounting. During the nine months ended September 30, 2017, the foreign currency forward contracts were dedesignated when the hedge relationship ceased to be highly effective. The Company continues to economically hedge its foreign currency exposure resulting from East West Bank (China) Limited and the foreign currency forward contracts are includeddesignated as ~~part of the~~ ~~“Foreign Exchange Contracts”~~ ~~caption as of September 30, 2017.~~net investment hedges. The fair value of foreign currency non-deliverable forward contracts is ~~valued~~determined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. ~~Inputs~~Key inputs of the current market exchange rate include spot rates and forward rates ~~and the interest rate curves~~ of the ~~domestic and foreign currency. Interest rate~~contractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

Credit ~~Risk Participation Agreements~~ Contracts — The Company ~~enters~~may periodically enter into ~~RPAs, under which the Company assumes its pro-rata share of~~credit risk participation agreements (“RPAs”) to manage the credit exposure on interest rate contracts associated with the ~~borrower’s performance related to interest rate derivative contracts.~~syndicated loans. The Company may enter into protection sold or protection purchased RPAs with institutional counterparties. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. The credit spreads of the borrowers used in the calculation are estimated by the Company based on current market conditions, including consideration of current borrowing spreads for similar customers and transactions, review of existing collateralization or other credit enhancements, and changes in credit sector and entity-specific credit information. The Company has determined thatSince the majority of the inputs used to value the RPAs are ~~observable. Accordingly,~~observable, RPAs ~~fall within~~are classified as Level ~~2 of the fair value hierarchy.~~2.

~~Warrants~~ Equity Contracts — ~~The Company obtained warrants to purchase preferred and common stock of technology and life sciences companies as~~ As part of the loan origination ~~process.~~process, the Company may obtain warrants to purchase preferred and/or common stock of the borrowers, which are mainly in the technology and life sciences sectors. As of ~~September~~June 30, ~~2017,~~2022 and December 31, 2021, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company ~~valued~~values these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The ~~option volatility assumption was~~Company applies proxy volatilities based on ~~public market indices that include members that operate in similar industries as~~ the ~~companies in our~~industry sectors of the private ~~company portfolio.~~companies. The model values ~~were further~~are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private company warrants. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. There is a direct correlation between changes in the volatility assumption and the fair value measurement of warrants from private companies, while there is an inverse correlation between changes in the liquidity discount assumption and the fair value measurement of warrants from private companies. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a ~~sensitivity~~measurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.

Commodity Contracts — The Company enters into energy commodity contracts consisting of swaps and options with its oil and gas loan customers, which allow them to hedge against the risk of fluctuation in energy commodity prices. The fair value ~~estimates presented herein~~of the commodity option contracts is determined using the Black-Scholes model and assumptions that include expectations of future commodity price and volatility. The future commodity contract price is derived from observable inputs such as the market price of the commodity. Commodity swaps are structured as an exchange of fixed cash flows for floating cash flows. The fair value of the commodity swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments) based on ~~pertinent information available~~the market prices of the commodity. The fixed cash flows are predetermined based on the known volumes and fixed price as specified in the swap agreement. The floating cash flows are correlated with the change of forward commodity prices, which is derived from market corroborated futures settlement prices. As a result, the Company classifies these derivative instruments as Level 2 due to ~~management~~the observable nature of the significant inputs utilized.

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of ~~each reporting date. Although~~June 30, 2022 and December 31, 2021:



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	624,686	$	—	$	—	$	624,686
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		285,245		—		285,245
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		563,832		—		563,832
Residential mortgage-backed securities	—		1,910,240		—		1,910,240
Municipal securities	—		266,733		—		266,733
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		411,768		—		411,768
Residential mortgage-backed securities	—		726,989		—		726,989
Corporate debt securities	—		559,293		—		559,293
Foreign government bonds	—		242,997		—		242,997
Asset-backed securities	—		67,350		—		67,350
Collateralized loan obligations (“CLOs”)	—		596,371		—		596,371
Total AFS debt securities	$	624,686	$	5,630,818	$	—	$	6,255,504

Investments in tax credit and other investments:
Equity securities	$	20,463	$	4,312	$	—	$	24,775
Total investments in tax credit and other investments	$	20,463	$	4,312	$	—	$	24,775

Derivative assets:
Interest rate contracts	$	—	$	261,326	$	—	$	261,326
Foreign exchange contracts	—		42,324		—		42,324

Equity contracts	—		2		357		359
Commodity contracts	—		404,275		—		404,275
Gross derivative assets	$	—	$	707,927	$	357	$	708,284
Netting adjustments (1)	$	—	$	(251,718)	$	—	$	(251,718)
Net derivative assets	$	—	$	456,209	$	357	$	456,566

Derivative liabilities:
Interest rate contracts	$	—	$	359,674	$	—	$	359,674
Foreign exchange contracts	—		29,144		—		29,144
Credit contracts	—		76		—		76
Commodity contracts	—		373,675		—		373,675
Gross derivative liabilities	$	—	$	762,569	$	—	$	762,569
Netting adjustments (1)	$	—	$	(126,414)	$	—	$	(126,414)
Net derivative liabilities	$	—	$	636,155	$	—	$	636,155



($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:
U.S. Treasury securities	$	1,032,681	$	—	$	—	$	1,032,681
U.S. government agency and U.S. government-sponsored enterprise debt securities	—		1,301,971		—		1,301,971
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	—		1,228,980		—		1,228,980
Residential mortgage-backed securities	—		2,928,283		—		2,928,283
Municipal securities	—		523,158		—		523,158
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	—		496,443		—		496,443
Residential mortgage-backed securities	—		881,931		—		881,931
Corporate debt securities	—		649,665		—		649,665
Foreign government bonds	—		257,733		—		257,733
Asset-backed securities	—		74,558		—		74,558
CLOs	—		589,950		—		589,950
Total AFS debt securities	$	1,032,681	$	8,932,672	$	—	$	9,965,353

Investments in tax credit and other investments:
Equity securities	$	22,130	$	4,474	$	—	$	26,604
Total investments in tax credit and other investments	$	22,130	$	4,474	$	—	$	26,604

Derivative assets:
Interest rate contracts	$	—	$	240,222	$	—	$	240,222
Foreign exchange contracts	—		21,033		—		21,033

Equity contracts	—		5		215		220
Commodity contracts	—		222,709		—		222,709
Gross derivative assets	$	—	$	483,969	$	215	$	484,184
Netting adjustments (1)	$	—	$	(100,953)	$	—	$	(100,953)
Net derivative assets	$	—	$	383,016	$	215	$	383,231

Derivative liabilities:
Interest rate contracts	$	—	$	179,962	$	—	$	179,962
Foreign exchange contracts	—		15,501		—		15,501
Credit contracts	—		141		—		141
Commodity contracts	—		194,567		—		194,567
Gross derivative liabilities	$	—	$	390,171	$	—	$	390,171
Netting adjustments (1)	$	—	$	(232,727)	$	—	$	(232,727)
Net derivative liabilities	$	—	$	157,444	$	—	$	157,444

(1)Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.

For the three and six months ended June 30, 2022 and 2021, Level 3 fair value measurements that were measured on a recurring basis consisted of equity contracts issued by private companies. The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three and six months ended June 30, 2022 and 2021:



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Equity contracts
Beginning balance	$	309	$	272	$	215	$	273

Total gains included in earnings (1)	48		47		51		46




Issuances	—		—		91		—

Settlements	—		(96)		—		(96)

Ending balance	$	357	$	223	$	357	$	223

(1)Includes unrealized gains (losses) of $48 thousand and $(27) thousand for the three months ended June 30, 2022 and 2021, respectively, and $51 thousand and $(29) thousand for the six months ended June 30, 2022 and 2021, respectively. The realized/unrealized gains (losses) of equity contracts are recorded in Lending fees on the Consolidated Statement of Income.

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of June 30, 2022 and December 31, 2021. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
June 30, 2022
Derivative assets:
Equity contracts	$	357	Black-Scholes option pricing model	Equity volatility	46% — 70%.	61%
				Liquidity discount	47%	47%
December 31, 2021
Derivative assets:
Equity contracts	$	215	Black-Scholes option pricing model	Equity volatility	44% — 54%	49%
				Liquidity discount	47%	47%

(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of June 30, 2022 and December 31, 2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis include certain individually evaluated loans held-for-investment, investments in qualified affordable housing partnerships, tax credit and other investments, OREO, loans held-for-sale, and other nonperforming assets. Nonrecurring fair value adjustments result from the impairment on certain individually evaluated loans held-for-investment and investments in qualified affordable housing partnerships, tax credit and other investments, from write-downs of OREO and other nonperforming assets, or from the application of lower of cost or fair value on loans held-for-sale.

Individually Evaluated Loans Held-for-Investment — Individually evaluated loans held-for-investment are classified as Level 3 assets. The following two methods are used to derive the fair value of individually evaluated loans held-for-investment:

•Discounted cash flow valuation techniques that consist of developing an expected stream of cash flows over the life of the loans, and then calculating the present value of the loans by discounting the expected cash flows at a designated discount rate.

•When the repayment of an individually evaluated loan is dependent on the sale of the collateral, the fair value of the loan is determined based on the fair value of the underlying collateral, which may take the form of real estate, inventory, equipment, contracts or guarantees. The fair value of the underlying collateral is generally based on third-party appraisals, or an internal valuation if a third-party appraisal is not ~~aware~~required by regulations, or unavailable. An internal valuation utilizes one or more valuation techniques such as the income, market and/or cost approaches.

Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net — The Company conducts due diligence on its investments in qualified affordable housing partnerships, tax credit and other investments prior to the initial investment date and through the placed-in-service date. After these investments are either acquired or placed into service, the Company continues its periodic monitoring process to ensure book values are realizable and that there is no significant tax credit recapture risk. This monitoring process includes the quarterly review of ~~any~~the financial statements, the annual review of tax returns of the investment entity, the annual review of the financial statements of the guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time when the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment (“OTTI”) on an annual basis or when events or circumstances suggest that the carrying amount of the investments may not be realizable. These circumstances can include, but are not limited to the following factors:

•expected future cash flows that are less than the carrying amount of the investment;

•changes in the economic, market or technological environment that could adversely affect the investee’s operations; and

•other factors that raise doubt about the investee’s ability to continue as a going concern, such as negative cash flows from operations and the continuing prospects of the underlying operations of the investment.

All available information is considered in assessing whether a decline in value is other-than-temporary. Generally, none of the aforementioned factors are individually conclusive and the relative importance placed on individual facts may vary depending on the situation. In accordance with ASC 323-10-35-32, Investments — Equity Method and Joint Ventures, an impairment charge would ~~significantly affect the~~only be recognized in earnings for a decline in value that is determined to be other-than-temporary.

Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. These OREO properties are recorded at estimated fair value ~~amounts, such amounts have not been comprehensively revalued for purposes~~less the costs to sell at the time of ~~these Consolidated Financial Statements since that date,~~foreclosure and ~~therefore, current estimates~~at the lower of cost or estimated fair value ~~may differ significantly~~less the costs to sell subsequent to acquisition. On a monthly basis, the current fair market value of each OREO property is reviewed to ensure that the current carrying value is appropriate. OREO properties are classified as Level 3.

Other Nonperforming Assets—Other nonperforming assets are recorded at fair value upon the transfer from loans to foreclosed assets. Subsequently, foreclosed assets are recorded at the lower of carrying value or fair value. Fair value is based on independent market prices, appraised values of the collateral or management’s estimated recovery of the foreclosed asset. The Company records an impairment when the foreclosed asset’s fair value declines below its carrying value. The fair value measurement of other nonperforming assets is classified within one of the three levels in a valuation hierarchy based upon the observability of inputs to the valuation as of the measurement date.

The following tables present the carrying amounts of assets that were still held and had fair value adjustments measured on a nonrecurring basis as of June 30, 2022 and December 31, 2021:



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of June 30, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)	$	—	$	—	$	55,015	$	55,015
Commercial real estate (“CRE”):
CRE	—		—		30,716		30,716
Multifamily residential	—		—		1,055		1,055


Total commercial	—		—		86,786		86,786
Consumer:
Residential mortgage:

Home equity lines of credit (“HELOCs”)	—		—		1,167		1,167


Total consumer	—		—		1,167		1,167
Total loans held-for-investment	$	—	$	—	$	87,953	$	87,953



($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:
Commercial:
C&I	$	—	$	—	$	102,349	$	102,349
CRE:
CRE	—		—		21,891		21,891



Total commercial	—		—		124,240		124,240
Consumer:
Residential mortgage:

HELOCs	—		—		2,744		2,744


Total consumer	—		—		2,744		2,744
Total loans held-for-investment	$	—	$	—	$	126,984	$	126,984

Other nonperforming assets	$	391	$	—	$	—	$	391

The following table presents the increase (decrease) in fair value of certain assets held at the end of the respective reporting periods, for which a nonrecurring fair value adjustment was recognized for the three and six months ended June 30, 2022 and 2021:



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Loans held-for-investment:
Commercial:
C&I	$	(6,054)	$	(6,462)	$	(14,740)	$	(15,530)
CRE:
CRE	(533)		(275)		2,330		(7,336)
Multifamily residential	(8)		2		(8)		(6)
Construction and land	—		(209)		—		(280)

Total commercial	(6,595)		(6,944)		(12,418)		(23,152)
Consumer:
Residential mortgage:
Single-family residential	—		—		—		(8)
HELOCs	82		3		85		(23)

Other consumer	—		(2,491)		—		(2,491)
Total consumer	82		(2,488)		85		(2,522)
Total loans held-for-investment	$	(6,513)	$	(9,432)	$	(12,333)	$	(25,674)
Investments in tax credit and other investments, net	$	—	$	877	$	—	$	877
OREO	$	—	$	(910)	$	—	$	(910)
Other nonperforming assets	$	(6,861)	$	—	$	(6,861)	$	(3,890)

The following table presents the quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements that are measured on a nonrecurring basis as of June 30, 2022 and December 31, 2021:



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
June 30, 2022
Loans held-for-investment	$	36,889	Discounted cash flows	Discount	4% — 6%	4%
	$	19,293	Fair value of collateral	Discount	15% — 77%	37%

	$	31,771	Fair value of property	Selling cost	8%	8%




December 31, 2021
Loans held-for-investment	$	64,919	Discounted cash flows	Discount	4% — 15%	7%

	$	38,537	Fair value of collateral	Discount	15% — 75%	41%

	$	23,528	Fair value of property	Selling cost	8%	8%

(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of June 30, 2022 and December 31, 2021.

Disclosures about Fair Value of Financial Instruments

The following tables present the fair value estimates for financial instruments as of June 30, 2022 and December 31, 2021, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented ~~herein.~~elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable, restricted equity securities, at cost, and mortgage servicing rights that are included in Other assets, and accrued interest payable which is included in Accrued expenses and other liabilities. These financial assets and liabilities are measured on an amortized cost basis on the Company’s Consolidated Balance Sheet.



($ in thousands)	June 30, 2022
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	1,902,053	$	1,902,053	$	—	$	—	$	1,902,053
Interest-bearing deposits with banks	$	712,709	$	—	$	712,709	$	—	$	712,709
Resale agreements	$	1,422,794	$	—	$	1,348,036	$	—	$	1,348,036
HTM debt securities	$	3,028,302	$	486,521	$	2,170,028	$	—	$	2,656,549
Restricted equity securities, at cost	$	77,962	$	—	$	77,962	$	—	$	77,962
Loans held-for-sale	$	28,464	$	—	$	28,464	$	—	$	28,464
Loans held-for-investment, net	$	45,938,806	$	—	$	—	$	45,860,749	$	45,860,749
Mortgage servicing rights	$	5,909	$	—	$	—	$	10,349	$	10,349
Accrued interest receivable	$	172,008	$	—	$	172,008	$	—	$	172,008
Financial liabilities:
Demand, checking, savings and money market deposits	$	44,965,778	$	—	$	44,965,778	$	—	$	44,965,778
Time deposits	$	9,377,576	$	—	$	9,318,992	$	—	$	9,318,992


FHLB advances	$	174,776	$	—	$	175,207	$	—	$	175,207
Repurchase agreements	$	611,785	$	—	$	619,280	$	—	$	619,280
Long-term debt	$	147,801	$	—	$	139,206	$	—	$	139,206
Accrued interest payable	$	9,596	$	—	$	9,596	$	—	$	9,596



($ in thousands)	December 31, 2021
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	3,912,935	$	3,912,935	$	—	$	—	$	3,912,935
Interest-bearing deposits with banks	$	736,492	$	—	$	736,492	$	—	$	736,492
Resale agreements	$	2,353,503	$	—	$	2,335,901	$	—	$	2,335,901

Restricted equity securities, at cost	$	77,434	$	—	$	77,434	$	—	$	77,434
Loans held-for-sale	$	635	$	—	$	635	$	—	$	635
Loans held-for-investment, net	$	41,152,202	$	—	$	—	$	41,199,599	$	41,199,599

Mortgage servicing rights	$	5,706	$	—	$	—	$	9,104	$	9,104
Accrued interest receivable	$	159,833	$	—	$	159,833	$	—	$	159,833
Financial liabilities:

Demand, checking, savings and money market deposits	$	45,388,550	$	—	$	45,388,550	$	—	$	45,388,550
Time deposits	$	7,961,982	$	—	$	7,966,116	$	—	$	7,966,116

FHLB advances	$	249,331	$	—	$	250,372	$	—	$	250,372
Repurchase agreements	$	300,000	$	—	$	310,525	$	—	$	310,525
Long-term debt	$	147,658	$	—	$	151,020	$	—	$	151,020
Accrued interest payable	$	11,435	$	—	$	11,435	$	—	$	11,435

Note 54 —~~Securities~~Assets Purchased under Resale Agreements and Sold under Repurchase Agreements

Assets Purchased under Resale Agreements

~~Resale agreements are recorded at the balances at which the securities were acquired. The market values of the underlying securities collateralizing the related receivable of~~In the resale agreements, ~~including accrued interest, are monitored. Additional~~the Company is exposed to credit risk for both the counterparties and the underlying collateral. The Company manages credit exposure from certain transactions by entering into master netting agreements and collateral ~~may be requested~~arrangements with the counterparties. The relevant agreements allow for the efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is also the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company ~~from the counterparty when deemed appropriate. Gross~~did not hold any reserves for credit impairment with respect to these agreements as of both June 30, 2022 and December 31, 2021.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were ~~$1.65 billion and $2.10~~$1.13 billion as of ~~September~~June 30, ~~2017~~2022, and $1.33 billion as of December 31, ~~2016,~~2021. The weighted-average yields were 1.96% and 1.54% for the three months ended June 30, 2022 and 2021, respectively; and 1.79% and 1.55% for the six months ended June 30, 2022 and 2021, respectively. ~~The weighted average interest rates~~

Loans Purchased under Resale Agreements — Total loans purchased under resale agreements were ~~2.30% and 1.84%~~$289.8 million as of ~~September~~June 30, ~~2017~~2022, and $1.02 billion as of December 31, ~~2016,~~2021. The weighted-average yields were 2.47% and 1.47% for the three months ended June 30, 2022 and 2021, respectively; and 1.91% and 1.64% for the six months ended June 30, 2022 and 2021, respectively.

Assets Sold under Repurchase Agreements

~~Long-term repurchase agreements are accounted for as collateralized financing transactions and recorded at the balances at which the~~ — As of June 30, 2022, securities ~~were sold. The collateral for~~sold under the repurchase agreements ~~is primarily comprised~~consisted of ~~U.S. Treasury securities,~~ U.S. government agency and U.S. ~~government sponsored~~government-sponsored enterprise mortgage-backed securities, and U.S. ~~government agency and U.S. government sponsored enterprise debt~~Treasury securities. ~~The Company may have to provide additional collateral for the repurchase agreements, as necessary.~~ Gross repurchase agreements were ~~$450.0~~$611.8 million as of ~~each~~June 30, 2022, and $300.0 million as of ~~September 30, 2017 and~~ December 31, ~~2016.~~2021. The ~~weighted average~~weighted-average interest rates were ~~3.56%~~2.70% and ~~3.15% as~~2.63% for the three months ended June 30, 2022 and 2021, respectively; and 2.66% and 2.65% for the six months ended June 30, 2022 and 2021, respectively. As of ~~September~~June 30, ~~2017~~2022, $311.8 million and ~~December 31, 2016,~~$300.0 million of the securities sold under repurchase agreements will mature in 2022 and 2023, respectively.

Balance Sheet Offsetting

The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchase agreements that, ~~provide the Company,~~ in the event of default by the counterparty, provide the Company the right to liquidate securities held and to offset receivables and payables with the same counterparty. The Company nets resale and repurchase transactions with the same counterparty on the Consolidated Balance ~~Sheets~~Sheet when it has a legally enforceable master netting agreement and the transactions are eligible for netting under ASC ~~210-20-45.~~210-20-45-11, Balance Sheet Offsetting Repurchase and Reverse Repurchase Agreements. Collateral ~~accepted~~received includes securities and loans that are not recognized on the Consolidated Balance ~~Sheets.~~Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance ~~Sheets~~Sheet against the related collateralized liability. ~~Collateral accepted~~Securities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, ~~but is~~and are usually delivered to and held by the ~~third party~~third-party trustees. The collateral amounts received/posted are limited for presentation purposes to the related recognized asset/liability balance for each counterparty, and accordingly, do not include excess collateral received/pledged.

The following tables present the resale and repurchase agreements included on the Consolidated Balance ~~Sheets~~Sheet as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021:



($ in thousands)	June 30, 2022

Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount

							Collateral Received
Resale agreements	$	1,422,794	$	—	$	1,422,794	$	(1,336,962)	(1)	$	85,832

Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Liabilities Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount

							Collateral Pledged
Repurchase agreements	$	611,785	$	—	$	611,785	$	(611,785)	(2)	$	—



($ in thousands)	As of September 30, 2017																($ in thousands)				December 31, 2021
	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheets			Net Amounts of Assets Presented on the Consolidated Balance Sheets			Gross Amounts Not Offset on the Consolidated Balance Sheets
															Gross Amounts of Recognized Assets				Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts of Assets Presented on the Consolidated Balance Sheet					Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets																	Assets																	Net Amount
		Gross Amounts of Recognized Assets						Gross Amounts Offset on the Consolidated Balance Sheets			Net Amounts of Assets Presented on the Consolidated Balance Sheets					Financial Instruments						Collateral Pledged					Net Amount										Gross Amounts of Recognized Assets	Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet		Collateral Received
Resale agreements				$	—		$			(1,240,568				)		⁽²⁾			$	9,432	Resale agreements					$	2,353,503			$	—	$	2,353,503		$	(2,327,687)							(1)		$	25,816

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheets			Net Amounts of Liabilities Presented on the Consolidated Balance Sheets			Gross Amounts Not Offset on the Consolidated Balance Sheets
Liabilities										Liabilities					Gross Amounts of Recognized Liabilities				Gross Amounts Offset on the Consolidated Balance Sheet						Net Amounts of Liabilities Presented on the Consolidated Balance Sheet						Gross Amounts Not Offset on the Consolidated Balance Sheet
																														Net Amount
		Gross Amounts of Recognized Liabilities						Gross Amounts Offset on the Consolidated Balance Sheets					Net Amounts of Liabilities Presented on the Consolidated Balance Sheets				Financial Instruments					Collateral Posted						Net Amount													Collateral Pledged
Repurchase agreements				$	—		$					(50,000				)	⁽³⁾	$			—		Repurchase agreements					$	300,000					$	—			$	300,000			$	(300,000)	(2)			$	—

(1)Represents the fair value of assets the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

($ in thousands) As of December 31, 2016

Gross
Amounts
of Recognized
Assets
Gross Amounts
Offset on the
Consolidated
Balance Sheets Net Amounts of
Assets Presented
on the
Consolidated
Balance Sheets Gross Amounts Not Offset on the
Consolidated Balance Sheets
Assets Financial
Instruments Collateral
Pledged Net Amount
Resale agreements $ 2,100,000
$ (100,000 ) $ 2,000,000
$ (150,000 )
⁽¹⁾
$ (1,839,120 )
⁽²⁾
$ 10,880

Gross
Amounts
of Recognized
Liabilities
Gross Amounts
Offset on the
Consolidated
Balance Sheets Net Amounts of
Liabilities
Presented
on the
Consolidated
Balance Sheets Gross Amounts Not Offset on the
Consolidated Balance Sheets
Liabilities Financial
Instruments Collateral
Posted Net Amount
Repurchase agreements $ 450,000
$ (100,000 ) $ 350,000
$ (150,000 )
⁽¹⁾
$ (200,000 )
⁽³⁾
$ —

(2)Represents the fair value of assets the Company has pledged under repurchase agreements, limited for table presentation purposes to the amount of the recognized liability due to each counterparty. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

In addition to the amounts included in the tables above, the Company also has balance sheet netting related to ~~derivatives, refer~~derivatives. Refer to Note 7 6 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.

Note 65 — Securities

The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of ~~available-for-sale investment~~AFS and HTM debt securities ~~which are carried at fair value, and the held-to-maturity investment security, which is carried at amortized cost,~~ as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021:



($ in thousands)	June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:
U.S. Treasury securities	$	676,320	$	—	$	(51,634)	$	624,686
U.S. government agency and U.S. government-sponsored enterprise debt securities	324,463		—		(39,218)		285,245
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	614,135		125		(50,428)		563,832
Residential mortgage-backed securities	2,097,339		193		(187,292)		1,910,240
Municipal securities	306,419		22		(39,708)		266,733
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	451,200		247		(39,679)		411,768
Residential mortgage-backed securities	808,012		—		(81,023)		726,989
Corporate debt securities	673,502		105		(114,314)		559,293
Foreign government bonds	253,118		648		(10,769)		242,997
Asset-backed securities	69,764		—		(2,414)		67,350
CLOs	617,250		—		(20,879)		596,371
Total AFS debt securities	6,891,522		1,340		(637,358)		6,255,504
HTM debt securities:
U.S. Treasury securities	521,352		—		(34,831)		486,521
U.S. government agency and U.S. government-sponsored enterprise debt securities	997,369		—		(144,291)		853,078
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	512,391		—		(62,563)		449,828
Residential mortgage-backed securities	807,111		—		(96,637)		710,474
Municipal securities	190,079		—		(33,431)		156,648
Total HTM debt securities	3,028,302		—		(371,753)		2,656,549
Total debt securities	$	9,919,824	$	1,340	$	(1,009,111)	$	8,912,053

As of September 30, 2017
($ in thousands) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Available-for-sale investment securities:

U.S. Treasury securities $ 533,035
$ —
$ (6,703 ) $ 526,332
U.S. government agency and U.S. government sponsored enterprise debt securities 191,727
81
(2,623 ) 189,185
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

Commercial mortgage-backed securities 321,943
326
(7,097 ) 315,172
Residential mortgage-backed securities 1,154,026
4,790
(7,882 ) 1,150,934
Municipal securities 116,798
900
(456 ) 117,242
Non-agency residential mortgage-backed securities:
Investment grade ⁽¹⁾
9,680
21
(7 ) 9,694
Corporate debt securities:
Investment grade ⁽¹⁾
2,464
—
(137 ) 2,327
Non-investment grade ⁽¹⁾
10,191
—
(576 ) 9,615
Foreign bonds:

Investment grade ^{(1) (2)}
505,395
229
(16,484 ) 489,140
Other securities⁽³⁾
147,504
3
(372 ) 147,135
Total available-for-sale investment securities $ 2,992,763
$ 6,350
$ (42,337 ) $ 2,956,776
Held-to-maturity investment security:
Non-agency commercial mortgage-backed security $ —
$ —
$ —
$ —
Total investment securities $ 2,992,763
$ 6,350
$ (42,337 ) $ 2,956,776

As of December 31, 2016
($ in thousands) Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Available-for-sale investment securities:

U.S. Treasury securities $ 730,287
$ 21
$ (9,829 ) $ 720,479
U.S. government agency and U.S. government sponsored enterprise debt securities 277,891
224
(3,249 ) 274,866
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

Commercial mortgage-backed securities 272,672
345
(6,218 ) 266,799
Residential mortgage-backed securities 1,266,372
3,924
(11,549 ) 1,258,747
Municipal securities 148,302
1,252
(1,900 ) 147,654
Non-agency residential mortgage-backed securities:
Investment grade ⁽¹⁾
11,592
—
(115 ) 11,477
Corporate debt securities:
Investment grade ⁽¹⁾
222,190
562
(375 ) 222,377
Non-investment grade ⁽¹⁾
10,191
—
(1,018 ) 9,173
Foreign bonds:
Investment grade ^{(1) (2)}
405,443
30
(21,579 ) 383,894
Other securities 40,501
337
(509 ) 40,329
Total available-for-sale investment securities $ 3,385,441
$ 6,695
$ (56,341 ) $ 3,335,795
Held-to-maturity investment security:
Non-agency commercial mortgage-backed security ⁽³⁾
$ 143,971
$ 622
$ —
$ 144,593
Total investment securities $ 3,529,412
$ 7,317
$ (56,341 ) $ 3,480,388


~~(1)~~	Available-for-sale investment securities rated BBB- or higher by Standard &Poor’s (“S&P”) or Baa3 or higher by Moody’s are considered investment grade. Conversely, available-for-sale investment securities rated lower than BBB- by S&P or lower than Baa3 by Moody’s are considered non-investment grade. Classifications are based on the lower of the credit ratings by S&P or Moody’s.


~~(2)~~	~~Fair values of foreign bonds include $458.9 million and $353.6 million of multilateral development bank bonds as of September 30, 2017 and December 31, 2016, respectively.~~


~~(3)~~	~~During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale.~~



($ in thousands)	December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:
U.S. Treasury securities	$	1,049,238	$	130	$	(16,687)	$	1,032,681
U.S. government agency and U.S. government-sponsored enterprise debt securities	1,333,984		2,697		(34,710)		1,301,971
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	1,242,043		15,791		(28,854)		1,228,980
Residential mortgage-backed securities	2,968,789		8,629		(49,135)		2,928,283
Municipal securities	519,381		10,065		(6,288)		523,158
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	498,920		3,000		(5,477)		496,443
Residential mortgage-backed securities	889,937		971		(8,977)		881,931
Corporate debt securities	657,516		8,738		(16,589)		649,665
Foreign government bonds	260,447		767		(3,481)		257,733
Asset-backed securities	74,674		185		(301)		74,558
CLOs	592,250		52		(2,352)		589,950
Total AFS debt securities	$	10,087,179	$	51,025	$	(172,851)	$	9,965,353

During the first quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM. At the time of the transfer, $113.0 million of unrealized losses, net of tax, was retained in AOCI.

As of June 30, 2022 and December 31, 2021, the amortized cost of debt securities excluded accrued interest receivables of $34.9 million and $33.1 million, respectively, which are included in Other assets on the Consolidated Balance Sheet. For the Company’s accounting policy related to debt securities’ accrued interest receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in the Company’s 2021 Form 10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

Unrealized Losses of Available-for-Sale Debt Securities

The following tables present the fair value and the associated gross unrealized losses ~~and related fair values~~ of the Company’s ~~investment portfolio,~~AFS debt securities, aggregated by investment category and the length of time that ~~individual~~the securities have been in a continuous unrealized loss position as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021.



($ in thousands)	June 30, 2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:
U.S. Treasury securities	$	466,095	$	(32,524)	$	158,591	$	(19,110)	$	624,686	$	(51,634)
U.S. government agency and U.S. government sponsored enterprise debt securities	249,274		(35,689)		35,971		(3,529)		285,245		(39,218)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	440,235		(34,101)		110,670		(16,327)		550,905		(50,428)
Residential mortgage-backed securities	1,433,558		(122,567)		463,552		(64,725)		1,897,110		(187,292)
Municipal securities	265,197		(39,708)		—		—		265,197		(39,708)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	335,199		(28,436)		65,175		(11,243)		400,374		(39,679)
Residential mortgage-backed securities	616,819		(67,098)		110,170		(13,925)		726,989		(81,023)
Corporate debt securities	295,000		(35,503)		236,189		(78,811)		531,189		(114,314)
Foreign government bonds	18,887		(165)		67,798		(10,604)		86,685		(10,769)
Asset-backed securities	57,469		(1,888)		9,881		(526)		67,350		(2,414)
CLOs	312,368		(10,882)		284,003		(9,997)		596,371		(20,879)
Total AFS debt securities	$	4,490,101	$	(408,561)	$	1,542,000	$	(228,797)	$	6,032,101	$	(637,358)



($ in thousands)	December 31, 2021
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:
U.S. Treasury securities	$	935,776	$	(14,689)	$	47,881	$	(1,998)	$	983,657	$	(16,687)
U.S. government agency and U.S. government-sponsored enterprise debt securities	773,647		(18,000)		402,907		(16,710)		1,176,554		(34,710)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	440,734		(13,589)		257,745		(15,265)		698,479		(28,854)
Residential mortgage-backed securities	2,138,542		(37,691)		330,522		(11,444)		2,469,064		(49,135)
Municipal securities	177,065		(5,682)		17,003		(606)		194,068		(6,288)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	301,925		(4,158)		40,013		(1,319)		341,938		(5,477)
Residential mortgage-backed securities	707,792		(8,966)		6,431		(11)		714,223		(8,977)
Corporate debt securities	183,916		(3,084)		251,494		(13,505)		435,410		(16,589)
Foreign government bonds	27,097		(5)		133,279		(3,476)		160,376		(3,481)
Asset-backed securities	24,885		(301)		—		—		24,885		(301)
CLOs	221,586		(64)		291,712		(2,288)		513,298		(2,352)
Total AFS debt securities	$	5,932,965	$	(106,229)	$	1,778,987	$	(66,622)	$	7,711,952	$	(172,851)

As of September 30, 2017
($ in thousands) Less Than 12 Months 12 Months or More Total

Fair
Value

Gross
Unrealized
Losses

Fair
Value

Gross
Unrealized
Losses

Fair
Value

Gross
Unrealized
Losses
Available-for-sale investment securities:

U.S. Treasury securities $ 415,507
$ (4,615 ) $ 110,825
$ (2,088 ) $ 526,332
$ (6,703 )
U.S. government agency and U.S. government sponsored enterprise debt securities 96,681
(367 ) 54,512
(2,256 ) 151,193
(2,623 )
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

Commercial mortgage-backed securities 120,070
(1,721 ) 155,128
(5,376 ) 275,198
(7,097 )
Residential mortgage-backed securities 365,038
(2,344 ) 288,768
(5,538 ) 653,806
(7,882 )
Municipal securities 22,010
(222 ) 11,256
(234 ) 33,266
(456 )
Non-agency residential mortgage-backed securities:

Investment grade 4,715
(7 ) —
—
4,715
(7 )
Corporate debt securities:

Investment grade —
—
2,327
(137 ) 2,327
(137 )
Non-investment grade —
—
9,615
(576 ) 9,615
(576 )
Foreign bonds:
Investment grade 73,619
(873 ) 344,298
(15,611 ) 417,917
(16,484 )
Other securities 31,223
(372 ) —
—
31,223
(372 )
Total available-for-sale investment securities $ 1,128,863
$ (10,521 ) $ 976,729
$ (31,816 ) $ 2,105,592
$ (42,337 )
Held-to-maturity investment security:
Non-agency commercial mortgage-backed security $ —
$ —
$ —
$ —
$ —
$ —
Total investment securities $ 1,128,863
$ (10,521 ) $ 976,729
$ (31,816 ) $ 2,105,592
$ (42,337 )

As of December 31, 2016
($ in thousands) Less Than 12 Months 12 Months or More Total

Fair
Value

Gross
Unrealized
Losses

Fair
Value

Gross
Unrealized
Losses

Fair
Value

Gross
Unrealized
Losses
Available-for-sale investment securities:

U.S. Treasury securities $ 670,268
$ (9,829 ) $ —
$ —
$ 670,268
$ (9,829 )
U.S. government agency and U.S. government sponsored enterprise debt securities 203,901
(3,249 ) —
—
203,901
(3,249 )
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:

Commercial mortgage-backed securities 202,106
(5,452 ) 29,201
(766 ) 231,307
(6,218 )
Residential mortgage-backed securities 629,324
(9,594 ) 119,603
(1,955 ) 748,927
(11,549 )
Municipal securities 57,655
(1,699 ) 2,692
(201 ) 60,347
(1,900 )
Non-agency residential mortgage-backed securities:

Investment grade 5,033
(101 ) 6,444
(14 ) 11,477
(115 )
Corporate debt securities:

Investment grade —
—
71,667
(375 ) 71,667
(375 )
Non-investment grade —
—
9,173
(1,018 ) 9,173
(1,018 )
Foreign bonds:
Investment grade 363,618
(21,327 ) 14,258
(252 ) 377,876
(21,579 )
Other securities 30,991
(509 ) —
—
30,991
(509 )
Total available-for-sale investment securities $ 2,162,896
$ (51,760 ) $ 253,038
$ (4,581 ) $ 2,415,934
$ (56,341 )
Held-to-maturity investment security:
Non-agency commercial mortgage-backed security $ —
$ —
$ —
$ —
$ —
$ —
Total investment securities $ 2,162,896
$ (51,760 ) $ 253,038
$ (4,581 ) $ 2,415,934
$ (56,341 )

As of June 30, 2022, the Company had a total of 531 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 244 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 100 non-agency mortgage-backed securities, and 63 corporate debt securities. In comparison, as of December 31, 2021, the Company had a total of 431 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 180 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 50 U.S. government agency and U.S. government-sponsored agency debt securities, 21 U.S. Treasury securities, and 30 corporate debt securities.

Allowance for Credit Losses on Available-for-Sale Debt Securities

~~For each~~

Each reporting period, the Company ~~examines all individual securities~~assesses each AFS debt security that ~~are~~is in an unrealized loss position ~~for OTTI.~~to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for ~~OTTI,~~impairment related to credit losses, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale ~~Investment~~Debt Securitiesto to the Consolidated Financial Statements ofin the Company’s ~~2016~~2021 Form 10-K.

The gross unrealized losses presented in the preceding tables were primarily attributable to ~~the yield curve~~interest rate movement ~~in addition to widened~~and widening of liquidity ~~and~~and/or credit spreads. U.S. Treasury, U.S. government agency, U.S. government-sponsored agency, and U.S. government-sponsored enterprise mortgage-backed securities, are issued, guaranteed, or otherwise supported by the U.S. government and have a zero credit loss assumption. The other securities that were in an unrealized loss position as of June 30, 2022 were mainly comprised of the following:

•Non-agency mortgage-backed securities — The market value decline as of June 30, 2022 was primarily due to interest rate movement and spreads widening. Since these securities are rated investment grade by NRSROs, or have high priority in the cash flow waterfall within the securitization structure, and the contractual payments have historically been on time, the Company believes the risk of credit losses on these securities is low.

•Corporate debt securities — The market value decline as of June 30, 2022 was primarily due to interest rate movement and spreads widening. Since credit profiles of these securities are strong (rated investment grade by NRSROs) and the contractual payments from these bonds have been and are expected to be received on time, the Company believes that the risk of credit losses on these securities is low.

As of June 30, 2022 and December 31, 2021, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. The Company believes that the gross unrealized losses detailed in the previous tables are temporary and not due to reasons of credit quality. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no ~~impairment loss was recorded on the Company’s Consolidated Statements of Income~~allowance for ~~the three and nine months ended September 30, 2017 and 2016. As of September 30, 2017, the Company had 146 available-for-sale investment securities in an unrealized loss position with no~~ credit impairment, primarily comprised of 79 U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, 22 U.S. Treasury securities and 14 investment grade foreign bonds. In comparison,losses as of June 30, 2022 and December 31, ~~2016, the Company had 170 available-for-sale investment securities in an unrealized loss position with~~2021 provided against these securities. In addition, there was no credit impairment, primarily comprised of 82 U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, 26 U.S. Treasury securities and 13 investment grade foreign bonds.

During the first quarter of 2016, the Company obtained a non-agency commercial mortgage-backed security, through the securitization of multifamily real estate loans, which was classified as held-to-maturity and recorded at amortized cost. During the third quarter of 2017, the Company transferred this non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale. The transfer reflects the Company’s intent to sell the security under active liquidity management.

~~Other-Than-Temporary Impairment~~

~~No OTTI~~provision for credit losses ~~were~~ recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016.~~2021. If a credit loss had been identified, the Company would record an impairment through the allowance for credit losses with a corresponding Provision for credit losses on the Consolidated Statement of Income.

Allowance for Credit Losses on Held-to-Maturity Debt Securities

The Company separately evaluates its HTM debt securities for any credit losses using an expected loss model, similar to the methodology used for loans. Any expected credit loss is recorded through the allowance for credit losses and is deducted from the amortized cost basis. The net amount the Company expects to collect is reflected on the Consolidated Balance Sheet.

The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of June 30, 2022, all HTM securities were rated investment grade by NRSROs and issued, guaranteed, or supported by U.S. government entities and agencies. Accordingly, the Company applied a zero credit loss assumption and no allowance for credit losses was recorded as of June 30, 2022. Overall, the Company believes that the credit support levels of the debt securities are strong and, based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received. For more information on the Company’s credit loss methodology, refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

Realized Gains and Losses

The following table presents the ~~proceeds,~~ gross realized gains ~~and losses,~~ and tax expense related to the sales of ~~available-for-sale investment~~AFS debt securities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Gross realized gains	$	28	$	632	$	1,306	$	824
Related tax expense	$	8	$	187	$	386	$	244

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Proceeds from sales $ 124,887
$ 143,513
$ 676,776
$ 1,008,256
Gross realized gains $ 1,539
$ 1,790
$ 6,733
$ 8,593
Gross realized losses $ —
$ —
$ —
$ (125 )
Related tax expense $ 647
$ 752
$ 2,831
$ 3,560

~~Scheduled~~Contractual Maturities of ~~Investment~~Available-for-Sale and Held-to-Maturity Debt Securities

The following ~~table presents~~tables present the ~~scheduled~~contractual maturities, amortized cost, fair value and weighted average yields of ~~available-for-sale investment~~AFS and HTM debt securities as of ~~September~~June 30, ~~2017:~~

($ in thousands)
Amortized
Cost

Estimated
Fair Value
Due within one year $ 638,257
$ 621,343
Due after one year through five years 629,892
623,058
Due after five years through ten years 176,117
172,902
Due after ten years 1,548,497
1,539,473
Total available-for-sale investment securities $ 2,992,763
$ 2,956,776

~~Actual~~2022. Expected maturities ~~of mortgage-backed securities can~~will differ from contractual maturities ~~because~~on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay ~~obligations. In addition, factors such as prepayments and interest rates may affect the~~obligations with or without prepayment penalties.



($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
AFS debt securities:
U.S. Treasury securities
Amortized cost	$	—		$	576,626		$	99,694		$	—		$	676,320
Fair value	—			536,698			87,988			—			624,686
Weighted-average yield (1)	—		%	1.28		%	0.74		%	—		%	1.20		%
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	—			29,193			125,001			170,269			324,463
Fair value	—			27,700			110,199			147,346			285,245
Weighted-average yield (1)	—		%	1.62		%	1.16		%	2.09		%	1.69		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Amortized cost	—			13,289			192,287			2,505,898			2,711,474
Fair value	—			13,205			182,832			2,278,035			2,474,072
Weighted-average yield (1)	—		%	3.11		%	2.69		%	2.11		%	2.15		%
Municipal securities
Amortized cost	—			39,712			6,498			260,209			306,419
Fair value	—			37,800			5,758			223,175			266,733
Weighted-average yield (1) (2)	—		%	2.47		%	1.79		%	2.23		%	2.25		%
Non-agency mortgage-backed securities
Amortized cost	10,019			196,136			40,404			1,012,653			1,259,212
Fair value	9,894			189,963			39,224			899,676			1,138,757
Weighted-average yield (1)	4.47		%	3.56		%	1.19		%	2.23		%	2.42		%
Corporate debt securities
Amortized cost	10,000			—			334,502			329,000			673,502
Fair value	9,847			—			309,395			240,051			559,293
Weighted average yield (1)	3.26		%	—		%	3.59		%	1.98		%	2.80		%
Foreign government bonds
Amortized cost	108,712			44,406			50,000			50,000			253,118
Fair value	108,660			44,832			50,081			39,424			242,997
Weighted-average yield (1)	1.82		%	3.01		%	0.55		%	1.50		%	1.71		%
Asset-backed securities:
Amortized cost	—			—			—			69,764			69,764
Fair value	—			—			—			67,350			67,350
Weighted-average yield (1)	—		%	—		%	—		%	2.74		%	2.74		%
CLOs
Amortized cost	—			—			—			617,250			617,250
Fair value	—			—			—			596,371			596,371
Weighted average yield (1)	—		%	—		%	—		%	2.22		%	2.22		%
Total AFS debt securities
Amortized cost	$	128,731		$	899,362		$	848,386		$	5,015,043		$	6,891,522
Fair value	$	128,401		$	850,198		$	785,477		$	4,491,428		$	6,255,504
Weighted-average yield (1)	2.14		%	1.95		%	2.39		%	2.15		%	2.15		%



($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
HTM debt securities:
U.S. Treasury securities
Amortized cost	$	—		$	166,856		$	354,496		$	—		$	521,352
Fair value	—			156,200			330,321			—			486,521
Weighted-average yield (1)	—		%	0.90		%	1.12		%	—		%	1.05		%
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	—			—			213,101			784,268			997,369
Fair value	—			—			193,357			659,721			853,078
Weighted-average yield (1)	—		%	—		%	2.03		%	1.86		%	1.90		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost	—			—			87,264			1,232,238			1,319,502
Fair value	—			—			78,993			1,081,309			1,160,302
Weighted-average yield (1)	—		%	—		%	1.60		%	1.59		%	1.59		%
Municipal securities
Amortized cost	—			—			—			190,079			190,079
Fair value	—			—			—			156,648			156,648
Weighted-average yield (1) (2)	—		%	—		%	—		%	1.97		%	1.97		%
Total HTM debt securities
Amortized cost	$	—		$	166,856		$	654,861		$	2,206,585		$	3,028,302
Fair value	$	—		$	156,200		$	602,671		$	1,897,678		$	2,656,549
Weighted-average yield (1)	—		%	0.90		%	1.48		%	1.72		%	1.62		%

(1)Weighted-average yields are computed based on ~~the carrying values~~amortized cost balances.

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

As of ~~mortgage-backed securities.~~

~~Available-for-sale investment securities with fair values of $584.9 million and $767.4 million as of September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~ 2021, AFS and HTM debt securities with carrying values of $1.29 billion and $803.9 million, respectively, were pledged to secure public deposits, repurchase agreements ~~the Federal Reserve Bank’s discount window~~ and for other purposes required or permitted by law.

Restricted Equity Securities

Restricted equity securities include stock of the Federal Reserve Bank and of the FHLB. Restricted equity securities are carried at cost as these securities do not have a readily determinable fair value. The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021:



($ in thousands)	June 30, 2022		December 31, 2021
Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	60,712	$	60,184
FHLB stock	17,250		17,250
Total restricted equity securities	$	77,962	$	77,434

($ in thousands) September 30, 2017 December 31, 2016
Federal Reserve Bank stock $ 56,072
$ 55,525
FHLB stock 17,250
17,250
Total $ 73,322
$ 72,775

The Company uses derivatives to manage exposure to market risk, primarily ~~including~~ interest rate ~~risk and~~or foreign currency risk, ~~and~~as well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility ~~so that movements in~~to mitigate the effect of interest ~~rates are not significant to~~rate changes on earnings or capital. The Company also uses foreign exchange contracts to manage the foreign exchange rate risk associated with certain foreign currency-denominated assets and liabilities, as well as the ~~Company’s~~Bank’s investment in ~~its China subsidiary,~~ East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance ~~Sheets~~Sheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives ~~consist of~~serve as economic hedges. For additional information on the Company’s derivatives and hedging activities, seeNote 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivativesto the Consolidated Financial Statements of the Company’s ~~2016~~2021 Form 10-K.

The following table presents the ~~total~~ notional amounts and gross fair ~~value~~values of the Company’s derivatives, as well as the balance sheet netting adjustments on an aggregate basis as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021. The derivative assets and liabilities are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after applicable variation margin payments with central clearing organizations have been applied as settlement. Total derivative assets and liabilities are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid as of June 30, 2022 and December 31, 2021. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.



($ in thousands)	June 30, 2022							December 31, 2021
	Notional Amount			Fair Value				Notional Amount			Fair Value
				Derivative Assets		Derivative Liabilities					Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:


Cash flow hedges:
Interest rate contracts	$	1,525,000		$	586	$	96	$	275,000		$	—	$	57
Net investment hedges:
Foreign exchange contracts	84,832			2,765		—		86,531			—		225
Total derivatives designated as hedging instruments	$	1,609,832		$	3,351	$	96	$	361,531		$	—	$	282
Derivatives not designated as hedging instruments:
Interest rate contracts	$	17,570,112		$	260,740	$	359,578	$	17,575,420		$	240,222	$	179,905
Foreign exchange contracts	2,654,194			39,559		29,144		1,874,681			21,033		15,276
Credit contracts	121,784			—		76		72,560			—		141
Equity contracts	—		(1)	359		—		—		(1)	220		—
Commodity contracts	—		(2)	404,275		373,675		—		(2)	222,709		194,567
Total derivatives not designated as hedging instruments	$	20,346,090		$	704,933	$	762,473	$	19,522,661		$	484,184	$	389,889
Gross derivative assets/liabilities				$	708,284	$	762,569				$	484,184	$	390,171
Less: Master netting agreements				(126,414)		(126,414)					(58,679)		(58,679)
Less: Cash collateral received/paid				(125,304)		—					(42,274)		(174,048)
Net derivative assets/liabilities				$	456,566	$	636,155				$	383,231	$	157,444

($ in thousands) September 30, 2017 December 31, 2016

Notional
Amount
Fair Value
Notional
Amount
Fair Value

Derivative
Assets ⁽¹⁾

Derivative
Liabilities ⁽¹⁾

Derivative
Assets ⁽¹⁾

Derivative
Liabilities ⁽¹⁾
Derivatives designated as hedging instruments:
Interest rate swaps on certificates of deposit $ 42,566
$ —
$ 6,648
$ 48,365
$ —
$ 5,976
Foreign currency forward contracts —
—
—
83,026
4,325
—
Total derivatives designated as hedging instruments $ 42,566
$ —
$ 6,648
$ 131,391
$ 4,325
$ 5,976
Derivatives not designated as hedging instruments:
Interest rate swaps and options $ 8,742,980
$ 64,822
$ 64,212
$ 7,668,482
$ 67,578
$ 65,131
Foreign exchange contracts 1,131,414
14,187
20,054
767,764
11,874
11,213
RPAs 68,387
2
1
71,414
3
3
Warrants —
⁽²⁾
1,455
—
—
—
—
Total derivatives not designated as hedging instruments $ 9,942,781
$ 80,466
$ 84,267
$ 8,507,660
$ 79,455
$ 76,347

~~Derivative assets and derivative liabilities are included in~~ ~~Other assets~~ ~~and~~ ~~Accrued expenses and other liabilities,~~ ~~respectively,on the Consolidated Balance Sheets.~~

(1)The Company held equity contracts in 1 public company and 13 private companies as of June 30, 2022. In comparison, the Company held equity contracts in 1 public company and 12 private companies as of December 31, 2021.

(2)The notional amount of the Company’s commodity contracts entered with its customers totaled 8,211 thousand barrels of crude oil and 83,113 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of June 30, 2022. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled 7,519 thousand barrels of crude oil and 83,274 thousand MMBTUs of natural gas as of December 31, 2021. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.

