0001069157ewbc:ConstructionAndLandLoanMemberus-gaap:CommercialPortfolioSegmentMember2023-01-01



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2017March 31, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-24939


EAST WEST BANCORP, INC.
(Exact name of registrant as specified in its charter)


Delaware
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)


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)

Registrant’s telephone number, including area code:
(626) 768-6000

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)		Name of each exchange
 on which registered
Common Stock, par value $0.001 per shareEWBCThe Nasdaq Global Select Market

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.
Yes x☒ No ¨☐

    
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x☒ No ¨☐


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.
Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer¨☐(Do not check if a smaller reporting company)Smaller reporting company¨☐
Emerging growth company¨☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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).
Yes ¨☐ No x☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: 144,542,911139,143,317 shares as of October 31, 2017.

April 30, 2024.




TABLE OF CONTENTS
Page
3
5
5
Consolidated Balance SheetsSheet (Unaudited)
5
Consolidated StatementsStatement of Income (Unaudited)
6
Consolidated StatementsStatement of Comprehensive Income (Loss) (Unaudited)
7
Consolidated StatementsStatement of Changes in Stockholders’ Equity (Unaudited)
8
Consolidated StatementsStatement of Cash Flows (Unaudited)
9
11
1 — Basis of Presentation
11
2 — Current Accounting Developments and Summary of Significant Accounting Policies
11
3 — Dispositions
14
4 — Fair Value Measurement and Fair Value of Financial Instruments
1512
54 — Securities Purchased under Resale Agreements and Sold under Repurchase Agreements
2422
5 — Securities
23
6 — SecuritiesDerivatives
2729
7 — Derivatives
30
8 — Loans Receivable and Allowance for Credit Losses
3536
98 — Investments in Qualified Affordable Housing Partnerships,Partnership, Tax Credit and OtherCommunity Reinvestment Act Investments, Net
4849
9 — Goodwill
51
10 — GoodwillShort-Term Borrowings and Other Intangible AssetsLong-Term Debt
4951
1111 — Commitments and Contingencies
5051
1212 — Stock Compensation Plans
5153
1313 — Stockholders’ Equity and Earnings Per Share
5254
1414 — Accumulated Other Comprehensive Income (Loss)
5355
1515 — Business Segments
5456
16 — Subsequent Events
56
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
9294
9294
9395
9395
9395
9396
96
9397
9498
9599
EXHIBIT INDEX
96

2


Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q (“Form(this “Form 10-Q”) contain or incorporate“forward-looking statements” that are intended to be covered by the safe harbor for such statements thatprovided by the Private Securities Litigation Reform Act of 1995. East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as the “Company”“Company,” “we,” “us,” “our” or “EWBC”) believesmay 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 “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 statementsthose that do not relate to historical facts and that are based on current assumptions, beliefs, estimates, expectations and projections, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Forward-looking statements may relate to various matters, including the Company’s financial condition, results of operations, plans, objectives, future performance, business or business. Theyindustry, and usually can be identified by the use of forward-looking language,words, such as “likely result in,“anticipates,” “assumes,” “believes,” “can,” “continues,” “could,” “estimates,” “expects,” “anticipates,“forecasts,” “estimates,“goal,” “forecasts,“intends,” “likely,” “may,” “might,” “objective,” “plans,” “potential,” “projects,” “intends to,“remains,” or may include other similar words or phrases, such as “believes,“should,” “plans,“target,” “trend,” “objective,“will,” “continues,” “remains,“would,” or similar expressions or future or conditional verbs,variations thereof, and the negative thereof, but these terms are not the exclusive means of identifying such as “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar verbs.statements. You should not place undue reliance on theseforward-looking statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference.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 ofvarious important factors that could cause future results to differ materially from historical performance and theseany 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.”)global economy, including an economic slowdown, capital or financial market disruption, supply chain disruption, level of inflation, interest rate environment, residential and commercial property prices, employment levels, rate of growth and general business conditions;conditions, which could result in, among other things, reduced demand for loans, reduced availability of funding or increased funding costs, declines in asset values and/or recognition of allowance for credit losses;
•changes in government interest rate policies;local, regional and global business, economic and political conditions and geopolitical events, such as political unrest, wars and acts of terrorism;
•the soundness of other financial institutions and the impacts related to or resulting from bank failures and other economic and industry volatility, including potential increased regulatory requirements, Federal Deposit Insurance Corporation (“FDIC”) insurance premiums and assessments, deposit withdrawals, or other adverse consequences of negative market perceptions of the banking industry or us;
•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 Board System (“Federal Reserve”), the Federal Deposit Insurance Corporation,FDIC, the U.S. Securities and Exchange Commission,SEC, the Consumer Financial Protection Bureau and(“CFPB”), the California Department of Business Oversight Financial Protection and Innovation — Division of Financial Institutions;Institutions, the People’s Bank of China, China’s National Administration of Financial Regulation, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, and the Monetary Authority of Singapore;
•changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade, 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;
•the impact from changes to income tax laws and regulations, federal spending and economic stimulus programs;
•the impact of any future U.S. federal government shutdown and uncertainty regarding the U.S. federal government’s debt limit and credit rating;
•the Company’s ability to compete effectively against financial institutions and other entities, including as a result of emerging technologies;
•the success and timing of the Company’s business strategies;
•the Company’s ability to retain key officers and employees;
•the 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 initiatives or technologies into its business in a strategic manner;