Derivatives Designated as Hedging Instruments

~~Interest Rate Swaps on Certificates of Deposit~~ Cash Flow Hedges— The Company is exposed to changes in the fair value of certain fixed rate certificates of deposit due to changes in the benchmark interest rate, London Interbank Offered Rate. Interest rate swaps designated as fair value hedges involve the receipt of fixed rate amounts from a counterparty in exchange for In 2020, the Company ~~making variable rate payments over the life of the agreements without the exchange of the underlying notional amount.~~

The following table presents the ~~net gains (losses) recognized on the Consolidated Statements of Income related to the derivatives designated as fair value~~pre-tax changes in AOCI from cash flow hedges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021. The after-tax impact of cash flow hedges on AOCI is discussed in Note 13 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
(Losses) gains recognized in AOCI:
Interest rate contracts	$	(7,837)	$	(106)	$	(40,446)	$	320


Gains (losses) reclassified from AOCI into earnings:
Interest expense	$	308	$	(201)	$	135	$	(378)
Interest income	812		—		3,085		—
Total	$	1,120	$	(201)	$	3,220	$	(378)

As of September 30, 2017, there were no derivative contracts designated as net investment hedges. As of December 31, 2016, the total notional amount and fair value of the foreign currency forward contracts designated as net investment hedges were $83.0 million and a $4.3 million asset, respectively. The following table presents the after-tax gains (losses) ~~recorded~~recognized in ~~the~~ ~~Foreign currency translation adjustment~~ ~~account within~~ AOCI ~~related to the effective portion of the~~on net investment hedges ~~and the ineffective portion recorded on the Consolidated Statements of Income~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Gains (losses) recognized in AOCI	$	2,319	$	(1,643)	$	1,200	$	(1,543)

Derivatives Not Designated as Hedging Instruments

Interest Rate ~~Swaps and Options~~Contracts— The Company enters into interest rate ~~derivatives including~~contracts, which include interest rate swaps and options with its customers to allow ~~them~~the customers to hedge against the risk of rising interest rates on their ~~variable rate~~variable-rate loans. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with ~~institutional counterparties. As~~third-party financial institutions, including central clearing organizations.

The following tables present the notional amounts and the gross fair values of ~~September~~interest rate derivative contracts outstanding as of June 30, ~~2017,~~2022 and December 31, 2021:

Included in the total notional ~~amounts~~amount of $8.83 billion of interest rate contracts entered into with financial counterparties as of June 30, 2022, was a notional amount of $2.24 billion of interest rate swaps ~~and options, including mirrored~~that cleared through London Clearing House (“LCH”). Applying variation margin payments as settlement to LCH cleared derivative transactions ~~with institutional counterparties and the Company’s customers, totaled $4.37 billion for derivatives that were in an asset valuation position and $4.37 billion for derivatives that were~~resulted in a reduction in derivative asset fair value of $113.2 million and a reduction in liability ~~valuation position. As~~fair value of $2.2 million as of June 30, 2022. In comparison, included in the total notional amount of $8.80 billion of interest rate contracts entered into with financial counterparties as of December 31, ~~2016, the total~~2021, was a notional ~~amounts~~amount of $2.79 billion of interest rate swaps ~~and options, including mirrored~~that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions ~~with institutional counterparties and the Company’s customers, totaled $3.86 billion for derivatives that were in an asset valuation position and $3.81 billion for derivatives that were~~resulted in a ~~liability valuation position. The~~reduction in derivative asset fair ~~value~~values of ~~interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $64.8~~$18.1 million ~~asset~~ and a ~~$64.2~~reduction in liability fair values of $79.9 million liability as of September 30, 2017. The fair value of interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $67.6 million asset and a $65.1 million liability as of December 31, ~~2016.~~2021.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, ~~primarily comprised~~consisting of forward, spot, swap and ~~spot~~option contracts to ~~enable~~accommodate the business needs of its customers to hedge their transactions in foreign currencies against fluctuations in foreign exchange rates, and also to allow the Company to economically hedge against foreign currency fluctuations in certain foreign currency denominated deposits that it offers to its customers, as well as the Company’s investment in its China subsidiary, East West Bank (China) Limited. For a majority of the foreign exchange transactions entered with its customers, thecustomers. The Company enters into offsetting foreign exchange contracts with ~~institutional~~third-party financial institutions to manage its foreign exchange exposure with its customers, or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. The Company also utilizes foreign exchange contracts, which are not designated as hedging instruments, to mitigate the economic effect of currency fluctuations on certain foreign ~~exchange risk.~~currency-denominated on-balance sheet assets and liabilities, primarily foreign currency-denominated deposits offered to its customers. A majority of ~~these~~the foreign exchange contracts ~~have~~had original maturities of one year or ~~less. As~~less as of ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016,~~2021.

The following tables present the ~~total~~ notional amounts ofand the ~~foreign exchange contracts were $1.13 billion and $767.8 million, respectively. The~~gross fair values of ~~the~~ foreign exchange derivative contracts ~~recorded were a $14.2 million asset and a $20.1 million liability~~outstanding as of ~~September~~June 30, ~~2017.~~2022 and December 31, 2021:



($ in thousands)	June 30, 2022
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Forwards and spots	$	954,101	$	13,188	$	19,119	Forwards and spots	$	310,784	$	10,139	$	2,014
Swaps	175,373		648		864		Swaps	1,163,410		15,061		6,624
Written options	20,000		170		312		Purchased options	20,000		312		170
Collars	5,263		—		41		Collars	5,263		41		—
Total	$	1,154,737	$	14,006	$	20,336	Total	$	1,499,457	$	25,553	$	8,808



($ in thousands)	December 31, 2021
	Customer Counterparty						($ in thousands)	Financial Counterparty
	Notional Amount		Fair Value					Notional Amount		Fair Value
			Assets		Liabilities					Assets		Liabilities
Forwards and spots	$	900,290	$	13,688	$	9,446	Forwards and spots	$	267,689	$	1,564	$	2,695
Swaps	66,474		1,034		17		Swaps	599,654		4,745		3,116
Written options	20,287		1		—		Purchased options	20,287		1		2

Total	$	987,051	$	14,723	$	9,463	Total	$	887,630	$	6,310	$	5,813

Credit Contracts — The ~~fair values~~Company may periodically enter into credit RPAs with institutional counterparties to manage the credit exposure of the ~~foreign exchange~~interest rate contracts ~~recorded were an $11.9 million asset and an $11.2 million liability as of December 31, 2016.~~

The notional amount of the RPAs ~~reflect~~reflects the Company’s pro-rata share of the derivative instrument. ~~As of September 30, 2017,~~The following table presents the notional ~~amount~~amounts and the gross fair ~~value~~values of ~~the RPAs purchased were $47.8 million and a $1 thousand liability, respectively. As of September 30, 2017, the notional amount and fair value of the~~ RPAs sold were $20.6 million and a $2 thousand asset, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs purchased were $48.3 million and a $3 thousand liability, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs sold were $23.1 million and a $3 thousand asset, respectively. Assuming all underlying borrowers referenced in the interest rate derivative contracts defaultedoutstanding as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, the exposures from the RPAs purchased would be $92 thousand and $179 thousand, respectively. As of September 30, 2017 and December 31, 2016, the weighted average remaining maturities~~2021:

RPAs — protection sold

Equity Contracts — From time to time, as part of the ~~outstanding RPAs were 3.0 years and 3.7 years, respectively.~~

Commodity Contracts — The Company enters into energy commodity contracts in the form of swaps and options with its commercial loan ~~origination process. As~~customers to allow them to hedge against the risk of ~~September 30, 2017,~~energy commodity price fluctuation. To economically hedge against the risk and exposure of commodity price fluctuation in the products offered to its customers, the Company ~~held four warrants in public companies~~enters into offsetting commodity contracts with third-party financial institutions.

The following tables present the notional amounts and ~~32 warrants in private companies. The~~ fair values of the ~~warrants for public~~commodity derivative positions outstanding as of June 30, 2022 and ~~private companies were an $856~~December 31, 2021:



($ and units in thousands)	June 30, 2022
	Customer Counterparty						($ and units in thousands)	Financial Counterparty
	Notional Unit		Fair Value					Notional Unit		Fair Value
			Assets		Liabilities					Assets		Liabilities
Crude oil:							Crude oil:
Written options	1,205	Barrels	$	1,330	$	—	Purchased options	1,205	Barrels	$	—	$	1,154
Collars	3,218	Barrels	70,802		817		Collars	3,223	Barrels	288		65,988
Swaps	3,788	Barrels	105,189		2,658		Swaps	5,935	Barrels	43,075		133,723
Total	8,211		$	177,321	$	3,475	Total	10,363		$	43,363	$	200,865

Natural gas:							Natural gas:

Collars	28,206	MMBTUs	29,062		3,815		Collars	30,122	MMBTUs	2,999		28,390
Swaps	54,907	MMBTUs	98,480		6,478		Swaps	91,869	MMBTUs	53,050		130,652
Total	83,113		$	127,542	$	10,293	Total	121,991		$	56,049	$	159,042

Total			$	304,863	$	13,768	Total			$	99,412	$	359,907



($ and units in thousands)	December 31, 2021
	Customer Counterparty						($ and units in thousands)	Financial Counterparty
	Notional Unit		Fair Value					Notional Unit		Fair Value
			Assets		Liabilities					Assets		Liabilities
Crude oil:							Crude oil:
Written options	—	Barrels	$	87	$	—	Purchased options	—	Barrels	$	—	$	81
Collars	2,837	Barrels	33,826		106		Collars	2,888	Barrels	—		33,399
Swaps	4,682	Barrels	71,242		60		Swaps	7,517	Barrels	27,524		82,723
Total	7,519		$	105,155	$	166	Total	10,405		$	27,524	$	116,203

Natural gas:							Natural gas:

Collars	24,315	MMBTUs	$	10,903	$	458	Collars	25,929	MMBTUs	$	1,136	$	10,936
Swaps	58,959	MMBTUs	49,188		3,775		Swaps	109,567	MMBTUs	28,803		63,029
Total	83,274		$	60,091	$	4,233	Total	135,496		$	29,939	$	73,965

Total			$	165,246	$	4,399	Total			$	57,463	$	190,168

As of June 30, 2022, the notional amounts that cleared through the Chicago Mercantile Exchange (“CME”) totaled 1,100 thousand barrels of crude oil and 14,625 thousand MMBTUs of natural gas. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.1 million and a ~~$599 thousand asset,~~reduction to the liability fair value of $28.9 million, respectively, ~~totaling $1.5 million~~ as of ~~September~~June 30, ~~2017.~~2022. In comparison, the notional amounts that cleared through CME totaled 1,036 thousand barrels of crude oil and 11,490 thousand MMBTUs of natural gas as of December 31, 2021. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.2 million and a reduction to the liability fair value of $25.8 million, respectively, as of December 31, 2021.

The following table presents the net gains (losses) recognized on the Company’s Consolidated ~~Statements~~Statement of Income related to derivatives not designated as hedging instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Classification on Consolidated Statement of Income	Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts and other derivative income (loss)	$	5,984	$	(5,338)	$	13,569	$	8,563
Foreign exchange contracts	Foreign exchange income	(4,557)		11,972		2,765		22,215
Credit contracts	Interest rate contracts and other derivative income (loss)	(9)		150		65		195
Equity contracts	Lending fees	93		74		187		385
Commodity contracts	Interest rate contracts and other derivative income (loss)	344		(188)		295		(19)
Net gains		$	1,855	$	6,670	$	16,881	$	31,339

($ in thousands)
Location in
Consolidated
Statements of Income
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Derivatives not designated as hedging instruments:
Interest rate swaps and options Derivative fees and other income $ (94 ) $ 411
$ (1,838 ) $ (2,220 )
Foreign exchange contracts Foreign exchange income 3,720
3,787
17,936
10,982
RPAs Derivative fees and other income —
4
1
(7 )
Warrants Ancillary loan fees and other income 669
—
1,455
—
Net gains $ 4,295
$ 4,202
$ 17,554
$ 8,755

Offsetting of Derivatives

The Company has entered into agreements with certain counterparty financial institutions, which include master netting agreements. However, the Company has elected to account for all derivatives with counterparty institutions on a gross basis. The following tables present the gross ~~derivatives~~derivative fair values, the balance sheet netting adjustments and the resulting net fair values recorded on the ~~Consolidated Balance Sheets~~consolidated balance sheet, as well as the cash and noncash collateral associated with master netting arrangements. The gross amounts of derivative assets and liabilities are presented after the ~~respective collateral received or pledged in the form~~application of ~~other financial instruments, which are generally marketable securities and/or cash.~~variation margin payments as settlements with central counterparties, where applicable. The collateral amounts in ~~these~~the following tables are limited to the outstanding balances of the related asset or liability, ~~(after netting is applied); thus~~after the application of netting; therefore, instances of overcollateralization are not shown:



($ in thousands)	As of June 30, 2022

	Gross Amounts Recognized (1)		Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements		Cash Collateral Received (3)				Security Collateral Received (5)
Derivative assets	$	708,284	$	(126,414)	$	(125,304)	$	456,566	$	—	$	456,566
	Gross Amounts Recognized (2)		Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements		Cash Collateral Pledged (4)				Security Collateral Pledged (5)
Derivative liabilities	$	762,569	$	(126,414)	$	—	$	636,155	$	(118,694)	$	517,461

As of September 30, 2017
($ in thousands) Total Contracts Not Subject to Master Netting Arrangements Contracts Subject to Master Netting Arrangements

Gross
Amounts Recognized

Gross
Amounts Recognized

Gross
Amounts Recognized
Gross Amounts
Offset on the
Consolidated
Balance Sheets Net Amounts
Presented
on the
Consolidated
Balance Sheets Gross Amounts Not Offset on the
Consolidated Balance Sheets

Derivative
Amount
Collateral
Received Net Amount
Derivatives Assets $ 80,466
$ 57,720
$ 22,746
$ —
$ 22,746
$ (20,240 )
⁽¹⁾
$ (2,230 )
⁽²⁾
$ 276

Gross
Amounts Recognized

Gross
Amounts Recognized

Gross
Amounts Recognized
Gross Amounts
Offset on the
Consolidated
Balance Sheets Net Amounts
Presented
on the
Consolidated
Balance Sheets Gross Amounts Not Offset on the
Consolidated Balance Sheets

Derivative
Amount
Collateral
Posted Net Amount
Derivatives Liabilities $ 90,915
$ 17,814
$ 73,101
$ —
$ 73,101
$ (20,240 )
⁽¹⁾
$ (52,851 )
⁽³⁾
$ 10



($ in thousands)	As of December 31, 2021

	Gross Amounts Recognized (1)		Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements		Cash Collateral Received (3)				Security Collateral Received (5)
Derivative assets	$	484,184	$	(58,679)	$	(42,274)	$	383,231	$	—	$	383,231
	Gross Amounts Recognized (2)		Gross Amounts Offset on the Consolidated Balance Sheet				Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements		Cash Collateral Pledged (4)				Security Collateral Pledged (5)
Derivative liabilities	$	390,171	$	(58,679)	$	(174,048)	$	157,444	$	(106,598)	$	50,846

(1)Includes $1.1 million and $587 thousand of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of June 30, 2022 and December 31, 2021, respectively.

As of December 31, 2016
($ in thousands) Total Contracts Not Subject to Master Netting Arrangements Contracts Subject to Master Netting Arrangements

Gross
Amounts Recognized

Gross
Amounts Recognized

Gross
Amounts Recognized

Gross Amounts
Offset on the
Consolidated
Balance Sheets
Net Amounts
Presented
on the
Consolidated
Balance Sheets Gross Amounts Not Offset on the
Consolidated Balance Sheets
Derivative
Amounts Collateral
Received Net Amount
Derivatives Assets $ 83,780
$ 51,218
$ 32,562
$ —
$ 32,562
$ (20,991 )
⁽¹⁾
$ (10,687 )
⁽²⁾
$ 884

Gross
Amounts Recognized

Gross
Amounts Recognized

Gross
Amounts Recognized

Gross Amounts
Offset on the
Consolidated
Balance Sheets
Net Amounts
Presented
on the
Consolidated
Balance Sheets Gross Amounts Not Offset on the
Consolidated Balance Sheets
Derivative
Amounts Collateral
Posted Net Amount
Derivatives Liabilities $ 82,323
$ 24,097
$ 58,226
$ —
$ 58,226
$ (20,991 )
⁽¹⁾
$ (36,349 )
⁽³⁾
$ 886

(3)Gross cash collateral received under master netting arrangements or similar agreements were $141.9 million and $47.0 million as of June 30, 2022 and December 31, 2021, respectively. Of the gross cash collateral received, $125.3 million and $42.3 million were used to offset against derivative assets as of June 30, 2022 and December 31, 2021, respectively.

(4)No cash collateral was pledged under master netting arrangements or similar agreements as of June 30, 2022. In comparison, cash collateral pledged under master netting arrangements or similar agreements was $176.5 million as of December 31, 2021, of which $174.0 million were used to offset against derivative liabilities as of December 31, 2021.

(5)Represents the fair value of security collateral received and pledged limited to derivative assets and liabilities that are subject to enforceable master netting arrangements or similar agreements. GAAP does not permit the netting of noncash collateral on the consolidated balance sheet but requires the disclosure of such amounts.

In addition to the amounts included in the tables above, the Company also has balance sheet netting related to the resale and repurchase ~~agreements, refer~~agreements. Refer to Note 54 — ~~Securities~~Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q for additional information. Refer toNote 4 3— Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for fair value measurement disclosures on derivatives.

Note 87 — Loans Receivable and Allowance for Credit Losses

The Company’s held-for-investment loan portfolio includes originated and purchased loans. Originated and purchased loans with no evidence of credit deterioration at their acquisition date are referred to collectively as non-PCI loans. PCI loans are loans acquired with evidence of credit deterioration since their origination and it is probable at the acquisition date that the Company would be unable to collect all contractually required payments. PCI loans are accounted for under ASC Subtopic 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality. The Company has elected to account for PCI loans on a pool level basis under ASC 310-30 at the time of acquisition.~~

The following table presents the composition of the Company’s ~~non-PCI and PCI~~ loans held-for-investment outstanding as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021:



($ in thousands)	June 30, 2022		December 31, 2021
Commercial:
C&I (1)	$	15,377,117	$	14,150,608
CRE:
CRE	13,566,748		12,155,047
Multifamily residential	4,443,704		3,675,605
Construction and land	515,857		346,486
Total CRE	18,526,309		16,177,138
Total commercial	33,903,426		30,327,746
Consumer:
Residential mortgage:
Single-family residential	10,234,473		9,093,702
HELOCs	2,280,080		2,144,821
Total residential mortgage	12,514,553		11,238,523
Other consumer	84,097		127,512
Total consumer	12,598,650		11,366,035
Total loans held-for-investment (2)	$	46,502,076	$	41,693,781
Allowance for loan losses	(563,270)		(541,579)
Loans held-for-investment, net (2)	$	45,938,806	$	41,152,202

($ in thousands) September 30, 2017 December 31, 2016

Non-PCI
Loans ⁽¹⁾

PCI
Loans ⁽²⁾

Total ⁽¹⁾⁽²⁾

Non-PCI
Loans ⁽¹⁾

PCI
Loans ⁽²⁾

Total ⁽¹⁾⁽²⁾
CRE:
Income producing $ 8,530,519
$ 313,257
$ 8,843,776
$ 7,667,661
$ 348,448
$ 8,016,109
Construction 572,027
—
572,027
551,560
—
551,560
Land 111,006
371
111,377
121,276
1,918
123,194
Total CRE 9,213,552
313,628
9,527,180
8,340,497
350,366
8,690,863
C&I:
Commercial business 9,763,688
12,566
9,776,254
8,921,246
38,387
8,959,633
Trade finance 868,902
—
868,902
680,930
—
680,930
Total C&I 10,632,590
12,566
10,645,156
9,602,176
38,387
9,640,563
Residential:
Single-family 4,234,017
121,992
4,356,009
3,370,669
139,110
3,509,779
Multifamily 1,808,311
68,645
1,876,956
1,490,285
95,654
1,585,939
Total residential 6,042,328
190,637
6,232,965
4,860,954
234,764
5,095,718
Consumer 2,104,614
15,442
2,120,056
2,057,067
18,928
2,075,995
Total loans held-for-investment $ 27,993,084
$ 532,273
$ 28,525,357
$ 24,860,694
$ 642,445
$ 25,503,139
Allowance for loan losses (285,858 ) (68 ) (285,926 ) (260,402 ) (118 ) (260,520 )
Loans held-for-investment, net $ 27,707,226
$ 532,205
$ 28,239,431
$ 24,600,292
$ 642,327
$ 25,242,619


~~(1)~~	~~Includes $(29.2) million and $1.2 million as of September 30, 2017 and December 31, 2016, respectively, of net deferred loan fees, unearned income, unamortized premiums and unaccreted discounts.~~


~~(2)~~	~~Loans net of ASC 310-30 discount.~~

~~CRE~~(1)Includes Paycheck Protection Program loans ~~include income producing real estate, construction~~of $153.3 million and land loans where the interest rates may be fixed, variable or hybrid. Included in CRE loans are owner occupied and non-owner occupied loans where the borrowers rely on income from tenants to service the loan. Commercial business and trade finance in the C&I segment provide financing to businesses in a wide spectrum$534.2 million as of ~~industries.~~

Residential loans are comprised of single-family and multifamily loans. The Company offers first lien mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans and adjustable rate mortgage loans with initial fixed periods of one to seven years, which adjust annually thereafter.

~~Consumer loans are comprised of home equity lines of credit (“HELOCs”), insurance premium financing loans, credit card and auto loans. As of September~~June 30, ~~2017~~2022 and December 31, ~~2016, the Company’s HELOCs were the largest component~~2021, respectively.

(2)Includes $(56.2) million and $(50.7) million of ~~the consumer~~net deferred loan ~~portfolio,~~fees and ~~were secured by one-to-four unit residential properties located in its primary lending areas. The HELOCs loan portfolio is largely comprised~~net unamortized premiums as of loans originated through a reduced documentation loan program, where a substantial down payment is required, resulting in a low loan-to-value ratio, typically 60% or less at origination. The Company is in a first lien position for many of these reduced documentation HELOCs. These loans have historically experienced low delinquency and default rates.

All loans originated are subject to the Company’s 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 a variety of quality control procedures and periodic audits, including the review of lending and legal requirements to ensure that it is in compliance with these requirements.

~~As of September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively.

Loans held-for-investment accrued interest receivable was $132.3 million and $107.4 million as of June 30, 2022 and December 31, 2021, respectively, and is included in Other assets on the Consolidated Balance Sheet. Interest income reversed for the three and six months ended June 30, 2022 and 2021 was insignificant. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling ~~$18.18~~$26.78 billion and ~~$16.44~~$27.67 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity ~~from the Federal Reserve Bank~~as of June 30, 2022 and ~~the FHLB.~~December 31, 2021.

Credit Quality Indicators

All loans are subject to the Company’s ~~internal and external~~ credit review and ~~monitoring. Loans~~monitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the ~~current state of the borrower’s credit quality. The analysis of credit quality includes a review of all repayment sources, the~~ borrower’s current payment ~~performance/~~performance or delinquency, ~~current~~repayment sources, financial and liquidity ~~status~~factors, including industry and ~~all other relevant information.~~geographic considerations. For ~~single-family residential loans,~~the consumer loan portfolio, payment ~~performance/~~performance or delinquency is typically the driving indicator for ~~the~~ risk ratings. ~~Risk ratings are the overall credit quality indicator for the Company and the credit quality indicator utilized for estimating the appropriate allowance for loan losses.~~

The Company utilizes internal credit risk ratings to assign each individual loan a risk rating ~~system, which can be classified within the following categories:~~ of 1 through 10:

•Pass ~~Watch, Special Mention, Substandard, Doubtful and Loss. The~~— loans risk ~~ratings reflect the relative strength~~rated 1 through 5 are assigned an internal risk rating category of ~~the repayment sources.~~

“Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass ~~and Watch~~ loans ~~are generally considered to~~ have sufficient sources of repayment ~~in order~~ to repay the loan in full, in accordance with all terms and conditions.

•Special ~~Mention~~mention — loans ~~are considered to~~assigned a risk rating of 6 have potential weaknesses that warrant closer attention by ~~management. Special Mention is considered~~management; these are assigned an internal risk rating category of “Special Mention.”

•Substandard — loans assigned a ~~transitory grade. If potential weaknesses are resolved, the loan is upgraded to a Pass~~risk rating of 7 or Watch grade. If negative trends in the borrower’s financial status or other information indicate that the repayment sources may become inadequate, the loan is downgraded to a Substandard grade. Substandard loans are considered to8 have well-defined weaknesses that may jeopardize the full and timely repayment of the ~~loan. Substandard~~loan; these are assigned an internal risk rating category of “Substandard.”

•Doubtful — loans ~~have~~assigned a ~~distinct possibility~~risk rating of loss, if the deficiencies are not corrected. Additionally, when management has assessed a potential for loss but a distinct possibility of loss is not recognizable, the loan is still classified as Substandard. Doubtful loans9 have insufficient sources of repayment and a high probability of ~~loss.~~ loss; these are assigned an internal risk rating category of “Doubtful.”

•Loss — loans assigned a risk rating of 10 are ~~considered to be~~ uncollectible and of such little value that they are no longer considered bankable ~~assets. These~~assets; these are assigned an internal risk rating category of “Loss.”

Loan exposures categorized as criticized consist of special mention, substandard, doubtful and loss categories. The Company reviews the internal risk ratings ~~are reviewed routinely~~of its loan portfolio on a regular basis, and ~~adjusted~~adjusts the ratings based on changes in the borrowers’ financial status and the ~~loans’ collectability.~~collectability of the loans.

The following tables ~~present~~summarize the ~~credit~~Company’s loans held-for-investment by loan portfolio segments, internal risk ratings ~~for non-PCI loans by portfolio segment~~and vintage year as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021. The vintage year is the year of origination, renewal or major modification.



($ in thousands)	June 30, 2022
	Term Loans by Origination Year												Revolving Loans		Revolving Loans Converted to Term Loans		Total



	2022		2021		2020		2019		2018		Prior
Commercial:
C&I:
Pass	$	1,632,575	$	2,948,526	$	769,887	$	524,311	$	170,119	$	270,405	$	8,656,225	$	28,475	$	15,000,523
Criticized (accrual)	64,608		43,748		50,746		32,574		24,206		19,222		101,437		—		336,541
Criticized (nonaccrual)	3,242		4,129		15,356		—		5,630		11,660		36		—		40,053


Total C&I	1,700,425		2,996,403		835,989		556,885		199,955		301,287		8,757,698		28,475		15,377,117
CRE:

Pass	2,638,027		2,565,665		1,815,298		1,907,721		1,598,242		2,358,965		150,983		14,498		13,049,399
Criticized (accrual)	5,023		109,974		69,751		99,541		101,188		102,333		1,455		16,808		506,073
Criticized (nonaccrual)	—		4,201		—		—		—		7,075		—		—		11,276


Subtotal CRE	2,643,050		2,679,840		1,885,049		2,007,262		1,699,430		2,468,373		152,438		31,306		13,566,748
Multifamily residential:
Pass	1,091,403		967,791		687,577		591,961		371,378		661,082		13,301		—		4,384,493
Criticized (accrual)	—		—		0		714		20,454		36,577		—		—		57,745
Criticized (nonaccrual)	—		—		—		—		—		1,466		—		—		1,466


Subtotal multifamily residential	1,091,403		967,791		687,577		592,675		391,832		699,125		13,301		—		4,443,704
Construction and land:
Pass	94,071		232,421		98,608		60,928		3,332		236		—		—		489,596
Criticized (accrual)	—		0		4,405		—		21,856		—		—		—		26,261
Criticized (nonaccrual)	—		—		—		—		—		—		—		—		—
Subtotal construction and land	94,071		232,421		103,013		60,928		25,188		236		—		—		515,857
Total CRE	3,828,524		3,880,052		2,675,639		2,660,865		2,116,450		3,167,734		165,739		31,306		18,526,309
Total commercial	5,528,949		6,876,455		3,511,628		3,217,750		2,316,405		3,469,021		8,923,437		59,781		33,903,426
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)	1,983,527		2,565,374		1,903,821		1,194,265		898,768		1,655,824		—		—		10,201,579
Criticized (accrual)	—		—		2,146		1,087		2,159		1,301		—		—		6,693
Criticized (nonaccrual) (1)	—		—		753		2,778		8,504		14,166		—		—		26,201
Total single-family residential mortgage	1,983,527		2,565,374		1,906,720		1,198,130		909,431		1,671,291		—		—		10,234,473
HELOCs:
Pass	929		6,114		6,859		1,253		2,088		13,340		2,081,521		157,658		2,269,762
Criticized (accrual)	—		—		—		—		—		0		2		613		615
Criticized (nonaccrual)	—		1,008		815		220		463		1,640		1,692		3,865		9,703
Total HELOCs	929		7,122		7,674		1,473		2,551		14,980		2,083,215		162,136		2,280,080
Total residential mortgage	1,984,456		2,572,496		1,914,394		1,199,603		911,982		1,686,271		2,083,215		162,136		12,514,553
Other consumer:
Pass	1,211		13,072		5,258		—		—		15,173		49,369		—		84,083
Criticized (accrual)	3		—		—		—		—		—		—		—		3
Criticized (nonaccrual)	—		—		—		—		—		—		11		—		11
Total other consumer	1,214		13,072		5,258		—		—		15,173		49,380		—		84,097
Total consumer	1,985,670		2,585,568		1,919,652		1,199,603		911,982		1,701,444		2,132,595		162,136		12,598,650
Total by Risk Rating:
Pass	7,441,743		9,298,963		5,287,308		4,280,439		3,043,927		4,975,025		10,951,399		200,631		45,479,435
Criticized (accrual)	69,634		153,722		127,048		133,916		169,863		159,433		102,894		17,421		933,931
Criticized (nonaccrual)	3,242		9,338		16,924		2,998		14,597		36,007		1,739		3,865		88,710



Total	$	7,514,619	$	9,462,023	$	5,431,280	$	4,417,353	$	3,228,387	$	5,170,465	$	11,056,032	$	221,917	$	46,502,076

($ in thousands) September 30, 2017
Pass/Watch
Special
Mention
Substandard Doubtful Loss Total
Non-PCI
Loans
CRE:

Income producing $ 8,341,970
$ 74,028
$ 114,521
$ —
$ —
$ 8,530,519
Construction 540,851
22,176
9,000
—
—
572,027
Land 96,160
—
14,846
—
—
111,006
C&I:

Commercial business 9,447,163
142,531
152,975
21,019
—
9,763,688
Trade finance 830,268
18,631
20,003
—
—
868,902
Residential:

Single-family 4,199,554
11,501
22,962
—
—
4,234,017
Multifamily 1,789,351
—
18,960
—
—
1,808,311
Consumer 2,080,056
9,683
14,875
—
—
2,104,614
Total $ 27,325,373
$ 278,550
$ 368,142
$ 21,019
$ —
$ 27,993,084



($ in thousands)	December 31, 2021
	Term Loans by Origination Year												Revolving Loans		Revolving Loans Converted to Term Loans		Total



	2021		2020		2019		2018		2017		Prior
Commercial:
C&I:
Pass	$	3,911,722	$	1,133,085	$	629,007	$	187,195	$	132,392	$	225,326	$	7,383,485	$	28,842	$	13,631,054
Criticized (accrual)	85,036		117,357		72,277		51,553		15,136		4,005		115,167		—		460,531
Criticized (nonaccrual)	29,456		2,792		513		517		9,301		16,444		—		—		59,023


Total C&I	4,026,214		1,253,234		701,797		239,265		156,829		245,775		7,498,652		28,842		14,150,608

CRE:
Pass	2,792,193		2,090,503		2,230,520		1,863,481		1,120,682		1,727,862		128,668		6,389		11,960,298
Criticized (accrual)	71,055		3,200		9,176		21,077		24,851		55,892		—		—		185,251
Criticized (nonaccrual)	4,350		—		—		—		4,752		396		—		—		9,498


Subtotal CRE	2,867,598		2,093,703		2,239,696		1,884,558		1,150,285		1,784,150		128,668		6,389		12,155,047
Multifamily residential:
Pass	1,026,295		726,772		688,453		419,319		308,087		424,947		20,524		—		3,614,397
Criticized (accrual)	—		—		721		22,344		7,033		30,666		—		—		60,764
Criticized (nonaccrual)	—		—		—		—		—		444		—		—		444


Subtotal multifamily residential	1,026,295		726,772		689,174		441,663		315,120		456,057		20,524		—		3,675,605
Construction and land:
Pass	122,983		103,743		90,544		3,412		—		391		—		—		321,073
Criticized (accrual)	3,355		—		—		22,058		—		—		—		—		25,413
Criticized (nonaccrual)	—		—		—		—		—		—		—		—		—
Subtotal construction and land	126,338		103,743		90,544		25,470		—		391		—		—		346,486
Total CRE	4,020,231		2,924,218		3,019,414		2,351,691		1,465,405		2,240,598		149,192		6,389		16,177,138
Total commercial	8,046,445		4,177,452		3,721,211		2,590,956		1,622,234		2,486,373		7,647,844		35,231		30,327,746
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)	2,616,958		2,108,370		1,375,929		1,079,030		763,351		1,127,516		—		—		9,071,154
Criticized (accrual)	—		—		458		2,813		1,899		3,212		—		—		8,382
Criticized (nonaccrual) (1)	—		—		1,751		3,889		4,295		4,231		—		—		14,166
Total single-family residential mortgage	2,616,958		2,108,370		1,378,138		1,085,732		769,545		1,134,959		—		—		9,093,702
HELOCs:
Pass	648		3,277		4,644		1,347		3,268		11,215		1,913,478		197,414		2,135,291
Criticized (accrual)	—		—		—		—		—		371		7		708		1,086
Criticized (nonaccrual)	—		—		52		188		3,543		973		—		3,688		8,444
Total HELOCs	648		3,277		4,696		1,535		6,811		12,559		1,913,485		201,810		2,144,821
Total residential mortgage	2,617,606		2,111,647		1,382,834		1,087,267		776,356		1,147,518		1,913,485		201,810		11,238,523
Other consumer:
Pass	16,831		5,258		—		—		1,741		52,147		51,481		—		127,458
Criticized (accrual)	2		—		—		—		—		—		—		—		2
Criticized (nonaccrual)	—		—		—		—		—		—		52		—		52
Total other consumer	16,833		5,258		—		—		1,741		52,147		51,533		—		127,512
Total consumer	2,634,439		2,116,905		1,382,834		1,087,267		778,097		1,199,665		1,965,018		201,810		11,366,035
Total by Risk Rating:
Pass	10,487,630		6,171,008		5,019,097		3,553,784		2,329,521		3,569,404		9,497,636		232,645		40,860,725
Criticized (accrual)	159,448		120,557		82,632		119,845		48,919		94,146		115,174		708		741,429
Criticized (nonaccrual)	33,806		2,792		2,316		4,594		21,891		22,488		52		3,688		91,627



Total	$	10,680,884	$	6,294,357	$	5,104,045	$	3,678,223	$	2,400,331	$	3,686,038	$	9,612,862	$	237,041	$	41,693,781

($ in thousands) December 31, 2016
Pass/Watch
Special
Mention
Substandard Doubtful Loss
Total
Non-PCI
Loans
CRE:

Income producing $ 7,476,804
$ 29,005
$ 161,852
$ —
$ —
$ 7,667,661
Construction 551,560
—
—
—
—
551,560
Land 107,976
—
13,290
10
—
121,276
C&I:

Commercial business 8,559,674
155,276
201,139
5,157
—
8,921,246
Trade finance 635,027
9,435
36,460
—
8
680,930
Residential:

Single-family 3,341,015
10,179
19,475
—
—
3,370,669
Multifamily 1,462,522
2,268
25,495
—
—
1,490,285
Consumer 2,043,405
6,764
6,898
—
—
2,057,067
Total $ 24,177,983
$ 212,927
$ 464,609
$ 5,167
$ 8
$ 24,860,694

~~The following tables present the credit risk ratings for PCI loans by portfolio segment as~~(1)As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021, $1.2 million and $1.6 million, respectively, of nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a “Pass” rating.

($ in thousands) September 30, 2017
Pass/Watch
Special
Mention
Substandard Doubtful Loss
Total
PCI Loans
CRE:

Income producing $ 261,907
$ —
$ 51,350
$ —
$ —
$ 313,257
Land 44
—
327
—
—
371
C&I:
Commercial business 11,205
90
1,271
—
—
12,566
Residential:
Single-family 118,281
1,769
1,942
—
—
121,992
Multifamily 64,455
—
4,190
—
—
68,645
Consumer 13,962
364
1,116
—
—
15,442
Total ⁽¹⁾
$ 469,854
$ 2,223
$ 60,196
$ —
$ —
$ 532,273

Revolving loans that are converted to term loans presented in the tables above are excluded from the term loans by vintage year columns. During the three and six months ended June 30, 2022, there were no conversions of HELOC revolving loans to term loans. NaN CRE revolving loans of $26.4 million were converted to term loans during the three and six months ended June 30, 2022. In comparison, HELOC revolving loans of $20.9 million and $57.6 million were converted to term loans during the three and six months ended June 30, 2021, respectively. There were no conversions of CRE revolving loans to term loans during the three months ended June 30, 2021. NaN CRE revolving loans of $5.0 million were converted to term loans during the six months ended June 30, 2021.

($ in thousands) December 31, 2016
Pass/Watch
Special
Mention
Substandard Doubtful Loss
Total
PCI Loans
CRE:

Income producing $ 293,529
$ 3,239
$ 51,680
$ —
$ —
$ 348,448
Land 1,562
—
356
—
—
1,918
C&I:

Commercial business 33,885
772
3,730
—
—
38,387
Residential:

Single-family 136,245
1,239
1,626
—
—
139,110
Multifamily 86,190
—
9,464
—
—
95,654
Consumer 17,433
316
1,179
—
—
18,928
Total ⁽¹⁾
$ 568,844
$ 5,566
$ 68,035
$ —
$ —
$ 642,445


~~(1)~~	~~Loans net of ASC 310-30 discount.~~

Nonaccrual and Past Due Loans

~~Non-PCI loans~~Loans that are 90 or more days past due are generally placed on nonaccrual ~~status. Additionally, non-PCI loans~~status unless the loan is well-collateralized and in the process of collection. Loans that are less than 90 days past due but have identified deficiencies, such as when the full collection of principal or interest becomes uncertain, are also placed on nonaccrual status. The following tables present the aging analysis ~~on non-PCI~~of total loans held-for-investment as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021:



($ in thousands)	June 30, 2022
	Current Accruing Loans (1)		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Total Nonaccrual Loans		Total Loans
Commercial:
C&I	$	15,326,934	$	10,097	$	33	$	10,130	$	40,053	$	15,377,117
CRE:
CRE	13,554,820		451		201		652		11,276		13,566,748
Multifamily residential	4,441,408		830		—		830		1,466		4,443,704
Construction and land	515,857		—		—		—		—		515,857
Total CRE	18,512,085		1,281		201		1,482		12,742		18,526,309
Total commercial	33,839,019		11,378		234		11,612		52,795		33,903,426
Consumer:
Residential mortgage:
Single-family residential	10,186,333		13,718		6,996		20,714		27,426		10,234,473
HELOCs	2,263,510		6,254		613		6,867		9,703		2,280,080
Total residential mortgage	12,449,843		19,972		7,609		27,581		37,129		12,514,553
Other consumer	83,988		92		6		98		11		84,097
Total consumer	12,533,831		20,064		7,615		27,679		37,140		12,598,650
Total	$	46,372,850	$	31,442	$	7,849	$	39,291	$	89,935	$	46,502,076

($ in thousands) September 30, 2017

Accruing
Loans
30-59 Days
Past Due

Accruing
Loans
60-89 Days
Past Due

Total
Accruing
Past Due
Loans

Nonaccrual
Loans Less
Than 90
Days
Past Due

Nonaccrual
Loans
90 or More
Days
Past Due

Total
Nonaccrual
Loans

Current
Accruing
Loans

Total
Non-PCI
Loans
CRE:

Income producing $ 5,211
$ 1,924
$ 7,135
$ 4,853
$ 19,949
$ 24,802
$ 8,498,582
$ 8,530,519
Construction 9,000
—
9,000
—
—
—
563,027
572,027
Land —
—
—
10
4,173
4,183
106,823
111,006
C&I:

Commercial business 16,315
108
16,423
34,844
38,540
73,384
9,673,881
9,763,688
Trade finance —
—
—
—
—
—
868,902
868,902
Residential:

Single-family 16,765
1,560
18,325
—
6,639
6,639
4,209,053
4,234,017
Multifamily 7,476
664
8,140
1,456
1,164
2,620
1,797,551
1,808,311
Consumer 8,837
5,346
14,183
93
3,004
3,097
2,087,334
2,104,614
Total $ 63,604
$ 9,602
$ 73,206
$ 41,256
$ 73,469
$ 114,725
$ 27,805,153
$ 27,993,084



($ in thousands)	December 31, 2021
	Current Accruing Loans (1)		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Total Nonaccrual Loans		Total Loans
Commercial:
C&I	$	14,080,516	$	6,983	$	4,086	$	11,069	$	59,023	$	14,150,608
CRE:
CRE	12,141,827		3,722		—		3,722		9,498		12,155,047
Multifamily residential	3,669,819		5,320		22		5,342		444		3,675,605
Construction and land	346,486		—		—		—		—		346,486
Total CRE	16,158,132		9,042		22		9,064		9,942		16,177,138
Total commercial	30,238,648		16,025		4,108		20,133		68,965		30,327,746
Consumer:
Residential mortgage:
Single-family residential	9,059,222		10,191		8,569		18,760		15,720		9,093,702
HELOCs	2,130,523		4,776		1,078		5,854		8,444		2,144,821
Total residential mortgage	11,189,745		14,967		9,647		24,614		24,164		11,238,523
Other consumer	127,352		99		9		108		52		127,512
Total consumer	11,317,097		15,066		9,656		24,722		24,216		11,366,035
Total	$	41,555,745	$	31,091	$	13,764	$	44,855	$	93,181	$	41,693,781

($ in thousands) December 31, 2016

Accruing
Loans
30-59 Days
Past Due

Accruing
Loans
60-89 Days
Past Due

Total
Accruing
Past Due
Loans

Nonaccrual
Loans Less
Than 90
Days
Past Due

Nonaccrual
Loans
90 or More
Days
Past Due

Total
Nonaccrual
Loans

Current
Accruing
Loans
Total
Non-PCI
Loans
CRE:

Income producing $ 6,233
$ 14,080
$ 20,313
$ 14,872
$ 12,035
$ 26,907
$ 7,620,441
$ 7,667,661
Construction 4,994
—
4,994
—
—
—
546,566
551,560
Land —
—
—
433
4,893
5,326
115,950
121,276
C&I:

Commercial business 45,052
2,279
47,331
60,511
20,737
81,248
8,792,667
8,921,246
Trade finance —
—
—
8
—
8
680,922
680,930
Residential:

Single-family 9,595
8,076
17,671
—
4,214
4,214
3,348,784
3,370,669
Multifamily 3,951
374
4,325
2,790
194
2,984
1,482,976
1,490,285
Consumer 3,327
3,228
6,555
165
1,965
2,130
2,048,382
2,057,067
Total $ 73,152
$ 28,037
$ 101,189
$ 78,779
$ 44,038
$ 122,817
$ 24,636,688
$ 24,860,694

~~For information on the policy for recording payments received and resuming accrual of interest on non-PCI loans that are placed on nonaccrual status, see~~ ~~Note 1~~ — ~~Summary of Significant Accounting Policies~~ ~~to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.~~

PCI loans are excluded from the above aging analysis tables as the Company has elected to account for these loans on a pool level basis under ASC 310-30 at the time of acquisition. Refer to the discussion on PCI loans within this note for additional details on interest income recognition. (1)As of ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016, PCI~~2021, loans in payment deferral programs offered in response to the Coronavirus Disease 2019 (“COVID-19”) pandemic that are performing according to their modified terms are generally not considered delinquent, and are included in the “Current Accruing Loans” column.

The following table presents the amortized cost of loans on nonaccrual status ~~totaled $5.7 million and $11.7 million, respectively.~~

~~Loans in Process~~for which there was no related allowance for loan losses as of ~~Foreclosure~~

~~As of September~~both June 30, ~~2017~~2022 and December 31, ~~2016,~~2021. Nonaccrual loans may not have an allowance for credit losses since there is no loss expectation when the loan balances are well-secured by the collateral value.



($ in thousands)	June 30, 2022		December 31, 2021

Commercial:
C&I	$	18,251	$	22,967

CRE	10,956		9,102
Multifamily residential	1,055		—


Total commercial	30,262		32,069
Consumer:

Single-family residential	12,952		5,785
HELOCs	5,351		5,033


Total consumer	18,303		10,818
Total nonaccrual loans with no related allowance for loan losses	$	48,565	$	42,887

Foreclosed Assets

The Company ~~had $6.3 million~~acquires assets from borrowers through loan restructurings, workouts, and ~~$3.1 million, respectively, of recorded investments in residential and consumer mortgage loans secured by~~foreclosures. Assets acquired may include real properties (e.g., residential real estate, ~~properties, for which formal foreclosure proceedings were~~land, and buildings) and commercial and personal properties. The Company recognizes foreclosed assets upon receiving assets in ~~process according to local requirements~~satisfaction of ~~the applicable jurisdictions, which were not~~a loan (e.g., taking legal title or physical possession).

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in ~~OREO. A~~Other assets on the Consolidated Balance Sheet. The Company had no foreclosed ~~residential real estate property with a carrying amount of $391 thousand was included in total net OREO of $2.3 million~~ assets as of ~~September~~June 30, ~~2017. In comparison, foreclosed residential real estate properties~~2022, compared with ~~a carrying amount of $401 thousand were included in total net OREO of $6.7~~$10.3 million as of December 31, ~~2016.~~2021. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of consumer real estate loans that were in the process of active or suspended foreclosure was $12.9 million and $7.3 million as of June 30, 2022 and December 31, 2021, respectively.

As part of our actions to support customers during the COVID-19 pandemic, the Company temporarily suspended certain mortgage foreclosure activities through December 31, 2021. Beginning January 1, 2022, the Company resumed these mortgage foreclosure activities. The Company continues to take proactive measures to prevent avoidable foreclosures.

Troubled Debt Restructurings

~~Potential troubled debt restructurings (“TDRs”)~~TDRs are individually evaluated, and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial ~~difficulty in order to maximize the Company’s recovery.~~difficulties. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered. The COVID-related modifications that occurred between March 2020 and January 1, 2022, were generally not classified as TDRs due to the relief under the Coronavirus Aid, Relief, and Economic Security Act, as amended by the Consolidated Appropriations Act, 2021, and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), and therefore are not included in the discussion below. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K for additional information.

The following tables present the additions to ~~non-PCI~~ TDRs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Loans Modified as TDRs During the Three Months Ended June 30,
	2022							2021
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:
C&I	2	$	12,955	$	12,245	$	2,111	4	$	20,375	$	20,084	$	2,162













Total	2	$	12,955	$	12,245	$	2,111	4	$	20,375	$	20,084	$	2,162

Loans Modified as TDRs During the Three Months Ended September 30,
($ in thousands) 2017 2016
Number
of
Loans
Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment ⁽¹⁾

Financial
Impact ⁽²⁾
Number
of
Loans
Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment ⁽¹⁾

Financial
Impact ⁽²⁾
CRE: ��

Income producing 1 $ 172
$ 172
$ 8
— $ —
$ —
$ —
C&I:
Commercial business 10 $ 15,143
$ 14,927
$ 65
3 $ 493
$ 475
$ 93



($ in thousands)	Loans Modified as TDRs During the Six Months Ended June 30,
	2022							2021
	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:
C&I	3	$	30,134	$	21,428	$	10,157	5	$	20,818	$	20,499	$	2,318













Total	3	$	30,134	$	21,428	$	10,157	5	$	20,818	$	20,499	$	2,318

(1)Includes subsequent payments after modification and reflects the balance as of June 30, 2022 and 2021.

Loans Modified as TDRs During the Nine Months Ended September 30,
($ in thousands) 2017 2016
Number
of
Loans
Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment ⁽¹⁾

Financial
Impact ⁽²⁾
Number
of
Loans
Pre-
Modification
Outstanding
Recorded
Investment

Post-
Modification
Outstanding
Recorded
Investment ⁽¹⁾

Financial
Impact ⁽²⁾
CRE:

Income producing 2 $ 1,699
$ 1,648
$ 8
3 $ 15,899
$ 15,730
$ 43
Land — $ —
$ —
$ —
1 $ 5,522
$ 5,233
$ —
C&I:
Commercial business 15 $ 29,541
$ 28,796
$ 10,365
8 $ 22,182
$ 9,113
$ 2,711
Trade finance — $ —
$ —
$ —
2 $ 7,901
$ 3,025
$ —
Residential:
Single-family — $ —
$ —
$ —
2 $ 1,071
$ 1,065
$ —
Multifamily 1 $ 3,655
$ 3,620
$ 112
— $ —
$ —
$ —
Consumer — $ —
$ —
$ —
1 $ 344
$ 337
$ 1


~~(1)~~	~~Includes subsequent payments after modification and reflects the balance as of September 30, 2017 and 2016.~~


~~(2)~~	~~The financial impact includes charge-offs and specific reserves recorded at the modification date.~~

(2)Includes charge-offs and specific reserves recorded since the modification date.

The following tables present the ~~non-PCI~~ TDR ~~modifications~~post-modification outstanding balances by the primary modification type for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016 by modification type:~~2021:



($ in thousands)	Modification Type During the Three Months Ended June 30,
	2022				2021
	Principal (1)		Interest Rate Reduction		Other (2)		Total		Principal (1)		Interest Rate Reduction		Other		Total
Commercial:
C&I	$	—	$	—	$	12,245	$	12,245	$	3,373	$	16,711	$	—	$	20,084













Total	$	—	$	—	$	12,245	$	12,245	$	3,373	$	16,711	$	—	$	20,084



($ in thousands)	Modification Type During the Three Months Ended September 30, 2017												($ in thousands)		Modification Type During the Six Months Ended June 30,
	Principal ⁽¹⁾		Principal and Interest ⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total				2022				2021
CRE	$	172	$	—	$	—	$	—	$	—	$	172
($ in thousands)													($ in thousands)		Principal (1)				Interest Rate Reduction				Other (2)				Total				Principal (1)				Interest Rate Reduction				Other				Total

	14,903		24		—		—		—		14,927				$	9,183			$	—			$	12,245			$	21,428			$	3,788			$	16,711			$	—			$	20,499

Total	$	15,075	$	24	$	—	$	—	$	—	$	15,099		Total			$	9,183			$	—			$	12,245			$	21,428			$	3,788			$	16,711			$	—			$	20,499

(1)Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.

($ in thousands) Modification Type During the Three Months Ended September 30, 2016

Principal ⁽¹⁾

Principal
and
Interest ⁽²⁾
Interest
Rate
Reduction Interest
Deferments Other Total
C&I $ 444
$ —
$ —
$ 31
$ —
$ 475
Total $ 444
$ —
$ —
$ 31
$ —
$ 475

(2)Includes increase in new commitment.

($ in thousands) Modification Type During the Nine Months Ended September 30, 2017

Principal ⁽¹⁾

Principal
and
Interest ⁽²⁾
Interest
Rate
Reduction Interest
Deferments Other Total
CRE $ 1,648
$ —
$ —
$ —
$ —
$ 1,648
C&I 18,289
10,507
—
—
—
28,796
Residential 3,620
—
—
—
—
3,620
Total $ 23,557
$ 10,507
$ —
$ —
$ —
$ 34,064

($ in thousands) Modification Type During the Nine Months Ended September 30, 2016

Principal ⁽¹⁾

Principal
and
Interest ⁽²⁾
Interest
Rate
Reduction Interest
Deferments Other Total
CRE $ 19,812
$ —
$ —
$ —
$ 1,151
$ 20,963
C&I 10,218
—
1,288
32
600
12,138
Residential 266
—
799
—
—
1,065
Consumer 337
—
—
—
—
337
Total $ 30,633
$ —
$ 2,087
$ 32
$ 1,751
$ 34,503



($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended June 30,
	2022			2021
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:
C&I	1	$	1,055	—	$	—













Total	1	$	1,055	—	$	—



($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted During the Six Months Ended June 30,
	2022			2021
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:
C&I	2	$	4,305	1	$	11,431













Total	2	$	4,305	1	$	11,431

As of June 30, 2022 and ~~were still in default at~~December 31, 2021, the ~~respective period end:~~

~~Impaired Loans~~Allowance for Credit Losses

•Quantitative Component — The Company applies quantitative methods to estimate loan islosses by considering a variety of factors such as historical loss experience, the current credit quality of the portfolio, and an economic outlook over the life of the loan. The Company incorporates forward-looking information using macroeconomic scenarios, which include variables that are considered ~~impaired when, based on current information~~key drivers of increases and ~~events, it is probable~~decreases in credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, combined with downside or upside scenarios reflecting possible worsening or improving economic conditions. The quantitative models incorporate a probability-weighted calculation of these macroeconomic scenarios over a reasonable and supportable forecast period. If the life of loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining lives of the loans to estimate the allowance for loan losses.

(1)Due to the model enhancements during the third quarter of 2021, the risk characteristic related to “time-to-maturity” was changed to “age”; while macroeconomic variables related to “unemployment rate and two- and ten-year U.S. Treasury spread” were changed to “VIX and BBB Spread”.

(2)Macroeconomic variables are included in the qualitative estimate.

Allowance for Loan Losses for the Commercial Loan Portfolio

Allowance for Loan Losses for the Consumer Loan Portfolio

•Collateral-Dependent Loans —The allowance of a collateral-dependent loan is ~~less than~~limited to the difference between the recorded ~~investment~~value and fair value of the ~~loan is classified~~collateral less cost of disposal or sale. As of June 30, 2022, collateral-dependent commercial and consumer loans totaled $38.9 million and $19.0 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $37.0 million and $14.0 million, respectively, as ~~nonperforming~~of December 31, 2021. The Company's commercial collateral-dependent loans were secured by real estate, and ~~uncollectible,~~its consumer collateral-dependent loans were all residential mortgage loans, secured by the ~~deficiency is charged-off against~~underlying real estate. As of both June 30, 2022 and December 31, 2021, the ~~allowance for loan losses. Impaired~~collateral value of the properties securing the collateral-dependent loans, ~~exclude~~net of selling costs, exceeded the recorded value of the homogeneous consumer loan portfolio, which is evaluated collectively for impairment. The Company’s impaired loans include predominantly non-PCI loans held-for-investment on nonaccrual status and any non-PCI loans modified in a TDR, which may be on accrual or nonaccrual status.loans.

~~Allowance for Credit Losses~~



($ in thousands)		Three Months Ended June 30, 2021
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	394,084	$	146,399	$	27,407	$	19,089	$	15,839	$	2,670	$	2,018	$	607,506

(Reversal of) provision for credit losses on loans	(a)	(22,605)		19,375		(5,385)		(3,243)		609		250		2,209		(8,790)

Gross charge-offs		(10,572)		(4,134)		(113)		(209)		—		—		(32)		(15,060)
Gross recoveries		1,338		322		16		6		82		18		3		1,785
Total net (charge-offs) recoveries		(9,234)		(3,812)		(97)		(203)		82		18		(29)		(13,275)
Foreign currency translation adjustment		283		—		—		—		—		—		—		283
Allowance for loan losses, end of period		$	362,528	$	161,962	$	21,925	$	15,643	$	16,530	$	2,938	$	4,198	$	585,724



($ in thousands)		Six Months Ended June 30, 2022
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	338,252	$	150,940	$	14,400	$	15,468	$	17,160	$	3,435	$	1,924	$	541,579
Provision for (reversal of) credit losses on loans	(a)	28,292		(10,312)		11,633		(8,844)		4,387		(40)		(395)		24,721
Gross charge-offs		(11,428)		(1,069)		(9)		—		—		(193)		(80)		(12,779)
Gross recoveries		9,516		686		528		58		293		18		—		11,099
Total net (charge-offs) recoveries		(1,912)		(383)		519		58		293		(175)		(80)		(1,680)
Foreign currency translation adjustment		(1,350)		—		—		—		—		—		—		(1,350)
Allowance for loan losses, end of period		$	363,282	$	140,245	$	26,552	$	6,682	$	21,840	$	3,220	$	1,449	$	563,270

($ in thousands) Three Months Ended September 30, 2017
Non-PCI Loans PCI Loans Total
CRE C&I Residential Consumer Total
Beginning balance $ 73,985
$ 150,136
$ 43,679
$ 8,438
$ 276,238
$ 78
$ 276,316
(Reversal of) provision for loan losses (346 ) 15,656
(583 ) (1,269 ) 13,458
(10 ) 13,448
Charge-offs —
(7,359 ) —
(65 ) (7,424 ) —
(7,424 )
Recoveries 610
2,165
809
2
3,586
—
3,586
Net recoveries (charge-offs) 610
(5,194 ) 809
(63 ) (3,838 ) —
(3,838 )
Ending balance $ 74,249
$ 160,598
$ 43,905
$ 7,106
$ 285,858
$ 68
$ 285,926



($ in thousands)		Six Months Ended June 30, 2021
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	398,040	$	163,791	$	27,573	$	10,239	$	15,520	$	2,690	$	2,130	$	619,983
(Reversal of) provision for credit losses on loans	(a)	(18,763)		9,098		(6,776)		5,349		985		272		2,096		(7,739)
Gross charge-offs		(19,008)		(11,329)		(130)		(280)		(134)		(45)		(33)		(30,959)
Gross recoveries		2,098		402		1,258		335		159		21		5		4,278
Total net (charge-offs) recoveries		(16,910)		(10,927)		1,128		55		25		(24)		(28)		(26,681)
Foreign currency translation adjustment		161		—		—		—		—		—		—		161
Allowance for loan losses, end of period		$	362,528	$	161,962	$	21,925	$	15,643	$	16,530	$	2,938	$	4,198	$	585,724

($ in thousands) Three Months Ended September 30, 2016
Non-PCI Loans PCI Loans Total
CRE C&I Residential Consumer Total
Beginning balance $ 78,102
$ 148,427
$ 31,561
$ 8,421
$ 266,511
$ 257
$ 266,768
(Reversal of) provision for loan losses (6,598 ) 18,548
309
(644 ) 11,615
(101 ) 11,514
Charge-offs (309 ) (23,696 ) (29 ) (13 ) (24,047 ) —
(24,047 )
Recoveries 634
165
654
124
1,577
—
1,577
Net recoveries (charge-offs) 325
(23,531 ) 625
111
(22,470 ) —
(22,470 )
Ending balance $ 71,829
$ 143,444
$ 32,495
$ 7,888
$ 255,656
$ 156
$ 255,812

($ in thousands) Nine Months Ended September 30, 2017
Non-PCI Loans PCI Loans Total
CRE C&I Residential Consumer Total
Beginning balance $ 72,804
$ 142,166
$ 37,333
$ 8,099
$ 260,402
$ 118
$ 260,520
(Reversal of) provision for loan losses (120 ) 28,576
4,815
(1,087 ) 32,184
(50 ) 32,134
Charge-offs (149 ) (19,802 ) (1 ) (72 ) (20,024 ) —
(20,024 )
Recoveries 1,714
9,658
1,758
166
13,296
—
13,296
Net recoveries (charge-offs) 1,565
(10,144 ) 1,757
94
(6,728 ) —
(6,728 )
Ending balance $ 74,249
$ 160,598
$ 43,905
$ 7,106
$ 285,858
$ 68
$ 285,926

($ in thousands) Nine Months Ended September 30, 2016
Non-PCI Loans PCI Loans Total
CRE C&I Residential Consumer Total
Beginning balance $ 81,191
$ 134,597
$ 39,292
$ 9,520
$ 264,600
$ 359
$ 264,959
(Reversal of) provision for loan losses (9,731 ) 38,549
(7,679 ) (1,887 ) 19,252
(203 ) 19,049
Charge-offs (504 ) (31,770 ) (166 ) (17 ) (32,457 ) —
(32,457 )
Recoveries 873
2,068
1,048
272
4,261
—
4,261
Net recoveries (charge-offs) 369
(29,702 ) 882
255
(28,196 ) —
(28,196 )
Ending balance $ 71,829
$ 143,444
$ 32,495
$ 7,888
$ 255,656
$ 156
$ 255,812

($ in thousands) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Beginning balance $ 15,188
$ 20,318
$ 16,121
$ 20,360
Reversal of unfunded credit reserves (452 ) (1,989 ) (1,385 ) (2,031 )
Ending balance $ 14,736
$ 18,329
$ 14,736
$ 18,329

($ in thousands) September 30, 2017
CRE C&I Residential Consumer Total
Allowance for loan losses
Individually evaluated for impairment $ 1,012
$ 18,969
$ 766
$ 4
$ 20,751
Collectively evaluated for impairment 73,237
141,629
43,139
7,102
265,107
Acquired with deteriorated credit quality
68
—
—
—
68
Ending balance $ 74,317
$ 160,598
$ 43,905
$ 7,106
$ 285,926

Recorded investment in loans
Individually evaluated for impairment $ 39,332
$ 93,800
$ 28,131
$ 4,301
$ 165,564
Collectively evaluated for impairment 9,174,220
10,538,790
6,014,197
2,100,313
27,827,520
Acquired with deteriorated credit quality ⁽¹⁾
313,628
12,566
190,637
15,442
532,273
Ending balance ⁽¹⁾
$ 9,527,180
$ 10,645,156
$ 6,232,965
$ 2,120,056
$ 28,525,357

($ in thousands) December 31, 2016
CRE C&I Residential Consumer Total
Allowance for loan losses
Individually evaluated for impairment $ 1,326
$ 10,477
$ 867
$ 31
$ 12,701
Collectively evaluated for impairment 71,478
131,689
36,466
8,068
247,701
Acquired with deteriorated credit quality 112
1
5
—
118
Ending balance $ 72,916
$ 142,167
$ 37,338
$ 8,099
$ 260,520

Recorded investment in loans
Individually evaluated for impairment $ 52,378
$ 125,619
$ 24,376
$ 3,682
$ 206,055
Collectively evaluated for impairment 8,288,119
9,476,557
4,836,578
2,053,385
24,654,639
Acquired with deteriorated credit quality ⁽¹⁾
350,366
38,387
234,764
18,928
642,445
Ending balance ⁽¹⁾
$ 8,690,863
$ 9,640,563
$ 5,095,718
$ 2,075,995
$ 25,503,139

~~Purchased Credit Impaired Loans~~

The allowance for credit losses was $587.6 million as of June 30, 2022, an increase of $18.5 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily due to an increase in provision for credit losses, driven by loan growth across the segments and a weakening economic outlook, partially offset by lower net charge-offs in 2022 year-to-date.

Loans held-for-sale ~~are carried at the lower~~consisted of ~~cost or fair value. When a determination is made at the time of commitment to originate or purchase~~$28.5 million C&I loans and $635 thousand single-family residential loans as ~~held-for-investment, it is~~of June 30, 2022 and December 31, 2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies— Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements in the Company’s ~~intent~~2021 Form 10-K for additional details.

Loan Transfers, Sales and Purchases

The Company’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loans with other banks. In the normal course of doing business, the Company also provides other financial institutions with the ability to ~~hold these~~participate in commercial loans that it originates and sells loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certainsuch institutions. Purchased loans ~~the loans are~~may be transferred from held-for-investment to held-for-sale, atand write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information on the ~~lower~~carrying value of ~~cost or fair value.~~

(1)Includes write-downs of C&I loans for both periods. In comparison, $144.9 million and $720.7 million of loans were transferred from held-for-investment to held-for-sale during the three and nine months ended September 30, 2016, respectively. These loan transfers were primarily comprised of C&I, multifamily residential and CRE loans for both periods. The Company recorded $232$158 thousand and ~~$441~~$217 thousand ~~in write-downs~~ to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively. In comparison, there were no write-downs~~2022 and ~~$1.9~~$1.3 million ~~of write-downs recorded to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2021.

(3)Includes $134.5 million and $151.9 million of ~~C&I syndication loans. Purchased~~purchased loans ~~for each of~~sold in the ~~three and nine months ended September 30, 2016 were primarily comprised of C&I syndication loans and single-family residential loans. The higher loans purchased~~secondary market for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, primarily included $165.8~~2022, respectively and $36.6 million and ~~$488.3 million, respectively, of single-family residential loans purchased for Community Reinvestment Act (“CRA”) purposes.~~

(5)C&I loan purchases were comprised primarily of syndicated C&I term loans.

The CRA encourages banks to meet the credit needs of their communities, ~~for housing~~particularly low- and ~~other purposes, particularly in neighborhoods with low or moderate income.~~moderate-income individuals and neighborhoods. The Company invests in certain affordable housing projects in the form of ownership interests in limited partnerships or limited liability companies that qualify for CRA consideration and tax credits. ~~Such limited partnerships~~These entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. ~~Each~~To fully utilize the available tax credits, each of ~~the partnerships~~these entities must meet the regulatory ~~requirements for~~ affordable housing requirements for a minimum 15-year compliance ~~period to fully utilize the tax credits.~~period. In addition to affordable housing ~~limited partnerships,~~projects, the Company also invests in small business investment companies and new market tax credit projects that qualify for CRA ~~credits and~~consideration, as well as eligible projects that qualify for renewable energy and historic tax credits. Investments in renewable energy tax credits help promote the development of renewable energy sources, ~~while~~and the investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.

Investments in Qualified Affordable Housing Partnerships, Net

The Company records its investments in qualified affordable housing partnerships, net, using the proportional amortization ~~method.~~method if certain criteria are met. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the amortization in Income tax expense on the Consolidated ~~Statements~~Statement of Income.

The following table presents ~~the balances of~~ the Company’s investments in qualified affordable housing partnerships, net, and related unfunded commitments as of ~~the periods indicated:~~June 30, 2022 and December 31, 2021:



($ in thousands)	June 30, 2022		December 31, 2021
Investments in qualified affordable housing partnerships, net	$	319,484	$	289,741
Accrued expenses and other liabilities — Unfunded commitments	$	178,714	$	146,152

($ in thousands) September 30, 2017 December 31, 2016
Investments in qualified affordable housing partnerships, net $ 178,344
$ 183,917
Accrued expenses and other liabilities — Unfunded commitments $ 63,607
$ 57,243

The following table presents additional information related to the Company’s investments in qualified affordable housing partnerships, net, for the ~~periods indicated:~~three and six months ended June 30, 2022 and 2021:



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Tax credits and other tax benefits recognized	$	12,754	$	11,319	$	25,584	$	22,722
Amortization expense included in income tax expense	$	10,042	$	7,736	$	20,067	$	16,448

($ in thousands) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Tax credits and other tax benefits recognized $ 15,840
$ 8,591
$ 35,027
$ 26,561
Amortization expense included in income tax expense $ 8,944
$ 6,612
$ 22,945
$ 20,923

Investments in Tax Credit and Other Investments, Net

Depending on the Company’s ownership percentage in investments in tax credit and other investments, the Company applies the equity or fair value method of accounting, or the measurement alternative as elected under ASU 2016-01 for equity investments without readily determinable fair values.

The following table presents the Company’s investments in tax credit and other investments, net, and related unfunded commitments as of June 30, 2022 and December 31, 2021:



($ in thousands)	June 30, 2022		December 31, 2021
Investments in tax credit and other investments, net	$	314,820	$	338,522
Accrued expenses and other liabilities — Unfunded commitments	$	144,272	$	163,464

Amortization of tax credit and other investments totaled $15.0 million and $28.9 million, for the three and six months ended June 30, 2022, respectively, as compared with $27.3 million and $52.6 million, for the same periods in 2021, respectively.

For CRA investment purposes, the Company held equity securities that are mutual funds with readily determinable fair values of $24.8 million and $26.6 million, as of June 30, 2022 and December 31, 2021, respectively. These equity securities were measured at fair value with changes in fair value recorded in Other investment income on the Consolidated Statement of Income. The Company recorded unrealized losses of $783 thousand and unrealized gains of $69 thousand on these equity securities for the three months ended June 30, 2022 and 2021, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded unrealized losses of $1.9 million and $428 thousand, respectively. Equity securities with readily determinable fair values were included in Investments in tax credit and other investments, net ~~were $203.8~~on the Consolidated Balance Sheet.

The Company held equity securities without readily determinable fair values totaling $35.0 million and ~~$173.3~~$33.1 million as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, respectively. The Company is not~~2021, respectively, which were measured using the ~~primary beneficiary~~measurement alternative at cost less impairment and adjusted for observable price changes. For the three and six months ended June 30, 2022 and 2021, there were no adjustments made to these securities. Equity securities without readily determinable fair values were included in ~~these~~Investments in qualified affordable housing partnerships, ~~and, therefore, is not required to consolidate its investments in~~ tax credit and other investments, ~~on the Consolidated Financial Statements. Depending on the ownership percentage~~net and ~~the influence the Company has on the limited partnership, the Company applies either the equity or cost method of accounting.~~

~~Total unfunded commitments for these investments were $103.0 million and $117.0 million as of September 30, 2017 and December 31, 2016, respectively, and are included in~~ ~~Accrued expenses and other liabilities~~Other assets on the Consolidated Balance ~~Sheets.~~ Sheet.

Tax credit investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount of the tax credit investments may not be realizable. OTTI charges and impairment recoveries are recorded within Amortization of tax credit and other investments ~~was $23.8 million~~on the Consolidated Statement of Income. Refer to Note 3 — Fair Value Measurement and ~~$32.6 million~~Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments. For the three and six months ended June 30, 2022, the Company recorded no impairment recoveries and no OTTI charges. In comparison, the Company recorded impairment recoveries of $877 thousand related to 2 energy tax credit investments and no OTTI charges for the three months ended ~~September~~June 30, ~~2017 and 2016, respectively. Amortization~~2021. For the six months ended June 30, 2021, the Company recorded $1.3 million of impairment recoveries related to 1 historic tax credit and ~~other~~2 energy tax credits and no OTTI charges.

Variable Interest Entities

The Company invests in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, historic rehabilitation, and wind and solar energy projects, of which the majority of such investments are variable interest entities (“VIEs”). As a limited partner in these partnerships, these investments are designed to generate a return primarily through the realization of federal tax credits and tax benefits. An unrelated third party is typically the general partner or managing member who has control over the significant activities of such investments. While the Company’s interest in some of the investments may exceed 50% of the outstanding equity interests, the Company does not consolidate these structures due to the general partner’s or managing member’s ability to manage the entity, which is indicative of the general partner’s or managing member’s power over the entity. The Company’s maximum exposure to loss in connection with these partnerships consists of the unamortized investment balance and any tax credits claimed that may become subject to recapture.

Special purpose entities formed in connection with securitization transactions are generally considered VIEs. A CLO is a VIE that purchases a pool of assets consisting primarily of non-investment grade corporate loans, and issues multiple tranches of notes to investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company served as the collateral manager of a CLO that closed in 2019 and subsequently reassigned its portfolio manager responsibilities in 2020. The Company retained the top three investment grade-rated tranches issued by the CLO, for which the total carrying amount was ~~$66.1~~$284.0 million and ~~$60.8~~$291.7 million ~~for the nine months ended September~~as of June 30, ~~2017~~2022 and ~~2016,~~December 31, 2021, respectively.

Note 9—Goodwill

~~Note 10~~—~~Goodwill and Other Intangible Assets~~

~~Goodwill~~

Total goodwill ~~of $469.4~~was $465.7 million ~~remained unchanged~~ as of ~~September~~both June 30, ~~2017 compared to~~2022 and December 31, ~~2016. Goodwill~~2021. The Company’s goodwill impairment test is ~~tested for impairment on an annual basis~~performed annually, as of December 31,^st, or more frequently asif events occur or circumstances change that would ~~more likely than not~~more-likely-than-not reduce the fair value of a reporting unit below its carrying ~~amount. The Company’s three operating segments, Retail Banking, Commercial Banking and Other, are equivalent to~~value. Based on the Company’s ~~reporting units. For complete discussion and disclosure, see~~ ~~Note 15~~ — ~~Business Segments~~ ~~to the Consolidated Financial Statements.~~

~~Impairment Analysis~~

~~The Company performed its~~ annual goodwill impairment ~~analysis~~testing as of December 31, ~~2016 and concluded that~~2021, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill ~~impairment as the fair values~~is summarized in Note 1 — Summary of all reporting units exceeded the carrying amounts of goodwill. There were no triggering events during the nine months ended September 30, 2017, and therefore, no additional goodwill impairment analysis was performed. No assurance can be given that goodwill will not be written down in future periods. Refer to ~~Note 9~~ Significant Accounting Policies — Significant Accounting Policies — Goodwill and Other Intangible Assetsto the Consolidated Financial Statements ofin the Company’s ~~2016~~2021 Form ~~10-K for additional details related to~~10-K. As of June 30, 2022, the ~~Company’s annual~~Company reviewed recent market movements, as well as its business performance and market capitalization, and concluded that goodwill ~~impairment analysis.~~was not impaired.

~~Core Deposit Intangibles~~

~~Core deposit intangibles represent the intangible value of depositor relationships resulting from deposit liabilities assumed in various acquisitions and were included in~~ ~~Other assets~~ on the Consolidated Balance Sheets. These intangibles are tested for impairment on an annual basis, or more frequently as events occur, or as current circumstances and conditions warrant. There were no impairment write-downs on core deposit intangibles for the nine months ended September 30, 2017 and 2016.

~~The following table presents the gross carrying value of intangible assets and accumulated amortization as of September 30, 2017 and December 31, 2016:~~

($ in thousands) September 30, 2017 December 31, 2016
Gross balance $ 108,814
$ 108,814
Accumulated amortization (86,140 ) (80,825 )
Net carrying balance $ 22,674
$ 27,989

~~Amortization Expense~~

The Company amortizes the core deposit intangibles based on the projected useful lives of the related deposits. The amortization expense related to the intangible assets was $1.7 million and $2.0 million for the three months ended September 30, 2017 and 2016, respectively, and $5.3 million and $6.2 million for the nine months ended September 30, 2017 and 2016, respectively.

~~The following table presents the estimated future amortization expense of core deposit intangibles:~~

Year Ended December 31,
Amount
($ in thousands)
Remainder of 2017 $ 1,620
2018 5,883
2019 4,864
2020 3,846
2021 2,833
Thereafter 3,628
Total $ 22,674

Note 1110—Commitments and Contingencies

Commitments to Extend Credit ~~Extensions~~ — In the normal course of doing business, the Company ~~has various~~provides customers loan commitments on predetermined terms. These outstanding commitments to extend credit ~~that~~ are not reflected in the accompanying Consolidated Financial Statements. While the Company does not anticipate losses ~~as a result of~~from these transactions, commitments to extend credit are included in determining the appropriate level of ~~the~~ allowance for unfunded credit commitments, and outstanding commercial letters of credit and standby letters of credit (“SBLCs”).

The following table presents the Company’s credit-related commitments as of ~~the periods indicated:~~June 30, 2022 and December 31, 2021:



	June 30, 2022										December 31, 2021
($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total
Loan commitments	$	3,642,119	$	2,880,229	$	963,277	$	139,623	$	7,625,248	$	6,911,398
Commercial letters of credit and SBLCs	1,080,377		342,243		111,182		732,561		2,266,363		2,221,699
Total	$	4,722,496	$	3,222,472	$	1,074,459	$	872,184	$	9,891,611	$	9,133,097

($ in thousands) September 30, 2017 December 31, 2016
Loan commitments $ 4,956,515
$ 5,077,869
Commercial letters of credit and SBLCs $ 1,757,648
$ 1,525,613

Loan commitments are agreements to lend to ~~a customer~~customers provided ~~that~~ there are no violations of any conditions established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require maintenance of compensatory balances. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements.

Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As a part of its risk management activities, the Company monitors the creditworthiness of customers in conjunction with its SBLC exposure. Customers are obligated to reimburse the Company for any payment made on the customers’ behalf. If the customers fail to pay, the Company would, as applicable, liquidate the collateral and/or offset existing accounts. As of ~~September~~June 30, ~~2017,~~2022, total letters of credit ~~which amounted to $1.76~~of $2.27 billion ~~were comprised~~consisted of SBLCs of ~~$1.70~~$2.23 billion and commercial letters of credit of ~~$59.1~~$33.6 million. As of December 31, 2021, total letters of credit of $2.22 billion consisted of SBLCs of $2.14 billion and commercial letters of credit of $78.9 million. As of both June 30, 2022 and December 31, 2021, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.

The Company ~~uses~~applies the same credit underwriting criteria ~~in extending~~to extend loans, commitments and conditional obligations to customers. Each customer’s creditworthiness is evaluated on a case-by-case basis. Collateral and financial guarantees may be obtained based on management’s assessment of ~~the~~a customer’s ~~credit.~~credit risk. Collateral may include cash, accounts receivable, inventory, property, plant and equipment, and ~~income-producing commercial~~real estate property.

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit ~~reserves,~~commitments and amounted to ~~$14.0~~$24.3 million and $27.5 million as of ~~September~~June 30, ~~2017~~2022 and ~~$15.7 million as of~~ December 31, ~~2016. These amounts are included in~~ ~~Accrued expenses~~2021, respectively.

Guarantees — From time to time, the Company sells or securitizes single-family and ~~other liabilities~~ ~~on the Consolidated Balance Sheets.~~

~~Guarantees~~ ~~— The Company has sold or securitized~~multifamily residential loans with recourse in the ordinary course of business. The Company is obligated to repurchase up to the recourse component inof the loans if the loans default. The following table presents the carrying amounts of loans sold or securitized with recourse ~~is considered a guarantee. As~~and the ~~guarantor, the Company is obligated to make~~maximum potential future payments ~~when the loans default. As~~as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, the unpaid principal balance of total single-family and multifamily residential loans sold or securitized with recourse amounted to $121.2 million and $150.5 million, respectively.~~ 2021:



($ in thousands)	Maximum Potential Future Payments										Carrying Value
	June 30, 2022								December 31, 2021		June 30, 2022		December 31, 2021
	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total		Total		Total
Single-family residential loans sold or securitized with recourse	$	12	$	174	$	32	$	6,897	$	7,115	$	7,926	$	7,115	$	7,926
Multifamily residential loans sold or securitized with recourse	—		—		—		14,996		14,996		14,996		22,089		23,169
Total	$	12	$	174	$	32	$	21,893	$	22,111	$	22,922	$	29,204	$	31,095

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit ~~reserves,~~commitments and totaled ~~$256~~$37 thousand and ~~$373~~$29 thousand as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. The allowance for unfunded credit ~~reserves~~commitments is included inAccrued expenses and other liabilities on the Consolidated Balance ~~Sheets.~~Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.

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 reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.

Other Commitments — The Company has commitments to invest in qualified affordable housing partnerships, tax credit and other investments as discussed in Note 9 8 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entitiesto the Consolidated Financial ~~Statements. These commitments are payable on demand.~~Statements in this Form 10-Q. As of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, these commitments were ~~$166.6~~$323.0 million and ~~$174.3~~$309.6 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance ~~Sheets.~~Sheet.

Note 1211—Stock Compensation Plans

Pursuant to the Company’s ~~2016~~2021 Stock Incentive Plan, as amended, the Company may issue stocks, stock options, restricted stock, ~~awards~~restricted stock units (“~~RSAs”~~RSUs”), including performance-based RSUs, stock purchase warrants, stock appreciation rights, ~~stock purchase warrants,~~ phantom stock and dividend equivalents to ~~certain~~eligible employees, ~~and~~ non-employee directors, consultants, and other service providers of the Company and its subsidiaries. There were no outstanding ~~stock options or unvested RSAs~~awards other than RSUs as of ~~September~~both June 30, ~~2017~~2022 and ~~2016.~~December 31, 2021.

RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs vest ratably over three years or cliff vest after three or five years of continued employment from the date of the grant. RSUs entitle the recipient to receive cash dividends equivalent to any dividends paid on the underlying common stock during the period the RSUs are outstanding. RSU dividends are accrued during the vesting period and are paid at the time of vesting. While a portion of RSUs are time-vesting awards, others vest subject to the attainment of specified performance goals referred to as “Performance-based RSUs.” All RSUs are subject to forfeiture until vested.

Performance-based RSUs are granted at the target amount of awards. Based on the Company’s attainment of specified performance goals and consideration of market conditions, the number of shares that vest can be adjusted to a minimum of zero and to a maximum of 200% of the target. The amount of performance-based RSUs that are eligible to vest is determined at the end of each performance period and is then added together to determine the total number of performance shares that are eligible to vest. Performance-based RSUs cliff vest three years from the date of grant.

Compensation costs for the time-based awards are based on the quoted market price of the Company’s stock at the grant date. Compensation costs associated with performance-based RSUs are based on grant date fair value which considers both market and performance conditions, and is subject to subsequent adjustments based on the changes in the Company’s stock price and the projected outcome of the performance criteria. Compensation costs of both time-based and performance-based awards are recognized on a straight-line basis from the grant date until the vesting date of each grant.

The following table presents a summary of the total share-based compensation expense and the related net tax ~~benefit~~benefits associated with the Company’s various employee share-based compensation plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Stock compensation costs	$	8,576	$	8,208	$	17,009	$	16,025
Related net tax benefits for stock compensation plans	$	109	$	37	$	5,268	$	1,657

($ in thousands) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Stock compensation costs $ 5,665
$ 4,763
$ 15,780
$ 13,973
Related net tax benefits for stock compensation plans $ 151
$ 14
$ 4,614
$ 1,019

Restricted Stock Units — RSUs are granted under the Company’s long-term incentive plan at no cost to the recipient. RSUs generally cliff vest after three years of continued employment from the date of the grant, and are authorized to settle predominantly in shares of the Company’s common stock. Certain RSUs are settled in cash. Dividends are accrued during the vesting period and paid at the time of vesting. While a portion of RSUs are time-based vesting awards, others vest subject to the attainment of specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation Committee based on the performance in the year prior to the grant date of the award. The number of awards that vest can range from zero to a maximum of 200% of the granted number of awards based on the Company’s achievement of specified performance criteria over a performance period of three years.

~~Effective January~~

Compensation costs are calculated using the quoted market price of the Company’s common stock at the grant date. Compensation costs for certain time-based awards that will be settled in cash are adjusted to fair value based on changes in the share price of the Company’s common stock up to the settlement date. For performance-based RSUs, the compensation costs are based on grant date fair value which considers both performance and market conditions, and is subject to subsequent adjustments based on the Company’s outcome in meeting the performance criteria at the end of the performance period. Compensation costs of both time and performance-based awards are estimated based on awards ultimately expected to vest, and are recognized net of estimated forfeitures on a straight-line basis from the grant date until the vesting date of each grant. For accounting on stock-based compensation plans, see Note 1 ~~2017,~~— Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s 2021 Form 10-K for additional information.

During the six months ended June 30, 2022, the Company ~~adopted ASU 2016-09,~~ ~~Compensation~~ — ~~Stock Compensation (Topic 718): Improvements~~modified 31,523 time-based RSUs held by 119 foreign employees from vesting in cash to ~~Employee Share-Based Payment Accounting. As~~vesting in shares without changing any of the other terms. There was no incremental compensation expense recognized as a result of the ~~adoption of this new guidance, all excess tax benefits and deficiencies on share-based payment awards were recognized within~~ ~~Income tax expense~~ ~~on the Consolidated Statements of Income~~modification for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017. For the three and nine months ended September 30, 2016, these tax benefits were recorded as increases to~~ ~~Additional paid-in capital~~ ~~on the Consolidated Statements of Changes in Stockholders’ Equity.~~2022.

The following table presents a summary of the ~~activity~~activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the ~~nine~~six months ended ~~September~~June 30, ~~2017 based~~2022. The number of performance-based RSUs stated below reflects the number of awards granted on the ~~target~~grant date.





	Time-Based RSUs	Performance-Based RSUs
		Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value
Outstanding, January 1, 2022		1,329,946	$	52.65	369,731	$	54.28
Modified from cash-settled RSUs		31,523	77.28		—	—
Granted		409,065	52.97		91,874	77.91
Vested		(370,018)	53.11		(125,213)	54.64
Forfeited		(68,084)	61.50		—	—
Outstanding, June 30, 2022		1,332,432	$	52.76	336,392	$	60.60

The following table presents a summary of the activities for the Company’s time-based RSUs that are cash-settled for the six months ended June 30, 2022. During the six months ended June 30, 2022, the amount of ~~awards:~~cash paid to settle the RSUs that vested was $318 thousand.




												Shares
Outstanding, January 1, 2022												32,647
Modified to share-settled RSUs												(31,523)
Granted												2,668
Vested												(3,471)
Forfeited												(321)
Outstanding, June 30, 2022												—

Nine Months Ended September 30, 2017
Time-Based RSUs Performance-Based RSUs
Shares
Weighted
Average
Grant-Date
Fair Value
Shares
Weighted
Average
Grant-Date
Fair Value
Outstanding, beginning of period 1,218,714
$ 35.92
410,746
$ 35.27
Granted 370,514
54.71
131,597
56.59
Vested (299,164 ) 36.68
(118,044 ) 36.85
Forfeited (131,472 ) 40.05
—
—
Outstanding, end of period 1,158,592
$ 41.26
424,299
$ 41.44

As of ~~September~~June 30, ~~2017,~~2022, there were $38.1 million and $20.3 million of total unrecognized compensation costs related to unvested time-based and performance-based RSUs, ~~amounted to $28.2 million and $15.3 million,~~ respectively. ~~These~~Both of these costs are expected to be recognized over a ~~weighted average~~weighted-average period of ~~2.00~~2.13 years and ~~2.02~~2.11 years, respectively.

Note 1312 — Stockholders’ Equity and Earnings Per Share

~~Warrant~~ — The Company acquired MetroCorp Bancshares, Inc., (“MetroCorp”) on January 17, 2014. Prior to the acquisition, MetroCorp had an outstanding warrant to purchase 771,429 shares of its common stock. Upon the acquisition, the rights of the warrant holder were converted into the right to acquire 230,282 shares of East West’s common stock until January 16, 2019. The warrant has not been exercised as of September 30, 2017.

~~Earnings Per Share~~— Basic EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period, plus common share equivalents calculated for warrants and RSUs outstanding using the treasury stock method. With the adoption of ASU 2016-09 during the first quarter of 2017, the impact of excess tax benefits and deficiencies is no longer included in the calculation of diluted EPS. As a result of applying ASU 2016-09, the Company recorded income tax benefits of $151 thousand or $0 per common share, and $4.6 million or $0.03 per common share for the three and nine months ended September 30, 2017, respectively, related to the vesting of the RSUs. See ~~Note 2~~ — ~~Current Accounting Developments~~ ~~to the Consolidated Financial Statements for additional information.~~

The following table presents the basic and diluted EPS calculations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021. For more information on the calculation of EPS, see Note 1 — Summary of Significant Accounting Policies— Significant Accounting Policies —Earnings Per Share to the Consolidated Financial Statements of the Company’s 2021 Form 10-K.



($ and shares in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Basic:
Net income	$	258,329	$	224,742	$	495,981	$	429,736
Weighted-average number of shares outstanding	141,429		141,868		141,725		141,758
Basic EPS	$	1.83	$	1.58	$	3.50	$	3.03
Diluted:
Net income	$	258,329	$	224,742	$	495,981	$	429,736
Weighted-average number of shares outstanding	141,429		141,868		141,725		141,758
Add: Dilutive impact of unvested RSUs	943		1,172		1,113		1,205
Diluted weighted-average number of shares outstanding	142,372		143,040		142,838		142,963
Diluted EPS	$	1.81	$	1.57	$	3.47	$	3.01

Three Months Ended
September 30, Nine Months Ended
September 30,
($ and shares in thousands, except per share data) 2017 2016 2017 2016
Basic
Net income $ 132,660
$ 110,143
$ 420,726
$ 320,943

Basic weighted average number of shares outstanding 144,498
144,122
144,412
144,061
Basic EPS $ 0.92
$ 0.76
$ 2.91
$ 2.23

Diluted
Net income $ 132,660
$ 110,143
$ 420,726
$ 320,943

Basic weighted average number of shares outstanding 144,498
144,122
144,412
144,061
Diluted potential common shares ⁽¹⁾
1,384
1,116
1,437
1,025
Diluted weighted average number of shares outstanding 145,882
145,238
145,849
145,086
Diluted EPS $ 0.91
$ 0.76
$ 2.88
$ 2.21


~~(1)~~	~~Includes dilutive shares from RSUs and warrants for the three and nine months ended September 30, 2017 and 2016.~~

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, 4~~2022, approximately 381 thousand and 670 thousand ~~weighted average~~weighted-average shares of anti-dilutive ~~shares from~~ RSUs, respectively, were excluded from the diluted EPS ~~computation. For the three~~computations. In comparison, 2000 and ~~nine months ended September 30, 2016, 2 thousand and 7 thousand weighted average~~4000 weighted-average shares of anti-dilutive ~~shares from~~ RSUs ~~respectively,~~ were excluded from the diluted EPS ~~computation.~~computations for the three and six months ended June 30, 2021, respectively.

Stock Repurchase Program — In 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500.0 million of the Company’s common stock. During the three and six months ended June 30, 2022, the Company repurchased 1,385,517 shares at an average price of $72.17 per share at a total cost of $100.0 million.

Note 1413 — Accumulated Other Comprehensive Income (Loss)

The following tables present the changes in the components of AOCI balances for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Debt Securities			Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
Balance, April 1, 2021	$	(81,201)		$	(798)	$	(8,041)	$	(90,040)
Net unrealized gains (losses) arising during the period	73,494			(76)		2,234		75,652
Amounts reclassified from AOCI	(445)			144		—		(301)
Changes, net of tax	73,049			68		2,234		75,351
Balance, June 30, 2021	$	(8,152)		$	(730)	$	(5,807)	$	(14,689)

Balance, April 1, 2022	$	(365,653)	(2)	$	(24,466)	$	(4,806)	$	(394,925)
Net unrealized losses arising during the period	(192,858)			(5,582)		(10,215)		(208,655)
Amounts reclassified from AOCI	3,730			(798)		—		2,932
Changes, net of tax	(189,128)			(6,380)		(10,215)		(205,723)
Balance, June 30, 2022	$	(554,781)		$	(30,846)	$	(15,021)	$	(600,648)



($ in thousands)	Debt Securities			Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
Balance, January 1, 2021	$	52,247		$	(1,230)	$	(6,692)	$	44,325
Net unrealized (losses) gains arising during the period	(59,819)			229		885		(58,705)
Amounts reclassified from AOCI	(580)			271		—		(309)
Changes, net of tax	(60,399)			500		885		(59,014)
Balance, June 30, 2021	$	(8,152)		$	(730)	$	(5,807)	$	(14,689)

Balance, January 1, 2022	$	(85,703)		$	257	$	(4,935)	$	(90,381)
Net unrealized losses arising during the period	(474,219)			(28,809)		(10,086)		(513,114)
Amounts reclassified from AOCI	5,141			(2,294)		—		2,847
Changes, net of tax	(469,078)			(31,103)		(10,086)		(510,267)
Balance, June 30, 2022	$	(554,781)	(2)	$	(30,846)	$	(15,021)	$	(600,648)

(1)Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations, including related hedges. The functional currency and reporting currency of the Company’s foreign subsidiary was RMB and USD, respectively.

(2)Includes after-tax unamortized losses of $113.0 million related to AFS debt securities that were transferred to HTM. For further information, refer to Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.

($ in thousands) Three Months Ended September 30,
2017 2016
Available-
for-Sale
Investment
Securities
Foreign
Currency
Translation
Adjustments ⁽¹⁾
Total Available-
for-Sale
Investment
Securities
Foreign
Currency
Translation
Adjustments ⁽¹⁾
Total
Beginning balance $ (18,950 ) $ (15,231 ) $ (34,181 ) $ 11,756
$ (13,468 ) $ (1,712 )
Net unrealized (losses) gains arising during the period (1,014 ) 3,870
2,856
(3,869 ) (555 ) (4,424 )
Amounts reclassified from AOCI (892 ) —
(892 ) (1,038 ) —
(1,038 )
Changes, net of taxes (1,906 ) 3,870
1,964
(4,907 ) (555 ) (5,462 )
Ending balance $ (20,856 ) $ (11,361 ) $ (32,217 ) $ 6,849
$ (14,023 ) $ (7,174 )

($ in thousands) Nine Months Ended September 30,
2017 2016
Available-
for-Sale
Investment
Securities
Foreign
Currency
Translation
Adjustments ⁽¹⁾
Total Available-
for-Sale
Investment
Securities
Foreign
Currency
Translation
Adjustments ⁽¹⁾
Total
Beginning balance $ (28,772 ) $ (19,374 ) $ (48,146 ) $ (6,144 ) $ (8,797 ) $ (14,941 )
Net unrealized gains (losses) arising during the period 11,818
8,013
19,831
17,901
(5,226 ) 12,675
Amounts reclassified from AOCI (3,902 ) —
(3,902 ) (4,908 ) —
(4,908 )
Changes, net of taxes 7,916
8,013
15,929
12,993
(5,226 ) 7,767
Ending balance $ (20,856 ) $ (11,361 ) $ (32,217 ) $ 6,849
$ (14,023 ) $ (7,174 )

53


~~(1)~~	Represents foreign currency translation adjustments related to the Company’s net investment in non-U.S. operations, including related hedges. The functional currency and reporting currency of the Company’s foreign subsidiary was Chinese Renminbi and USD, respectively.

The following tables present the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Three Months Ended June 30,
	2022						2021
	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
Debt securities:
Net unrealized (losses) gains arising during the period	$	(273,840)	$	80,982	$	(192,858)	$	104,283	$	(30,789)	$	73,494
Reclassification adjustments:
Net realized (gains) reclassified into net income (1)	(28)		8		(20)		(632)		187		(445)
Amortization of unrealized losses on transferred securities (2)	5,324		(1,574)		3,750		—		—		—
Net change	(268,544)		79,416		(189,128)		103,651		(30,602)		73,049
Cash flow hedges:
Net unrealized (losses) gains arising during the period	(7,837)		2,255		(5,582)		(106)		30		(76)
Net realized (gains) losses reclassified into net income (3)	(1,120)		322		(798)		201		(57)		144
Net change	(8,957)		2,577		(6,380)		95		(27)		68
Foreign currency translation adjustments, net of hedges:
Net unrealized (losses) gains arising during the period	(9,278)		(937)		(10,215)		1,584		650		2,234
Net change	(9,278)		(937)		(10,215)		1,584		650		2,234
Other comprehensive (loss) income	$	(286,779)	$	81,056	$	(205,723)	$	105,330	$	(29,979)	$	75,351



($ in thousands)	Six Months Ended June 30,
	2022						2021
	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
Debt securities:
Net unrealized losses arising during the period	$	(673,302)	$	199,083	$	(474,219)	$	(84,993)	$	25,174	$	(59,819)
Reclassification adjustments:
Net realized (gains) reclassified into net income (1)	(1,306)		386		(920)		(824)		244		(580)
Amortization of unrealized losses on transferred securities (2)	8,605		(2,544)		6,061		—		—		—
Net change	(666,003)		196,925		(469,078)		(85,817)		25,418		(60,399)
Cash flow hedges:
Net unrealized (losses) gains arising during the period	(40,446)		11,637		(28,809)		320		(91)		229
Net realized (gains) losses reclassified into net income (3)	(3,220)		926		(2,294)		378		(107)		271
Net change	(43,666)		12,563		(31,103)		698		(198)		500
Foreign currency translation adjustments, net of hedges:
Net unrealized (losses) gains arising during the period	(9,600)		(486)		(10,086)		275		610		885
Net change	(9,600)		(486)		(10,086)		275		610		885
Other comprehensive loss	$	(719,269)	$	209,002	$	(510,267)	$	(84,844)	$	25,830	$	(59,014)

(1)For the three and six months ended June 30, 2022 and 2021, pre-tax amounts were reported in Gains on sales of AFS debt securities on the Consolidated Statement of Income.

(2)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio.

(3)For the three and six months ended June 30, 2022 and 2021, pre-tax amounts were reported in Interest expense on the Consolidated Statement of Income.

($ in thousands) Three Months Ended September 30,
2017 2016
Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
Available-for-sale investment securities:

Net unrealized losses arising during the period $ (1,749 ) $ 735
$ (1,014 ) $ (6,677 ) $ 2,808
$ (3,869 )
Net realized gains reclassified into net income ⁽¹⁾
(1,539 ) 647
(892 ) (1,790 ) 752
(1,038 )
Net change (3,288 ) 1,382
(1,906 ) (8,467 ) 3,560
(4,907 )

Foreign currency translation adjustments:
Net unrealized gains (losses) arising during period 3,870
—
3,870
(555 ) —
(555 )
Net change 3,870
—
3,870
(555 ) —
(555 )
Other comprehensive income (loss) $ 582
$ 1,382
$ 1,964
$ (9,022 ) $ 3,560
$ (5,462 )

($ in thousands) Nine Months Ended September 30,
2017 2016
Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
Available-for-sale investment securities:

Net unrealized gains arising during the period $ 20,392
$ (8,574 ) $ 11,818
$ 30,888
$ (12,987 ) $ 17,901
Net realized gains reclassified into net income ⁽¹⁾
(6,733 ) 2,831
(3,902 ) (8,468 ) 3,560
(4,908 )
Net change 13,659
(5,743 ) 7,916
22,420
(9,427 ) 12,993

Foreign currency translation adjustments:
Net unrealized gains (losses) arising during period 8,013
—
8,013
(5,226 ) —
(5,226 )
Net change 8,013
—
8,013
(5,226 ) —
(5,226 )
Other comprehensive income $ 21,672
$ (5,743 ) $ 15,929
$ 17,194
$ (9,427 ) $ 7,767


~~(1)~~	~~For the three and nine months ended September 30, 2017 and 2016, pre-tax amounts were reported in~~ ~~Net gains on sales of available-for-sale investment securities~~ ~~on the Consolidated Statements of Income.~~

Note 1514 —Business Segments

The Company ~~utilizes an internal reporting system to measure the performance of various~~organizes its operations into 3 reportable operating ~~segments within the Bank~~segments: (1) Consumer and ~~the Company. The Company has identified three operating segments for purposes of management reporting: (1) Retail~~Business Banking; (2) Commercial Banking; and (3) Other. These ~~three business~~ segments ~~meet the criteria of an operating segment: the segment engages in business activities from which it earns revenues and incurs expenses; its operating results~~ are ~~regularly reviewed~~defined by the ~~Company’s chief operating decision-maker to render decisions about resources to be allocated to~~type of customers served, and the related products and services provided. The segments ~~and assess its performance; and discrete~~reflect how financial information is ~~available.~~

The Retail Banking segment focuses primarily on retail operations through the Bank’s branch network. The Commercial Banking segment, which includes C&I and CRE operations, primarily generates commercial loans and deposits through the bank’s commercial lending offices. Furthermore, the Company’s Commercial Banking segment offers a wide variety of international finance, trade finance, and cash management services and products. The remaining centralized functions, including treasury activities and eliminations of inter-segment amounts, have been aggregated and included in the “Other” segment, which provides broad administrative support to the two core segments.

currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain ~~operating~~balance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities due to the interrelationships among the segments.

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 platform. 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, treasury management, interest rate risk hedging and foreign exchange services.

The Commercial Banking segment primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, working capital lines of credit, trade finance, letters of credit, commercial business lending, 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 remaining centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative ~~costs~~support to the 2 core segments, namely the Consumer and Business Banking and the ~~provision~~Commercial Banking segments.

The Company utilizes an internal reporting process to measure the performance of the 3 operating segments within the Company. The internal reporting process derives operating segment results by utilizing allocation methodologies for ~~credit losses.~~revenues and expenses. Net interest income ~~is allocated based~~of each segment 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 ~~system, which assigns a cost of funds or a credit for funds to assets or liabilities based on their type, maturity or repricing characteristics.~~(“FTP”) process. Noninterest income and noninterest expense ~~including depreciation and amortization,~~ directly attributable to a business segment are assigned to ~~the related business~~that segment. Indirect costs, including technology-related costs and corporate overhead, ~~expense,~~ are allocated ~~to the segments~~ based on ~~several~~a segment’s estimated usage using factors including but not limited to, full-time equivalent employees, net interest income, and loan ~~volume~~ and deposit volume. ~~The~~Charge-offs are recorded to the segment directly associated with the respective loans charged off, and provision for credit losses is ~~allocated~~recorded to the segments based on ~~actual charge-offs~~the related loans for the period as well as average loan balances for each segment during the period. The Company evaluates overall performance based on profit or loss from operations before income taxes excluding nonrecurring gains and losses.

which allowances are evaluated. The Company’s internal ~~funds transfer pricing assumptions~~reporting process utilizes a full-allocation methodology. Under this methodology, corporate and indirect expenses incurred by the Other segment are ~~intended~~allocated to ~~promote core deposit growth~~the Consumer and ~~to reflect~~Business Banking and the ~~current risk profiles of various loan categories~~Commercial Banking segments, except certain corporate treasury-related expenses and insignificant unallocated expenses.

The corporate treasury function within the ~~credit portfolio. Internal funds transfer pricing assumptions and methodologies are reviewed at least annually to ensure that~~Other segment is responsible for the Company’s liquidity and interest rate management. The Company’s internal FTP process is ~~reflective of current market conditions.~~also managed by the corporate treasury function within the Other segment. The ~~internal funds transfer pricing~~ process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as to provide a reasonable and consistent basis for the measurement of ~~the Company’s~~its business ~~segments and product~~segments’ net interest ~~margins.~~

~~Changes~~margins and profitability. The FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on a matched cost of funds, which is tied to the pricing and term characteristics of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed. The Company’s ~~management structure or reporting~~internal FTP assumptions and methodologies ~~may result in changes in~~are reviewed at least annually to ensure that the ~~measurement~~process is reflective of operating segment results. Results for prior year periods are generally restated for comparability for changes in management structure or reporting methodologies unless it is deemed not practicable to do so.current market conditions.