3

•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, proprietary, or personally identifiable 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;
•the impact of adverse judgments or settlements in litigation and other proceedings;
•the impact of 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 on the Company and its customers;
•heightened regulatory and governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;
changes in •the economyimpact of reputational risk from negative publicity, fines, penalties and monetary policy inother negative consequences from regulatory violations, legal actions and the People’s RepublicCompany’s interactions with business partners, counterparties, service providers and other third parties;
•the impact of China;regulatory investigations, regulatory agreements, supervisory criticisms, and enforcement actions;
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 the Company’s 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 Actimpact on the Company’s business, business practices and cost of operations;
impact of adverse changesliquidity due 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 levelCompany’s ability to receive dividends from its subsidiaries;
•any strategic acquisitions or divestitures and the introduction of checkingnew or savings account deposits on the Company’s funding costsexpanded products and net interest margin; andservices;
a recurrence of significant turbulence or disruption•changes 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 loansequity and declines in asset values and/or recognition of other-than-temporary impairment (“OTTI”) ondebt securities heldmarkets;
•fluctuations in the Company’s available-for-sale investment securities portfolio.stock price;

•fluctuations in foreign currency exchange rates;
•the impact of increased focus on social, environmental and sustainability matters, which may affect the operations of the Company and its customers and the economy more broadly; and
•the impact of climate change, natural or man-made disasters or calamities, such as wildfires, droughts, hurricanes, flooding and earthquakes or other events that may directly or indirectly result in a negative impact on the financial performance of the Company and its customers.

For a more detailed discussion of some of the factors that might cause such differences, see the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 2016,2023, filed with the U.S. Securities and Exchange CommissionSEC on February 27, 201729, 2024 (the “Company’s 20162023 Form 10-K”), under the heading “ITEMItem 1A. RISK FACTORS”Risk Factors. You should treat forward-looking statements as speaking only as of the date they are made and based only on information then actually known to the information set forth under “ITEM 1A. RISK FACTORS” in this Form 10-Q.Company. 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.

4



PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except shares)

(Unaudited)
March 31,
2024		December 31,
2023
ASSETS
Cash and due from banks$382,484 $444,793 
Interest-bearing cash with banks3,828,317 4,170,191 
Cash and cash equivalents4,210,801 4,614,984 
Interest-bearing deposits with banks24,593 10,498 
Securities purchased under resale agreements (“resale agreements”)485,000 785,000 
Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $9,131,953 and $6,916,491)8,400,468 6,188,337 
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,414,478 and $2,453,971)2,948,642 2,956,040 
Loans held-for-sale13,280 116 
Loans held-for-investment (net of allowance for loan losses of $670,280 and $668,743)51,322,224 51,542,039 
Affordable housing partnership, tax credit and Community Reinvestment Act (“CRA”) investments, net933,187 905,036 
Premises and equipment (net of accumulated depreciation of $159,760 and $157,622)83,989 86,370 
Goodwill465,697 465,697 
Operating lease right-of-use assets87,535 94,024 
Other assets1,900,254 1,964,743 
TOTAL$70,875,670 $69,612,884 
LIABILITIES
Deposits:
Noninterest-bearing$14,798,927 $15,539,872 
Interest-bearing43,761,697 40,552,566 
Total deposits58,560,624 56,092,438 
Short-term borrowings19,173 — 
Bank Term Funding Program (“BTFP”) borrowings— 4,500,000 
Federal Home Loan Bank (“FHLB”) advances3,500,000 — 
Long-term debt and finance lease liabilities36,428 153,011 
Operating lease liabilities95,643 102,353 
Accrued expenses and other liabilities1,640,570 1,814,248 
Total liabilities63,852,438 62,662,050 
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 169,835,469 and 169,372,230 shares issued170 169 
Additional paid-in capital1,993,806 1,980,818 
Retained earnings6,662,919 6,465,230 
Treasury stock, at cost 30,714,307 and 29,344,863 shares(970,930)(874,787)
Accumulated other comprehensive loss (“AOCI”), net of tax(662,733)(620,596)
Total stockholders’ equity7,023,232 6,950,834 
TOTAL$70,875,670 $69,612,884 
 
  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.