The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016:~~2021:



($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Three Months Ended June 30, 2022






Net interest income (loss) before provision for credit losses	$	284,373	$	230,964	$	(42,385)	$	472,952
Provision for credit losses	2,898		10,602		—		13,500
Noninterest income	28,384		48,032		2,028		78,444
Noninterest expense	94,295		81,023		21,542		196,860
Segment income (loss) before income taxes	215,564		187,371		(61,899)		341,036

Segment net income (loss)	$	153,549	$	133,861	$	(29,081)	$	258,329
As of June 30, 2022

Segment assets	$	16,472,373	$	32,256,044	$	13,665,866	$	62,394,283



($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Three Months Ended June 30, 2021






Net interest income before provision for (reversal of) credit losses	$	173,775	$	192,696	$	10,002	$	376,473
Provision for (reversal of) credit losses	2,358		(17,358)		—		(15,000)
Noninterest income (1)	24,332		32,674		11,425		68,431
Noninterest expense	87,650		64,164		37,709		189,523
Segment income (loss) before income taxes (1)	108,099		178,564		(16,282)		270,381

Segment net income (1)	$	77,429	$	127,873	$	19,440	$	224,742
As of June 30, 2021

Segment assets	$	14,594,087	$	27,354,253	$	17,906,536	$	59,854,876


($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Six Months Ended June 30, 2022






Net interest income (loss) before provision for credit losses	$	497,587	$	439,041	$	(48,063)	$	888,565
Provision for credit losses	6,002		15,498		—		21,500
Noninterest income	53,583		97,109		7,495		158,187
Noninterest expense	190,390		154,418		41,502		386,310
Segment income (loss) before income taxes	354,778		366,234		(82,070)		638,942

Segment net income (loss)	$	252,713	$	261,368	$	(18,100)	$	495,981
As of June 30, 2022

Segment assets	$	16,472,373	$	32,256,044	$	13,665,866	$	62,394,283

($ in thousands) Three Months Ended September 30, 2017

Retail
Banking

Commercial
Banking
Other Total
Interest income $ 93,714
$ 218,397
$ 27,799
$ 339,910
Charge for funds used (37,979 ) (87,071 ) (7,589 ) (132,639 )
Interest spread on funds used 55,735
131,326
20,210
207,271
Interest expense (20,090 ) (5,943 ) (10,722 ) (36,755 )
Credit on funds provided 111,812
12,770
8,057
132,639
Interest spread on funds provided (used) 91,722
6,827
(2,665 ) 95,884
Net interest income before provision for credit losses $ 147,457
$ 138,153
$ 17,545
$ 303,155
Provision for credit losses $ 2,058
$ 10,938
$ —
$ 12,996
Depreciation, amortization and (accretion), net $ 3,401
$ (5,449 ) $ 40,001
$ 37,953
Segment income before income taxes $ 68,554
$ 99,025
$ 7,705
$ 175,284
As of September 30, 2017:

Goodwill $ 357,207
$ 112,226
$ —
$ 469,433
Segment assets $ 8,877,186
$ 21,216,848
$ 6,213,932
$ 36,307,966


($ in thousands)	Consumer and Business Banking		Commercial Banking		Other		Total
Six Months Ended June 30, 2021






Net interest income before reversal of credit losses	$	323,674	$	369,788	$	36,706	$	730,168
Reversal of credit losses	(1,891)		(13,109)		—		(15,000)
Noninterest income (1)	47,774		80,070		13,453		141,297
Noninterest expense	176,936		133,421		70,243		380,600
Segment income (loss) before income taxes (1)	196,403		329,546		(20,084)		505,865

Segment net income (1)	$	140,680	$	236,080	$	52,976	$	429,736
As of June 30, 2021

Segment assets	$	14,594,087	$	27,354,253	$	17,906,536	$	59,854,876

($ in thousands) Three Months Ended September 30, 2016
Retail
Banking Commercial
Banking Other Total
Interest income $ 77,186
$ 180,095
$ 23,036
$ 280,317
Charge for funds used (24,320 ) (53,262 ) (3,858 ) (81,440 )
Interest spread on funds used 52,866
126,833
19,178
198,877
Interest expense (14,855 ) (3,699 ) (7,615 ) (26,169 )
Credit on funds provided 68,622
8,206
4,612
81,440
Interest spread on funds provided (used) 53,767
4,507
(3,003 ) 55,271
Net interest income before (reversal of) provision for credit losses $ 106,633
$ 131,340
$ 16,175
$ 254,148
(Reversal of) provision for credit losses $ (3,709 ) $ 13,234
$ —
$ 9,525
Depreciation, amortization, and (accretion), net $ 782
$ (5,875 ) $ 40,541
$ 35,448
Segment income before income taxes $ 32,304
$ 80,393
$ 10,767
$ 123,464
As of September 30, 2016:

Goodwill $ 357,207
$ 112,226
$ —
$ 469,433
Segment assets $ 7,606,611
$ 18,549,562
$ 7,099,102
$ 33,255,275

($ in thousands) Nine Months Ended September 30, 2017

Retail
Banking

Commercial
Banking
Other Total
Interest income $ 263,491
$ 616,689
$ 85,174
$ 965,354
Charge for funds used (98,856 ) (229,330 ) (50,273 ) (378,459 )
Interest spread on funds used 164,635
387,359
34,901
586,895
Interest expense (54,650 ) (16,225 ) (29,111 ) (99,986 )
Credit on funds provided 320,452
37,436
20,571
378,459
Interest spread on funds provided (used) 265,802
21,211
(8,540 ) 278,473
Net interest income before provision for credit losses $ 430,437
$ 408,570
$ 26,361
$ 865,368
Provision for credit losses $ 1,772
$ 28,977
$ —
$ 30,749
Depreciation, amortization and (accretion), net $ 6,741
$ (14,609 ) $ 111,639
$ 103,771
Segment income before income taxes $ 204,601
$ 284,195
$ 72,177
$ 560,973
As of September 30, 2017:
Goodwill $ 357,207
$ 112,226
$ —
$ 469,433
Segment assets $ 8,877,186
$ 21,216,848
$ 6,213,932
$ 36,307,966

($ in thousands) Nine Months Ended September 30, 2016
Retail
Banking Commercial
Banking Other Total
Interest income $ 233,192
$ 534,603
$ 67,559
$ 835,354
Charge for funds used (70,770 ) (159,734 ) (22,465 ) (252,969 )
Interest spread on funds used 162,422
374,869
45,094
582,385
Interest expense (44,133 ) (11,965 ) (19,320 ) (75,418 )
Credit on funds provided 210,831
26,655
15,483
252,969
Interest spread on funds provided (used) 166,698
14,690
(3,837 ) 177,551
Net interest income before (reversal of) provision for credit losses $ 329,120
$ 389,559
$ 41,257
$ 759,936
(Reversal of) provision for credit losses $ (2,846 ) $ 19,864
$ —
$ 17,018
Depreciation, amortization and (accretion), net $ 279
$ (25,915 ) $ 86,316
$ 60,680
Segment income before income taxes $ 114,513
$ 268,401
$ 28,137
$ 411,051
As of September 30, 2016:
Goodwill $ 357,207
$ 112,226
$ —
$ 469,433
Segment assets $ 7,606,611
$ 18,549,562
$ 7,099,102
$ 33,255,275

~~Note 16 — Subsequent Events~~

~~On October 19, 2017,~~(1)During the ~~Company’s Board of Directors declared~~ fourth quarter ~~2017 cash dividends~~of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the ~~Company’s common stock. The common stock cash dividend~~second quarter and first half of ~~$0.20 is payable on November 15, 2017~~2021 have been reclassified to ~~stockholders of record as of November 1, 2017.~~

reflect these allocation changes for comparability.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


			Page
~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~ Forward-Looking Statements		59
	Overview		61
	Financial Review		63
	Results of Operations		64
		Net Interest Income	64
		Noninterest Income	69
		Noninterest Expense	70
		Income Taxes	71
		Operating Segment Results	71
	Balance Sheet Analysis		75
		Debt Securities	75
		Loan Portfolio	77
		Foreign Outstandings	83
		Capital	83
		Deposits and Other Sources of Funding	84
		Regulatory Capital and Ratios	85
	Risk Management		86
		Credit Risk Management	87
		Liquidity Risk Management	92
		Market Risk Management	94
	Critical Accounting Policies and Estimates		100
	Reconciliation of GAAP to Non-GAAP Financial Measures		100

~~The following discussion provides information about~~

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (“this Form 10-Q”) contain forward-looking statements that are intended to be covered by the ~~results~~safe harbor for such statements provided by the Private Securities Litigation Reform Act of ~~operations, financial condition, liquidity, and capital resources of~~1995. In addition, East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the ~~“Company”~~“Company,” “we” or “EWBC”) may make forward-looking statements in other documents that it files with, or furnishes to, the United States (“U.S.”) Securities and Exchange Commission (“SEC”) and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are those that do not relate to historical facts, and that are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. These statements may relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business and usually can be identified by the use of forward-looking language, such as “anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends to,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “remains,” “should,” “target,” “trend,” “will,” “would,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described below. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

There are a number of important factors that could cause future results to differ materially from historical performance and any forward-looking statements. Factors that might cause such differences, include, but are not limited to:

•changes in the global economy, including an economic slowdown, market or supply chain disruption, level of inflation, interest rate environment, housing prices, employment levels, rate of growth and general business conditions;

•the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit;

•changes in local, regional and global business, economic and political conditions and geopolitical events;

•the economic, financial, reputational and other impacts of the ongoing Coronavirus Disease 2019 (“COVID-19”) pandemic, including variants, thereof and any other pandemic, epidemic or health-related crisis, as well as a deterioration of asset quality and an increase in credit losses due to the COVID-19 pandemic;

•changes in laws or the regulatory environment, including regulatory reform initiatives and policies of the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System (“Federal Reserve”), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the California Department of Financial Protection and Innovation - Division of Financial Institutions;

•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing economic and political disputes between the U.S. and the People’s Republic of China and the monetary policies of the Federal Reserve;

•changes in the commercial and consumer real estate markets;

•changes in consumer or commercial spending, savings and borrowing habits, and patterns and behaviors;

•fluctuations in the Company’s stock price;

•the impact from potential changes to income tax laws and regulations, federal spending and economic stimulus programs;

•the Company’s ability to compete effectively against financial institutions in its banking markets and other entities, including as a result of emerging technologies;

•the soundness of other financial institutions;

•the success and timing of the Company’s business strategies;

•the Company’s ability to retain key officers and employees;

•impact on the Company’s funding costs, net interest income and net interest margin from changes in key variable market interest rates, competition, regulatory requirements and the Company’s product mix;

•changes in the Company’s costs of operation, compliance and expansion;

•the Company’s ability to adopt and successfully integrate new technologies into its business in a strategic manner;

•the impact of the benchmark interest rate reform in the U.S. including the transition away from the U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) to alternative reference rates;

•the impact of communications or technology disruption, failure in, or breach of, the Company’s operational or security systems or infrastructure, or those of third party vendors with which the Company does business, including as a result of cyber-attacks; and other similar matters which could result in, among other things, confidential and/or proprietary information being disclosed or misused, and materially impact the Company’s ability to provide services to its clients;

•the adequacy of the Company’s risk management framework, disclosure controls and procedures and internal control over financial reporting;

•future credit quality and performance, including the Company’s expectations regarding future credit losses and allowance levels;

•the impact of adverse changes to the Company’s credit ratings from major credit rating agencies;

•impact of adverse judgments or settlements in litigation;

•the impact on the Company’s operations due to political developments, pandemics, wars, civil unrest, terrorism or other hostilities that may disrupt or increase volatility in securities or otherwise affect business and economic conditions;

•heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;

•the impact of reputational risk from negative publicity, fines, penalties and other negative consequences from regulatory violations, legal actions and the Company’s interactions with business partners, counterparties, service providers and other third parties;

•the impact of regulatory investigations and enforcement actions;

•changes in accounting standards as may be required by the Financial Accounting Standards Board or other regulatory agencies and their impact on critical accounting policies and assumptions;

•the Company’s capital requirements and its ~~various~~ability to generate capital internally or raise capital on favorable terms;

•the impact on the Company’s liquidity due to changes in the Company’s ability to receive dividends from its subsidiaries;

•any future strategic acquisitions or divestitures;

•changes in the equity and debt securities markets;

•fluctuations in foreign currency exchange rates;

•the impact of increased focus on social, environmental and sustainability matters, which may affect the Company’s operations as well as those of its customers and the economy more broadly;

•significant turbulence or disruption in the capital or financial markets, which could result in, among other things, reduced investor demand for loans, a reduction in the availability of funding or increases in funding costs, declines in asset values and/or recognition of allowance for credit losses on securities held in the Company’s debt securities and equity securities portfolio; and

•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts and earthquakes, all of which are particularly common in California, or other events that may directly or indirectly result in a negative impact on the Company’s financial performance.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022 (the “Company’s 2021 Form 10-K”) under the heading Item 1A. Risk Factors and the information set forth under Item 1A. Risk Factors in this Form 10-Q. The Company does not undertake, and specifically disclaims any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of the Company and its subsidiaries, including ~~the~~its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “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 report, and the Company’s ~~annual report on~~2021 Form ~~10-K for the year ended December 31, 2016 filed with the U.S. Securities~~10-K.

Organization and ~~Exchange Commission on February 27, 2017 (the “Company’s 2016 Form 10-K”).~~Strategy

~~Overview~~

East West is a bank holding company incorporated in Delaware on August 26, 1998 and is registered under the Bank Holding Company Act of 1956, as amended. The Company commenced business on December 30, 1998 when, pursuant to a reorganization, it acquired all of the voting stock of the Bank, which became its principal asset. The Bank is an independent commercial bank headquartered in California ~~and is the largest bank in the United States (“U.S.”)~~ that ~~has a strong focus~~focuses on the financial service needs of the ~~Chinese American~~Asian-American community. ~~The Bank operates both in the U.S. and Greater China.~~

The Company’s vision is to serve as the financial bridge between the U.S. and Greater China. The Company’s primary strategy to achieve this vision is to expand the Company’s global network of contacts and resources to better meet its customers’ diverse financial needs in and between the world’s two largest markets. WithThrough over ~~130~~120 locations in the U.S. and ~~Greater~~ China, ~~and~~the Company provides a full range of ~~cross-border~~consumer and commercial products and services through the ~~Company continues~~following three business segments: (1) Consumer and Business Banking, and (2) Commercial Banking, with the remaining operations recorded in (3) Other. The Company’s principal activity is lending to ~~seek attractive opportunities for growth in pursuing its cross-border business banking strategy.~~

~~In executing our strategic vision, we remain focused on the fundamentals of~~and accepting deposits from businesses and individuals. We are committed to enhancing long-term stockholder value by growing loans, deposits and revenue, ~~and~~ improving profitability, ~~while~~and investing for the future ~~and~~while managing ~~risk,~~risks, expenses and capital. Our business model is built on promoting customer loyalty and engagement, understanding our customers’ financial goals, and meeting ~~their~~our customers’ financial needs through our ~~offering of~~ diverse products and services. We expect our relationship-focused business model to continue to generate organic growth from existing customers and to expand our targeted customer bases. As of June 30, 2022, the Company had $62.39 billion in assets and approximately 3,200 full-time equivalent employees. For additional information on our strategy, and the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2021 Form 10-K.

Developments

The COVID-19 Pandemic

The COVID-19 pandemic created a historic public health crisis and caused unprecedented disruptions to global economies. Although U.S. economic conditions have continued to recover from the COVID-19 pandemic as many health and safety restrictions have been lifted and vaccine rates have increased, certain adverse consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time, including inflationary concerns, and global supply chain disruption. As a result, it is difficult to predict and quantify all the specific impacts, and the extent to which the COVID-19 pandemic may negatively affect our business, financial condition, results of operations, regulatory capital, and liquidity ratios. The Company has been, and may continue to be, impacted by the COVID-19 pandemic. Despite this, the Company has continued to focus on serving its customers and communities and maintaining the well-being of its employees. The Company continues to monitor the external environment and make changes to its safety protocols as appropriate.

Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Overview in the Company’s ~~approach~~2021 Form 10-K and Item 2. MD&A — Balance Sheet Analysis — Loan Portfolio in this Form 10-Q for a discussion on the initiatives the Company has undertaken to support its customers. Further discussion of the potential impacts on the Company’s business due to the COVID-19 pandemic has been provided in Item 1A. — Risk Factors — Risks Related to the COVID-19 Pandemic in the Company’s 2021 Form 10-K.

LIBOR Transition

LIBOR is ~~concentrated~~the average interbank interest rate at which a large number of banks are prepared to lend one another unsecured funds. In March 2021, the United Kingdom’s Financial Conduct Authority and Intercontinental Exchange Benchmark Administration announced that the one-week and two-month USD LIBOR settings would cease to be published after December 31, 2021. The publication of overnight, one-, three-, six- and 12-month USD LIBOR settings will be extended through June 30, 2023, which will provide additional time to wind down or renegotiate existing contracts that reference these LIBOR settings, and will cease or become non-representative after June 30, 2023.

In March 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to facilitate the transition of legacy LIBOR-based contracts that either (a) lack LIBOR fallback provisions entirely or (b) contain inadequate LIBOR fallback provisions. The LIBOR Act includes different statutory provisions that may apply to LIBOR-based contracts, depending on ~~organically growing~~the type of fallback provisions included in the contract, if any. One statutory provision automatically replaces LIBOR with a benchmark selected by the Federal Reserve (the “Board-selected benchmark replacement”) by operation of law in certain circumstances, including when the contract has no fallback provisions. Another statutory provision applies to contracts that allow a designated person to select a benchmark replacement rate and ~~deepening client relationships~~provides a safe harbor should that ~~meet our risk/return measures.~~individual select the Board-selected benchmark replacement. Any Federal Reserve-identified replacement benchmark will be based on the Secured Overnight Financing Rate (“SOFR”), a rate published by the Federal Reserve Bank of New York.

~~Financial Highlights~~

The Company ~~delivered strong financial performance~~holds a significant volume of LIBOR-based products, including loans, derivatives, debt securities, assets purchased under resale agreements (“resale agreements”), junior subordinated debt, and assets sold under repurchase agreements (“repurchase agreements”) that are indexed to LIBOR tenors that will cease to be published after June 30, 2023. The Company has a cross-functional team to manage the communication of the Company’s transition plans with both internal and external stakeholders. The team helps to ensure that the Company appropriately updates its business processes, analytical tools, information systems and contract language to minimize disruption during and after the LIBOR transition. The Company has invested in updates to business and legal processes, models, analytical tools, and information and operational systems to facilitate the ~~third~~transition of legacy LIBOR products and offer products under alternative rates.

The Company began offering loans based on alternative reference rates, including SOFR and the Bloomberg Short-Term Bank Yield Index during the fourth quarter of ~~2017 across key measures of~~2021, and ceased offering new LIBOR loans and LIBOR loan ~~growth, revenue~~renewals beginning January 1, 2022. The Company also adopted industry best practice guidelines for fallback language for new transactions and ~~net income growth,~~distributed communications related to the transition to certain impacted internal and ~~credit quality. It~~external stakeholders. The Company has begun dialogue with customers to proactively modify LIBOR-based product contracts and transition to a benchmark replacement prior to June 30, 2023. The Company is assessing and planning to leverage relevant contractual and statutory solutions, including the LIBOR Act and other relevant legislation, to transition any residual LIBOR-based product exposures maturing after June 2023 to appropriate benchmark replacements. The Company’s ~~priority~~LIBOR transition is anticipated to ~~focus on strengthening its risk management infrastructure~~continue through June 30, 2023.

The Company will continue to monitor potential risks and ~~compliance in order~~impacts associated with the transition. For additional information related to ~~meet increasing regulatory expectations, while still providing strong returns to stockholders.~~

~~Financial Performance~~

~~Noteworthy items~~the potential impact surrounding the transition from LIBOR on the Company’s ~~performance included:~~business, see Item 1A. Risk Factors — Risks Related to Financial Matters in the Company’s 2021 Form 10-K.

~~Net~~Deposit Insurance Assessment Rates

On June 21, 2022, the FDIC issued a proposed rule to increase initial base deposit insurance assessment rates for insured depository institutions by two basis points (“bps”), beginning with the first quarterly assessment period of 2023. The proposed assessment rate schedules would remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds two percent. If the proposed rule is finalized as proposed, the FDIC insurance costs of insured depository institutions, including the Bank, would generally increase.

Community Reinvestment Act

On May 5, 2022, the federal banking agencies issued a proposed rule that would substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods, under the Community Reinvestment Act (“CRA”). We are evaluating the potential impact of the proposed rule on the Bank.

Financial Review



($ and shares in thousands, except per share, and ratio data)	Three Months Ended June 30,			Six Months Ended June 30,
	2022			2021			2022			2021
Summary of operations:
Net interest income before provision for (reversal of) credit losses (1)	$	472,952		$	376,473		$	888,565		$	730,168
Noninterest income	78,444			68,431			158,187			141,297
Total revenue	551,396			444,904			1,046,752			871,465
Provision for (reversal of) credit losses	13,500			(15,000)			21,500			(15,000)


Noninterest expense	196,860			189,523			386,310			380,600
Income before income taxes	341,036			270,381			638,942			505,865
Income tax expense	82,707			45,639			142,961			76,129

Net income	$	258,329		$	224,742		$	495,981		$	429,736

Per common share:
Basic earnings	$	1.83		$	1.58		$	3.50		$	3.03
Diluted earnings	$	1.81		$	1.57		$	3.47		$	3.01
Dividends declared	$	0.40		$	0.33		$	0.80		$	0.66



Weighted-average number of shares outstanding:
Basic	141,429			141,868			141,725			141,758
Diluted	142,372			143,040			142,838			142,963


Performance metrics:
Return on average assets (“ROA”)	1.66		%	1.56		%	1.61		%	1.53		%
Return on average equity (“ROE”)	18.23		%	16.61		%	17.36		%	16.10		%
Tangible return on average tangible equity (2)	19.94		%	18.28		%	18.96		%	17.73		%

Common dividend payout ratio	22.22		%	21.11		%	23.18		%	22.07		%
Net interest margin	3.23		%	2.75		%	3.05		%	2.73		%
Efficiency ratio (3)	35.70		%	42.60		%	36.91		%	43.67		%
Adjusted efficiency ratio (2)	32.90		%	36.30		%	34.05		%	37.47		%


At period end:	June 30, 2022		December 31, 2021
Total assets	$	62,394,283	$	60,870,701
Total loans (4)	$	46,530,540	$	41,694,416
Total deposits	$	54,343,354	$	53,350,532
Common shares outstanding at period-end	140,917		141,908
Book value per common share	$	39.81	$	41.13
Tangible equity per common share (2)	$	36.44	$	37.79

(1)Includes $1.4 million and $15.4 million of interest income ~~totaled $132.7 million~~related to Paycheck Protection Program (“PPP”) loans for the three months ended ~~September~~June 30, ~~2017,~~2022 and 2021, respectively, and $6.5 million and $30.4 million for the six months ended June 30, 2022 and 2021, respectively.

(2)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.

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

(4)Includes $153.3 million and $534.2 million of PPP loans as of June 30, 2022 and December 31, 2021, respectively.

The Company’s second quarter 2022 net income was $258.3 million, an increase of ~~$22.5~~$33.6 million or ~~20%~~15%, ~~from $110.1 million~~compared with second quarter 2021 net income of $224.7 million. Net income for the ~~same period~~first half of 2022 was $496.0 million, an increase of $66.2 million or 15% compared with first half of 2021 net income of $429.7 million. The increases in ~~2016. This increase was~~both periods were primarily due to higher net interest income, partially offset by higher income tax expense ~~reflecting a higher effective tax rate. Net income totaled $420.7 million~~and provision for credit losses. Noteworthy items about the Company’s second quarter and first half of 2022 performance included:

•Expanding profitability. Second quarter 2022 ROA, ROE and the tangible return on average tangible equity of 1.66%, 18.23% and 19.94%, respectively, all expanded compared with second quarter 2021. Likewise, for the ~~nine months ended September 30, 2017, an increase~~first half of ~~$99.8 million or 31%~~2022, ROA, ROE and the tangible return on average tangible equity of 1.61%, ~~from $320.9 million for~~17.36% and 18.96%, respectively, all expanded year-over-year. For additional details, see the ~~same period~~reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in ~~2016. This increase was primarily due to higher~~this Form 10-Q.

•Net interest income growth and net interest income and noninterest income, partially offset by higher income tax expense due to a higher effective tax rate. The higher net interest income during the three and nine months ended September 30, 2017 was primarily due to growth in the loan portfolio and higher yields. The higher noninterest income during the nine months ended September 30, 2017 was primarily due to a $41.5 million after-tax net gain recognized from the sale of a commercial property in San Francisco, California during the firstmargin expansion. Second quarter ~~of 2017 and a $2.2 million after-tax net gain recognized from the sale of East West Insurance Services, Inc.’s (“EWIS”) business during the third quarter of 2017.~~

Diluted earnings per share (“EPS”) was $0.91 and $0.76 for the three months ended September 30, 2017 and 2016, respectively, which reflected an increase of $0.15 or 20%. Diluted EPS was $2.88 and $2.21 for the nine months ended September 30, 2017 and 2016, respectively, an increase of $0.67 or 30%. The diluted EPS impact from the sale of EWIS’s business in the third quarter of 2017 was $0.02, and the diluted EPS impact from the commercial property sale in the first quarter of 2017 was $0.28.

~~Revenue, or the sum of~~2022 net interest income before provision for (reversal of) credit losses ~~and noninterest income, increased $49.3~~was $473.0 million, an increase of $96.5 million or ~~16%~~26%, from the second quarter 2021 Second quarter 2022 net interest margin of 3.23% expanded by 48 bps year-over-year. For the first half of 2022, net interest income before provision for (reversal of) credit losses was $888.6 million, an increase of $158.4 million or 22% year-over-year; first half of 2022 net interest margin was 3.05%, up by 32 bps year-over-year.

•Improved efficiency. Efficiency ratios of 35.70% and 36.91% for the second quarter and first half of 2022, respectively, both improved year-over-year. The adjusted efficiency ratios of 32.90% and 34.05% for the second quarter and first half of 2022, respectively, both improved year-over-year. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to ~~$352.8~~Non-GAAP Financial Measures in this Form 10-Q.

•The Company recorded a provision for credit losses of $13.5 million and $21.5 million for the ~~three months ended September 30, 2017, compared to the same period in 2016,~~second quarter and ~~increased $184.4 million or 21% to $1.08 billion for the nine months ended September 30, 2017, compared to the same period in 2016.~~

Noninterest expense decreased $6.0 million or 4% to $164.5 million for the three months ended September 30, 2017, compared to the same period in 2016. For the nine months ended September 30, 2017, noninterest expense increased $20.7 million or 4% to $486.7 million, compared to the same period in 2016.

~~The Company’s effective tax rate for the three and nine months ended September 30, 2017 was 24.3% and 25.0%,~~first half of 2022, respectively, compared ~~to 10.8%~~with a reversal of provision for credit losses of $15.0 million during both the second quarter and ~~21.9%, respectively, for the same periods in 2016.~~first half of 2021.

~~Return on average~~•Total assets increased 13 and 28 basis points to 1.46% and 1.59% for the three and nine months ended September 30, 2017, respectively, compared to 1.33% and 1.31%, respectively, for the same periods in 2016. Return on average equity increased 93 and 238 basis points to 14.01% and 15.50% for the three and nine months ended September 30, 2017, respectively, compared to 13.08% and 13.12%, respectively, for the same periods in 2016.

~~Balance Sheet and Liquidity~~

~~The Company experienced growth of~~reached $62.39 billion, growing by $1.52 billion or ~~4% in total assets~~3% from December 31, 2021, primarily driven by loan growth.

•Total loans were $46.53 billion as of ~~September~~June 30, 2017 compared to December 31, 2016. This growth was largely attributable to loan growth, partially offset by decreases in securities purchased under resale agreements (“resale agreements”) and available-for-sale investment securities.

~~Gross loans held-for-investment increased $3.02~~2022, an increase of $4.84 billion or 12% ~~to $28.53 billion as of September 30, 2017, compared to $25.50~~from $41.69 billion as of December 31, ~~2016, while~~2021. This was primarily driven by well-diversified growth across the ~~allowance for~~commercial real estate (“CRE”), residential mortgage, and commercial and industrial (“C&I”) loan losses to loans held-for-investment ratio slightly declined by two basis points to 1.00% as of September 30, 2017, compared to 1.02% as of December 31, 2016. Deposits increased $1.42 billion or 5% to $31.31segments.

•Total deposits were $54.34 billion as of ~~September~~June 30, ~~2017, compared to $29.89~~2022, an increase of $992.8 million or 2%, from $53.35 billion as of December 31, ~~2016, consisting~~2021. Growth was primarily driven by time and interest-bearing checking deposits, partially offset by a decrease in money market accounts. Noninterest-bearing demand deposit balances were $23.03 billion as of ~~a $1.24 billion or 5%~~June 30, 2022, an increase ~~in core deposits and a $179.3~~of $183.4 million or ~~3% increase in time deposits. Core~~1% year-to-date. Noninterest-bearing demand deposits comprised ~~81%~~42% of total deposits as of ~~each of September~~June 30, ~~2017 and December 31, 2016.~~2022.

~~Capital~~

Our financial performance in the nine months ended September 30, 2017 resulted in strong capital generation, which increased total stockholders’ equity by $354.2 million or 10% to $3.78 billion as of September 30, 2017, compared to December 31, 2016. We returned $29.2 million and $87.6 million in cash dividends to our stockholders during the three and nine months ended September 30, 2017, respectively. Book value per common share increased 10% to $26.17 as of September 30, 2017, compared to $23.78 as of December 31, 2016.

From a capital management perspective, the Company continued to maintain a strong capital position with its Common Equity Tier 1 (“CET1”) capital ratio at 11.4% as of September 30, 2017, compared to 10.9% as of December 31, 2016. The total risk-based capital ratio was 12.9% and 12.4% as of September 30, 2017 and December 31, 2016, respectively. The Tier 1 leverage capital ratio was 9.4% as of September 30, 2017, compared to 8.7% as of December 31, 2016.

Results of Operations

~~Components of Net Income~~

($ in thousands, except per share data and ratios) Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 % Change / Basis Point (“BP”) Change 2017 2016
% Change / BP
Change
Interest and dividend income $ 339,910
$ 280,317
21 % $ 965,354
$ 835,354
16 %
Interest expense 36,755
26,169
40 % 99,986
75,418
33 %
Net interest income before provision for credit losses 303,155
254,148
19 % 865,368
759,936
14 %
Provision for credit losses 12,996
9,525
36 % 30,749
17,018
81 %
Noninterest income 49,624
49,341
1 % 213,047
134,118
59 %
Noninterest expense 164,499
170,500
(4 )% 486,693
465,985
4 %
Income tax expense 42,624
13,321
220 % 140,247
90,108
56 %
Net income $ 132,660
$ 110,143
20 % $ 420,726
$ 320,943
31 %
Diluted EPS $ 0.91
$ 0.76
20 % $ 2.88
$ 2.21
30 %
Annualized return on average assets 1.46 % 1.33 % 13 bps 1.59 % 1.31 % 28 bps
Annualized return on average equity 14.01 % 13.08 % 93 bps 15.50 % 13.12 % 238 bps

Net income increased $22.5 million or 20% to $132.7 million for the three months ended September 30, 2017, from $110.1 million for the same period in 2016. Diluted EPS was $0.91 for the three months ended September 30, 2017, an increase of $0.15 or 20% from the prior year period. Net income increased $99.8 million or 31% to $420.7 million for the nine months ended September 30, 2017, from $320.9 million for the same period in 2016. Diluted EPS was $2.88 for the nine months ended September 30, 2017, an increase of $0.67 or 30% from the prior year period. As discussed in ~~Note 3 — Dispositions~~ to the Consolidated Financial Statements, the Company completed the sale and leaseback of a commercial property, which resulted in an after-tax net gain of $41.5 million recorded during the first quarter of 2017. Additionally, the Company sold its insurance brokerage business, EWIS, and recorded an after-tax net gain of $2.2 million during the third quarter of 2017. Excluding the net gains on the sales of the commercial property and EWIS’s business during the nine months ended September 30, 2017, non-Generally Accepted Accounting Principles (“non-GAAP”) net income of $377.0 million and non-GAAP diluted EPS of $2.58 increased $56.1 million and $0.37 per share, respectively, from the same prior year period (see reconciliations of non-GAAP measures used below under “Use of Non-GAAP Financial Measures”).

Revenue, or the sum of net interest income before provision for credit losses and noninterest income, increased $49.3 million or 16% to $352.8 million during the three months ended September 30, 2017, from $303.5 million during the same period in 2016. This increase was primarily due to a $49.0 million increase in net interest income, reflecting the growth in the loan portfolio and the positive impact of short-term interest rate increases in 2017. Revenue increased $184.4 million or 21% to $1.08 billion during the nine months ended September 30, 2017, from $894.1 million during the same period in 2016. This increase was due to a $105.4 million increase in net interest income, reflecting the growth in the loan portfolio and the positive impact of short-term interest rate increases in 2017; and a $78.9 million increase in noninterest income, primarily due to the $71.7 million pre-tax gain recognized from the sale of the commercial property during the first quarter of 2017 and the $3.8 million pre-tax gain recognized from the sale of EWIS’s business.

Noninterest expense was $164.5 million for the three months ended September 30, 2017, a decrease of $6.0 million or 4% from $170.5 million for the same period in 2016. This decrease was largely driven by lower amortization expense of tax credits and other investments and lower legal expense, partially offset by an increase in compensation and employee benefits. Noninterest expense was $486.7 million for the nine months ended September 30, 2017, an increase of $20.7 million or 4% from $466.0 million for the same period in 2016. This increase was largely driven by higher compensation and employee benefits and amortization expense of tax credit and other investments, partially offset by lower consulting and legal expenses.

Strong returns on average assets and average equity during the three and nine months ended September 30, 2017 reflected the Company’s ability to achieve higher profitability while expanding the loan and deposit base. The return on average assets increased 13 basis points to 1.46% while the return on average equity increased 93 basis points to 14.01% for the three months ended September 30, 2017, compared to the same period in 2016. The return on average assets increased 28 basis points to 1.59% while the return on average equity increased 238 basis points to 15.50% for the nine months ended September 30, 2017, compared to the same period in 2016. Excluding the impact of the after-tax gains on the sales of the commercial property and EWIS’s business that were recognized in the first and third quarters of 2017, respectively, non-GAAP return on average assets was 1.43% for the nine months ended September 30, 2017, a 12 basis point increase from the same prior year period, while non-GAAP return on average equity was 13.89% for the nine months ended September 30, 2017, a 77 basis point increase from the same prior year period. (See reconciliations of non-GAAP measures used below under “Use of Non-GAAP Financial Measures”.)

~~Use of Non-GAAP Financial Measures~~

To supplement the Company’s unaudited interim Consolidated Financial Statements presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement.

The Company believes these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding its performance. Management believes that excluding the non-recurring after-tax effect of the gains on sales of the commercial property and EWIS’s business from net income, diluted EPS, and returns on average assets and average equity, will make it easier to analyze the results by presenting them on a more comparable basis. However, note that these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP.

~~The following table presents a reconciliation of GAAP to non-GAAP financial measures for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended September 30,
($ and shares in thousands, except per share data) 2017 2016
Net income (a) $ 420,726
$ 320,943
Less: Gain on sale of the commercial property, net of tax ⁽¹⁾
(b) (41,526 ) —
Gain on sale of business, net of tax ⁽¹⁾
(2,206 ) —
Non-GAAP net income (c) $ 376,994

$ 320,943

Diluted weighted average number of shares outstanding (d) 145,849
145,086

Diluted EPS (a)/(d) $ 2.88
$ 2.21
Diluted EPS impact of the gain on sale of the commercial property, net of tax (b)/(d) (0.28 ) —
Diluted EPS impact of the gain on sale of business, net of tax (0.02 ) —
Non-GAAP diluted EPS (c)/(d) $ 2.58

$ 2.21

Average total assets (e) $ 35,290,542
$ 32,662,445
Average stockholders’ equity (f) $ 3,630,062
$ 3,266,485
Return on average assets ⁽²⁾
(a)/(e) 1.59 % 1.31 %
Non-GAAP return on average assets ⁽²⁾
(c)/(e) 1.43 % 1.31 %
Return on average equity ⁽²⁾
(a)/(f) 15.50 % 13.12 %
Non-GAAP return on average equity ⁽²⁾
(c)/(f) 13.89 % 13.12 %


~~(1)~~	~~Applied statutory tax rate of 42.05%.~~


~~(2)~~	~~Annualized.~~

~~A discussion of net interest income, noninterest income, noninterest expense, income taxes and operating segment results are presented below.~~

Net Interest Income

The Company’s primary source of revenue is net interest income, which is the ~~difference between~~ interest income earned on ~~loans, investment securities, resale agreements and other~~ interest-earning assets less interest expense paid on ~~customer deposits, securities sold under repurchase agreements (“repurchase agreements”), borrowings and other~~ interest-bearing liabilities. Net interest margin is ~~calculated by dividing~~ the ~~annualized~~ratio of net interest income byto average interest-earning assets. Net interest income and net interest margin are ~~affected~~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~~

Second quarter 2022 net interest income before provision for ~~the three months ended September 30, 2017~~credit losses was ~~$303.2~~$473.0 million, an increase of ~~$49.0~~$96.5 million or ~~19%~~26%, compared ~~to $254.1~~with $376.5 million for the ~~same period in 2016. Net~~second quarter 2021. For the first half of 2022, net interest income ~~for the nine months ended September 30, 2017~~ was ~~$865.4~~$888.6 million, an increase of ~~$105.4~~$158.4 million or ~~14%~~22%, compared ~~to $759.9~~with $730.2 million for the ~~same period in 2016.~~first half of 2021. Second quarter 2022 net interest margin was 3.23%, an increase of 48 bps from 2.75% for the second quarter of 2021. For the first half of 2022, net interest margin was 3.05%, an increase of 32 bps from 2.73% for the first half of 2021. The ~~notable increases~~year-over-year changes in net interest income and net interest margin primarily reflected strong loan growth, higher loan yields, and higher debt securities yield and volume. Yields expanded year-over-year due to rising interest rates.

Average interest-earning assets were $58.67 billion for the ~~three~~second quarter of 2022, an increase of $3.77 billion or 7% from $54.90 billion for the second quarter of 2021. For the first half of 2022, the average interest-earning assets were $58.68 billion, an increase of $4.80 billion or 9% from $53.88 billion for the first half of 2021. The increases in average interest-earning assets in both periods primarily reflected growth in loans and ~~nine months ended September 30, 2017, compared to the same periods in 2016, were primarily due to increased interest income resulting from loan growth and higher yields on interest-earning assets,~~debt securities, partially offset by a ~~16 and 12 basis point increase~~decrease in the cost of interest-bearing deposits during the three and nine months ended September 30, 2017, respectively. The cost of interest-bearing deposits was 0.60% and 0.55% for the three and nine months ended September 30, 2017, respectively, compared to 0.44% and 0.43% for the three and nine months ended September 30, 2016.

For the three months ended September 30, 2017, net interest margin increased to 3.52%, compared to 3.26% for the same period in 2016. For the nine months ended September 30, 2017, net interest margin increased to 3.45%, compared to 3.29% for the same period in 2016. The increases in net interest margin for the three and nine months ended September 30, 2017 were due to higher yields from interest-earning assets (primarily due to an increase in loan yields for the three months ended September 30, 2017 compared to the same prior year period, and primarily due to increases in yields of loans, interest-bearing cash and deposits with ~~banks and investment securities during the nine months ended September 30, 2017), as a result of the short-term interest rate increases in 2017.~~ banks.

The higher loan yields for the three and nine months ended September 30, 2017 were partially offset by lower accretion income from the purchased credit impaired (“PCI”) loans accounted for under Accounting Standard Codification (“ASC”) 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~. During the three and nine months ended September 30, 2017, total accretion income from loans accounted for under ASC 310-30 was $4.5 million and $14.0 million, respectively, compared to $7.1 million and $33.8 million, respectively, for the same periods in 2016.

~~For the three months ended September 30, 2017,~~yield on average interest-earning assets ~~increased $3.15 billion or 10% to $34.21 billion from $31.06 billion~~ for the ~~same period in 2016. This~~second quarter of 2022 was 3.42%, an increase ~~was primarily due to increases~~ of $3.22 billion or 13% in average loans, and $751.0 million or 47% in average interest-bearing cash and deposits with banks, partially offset by decreases of $508.2 million or 28% in average resale agreements and $310.7 million or 9% in average investment securities. For50 bps from 2.92% for the ~~nine months ended September 30, 2017,~~second quarter 2021. The yield on average interest-earning assets ~~increased $2.73 billion or 9% to $33.54 billion from $30.81 billion~~ for the ~~same period~~first half of 2022 was 3.20%, an increase of 28 bps from 2.92% for the first half of 2021. The year-over-year changes in ~~2016. This increase was primarily due to increases of $2.78 billion or 12% in average loans, and $305.1 million or 17% in~~the yield on average interest-bearing ~~cash~~assets primarily resulted from rising benchmark interest rates and ~~deposits with banks, partially offset by~~ a ~~$228.3 million~~changed earning asset mix in favor of higher-yielding assets.

The average loan yield for the second quarter of 2022 was 3.95%, an increase of 38 bps from 3.57% for the second quarter of 2021. The average loan yield for the first half of 2022 was 3.80%, an increase of 23 bps from 3.57% for the first half of 2021. The year-over-year changes in the average loan yield reflect the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately 63% and 64% of loans held-for-investment were variable-rate or ~~7% decrease~~hybrid loans in ~~average investment securities.~~their adjustable-rate period as of June 30, 2022 and 2021, respectively.

~~Customer deposits~~

Deposits are an important source of ~~funding~~funds and ~~affect~~impact both net interest income and net interest margin. ~~Deposits are comprised of noninterest-bearing demand, interest-bearing checking, money market, savings and time deposits.~~ Average deposits ~~increased $2.79~~were $54.13 billion for the second quarter of 2022, an increase of $3.95 billion or 8% from $50.18 billion for the second quarter of 2021. For the first half of 2022, average deposits were $54.08 billion, an increase of $5.06 billion or 10% ~~to $31.07~~from $49.02 billion for the ~~three months ended September 30, 2017, compared to $28.28~~first half of 2021. Average noninterest-bearing deposits were $23.89 billion for the ~~same period in 2016. The ratio~~second quarter of average noninterest-bearing demand deposits to total deposits increased to 34% for the three months ended September 30, 2017, from 33% for the three months ended September 30, 2016. Average deposits increased $2.272022, an increase of $4.17 billion or ~~8% to $30.33~~21% from $19.72 billion for the ~~nine months ended September 30, 2017, compared to $28.06~~second quarter of 2021. For the first half of 2022, average noninterest-bearing deposits were $23.66 billion, an increase of $4.75 billion or 25% from $18.91 billion for the ~~same period in 2016. The ratio~~first half of 2021. Average noninterest-bearing deposits made up 44% of average ~~noninterest-bearing demand~~ deposits ~~to total~~for both the second quarter and first half of 2022, compared with 39% in the year-ago periods.

The average cost of deposits ~~increased to 34%~~was 0.17% for the ~~nine months ended September 30, 2017,~~second quarter of 2022, a three bp increase from ~~32%~~0.14% for the ~~nine months ended September 30, 2016.~~second quarter of 2021. The average ~~loans to average~~cost of interest-bearing deposits ~~ratio increased to 89%~~was 0.30% for the ~~three months ended September 30, 2017,~~second quarter of 2022, an increase of six bps, from ~~86%~~0.24% for the ~~three months ended September 30, 2016.~~ second quarter of 2021. The year-over-year increases were primarily due to higher rates paid on money market accounts.

The average ~~loans to average~~cost of deposits ~~ratio increased to 88%~~was 0.13% for the ~~nine months ended September 30, 2017,~~first half of 2022, a three bp decrease from ~~86%~~0.16% for the ~~nine months ended September 30, 2016. In addition,~~first half of 2021. The average cost of interest-bearing deposits was 0.24% for the first half of 2022, a three bp decrease from 0.27% for the first half of 2021. The year-over-year decreases reflected lower rates paid on checking and time deposits, and the run-off of higher-cost time deposits, partially offset by higher interest paid on money market deposits.

The average cost of funds ~~increased 10 basis points to 0.46%~~calculation includes deposits, Federal Home Loan Bank (“FHLB”) advances, repurchase agreements, long-term debt and short-term borrowings. For the second quarter of 2022, the average cost of funds was 0.20%, a two bp increase from 0.18% for the ~~three months ended September 30, 2017~~second quarter of 2021. For the first half of 2022, the average cost of funds was 0.16%, a four bp decrease from ~~0.36%~~0.20% for the ~~same period~~first half of 2021. The year-over-year changes in ~~2016. Cost~~the average cost of funds ~~increased eight basis points to 0.43% for~~were driven by the ~~nine months ended September 30, 2017 from 0.35% for~~changes in the ~~same period~~cost of deposits as discussed above, and the maturity of higher cost FHLB advances. $405.0 million and $175.0 million in ~~2016.~~FHLB advances matured during the second quarter of 2021 and first quarter of 2022, respectively.

The Company utilizes various tools to manage interest rate risk. Refer to the ~~“Interest~~Interest Rate Risk ~~Management”~~Management section of ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations (“~~Item 2. MD~~&A”)~~ &A — ~~Asset Liability and~~ Risk Management —Market Risk Management ~~for details.~~in 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 ~~three months ended September 30, 2017~~second quarters of 2022 and ~~2016:~~2021:



($ in thousands)	Three Months Ended June 30,
	2022						2021
	Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks	$	2,797,711	$	4,787	0.69	%	$	5,072,225	$	3,628	0.29	%
Resale agreements	1,641,723		8,553		2.09	%	2,129,567		8,021		1.51	%
Available-for-sale (“AFS”) debt securities (2)(3)	6,503,677		33,438		2.06	%	7,997,005		34,690		1.74	%
Held-to-maturity (“HTM”) debt securities (2)(4)	3,021,239		12,738		1.69	%	—		—		—	%
Loans (5)(6)	44,626,488		439,416		3.95	%	39,622,270		352,453		3.57	%







Restricted equity securities	77,839		822		4.24	%	80,142		541		2.71	%
Total interest-earning assets	$	58,668,677	$	499,754	3.42	%	$	54,901,209	$	399,333	2.92	%
Noninterest-earning assets:
Cash and due from banks	712,884						600,053
Allowance for loan losses	(545,489)						(607,523)
Other assets	3,396,769						2,878,098
Total assets	$	62,232,841					$	57,771,837
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits	$	6,712,890	$	3,178	0.19	%	$	6,671,358	$	3,777	0.23	%
Money market deposits	12,319,930		8,892		0.29	%	12,596,515		3,712		0.12	%
Savings deposits	2,970,007		1,864		0.25	%	2,676,865		2,078		0.31	%
Time deposits	8,239,571		8,554		0.42	%	8,518,936		8,431		0.40	%
Short-term borrowings	64,145		241		1.51	%	336		—		—	%
FHLB advances	138,960		559		1.61	%	474,887		2,099		1.77	%
Repurchase agreements	359,778		2,418		2.70	%	303,118		1,991		2.63	%
Long-term debt and finance lease liabilities	152,194		1,096		2.89	%	152,099		772		2.04	%
Total interest-bearing liabilities	$	30,957,475	$	26,802	0.35	%	$	31,394,114	$	22,860	0.29	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	23,887,452						19,717,315
Accrued expenses and other liabilities	1,705,487						1,234,456
Stockholders’ equity	5,682,427						5,425,952
Total liabilities and stockholders’ equity	$	62,232,841					$	57,771,837
Interest rate spread					3.07	%					2.63	%
Net interest income and net interest margin			$	472,952	3.23	%			$	376,473	2.75	%

(1)Annualized.

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

(3)Includes the amortization of premiums on AFS debt securities of $20.3 million and $21.0 million for the second quarters of 2022 and 2021, respectively.

(4)Includes the amortization of premiums on HTM debt securities of $100 thousand for the second quarter of 2022.

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

(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $11.4 million and $15.8 million for the second quarters of 2022 and 2021, respectively.

($ in thousands) Three Months Ended September 30,
2017 2016

Average
Balance
Interest
Average
Yield/
Rate⁽¹⁾
Average
Balance Interest
Average
Yield/
Rate⁽¹⁾
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks $ 2,344,561
$ 9,630
1.63 % $ 1,593,577
$ 3,168
0.79 %
Resale agreements ⁽²⁾
1,297,826
7,901
2.42 % 1,805,978
7,834
1.73 %
Investment securities ⁽³⁾
2,963,122
14,828
⁽⁴⁾
1.99 % 3,273,861
13,388
⁽⁴⁾
1.63 %
Loans⁽⁵⁾
27,529,779
306,939
⁽⁶⁾
4.42 % 24,309,313
255,316
⁽⁶⁾
4.18 %
Restricted equity securities 73,245
612
3.31 % 72,625
611
3.35 %
Total interest-earning assets 34,208,533
339,910
3.94 % 31,055,354
280,317
3.59 %
Noninterest-earning assets:
Cash and due from banks 387,705
354,053

Allowance for loan losses (276,467 ) (266,763 )
Other assets 1,617,796
1,763,889

Total assets $ 35,937,567
$ 32,906,533

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits $ 4,014,290
$ 4,768
0.47 % $ 3,553,477
$ 3,253
0.36 %
Money market deposits 7,997,648
11,828
0.59 % 7,548,835
6,663
0.35 %
Savings deposits 2,423,312
1,810
0.30 % 2,133,036
1,160
0.22 %
Time deposits 5,974,793
12,680
0.84 % 5,627,084
9,973
0.71 %
Federal funds purchased and other short-term borrowings 29,661
212
2.84 % 32,137
212
2.62 %
Federal Home Loan Bank (“FHLB”) advances 322,973
1,947
2.39 % 320,743
1,361
1.69 %
Repurchase agreements ⁽²⁾
50,000
2,122
16.84 % 200,000
2,319
4.61 %
Long-term debt 176,472
1,388
3.12 % 196,170
1,228
2.49 %
Total interest-bearing liabilities 20,989,149
36,755
0.69 % 19,611,482
26,169
0.53 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits 10,655,860
9,413,031

Accrued expenses and other liabilities 536,351
532,779

Stockholders’ equity 3,756,207
3,349,241

Total liabilities and stockholders’ equity $ 35,937,567
$ 32,906,533

Interest rate spread
3.25 % 3.06 %
Net interest income and net interest margin
$ 303,155
3.52 % $ 254,148
3.26 %


~~(1)~~	~~Annualized.~~


~~(2)~~	~~Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45,~~ ~~Balance Sheet Offsetting~~.


~~(3)~~	~~Yields on tax-exempt securities are not presented on a tax-equivalent basis.~~


~~(4)~~	~~Includes the amortization of net premiums on investment securities of $5.2 million and $5.4 million for the three months ended September 30, 2017 and 2016, respectively.~~


~~(5)~~	~~Average balance includes nonperforming loans.~~


~~(6)~~	Interest income on loans includes net deferred loan fees, accretion of ASC 310-30 discounts and amortization of premiums, which totaled $6.5 million and $8.5 million for the three months ended September 30, 2017 and 2016, respectively.

The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/~~rates~~rate by asset and liability component for the ~~nine months ended September 30, 2017~~first halves of 2022 and ~~2016:~~2021:



($ in thousands)	Six Months Ended June 30,
	2022						2021
	Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks	$	3,627,253	$	8,047	0.45	%	$	5,592,124	$	7,260	0.26	%
Resale agreements	1,868,600		16,936		1.83	%	1,797,578		14,120		1.58	%
AFS debt securities (2)(3)	7,232,686		67,907		1.89	%	7,232,686		63,790		1.78	%
HTM debt securities (2)(4)	2,497,811		20,936		1.69	%	—		—		—	%
Loans (5)(6)	43,376,398		816,526		3.80	%	39,178,255		694,461		3.57	%







Restricted equity securities	77,708		1,431		3.71	%	81,645		1,088		2.69	%
Total interest-earning assets	$	58,680,456	$	931,783	3.20	%	$	53,882,288	$	780,719	2.92	%
Noninterest-earning assets:
Cash and due from banks	677,579						590,219
Allowance for loan losses	(544,423)						(613,026)
Other assets	3,183,144						2,829,594
Total assets	$	61,996,756					$	56,689,075
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits	$	6,680,657	$	4,580	0.14	%	$	6,532,965	$	7,991	0.25	%
Money market deposits	12,614,994		12,095		0.19	%	12,088,006		8,423		0.14	%
Savings deposits	2,950,268		3,568		0.24	%	2,675,677		3,819		0.29	%
Time deposits	8,170,613		15,234		0.38	%	8,814,159		19,587		0.45	%
Short-term borrowings	33,177		250		1.52	%	2,508		42		3.38	%
FHLB advances	149,431		1,137		1.53	%	563,331		5,168		1.85	%
Repurchase agreements	336,013		4,434		2.66	%	301,567		3,969		2.65	%
Long-term debt and finance lease liabilities	152,103		1,920		2.55	%	152,094		1,552		2.06	%
Total interest-bearing liabilities	$	31,087,256	$	43,218	0.28	%	$	31,130,307	$	50,551	0.33	%
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	23,661,355						18,909,991
Accrued expenses and other liabilities	1,486,067						1,266,510
Stockholders’ equity	5,762,078						5,382,267
Total liabilities and stockholders’ equity	$	61,996,756					$	56,689,075
Interest rate spread					2.92	%					2.59	%
Net interest income and net interest margin			$	888,565	3.05	%			$	730,168	2.73	%

(1)Annualized.

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

(3)Includes the amortization of premiums on AFS debt securities of $43.8 million and $40.1 million for the first halves of 2022 and 2021, respectively.

(4)Includes the amortization of premiums on HTM debt securities of $234 thousand for the first half of 2022.

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

(6)Loans include the accretion of net deferred loan fees and amortization of net premiums, which totaled $23.8 million and $29.8 million for the first halves of 2022 and 2021, respectively.

($ in thousands) Nine Months Ended September 30,
2017 2016

Average
Balance
Interest
Average
Yield/
Rate⁽¹⁾
Average
Balance Interest
Average
Yield/
Rate⁽¹⁾
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks $ 2,073,322
$ 22,298
1.44 % $ 1,768,252
$ 10,245
0.77 %
Resale agreements⁽²⁾
1,552,198
25,222
2.17 % 1,672,993
22,479
1.79 %
Investment securities ⁽³⁾
3,060,688
43,936
⁽⁴⁾
1.92 % 3,289,014
37,433
⁽⁴⁾
1.52 %
Loans⁽⁵⁾
26,783,082
872,039
⁽⁶⁾
4.35 % 24,006,926
763,189
⁽⁶⁾
4.25 %
Restricted equity securities 73,651
1,859
3.37 % 76,122
2,008
3.52 %
Total interest-earning assets 33,542,941
965,354
3.85 % 30,813,307
835,354
3.62 %
Noninterest-earning assets:
Cash and due from banks 387,440
349,721

Allowance for loan losses (268,477 ) (264,088 )
Other assets 1,628,638
1,763,505

Total assets $ 35,290,542
$ 32,662,445

LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits $ 3,830,004
$ 12,538
0.44 % $ 3,445,996
$ 9,058
0.35 %
Money market deposits 7,968,457
30,409
0.51 % 7,519,261
19,295
0.34 %
Saving deposits 2,334,752
4,525
0.26 % 2,043,547
3,207
0.21 %
Time deposits 5,873,217
34,331
0.78 % 5,941,760
29,148
0.66 %
Federal funds purchased and other short-term borrowings 40,772
877
2.88 % 19,384
390
2.69 %
FHLB advances 414,355
5,738
1.85 % 400,850
4,153
1.38 %
Repurchase agreements ⁽²⁾
170,330
7,538
5.92 % 182,482
6,441
4.71 %
Long-term debt 181,337
4,030
2.97 % 201,060
3,726
2.48 %
Total interest-bearing liabilities 20,813,224
99,986
0.64 % 19,754,340
75,418
0.51 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits 10,323,254
9,107,051

Accrued expenses and other liabilities 524,002
534,569

Stockholders’ equity 3,630,062
3,266,485

Total liabilities and stockholders’ equity $ 35,290,542
$ 32,662,445

Interest rate spread 3.21 % 3.11 %
Net interest income and net interest margin $ 865,368
3.45 % $ 759,936
3.29 %


~~(1)~~	~~Annualized.~~


~~(2)~~	~~Average balances of resale and repurchase agreements are reported net, pursuant to ASC 210-20-45,~~ ~~Balance Sheet Offsetting~~.


~~(3)~~	~~Yields on tax-exempt securities are not presented on a tax-equivalent basis.~~


~~(4)~~	~~Includes the amortization of net premiums on investment securities of $16.3 million and $18.2 million for the nine months ended September 30, 2017 and 2016, respectively.~~


~~(5)~~	~~Average balance includes nonperforming loans.~~


~~(6)~~	Interest income on loans includes net deferred loan fees, accretion of ASC 310-30 discounts and amortization of premiums, which totaled $21.1 million and $39.7 million for the nine months ended September 30, 2017 and 2016, respectively.

The following table summarizes the extent to which changes in (1) interest rates, and ~~changes in~~(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 ~~the change~~changes attributable to variations in volume and ~~the change attributable to variations in interest rates.~~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 rate. ~~Nonaccrual loans are included in average loans used to compute the table below:~~



($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2022 vs. 2021						2022 vs. 2021
	Total Change		Changes Due to				Total Change		Changes Due to
			Volume		Yield/Rate				Volume		Yield/Rate
Interest-earning assets:
Interest-bearing cash and deposits with banks	$	1,159	$	(2,179)	$	3,338	$	787	$	(3,150)	$	3,937
Resale agreements	532		(2,101)		2,633		2,816		575		2,241
AFS debt securities	(1,252)		(7,080)		5,828		4,117		—		4,117
HTM debt securities	12,738		12,738		—		20,936		20,936		—
Loans	86,963		47,092		39,871		122,065		77,337		44,728
Restricted equity securities	281		(16)		297		343		(55)		398
Total interest and dividend income	$	100,421	$	48,454	$	51,967	$	151,064	$	95,643	$	55,421
Interest-bearing liabilities:
Checking deposits	$	(599)	$	23	$	(622)	$	(3,411)	$	177	$	(3,588)
Money market deposits	5,180		(83)		5,263		3,672		382		3,290
Savings deposits	(214)		212		(426)		(251)		368		(619)
Time deposits	123		(282)		405		(4,353)		(1,358)		(2,995)
Short-term borrowings	241		—		241		208		243		(35)
FHLB advances	(1,540)		(1,366)		(174)		(4,031)		(3,271)		(760)
Repurchase agreements	427		380		47		465		455		10
Long-term debt and finance lease liabilities	324		—		324		368		—		368
Total interest expense	$	3,942	$	(1,116)	$	5,058	$	(7,333)	$	(3,004)	$	(4,329)
Change in net interest income	$	96,479	$	49,570	$	46,909	$	158,397	$	98,647	$	59,750

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2017 vs. 2016 2017 vs. 2016

Total
Change
Changes Due to
Total
Change
Changes Due to
Volume Yield/Rate Volume Yield/Rate
Interest-earning assets:

Interest-bearing cash and deposits with banks $ 6,462
$ 1,988
$ 4,474
$ 12,053
$ 2,018
$ 10,035
Resale agreements 67
(2,566 ) 2,633
2,743
(1,714 ) 4,457
Investment securities 1,440
(1,348 ) 2,788
6,503
(2,746 ) 9,249
Loans 51,623
35,780
15,843
108,850
89,417
19,433
Restricted equity securities 1
6
(5 ) (149 ) (65 ) (84 )
Total interest and dividend income $ 59,593
$ 33,860
$ 25,733
$ 130,000
$ 86,910
$ 43,090
Interest-bearing liabilities:

Checking deposits $ 1,515
$ 464
$ 1,051
$ 3,480
$ 1,083
$ 2,397
Money market deposits 5,165
420
4,745
11,114
1,211
9,903
Savings deposits 650
175
475
1,318
496
822
Time deposits 2,707
654
2,053
5,183
(341 ) 5,524
Federal funds purchased and other short-term borrowings —
(17 ) 17
487
458
29
FHLB advances 586
10
576
1,585
144
1,441
Repurchase agreements (197 ) (2,762 ) 2,565
1,097
(452 ) 1,549
Long-term debt 160
(132 ) 292
304
(390 ) 694
Total interest expense $ 10,586
$ (1,188 ) $ 11,774
$ 24,568
$ 2,209
$ 22,359
Change in net interest income $ 49,007
$ 35,048
$ 13,959
$ 105,432
$ 84,701
$ 20,731

Noninterest Income

Noninterest income increased $283 thousand or 1% to $49.6 million for the three months ended September 30, 2017, compared to $49.3 million for the same period in 2016. This increase was primarily due to a $3.8 million increase in net gain on sale of EWIS’s business and an $872 thousand increase in derivative fees and other income, partially offset by a $4.0 million decrease in other fees and operating income. Noninterest income increased $78.9 million or 59% to $213.0 million for the nine months ended September 30, 2017, compared to $134.1 million for the same period in 2016. This increase was comprised of a $71.2 million increase in net gains on sales of fixed assets, primarily related to the sale of a commercial property, and a $3.8 million increase in net gain on the sale of EWIS’s business, partially offset by a $4.5 million decrease in other fees and operating income. Noninterest income represented 14% and 20% of revenue for the three and nine months ended September 30, 2017, respectively, compared to 16% and 15%, respectively, for the same periods in 2016.

The following table presents the components of noninterest income for the ~~periods indicated:~~second quarters and first halves of 2022 and 2021:



($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,

	2022		2021		% Change		2022		2021		% Change
Lending fees	$	20,142	$	21,092	(5)	%	$	39,580	$	39,449	0	%
Deposit account fees	22,372		17,342		29	%	42,687		32,725		30	%
Interest rate contracts and other derivative income (loss)	9,801		(3,172)		409	%	20,934		13,825		51	%
Foreign exchange income	11,361		13,007		(13)	%	24,060		22,533		7	%
Wealth management fees	6,539		7,951		(18)	%	12,591		14,862		(15)	%
Net gains on sales of loans	917		1,491		(38)	%	3,839		3,272		17	%
Gains on sales of AFS debt securities	28		632		(96)	%	1,306		824		58	%


Other investment income	4,863		7,596		(36)	%	6,490		8,521		(24)	%
Other income	2,421		2,492		(3)	%	6,700		5,286		27	%
Total noninterest income	$	78,444	$	68,431	15	%	$	158,187	$	141,297	12	%

($ in thousands) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 % Change 2017 2016 % Change
Branch fees $ 10,803
$ 10,408
4 % $ 31,799
$ 30,983
3 %
Letters of credit fees and foreign exchange income 10,154
10,908
(7 )% 33,209
31,404
6 %
Ancillary loan fees and other income 5,987
6,135
(2 )% 16,876
13,997
21 %
Wealth management fees 3,615
4,033
(10 )% 11,682
9,862
18 %
Derivative fees and other income 6,663
5,791
15 % 12,934
9,778
32 %
Net gains on sales of loans 2,361
2,158
9 % 6,660
6,965
(4 )%
Net gains on sales of available-for-sale investment securities 1,539
1,790
(14 )% 6,733
8,468
(20 )%
Net gains on sales of fixed assets 1,043
486
115 % 74,092
2,916
NM
Net gain on sale of business 3,807
—
NM
3,807
—
NM
Other fees and operating income 3,652
7,632
(52 )% 15,255
19,745
(23 )%
Total noninterest income $ 49,624
$ 49,341
1 % $ 213,047
$ 134,118
59 %

~~NM Not Meaningful.~~

~~The following discussion provides~~Noninterest income comprised 14% and 15% of total revenue for the ~~composition~~second quarter and the first half of 2022, respectively, compared with 15% and 16% for the ~~major changes in~~second quarter and the first half of 2021, respectively. Second quarter 2022 noninterest income ~~and the factors contributing to the changes.~~

~~Net gains on sales~~was $78.4 million, an increase of ~~fixed assets increased $71.2~~$10.0 million ~~to $74.1 million for the nine months ended September 30, 2017,~~or 15%, compared ~~to $2.9~~with $68.4 million for the same period in ~~2016.~~2021. This increase was primarily due to ~~the $71.7 million of pre-tax gain recognized from the sale of the commercial property~~increases in ~~California during~~interest rate contracts and other derivative income, and deposit account fees, partially offset by decreases in other investment income, foreign exchange income and wealth management fees. Noninterest income for the first ~~quarter~~half of ~~2017. In the first quarter~~2022 was $158.2 million, an increase of 2017, East West Bank completed the sale and leaseback of a commercial property in California for cash consideration of $120.6 million and entered into a lease agreement for part of the property, consisting of a retail branch and office facilities. The total pre-tax profit from the sale was $85.4 million, of which $71.7 million was recognized in the first quarter of 2017, and $13.7 million was deferred and recognized over the term of the lease agreement.

~~In the third quarter of 2017, the Company sold its insurance brokerage business, EWIS, for $4.3 million and recognized a pre-tax gain of $3.8 million.~~

~~Other fees and operating income decreased $4.0~~$16.9 million or ~~52% to $3.7~~12%, compared with $141.3 million for the ~~three months ended September 30, 2017 from~~same period in 2021. This increase was primarily due to increases in deposit account fees, interest rate contracts and other derivative income, and foreign exchange income, partially offset by lower wealth management fees and other investment income.

Deposit account fees were $22.4 million for the second quarter of 2022, an increase of $5.0 million or 29%, compared with $17.3 million for the same period in 2021. For the first half of 2022, deposit account fees were $42.7 million, an increase of $10.0 million or 30%, compared with $32.7 million for the same period in 2021. These increases were primarily driven by commercial deposit account growth.

Interest rate contracts and other derivative income was $9.8 million forthe second quarter of 2022, compared with a loss of $3.2 million for the same period in 2021. For the first half of 2022, interest rate contracts and other derivative income was $20.9 million, an increase of $7.1 million or 51%, compared with $13.8 million for the same period in 2021. These increases were primarily due to higher favorable credit valuation adjustments during the second quarter and first half of 2022, compared to the same year-ago periods.

Foreign exchange income was $11.4 million forthe second quarter of 2022, a decrease of $1.6 million or 13%, compared with $13.0 million for the same period in 2021. For the first half of 2022, foreign exchange income was $24.1 million, an increase of $1.5 million or 7%, compared with $22.5 million for the first half of 2021. Wealth management fees were $6.5 million for the second quarter of 2022, a decrease of $1.4 million or 18%, compared with $8.0 million for the same period in 2021. For the first half of 2022, wealth management fees were $12.6 million, a decrease of $2.3 million or 15%, compared with $14.9 million for the first half of 2021.

Other investment income was $4.9 million for the second quarter of 2022, a decrease of $2.7 million or 36%, compared with $7.6 million for the same period in ~~2016, and decreased $4.5~~2021. For the first half of 2022, other investment income was $6.5 million, a decrease of $2.0 million or ~~23% to $15.3~~24%, compared with $8.5 million for the ~~nine months ended September 30, 2017 from $19.7 million for the same period in 2016.~~first half of 2021. The ~~$4.0 million decrease for the three months ended September 30, 2017, compared to the same period in 2016,was mainly attributable to~~ decreases in rental income, as a result of the commercial property sale during the first quarter of 2017, and decreases in dividend income from other investments. The $4.5 million decrease for the nine months ended September 30, 2017, compared to the same period in 2016, was largely due toreflected a decrease in ~~rental income as~~equity pick-up and a ~~result~~smaller amount of ~~sale of~~valuation adjustments in 2022, compared with the ~~commercial property during the first quarter of 2017.~~year-ago periods.

Noninterest Expense

~~Noninterest~~The following table presents the components of noninterest expense ~~totaled $164.5 million~~ for the ~~three months ended September 30, 2017, a decrease~~second quarters and first halves of ~~$6.0~~2022 and 2021:



($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2022		2021		%		2022		2021		%
Compensation and employee benefits	$	113,364	$	105,426	8	%	$	229,633	$	213,234	8	%
Occupancy and equipment expense	15,469		15,377		1	%	30,933		31,299		(1)	%
Deposit insurance premiums and regulatory assessments	4,927		4,274		15	%	9,644		8,150		18	%
Deposit account expense	5,671		3,817		49	%	10,364		7,709		34	%
Data processing	3,486		4,035		(14)	%	7,151		8,513		(16)	%
Computer software expense	6,572		7,521		(13)	%	13,866		14,680		(6)	%
Consulting expense	2,021		1,868		8	%	3,854		3,343		15	%
Legal expense	1,047		1,975		(47)	%	1,765		3,477		(49)	%
Other operating expense	29,324		17,939		63	%	50,221		37,546		34	%
Amortization of tax credit and other investments	14,979		27,291		(45)	%	28,879		52,649		(45)	%


Total noninterest expense	$	196,860	$	189,523	4	%	$	386,310	$	380,600	2	%

Second quarter 2022 noninterest expense was $196.9 million, an increase of $7.3 million or 4%, compared ~~to $170.5~~with $189.5 million for the same period in ~~2016. This decrease~~2021. First half of 2022 noninterest expense was $386.3 million, an increase of $5.7 million or 2%, compared with $380.6 million for the same period in 2021. The increases in both the second quarter and the first half of 2022, were primarily due to ~~an $8.8 million~~increases in other operating expense and compensation and employee benefits, partially offset by a decrease in the amortization of tax credit and other ~~investments and a $2.0 million decrease in legal expense, partially offset by a $4.5 million increase in compensation~~investments.

Compensation and employee ~~benefits. Noninterest expense totaled $486.7~~benefits was $113.4 million for the ~~nine months ended September 30, 2017,~~second quarter of 2022, an increase of ~~$20.7~~$7.9 million or 4%8%, compared ~~to $466.0~~with $105.4 million for the same period in ~~2016. This increase was~~2021, primarily due to ~~a $24.8 million increase in~~headcount growth and higher bonus accrual. First half of 2022 compensation and employee benefits ~~and a $5.3~~was $229.6 million, an increase ~~in amortization~~ of ~~tax credit and other investments, partially offset by an $8.3 million decrease in consulting expense and a $3.8 million decrease in legal expense.~~

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

Three Months Ended
September 30, Nine Months Ended
September 30,
($ in thousands) 2017 2016 % Change 2017 2016 % Change
Compensation and employee benefits $ 79,583
$ 75,042
6 % $ 244,930
$ 220,166
11 %
Occupancy and equipment expense 16,635
15,456
8 % 47,829
45,619
5 %
Deposit insurance premiums and regulatory assessments 5,676
6,450
(12 )% 17,384
17,341
— %
Legal expense 3,316
5,361
(38 )% 8,930
12,714
(30 )%
Data processing 3,004
2,729
10 % 9,009
8,712
3 %
Consulting expense 4,087
4,594
(11 )% 10,775
19,027
(43 )%
Deposit related expenses 2,413
3,082
(22 )% 7,283
7,675
(5 )%
Computer software expense 4,393
3,331
32 % 13,823
9,267
49 %
Other operating expense 19,830
19,814
— % 55,357
58,508
(5 )%
Amortization of tax credit and other investments 23,827
32,618
(27 )% 66,059
60,779
9 %
Amortization of core deposit intangibles 1,735
2,023
(14 )% 5,314
6,177
(14 )%
Total noninterest expense $ 164,499
$ 170,500
(4 )% $ 486,693
$ 465,985
4 %

~~The following provides a discussion of the major changes in noninterest expense and the factors contributing to the changes.~~

~~Compensation and employee benefits increased $4.5~~$16.4 million or ~~6% to $79.6~~8%, compared with $213.2 million for the ~~three months ended September 30, 2017,~~first half of 2021, primarily due to headcount growth and the year-over-year change in deferred loan costs.

Other operating expense was $29.3 million for the second quarter of 2022, an increase of $11.4 million or 63%, compared ~~to $75.0~~with $17.9 million for the same period in ~~2016,~~2021, primarily due to the write-downs of other foreclosed assets and ~~increased $24.8~~miscellaneous operational losses. For the first half of 2022, other operating expense was $50.2 million, an increase of $12.7 million or ~~11% to $244.9 million for the nine months ended September 30, 2017,~~34% compared ~~to $220.2~~with $37.5 million for the same period in ~~2016. The increases for the three~~2021, primarily due to miscellaneous operational losses, increased charitable contributions, travel and nine months ended September 30, 2017 were primarily attributable to an increase in headcount to support the Company’s growing business and risk management and compliance requirements, as well as additional severanceloan related expenses.

Amortization of tax credit and other investments ~~decreased $8.8 million or 27% to $23.8~~was $15.0 million for the ~~three months ended September 30, 2017,~~second quarter of 2022, a decrease of $12.3 million or 45%, compared ~~to $32.6~~with $27.3 million for the same period in ~~2016,~~2021. For the first half of 2022, amortization of tax credit and ~~increased $5.3~~other investments was $28.9 million, a decrease of $23.8 million or ~~9% to $66.1 million for the nine months ended September 30, 2017,~~45%, compared ~~to $60.8~~with $52.6 million for the same period in ~~2016.~~2021. The ~~decrease~~year-over-year change reflects the mix of tax credits being recognized, which have differing amortization periods, as well as the impact of investments that close in ~~the third quarter of 2017, compared with the prior year period, was mainly driven by higher amortization, which resulted from~~ a renewable energy tax credit investment newly placed in service in the third quarter of 2016. Likewise, the increase in the first nine months of 2017, compared with the prior year period, was primarily driven by additional renewable energy and historical rehabilitation tax credit investments placed in service during the nine months ended September 30, 2017.given period.

Legal expense decreased $2.0 million or 38% to $3.3 million for the three months ended September 30, 2017, compared to $5.4 million for the same period in 2016, and decreased $3.8 million or 30% to $8.9 million for the nine months ended September 30, 2017, compared to $12.7 million for the same period in 2016. The decreases for the three and nine months ended September 30, 2017 were predominantly due to lower legal fees and litigation expense following the resolution of previously outstanding litigation.

Consulting expense decreased $507 thousand or 11% to $4.1 million for the three months ended September 30, 2017, compared to $4.6 million for the same period in 2016, and decreased $8.3 million or 43% to $10.8 million for the nine months ended September 30, 2017, compared to $19.0 million for the same period in 2016. The decreases for both periods were primarily attributable to a decline in Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) related consulting expense.

Income Taxes



($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2022			2021			% Change		2022			2021			% Change
Income before income taxes	$	341,036		$	270,381		26	%	$	638,942		$	505,865		26	%
Income tax expense	$	82,707		$	45,639		81	%	$	142,961		$	76,129		88	%
Effective tax rate	24.3		%	16.9		%			22.4		%	15.0		%

~~Income~~

Second quarter 2022 income tax expense was ~~$42.6~~$82.7 million and ~~$140.2 million for~~ the ~~three and nine months ended September 30, 2017, respectively, compared to $13.3 million and $90.1 million, respectively, for the same periods in 2016. The~~ effective tax rate was 24.3%, compared with second quarter 2021 income tax expense of $45.6 million and ~~25.0% for~~an effective tax rate of 16.9%. For the ~~three~~first half of 2022, income tax expense was $143.0 million and ~~nine months ended September 30, 2017, respectively,~~the effective tax rate was 22.4%, compared ~~to 10.8%~~with income tax expense of $76.1 million and ~~21.9%, respectively,~~an effective tax rate of 15.0% for the same ~~periods~~period in ~~2016.~~

2021. The ~~higher~~year-over-year increases in the income tax expense and the effective tax ~~rates for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were mainly due to~~rate reflected a higher ~~projected~~level of income before income taxes ~~that was partially offset by increases~~and a decrease in tax credits primarily generated from investments in renewable energy, historic rehabilitation and affordable housing partnership projects. For the three and nine months ended September 30, 2017, tax credits generated from these investments were $40.0 million and $106.4 million, respectively, compared to $33.3 million and $83.7 million, respectively, for the same periods in 2016. In addition, the effective tax rates for the three and nine months ended September 30, 2017 were further reduced by the adoption of Accounting Standards Update (“ASU”) 2016-09, ~~Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,~~ ~~beginning January 1, 2017~~. ~~As a result of the adoption of this ASU, net excess tax benefits for restricted stock units of $151 thousand and $4.6 million were~~ recognized in ~~Income tax expense~~ ~~on the Consolidated Statements of Income during the three and nine months ended September 30, 2017, respectively, which partially offset the higher effective tax rates for the same periods.~~2022.

Management regularly reviews the Company’s tax positions and deferred tax assets. Factors considered in this analysis include the Company’s ability to generate future taxable income, implement tax-planning strategies and utilize taxable income from prior carryback years (if such carryback is permitted under the applicable tax law), as well as future reversals of existing taxable temporary differences. The Company accounts for income taxes using the asset and liability approach, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized and settled. As of September 30, 2017 and December 31, 2016, the Company had net deferred tax assets of $142.0 million and $129.7 million, respectively.

A valuation allowance is established for deferred tax assets if, based on the weight of all positive evidence against all negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance is used, as needed, to reduce the deferred tax assets to the amount that is more likely than not to be realized. Management has concluded that it is more likely than not that all of the benefits of the deferred tax assets will be realized, with the exception of the deferred tax assets related to net operating losses in certain states. Accordingly, a valuation allowance has been recorded for these amounts. The Company believes that adequate provisions have been made for all income tax uncertainties consistent with ASC 740-10, ~~Income Taxes~~.

Operating Segment Results

The Company ~~defines~~organizes its ~~operating segments based on its core strategy and has identified~~operations into three reportable operating segments: ~~Retail Banking,~~(1) Consumer and Business Banking; (2) Commercial ~~Banking~~Banking; and (3) Other.

These segments are defined by the type of customers served and the related products and services provided. The ~~Retail Banking segment focuses primarily on retail operations through~~segments reflect how financial information is currently evaluated by management. For additional description of the Bank’s branch network. The Commercial Banking segment, which includes commercial and industrial (“C&I”) and commercial real estate (“CRE”) operations, primarily generates commercial loans and deposits through domestic commercial lending offices located in California, New York, Texas, Washington, Massachusetts, Nevada and Georgia, and foreign commercial lending offices located in China and Hong Kong. Furthermore, the Commercial Banking segment offers a wide variety of international finance, trade finance, and cashCompany’s internal management ~~services and products. The remaining centralized functions,~~reporting process, including the ~~treasury activities~~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 ~~Company and eliminations of inter-segment amounts have been aggregated and included in~~segment, adjusted for funding charges or credits through the ~~“Other” segment, which provides broad administrative support to the two core segments.~~

Changes in the Company’s management structure or reporting methodologies may result in changes in the measurement of operating segment results. Results for prior periods are generally restated for comparability when there are changes in management structure or reporting methodologies, unless it is deemed not practicable to do so.

~~The~~ Company’s internal funds transfer pricing process is formulated with the goal of encouraging loan and deposit growth that is consistent with the Company’s overall profitability objectives, as well as to provide a reasonable and consistent basis for the measurement of its business segments and product net interest margins. The Company’s internal funds transfer pricing assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions. (“FTP”) process.

~~Note 15 — Business Segments~~ to the Consolidated Financial Statements describes the Company’s segment reporting methodology and the business activities of each business segment, and presents financial results of these business segments for the three and nine months ended September 30, 2017 and 2016.

The following tables present the ~~selected~~results by operating segment for the periods indicated:



($ in thousands)	Three Months Ended June 30,
	Consumer and Business Banking				Commercial Banking				Other
	2022		2021		2022		2021		2022		2021
Total revenue (loss) (1)	$	312,757	$	198,107	$	278,996	$	225,370	$	(40,357)	$	21,427
Provision for (reversal of) credit losses	2,898		2,358		10,602		(17,358)		—		—























Noninterest expense	94,295		87,650		81,023		64,164		21,542		37,709
Segment income (loss) before income taxes (1)	215,564		108,099		187,371		178,564		(61,899)		(16,282)

Segment net income (loss) (1)	$	153,549	$	77,429	$	133,861	$	127,873	$	(29,081)	$	19,440



($ in thousands)	Six Months Ended June 30,
	Consumer and Business Banking				Commercial Banking				Other
	2022		2021		2022		2021		2022		2021
Total revenue (loss) (1)	$	551,170	$	371,448	$	536,150	$	449,858	$	(40,568)	$	50,159
Provision for (reversal of) credit losses	6,002		(1,891)		15,498		(13,109)		—		—























Noninterest expense	190,390		176,936		154,418		133,421		41,502		70,243
Segment income (loss) before income taxes (1)	354,778		196,403		366,234		329,546		(82,070)		(20,084)

Segment net income (loss) (1)	$	252,713	$	140,680	$	261,368	$	236,080	$	(18,100)	$	52,976

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the second quarter and first half of 2021 have been reclassified to reflect these allocation changes 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. 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. Other products and services provided by this segment include wealth management, treasury management, interest rate risk hedging and foreign exchange services.

The following tables present additional financial information for the ~~three~~Consumer and ~~nine months ended September 30, 2017 and 2016:~~

($ in thousands) Three Months Ended September 30, 2017

Retail
Banking

Commercial
Banking
Other Total
Net interest income $ 147,457
$ 138,153
$ 17,545
$ 303,155
Noninterest income $ 16,218
$ 30,320
$ 3,086
$ 49,624
Noninterest expense $ 56,062
$ 45,686
$ 62,751
$ 164,499
Pre-tax income $ 68,554
$ 99,025
$ 7,705
$ 175,284

($ in thousands) Three Months Ended September 30, 2016

Retail
Banking

Commercial
Banking
Other Total
Net interest income $ 106,633
$ 131,340
$ 16,175
$ 254,148
Noninterest income $ 14,700
$ 26,218
$ 8,423
$ 49,341
Noninterest expense $ 55,942
$ 45,306
$ 69,252
$ 170,500
Pre-tax income $ 32,304
$ 80,393
$ 10,767
$ 123,464

($ in thousands) Nine Months Ended September 30, 2017

Retail
Banking

Commercial
Banking
Other Total
Net interest income $ 430,437
$ 408,570
$ 26,361
$ 865,368
Noninterest income $ 43,767
$ 82,645
$ 86,635
$ 213,047
Noninterest expense $ 181,811
$ 149,510
$ 155,372
$ 486,693
Pre-tax income $ 204,601
$ 284,195
$ 72,177
$ 560,973

($ in thousands) Nine Months Ended September 30, 2016

Retail
Banking

Commercial
Banking
Other Total
Net interest income $ 329,120
$ 389,559
$ 41,257
$ 759,936
Noninterest income $ 37,798
$ 70,450
$ 25,870
$ 134,118
Noninterest expense $ 173,337
$ 145,695
$ 146,953
$ 465,985
Pre-tax income $ 114,513
$ 268,401
$ 28,137
$ 411,051

~~Retail Banking~~

~~The Retail~~Business Banking segment ~~reported pre-tax~~for the periods indicated:



($ in thousands)	Three Months Ended June 30,
					Change from 2021
	2022		2021		$		%
Net interest income before provision for credit losses	$	284,373	$	173,775	$	110,598	64	%
Noninterest income (1)	28,384		24,332		4,052		17	%
Total revenue (1)	312,757		198,107		114,650		58	%
Provision for credit losses	2,898		2,358		540		23	%
Noninterest expense	94,295		87,650		6,645		8	%
Segment income before income taxes (1)	215,564		108,099		107,465		99	%
Income tax expense	62,015		30,670		31,345		102	%
Segment net income (1)	$	153,549	$	77,429	$	76,120	98	%
Average loans	$	15,314,974	$	13,866,502	$	1,448,472	10	%
Average deposits	$	33,429,541	$	31,146,296	$	2,283,245	7	%



($ in thousands)	Six Months Ended June 30,
					Change from 2021
	2022		2021		$		%
Net interest income before provision for (reversal of) credit losses	$	497,587	$	323,674	$	173,913	54	%
Noninterest income (1)	53,583		47,774		5,809		12	%
Total revenue (1)	551,170		371,448		179,722		48	%
Provision for (reversal of) credit losses	6,002		(1,891)		7,893		417	%
Noninterest expense	190,390		176,936		13,454		8	%
Segment income before income taxes (1)	354,778		196,403		158,375		81	%
Income tax expense	102,065		55,723		46,342		83	%
Segment net income (1)	$	252,713	$	140,680	$	112,033	80	%
Average loans	$	14,962,667	$	13,584,892	$	1,377,775	10	%
Average deposits	$	33,272,553	$	30,688,116	$	2,584,437	8	%

Consumer and Business Banking segment net income ~~of $68.6~~increased $76.1 million ~~and $204.6~~or 98% year-over-year to $153.5 million for the ~~three~~second quarter of 2022, and ~~nine months ended September 30, 2017, respectively, compared~~$112.0 million or 80% year-over-year to ~~$32.3~~$252.7 million ~~and $114.5 million, respectively,~~ for the ~~same periods in 2016.~~first half of 2022. The increases in ~~pre-tax~~both periods reflected revenue growth, partially offset by higher income tax expense and noninterest expense. Net interest income before provision for ~~this segment~~credit losses increased $110.6 million or 64% year-over-year to $284.4 million for the ~~three~~second quarter of 2022, and ~~nine months ended September 30, 2017, compared~~$173.9 million or 54% year-over-year to $497.6 million for the ~~same~~first half of 2022. The increases in both periods ~~in 2016,~~ were primarily driven by ~~an increase in net~~higher deposit fund transfer pricing credits due to noninterest-bearing deposit growth, and higher loan interest income, ~~partially offset by an increase~~primarily from growth in ~~provision for credit losses.~~

~~Net interest income for this segment~~residential mortgage loans. Noninterest expense increased ~~$40.8~~$6.6 million or ~~38%~~8% year-over-year to ~~$147.5~~$94.3 million for the ~~three months ended September 30, 2017, compared~~second quarter of 2022, and $13.5 million or 8% year-over-year to ~~$106.6~~$190.4 million for the ~~same period in 2016. Net interest income increased $101.3 million or 31% to $430.4 million for the nine months ended September 30, 2017, compared to $329.1 million for the same period in 2016.~~first half of 2022. The increases in ~~net interest income for the three and nine months ended September 30, 2017, compared to the same~~both periods ~~in 2016, were primarily due to the growth in core deposits for the segment, for which the segment receives interest income credit under the Bank’s internal funds transfer pricing system.~~

Noninterest income for this segment increased $1.5 million or 10% to $16.2 million for the three months ended September 30, 2017, compared to $14.7 million for the same period in 2016. Noninterest income increased $6.0 million or 16% to $43.8 million for the nine months ended September 30, 2017, compared to $37.8 million for the same period in 2016. The increases in noninterest income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were primarily attributable to increases in branch fees, derivative fees and other income, wealth management fees, and net gains on sales of loans. This was partially offset by a decrease in ancillary loan fees and other income.

Noninterest expense for this segment increased slightly by $120 thousand to $56.1 million for the three months ended September 30, 2017, compared to $55.9 million for the same period in 2016. Noninterest expense increased $8.5 million or 5% to $181.8 million for the nine months ended September 30, 2017, compared to $173.3 million for the same period in 2016. The increases in noninterest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were primarily due to increases inreflected higher compensation and employee benefits ~~occupancy and equipment~~ expense, and ~~data processing expense, partially offset by a decrease in consulting expense.~~higher allocated corporate overhead.

Commercial Banking

The Commercial Banking segment ~~reported pre-tax~~primarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, working capital lines of credit, trade finance, letters of credit, commercial business lending, 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 additional financial information for the Commercial Banking segment for the periods indicated:



($ in thousands)	Three Months Ended June 30,
					Change from 2021
	2022		2021		$		%
Net interest income before provision for (reversal of) credit losses	$	230,964	$	192,696	$	38,268	20	%
Noninterest income (1)	48,032		32,674		15,358		47	%
Total revenue (1)	278,996		225,370		53,626		24	%
Provision for (reversal of) credit losses	10,602		(17,358)		27,960		161	%
Noninterest expense	81,023		64,164		16,859		26	%
Segment income before income taxes (1)	187,371		178,564		8,807		5	%
Income tax expense	53,510		50,691		2,819		6	%
Segment net income (1)	$	133,861	$	127,873	$	5,988	5	%
Average loans	$	29,311,514	$	25,755,768	$	3,555,746	14	%
Average deposits	$	17,539,067	$	16,429,188	$	1,109,879	7	%



($ in thousands)	Six Months Ended June 30,
					Change from 2021
	2022		2021		$		%
Net interest income before provision for (reversal of) credit losses	$	439,041	$	369,788	$	69,253	19	%
Noninterest income (1)	97,109		80,070		17,039		21	%
Total revenue (1)	536,150		449,858		86,292		19	%
Provision for (reversal of) credit losses	15,498		(13,109)		28,607		218	%
Noninterest expense	154,418		133,421		20,997		16	%
Segment income before income taxes (1)	366,234		329,546		36,688		11	%
Income tax expense	104,866		93,466		11,400		12	%
Segment net income (1)	$	261,368	$	236,080	$	25,288	11	%
Average loans	$	28,413,731	$	25,593,363	$	2,820,368	11	%
Average deposits	$	17,637,251	$	15,766,127	$	1,871,124	12	%

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the second quarter and first half of 2021 have been reclassified to reflect these allocation changes for comparability.

Commercial Banking segment net income ~~of $99.0~~increased $6.0 million ~~and $284.2~~or 5% year-over-year to $133.9 million for the ~~three~~second quarter of 2022, and ~~nine months ended September 30, 2017, respectively, compared~~$25.3 million or 11% year-over-year to ~~$80.4~~$261.4 million ~~and $268.4 million, respectively,~~ for the ~~same periods in 2016.~~first half of 2022. The increases in ~~pre-tax~~both periods reflected revenue growth, partially offset by higher provision for credit losses and noninterest expense. Net interest income before provision for ~~this~~credit losses increased $38.3 million or 20% year-over-year to $231.0 million for the second quarter of 2022, and $69.3 million or 19% year-over-year to $439.0 million for the first half of 2022. The increases in both periods were primarily due to higher loan interest income from commercial loan growth. Provision for credit losses increased $28.0 million or 161% year-over-year to $10.6 million for the second quarter of 2022, and $28.6 million or 218% year-over-year to $15.5 million for the first half of 2022, primarily driven by commercial loan growth and a weakening economic outlook, partially offset by lower net charge-offs. Noninterest expense increased $16.9 million or 26% year-over-year to $81.0 million for the second quarter of 2022 and increased $21.0 million or 16% year-over-year to $154.4 million for the first half of 2022. The increases in both periods were driven by higher compensation and employee benefits, miscellaneous operational losses and write-downs on other foreclosed assets, and higher corporate overhead allocations.

Other

Centralized functions, including the corporate treasury activities of the Company and eliminations of inter-segment amounts, have been aggregated and included in the Other segment, which provides broad administrative support to the two core segments, namely the Consumer and Business Banking, and the Commercial Banking segments.

The following tables present additional financial information for the Other segment for the ~~three and nine months ended September 30, 2017, compared to the same~~ periods ~~in 2016, were attributable to increases in~~indicated:



($ in thousands)	Three Months Ended June 30,
					Change from 2021
	2022		2021		$		%
Net interest (loss) income before provision for credit losses	$	(42,385)	$	10,002	$	(52,387)	(524)	%
Noninterest income	2,028		11,425		(9,397)		(82)	%
Total (loss) revenue	(40,357)		21,427		(61,784)		(288)	%

Noninterest expense	21,542		37,709		(16,167)		(43)	%
Segment loss before income taxes	(61,899)		(16,282)		(45,617)		280	%
Income tax (benefit) expense	(32,818)		(35,722)		2,904		(8)	%
Segment net (loss) income	$	(29,081)	$	19,440	$	(48,521)	(250)	%

Average deposits	$	3,161,242	$	2,605,505	$	555,737	21	%



($ in thousands)	Six Months Ended June 30,
					Change from 2021
	2022		2021		$		%
Net interest (loss) income before provision for credit losses	$	(48,063)	$	36,706	$	(84,769)	(231)	%
Noninterest income	7,495		13,453		(5,958)		(44)	%
Total (loss) revenue	(40,568)		50,159		(90,727)		(181)	%

Noninterest expense	41,502		70,243		(28,741)		(41)	%
Segment loss before income taxes	(82,070)		(20,084)		(61,986)		309	%
Income tax (benefit) expense	(63,970)		(73,060)		9,090		(12)	%
Segment net (loss) income	$	(18,100)	$	52,976	$	(71,076)	(134)	%

Average deposits	$	3,168,083	$	2,566,555	$	601,528	23	%

Other segment net ~~interest income and noninterest income.~~

~~Net interest income for this segment increased $6.8 million or 5% to $138.2~~loss was $29.1 million for the ~~three months ended September 30, 2017, compared to $131.3~~second quarter of 2022, a decrease of $48.5 million from net income of $19.4 million for the same period in ~~2016. Net interest~~2021. For the first half of 2022, the Other segment net loss was $18.1 million, a decrease of $71.1 million from net income ~~increased $19.0 million or 5% to $408.6 million for the nine months ended September 30, 2017, compared to $389.6~~of $53.0 million for the same period in ~~2016.~~2021. The ~~increases~~decreases in both periods were primarily driven by lower revenue, partially offset by lower noninterest expense. For the second quarter of 2022, the Other segment recorded a net interest loss before provision for credit losses of $42.4 million, a $52.4 million decrease from $10.0 million of net interest income before provision for credit losses in the ~~three and nine months ended September 30, 2017, compared to~~second quarter of 2021. For the ~~same periods in 2016, were due to~~first half of 2022, the ~~growth in commercial loans and commercial core deposits,~~Other segment recorded a net interest loss before provision for ~~which the segment receives~~credit losses of $48.1 million, an $84.8 million decrease from $36.7 million of net interest income before provision for credit ~~under~~losses in the ~~Bank’s internal funds transfer pricing system.~~

~~Noninterest income for this segment increased $4.1 million or 16% to $30.3 million for the three months ended September 30, 2017, compared to $26.2 million for the same period~~first half of 2021. The decreases in 2016. Noninterest income increased $12.2 million or 17% to $82.6 million for the nine months ended September 30, 2017, compared to $70.5 million for the same period in 2016. The increases in noninterest income for the three and nine months ended September 30, 2017, compared to the sameboth periods ~~in 2016,~~ were primarily due to a net gain on sale of the Company’s insurance brokerage business, EWIS, during the three and nine months ended September 30, 2017, and increases in branch fees, ancillary loan fees and other income, as well as letters of credit fees and foreign exchange income.

Noninterest expense for this segment increased slightly by $380 thousand to $45.7 million for the three months ended September 30, 2017, compared to $45.3 million for the same period in 2016. Noninterest expense increased $3.8 million or 3% to $149.5 million for the nine months ended September 30, 2017, compared to $145.7 million for the same period in 2016. The increases in noninterest expense for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were primarily due to increases in compensation and employee benefits, and consulting expense, partially offset by a decrease in legal expense.

~~Other~~

The Other segment includes the activities of the treasury function, which is responsible for liquidity and interest rate risk management of the Company, and supports the Retail Banking and Commercial Banking segments through internal funds transfer pricing credits and charges, which are included in net interest income. The Other segment reported pre-tax income of $7.7 million and $72.2 million for the three and nine months ended September 30, 2017, respectively, compared to $10.8 million and $28.1 million, respectively, for the same periods in 2016. The decrease in pre-tax income for this segment for the three months ended September 30, 2017, compared to the same period in 2016, was primarily driven by ~~decreases in noninterest~~lower FTP spread income ~~and internal funds transfer pricing credits,~~absorbed by the Other segment, partially offset by a decrease in noninterest expense and an increase in net interest income. The increase in pre-tax income for this segment for the nine months ended September 30, 2017, compared to the same period in 2016, was primarily driven by an increase in noninterest income as the result of the net gain on sale of the commercial property, partially offset by a decrease in net interest income and an increase in noninterest expense.

Net interest income for this segment increased $1.4 million or 8% to $17.5 million for the three months ended September 30, 2017, compared to $16.2 million for the same period in 2016. Net interest income decreased $14.9 million or 36% to $26.4 million for the nine months ended September 30, 2017, compared to $41.3 million for the same period in 2016. The increase in net interest income for the three months ended September 30, 2017, compared to the same period in 2016, was primarily due to an increase in interest income from ~~investments. The decrease in net interest income for the nine months ended September 30, 2017, compared to the same period in 2016, was~~investments due to ~~increases in interest~~a higher volume of debt securities. Noninterest expense ~~on borrowings and deposits.~~

~~Noninterest income for this segment~~ decreased ~~$5.3~~$16.2 million ~~or 63%~~year-over-year to ~~$3.1~~$21.5 million for the ~~three months ended September 30, 2017, compared~~second quarter of 2022, and $28.7 million year-over-year to ~~$8.4~~$41.5 million for the same period in 2016. Noninterest income increased $60.8 million or 235% to $86.6 million for the nine months ended September 30, 2017, compared to $25.9 million for the same period in 2016. The decrease in noninterest income for the three months ended September 30, 2017, compared to the same period in 2016, wasfirst half of 2022, primarily due to decreases in foreign exchange income arising from valuation changes associated with currency hedges and decreases in rental income. The increase in noninterest income for the nine months ended September 30, 2017, compared to the same period in 2016, was primarily due to the $71.7 million net gain on sale of the commercial property, as discussed in the ~~Noninterest income~~ ~~section of~~ ~~MD&A~~.

Noninterest expense for this segment decreased $6.5 million or 9% to $62.8 million for the three months ended September 30, 2017, compared to $69.3 million for the same period in 2016. Noninterest expense increased $8.4 million or 6% to $155.4 million for the nine months ended September 30, 2017, compared to $147.0 million for the same period in 2016. The decrease in noninterest expense for the three months ended September 30, 2017, compared to the same period in 2016, was primarily attributable to a decrease of $8.8 million inlower amortization of tax ~~credit~~credits and other investments, partially offset by increases of $2.5 million in compensation and employee benefits. The increase in noninterest expense for the nine months ended September 30, 2017, compared to the same period in 2016, was primarily attributable to increases of $5.3 million in amortization of tax credit and other investments, and $6.5 million in compensation and employee benefits.investments.

Balance Sheet Analysis

~~The following is a discussion of the significant changes between September 30, 2017 and December 31, 2016.~~

~~Selected Consolidated Balance Sheets Data~~

Change
($ in thousands) September 30, 2017 December 31, 2016 $ %
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,736,749
$ 1,878,503
$ (141,754 ) (8 )%
Interest-bearing deposits with banks 404,946
323,148
81,798
25 %
Resale agreements 1,250,000
2,000,000
(750,000 ) (38 )%
Available-for-sale investment securities, at fair value 2,956,776
3,335,795
(379,019 ) (11 )%
Held-to-maturity investment security, at cost —
143,971
(143,971 ) (100 )%
Restricted equity securities, at cost 73,322
72,775
547
1 %
Loans held-for-sale 178
23,076
(22,898 ) (99 )%
Loans held-for-investment (net of allowance for loan losses of $285,926 in 2017 and $260,520 in 2016) 28,239,431
25,242,619
2,996,812
12 %
Investments in qualified affordable housing partnerships, net 178,344
183,917
(5,573 ) (3 )%
Investments in tax credit and other investments, net 203,758
173,280
30,478
18 %
Premises and equipment 131,311
159,923
(28,612 ) (18 )%
Goodwill 469,433
469,433
—
— %
Other assets 663,718
782,400
(118,682 ) (15 )%
TOTAL $ 36,307,966
$ 34,788,840
$ 1,519,126
4 %
LIABILITIES

Customer deposits $ 31,311,662
$ 29,890,983
$ 1,420,679
5 %
Short-term borrowings 24,813
60,050
(35,237 ) (59 )%
FHLB advances 323,323
321,643
1,680
1 %
Repurchase agreements 50,000
350,000
(300,000 ) (86 )%
Long-term debt 176,513
186,327
(9,814 ) (5 )%
Accrued expenses and other liabilities 639,759
552,096
87,663
16 %
Total liabilities 32,526,070
31,361,099
1,164,971
4 %
STOCKHOLDERS’ EQUITY 3,781,896
3,427,741
354,155
10 %
TOTAL $ 36,307,966
$ 34,788,840
$ 1,519,126
4 %

As of September 30, 2017, total assets were $36.31 billion, an increase of $1.52 billion or 4% from December 31, 2016. The predominant area of asset growth was in loans, which was driven by strong increases across all of the Company’s commercial and retail lines of business. These increases were partially offset by maturities of resale agreements, and decreases in investment securities, cash and cash equivalents, and other assets.

As of September 30, 2017, total liabilities were $32.53 billion, an increase of $1.16 billion or 4% from December 31, 2016, primarily due to increases in customer deposits, reflecting the continued strong growth from existing and new customers. This increase was partially offset by a decrease in repurchase agreements primarily due to an increase in resale agreements that were eligible for netting against repurchase agreements under ASC 210-20-45, ~~Balance Sheet Offsetting.~~

~~Stockholders’ equity growth benefited primarily from $420.7 million in net income, partially offset by $87.6 million of cash dividends on common stock.~~

~~Investment~~Debt Securities

The Company ~~aims to maintain an investment~~maintains a portfolio ~~that consists~~ of high quality and liquid debt securities with ~~relatively short durations to minimize~~a moderate duration profile. It closely manages the overall portfolio interest rate and liquidity risks. The Company’s ~~available-for-sale investment~~debt securities provide:

•interest income for earnings and yield enhancement;

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

•the ability to execute interest rate risk management strategies ~~due~~in response to changes in economic or market ~~conditions, which influence loan origination, prepayment speeds, or deposit balances~~conditions; and ~~mix; and~~

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

~~Held-to-maturity investment security~~

~~During the first quarter of 2016,~~While the Company ~~securitized $201.7 million of multifamily residential loans and retained $160.1 million of the senior tranche of the resulting~~intends to hold its debt securities from the securitization as held-to-maturity, which is carried at amortized cost. The held-to-maturity investment security is a non-agency commercial mortgage-backed security maturing on April 25, 2046. During the third quarter of 2017, the Company transferred this non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturityindefinitely, it may sell AFS securities in response to ~~available-for-sale. The transfer reflects the Company’s intent to sell the security under active liquidity management.~~

~~Available-for-sale investment securities~~

As of September 30, 2017 and December 31, 2016, the Company’s available-for-sale investment securities portfolio was primarily comprised of U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, U.S. Treasury securities and foreign bonds. Investment securities classified as available-for-sale are carried at their estimated fair value with the corresponding changes in ~~fair value recorded in~~ ~~Accumulated other comprehensive loss, net of tax, as a component of~~ ~~Stockholders’ equity~~ on the ~~Consolidated Balance Sheets.~~balance sheet and related interest rate risk to meet liquidity, regulatory, and strategic requirements.