5



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF INCOME
($ and shares in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
2024
2024
INTEREST AND DIVIDEND INCOME
INTEREST AND DIVIDEND INCOME
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees
Loans receivable, including fees
Loans receivable, including fees
Debt securities
Debt securities
Debt securities
Resale agreements
Resale agreements
Resale agreements
Restricted equity securities
Restricted equity securities
Restricted equity securities
Interest-bearing cash and deposits with banks
Interest-bearing cash and deposits with banks
Interest-bearing cash and deposits with banks
Total interest and dividend income
Total interest and dividend income
Total interest and dividend income
INTEREST EXPENSE
INTEREST EXPENSE
INTEREST EXPENSE
Deposits
Deposits
Deposits
Federal funds purchased and other short-term borrowings
Federal funds purchased and other short-term borrowings
Federal funds purchased and other short-term borrowings
FHLB advances
FHLB advances
FHLB advances
Securities sold under repurchase agreements (“repurchase agreements”)
Securities sold under repurchase agreements (“repurchase agreements”)
Securities sold under repurchase agreements (“repurchase agreements”)
Long-term debt and finance lease liabilities
Long-term debt and finance lease liabilities
Long-term debt and finance lease liabilities
Total interest expense
Total interest expense
Total interest expense
Net interest income before provision for credit losses
Net interest income before provision for credit losses
Net interest income before provision for credit losses
Provision for credit losses
Provision for credit losses
Provision for credit losses
Net interest income after provision for credit losses
Net interest income after provision for credit losses
Net interest income after provision for credit losses
NONINTEREST INCOME
NONINTEREST INCOME
NONINTEREST INCOME
Deposit account fees
Deposit account fees
Deposit account fees
Lending fees
Lending fees
Lending fees
Foreign exchange income
Foreign exchange income
Foreign exchange income
Wealth management fees
Wealth management fees
Wealth management fees
Customer derivative income
Customer derivative income
Customer derivative income
Net losses on sales of loans
Net losses on sales of loans
Net losses on sales of loans
Net gains (losses) on AFS debt securities
Net gains (losses) on AFS debt securities
Net gains (losses) on AFS debt securities
Other investment income
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
INTEREST AND DIVIDEND INCOME      
  
Loans receivable, including fees $306,939
 $255,316
 $872,039
 $763,189
Investment securities 14,828
 13,388
 43,936
 37,433
Resale agreements 7,901
 7,834
 25,222
 22,479
Restricted equity securities 612
 611
 1,859
 2,008
Interest-bearing cash and deposits with banks 9,630
 3,168
 22,298
 10,245
Total interest and dividend income 339,910
 280,317
 965,354
 835,354
INTEREST EXPENSE      
  
Customer deposits 31,086
 21,049
 81,803
 60,708
Federal funds purchased and other short-term borrowings 212
 212
 877
 390
FHLB advances 1,947
 1,361
 5,738
 4,153
Repurchase agreements 2,122
 2,319
 7,538
 6,441
Long-term debt 1,388
 1,228
 4,030
 3,726
Total interest expense 36,755
 26,169
 99,986
 75,418
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
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
Wealth management fees 3,615
 4,033
 11,682
 9,862
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 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
Other investment income
Other investment income
Other income
Other income
Other income
Total noninterest income
Total noninterest income
Total noninterest income 49,624
 49,341
 213,047
 134,118
NONINTEREST EXPENSE      
  