The following table presents the ~~breakout~~distribution of the ~~amortized cost~~Company’s AFS and ~~fair value of available-for-sale investment~~HTM debt securities ~~by major categories~~portfolio as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016:~~2021, and by credit ratings as of June 30, 2022:



($ in thousands)	June 30, 2022						December 31, 2021							Ratings as of June 30, 2022 (1)
	Amortized Cost		Fair Value		% of Fair Value			Amortized Cost		Fair Value		% of Fair Value			AAA/AA		A		BBB		No Rating (2)
AFS debt securities:
U.S. Treasury securities	$	676,320	$	624,686	10	%		$	1,049,238	$	1,032,681	10	%		100	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise debt securities	324,463		285,245		5	%		1,333,984		1,301,971		13	%		100	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	2,711,474		2,474,072		40	%		4,210,832		4,157,263		42	%		100	%	—	%	—	%	—	%
Municipal securities	306,419		266,733		4	%		519,381		523,158		5	%		91	%	5	%	—	%	4	%
Non-agency mortgage-backed securities	1,259,212		1,138,757		18	%		1,388,857		1,378,374		14	%		83	%	—	%	—	%	17	%
Corporate debt securities	673,502		559,293		9	%		657,516		649,665		6	%		—	%	31	%	69	%	—	%
Foreign government bonds	253,118		242,997		4	%		260,447		257,733		3	%		45	%	55	%	—	%	—	%
Asset-backed securities	69,764		67,350		1	%		74,674		74,558		1	%		100	%	—	%	—	%	—	%
Collateralized loan obligations (“CLOs”)	617,250		596,371		9	%		592,250		589,950		6	%		96	%	4	%	—	%	—	%
Total AFS debt securities	$	6,891,522	$	6,255,504	100	%		$	10,087,179	$	9,965,353	100	%		85	%	6	%	6	%	3	%

HTM debt securities:
U.S. Treasury securities	$	521,352	$	486,521	18	%		$	—	$	—	—	%		100	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise debt securities	997,369		853,078		32	%		—		—		—	%		100	%	—	%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	1,319,502		1,160,302		44	%		—		—		—	%		100	%	—	%	—	%	—	%
Municipal securities	190,079		156,648		6	%		—		—		—	%		100	%	—	%	—	%	—	%
Total HTM debt securities	$	3,028,302	$	2,656,549	100	%		$	—	$	—	—	%		100	%	—	%	—	%	—	%
Total debt securities	$	9,919,824	$	8,912,053				$	10,087,179	$	9,965,353

($ in thousands) September 30, 2017 December 31, 2016

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value
Available-for-sale investment securities:
U.S. Treasury securities $ 533,035
$ 526,332
$ 730,287
$ 720,479
U.S. government agency and U.S. government sponsored enterprise debt securities 191,727
189,185
277,891
274,866
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities 1,475,969
1,466,106
1,539,044
1,525,546
Municipal securities 116,798
117,242
148,302
147,654
Non-agency residential mortgage-backed securities 9,680
9,694
11,592
11,477
Corporate debt securities 12,655
11,942
232,381
231,550
Foreign bonds 505,395
489,140
405,443
383,894
Other securities ⁽¹⁾
147,504
147,135
40,501
40,329
Total available-for-sale investment securities $ 2,992,763
$ 2,956,776
$ 3,385,441
$ 3,335,795


~~(1)~~	~~During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale.~~

(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”). Debt securities rated investment grade, which are those with ratings similar to BBB- or above (as defined by NRSROs), are generally considered by the rating agencies and market participants to be low credit risk. Ratings percentages are allocated based on fair value.

(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.

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 5.5 as of June 30, 2022. This increased from 5.0 as of December 31, 2021, primarily due to both the upshifting and steepening of the yield curve.

Available-for-Sale Debt Securities

The fair value of the ~~available-for-sale investment~~AFS debt securities portfolio totaled ~~$2.96~~$6.26 billion as of ~~September~~June 30, ~~2017, compared to $3.34~~2022, a decrease of $3.71 billion or 37% from $9.97 billion as of December 31, 2016. The decrease of $379.0 million or 11% primarily reflected the sales of corporate debt securities, U.S. Treasury securities, U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, and municipal securities; and paydowns, maturities and calls of U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, U.S. government agency and U.S. government sponsored enterprise debt securities, and U.S. Treasury securities.2021. The decrease was ~~partially offset by purchases~~primarily due to the Company’s transfer of ~~U.S. government agency~~$3.01 billion of AFS securities to HTM securities during the first quarter of 2022 and U.S. government sponsored enterprise mortgage-backed securities, foreign bonds, U.S. government agency and U.S. government sponsored enterprise debt securities, U.S. Treasury securities and municipal securities; anda decline in the portfolio valuation within the rising interest rate environment. For further discussion regarding the transfer, ~~of a non-agency commercial mortgage-backed security from held-to-maturity security.~~

refer to the Held-to-Maturity Debt Securities section below. The Company’s ~~available-for-sale investment~~AFS debt securities are carried at fair value with ~~changes~~noncredit-related unrealized gains and losses, net of tax, reported in ~~fair value reflected in~~ Other comprehensive (loss) income ~~(loss)~~ ~~unless a security is deemed to be other-than-temporarily impaired. As~~on the Consolidated Statement of ~~September 30, 2017, the Company’s~~Comprehensive Income. Pre-tax net unrealized losses on ~~available-for-sale investment~~AFS debt securities were ~~$36.0~~$636.0 million as of June 30, 2022, compared ~~to $49.6~~with $121.8 million as of December 31, ~~2016. The favorable change in~~2021.

As of June 30, 2022, 97% of the ~~net unrealized losses~~carrying value of the AFS debt securities portfolio was ~~primarily attributed to the flattening in the yield curve~~rated investment grade by NRSROs, compared with ~~long-term interest rates falling. Gross unrealized losses on available-for-sale investment securities totaled $42.3 million as of September 30, 2017, compared to $56.3 million~~98% as of December 31, ~~2016. As~~2021. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of ~~September~~June 30, ~~2017,~~2022 and December 31, 2021. There was no allowance for credit losses as of June 30, 2022 and December 31, 2021, provided against the AFS debt securities. Additionally, there were no credit losses recognized in earnings for both the second quarters and first halves of 2022 and 2021. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in this Form 10-Q.

Held-to-Maturity Debt Securities

During the first quarter of 2022, the Company ~~had~~transferred $3.01 billion in aggregate fair value of U.S. Treasury, government agency and government-sponsored enterprise debt and mortgage-back securities, and municipal securities from AFS to HTM. In comparison, there were no ~~intention to sell~~HTM debt securities ~~with unrealized losses and believes it is more likely than not that it would not be required to sell such~~as of December 31, 2021. The Company’s HTM debt securities ~~before recovery of their~~are carried at amortized cost. ~~No other-than-temporary impairment~~The unrealized gains or losses at the date of transfer of these securities continue to be reported in Accumulated other comprehensive income (loss) (“AOCI”), net of tax on the Consolidated Balance Sheet and are amortized over the remaining life of the 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 ~~recognized~~recorded as of June 30, 2022. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the ~~three~~Consolidated Financial Statements in this Form 10-Q.

For additional information on AFS and ~~nine months ended September 30, 2017~~HTM securities, see Note 1— Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s2021 Form 10-K and ~~2016. For a complete discussion~~Note 2— Current Accounting Developments and ~~disclosure, see~~ Summary of Significant Accounting Policies, Note 43 — Fair Value Measurement and Fair Value of Financial Instruments, and Note 65 — Securities to the Consolidated Financial ~~Statements.~~Statements in this Form 10-Q.

As of September 30, 2017 and December 31, 2016, available-for-sale investment securities with a fair value of $584.9 million and $767.4 million, respectively, were pledged to secure public deposits, repurchase agreements, the Federal Reserve Bank’s discount window and for other purposes required or permitted by law.

The following table presents the weighted average yields and contractual maturity distributions, excluding periodic principal payments, of the Company’s investment securities as of the periods indicated. Actual maturities of mortgage-backed securities can differ from contractual maturities as the borrowers have the right to prepay the obligations. In addition, such factors as prepayments and interest rate changes may affect the yields on the carrying value of mortgage-backed securities.

($ in thousands) September 30, 2017 December 31, 2016
Amortized
Cost Fair Value
Yield ⁽¹⁾
Amortized
Cost Fair Value
Yield ⁽¹⁾
Available-for-sale investment securities:
U.S. Treasury securities:
Maturing in one year or less $ 150,431
$ 150,134
0.96 % $ 100,707
$ 100,653
0.65 %
Maturing after one year through five years 382,604
376,198
1.35 % 376,580
371,917
1.27 %
Maturing after five years through ten years —
—
— % 253,000
247,909
1.59 %
Total 533,035
526,332
1.24 % 730,287
720,479
1.29 %
U.S. government agency and U.S. government sponsored enterprise debt securities:
Maturing in one year or less 24,999
24,916
1.02 % 118,966
118,982
0.94 %
Maturing after one year through five years 9,732
9,774
2.37 % 52,622
52,630
1.38 %
Maturing after five years through ten years 103,394
101,030
2.19 % 81,829
78,977
2.07 %
Maturing after ten years 53,602
53,465
2.58 % 24,474
24,277
2.50 %
Total 191,727
189,185
2.15 % 277,891
274,866
1.49 %
U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities:
Maturing after one year through five years 52,312
52,055
2.33 % 47,278
46,950
1.74 %
Maturing after five years through ten years 66,351
65,534
2.45 % 79,379
78,903
3.11 %
Maturing after ten years 1,357,306
1,348,517
2.20 % 1,412,387
1,399,693
2.34 %
Total 1,475,969
1,466,106
2.22 % 1,539,044
1,525,546
2.36 %
Municipal securities ⁽²⁾:

Maturing in one year or less 12,987
13,058
3.56 % 6,404
6,317
2.56 %
Maturing after one year through five years 85,244
85,767
2.29 % 127,178
127,080
2.31 %
Maturing after five years through ten years 6,274
6,235
2.50 % 9,785
9,515
2.50 %
Maturing after ten years 12,293
12,182
4.31 % 4,935
4,742
3.95 %
Total 116,798
117,242
2.67 % 148,302
147,654
2.40 %
Non-agency residential mortgage-backed securities:
Maturing after ten years 9,680
9,694
2.72 % 11,592
11,477
2.52 %
Corporate debt securities:
Maturing in one year or less 12,655
11,942
2.19 % 12,671
11,347
1.80 %
Maturing after five years through ten years —
—
— % 40,479
40,500
2.40 %
Maturing after ten years —
—
— % 179,231
179,703
2.26 %
Total 12,655
11,942
2.19 % 232,381
231,550
2.26 %
Foreign bonds:
Maturing in one year or less 405,395
389,876
2.13 % 304,427
287,695
2.09 %
Maturing after one year through five years 100,000
99,264
2.70 % 101,016
96,199
2.11 %
Total 505,395
489,140
2.24 % 405,443
383,894
2.09 %
Other securities:
Maturing in one year or less 31,790
31,417
— % 40,501
40,329
2.72 %
Maturing after five years through ten years 99
103
1.43 % —
—
— %
Maturing after ten years 115,615
115,615
3.78 % —
—
— %
Total 147,504
147,135
2.96 % 40,501
40,329
2.72 %

Total:
Maturing in one year or less 638,257
621,343
583,676
565,323

Maturing after one year through five years 629,892
623,058
704,674
694,776

Maturing after five years through ten years 176,118
172,902
464,472
455,804

Maturing after ten years 1,548,496
1,539,473
1,632,619
1,619,892

Total available-for-sale investment securities $ 2,992,763
$ 2,956,776
$ 3,385,441
$ 3,335,795

Held-to-maturity investment security:
Non-agency commercial mortgage-backed security:
Maturing after ten years $ —
$ —
— % $ 143,971
$ 144,593
3.91 %


~~(1)~~	~~Weighted average yields are computed based on amortized cost balances.~~


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

~~The following sections discuss additional information on the Company’s loan portfolios, non-purchased credit impaired (“non-PCI”) nonperforming assets and allowance for credit losses.~~

~~Total~~ 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 ~~CRE,~~commercial loans, which consist of C&I, CRE, multifamily residential, construction and land loans, and consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. ~~Net~~Total net loans ~~including loans held-for-sale, increased $2.97~~were $45.97 billion as of June 30, 2022, an increase of $4.81 billion or 12% ~~to $28.24 billion as of September 30, 2017~~ from ~~$25.27~~$41.15 billion as of December 31, ~~2016. The~~2021. This increase was ~~broad based and~~primarily driven by ~~strong~~well-diversified growth throughout our major loan categories including increases of ~~$1.14~~$2.35 billion or ~~22%~~15% in total CRE loans, $1.28 billion or 11% in residential mortgage loans, ~~$1.00~~and $1.25 billion or ~~10%~~9% in C&I ~~loans, $836.3 million or 10% in CRE loans and $44.1 million or 2% in consumer loans.~~

($ in thousands) September 30, 2017 December 31, 2016

Amount ⁽¹⁾
Percent
Amount ⁽¹⁾
Percent
CRE:
Income producing $ 8,843,776
31 % $ 8,016,109
31 %
Construction 572,027
2 % 551,560
2 %
Land 111,377
— % 123,194
1 %
Total CRE 9,527,180
33 % 8,690,863
34 %
C&I:
Commercial business 9,776,254
34 % 8,959,633
35 %
Trade finance 868,902
3 % 680,930
3 %
Total C&I 10,645,156
37 % 9,640,563
38 %
Residential:
Single-family 4,356,009
16 % 3,509,779
14 %
Multifamily 1,876,956
7 % 1,585,939
6 %
Total residential 6,232,965
23 % 5,095,718
20 %
Consumer 2,120,056
7 % 2,075,995
8 %
Total loans held-for-investment ⁽²⁾
$ 28,525,357
100 % $ 25,503,139
100 %
Allowance for loan losses (285,926 ) (260,520 )
Loans held-for-sale 178
23,076

Total loans, net $ 28,239,609
$ 25,265,695


~~(1)~~	~~Includes $(29.2) million and $1.2 million as of September 30, 2017 and December 31, 2016, respectively, of net deferred loan fees, unearned income, unamortized premiums and unaccreted discounts.~~


~~(2)~~	~~Loans net of ASC 310-30 discount.~~

Although the loan portfolio grew 12% during the nine months ended September 30, 2017, the loan type composition remained relatively unchanged from December 31, 2016. The Company’s largest credit risks are concentrated in the commercial lending portfolios, which are comprised of C&I and CRE loans. The ~~commercial lending portfolios comprised 70% and 72%~~composition of the ~~total~~ loan portfolio as of ~~September~~June 30, ~~2017~~2022 was similar to the composition as of December 31, 2021.

The following table presents the composition of the Company’s total loan portfolio by loan type as of June 30, 2022 and December 31, ~~2016, respectively,~~2021:



($ in thousands)	June 30, 2022				December 31, 2021
	Amount		%		Amount		%
Commercial:
C&I (1)	$	15,377,117	33	%	$	14,150,608	34	%
CRE:
CRE	13,566,748		29	%	12,155,047		29	%
Multifamily residential	4,443,704		10	%	3,675,605		9	%
Construction and land	515,857		1	%	346,486		1	%
Total CRE	18,526,309		40	%	16,177,138		39	%
Total commercial	33,903,426		73	%	30,327,746		73	%
Consumer:
Residential mortgage:
Single-family residential	10,234,473		22	%	9,093,702		22	%
HELOCs	2,280,080		5	%	2,144,821		5	%
Total residential mortgage	12,514,553		27	%	11,238,523		27	%
Other consumer	84,097		0	%	127,512		0	%
Total consumer	12,598,650		27	%	11,366,035		27	%
Total loans held-for-investment (2)	46,502,076		100	%	41,693,781		100	%
Allowance for loan losses	(563,270)				(541,579)
Loans held-for-sale (3)	28,464				635
Total loans, net	$	45,967,270			$	41,152,837

(1)Includes $153.3 million and ~~are discussed further below.~~$534.2 million of PPP loans as of June 30, 2022 and December 31, 2021, respectively.

(2)Includes $(56.2) million and $(50.7) million of net deferred loan fees and net unamortized premiums as of June 30, 2022 and December 31, 2021, respectively.

~~C&I Loans~~.(3)Consists of C&I loans as of ~~$10.65 billion~~June 30, 2022 and ~~$9.64 billion,~~single-family residential loans as of December 31, 2021.

Actions to Support Customers during the COVID-19 Pandemic

In response to the COVID-19 pandemic, the Company assisted customers by offering Small Business Administration (“SBA”) PPP loans to help struggling businesses in our communities pay their employees and sustain their businesses. The SBA stopped accepting new loan applications on May 31, 2021. As of June 30, 2022, the Company had PPP loans outstanding totaling $153.3 million, which ~~accounted~~were recorded in the C&I portfolio. During the first half of 2022, the Company submitted and received SBA approval for ~~37% and 38%~~the forgiveness of PPP loans totaling $356.4 million. For more information on PPP loans, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Paycheck Protection Program to the ~~total~~Consolidated Financial Statements in the Company’s 2021 Form 10-K.

In addition, the Company provided payment relief through various loan modification programs, which expired on January 1, 2022. Refer to Item 2. MD&A — Risk Management — Credit Risk Management in this Form 10-Q for details.

Commercial

The commercial loan portfolio comprised 73% of total loans as of ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016, respectively, include~~2021. The Company actively monitors this commercial ~~business~~lending portfolio for elevated levels of credit risk and ~~trade finance~~reviews credit exposures for sensitivity to changing economic conditions.

Commercial — Commercial and Industrial Loans. Total C&I loan commitments (loans outstanding plus unfunded credit commitments, excluding issued letters of credit) were $22.04 billion as of June 30, 2022, an increase of $1.75 billion or 9% from $20.29 billion as of December 31, 2021. Total C&I loans ~~which comprised the largest sector in the lending portfolio. Over the last few years, the Company has experienced higher growth in specialized lending verticals in industries such~~were $15.38 billion as ~~private equity, energy, entertainment~~of June 30, 2022, an increase of $1.23 billion or 9% from $14.15 billion. Total C&I loans made up 33% and ~~structured specialty finance. As~~34% of ~~September~~total loans held-for-investment as of June 30, ~~2017~~2022 and December 31, ~~2016, specialized lending verticals comprised 42% and 37% of total C&I loans,~~2021, respectively.

Although the C&I industry sectors in which the Company provides financing are diversified, the Company has higher concentrations in the industry sectors of wholesale trade, manufacturing, real estate and leasing, entertainment and private equity. The Company’s C&I loan exposures within the wholesale trade sector, which totaled $1.63 billion and $1.38 billion as of September 30, 2017 and December 31, 2016, respectively, are largely related to U.S. domiciled companies, which import goods from Greater China for U.S. consumer consumption, many of which are companies based in California. The private equity loans are largely capital call lines of credit. The Company also has a syndicated loan portfolio within the C&I loan portfolio includes loans and financing for businesses in a wide spectrum of industries, comprised of working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. The C&I loan portfolio also includes PPP loans. 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 ~~$627.9~~$936.4 million and ~~$758.5~~$939.4 million as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. The majority of the C&I loans had variable interest rates as of both June 30, 2022 and December 31, 2021.

The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by customer exposure and industry ~~classifications, setting limits for specialized lending verticals and~~classification, setting diversification ~~targets.~~targets and exposure limits by industry or loan product. The following charts illustrate the industry mix within our C&I portfolio as of June 30, 2022 and December 31, 2021.

~~CRE~~Commercial — Total Commercial Real Estate Loans. Total CRE loans ~~include income producing real estate,~~outstanding were $18.53 billion as of June 30, 2022, which grew by $2.35 billion or 15%, from $16.18 billion as of December 31, 2021, and accounted for 40% and 39% of total loans held-for-investment as of June 30, 2022 and December 31, 2021, respectively. The total CRE loan portfolio consists of CRE, multifamily residential, and construction and land loans. The year-to-date growth in total CRE loans was primarily driven by multifamily and industrial property types.

The Company’s total CRE portfolio is diversified by property type with an average CRE loan size of $2.7 million and $2.5 million as of June 30, 2022 and December 31, 2021, respectively. The following table summarizes the Company’s total CRE loans by property type as of June 30, 2022 and December 31, 2021:



($ in thousands)	June 30, 2022				December 31, 2021
	Amount		%		Amount		%
Property types:
Retail (1)	$	4,015,944	22	%	$	3,685,900	23	%
Multifamily	4,443,704		24	%	3,675,605		23	%
Office (1)	3,050,073		17	%	2,804,006		17	%
Industrial (1)	3,375,663		18	%	2,807,325		18	%
Hospitality (1)	2,115,184		11	%	1,993,995		12	%
Construction and land	515,857		3	%	346,486		2	%
Other (1)	1,009,884		5	%	863,821		5	%
Total CRE loans	$	18,526,309	100	%	$	16,177,138	100	%

(1)Included in CRE loan category.

The weighted-average loan-to-value (“LTV”) ratio of the total CRE portfolio was 52% and 51% as of June 30, 2022 and December 31, 2021, respectively. The low weighted-average LTV ratio was consistent across CRE property types. Approximately 90% and 89% of total CRE loans had an LTV ratio of 65% or lower as of June 30, 2022 and December 31, 2021, respectively. The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses for CRE and multifamily residential loans.

The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans ~~where the interest rates may be fixed, variable or hybrid.~~by geography as of June 30, 2022 and December 31, 2021. The Company focuses on providing financing to experienced real estate investors and developers who are long-time customers and have moderate levels of leverage. Loans are generally underwritten with high standards for cash flows, debt service coverage ratios and loan-to-value ratios. Due to the naturedistribution of the ~~Company’s geographical footprint and market presence, the Company has CRE loan concentrations primarily in California, which comprised 74% of the~~total CRE loan portfolio reflects the Company’s geographic footprint, which is primarily concentrated in California:



($ in thousands)	June 30, 2022
	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:
Southern California	$	7,008,837			$	2,210,717			$	172,168			$	9,391,722
Northern California	2,796,688				828,553				195,423				3,820,664
California	9,805,525		72	%	3,039,270		68	%	367,591		71	%	13,212,386		72	%
Texas	1,159,905		9	%	414,697		9	%	3,868		1	%	1,578,470		9	%
New York	696,957		5	%	218,493		5	%	95,248		18	%	1,010,698		5	%
Washington	452,341		3	%	171,769		4	%	11,356		2	%	635,466		3	%
Nevada	170,745		1	%	110,717		3	%	19,852		4	%	301,314		2	%
Arizona	196,250		2	%	81,628		2	%	—		—	%	277,878		1	%
Other markets	1,085,025		8	%	407,130		9	%	17,942		4	%	1,510,097		8	%
Total loans	$	13,566,748	100	%	$	4,443,704	100	%	$	515,857	100	%	$	18,526,309	100	%



($ in thousands)	December 31, 2021
	CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:
Southern California	$	6,406,609			$	2,030,938			$	138,953			$	8,576,500
Northern California	2,622,398				748,631				109,483				3,480,512
California	9,029,007		75	%	2,779,569		77	%	248,436		70	%	12,057,012		75	%
Texas	1,005,455		8	%	308,652		8	%	1,896		1	%	1,316,003		8	%
New York	630,442		5	%	157,099		4	%	78,368		23	%	865,909		5	%
Washington	408,913		3	%	116,047		3	%	9,865		3	%	534,825		3	%
Nevada	128,395		1	%	115,163		3	%	5,775		2	%	249,333		2	%
Arizona	122,164		1	%	49,836		1	%	—		—	%	172,000		1	%
Other markets	830,671		7	%	149,239		4	%	2,146		1	%	982,056		6	%
Total loans	$	12,155,047	100	%	$	3,675,605	100	%	$	346,486	100	%	$	16,177,138	100	%

Because 72% and 75% of total CRE loans were concentrated in California as of ~~each of September~~June 30, ~~2017~~2022 and December 31, ~~2016. Accordingly,~~2021, respectively, changes in ~~the California~~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 real estate market, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s2021 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. CRE loans totaled $13.57 billion as of June 30, 2022, compared with $12.16 billion as of December 31, 2021, and accounted for 29% of total loans held-for-investment as of both periods. Interest rates on CRE loans may be fixed, variable or hybrid. As of June 30, 2022, 66% of our CRE portfolio was variable rate, of which 49% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by EWB to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2021, 75% of our CRE portfolio was variable rate, of which 52% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 19% and 20% of the CRE loans as of ~~each of September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021, respectively. The remainder were ~~owner occupied~~non-owner-occupied properties, ~~while the remaining 81% were non-owner occupied properties (where~~where 50% or more of the debt service for the loan is typically provided by rental ~~income). As of September 30, 2017 and December 31, 2016, the Company had~~income from an ~~income-producing CRE portfolio that was broadly diversified across all property types.~~unaffiliated third party.

The Company had $572.0 million of construction loans and $507.3 million of unfunded commitments as of September 30, 2017, compared to $551.6 million of construction loans and $526.4 million of unfunded commitments as of December 31, 2016. The construction portfolio as of September 30, 2017 and December 31, 2016 was largely comprised of financing for the construction of hotels, multifamily and residential condominiums, as well as mixed use (residential and retail) structures.

Commercial —Multifamily Residential Loans. ~~Residential loans are comprised of single-family and~~ The multifamily residential loans. The Company offers first lien mortgage loans secured by one-to-four unit residential properties located in its primary lending areas. The Company offers a variety of first lien mortgage loan programs, including fixed rate conforming loans and adjustable rate mortgage loans with initial fixed periods of one to seven years, which adjust annually thereafter. The Company’s multifamily loan portfolio is largely comprised of loans secured by ~~smaller multifamily~~residential properties ~~ranging from 5 to 15 units in its primary lending areas. 71% and 73% of the Company’s~~with five or more units. Multifamily residential loans ~~were concentrated in California~~totaled $4.44 billion as of ~~September~~June 30, ~~2017~~2022, compared with $3.68 billion as of December 31, 2021, and accounted for 10% and 9% of total loans held-for-investment as of June 30, 2022 and December 31, ~~2016,~~2021, respectively. ~~Many~~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.

Commercial —Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction and land loans totaled $515.9 million as of June 30, 2022, compared with $346.5 million as of December 31, 2021, and accounted for 1% of total loans held-for-investment as of both dates. Construction loans exposure was made up of $417.2 million in loans outstanding, plus $424.9 million in unfunded commitments as of June 30, 2022, compared with $297.9 million in loans outstanding, plus $361.2 million in unfunded commitments as of December 31, 2021. Land loans totaled $98.7 million as of June 30, 2022, compared with $48.6 million as of December 31, 2021.

Consumer

The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of June 30, 2022 and December 31, 2021:



($ in thousands)	June 30, 2022
	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	3,893,421			$	1,026,617			$	4,920,038
Northern California	1,155,502				525,676				1,681,178
California	5,048,923		48	%	1,552,293		69	%	6,601,216		53	%
New York	3,581,285		35	%	307,075		13	%	3,888,360		31	%
Washington	570,950		6	%	261,383		11	%	832,333		7	%
Massachusetts	277,068		3	%	89,026		4	%	366,094		3	%
Georgia	275,454		3	%	25,440		1	%	300,894		2	%
Texas	281,683		3	%	—		—	%	281,683		2	%
Other markets	199,110		2	%	44,863		2	%	243,973		2	%
Total	$	10,234,473	100	%	$	2,280,080	100	%	$	12,514,553	100	%
Lien priority:
First mortgage	$	10,234,473	100	%	$	1,964,856	86	%	$	12,199,329	97	%
Junior lien mortgage	—		—	%	315,224		14	%	315,224		3	%
Total	$	10,234,473	100	%	$	2,280,080	100	%	$	12,514,553	100	%



($ in thousands)	December 31, 2021
	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	3,520,010			$	971,731			$	4,491,741
Northern California	1,024,564				506,310				1,530,874
California	4,544,574		49	%	1,478,041		68	%	6,022,615		54	%
New York	3,102,129		34	%	292,540		14	%	3,394,669		30	%
Washington	526,721		6	%	230,294		11	%	757,015		7	%
Massachusetts	258,372		3	%	75,815		4	%	334,187		3	%
Georgia	279,328		3	%	25,208		1	%	304,536		3	%
Texas	230,402		3	%	—		—	%	230,402		2	%
Other markets	152,176		2	%	42,923		2	%	195,099		1	%
Total	$	9,093,702	100	%	$	2,144,821	100	%	$	11,238,523	100	%
Lien priority:
First mortgage	$	9,093,702	100	%	$	1,872,440	87	%	$	10,966,142	98	%
Junior lien mortgage	—		—	%	272,381		13	%	272,381		2	%
Total	$	9,093,702	100	%	$	2,144,821	100	%	$	11,238,523	100	%

Consumer — Single-Family Residential Mortgages. Single-family residential loans totaled $10.23 billion as of June 30, 2022, compared with $9.09 billion as of December 31, 2021, and accounted for 22% of total loans held-for-investment as of both dates. Year-to-date, single-family residential mortgages increased $1.14 billion or 13%, primarily driven by net growth in California and New York. The Company was in a first lien position for all of its single-family residential loans ~~within the Company’s portfolio~~as of both June 30, 2022 and December 31, 2021. Many of these loans are reduced documentation loans, ~~where~~for which a substantial down payment is required, resulting in a low ~~loan-to-value~~LTV ratio at origination, typically ~~60%~~65% or less. These loans have historically experienced low delinquency and ~~default~~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 each year, after an initial fixed rate period.

Consumer ~~Loans.~~ ~~Consumer~~— Home Equity Lines of Credit. Total HELOC commitments were $2.91 billion as of June 30, 2022, which grew by $411.7 million or 17% from $2.49 billion as of December 31, 2021. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled $2.28 billion as of June 30, 2022, compared with $2.14 billion as of December 31, 2021, and accounted for 5% of total loans ~~are comprised~~held-for-investment as of ~~home equity lines~~both dates. Year-to-date, HELOCs increased $135.3 million or 6%, primarily driven by growth in California and Washington. The Company was in a first lien position for 86% and 87% of ~~credit (“HELOCs”), insurance premium financing loans, credit card and auto loans. As~~total outstanding HELOCs as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016, the Company’s HELOCs were the largest component~~2021, respectively. Many of ~~the consumer loan portfolio, and were secured by one-to-four unit residential properties located in its primary lending areas. The HELOC loan portfolio is largely comprised of~~these loans ~~originated through a~~are reduced documentation ~~loan program where~~loans, for which a substantial down payment is required, resulting in a low ~~loan-to-value~~LTV ratio at origination, typically ~~60%~~65% or less. ~~The Company is in a first lien position for many of these reduced documentation HELOCs.~~ These loans have historically experienced low delinquency and ~~default~~loss rates.

~~The~~ Substantially all of the Company’s ~~total loan portfolio includes originated and purchased loans. Originated and purchased~~HELOCs were variable-rate loans for which there was no evidence of credit deterioration at their acquisition date, are collectively referred to as non-PCI loans. Acquired loans for which there was, at the acquisition date, evidence of credit deterioration are referred to as PCI loans. PCI loans are recorded net of ASC 310-30 discount and totaled $532.3 million and $642.4 million as of ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016, respectively. For additional details regarding PCI~~2021.

All originated commercial and consumer loans ~~see~~ ~~Note 8 — Loans Receivable and Allowance for Credit Losses~~are subject to the ~~Consolidated Financial Statements.~~Company’s 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 a variety of 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.

Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in ~~China.~~China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, economic and political uncertainties. As ~~of September 30, 2017~~such, the Company’s international operation risk exposure is largely concentrated in China and ~~December 31, 2016, loans~~Hong Kong. In addition, the Company’s financial assets held in the Hong Kong branch ~~totaled $686.3 million~~ and ~~$733.3 million, respectively. As of September 30, 2017 and December 31, 2016, loans held in~~ the subsidiary bank in China ~~totaled $499.5 million and $425.3 million, respectively. These~~may be affected by fluctuations in currency exchange rates or other factors. The following table presents the major financial assets held in the Company’s overseas ~~loans are comprised mainly of C&I loans made to cross-border or trade finance companies. In total, these loans represented 3% of total consolidated assets~~offices as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~2021:



($ in thousands)	June 30, 2022				December 31, 2021
	Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets
Hong Kong branch:
Cash and cash equivalents	$	813,263	1	%	$	831,283	1	%
Interest-bearing deposits with banks	$	50,000	0	%	$	—	—	%
AFS debt securities (1)	$	290,747	0	%	$	242,926	0	%
Loans held-for-investment (2)	$	1,028,028	2	%	$	849,573	1	%
Total assets	$	2,194,940	4	%	$	1,933,164	3	%
Subsidiary bank in China:
Cash and cash equivalents	$	504,764	1	%	$	543,134	1	%
Interest-bearing deposits with banks	$	17,460	0	%	$	51,243	0	%
AFS debt securities (3)	$	134,605	0	%	$	141,404	0	%
Loans held-for-investment (2)	$	1,138,011	2	%	$	984,591	2	%
Total assets	$	1,780,396	3	%	$	1,709,640	3	%

When a determination is made at the time of commitment to originate or purchase loans as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value. As of September 30, 2017, loans held-for-sale amounted to $178 thousand, which were(1)Primarily comprised of ~~single-family residential loans. In comparison,~~U.S. Treasury securities and foreign government bonds as of both June 30, 2022 and December 31, 2016, loans held-for-sale amounted to $23.1 million, which were primarily comprised of consumer loans. Loans transferred from held-for-investment to held-for-sale were $74.5 million and $418.5 million during the three and nine months ended September 30, 2017, respectively. These loan transfers were primarily2021.

(2)Primarily comprised of C&I loans for both periods. In comparison, $144.9 million and $720.7 million of loans were transferred from held-for-investment to held-for-sale during the three and nine months ended September 30, 2016, respectively. These loan transfers were primarily comprised of C&I, multifamily residential and CRE loans for both periods. The Company recorded $232 thousand and $441 thousand in write-downs to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2017, respectively. In comparison, there were no write-downs and $1.9 million of write-downs recorded to the allowance for loan losses related to loans transferred from held-for-investment to held-for-sale for the three and nine months ended September 30, 2016, respectively.

~~During the three and nine months ended September 30, 2017, the Company sold $33.8 million and $101.4 million, respectively, in originated loans, resulting in net gains of~~ $2.3 million and $5.5 million, respectively. Originated loans sold during the three months ended September 30, 2017 were primarily comprised of $15.7 million of CRE loans and $12.3 million of C&I loans. Originated loans sold during the nine months ended September 30, 2017 were primarily comprised of $50.5 million of C&I loans and $34.8 million of CRE loans. In comparison, the Company sold $107.3 million in originated loans during the three months ended September 30, 2016, resulting in net gains of $2.2 million. Originated loans sold during this period were primarily comprised of $53.9 million of C&I loans and $46.0 million of CRE loans. During the nine months ended September 30, 2016, the Company sold or securitized $529.5 million in originated loans, resulting in net gains of $9.3 million. Included in these amounts were $201.7 million of multifamily residential loans securitized during the first quarter of 2016, which resulted in net gains of $1.1 million, $641 thousand in mortgage servicing rights and $160.1 million of held-to-maturity investment security that were recorded. The remaining $327.8 million of originated loans sold during the nine months ended September 30, 2016, primarily comprising of $171.9 million of CRE loans and $99.6 million of C&I loans, resulted in net gains of $8.2 million.

During the three and nine months ended September 30, 2017, the Company purchased $72.4 million and $441.1 million loans, respectively, compared to $256.2 million and $1.04 billion during the three and nine months ended September 30, 2016, respectively. Purchased loans for each of the three and nine months ended September 30, 2017 were primarily comprised of C&I syndication loans. Purchased loans for each of the three and nine months ended September 30, 2016 were primarily comprised of C&I syndication loans and single-family residential loans. The higher loans purchased for the three and nine months ended September 30, 2016, primarily included $165.8 million and $488.3 million, respectively, of single-family residential loans purchased for Community Reinvestment Act purposes.

From time to time, the Company purchases and sells loans in the secondary market. Certain purchased loans are transferred from held-for-investment to held-for-sale and write-downs to allowance for loan losses are recorded, when appropriate. During the three and nine months ended September 30, 2017, the Company sold loans of $57.4 million and $354.5 million, respectively, in the secondary market at net gains of $19 thousand and $1.2 million, respectively. In comparison, the Company sold loans of $45.8 million and $179.4 million for the three and nine months ended September 30, 2016, respectively, in the secondary market. Loan sales in the secondary market resulted in no gains or losses and $69 thousand in net gains recorded for the three and nine months ended September 30, 2016, respectively.

~~The Company records valuation adjustments in~~ ~~Net gains on sales of loans~~ on the Consolidated Statements of Income to carry the loans held-for-sale portfolio at the lower of cost or fair value. For each of the three months ended September 30, 2017 and 2016, no valuation adjustments were recorded. For the nine months ended September 30, 2017 and 2016, the Company recorded $61 thousand and $2.4 million, respectively, in valuation adjustments.

~~Non-PCI Nonperforming Assets~~

Non-PCI nonperforming assets are comprised of nonaccrual loans and other real estate owned (“OREO”), net. Loans are placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. The following table presents information regarding non-PCI nonperforming assets as of ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016:~~2021.

($ in thousands) September 30, 2017 December 31, 2016
Nonaccrual loans:
Real estate - commercial $ 24,802
$ 26,907
Real estate - land and construction 4,183
5,326
Commercial 73,384
81,256
Real estate - single-family 6,639
4,214
Real estate - multifamily 2,620
2,984
Consumer 3,097
2,130
Total nonaccrual loans 114,725
122,817
OREO, net 2,289
6,745
Total nonperforming assets $ 117,014
$ 129,562
Non-PCI nonperforming assets to total assets⁽¹⁾
0.32 % 0.37 %
Non-PCI nonaccrual loans to loans held-for-investment ⁽¹⁾
0.40 % 0.48 %
Allowance for loan losses to non-PCI nonaccrual loans 249.23 % 212.12 %


~~(1)~~	~~Total assets and loans held-for-investment include PCI loans of $532.3 million and $642.4 million as of September 30, 2017 and December 31, 2016, respectively.~~

Typically, changes to nonaccrual loans period-over-period represent inflows for loans that are placed on nonaccrual status in accordance with the Company’s accounting policy, offset by reductions for loans that are paid down, charged off, sold, foreclosed, or no longer classified as nonaccrual as a result(3)Comprised of ~~continued performance and improvement in the borrower’s financial condition and loan repayment capabilities. Nonaccrual loans decreased by $8.1 million or 7% to $114.7 million~~foreign government bonds as of ~~September~~both June 30, 2017 from $122.8 million as of December 31, 2016. The decrease in nonaccrual loans was primarily due to payoffs and paydowns of nonaccrual loans of $70.2 million, transfers of nonaccrual loans to accrual status of $37.2 million, and charge-offs of nonaccrual loans of $19.5 million, partially offset by loans transferred to nonaccrual status of $119.4 million, during the nine months ended September 30, 2017. Nonaccrual loans as a percentage of loans held-for-investment declined from 0.48% as of December 31, 2016 to 0.40% as of September 30, 2017. C&I loans comprised 64% and 66% of total nonaccrual loans as of September 30, 20172022 and December 31, 2016, respectively. Credit risks related to the C&I nonaccrual loans were mitigated by the collateral. In addition, the risk of loss of all nonaccrual loans had been considered as of September 30, 2017 and December 31, 2016 and the Company believes that this was appropriately covered by the allowance for loan losses.2021.

~~In addition, 36% and 64% of non-PCI nonaccrual loans consisted of loans that were less than 90 days delinquent as of September 30, 2017 and December 31, 2016, respectively.~~

~~For additional details regarding the Company’s non-PCI nonaccrual loans policy, see~~ ~~Note 1 — Summary of Significant Accounting Policies~~ ~~to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.~~

Troubled debt restructurings (“TDRs”) may be designated as performing or nonperforming. A TDR may be designated as performing, if the loan has demonstrated sustained performance under the modified terms. The period of sustained performance may include the periods prior to modification if prior performance has met or exceeded the modified terms. A loan will remain on nonaccrual status until the borrower demonstrates a sustained period of performance, generally six consecutive months of payments.

The following table presents the ~~performing~~total revenue generated by the Company’s overseas offices for the second quarters and ~~nonperforming TDRs by loan segment~~first halves of 2022 and 2021:



($ in thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
	Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue
Hong Kong Branch:
Total revenue	$	10,768	2	%	$	6,873	2	%	$	18,109	2	%	$	12,340	1	%
Subsidiary Bank in China:
Total revenue	$	11,236	2	%	$	6,158	1	%	$	19,036	2	%	$	12,679	1	%

Capital

The Company maintains a strong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that the Company and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes on at least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, allocating capital to existing and future business activities. Furthermore, the Company conducts capital stress tests as part of ~~September 30, 2017~~its capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and ~~December 31, 2016:~~interest rates on its capital base.

($ in thousands) September 30, 2017 December 31, 2016

Performing
TDRs

Nonperforming
TDRs

Performing
TDRs

Nonperforming
TDRs
CRE $ 10,347
$ 19,830
$ 20,145
$ 14,446
C&I 20,416
44,292
44,363
23,771
Residential 18,872
486
17,178
717
Consumer 1,204
375
1,552
49
Total TDRs $ 50,839
$ 64,983
$ 83,238
$ 38,983

~~Performing TDRs decreased by $32.4~~On March 3, 2020, the Company’s Board of Directors authorized the repurchase of $500.0 million or 39% to $50.8 million as of September 30, 2017, primarily due to the transfers of one CRE and two C&I loans from performing to nonperforming status during the nine months ended September 30, 2017. Nonperforming TDRs increased by $26.0 million or 67% to $65.0 million as of September 30, 2017, primarily due to the aforementioned transfers of CRE and C&I loans between performing and nonperforming status and a C&I loan becoming a TDR loan during the nine months ended September 30, 2017.

~~The Company’s impaired loans include predominantly non-PCI loans held-for-investment on nonaccrual status and non-PCI loans modified as a TDR, on either accrual or nonaccrual status. See~~ ~~Note 1~~ — ~~Summary of Significant Accounting Policies~~ ~~to the Consolidated Financial Statements~~ of the Company’s ~~2016 Form 10-K~~common stock, of which $354.0 million was available as of March 31, 2022. During the second quarter of 2022, the Company repurchased $100.0 million of common stock or 1,385,517 shares, at an average price of $72.17 per share. As of June 30, 2022, the total remaining available capital authorized for repurchase was $254.0 million. For additional information ~~regarding~~about the share repurchases, see Part II, Item 2.— Unregistered Sales of Equity Securities and Use of Proceeds in this Form 10-Q.

The Company’s ~~TDRs and impaired loan policies. As~~stockholders’ equity was $5.61 billion as of ~~September~~June 30, ~~2017, the allowance for loan losses included $20.8~~2022, a decrease of $227.7 million for impaired loans with a total recorded investment balance of $72.6 million. In comparison, the allowance for loan losses included $12.7 million for impaired loans with a total recorded investment balance of $84.1 millionor 4% from $5.84 billion as of December 31, ~~2016.~~

2021. The ~~following table presents~~year-to-date decrease in the ~~recorded investment balances for non-PCI impaired loans as~~Company’s stockholders’ equity was primarily due to a negative change in AOCI of ~~September 30, 2017~~$510.3 million, $115.0 million in common dividends declared, and ~~December 31, 2016:~~

($ in thousands) September 30, 2017 December 31, 2016
Amount Percent Amount Percent
CRE:
Income producing $ 35,149
21 % $ 46,508
23 %
Land 4,183
3 % 5,870
3 %
Total CRE impaired loans 39,332
24 % 52,378
26 %
C&I:
Commercial business 89,092
54 % 120,453
58 %
Trade finance 4,708
3 % 5,166
2 %
Total C&I impaired loans 93,800
57 % 125,619
60 %
Residential:
Single-family 15,899
10 % 14,335
7 %
Multifamily 12,232
7 % 10,041
5 %
Total residential impaired loans 28,131
17 % 24,376
12 %
Consumer 4,301
2 % 3,682
2 %
Total impaired loans $ 165,564
100 % $ 206,055
100 %

~~Allowance for Credit Losses~~

~~Allowance for credit~~$100.0 million in common stock repurchases, partially offset by $496.0 million in net income. The negative change in AOCI was primarily due to increased unrealized losses consists of allowance for loan losses and allowance for unfunded credit reserves. Unfunded credit reserves include reserves provided for unfunded lending commitments, issued commercial letters of credit and standby letters of credit (“SBLCs”), and recourse obligations for loans sold. The allowance for credit losses is increased by the provision for credit losses which is charged against current period operating results, and is increased or decreased by the amount of net recoveries or charge-offs, respectively, during the period. The allowance for unfunded credit reserves is included in ~~Accrued expenses and~~AFS debt securities. For other ~~liabilities~~ ~~on the Consolidated Balance Sheets. Net adjustments~~factors that contributed to the ~~allowance for unfunded credit reserves are included~~changes in ~~Provision for credit losses~~ ~~on the Consolidated Statements of Income.~~

~~The Company is committed~~stockholders’ equity, refer to maintaining the allowance for credit losses at a level that is commensurate with the estimated inherent loss in the loan portfolio, including unfunded credit reserves. In addition to regular quarterly reviews of the adequacy of the allowance for credit losses, the Company performs an ongoing assessment of the risks inherent in the loan portfolio. While the Company believes that the allowance for loan losses is appropriate as of September 30, 2017, future allowance levels may increase or decrease based on a variety of factors, including loan growth, portfolio performance and general economic conditions. For additional details on the Company’s allowance for credit losses, including the methodologies used, see ~~Note 8 — Loans Receivable and Allowance for Credit Losses~~ ~~to the~~Item 1. Consolidated Financial Statements ~~and~~ ~~Item 7. MD&A~~ — ~~Critical Accounting Policies and Estimates~~ ~~and~~ ~~Note 1~~ — ~~Summary~~Consolidated Statement of ~~Significant Accounting Policies~~ ~~to the Consolidated Financial Statements~~Changes in Stockholders’ Equity in this Form 10-Q.

Book value was $39.81 per common share as of ~~the Company’s 2016 Form 10-K.~~

~~The following table presents~~June 30, 2022, a ~~summary~~decrease of ~~activities in the allowance for credit losses for the three and nine months ended September 30, 2017 and 2016:~~

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Allowance for loan losses, beginning of period $ 276,316
$ 266,768
$ 260,520
$ 264,959
Provision for loan losses 13,448
11,514
32,134
19,049
Gross charge-offs:
CRE —
(309 ) (149 ) (504 )
C&I (7,359 ) (23,696 ) (19,802 ) (31,770 )
Residential —
(29 ) (1 ) (166 )
Consumer (65 ) (13 ) (72 ) (17 )
Total gross charge-offs (7,424 ) (24,047 ) (20,024 ) (32,457 )
Gross recoveries:
CRE 610
634
1,714
873
C&I 2,165
165
9,658
2,068
Residential 809
654
1,758
1,048
Consumer 2
124
166
272
Total gross recoveries 3,586
1,577
13,296
4,261
Net charge-offs (3,838 ) (22,470 ) (6,728 ) (28,196 )
Allowance for loan losses, end of period 285,926
255,812
285,926
255,812

Allowance for unfunded credit reserves, beginning of period 15,188
20,318
16,121
20,360
Reversal of unfunded credit reserves (452 ) (1,989 ) (1,385 ) (2,031 )
Allowance for unfunded credit reserves, end of period 14,736
18,329
14,736
18,329
Allowance for credit losses $ 300,662
$ 274,141
$ 300,662
$ 274,141

Average loans held-for-investment $ 27,529,103
$ 24,258,913
$ 26,764,327
$ 23,961,288
Loans held-for-investment, end of period $ 28,525,357
$ 24,731,962
$ 28,525,357
$ 24,731,962
Annualized net charge-offs to average loans held-for-investment (0.06 )% (0.37 )% (0.03 )% (0.16 )%
Allowance for loan losses to loans held-for-investment 1.00 % 1.03 % 1.00 % 1.03 %

As of September 30, 2017, the allowance for loan losses amounted to $285.9 million or 1.00% of loans held-for-investment, compared to $260.5 million or 1.02% and $255.8 million or 1.03% of loans held-for-investment3% from $41.13 per common share as of December 31, 2016 and September 30, 2016, respectively. The increase in the allowance for loan losses was largely due to the overall growth in the loan portfolio. The allowance for loan losses to loans held-for-investment ratio2021, primarily as of September 30, 2017 decreased slightly compared to both December 31, 2016 and September 30, 2016. The decrease in this ratio was primarily attributable to the higher credit quality of newly originated loans, resulting in loans held-for-investment increasing at a higher rate than the estimated allowance for loan losses. In addition, the extended good economic cycle and sound credit risk management practices have led to continued declines in the Company’s historical loss rate experience, which has resulted in a slower rateresult of ~~change in the allowance for loan losses compared to the Company’s loan growth.~~Provision for credit losses includes provision for loan losses and unfunded credit reserves. Provision for credit losses is charged to income to bring the allowance for credit losses to a level deemed appropriate by the Company based on the factors described above. The fluctuation in the provision for credit losses is highly dependent on the historical loss rates trend along with the net charge-offs experienced during the period. The increase in the provision for credit losses for the three and nine months ended September 30, 2017, compared to the same periods in 2016,Tangible equity per common share was ~~reflective of the overall loan portfolio growth, partially offset by a decline in the historical loss factor during the same periods. The Company believes the allowance for credit losses~~$36.44 as of ~~September~~June 30, ~~2017 and December 31, 2016 was appropriate to cover credit losses inherent in the loan portfolio, including unfunded credit commitments, at that date.~~

The following table presents the Company’s allocation of the allowance for loan losses by segment and the ratio of each loan segment to total loans held-for-investment as of September 30, 2017 and December 31, 2016:

($ in thousands) September 30, 2017 December 31, 2016

Allowance
Allocation

% of
Total Loans

Allowance
Allocation

% of
Total Loans
CRE $ 74,317
33 % $ 72,916
34 %
C&I 160,598
37 % 142,167
38 %
Residential 43,905
23 % 37,338
20 %
Consumer 7,106
7 % 8,099
8 %
Total $ 285,926
100 % $ 260,520
100 %

~~The Company maintains an allowance on non-PCI and PCI loans. Based on the Company’s estimates of cash flows expected to be collected, an allowance for the PCI loans is established,~~2022, compared with a charge to income through the provision for loan losses. PCI loan losses are estimated collectively for groups of loans with similar characteristics. As of September 30, 2017, the Company established an allowance of $68 thousand on $532.3 million of PCI loans. In comparison, an allowance of $118 thousand was established on $642.4 million of PCI loans$37.79 as of December 31, ~~2016.~~2021. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q. The ~~allowance balances~~Company paid a quarterly cash dividend of $0.40 and $0.33 per common share during the second quarters of 2022 and 2021, respectively. In July 2022, the Company’s Board of Directors declared third quarter 2022 cash dividend of $0.40 per common share. The dividend is payable on August 15, 2022 to stockholders of record as of August 1, 2022.

Deposits and Other Sources of Funding

Deposits are the Company’s primary source of funding, the cost of which has a significant impact on the Company’s net interest income and net interest margin. Additional funding is provided by short- and long-term borrowings, and long-term debt. See Item 2.MD&A — Risk Management — Liquidity Risk Management — Liquidity in this Form 10-Q for ~~both periods were attributed mainly to~~a discussion of the ~~PCI CRE loans.~~Company’s liquidity management. The following table summarizes the Company’s sources of funds as of June 30, 2022 and December 31, 2021:



($ in thousands)	June 30, 2022				December 31, 2021				Change
	Amount		%		Amount		%		$		%
Deposits

Noninterest-bearing demand	$	23,028,831	42	%	$	22,845,464	43	%	$	183,367	1	%
Interest-bearing checking	7,094,726		13	%	6,524,721		12	%	570,005		9	%
Money market	11,814,402		22	%	13,130,300		25	%	(1,315,898)		(10)	%
Savings	3,027,819		6	%	2,888,065		5	%	139,754		5	%




Time deposits	9,377,576		17	%	7,961,982		15	%	1,415,594		18	%
Total deposits	$	54,343,354	100	%	$	53,350,532	100	%	$	992,822	2	%
Other Funds


FHLB advances	$	174,776			$	249,331			$	(74,555)	(30)	%
Repurchase agreements	611,785				300,000				311,785		104	%
Long-term debt	147,801				147,658				143		0	%
Total other funds	$	934,362			$	696,989			$	237,373	34	%
Total sources of funds	$	55,277,716			$	54,047,521			$	1,230,195	2	%

Deposits

The Company offers a wide variety of deposit products to ~~both~~ consumer and commercial customers. ~~Deposits are an important~~To provide a stable and low-cost source of funding and ~~affect net interest income and net interest margin. The following table presents~~liquidity, the ~~balances for customer deposits as of September 30, 2017 and December 31, 2016:~~

($ in thousands) Change
September 30, 2017
% of total
deposits
December 31, 2016 % of total
deposits $ %
Core deposits:
Noninterest-bearing demand $ 10,992,674
35 % $ 10,183,946
34 % $ 808,728
8 %
Interest-bearing checking 4,108,859
13 % 3,674,417
12 % 434,442
12 %
Money market 7,939,031
25 % 8,174,854
27 % (235,823 ) (3 )%
Savings 2,476,557
8 % 2,242,497
8 % 234,060
10 %
Total core deposits 25,517,121
81 % 24,275,714
81 % 1,241,407
5 %
Time deposits 5,794,541
19 % 5,615,269
19 % 179,272
3 %
Total deposits $ 31,311,662
100 % $ 29,890,983
100 % $ 1,420,679
5 %

~~Total deposits increased mainly due to growth in noninterest-bearing demand and interest-bearing checking deposits from existing and new customers. The~~ Company’s ~~deposit~~ strategy is to grow and retain relationship-based deposits. Total deposits ~~and provide a source of low-cost funding and liquidity to the Company. Core deposits comprised 81% of total deposits~~were $54.34 billion as of ~~each~~June 30, 2022, an increase of ~~September 30, 2017 and December 31, 2016. The $1.24~~$992.8 million or 2% from $53.35 billion or 5% increase in core deposits was primarily due to the increases in noninterest-bearing demand deposits and interest-bearing checking deposits. Noninterest-bearing demand deposits comprised 35% and 34% of total deposits as of September 30, 2017 and December 31, 2016, respectively. Interest-bearing checking deposits comprised 13% and 12% of total deposits as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, deposits were 110% of total loans, compared to 117% as of December 31, ~~2016, as the~~2021. The increase in deposits was primarily driven by growth in ~~total loans outpaced~~time and interest-bearing checking deposits, partially offset by a decrease in money market deposits. Additional information regarding the impact of deposits on net interest income, with a comparison of average deposit ~~growth.~~balances and rates, is provided in Item 2. MD&A — Results of Operations — Net Interest Income in this Form 10-Q.

Other Sources of Funding

~~Borrowings~~

~~The Company utilizes short-term and long-term borrowings to manage its liquidity position. Borrowings include short-term borrowings, long-term FHLB advances and repurchase agreements.~~

As of ~~September~~June 30, ~~2017 and December 31, 2016, short-term borrowings were comprised of~~2022, the Company’s subsidiary, East West Bank (China) Limited’s borrowings of $24.8 million and $60.1 million, respectively. The interest rates of these borrowings ranged from 2.96% to 3.27% and 2.80% to 3.27% as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, the short-term borrowings of $24.8 million are due to mature in the fourth quarter of 2017.

Company had FHLB advances ~~increased by $1.7~~of $174.8 million ~~to $323.3 million as of September 30, 2017 from $321.6~~compared with advances totaling $249.3 million as of December 31, ~~2016.~~2021. As of ~~September~~June 30, ~~2017,~~2022, the FHLB advances ~~had~~were comprised of an overnight advance of $100.0 million with a fixed interest rate of 1.66% and a term advance of $74.8 million with a floating interest ~~rates ranging from 1.48% to 1.72% with remaining maturities between 1.4~~rate of 1.76% and ~~5.1 years.~~ maturity in four months.

Gross repurchase agreements totaled ~~$450.0~~$611.8 million and $300.0 million as of ~~each of September~~June 30, ~~2017~~2022 and December 31, ~~2016.~~2021, respectively. Resale and repurchase agreements are reported net, pursuant to ~~ASC 210-20-45,~~ Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet ~~Offsetting~~Offsetting: Repurchase and Reverse Repurchase Agreements. ~~Net repurchase agreements totaled $50.0 million and $350.0 million as~~As of ~~September~~both June 30, ~~2017~~2022 and December 31, ~~2016, respectively. As of September 30, 2017, $400.0 million of repurchase~~2021, the Company did not have any gross resale agreements that were eligible for netting ~~against resale agreements, resulting in $50.0 million~~pursuant to ASC 210-20-45-11. The weighted-average interest rates were 2.70% and 2.63% for the second quarters of ~~net repurchase agreements reported. In comparison, $100.0 million~~June 30, 2022 and 2021, respectively; and 2.66% and 2.65% for the first half of 2022 and 2021, respectively. As of June 30, 2022, gross repurchase agreements were eligible for netting against resale agreements, resulting in $350.0 million of net repurchase agreements reported as of December 31, 2016. As of September 30, 2017, gross repurchase agreements of $450.0 million had ~~interest rates ranging between 3.54% to 3.58% and~~ original terms ~~ranging~~ between six months and 10.0 years and ~~16.5~~remaining maturities between six months and 1.2 years. ~~The remaining maturity terms of the repurchase agreements range between 5.1 and 5.9 years.~~

Repurchase agreements are accounted for as collateralized financing transactions and recorded atas liabilities based on the ~~balances~~values at which the ~~securities were~~assets are sold. ~~The~~As of June 30, 2022, the collateral for the repurchase agreements ~~is primarily~~was comprised of ~~U.S. Treasury securities,~~ U.S. government agency and U.S. ~~government sponsored~~government-sponsored enterprise mortgage-backed securities, and U.S. ~~government agency and U.S. government sponsored enterprise debt~~Treasury securities. To ensure ~~that~~ the market value of the underlying collateral remains sufficient, the Company monitors the fair value of collateral pledged relative to the principal amounts borrowed under repurchase agreements. The Company manages liquidity risks related to the repurchase agreements by sourcing ~~funding~~funds from a diverse group of counterparties, and entering into repurchase agreements with longer durations, when appropriate. For additional details, see Note 5 4 — ~~Securities~~ Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial ~~Statements.~~Statements in this Form 10-Q.

~~Long-Term Debt~~

The Company uses long-term debt to provide funding to acquire ~~income earning~~interest-earning assets, and to enhance ~~liquidity.~~liquidity and regulatory capital adequacy. Long-term debt ~~which~~totaled $147.8 million and $147.7 million as of June 30, 2022 and December 31, 2021, respectively. Long-term debt consists of junior subordinated debt, ~~and a term loan, decreased $9.8 million or 5% from $186.3 million~~which qualifies as of December 31, 2016 to $176.5 million as of September 30, 2017. The decrease was primarily due to the quarterly repayment on the term loan, totaling $10.0 million, during the nine months ended September 30, 2017.

Tier 2 capital for regulatory purposes. The junior subordinated debt was issued in connection with the Company’s various pooled trust preferred securities ~~offerings. Junior subordinated debt is recorded~~offerings, as ~~a component of long-term debt and includes the value of the~~well as with common stock issued by the six wholly-owned subsidiaries of the Company in conjunction with these ~~transactions. The junior subordinated debt totaled $152.6 million and $146.3 million as of September 30, 2017 and December 31, 2016, respectively.~~offerings. The junior subordinated debt had ~~a weighted average~~weighted-average interest ~~rate~~rates of ~~2.73%~~2.34% and ~~2.22%~~1.76% for the ~~nine months ended September 30, 2017~~first halves of 2022 and ~~2016,~~2021, respectively, with remaining maturities ranging between 12.4 years and ~~remaining maturity terms of 17.2 to 20.0~~15.2 years as of ~~September~~June 30, 2017. Beginning in 2016, trust preferred securities no longer qualify as Tier 1 capital and are limited to Tier 2 capital for regulatory purposes, based on Basel III Capital Rules. For further discussion, see ~~Item 1. Business — Supervision and Regulation — Capital Requirements~~ ~~of the Company’s 2016 Form 10-K.~~2022.

In 2013, the Company entered into a $100.0 million three-year term loan agreement. The terms of the agreement were modified in 2015 to extend the term loan maturity from July 1, 2016 to December 31, 2018, where principal repayments of $5.0 million are due quarterly. The term loan bears interest at the rate of the three-month London Interbank Offered Rate plus 150 basis points and the weighted average interest rate was 2.65% and 2.19% for the nine months ended September 30, 2017 and 2016, respectively. The outstanding balance of the term loan was $30.0 million and $40.0 million as of September 30, 2017 and December 31, 2016, respectively.

~~Capital~~

The Company maintains an adequate capital base to support its anticipated asset growth, operating needs and credit risks, and to ensure that East West and the Bank are in compliance with all regulatory capital guidelines. The Company engages in regular capital planning processes to optimize the use of available capital and to appropriately plan for future capital needs. The capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. In addition, the Company conducts capital stress tests as part of its annual capital planning process. The stress tests enable the Company to assess the impact of adverse changes in the economy and interest rates on its capital base.

The Company’s stockholders’ equity increased by $354.2 million or 10% to $3.78 billion as of September 30, 2017, compared to $3.43 billion as of December 31, 2016. The Company’s primary source of capital is the retention of its operating earnings. Retained earnings increased by $333.1 million or 15%to $2.52 billion as of September 30, 2017, compared to $2.19 billion as of December 31, 2016. The increase was primarily due to net income of $420.7 million, reduced by $87.6 million of cash dividends during the nine months ended September 30, 2017. In addition, common stock and additional paid-in capital increased by $17.7 million or 1.0% primarily due to the activities in employee stock compensation plans. For other factors that contributed to the changes in stockholders’ equity, refer to the Consolidated Statements of Changes in Stockholders’ Equity.

Book value was $26.17 per common share based on 144.5 million common shares outstanding as of September 30, 2017, compared to $23.78 per common share based on 144.2 million common shares outstanding as of December 31, 2016. The Company made dividend payments of $0.20 per common share in each quarter during the nine months ended September 30, 2017 and 2016. In October 2017, the Company’s Board of Directors (the “Board”) declared fourth quarter 2017 cash dividends for the Company’s common stock. The common stock cash dividend of $0.20 per share is payable on November 15, 2017 to stockholders of record as of November 1, 2017.

Regulatory Capital and Ratios

The federal banking agencies have risk-based capital adequacy ~~guidelines~~requirements intended to ensure that ~~are designed to reflect~~banking organizations maintain capital that is commensurate with the degree of risk associated with ~~a banking organization’s operations~~their operations. The Company and ~~transactions. The guidelines cover transactions that~~the Bank are reported on the balance sheet as well as those recorded as off-balance sheet items. In 2013, the Federal Reserve Board, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency issued the final Basel III Capital Rules establishing a new comprehensiveeach subject to these regulatory capital ~~framework for strengthening international capital standards as well as implementing certain provisions of the “Dodd-Frank Act”.~~adequacy requirements. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements ofand Regulatory Capital-Related Development in the Company’s ~~2016~~2021 Form 10-K for additional details.

The ~~Basel III Capital Rules became effective for the~~ Company ~~and the Bank~~adopted Accounting Standards Update (“ASU”) 2016-13 on January 1, ~~2015 (subject~~2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in ~~periods~~option provided by a final rule that delays an estimate of the current expected credit losses methodology (“CECL”) effect on regulatory capital for ~~certain components).~~

two years and phases the impact over three years. The ~~Basel III Capital Rules require that~~rule permits certain banking organizations ~~maintain~~to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses under CECL for each period until December 31, 2021, followed by a ~~minimum CET1 ratio of 4.5%~~three-year phase-out period in which the aggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), loans originated by a ~~Tier 1~~banking organization under the PPP will be risk-weighted at zero percent for regulatory capital ~~ratio of 6.0%, and a total capital ratio of 8.0%. Moreover, the rules require that banking organizations maintain a capital conservation buffer of 2.5% above~~purposes. Accordingly, the capital ~~minimums~~ratios as of June 30, 2022 delayed 75% of the estimated impact of CECL on regulatory capital through the year 2021, and PPP loans are ~~being phased-in over four years beginning in 2016 (increasing by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019)~~risk-weighted at 0%. When fully phased-in in 2019, the banking organizations will be required to maintain a minimum CET1 capital ratio of 7.0%, a minimum Tier 1 capital ratio of 8.5% and a minimum total capital ratio of 10.5% to avoid limitations on capital distributions (including common stock dividends and share repurchases) and certain discretionary incentive compensation payments.

The Company is committed to maintaining capital at a level sufficient to assure the Company’s stockholders, customers and regulators that the Company and the Bank are financially sound. As of September 30, 2017 and December 31, 2016, both the Company and the Bank were considered “well-capitalized,” and met all capital requirements on a fully phased-in basis under the Basel III Capital Rules.

The following table presents the Company’s and the Bank’s capital ratios as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021, under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:



	Basel III Capital Rules
	June 30, 2022				December 31, 2021				Minimum Regulatory Requirements		Minimum Regulatory Requirements including Capital Conservation Buffer		Well- Capitalized Requirements
	Company		Bank		Company		Bank
Risk-based capital ratios:
Common Equity Tier 1 capital	12.0	%	11.8	%	12.8	%	12.3	%	4.5	%	7.0	%	6.5	%
Tier 1 capital (1)	12.0	%	11.8	%	12.8	%	12.3	%	6.0	%	8.5	%	8.0	%
Total capital	13.2	%	12.8	%	14.1	%	13.2	%	8.0	%	10.5	%	10.0	%
Tier 1 leverage (1)	9.3	%	9.2	%	9.0	%	8.6	%	4.0	%	4.0	%	5.0	%

Basel III Capital Rules
September 30, 2017 December 31, 2016
Minimum
Regulatory
Requirements

Well-
Capitalized
Requirements

Fully
Phased-in
Minimum
Regulatory
Requirements
Company East
West
Bank Company East
West
Bank
CET1 risk-based capital 11.4 % 11.3 % 10.9 % 11.3 % 4.5 % 6.5 % 7.0 %
Tier 1 risk-based capital 11.4 % 11.3 % 10.9 % 11.3 % 6.0 % 8.0 % 8.5 %
Total risk-based capital 12.9 % 12.3 % 12.4 % 12.3 % 8.0 % 10.0 % 10.5 %
Tier 1 leverage capital 9.4 % 9.3 % 8.7 % 9.1 % 4.0 % 5.0 % 4.0 %

(1)The ~~Company’s CET1 and Tier 1 capital ratios have improved by 49 basis points, while the total risk-based and~~ Tier 1 leverage well-capitalized requirement applies only to the Bank since there is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company. In addition, the minimum Tier 1 risk-based capital ~~ratios increased by 48~~ratio requirement for the Company to be considered well-capitalized is 6.0%.

The Company is committed to maintaining strong capital levels to assure its investors, customers and ~~65 basis points, respectively, during~~regulators that the ~~nine months ended September~~Company and the Bank are financially sound. As of both June 30, ~~2017. The improvement was primarily driven by~~2022 and December 31, 2021, the ~~increases in revenues, primarily due~~Company and the Bank continued to exceed all “well-capitalized” capital requirements and the required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were $48.50 billion as of June 30, 2022, an increase ~~in net interest income and net gains recorded from the sale~~ of ~~commercial property during the first quarter of 2017. The $1.82~~$4.91 billion or ~~7% increase in risk-weighted assets increased~~11%, from ~~$27.36~~$43.59 billion as of December 31, ~~2016 to $29.18 billion as of September 30, 2017~~2021. The increase in the risk-weighted assets was primarily due to loan growth.

Risk Management

Overview

In the ~~growth~~normal course of conducting its business, the Company is exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to the Company’s businesses. The Company operates under a Board-approved enterprise risk management (“ERM”) framework, which outlines the company-wide approach to risk management and oversight, and describes the structures and practices employed to manage the current and emerging risks inherent to the Company. The Company’s ERM program incorporates risk management throughout the organization in identifying, managing, monitoring, and reporting risks. It identifies the Company’s major risk categories as credit risk, liquidity risk, capital risk, market risk, operational risk, compliance and regulatory risks, legal risks, strategic risks, and reputational risks.

The Risk Oversight Committee of the Board of Directors monitors the ERM program through established risk categories and provides oversight of the Company’s risk appetite and control environment. The Risk Oversight Committee provides focused oversight of the Company’s identified enterprise risk categories on behalf of the full Board of Directors. Under the direction of the Risk Oversight Committee, management committees apply targeted strategies to reduce the risks to which the Company’s operations are exposed.

The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational, and support units. The second line of defense is comprised of various risk management and control functions charged with monitoring and managing specific major risk categories and/or risk subcategories. The third line of defense is comprised of the Internal Audit function and Independent Asset Review. Internal Audit provides assurance and evaluates the effectiveness of risk management, control and governance processes as established by the Company. Internal Audit has organizational independence and objectivity, reporting directly to the Board’s Audit Committee. Further discussion and analysis of the primary risk areas are detailed in the following subsections of Risk Management.

Credit Risk Management

Credit risk is the risk that a borrower or a counterparty will fail to perform according to the terms and conditions of a loan or investment and expose the Company to loss. Credit risk exists with many of the Company’s assets and exposures such as loans and certain derivatives. The majority of the Company’s credit risk is associated with lending activities.

The Risk Oversight Committee has primary oversight responsibility for identified enterprise risk categories including credit risk. The Risk Oversight Committee monitors management’s assessment of asset quality, credit risk trends, credit quality administration, underwriting standards, and portfolio credit risk management strategies and processes, such as diversification and concentration limits, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of the credit risk rating policy. The Senior Credit Supervision function evaluates and reports the overall credit risk exposure to senior management and the Risk Oversight Committee. The Independent Asset Review function supports a strong credit risk management culture by providing an independent and objective assessment of underwriting and documentation quality, reporting directly to the Board’s Risk Oversight Committee. A key focus of our credit risk management is adherence to a well-controlled underwriting process.

The Company assesses overall credit quality performance of the loan held-for-investment portfolio through an integrated analysis of specific performance ratios. This approach forms the basis of the discussion in the sections immediately following: Nonperforming Assets, Troubled Debt Restructurings (“TDR”) and Allowance for Credit Losses.

Credit Quality

The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of 1 through 10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

The following table presents the Company’s criticized loans as of June 30, 2022 and December 31, 2021:



($ in thousands)							Change
	June 30, 2022			December 31, 2021			$		%
Criticized loans




































Special mention loans	$	590,227		$	384,694		$	205,533	53	%
Classified loans	432,414			448,362			(15,948)		(4)	%
Total criticized loans	$	1,022,641		$	833,056		$	189,585	23	%

Special mention loans to loans held-for-investment	1.27		%	0.92		%
Classified loans to loans held-for-investment	0.93		%	1.08		%
Criticized loans to loans held-for-investment	2.20		%	2.00		%

Nonperforming Assets

Nonperforming assets are comprised of nonaccrual loans, other real estate owned (“OREO”) and other nonperforming assets. Other nonperforming assets and OREO are repossessed assets and properties, respectively, acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. Nonperforming assets were $89.9 million or 0.14% of total assets as of June 30, 2022, a decrease of $13.5 million or 13%, compared with $103.5 million or 0.17% of total assets as of December 31, 2021.

The following table presents information regarding nonperforming assets as of June 30, 2022 and December 31, 2021:



($ in thousands)							Change
	June 30, 2022			December 31, 2021			$		%
Commercial:
C&I	$	40,053		$	59,023		$	(18,970)	(32)	%
CRE:
CRE	11,276			9,498			1,778		19	%
Multifamily residential	1,466			444			1,022		230	%

Total CRE	12,742			9,942			2,800		28	%
Consumer:
Residential mortgage:
Single-family residential	27,426			15,720			11,706		74	%
HELOCs	9,703			8,444			1,259		15	%
Total residential mortgage	37,129			24,164			12,965		54	%
Other consumer	11			52			(41)		(79)	%
Total nonaccrual loans	89,935			93,181			(3,246)		(3)	%
OREO, net	—			363			(363)		(100)	%
Other nonperforming assets	—			9,938			(9,938)		(100)	%
Total nonperforming assets	$	89,935		$	103,482		$	(13,547)	(13)	%
Nonperforming assets to total assets	0.14		%	0.17		%
Nonaccrual loans to loans held-for-investment	0.19		%	0.22		%
Allowance for loan losses to nonaccrual loans	626.31		%	581.21		%

TDRs included in nonperforming loans	$	41,314		$	30,383

Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is generally assessed based on economic and business conditions, the borrower’s financial condition, and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements in the Company’s 2021 Form 10-K.

Nonaccrual loans were $89.9 million as of June 30, 2022, a decrease of $3.2 million or 3% from $93.2 million as of December 31, 2021. This decrease was predominantly the result of charge-offs and paydowns of commercial loans, partially offset by increases in single-family residential nonaccrual loans. As of June 30, 2022, $44.3 million or 49% of nonaccrual loans were less than 90 days delinquent. In comparison, $54.2 million or 58% of nonaccrual loans were less than 90 days delinquent as of December 31, 2021.

The following table presents the accruing loans past due by portfolio segment as of June 30, 2022 and December 31, 2021:



($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding
	June 30, 2022		December 31, 2021		$		%		June 30, 2022		December 31, 2021
Commercial:
C&I	$	10,130	$	11,069	$	(939)	(8)	%	0.07	%	0.08	%
CRE:
CRE	652		3,722		(3,070)		(82)	%	0.00	%	0.03	%
Multifamily residential	830		5,342		(4,512)		(84)	%	0.02	%	0.15	%

Total CRE	1,482		9,064		(7,582)		(84)	%	0.01	%	0.06	%
Total commercial	11,612		20,133		(8,521)		(42)	%	0.03	%	0.07	%
Consumer:
Residential mortgage:
Single-family residential	20,714		18,760		1,954		10	%	0.20	%	0.21	%
HELOCs	6,867		5,854		1,013		17	%	0.30	%	0.27	%
Total residential mortgage	27,581		24,614		2,967		12	%	0.22	%	0.22	%
Other consumer	98		108		(10)		(9)	%	0.12	%	0.08	%
Total consumer	27,679		24,722		2,957		12	%	0.22	%	0.22	%
Total	$	39,291	$	44,855	$	(5,564)	(12)	%	0.08	%	0.11	%

(1)There were no accruing loans past due 90 days or more as of both June 30, 2022 and December 31, 2021.

Troubled Debt Restructurings

TDRs are loans for which contractual terms have been modified by the Company for economic or legal reasons related to a borrower’s financial difficulties, and for which a concession to the borrower was granted that the Company would not otherwise consider. The Company’s loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The following table presents the performing and nonperforming TDRs by portfolio segment as of June 30, 2022 and December 31, 2021. The allowance for loan losses for TDRs was $12.6 million as of June 30, 2022 and $4.8 million as of December 31, 2021.



($ in thousands)	June 30, 2022						December 31, 2021
	Performing TDRs		Nonperforming TDRs		Total		Performing TDRs		Nonperforming TDRs		Total
Commercial:
C&I	$	65,402	$	36,012	$	101,414	$	77,256	$	28,239	$	105,495
CRE:
CRE	22,937		—		22,937		23,379		—		23,379
Multifamily residential	2,903		1,238		4,141		4,042		197		4,239

Total CRE	25,840		1,238		27,078		27,421		197		27,618
Consumer:
Residential mortgage:
Single-family residential	3,018		3,604		6,622		6,585		1,102		7,687
HELOCs	2,060		460		2,520		2,553		845		3,398
Total residential mortgage	5,078		4,064		9,142		9,138		1,947		11,085

Total TDRs	$	96,320	$	41,314	$	137,634	$	113,815	$	30,383	$	144,198

Performing TDRs were $96.3 million as of June 30, 2022, a decrease of $17.5 million or 15% from $113.8 million as of December 31, 2021. This decrease primarily reflected the paydowns of performing C&I TDR loans and transfers of single-family and multifamily residential loans to nonperforming status. Approximately 97% and 94% of the performing TDRs were current as of June 30, 2022 and December 31, 2021, respectively. Nonperforming TDRs were $41.3 million as of June 30, 2022, an increase of $10.9 million or 36% from $30.4 million as of December 31, 2021. This increase primarily reflected newly designated nonperforming C&I TDR loans and transfers of single-family and multifamily residential loans from performing to nonperforming TDR status, partially offset by payoffs and paydowns of C&I nonperforming TDR loans.

Existing TDRs that were subsequently modified in response to the COVID-19 pandemic continue to be classified as TDRs. Customers who require further assistance upon exiting from the COVID-19 deferred programs may receive further modifications which may be classified as TDRs. As of June 30, 2022, there were no TDRs that were provided modifications related to the COVID-19 pandemic, and the amount of TDRs that were provided modification related to the COVID-19 pandemic were insignificant as of December 31, 2021.

Loan Modifications Due to COVID-19 Pandemic

The Company has granted a range of commercial and consumer loan accommodations, predominantly in the form of payment deferrals, to provide relief to borrowers experiencing financial hardship due to the COVID-19 pandemic. For COVID-19 related loan modifications, which occurred between March 2020 through January 1, 2022, that have met the loan modification criteria under Section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act, 2021, or under the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), the Company elected to temporarily suspend TDR accounting under ASC Subtopic 310-40. Accordingly, the delinquency aging of loans modified related to the COVID-19 pandemic were frozen at the time of the modification during the relief period which expired on January 1, 2022. Interest income continues to be recognized over the accommodation periods. See additional information in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements in the Company’s 2021 Form 10-K. As of June 30, 2022, COVID-19 loans under payment deferral and forbearance programs totaled $49.8 million, or 0.1% of total loans, compared with $363.1 million, or 0.9% of total loans as of December 31, 2021. Loans that have exited the modification program were predominantly current as of June 30, 2022.

Allowance for Credit Losses

ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The allowance for credit losses estimate uses various models and estimation techniques based on historical loss experience, current borrower characteristics, current conditions, reasonable and supportable forecasts, and other relevant factors.

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: 1) recourse obligations for loans sold, 2) letters of credit, and 3) unfunded lending commitments. The Company’s methodology for determining the allowance calculation for unfunded lending commitments uses the lifetime loss rates of the on-balance sheet commitment. Recourse obligations for loans sold and letters of credit use the weighted loss rates for the applicable segment of the individual credit.

In the case of loans and securities, allowance for credit losses are contra-asset valuation accounts that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected. In the case of unfunded credit commitments, the allowance for credit losses is a liability account that is reported as a component of Accrued expenses and other liabilities in our Consolidated Balance ~~Sheets.~~Sheet.

The Company is committed to maintain the allowance for credit losses at a level that is commensurate with the estimated inherent losses in the loan portfolio, including unfunded credit facilities. While the Company believes that the allowance for credit losses as of June 30, 2022 was appropriate to absorb losses inherent in the loan portfolio and in unfunded credit commitments based on the information available, future allowance levels may increase or decrease based on a variety of factors, including but not limited to, accounting standard and regulatory changes, loan growth, portfolio performance and general economic conditions. This evaluation is inherently subjective as it requires numerous estimates and judgements. For a description of the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2021 Form 10-K, and Note 7—Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

The following table presents an allocation of the allowance for loan losses by loan portfolio segments and unfunded credit commitments as of June 30, 2022 and December 31, 2021:



($ in thousands)	June 30, 2022						December 31, 2021
	Allowance Allocation			% of Loan Type to Total Loans			Allowance Allocation			% of Loan Type to Total Loans
Allowance for loan losses
Commercial:
C&I	$	363,282		33		%	$	338,252		34		%
CRE:
CRE	140,245			29		%	150,940			29		%
Multifamily residential	26,552			10		%	14,400			9		%
Construction and land	6,682			1		%	15,468			1		%
Total CRE	173,479			40		%	180,808			39		%
Total commercial	536,761			73		%	519,060			73		%
Consumer:
Residential mortgage:
Single-family residential	21,840			22		%	17,160			22		%
HELOCs	3,220			5		%	3,435			5		%
Total residential mortgage	25,060			27		%	20,595			27		%
Other consumer	1,449			0		%	1,924			0		%
Total consumer	26,509			27		%	22,519			27		%
Total allowance for loan losses	$	563,270		100		%	$	541,579		100		%
Allowance for unfunded credit commitments	$	24,304					$	27,514
Total allowance for credit losses	$	587,574					$	569,093

Loans held-for-investment	$	46,502,076					$	41,693,781
Allowance for loan losses to loans held-for-investment	1.21		%				1.30		%

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Average loans held-for-investment	$	44,625,760		$	39,622,090		$	43,375,718		$	39,177,831


Annualized net (recoveries) charge-offs to average loans held-for-investment	(0.06)		%	0.13		%	0.01		%	0.14		%

The allowance for loan losses was $563.3 million as of June 30, 2022, an increase of $21.7 million from $541.6 million as of December 31, 2021, primarilyreflecting loan growth. Second quarter 2022 net recoveries were $6.6 million or annualized 0.06% of average loans held-for-investment, compared with net charge-offs of $13.3 million or annualized 0.13% of average loans held-for-investment, for the second quarter of 2021. First half of 2022 net charge-offs were $1.7 million or annualized 0.01% of average loans held-for investment, compared with $26.7 million or annualized 0.14% of average loans held-for-investment for the first half of 2021. The decrease in net charge-offs was primarily due to decreases in C&I and CRE charge-offs.

The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome, and downside or upside scenarios reflecting possible worsening or improving economic conditions, respectively. As of ~~September~~June 30, ~~2017,~~2022, the Company assigned a lower weighting to its downside scenario and higher weighting to the baseline and upside scenarios, compared with the weightings assigned as of December 31, 2021. The current forecast incorporates an updated impact of rising inflation on the economy, supply chain constraints compounded by the continuing Russia-Ukraine war, and the lower than previously expected annual Gross Domestic Product (“GDP”) growth. Although economic growth has slowed, the labor market has remained strong. Macroeconomic assumptions underlying the baseline forecast include: (1) annual GDP growth of 2.7% for 2022; (2) 3.3% unemployment rate by the end of 2022; and (3) rising interest rates. The downside scenario assumed annual GDP growth of 1.5% in 2022, and an unemployment rate that was expected to rise from 3.6% to 6.4% by the end of 2022. The upside scenario assumed an annual GDP growth of 3.2% in 2022 and an unemployment rate that was expected to decline from 3.6% to 2.9% by the end of 2022.

As of June 30, 2022 and December 31, 2021, PPP loans outstanding were $153.3 million and $534.2 million, respectively. Because these loans are fully guaranteed by the SBA, there was no allowance for loan losses established for these loans as of June 30, 2022 and December 31, 2021.

The allowance for unfunded credit commitments was $24.3 million as of June 30, 2022, compared with $27.5 million as of December 31, 2021.

Liquidity Risk Management

Liquidity

Liquidity is a financial institution’s capacity to meet its deposit and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. The objective of liquidity management is to manage the potential mismatch of asset and liability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flows, and collateral needs without adversely affecting daily operations or the financial condition of the institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and utilizes diverse funding sources including its stable core deposit base.

The Board of Directors’ Risk Oversight Committee has primary oversight responsibility over liquidity risk management. At the management level, the Company’s ~~CET1 risk-based capital, Tier 1 risk-based capital, total risk-based capital ratios~~Asset/Liability Committee (“ALCO”) establishes the liquidity guidelines that govern the day-to-day active management of the Company’s liquidity position by requiring sufficient asset-based liquidity to cover potential funding requirements and ~~Tier 1 leverage capital ratios were 11.4%, 11.4%, 12.9%~~avoid over-dependence on volatile, less reliable funding markets. These guidelines are established and ~~9.4%, respectively, well above~~monitored for both the ~~well-capitalized requirements~~Bank and for East West on a stand-alone basis to ensure that the Company can serve as a source of ~~6.5%, 8.0%, 10.0%~~strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and ~~5.0%, respectively.~~related management processes, providing regular reports to the Board of Directors. The Company’s liquidity management practices have been effective under normal operating and stressed market conditions.

Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which are relatively stable and low-cost. Total deposits amounted to $54.34 billion as of June 30, 2022, compared with $53.35 billion as of December 31, 2021. The Company’s loan-to-deposit ratio was 86% as of June 30, 2022, compared with 78% as of December 31, 2021.

~~Regulatory Matters~~

~~The Bank entered into a Written Agreement, dated November 9, 2015,~~In addition to deposits, the Company has access to various sources of wholesale financing, including borrowing capacity with the FHLB and Federal Reserve Bank of San Francisco ~~(the “Written Agreement”~~(“FRBSF”), unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies to ~~correct less than satisfactory BSA~~sustain an adequate liquid asset portfolio, meet daily cash demands and ~~AML programs detailed in a joint examination~~allow management flexibility to execute its business strategy. Economic conditions and the stability of capital markets impact the Company’s access to and the cost of wholesale financing. The Company’s access to capital markets is also affected by the ~~Federal Reserve Bank~~ratings received from various credit rating agencies. As of ~~San Francisco (“FRB”) and~~June 30, 2022, the ~~California Department~~Company had available borrowing capacity of ~~Business Oversight (“DBO”). The Bank also entered into a related Memorandum of Understanding (“MOU”)~~$22.62 billion, including $12.60 billion with the ~~DBO in 2015. See~~ ~~Item 7. MD&A — Regulatory Matters~~ FHLB and ~~Note 18 — Regulatory Requirements and Matters~~ to$1.96 billion with the ~~Consolidated Financial Statementsof the Company’s 2016 Form 10-K for further details.~~

FRBSF. The Company believes that the Bank is making progress in executing the compliance plans and programs required by the Written Agreement and MOU, although there can be no assurances that our plans and progress will be found to be satisfactory by our regulators. To date, the Bank has added significant resourcesits liquidity sources are sufficient to meet all reasonably foreseeable short-term needs. Unencumbered loans and/or debt securities were pledged to the ~~monitoring~~FHLB and ~~reporting obligations imposed by~~ the ~~Written Agreement and will continue~~FRBSF discount window as collateral. The Company has established operational procedures to require significant management and third party consultant resources to comply with the Written Agreement and MOU, and to address any additional findings or recommendations by the regulators. These incremental administrative and third party costs, as well as the operational restrictions imposed by the Written Agreement, may adversely affect the Bank’s results of operations.

~~If additional compliance issues are identified or the regulators determine the Bank has not satisfactorily complied with the terms~~enable borrowing against these assets, including regular monitoring of the ~~Written Agreement,~~total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the ~~regulators could take~~FHLB and FRBSF and is subject to change at their discretion. The Bank’s unsecured federal funds lines of credit with correspondent banks, subject to availability, totaled $1.04 billion as of June 30, 2022. Estimated borrowing capacity from unpledged debt securities totaled $7.03 billion as of June 30, 2022. See Item 2— MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further ~~actions with respect~~detail related to the ~~Bank and, if such further actions were taken, such actions could have~~Company’s funding sources.

The Company maintains a ~~material adverse effect on the Bank. The operating and other conditions~~certain level of liquid assets in the ~~BSA~~form of cash and ~~AML program~~cash equivalents, interest-bearing deposits with banks, short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the ~~auditing~~Company’s liquid assets as of June 30, 2022 and ~~oversight~~December 31, 2021:



($ in thousands)	June 30, 2022						December 31, 2021
	Encumbered		Unencumbered		Total		Encumbered		Unencumbered		Total
Cash and cash equivalents	$	—	$	1,902,053	$	1,902,053	$	—	$	3,912,935	$	3,912,935
Interest-bearing deposits with banks	—		712,709		712,709		—		736,492		736,492
Resale agreements due to mature in one year	—		598,000		598,000		—		1,818,503		1,818,503
AFS debt securities:
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities	159,113		750,818		909,931		384,895		1,949,757		2,334,652
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	230,754		2,243,318		2,474,072		418,761		3,738,502		4,157,263
Foreign government bonds	—		242,997		242,997		—		257,733		257,733
Municipal securities	—		266,733		266,733		—		523,158		523,158
Non-agency mortgage-backed securities, asset-backed securities and CLOs	193		1,802,285		1,802,478		240		2,042,642		2,042,882
Corporate debt securities	—		559,293		559,293		—		649,665		649,665
Total	$	390,060	$	9,078,206	$	9,468,266	$	803,896	$	15,629,387	$	16,433,283

Unencumbered liquid assets totaled $9.08 billion as of ~~the program that led~~June 30, 2022, compared with $15.63 billion as of December 31, 2021. AFS debt securities, included as part of liquidity sources, consist of high quality and liquid securities with moderate durations to minimize overall interest rate and liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging. The year-to-date decrease in liquid assets was primarily related to the ~~Written Agreement~~transfer of $3.01 billion of debt securities from AFS to HTM, a $2.01 billion decrease in cash and ~~MOU could also lead~~cash equivalents primarily to ~~an increased risk~~fund loans, and a $1.22 billion decrease in resale agreements primarily due to repayments.

Management believes that the Company’s excess cash, unencumbered AFS debt securities, borrowing capacity and access to sufficient sources of ~~being subject~~capital are adequate to ~~additional actions by~~meet its short- and long-term liquidity needs in the ~~DBO~~foreseeable future. In addition, the Company may use debt and ~~FRB, an increased risk of future examinations that may downgrade~~equity issuances when costs are deemed attractive, should longer term needs arise.

Liquidity Risk — Cash Requirements. In the ~~regulatory ratings of the Bank, and an increased risk investigations by other government agencies may result in fines, penalties, increased expenses or restrictions on operations.~~

~~Off-Balance Sheet Arrangements~~

~~In the~~ordinary course of the Company’s business, the Company ~~may enter~~enters into ~~or be a party to~~contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, leases obligations and other cash commitments. The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance ~~Sheets and are considered to be~~Sheet. The Company’s off-balance sheet ~~arrangements. Off-balance sheet~~ arrangements ~~are any contractual arrangements whereby an~~include (i) commitments to extend credit, such as loan commitments, commercial letters of credit for foreign and domestic trade, standby letters of credit (“SBLCs”), and financial guarantees, to meet financing needs of its customers, (ii) future interest obligations related to customer deposits and the Company’s borrowings, and (iii) transactions with unconsolidated entity is a party, under which the Company has: (1) any obligation under a guarantee contract; (2) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangemententities that serves as credit, liquidity or market risk support to that entity for such assets; (3) any obligation under certain derivative instruments; or (4) any obligation under a material variable interest held by the Company in an unconsolidated entity that providesprovide financing, liquidity, market risk or credit risk support to the Company, or engages in leasing, hedging or research and development services with the Company.

~~As a financial service provider,~~ Since many of these commitments are expected to expire without being drawn upon, the ~~Company routinely enters into commitments to extend credit to customers, such as~~total commitment amounts do not necessarily represent future funding requirements. Information about the Company’s loan commitments, commercial letters of credit ~~for foreign~~ and ~~domestic trade,~~ SBLCs is provided in Note 10 — Commitments and ~~financial guarantees. Many of these commitments~~Contingencies to ~~extend credit may expire without being drawn upon. The credit policies used~~the Consolidated Financial Statements in underwriting loans to customers are also used to extend these commitments. Under some of these contractual agreements, the Company may also have liabilities contingent upon the occurrence of certain events.this Form 10-Q. The Company’s liquidity sources have been, and are expected to be, sufficient to meet ~~the~~all such cash ~~requirements~~requirements.

The Consolidated Statement of ~~its lending activities. The following table presents~~Cash Flows summarizes the Company’s ~~loan commitments, commercial letters~~sources and uses of ~~credit~~cash by type of activities in the first halves of 2022 and ~~SBLCs as of September 30, 2017:~~2021. Excess cash generated by operating and investing activities may be used to repay outstanding debt or invest in liquid assets.

($ in thousands) Commitments
Outstanding
Loan commitments $ 4,956,515
Commercial letters of credit and SBLCs $ 1,757,648

~~A discussion of significant contractual arrangements under which~~Liquidity Risk — Liquidity for East West. In addition to bank level liquidity management, the Company ~~may be held contingently liable~~manages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is ~~included~~from cash dividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in ~~Note 11~~ Item 1. Business — ~~Commitments~~ Supervision and ~~Contingencies~~ ~~to the Consolidated Financial Statements. In addition, the Company has commitments~~Regulation — Dividends and ~~obligations under post-retirement benefit plans as described in~~ ~~Note 15~~ — ~~Employee Benefit Plans~~ ~~to the Consolidated Financial Statements~~ Other Transfers of Funds of the Company’s ~~2016~~2021 Form ~~10-K,~~10-K. East West held $231.6 million and ~~has contractual obligations for future payments on debts, borrowings and lease obligations as detailed~~$345.0 million in~~Item 7 — MD&A — Off-Balance Sheet Arrangements and Aggregate Contractual Obligations~~ ~~of the Company’s 2016 Form 10-K.~~

~~Asset Liability and Market Risk Management~~

~~Liquidity~~

Liquidity refers to the Company’s ability to meet its contractual and contingent financial obligations, on or off-balance sheet, as they become due. The Company’s primary liquidity management objective is to provide sufficient funding for its businesses throughout market cycles and be able to manage both expected and unexpected cash flow needs and requirements without adversely impacting the financial health of the Company. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets and accesses diverse funding sources including its stable core deposit base. The Company’s Asset/Liability Committee (“ALCO”) sets the liquidity guidelines that govern the day-to-day active management of the Company’s liquidity position. The ALCO regularly monitors the Company’s liquidity status and related management processes, and provides regular reports to the Board.

~~The Company maintains liquidity in the form of~~ cash and cash equivalents ~~interest-bearing deposits with banks and available-for-sale investment securities. These assets totaled $5.10 billion and $5.54 billion, accounting for 14% and 16% of total assets,~~ as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively. ~~Traditional forms~~Management believes that East West has sufficient cash and cash equivalents to meet the projected cash obligations for the current year.

Liquidity Risk — Liquidity Stress Testing. The Company utilizes liquidity stress analysis to determine the appropriate amounts of liquidity to maintain at the Company, foreign subsidiary and foreign branch levels needed to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, potential uses of funding ~~such as customer deposits~~ and ~~borrowings augment these liquid assets. Total customer deposits amounted~~economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. Liquidity stress tests are conducted to ~~$31.31 billion as~~ascertain potential mismatches between liquidity sources and uses over a variety of ~~September 30, 2017, compared to $29.89 billion as~~time horizons, both immediate and longer term, and over a variety of ~~December 31, 2016,~~stressed conditions. Given the range of ~~which core deposits comprised 81% of total deposits as of each of September 30, 2017 and December 31, 2016. As a means of augmenting the Company’s liquidity,~~potential stresses, the Company maintains ~~available borrowing capacity under secured borrowing lines with the FHLB~~contingency funding plans on a consolidated basis and ~~FRB, unsecured federal funds’ lines~~for individual entities.

As of credit with various correspondent banks for purchase of overnight funds, and several master repurchase agreements with major brokerage companies. The Company’s available borrowing capacity with the FHLB and FRB was $6.45 billion and $3.23 billion, respectively, as of SeptemberJune 30, 2017. The Bank’s unsecured federal funds’ lines of credit, subject to availability, totaled $731.0 million with correspondent banks as of September 30, 2017. The Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term and intermediate-term needs.

The Company experienced net cash inflows from operating activities of $665.0 million and $417.6 million during the nine months ended September 30, 2017 and 2016, respectively. The $247.4 million increase in net cash inflows from operating activities between these periods was primarily due to a $99.8 million increase in net income, a $108.3 million increase in net changes in cash flows receivable from other assets and a $76.2 million increase in net changes in the cash flows from accrued expenses and other liabilities, partially offset by a $32.5 million change in non-cash amounts. The $108.3 million increase in net changes in cash flows receivable from other assets, comparing the nine months ended September 30, 2017 to the same period in 2016, was primarily due to a reduction in tax receivables, and an increase in fair value of interest rate swaps and options during the nine months ended September 30, 2016 contributing to operating cash outflows in that period. The $76.2 million increase in net changes in the cash flows from accrued expenses and other liabilities, comparing the nine months ended September 30, 2017 to the same period in 2016, was primarily due to a larger wire transfer in transit and an increase in tax payables.

Net cash used in investing activities totaled $2.07 billion and $473.3 million during the nine months ended September 30, 2017 and 2016, respectively. The $1.59 billion increase in net cash used in investing activities was primarily due to a $1.69 billion increase in net cash outflows from loans held-for-investment, partially offset by a $150.0 million increase in net cash inflows from resale agreements.

~~During the nine months ended September 30, 2017 and 2016,~~2022, the Company experienced net cash inflows from financing activities of $1.24 billion and $365.6 million, respectively. Net cash inflows from financing activities of $1.24 billion during the nine months ended September 30, 2017 was primarily comprised of a $1.39 billion net increase in customer deposits, partially offset by $87.9 million in cash dividends paid. Net cash inflows from financing activities of $365.6 million during the same period in 2016 were primarily comprised of a $1.13 billion net increase in customer deposits and a $37.7 million increase in short-term borrowings, partially offset by a $700.0 million repayment of short-term FHLB advances and $87.0 million in cash dividends paid.

As of September 30, 2017, the Company is not aware of any trends, events or uncertainties that had or were reasonably likely to have a material effect on its liquidity position. Furthermore, the Company is not aware of any material commitments for capital expenditures in the foreseeable ~~future.~~

~~East West’s~~future and believes it has adequate liquidity ~~has historically been dependent~~resources to conduct operations and meet other needs in the ordinary course of business. Given the uncertainty and the rapidly changing market and economic conditions, the Company will continue to actively evaluate the impact on ~~the payment of cash dividends by~~ its ~~subsidiary, East West Bank, subject to applicable statutes, regulations~~business and ~~special approval. The Bank paid total dividends~~ financial position. For more information on how economic conditions may impact our liquidity, see Item 1A. Risk Factors of $255.0 million and $100.0 million to East West during the nine months ended September 30, 2017 and 2016, respectively. In addition, in October 2017, the Board declared a quarterly cash dividend of $0.20 per share for the Company’s ~~common stock payable~~2021 Form 10-K.

Market Risk Management

Market risk is the risk that the Company’s financial condition may change resulting from adverse movements in market rates or prices including interest rates, foreign exchange rates, interest rate contracts, investment securities prices, credit spreads and related risk resulting from mismatches in rate sensitive assets and liabilities. In the event of market stress, the risk could have a material impact on ~~November 15, 2017~~our results of operations and financial condition.

The Board’s Risk Oversight Committee has primary oversight responsibility over market risk management. At the management level, the ALCO establishes and monitors compliance with the policies and risk limits pertaining to ~~stockholders of record on November 1, 2017.~~market risk management activities. Corporate Treasury supports the ALCO in measuring, monitoring and managing interest rate risk as well as all other market risks.

Interest Rate Risk Management

Interest rate risk results primarily from the Company’s traditional banking activities of gathering deposits and extending loans, ~~and is~~which are the primary areas of market risk for the Company. Economic and financial conditions, movements in interest rates, and consumer preferences impact the level of noninterest-bearing funding sources at the Company, as well as affect the difference between the interest the Company earns on interest-earning assets and pays on interest-bearing ~~liabilities, and the level of the noninterest-bearing funding sources.~~liabilities. In addition, changes in interest rates can influence the rate of principal prepayments on loans and the speed of deposit withdrawals. Due to the pricing term mismatches and the embedded options inherent in certain products, changes in market interest rates not only affect expected near-term earnings, but also the economic value of these interest-earning assets and interest-bearing liabilities. Other market risks include foreign currency exchange risk and equity price risk. These risks are not considered significant to the ~~Company’s interest rate risk~~Company and no separate quantitative information concerning these risks is presented herein.

With oversight by the Company’s Board of Directors, the ALCO coordinates the overall management of the Company’s interest rate risk. The ALCO meets regularly and is responsible for reviewing the Company’s open market positions and establishing policies to monitor and limit exposure to market risk. Management of interest rate risk is carried out primarily through strategies involving the Company’s ~~investment~~debt securities portfolio, loan portfolio, available funding channels, and capital market activities. In addition, the Company’s policies permit the use of ~~off-balance sheet~~ derivative instruments to assist in managing interest rate risk.

The interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity ~~analysis~~analyses under ~~multiple~~various interest rate scenarios. The model ~~includes~~incorporates the Company’s cash instruments, loans, ~~investment~~debt securities, resale agreements, ~~customer~~ deposits, borrowings and ~~borrowing portfolios, including~~ repurchase ~~agreements. The~~agreements, as well as financial instruments from the Company’s ~~domestic and~~ foreign operations, forecasted noninterest income and noninterest expense items are also incorporated in the simulation. The interest rate scenarios simulated include an instantaneous parallel shift and non-parallel shift in the yield curve. In addition, the Company also performs various simulations using alternative interest rate scenarios. The alternative interest rate scenarios include yield curve flattening, yield curve steepening and yield curve inverting. In order to apply the assumed interest rate environment, adjustments are made to reflect the shift in the U.S. Treasury and other appropriate yield curves.operations. The Company ~~incorporates~~uses both a static balance sheet and a forward growth balance sheet ~~in order~~ to perform these ~~evaluations.~~analyses. The simulated interest rate scenarios include a non-parallel shift in the yield curve and a gradual non-parallel shift in the yield curve (“rate ramp”) over a static balance sheet. In addition, the Company also performs simulations using alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. Results of these various simulations are used to formulate and gauge strategies to achieve a desired risk profile within the Company’s capital and liquidity guidelines.

The net interest income simulation model is based on the actual maturity and ~~re-pricing~~repricing characteristics of the Company’s interest-rate sensitive assets, liabilities, and related derivative contracts. It also incorporates various assumptions, which management believes to be reasonable but may have a significant impact on results. These assumptions include, but are not limited to, the timing and magnitude of changes in interest rates, the yield curve evolution and shape, the correlation between various interest rate indices, financial instruments’ future repricing characteristics and spread relative to benchmark rates, and the effect of interest rate floors and caps. The modeled results are highly sensitive to ~~the~~ deposit decay and deposit beta assumptions, ~~used for deposits that do not have specific maturities. The Company uses historical~~which are derived from a regression analysis of the Company’s ~~internal~~historical deposit ~~data as a guide~~data. The Company used full betas with each incremental rate increase in the rate ramp scenarios, and did not assume lags in repricing. Deposit beta commonly refers to ~~set deposit decay assumptions. In addition, the model is also highly sensitive to certain assumptions on~~ the correlation of the ~~change~~changes in interest rates paid on ~~core~~ deposits to changes in benchmark ~~market~~ interest ~~rates, commonly referred to as deposit beta assumptions. Deposit beta assumptions are based on the Company’s historical experience.~~rates. The model is also sensitive to the loan and investment prepayment ~~assumption. The loan~~assumptions that are based on an independent model and ~~investment~~the Company’s historical prepayment ~~assumption,~~data, which ~~considers the~~consider anticipated prepayments under different interest rate ~~environments, is based on an independent model, as well as the Company’s historical prepayment experiences.~~environments.

Existing investment securities, loans, customer deposits and borrowings are assumed to roll into new instruments at a similar spread relative to benchmark interest rates and internal pricing guidelines. The assumptions applied in the model are documented and supported for reasonableness. Changes to key model assumptions are reviewed by the ALCO. Due to the sensitivity of the model results, the Company performs periodic testing to assess the impact of the assumptions. The Company also makes appropriate calibrations when necessary. Scenarios do not reflect strategies that management could employ to limit the impact as interest rate expectations change. Simulation results are highly dependent on ~~these~~input assumptions. To the extent actual behavior is different from the assumptions in the models, there could be a material ~~change~~changes in interest rate ~~sensitivity.~~sensitivity results. The assumptions applied in the model are documented and supported for reasonableness, and periodically back-tested to assess their effectiveness. The Company makes appropriate calibrations to the model as needed and continually validates the model, methodology and results. Changes to key model assumptions are reviewed by the ALCO. Scenario results do not reflect strategies that management could employ to limit the impact of changing interest rate expectations.

In March 2022, the Federal Reserve raised the target range for the fed funds rate to 0.25% to 0.50% to address concerns about inflation, which reflected supply and demand imbalances due to the pandemic, higher energy prices, and broader price pressures. In June 2022, the Federal Reserve continued its aggressive approach in responding to inflation, raising the target range for the fed funds rate to 1.50% to 1.75%. In July 2022, the Federal Reserve further raised the benchmark rate to 2.25% to 2.50% and the market estimates that interest rates are likely to continue rising, potentially reaching 3.50% or higher by the end of 2022.

Twelve-Month Net Interest Income Simulation

Net interest income simulation modeling measures interest rate risk through earnings volatility. The simulation projects the cash flow changes in interest rate sensitive assets and liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest rate scenarios. Net interest income simulations generate insight into the impact of market rates changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the impacts of net interest income in different interest rate scenarios.

The following table presents the Company’s net interest income ~~and economic value of equity (“EVE”)~~ sensitivity ~~as of September 30, 2017 and December 31, 2016~~ related to an instantaneous and sustained non-parallel shift in market interest rates of 100 and 200 ~~basis points in both directions:~~bps as of June 30, 2022 and December 31, 2021, based on a static balance sheet as of the date of the analysis.



Change in Interest Rates (in bps)	Net Interest Income Volatility (1)
	June 30, 2022		December 31, 2021
+200	13.8	%	19.5	%
+100	7.0	%	9.4	%
-100	(7.0)	%	NM
-200	NM		NM

Change in
Interest Rates
(BP)

Net Interest
Income
Volatility ⁽¹⁾

EVE
Volatility ⁽²⁾
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
+200 20.5 % 22.4 % 13.4 % 12.3 %
+100 11.4 % 12.0 % 7.0 % 7.5 %
-100 (8.0 )% (6.8 )% (3.7 )% (5.0 )%
-200 (10.4 )% (7.5 )% (9.6 )% (9.3 )%

NM — Not meaningful.


~~(1)~~	(1)The percentage change represents ~~net interest income over 12 months in a stable interest rate environment versus net interest income in the various rate scenarios.~~


~~(2)~~	~~The percentage change represents net portfolio value of the Company in a stable interest rate environment versus net portfolio value in the various rate scenarios.~~

~~Twelve-Month Net Interest Income Simulation~~

~~The Company’s estimated twelve-month~~ net interest income over 12 months in a stable interest rate environment versus net interest income in the various rate scenarios.

The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to the imbalance between the faster repricing of the floating-rate loan portfolio versus deposit products. Growth and/or contraction in the Company’s loans, other earning assets, deposits and borrowings may lead to changes in sensitivity to interest rate movements. Year-to-date decreases in cash and cash equivalents, resale agreements, and short-term investments; growth in fixed-rate loans, as ~~of September~~well as changes in the funding mix have decreased the Company’s asset sensitivity. In the table above, net interest income volatility is expressed in relation to base-case net interest income, which increased between June 30, ~~2017 was slightly lower compared to~~2022 and December 31, ~~2016 for both upward~~2021, due to balance sheet growth and an expanded base-case net interest margin.

While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraphs, the Company also models scenarios based on gradual shifts in interest rates and the corresponding impacts. These interest rate scenarios ~~as simulated increases in~~provide additional information to estimate the Company’s underlying interest rate risk. The rate ramp table below shows the net interest income ~~are offset~~volatility under a gradual non-parallel shift of the yield curve, in even monthly increments over the first 12 months, followed by ~~an increase in~~rates held constant thereafter based on a static balance sheet as of the ~~rate~~date of ~~repricing for~~ the ~~Company’s deposit portfolio. In a simulated downward~~analysis. Actual results will vary based on the timing and pace of interest rate ~~scenario, sensitivity increased overall for both~~changes, as well as changes of the ~~downward interest rate scenarios, mainly due to the impact~~balance sheet.



Change in Interest Rates (in bps)	Net Interest Income Volatility
	June 30, 2022		December 31, 2021
+200 Rate Ramp	6.3	%	9.2	%
+100 Rate Ramp	3.0	%	4.1	%
-100 Rate Ramp	(2.8)	%	NM
-200 Rate Ramp	NM		NM

NM — Not meaningful.

As of ~~the recent interest rate increases on December 14, 2016, March 15, 2017, and~~ June 14, 2017. As interest rates rise further away from all time historical lows, there is more room for the Company’s simulated interest income to decline in a downward interest rate scenario, relative to previous simulations.

Under most rising interest rate environments, the Company would expect some customers to move balances in demand deposits into higher interest-bearing deposits such as money market, savings or time deposits. The models are particularly sensitive to the assumption about the rate of such migration. The federal funds target rate was between 0.50% and 0.75% as of December 31, 2016, and between 1.00% and 1.25% as of September 30, 2017. It should be noted that despite the two interest rate increases in 2017, as of September 30, 2017, the Company has not experienced this deposit movement, though there can be no assurance as to how long this is expected to last.

~~The following table presents~~2022, the Company’s net interest income ~~sensitivity~~profile reflects an asset sensitive position. Net interest income is expected to increase when interest rates rise, as the Company has a large share of ~~September 30, 2017 for the +100 and +200 basis points~~variable rate loans in its loan portfolio, primarily linked to Prime or LIBOR indices. The Company’s interest income is sensitive to changes in short-term interest rates. The Company’s deposit portfolio is primarily composed of non-maturity deposits, which are not directly tied to short-term interest rate ~~scenarios assuming~~indices, but are, nevertheless, sensitive to changes in short-term interest rates. The modeled results are highly sensitive to reinvestment yield and deposit beta assumptions. Actual results in terms of net interest income growth during a ~~$1.00 billion, $2.00 billion~~period of rising interest rates will also reflect earning asset growth and ~~$3.00 billion demand~~ deposit ~~migrations:~~mix changes based on customer preferences relative to the interest rate environment.

Change in
Interest Rates
(BP)
Net Interest Income Volatility
September 30, 2017

$1.00 Billion
Migration
12 Months

$2.00 Billion
Migration
12 Months

$3.00 Billion
Migration
12 Months
+200 18.3 % 16.0 % 13.8 %
+100 9.9 % 8.5 % 7.0 %

Economic Value of Equity at Risk

Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank. The fair market values of a bank's assets and liabilities are directly linked to interest rates. The economic value approach provides a comparatively broader scope than the net interest income volatility approach since it captures all anticipated cash flows.

The EVE simulation reflects the sensitivity of the EVE to interest rate changes across the full maturity spectrum of the Company’s assets and liabilities. It identifies risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as off-balance sheet derivative exposure. The simulation provides long-term economic perspective into the Bank’s interest rate risk profile, which allows the Bank to manage anticipated negative effects of interest rate fluctuations.

The following table presents the Company’s EVE sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates of 100 and 200 bps as of June 30, 2022 and December 31, 2021:



Change in Interest Rates (in bps)	EVE Volatility (1)
	June 30, 2022		December 31, 2021
+200	2.7	%	7.1	%
+100	1.4	%	3.5	%
-100	(1.1)	%	NM
-200	NM		NM

NM — Not meaningful.

(1)The percentage change represents net portfolio value of the Company in a stable interest rate environment versus net portfolio value in the various rate scenarios.

The Company’s EVE sensitivity for the upward interest rate scenarios decreased as of June 30, 2022, compared with the results as of December 31, 2021. The changes in EVE sensitivity were primarily due to faster deposit decay speed assumptions used in the model, changes in level and shape of the yield curve, and lower cash balances as of June 30, 2022.

The Company’s EVE sensitivity increased as of September 30, 2017, compared to December 31, 2016, for both of the upward interest rate scenarios. In the simulated upward 100 basis points and 200 basis points interest rate scenarios, EVE sensitivity was 7.0% and 13.4%, respectively. The increase in sensitivity as of September 30, 2017 compared to December 31, 2016 in the upward interest rate scenario was primarily due to changes in the balance sheet portfolio mix. EVE declined 3.7% and 9.6% of the base level as of September 30, 2017 in declining rate scenarios of 100 and 200 basis points, respectively.

~~The Company’s net interest income and EVE~~ profile as of ~~September~~June 30, ~~2017, as presented in the net interest income and EVE tables,~~2022 reflects an asset sensitive ~~net~~EVE position under the higher interest income position and an asset sensitive EVE position. The Company is naturally asset sensitive due to its large portfolio of rate-sensitive loans that are funded in part by noninterest-bearing and rate-stable core deposits. As a result, if there are no significant changes in the mix of assets and liabilities, net interest income increases when interest rates increase, and decreases when interest rates decrease.rate scenarios. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, and the shape of the yield curve, actual results may vary from those predicted by the Company’s model.

Derivatives

It is the Company’s policy not to speculate on the future direction of interest rates, or foreign currency exchange ~~rates.~~rates and energy commodity prices. However, the Company ~~will, from time to time, enter~~periodically enters into ~~derivatives~~derivative transactions in order to reduce its exposure to market risks, ~~including~~primarily interest rate risk and foreign currency risk. The Company believes that these derivative transactions, when properly structured and managed, may provide a hedge against inherent risk in certain assets orand liabilities ~~and~~or against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, ~~caps, floors, financial futures,~~ forwards, options, and ~~options.~~collars. Prior to entering into any hedging activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. In addition, the Company enters into derivative transactions in order to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and energy commodity prices. To economically hedge against the derivative contracts entered with the Company’s customers, the Company enters into mirrored derivative contracts with third-party financial institutions. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements entered between the Company and counterparty financial institutions.

~~Interest Rate Swaps on Certificates~~

The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of ~~Deposit~~ ~~— As~~risk, affected by both the exposure and credit quality of ~~September~~the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risks and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative positions by diversifying its positions among various counterparties, by entering into legally enforceable master netting arrangements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit risk related to interest rate swaps to third-party financial institutions through the use of credit risk participation agreements. Certain derivative contracts are required to be centrally cleared through clearinghouses to further mitigate credit risk. The Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives.

The following table summarizes certain information about derivative financial instruments utilized by the Company in its management of interest rate risk and foreign currency risk as of June 30, ~~2017~~2022 and December 31, ~~2016,~~2021:



	June 30, 2022				December 31, 2021
($ in thousands)	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts
Derivatives designated as hedging instruments:	Cash Flow Hedges		Net Investment Hedges		Cash Flow Hedges		Net Investment Hedges
Notional amounts	$	1,525,000	$	84,832	$	275,000	$	86,531
Fair value:
Recognized as an asset	586		2,765		—		—
Recognized as a liability	96		—		57		225
Net fair value	$	490	$	2,765	$	(57)	$	(225)
Weighted-average interest rates:
Variable-rate borrowings — Pay fixed (receive floating)	0.483% (3-month USD-LIBOR)		NM		0.483% (3-month USD-LIBOR)		NM
Variable-rate loans — Receive fixed (pay floating)	1.787% (1-month USD-LIBOR)		NM		NA		NM
Variable-rate loans — Sell cap-buy floor (floating rate )	4.575%-1.500% (1-month USD-SOFR)		NM		NA		NM
Weighted-average remaining term to maturity (in months):	29.2		8.7		13.9		2.7
Derivatives not designated as hedging instruments:	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts
Notional amounts	$	17,570,112	$	2,654,194	$	17,575,420	$	1,874,681
Fair value:
Recognized as an asset	260,740		39,559		240,222		21,033
Recognized as a liability	359,578		29,144		179,905		15,276
Net fair value	$	(98,838)	$	10,415	$	60,317	$	5,757

NM — Not meaningful.

Derivatives Designated as Hedging Instruments — Interest rate and foreign exchange derivative contracts are utilized in the ~~Company had two cancellable~~Company’s asset and liability management activities and serve as an efficient tool to manage the Company’s interest rate ~~swap contracts with original terms~~risk and foreign exchange risk. The Company uses derivatives to hedge the risk of ~~20 years. The objective of these~~variable cash flows in its variable interest rate ~~swaps,~~borrowings, which ~~were~~includes repurchase agreements and FHLB advances, as well as a portion of its variable interest rate CRE loans. The Company also uses derivatives to hedge the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. For both the cash flow and the net investment hedges, the changes in the fair value of the hedging instruments are recognized in AOCI, net of tax, on the Consolidated Balance Sheet.

The fluctuation in foreign currency translation of the hedged exposure is expected to be offset by changes in the fair value of the forward contracts. As of June 30, 2022, the outstanding foreign currency forwards effectively hedged approximately 44% of the net Chinese Renminbi exposure from East West Bank (China) Limited.

Changes to the composition of the Company’s derivatives designated as ~~fair value hedges, was to obtain low-cost floating~~hedging instruments during the first half of 2022 reflect actions taken for interest rate ~~funding~~risk and foreign exchange rate risk management. The Company repositions its derivatives portfolio based on the ~~Company’s brokered certificates~~current assessment of ~~deposit. As of September 30, 2017~~economic and ~~December 31, 2016, under~~financial conditions, including the ~~terms of the swap contracts, the Company received a fixed~~ interest rate and ~~paid a variable interest rate. As~~foreign currency environments, balance sheet composition and trends, and the relative mix of ~~September 30, 2017~~its cash and December 31, 2016, the notional amounts of the Company’s brokered certificates of deposit interest rate swaps were $42.6 million and $48.4 million, respectively. The fair value liabilities of the interest rate swaps were $6.6 million and $6.0 millionderivative positions.

Derivatives Not Designated as ~~of September 30, 2017 and December 31, 2016, respectively.~~

~~Interest Rate Swaps and Options~~Hedging Instruments — The Company ~~also offers various~~enters into interest rate, ~~derivative products~~foreign exchange and energy commodity contracts to support the business needs of its customers. When derivative transactions are executed with its customers, the derivative contracts are offset by paired trades with ~~registered swap dealers. These~~third-party financial institutions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through a clearinghouse or over-the-counter.

The Company offers various interest rate derivative contracts to its customers. For the interest rate contracts entered into with its customers, the Company managed its interest rate risk by entering into offsetting interest rate contracts with third-party financial institutions or central clearing organizations. Certain derivative contracts entered with central clearing organizations are settled-to-market daily to the extent the central clearing organizations’ rulebooks legally characterize the variation margin as settlement. Derivative contracts allow borrowers to lock in attractive intermediate and long-term fixed rate financing while not increasing the interest rate risk to the Company. These transactions are not linked to any specific Company assets or liabilities on the Consolidated Balance ~~Sheets~~Sheet, or to forecasted transactions in a ~~hedge~~hedging relationship, and are therefore ~~are~~classified as economic hedges. The contracts are ~~marked to market~~marked-to-market at each reporting period. ~~Fair values are determined from verifiable third-party sources that have considerable experience with derivative markets.~~ The ~~Company provides data to the third party source to calculate the credit valuation component of the~~changes in fair values of the ~~client~~ derivative ~~contracts.~~

~~As of September 30, 2017,~~contracts traded with third-party financial institutions are expected to be largely comparable to the total notional amounts of interest rate swaps and options, including mirrored transactions with institutional counterparties and the Company’s customers, totaled $4.37 billion for derivatives that werechanges in an asset valuation position and $4.37 billion for derivatives that were in a liability valuation position. As of December 31, 2016, the total notional amounts of interest rate swaps and options, including mirrored transactions with institutional counterparties and the Company’s customers, totaled $3.86 billion for derivatives that were in an asset valuation position and $3.81 billion for derivatives that were in a liability valuation position. The fair values of ~~interest rate swap and option~~the derivative transactions executed with customers throughout the terms of these contracts, ~~with institutional counterparties~~except for the credit valuation adjustment component. The Company records credit valuation adjustments on derivatives to properly reflect the variances of credit worthiness between the Company and the ~~Company’s customers amounted to a $64.8 million asset~~counterparties, considering the effects of enforceable master netting agreements and a $64.2 million liability as of September 30, 2017. The fair values of interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $67.6 million asset and a $65.1 million liability as of December 31, 2016.collateral arrangements.

~~Foreign Exchange Contracts~~ — The Company enters into foreign exchange contracts with its customers, ~~primarily comprised~~consisting of forward, spot, swap and ~~spot~~option contracts to ~~enable~~accommodate the business needs of its customers to hedge their transactions in foreign currencies from fluctuations in foreign exchange rates, and also to allow the Company to economically hedge against foreign currency fluctuations in certain foreign currency denominated deposits that it offers to its customers, as well as the Company’s investment in its China subsidiary, East West Bank (China) Limited.

customers. For ~~a majority of~~ the foreign exchange ~~transactions~~contracts entered into with its customers, the Company ~~enters~~managed its foreign exchange and credit exposures by entering into offsetting foreign exchange contracts with ~~institutional~~third-party financial institutions and/or entering into bilateral collateral and master netting agreements with customer counterparties. The changes in the fair values entered with third-party financial institutions are expected to be largely comparable to the changes in fair values of the foreign exchange transactions executed with the customers throughout the terms of these contracts. As of June 30, 2022, the Company anticipates performance by all counterparties and has not experienced nonperformance by any of its counterparties, and therefore did not incur any related losses. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign ~~exchange risk. These transactions are economic hedges~~currency on-balance sheet assets and ~~the Company does not apply hedge accounting.~~liabilities, primarily foreign currency denominated deposits offered to its customers. The Company’s policies ~~also~~ permit taking proprietary currency positions within approved limits, in compliance with ~~the~~exemptions to proprietary trading ~~exemption~~restrictions provided under Section 619 of the Dodd-Frank ~~Act.~~Wall Street Reform and Consumer Protection Act, or the Volcker Rule. The Company does not speculate in the foreign exchange markets, and actively manages its foreign exchange exposures within prescribed risk limits and defined controls.

~~ASC 830-20,~~ ~~Foreign Currency Matters — Foreign Currency Transactions~~ ~~and ASC 815,~~ ~~Derivatives and Hedging,~~ The Company enters into energy commodity contracts with its customers to allow ~~hedging of the foreign currency risk of a net investment in a foreign operation. During the fourth quarter of 2015, the Company began entering into foreign currency forward contracts~~them to hedge its investment in East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. The hedging instruments, designated as net investment hedges, involve hedging the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in China, against the risk of ~~adverse~~energy commodity price fluctuations. To economically hedge against the risk of fluctuation in energy commodity prices in the products offered to its customers, the Company enters into offsetting energy commodity contracts with third-party financial institutions or central clearing organizations. Certain derivative contracts entered into with central clearing organizations are settled-to-market daily, to the extent the central clearing organizations’ rulebooks legally characterize the variation margin as settlement. The changes in the foreign currency exchange rate. The notional amount and fair value of the net investment hedges were $83.0 million and a $4.3 million asset, respectively, as of December 31, 2016. Since recent policy changes by the People’s Bank of China, the central bank of the People’s Republic of China, as well as market sentiments have caused a divergence in the exchange rate movements of the on-shore Chinese Renminbi and off-shore Chinese Renminbi, the net investment hedge relationships were dedesignated during the first quarter of 2017, even though they continued to meet the hedge effectiveness test. As of September 30, 2017, the notional amount and fair value of these two foreign exchange forward contracts designated as economic hedges were $93.3 million and a $4.8 million liability, respectively, and have been included in the foreign exchange contracts’ notional amount of $1.13 billion and fair value of $14.2 million disclosed below.

As of September 30, 2017 and December 31, 2016, the Company’s total notional amounts of the foreign exchange contracts that were not designated as hedging instruments were $1.13 billion and $767.8 million, respectively. The fair values of the ~~foreign exchange~~energy commodity contracts ~~were a $14.2 million asset and a $20.1 million liability, respectively, as of September 30, 2017 and an $11.9 million asset and an $11.2 million liability, respectively, as of December 31, 2016.~~

~~Credit Risk Participation Agreements~~ ~~— The Company has entered into credit risk participation agreements (“RPAs”) under which~~traded with third-party financial institutions are expected to be largely comparable to the ~~Company assumed its pro-rata share~~changes in fair values of the ~~credit exposure associated~~energy commodity transactions executed with customers throughout the ~~borrower’s performance related to interest rate derivative~~terms of these contracts. The Company may or may not be a party to the interest rate derivative contract and enters into such RPAs in instances where the Company is a party to the related loan participation agreement with the borrower. The Company will make/receive payments under the RPAs if the borrower defaults on its obligation to perform under the interest rate derivative contract. The Company manages its credit risk on the RPAs by monitoring the credit worthiness of the borrowers, which is based on the normal credit review process. The notional amount of the RPAs reflects the Company’s pro-rata share of the derivative instrument. As of September 30, 2017, the notional amount and fair value of the RPAs purchased were $47.8 million and a $1 thousand liability, respectively. As of September 30, 2017, the notional amount and fair value of the RPAs sold were $20.6 million and a $2 thousand asset, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs purchased were $48.3 million and a $3 thousand liability, respectively. As of December 31, 2016, the notional amount and fair value of the RPAs sold were $23.1 million and a $3 thousand asset, respectively.

~~Warrants~~ — The Company obtained warrants to purchase preferred and common stock of technology and life sciences companies, as part of the loan origination process. As of September 30, 2017, the warrants included on the Consolidated Financial Statements were from public and private companies. The Company valued these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and market-observable company-specific option volatility as inputs to value the warrants. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The option volatility assumption was based on public market indices that include members that operate in similar industries as the companies in our private company portfolio. The model values were further adjusted for a general lack of liquidity due to the private nature of the underlying companies. As of September 30, 2017, the total fair value of the warrants held in public and private companies was a $1.5 million asset.

Additional information on the Company’s derivatives is presented in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements ofin the Company’s ~~2016~~2021 Form 10-K,, and Note 4 3 —Fair Value Measurement and Fair Value of Financial Instruments and Note 7 6 — Derivatives to the Consolidated Financial ~~Statements.~~Statements in this Form 10-Q.

Critical Accounting Policies and Estimates

~~Significant~~The Company’s significant accounting policies ~~(see~~ are described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements ~~and~~ ~~Item 7. MD&A~~ — ~~Critical Accounting Policies and Estimates~~ ofin the Company’s ~~2016~~2021 Form ~~10-K)~~10-K. Certain of these policies include critical accounting estimates, which are ~~fundamental~~subject to ~~understanding the Company’s reported results. Some accounting policies, by their nature,~~valuation assumptions, subjective or complex judgments about matters that are inherently ~~subject to estimation techniques, valuation~~uncertain, and it is likely that materially different amounts could be reported under different assumptions and other subjective assessments. In addition, some accounting policies require significant judgment in applying complex accounting principles to individual transactions to determine the most appropriate treatment.conditions. The Company has procedures and processes in place to facilitate making these judgments.

~~Certain~~ The following accounting policies are ~~considered~~critical to ~~have a critical effect on~~ the Company’s Consolidated Financial Statements in the Company’s judgment. In each area, the Company has identified the most important variables in the estimation process. The Company has used the best information available to make the estimations necessary for the related assets and liabilities. Actual results could differ from the Company’s estimates, and future changes in the key variables could change future valuations and impact the results of operations. The following is a list of the more judgmental and complex accounting estimates and principles:Statements:

~~fair value of financial instruments;~~

~~available-for-sale investment securities;~~

~~PCI loans;~~

•allowance for credit losses;

•fair value estimates;

•goodwill impairment; and

•income taxes.

For additional information on the Company’s critical accounting estimates involving significant judgments, see Item 7. MD&A — Critical Accounting Estimates in the Company’s 2021 Form 10-K.

~~Recently Issued Accounting Standards~~

~~For detailed discussion and disclosure on new accounting pronouncements adopted and recent accounting pronouncements issued, see~~ ~~Note 2~~ — ~~Current Accounting Developments~~

Reconciliation of GAAP to Non-GAAP Financial Measures

To supplement the Company’s unaudited interim Consolidated Financial ~~Statements.~~Statements presented in accordance with U.S. GAAP, the Company uses certain non-GAAP measures of financial performance. Non-GAAP financial measures are not prepared in accordance with, or as an alternative to U.S. GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. A non-GAAP financial measure may also be a financial metric that is not required by U.S. GAAP or other applicable requirements. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the periods presented:



($ in thousands)		Three Months Ended June 30,			Six Months Ended June 30,
		2022			2021			2022			2021
Net income	(a)	$	258,329		$	224,742		$	495,981		$	429,736
Add: Amortization of core deposit intangibles		488			710			999			1,442
Amortization of mortgage servicing assets		364			420			756			834
Tax effect of amortization adjustments (1)		(245)			(321)			(505)			(646)
Tangible net income	(b)	$	258,936		$	225,551		$	497,231		$	431,366






Average stockholders’ equity	(c)	$	5,682,427		$	5,425,952		$	5,762,078		$	5,382,267
Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)
Average other intangible assets (2)		(8,827)			(10,827)			(9,016)			(11,209)
Average tangible equity	(d)	$	5,207,903		$	4,949,428		$	5,287,365		$	4,905,361

Return on average equity (3)	(a)/(c)	18.23		%	16.61		%	17.36		%	16.10		%
Tangible return on average tangible equity (3)	(b)/(d)	19.94		%	18.28		%	18.96		%	17.73		%

(1)Applied statutory tax rate of 28.77% for the second quarter and first half of 2022. Applied statutory tax rate of 28.37% for the second quarter and first half of 2021.

(2)Includes core deposit intangibles and mortgage servicing assets.

(3)Annualized.

100



($ in thousands)		Three Months Ended June 30,			Six Months Ended June 30,
		2022			2021			2022			2021
Net interest income before provision for (reversal of) credit losses		$	472,952		$	376,473		$	888,565		$	730,168
Total noninterest income		78,444			68,431			158,187			141,297
Total revenue	(a)	$	551,396		$	444,904		$	1,046,752		$	871,465





Total noninterest expense	(b)	$	196,860		$	189,523		$	386,310		$	380,600
Less: Amortization of tax credit and other investments		(14,979)			(27,291)			(28,879)			(52,649)
Amortization of core deposit intangibles		(488)			(710)			(999)			(1,442)

Adjusted noninterest expense	(c)	$	181,393		$	161,522		$	356,432		$	326,509

Efficiency ratio	(b)/(a)	35.70		%	42.60		%	36.91		%	43.67		%
Adjusted efficiency ratio	(c)/(a)	32.90		%	36.30		%	34.05		%	37.47		%



($ and shares in thousands, except per share data)		June 30, 2022		December 31, 2021
Stockholders’ equity	(a)	$	5,609,482	$	5,837,218
Less: Goodwill		(465,697)		(465,697)
Other intangible assets (1)		(8,537)		(9,334)
Tangible equity	(b)	$	5,135,248	$	5,362,187









Number of common shares at period-end	(c)	140,917		141,908
Book value per common share	(a)/(c)	$	39.81	$	41.13
Tangible equity per common share	(b)/(c)	$	36.44	$	37.79

(1)Includes core deposit intangibles and mortgage servicing assets.

101

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, see ~~Item 1.~~Note 6 — Derivatives to the Consolidated Financial Statements ~~— Note 7 — Derivatives~~in this Form 10-Q and Item 2. MD&A — ~~Asset Liability and~~Risk Management — Market Risk Management in ~~Part I of~~ this ~~report.~~ Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of ~~September~~June 30, ~~2017,~~2022, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the ~~design and operation of the~~ Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2022.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the ~~U.S. Securities and Exchange Commission.~~SEC. The Company’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that the Company files under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

There ~~has been~~were no ~~change~~changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended ~~September~~June 30, ~~2017,~~2022, that ~~has~~have materially affected or isare reasonably likely to materially affect the Company’s internal control over financial reporting.

102

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 1110 —Commitments and Contingencies— Litigation to the Consolidated Financial Statements in Part I of this ~~report,~~Form 10-Q, incorporated herein by reference.

ITEM 1A. RISK FACTORS

The Company’s ~~2016~~2021 Form 10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors. There has been no material change to the Company’s risk factors as presented in the Company’s ~~2016~~2021 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~There were no unregistered sales~~The following table summarizes common stock repurchased by the Company under the Company’s common stock repurchase program for the second quarter of ~~equity securities or~~2022:



Calendar Month	Total Number of Shares Purchased (1)	Average Price Paid per Share of Common Stock		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (2)
April	370,000	$	72.91	370,000	$	327.1
May	1,015,517	71.90		1,015,517	254.0
June	—	—		—	254.0
Total	1,385,517	$	72.17	1,385,517	$	254.0

(1)Excludes the repurchase ~~activities~~of common stock pursuant to various stock compensation plans and agreements totaling $380 thousand during the ~~three months ended September 30, 2017.~~second quarter of 2022.

(2)On March 3, 2020, the Company’s Board of Directors authorized, and the Company announced, the repurchase of up to $500.0 million of the Company’s common stock. This $500.0 million repurchase authorization is inclusive of the Company’s $100.0 million stock repurchase authorization that is previously outstanding. The share repurchase authorization has no expiration date.

103

ITEM 6. EXHIBITS

The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2 furnished, with this report:


Exhibit No.						Exhibit Description

3.1						Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i) from Registrant’s Registration Statement on Form S-4 filed with the Commission on Sept ember 17, 1998 (File No. 333-63605).]

3.1.1						Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit 3(i).1 from Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 28, 2003 (File No. 000-24939).]

3.1.2						Amendment to Certificate of Incorporation to Increase Authorized Shares of the Registrant [Incorporated by reference from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 15, 2005 (File No. 000-24939).]

3.1.3						Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit A from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2008 (File No. 000-24939).]

3.1.4						Certificate of Designations of 8.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series A of the Registrant [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K, filed with the Commission on April 30, 2008 (File No. 000-24939).]

3.1.5						Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on December 9, 2008 (File No. 000-24939).]

3.1.6						Certificate of Designations of Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series C of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on November 12, 2009 (File No. 000-24939).]

3.2						Amended and Restated Bylaws of the Registrant dated May 26, 2022 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on May 27, 2022 (File No. 000-24939).]


~~Exhibit No.~~						~~Exhibit Description~~

~~31.1~~










31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

101.INS						The instance document does not appear in the interactive data file because its XBRL ~~Instance Document.~~tags are embedded within the inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document. Filed herewith.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.

104						Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.

104

~~All other material referenced in this report which is required to be filed as an exhibit hereto has previously been submitted.~~

GLOSSARY OF ACRONYMS



~~ALCO~~AFS			Available-for-sale		LIBOR	London Interbank Offered Rate
ALCO			Asset/Liability Committee		LIBOR Act	Adjustable Interest Rate (LIBOR) Act
~~AML~~AOCI			~~Anti-Money Laundering~~
~~AOCI~~	Accumulated other comprehensive (loss) income ~~(loss)~~	LTV		Loan-to-value
ASC			Accounting Standards Codification
~~ASU~~	~~Accounting Standards Update~~
BPMD&A	~~Basis point~~
~~BSA~~	~~Bank Secrecy Act~~
~~C&I~~	~~Commercial and industrial~~
~~CET1~~	~~Common Equity Tier 1~~
~~CRA~~	~~Community Reinvestment Act~~
~~CRE~~	~~Commercial real estate~~
~~DBO~~	~~California Department of Business Oversight~~
~~EPS~~	~~Earnings per share~~
~~EVE~~	~~Economic value of equity~~
~~EWIS~~	~~East West Insurance Service, Inc.~~
~~FASB~~	~~Financial Accounting Standards Board~~
~~FHLB~~	~~Federal Home Loan Bank~~
~~FRB~~	~~Federal Reserve Bank of San Francisco~~
~~GAAP~~	~~Generally Accepted Accounting Principles~~
~~HELOCs~~	~~Home equity lines of credit~~
~~MD&A~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~MOU~~ASU			~~Memorandum of Understanding~~Accounting Standards Update		MMBTU	Million British thermal unit
~~Non-GAAP~~C&I			~~Non-Generally Accepted Accounting Principles~~Commercial and industrial		NAV	Net asset value
~~Non-PCI~~CARES Act			~~Non-purchased credit impaired~~Coronavirus Aid, Relief, and Economic Security Act		NRSRO	Nationally recognized statistical rating organizations
~~OREO~~CECL			Current expected credit losses		OREO	Other real estate owned
~~OTTI~~CLO			Collateralized loan obligations		OTTI	Other-than-temporary impairment
~~PCI~~CME			~~Purchased credit impaired~~Chicago Mercantile Exchange		PD	Probability of default
~~RPAs~~COVID-19			Coronavirus Disease 2019		PPP	Paycheck Protection Program
CRA			Community Reinvestment Act		RMB	Chinese Renminbi
CRE			Commercial real estate		ROA	Return on average assets
EPS			Earnings per share		ROE	Return on average equity
ERM			Enterprise risk management		RPA	Credit risk participation ~~agreements~~agreement
~~RSAs~~EVE			Economic value of equity		RSU	Restricted stock ~~awards~~unit
~~RSUs~~FHLB			~~Restricted stock units~~Federal Home Loan Bank		SBA	Small Business Administration
~~SBLCs~~FRBSF			Federal Reserve Bank of San Francisco		SBLC	Standby letters of credit
~~S&P~~FTP			~~Standard~~Funds transfer pricing		SEC	U.S. Securities and ~~Poor’s~~Exchange Commission
~~TDRs~~GAAP			~~Troubled debt restructurings~~
~~U.S.~~	~~United States~~
~~U.S. GAAP~~	~~United States~~ Generally Accepted Accounting Principles	SOFR		Secured Overnight Financing Rate
~~USD~~GDP			Gross Domestic Product		TDR	Troubled debt restructuring
HELOC			Home equity lines of credit		U.S.	United States
HTM			Held-to-maturity		USD	U.S. ~~Dollar~~dollar
LCH			London Clearing House		VIE	Variable interest entity
LGD			Loss given default

105

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:

~~November 7, 2017~~August 8, 2022

~~EAST WEST BANCORP, INC.~~

~~(Registrant)~~

~~/s/ IRENE H. OH~~

~~Irene H. Oh~~

~~Executive Vice President and~~

~~Chief Financial Officer~~

~~EXHIBIT INDEX~~

~~The following exhibit index lists Exhibits filed, or in the case of Exhibits 32.1 and 32.2, furnished with this report:~~

~~Exhibit No.~~

~~Exhibit Description~~EAST WEST BANCORP, INC.
(Registrant)

~~31.1~~

~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

/s/ IRENE H. OH

Irene H. Oh

~~31.2~~

~~Certification of~~

Executive Vice President and
Chief Financial Officer ~~pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~

~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~

~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~

~~XBRL Instance Document.~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema Document.~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase Document.~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase Document.~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase Document.~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase Document.~~

~~All other material referenced in this report which is required to be filed as an exhibit hereto has previously been submitted.~~

106



~~Delaware~~ (State or other jurisdiction of incorporation or organization)		~~95-4703316~~ ~~(I.R.S. Employer Identification No.)~~

~~135 North Los Robles Ave., 7th Floor, Pasadena, California 91101~~ ~~(Address of principal executive offices)(Zip Code)~~


						Page
PART I — FINANCIAL INFORMATION						3

				~~Page~~
~~PART I — FINANCIAL INFORMATION~~			5

	Item 1.	Consolidated Financial Statements		53
					Consolidated Balance ~~Sheets~~Sheet (Unaudited)	53
					Consolidated ~~Statements~~Statement of Income (Unaudited)	64
					Consolidated ~~Statements~~Statement of Comprehensive Income (Unaudited)	75
					Consolidated ~~Statements~~Statement of Changes in Stockholders’ Equity (Unaudited)	86
					Consolidated ~~Statements~~Statement of Cash Flows (Unaudited)	97
					Notes to Consolidated Financial Statements (Unaudited)	119
					1 — Basis of Presentation	119
					2 — Current Accounting Developments and Summary of Significant Accounting Policies	119
					3 ~~— Dispositions~~	14
		4 — Fair Value Measurement and Fair Value of Financial Instruments	1510
					54 — ~~Securities~~Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	2420
					5 — Securities	22
					6 — ~~Securities~~Derivatives	2728
					7 ~~— Derivatives~~	30
		8 — Loans Receivable and Allowance for Credit Losses	35
					98 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	4847
					109 — Goodwill ~~and Other Intangible Assets~~	49
					1110 — Commitments and Contingencies	5049


					1211 — Stock Compensation Plans	5150
					1312 — Stockholders’ Equity and Earnings Per Share	52
					1413 — Accumulated Other Comprehensive Income (Loss)	53
					1514 — Business Segments	5455
					~~16 — Subsequent Events~~	56

			Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	5758
					~~Overview~~	57
					~~Results of Operations~~	59
					~~Balance Sheet Analysis~~	72
					~~Off-Balance Sheet Arrangements~~	86
					~~Asset Liability and Market Risk Management~~	87
					~~Critical Accounting Policies and Estimates~~	91




			Item 3.		Quantitative and Qualitative Disclosures About Market Risk	92102

			Item 4.		Controls and Procedures	92102


PART II — OTHER INFORMATION						93103

			Item 1.		Legal Proceedings	93103
			Item 1A.		Risk Factors	93103
			Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	93103



			Item 6.		Exhibits	93104

GLOSSARY OF ACRONYMS						94105

SIGNATURE						95106

~~EXHIBIT INDEX~~			96




	September 30, 2017			December 31, 2016
	(Unaudited)
ASSETS
Cash and due from banks	$	364,328		$	460,559
Interest-bearing cash with banks	1,372,421			1,417,944
Cash and cash equivalents	1,736,749			1,878,503
Interest-bearing deposits with banks	404,946			323,148
Securities purchased under resale agreements (“resale agreements”)	1,250,000			2,000,000
Securities :
Available-for-sale investment securities, at fair value (includes assets pledged as collateral of $584,907 in 2017 and $767,437 in 2016)	2,956,776			3,335,795
Held-to-maturity investment security, at cost (fair value of $144,593 in 2016)	—			143,971
Restricted equity securities, at cost	73,322			72,775
Loans held-for-sale	178			23,076
Loans held-for-investment (net of allowance for loan losses of $285,926 in 2017 and $260,520 in 2016; includes assets pledged as collateral of $18,182,265 in 2017 and $16,441,068 in 2016)	28,239,431			25,242,619
Investments in qualified affordable housing partnerships, net	178,344			183,917
Investments in tax credit and other investments, net	203,758			173,280
Premises and equipment (net of accumulated depreciation of $109,296 in 2017 and $114,890 in 2016)	131,311			159,923
Goodwill	469,433			469,433
Other assets	663,718			782,400
TOTAL	$	36,307,966		$	34,788,840
LIABILITIES
Customer deposits:
Noninterest-bearing	$	10,992,674		$	10,183,946
Interest-bearing	20,318,988			19,707,037
Total deposits	31,311,662			29,890,983
Short-term borrowings	24,813			60,050
Federal Home Loan Bank (“FHLB”) advances	323,323			321,643
Securities sold under repurchase agreements (“repurchase agreements”)	50,000			350,000
Long-term debt	176,513			186,327
Accrued expenses and other liabilities	639,759			552,096
Total liabilities	32,526,070			31,361,099
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 165,178,075 and 164,604,072 shares issued in 2017 and 2016, respectively	165			164
Additional paid-in capital	1,745,181			1,727,434
Retained earnings	2,520,817			2,187,676
Treasury stock at cost — 20,667,132 shares in 2017 and 20,436,621 shares in 2016	(452,050		)	(439,387		)
Accumulated other comprehensive loss, net of tax	(32,217		)	(48,146		)
Total stockholders’ equity	3,781,896			3,427,741
TOTAL	$	36,307,966		$	34,788,840




	Common Stock and Additional Paid-in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss, Net of Tax			Total Stockholders’ Equity
	Shares	Amount		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss, Net of Tax			Total Stockholders’ Equity
BALANCE, JANUARY 1, 2016	143,909,233	$	1,701,459	$	1,872,594		$	(436,162	)	$	(14,941	)	$	3,122,950
Net income	—	—		320,943			—			—			320,943
Other comprehensive income	—	—		—			—			7,767			7,767
Stock compensation costs	—	13,973		—			—			—			13,973
Net activity of common stock pursuant to various stock compensation plans and agreements, and related tax benefits	224,071	2,981		—			(3,144		)	—			(163		)
Cash dividends on common stock	—	—		(87,416		)	—			—			(87,416		)
BALANCE, SEPTEMBER 30, 2016	144,133,304	$	1,718,413	$	2,106,121		$	(439,306	)	$	(7,174	)	$	3,378,054
BALANCE, JANUARY 1, 2017	144,167,451	$	1,727,598	$	2,187,676		$	(439,387	)	$	(48,146	)	$	3,427,741
Net income	—	—		420,726			—			—			420,726
Other comprehensive income	—	—		—			—			15,929			15,929
Stock compensation costs	—	15,780		—			—			—			15,780
Net activity of common stock pursuant to various stock compensation plans and agreements	343,492	1,968		—			(12,663		)	—			(10,695		)
Cash dividends on common stock	—	—		(87,585		)	—			—			(87,585		)
BALANCE, SEPTEMBER 30, 2017	144,510,943	$	1,745,346	$	2,520,817		$	(452,050	)	$	(32,217	)	$	3,781,896




	Nine Months Ended September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	420,726		$	320,943
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	123,008			98,561
Accretion of discount and amortization of premiums, net	(19,237		)	(37,881		)
Stock compensation costs	15,780			13,973
Deferred income tax (benefit) expense	(14,500		)	3,730
Provision for credit losses	30,749			17,018
Net gains on sales of loans	(6,660		)	(6,965		)
Net gains on sales of available-for-sale investment securities	(6,733		)	(8,468		)
Net gains on sales of premises and equipment	(74,092		)	(2,916		)
Net gain on sale of business	(3,807		)	—
Originations and purchases of loans held-for-sale	(15,069		)	(10,901		)
Proceeds from sales and paydowns/payoffs in loans held-for-sale	15,792			15,065
Net change in accrued interest receivable and other assets	105,729			(2,591		)
Net change in accrued expenses and other liabilities	95,432			19,217
Other net operating activities	(2,135		)	(1,181		)
Total adjustments	244,257			96,661
Net cash provided by operating activities	664,983			417,604
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in:
Loans held-for-investment	(2,967,873		)	(776,277		)
Interest-bearing deposits with banks	(74,254		)	(13,469		)
Investments in qualified affordable housing partnerships, tax credit and other investments, net	(121,590		)	(57,742		)
Purchases of:
Resale agreements	(550,000		)	(1,150,000		)
Available-for-sale investment securities	(501,669		)	(1,330,724		)
Loans held-for-investment	(441,141		)	(1,038,083		)
Premises and equipment	(11,598		)	(10,412		)
Proceeds from sale of:
Available-for-sale investment securities	676,776			1,008,256
Loans held-for-investment	448,679			545,256
Other real estate owned (“OREO”)	5,431			3,271
Premises and equipment	116,021			8,163
Business, net of cash transferred	3,633			—
Paydowns and maturities of resale agreements	1,000,000			1,450,000
Repayments, maturities and redemptions of available-for-sale investment securities	323,463			870,965
Other net investing activities	27,914			17,527
Net cash used in investing activities	(2,066,208		)	(473,269		)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in:
Customer deposits	1,385,625			1,130,022
Short-term borrowings	(36,604		)	37,699
Proceeds from:
Issuance of common stock pursuant to various stock compensation plans and agreements	1,008			1,962
Payments for:
Repayment of FHLB advances	—			(700,000		)
Repayment of long-term debt	(10,000		)	(15,000		)
Repurchase of vested shares due to employee tax liability	(12,663		)	(3,144		)
Cash dividends on common stock	(87,880		)	(86,984		)
Other net financing activities	—			1,019
Net cash provided by financing activities	1,239,486			365,574
Effect of exchange rate changes on cash and cash equivalents	19,985			(3,964		)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(141,754		)	305,945
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,878,503			1,360,887
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,736,749		$	1,666,832



	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
($ in thousands)	Other securities		Warrants		Other securities		Warrants
Beginning balance	$	—	$	—	$	—	$	—
Issuances	—		599		—		599
Transfer from held-to-maturity investment security to available-for-sale investment security	115,615		—		115,615		—
Ending balance	$	115,615	$	599	$	115,615	$	599




	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2017			2016			2017			2016
Non-PCI impaired loans:
CRE	$	6		$	(282	)	$	(66	)	$	1,741
C&I	(16,954		)	77			(17,648		)	(5,497		)
Residential	(3		)	(14		)	49			(14		)
Consumer	—			—			25			17
Total non-PCI impaired loans	$	(16,951	)	$	(219	)	$	(17,640	)	$	(3,753	)
OREO	$	(285	)	$	(41	)	$	(286	)	$	(994	)
Loans held-for-sale	$	—		$	—		$	—		$	(2,351	)




($ in thousands)	Fair Value Measurements (Level 3)		Valuation Technique(s)	Unobservable Input(s)	Range of Input(s)	Weighted Average
September 30, 2017
Non-PCI impaired loans	$	30,563	Discounted cash flows	Discount	0% — 82%	19%
	$	17,374	Market comparables	Discount ⁽¹⁾	0% — 100%	40%
OREO	$	1,789	Appraisal	Selling cost	8%	8%
December 31, 2016
Non-PCI impaired loans	$	31,835	Discounted cash flows	Discount	0% — 62%	7%
	$	38,319	Market comparables	Discount ⁽¹⁾	0% — 100%	18%
OREO	$	345	Appraisal	Selling cost	8%	8%




($ in thousands)	As of December 31, 2016
	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheets			Net Amounts of Assets Presented on the Consolidated Balance Sheets		Gross Amounts Not Offset on the Consolidated Balance Sheets
Assets	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Consolidated Balance Sheets					Financial Instruments				Collateral Pledged				Net Amount
Resale agreements	$	2,100,000	$	(100,000	)	$	2,000,000	$	(150,000	)	⁽¹⁾	$	(1,839,120	)	⁽²⁾	$	10,880

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheets			Net Amounts of Liabilities Presented on the Consolidated Balance Sheets		Gross Amounts Not Offset on the Consolidated Balance Sheets
Liabilities	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Consolidated Balance Sheets					Financial Instruments				Collateral Posted				Net Amount
Repurchase agreements	$	450,000	$	(100,000	)	$	350,000	$	(150,000	)	⁽¹⁾	$	(200,000	)	⁽³⁾	$	—


~~(1)~~	Represents financial instruments subject to enforceable master netting arrangements that are not eligible to be offset under ASC 210-20-45 but would be eligible for offsetting to the extent that an event of default has occurred.


~~(2)~~	~~Represents the fair value of securities the Company has received under resale agreements, limited for table presentation purposes to the amount of the recognized asset due from each counterparty.~~


~~(3)~~	Represents the fair value of securities the Company has pledged under repurchase agreements, limited for table presentation purposes to the amount of the recognized liability owed to each counterparty.


~~(2)~~	~~The Company held four warrants in public companies and 32 warrants in private companies as of September 30, 2017.~~




($ in thousands)	Location in Consolidated Statements of Income	Three Months Ended September 30,					Nine Months Ended September 30,
($ in thousands)	Location in Consolidated Statements of Income	2017			2016		2017			2016
Derivatives not designated as hedging instruments:
Interest rate swaps and options	Derivative fees and other income	$	(94	)	$	411	$	(1,838	)	$	(2,220	)
Foreign exchange contracts	Foreign exchange income	3,720			3,787		17,936			10,982
RPAs	Derivative fees and other income	—			4		1			(7		)
Warrants	Ancillary loan fees and other income	669			—		1,455			—
Net gains		$	4,295		$	4,202	$	17,554		$	8,755


~~(1)~~	~~Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable master netting arrangements if the Company has elected to net.~~


~~(2)~~	Represents cash and securities received against derivative assets with the same counterparty that are subject to enforceable master netting arrangements. No cash collateral was received as of September 30, 2017. Includes $8.1 million of cash collateral received as of December 31, 2016.


~~(3)~~	Represents cash and securities pledged against derivative liabilities with the same counterparty that are subject to enforceable master netting arrangements. Includes $18.0 million and $170 thousand of cash collateral posted as of September 30, 2017 and December 31, 2016, respectively.




($ in thousands)	Modification Type During the Nine Months Ended September 30, 2017
($ in thousands)	Principal ⁽¹⁾		Principal and Interest ⁽²⁾		Interest Rate Reduction		Interest Deferments		Other		Total
CRE	$	1,648	$	—	$	—	$	—	$	—	$	1,648
C&I	18,289		10,507		—		—		—		28,796
Residential	3,620		—		—		—		—		3,620
Total	$	23,557	$	10,507	$	—	$	—	$	—	$	34,064


~~(1)~~	~~Includes forbearance payments, term extensions and principal deferments that modify the terms of the loan from principal and interest payments to interest payments only.~~


~~(2)~~	~~Includes principal and interest deferments or reductions.~~


~~(1)~~	~~Includes interest recognized on accruing non-PCI TDRs. Interest payments received on nonaccrual non-PCI loans are reflected as a reduction to principal and not as interest income.~~




($ in thousands)	Three Months Ended September 30, 2017
	Non-PCI Loans															PCI Loans			Total
	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Beginning balance	$	73,985		$	150,136		$	43,679		$	8,438		$	276,238		$	78		$	276,316
(Reversal of) provision for loan losses	(346		)	15,656			(583		)	(1,269		)	13,458			(10		)	13,448
Charge-offs	—			(7,359		)	—			(65		)	(7,424		)	—			(7,424		)
Recoveries	610			2,165			809			2			3,586			—			3,586
Net recoveries (charge-offs)	610			(5,194		)	809			(63		)	(3,838		)	—			(3,838		)
Ending balance	$	74,249		$	160,598		$	43,905		$	7,106		$	285,858		$	68		$	285,926




($ in thousands)	Three Months Ended September 30, 2016
	Non-PCI Loans															PCI Loans			Total
	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Beginning balance	$	78,102		$	148,427		$	31,561		$	8,421		$	266,511		$	257		$	266,768
(Reversal of) provision for loan losses	(6,598		)	18,548			309			(644		)	11,615			(101		)	11,514
Charge-offs	(309		)	(23,696		)	(29		)	(13		)	(24,047		)	—			(24,047		)
Recoveries	634			165			654			124			1,577			—			1,577
Net recoveries (charge-offs)	325			(23,531		)	625			111			(22,470		)	—			(22,470		)
Ending balance	$	71,829		$	143,444		$	32,495		$	7,888		$	255,656		$	156		$	255,812




($ in thousands)	Nine Months Ended September 30, 2016
	Non-PCI Loans															PCI Loans			Total
	CRE			C&I			Residential			Consumer			Total			PCI Loans			Total
Beginning balance	$	81,191		$	134,597		$	39,292		$	9,520		$	264,600		$	359		$	264,959
(Reversal of) provision for loan losses	(9,731		)	38,549			(7,679		)	(1,887		)	19,252			(203		)	19,049
Charge-offs	(504		)	(31,770		)	(166		)	(17		)	(32,457		)	—			(32,457		)
Recoveries	873			2,068			1,048			272			4,261			—			4,261
Net recoveries (charge-offs)	369			(29,702		)	882			255			(28,196		)	—			(28,196		)
Ending balance	$	71,829		$	143,444		$	32,495		$	7,888		$	255,656		$	156		$	255,812




Year Ended December 31,	Amount ($ in thousands)
Remainder of 2017	$	1,620
2018	5,883
2019	4,864
2020	3,846
2021	2,833
Thereafter	3,628
Total	$	22,674




($ in thousands)	Commitments Outstanding
Loan commitments	$	4,956,515
Commercial letters of credit and SBLCs	$	1,757,648




Change in Interest Rates (BP)	Net Interest Income Volatility ⁽¹⁾				EVE Volatility ⁽²⁾
Change in Interest Rates (BP)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
+200	20.5	%	22.4	%	13.4	%	12.3	%
+100	11.4	%	12.0	%	7.0	%	7.5	%
-100	(8.0	)%	(6.8	)%	(3.7	)%	(5.0	)%
-200	(10.4	)%	(7.5	)%	(9.6	)%	(9.3	)%