NONINTEREST EXPENSE
NONINTEREST EXPENSE
Compensation and employee benefits
Compensation and employee benefits
Compensation and employee benefits 79,583
 75,042
 244,930
 220,166
Occupancy and equipment expense 16,635
 15,456
 47,829
 45,619
Occupancy and equipment expense
Occupancy and equipment expense
Deposit insurance premiums and regulatory assessments 5,676
 6,450
 17,384
 17,341
Legal expense 3,316
 5,361
 8,930
 12,714
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
Deposit insurance premiums and regulatory assessments
Deposit insurance premiums and regulatory assessments
Deposit account expense
Deposit account expense
Deposit account expense
Computer software and data processing expenses
Computer software and data processing expenses
Computer software and data processing expenses
Other operating expense 19,830
 19,814
 55,357
 58,508
Amortization of tax credit and other investments 23,827
 32,618
 66,059
 60,779
Amortization of core deposit intangibles 1,735
 2,023
 5,314
 6,177
Other operating expense
Other operating expense
Amortization of tax credit and CRA investments
Amortization of tax credit and CRA investments
Amortization of tax credit and CRA investments
Total noninterest expense
Total noninterest expense
Total noninterest expense 164,499
 170,500
 486,693
 465,985
INCOME BEFORE INCOME TAXES 175,284
 123,464
 560,973
 411,051
INCOME BEFORE INCOME TAXES
INCOME BEFORE INCOME TAXES
INCOME TAX EXPENSE
INCOME TAX EXPENSE
INCOME TAX EXPENSE 42,624
 13,321
 140,247
 90,108
NET INCOME $132,660
 $110,143
 $420,726
 $320,943
NET INCOME
NET INCOME
EARNINGS PER SHARE (“EPS”)
EARNINGS PER SHARE (“EPS”)
EARNINGS PER SHARE (“EPS”)        
BASIC $0.92
 $0.76
 $2.91
 $2.23
DILUTED $0.91
 $0.76
 $2.88
 $2.21
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING        
BASIC
BASIC 144,498
 144,122
 144,412
 144,061
DILUTED 145,882
 145,238
 145,849
 145,086
DIVIDENDS DECLARED PER COMMON SHARE $0.20
 $0.20
 $0.60
 $0.60
DILUTED
DILUTED
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC
BASIC
BASIC
DILUTED
DILUTED
DILUTED



See accompanying Notes to Consolidated Financial Statements.


6



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF COMPREHENSIVE INCOME
($ in thousands)
(Unaudited)
Three Months Ended March 31,
20242023
Net income$285,075 $322,439 
Other comprehensive (loss) income, net of tax:
Net changes in unrealized (losses) gains on AFS debt securities(2,317)51,319 
Amortization of unrealized losses on debt securities transferred from AFS to HTM2,688 2,762 
Net changes in unrealized (losses) gains on cash flow hedges(46,330)28,613 
Foreign currency translation adjustments3,822 2,941 
Other comprehensive (loss) income(42,137)85,635 
COMPREHENSIVE INCOME$242,938 $408,074 
 
  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.


7



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
($ in thousands, except shares and per share data)
(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
SharesAmountRetained EarningsTreasury StockAOCI, Net of TaxTotal Stockholders’ Equity
BALANCE, JANUARY 1, 2023140,947,846 $1,936,557 $5,582,546 $(768,862)$(765,629)$5,984,612 
Cumulative-effect of a change in accounting principle (1)
— — (4,262)— — (4,262)
Net income— — 322,439 — — 322,439 
Other comprehensive income— — — — 85,635 85,635 
Issuance of common stock pursuant to various stock compensation plans and agreements740,722 11,130 — — — 11,130 
Repurchase of common stock pursuant to various stock compensation plans and agreements(292,768)— — (21,791)— (21,791)
Cash dividends on common stock ($0.48 per share)— — (68,432)— — (68,432)
BALANCE, MARCH 31, 2023141,395,800 $1,947,687 $5,832,291 $(790,653)$(679,994)$6,309,331 
BALANCE, JANUARY 1, 2024140,027,367 $1,980,987 $6,465,230 $(874,787)$(620,596)$6,950,834 
Cumulative-effect of a change in accounting principle (2)
— — (9,482)— — (9,482)
Net income— — 285,075 — — 285,075 
Other comprehensive loss— — — — (42,137)(42,137)
Issuance of common stock pursuant to various stock compensation plans and agreements463,239 12,989 — — — 12,989 
Repurchase of common stock pursuant to various stock compensation plans and agreements(187,593)— — (13,702)— (13,702)
Repurchase of common stock pursuant to the stock repurchase program(1,181,851)— — (82,441)— (82,441)
Cash dividends on common stock ($0.55 per share)— — (77,904)— — (77,904)
BALANCE, MARCH 31, 2024139,121,162 $1,993,976 $6,662,919 $(970,930)$(662,733)$7,023,232 

(1)Represents the change in the Company’s allowance for loan losses as a result of the adoption of Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and the Vintage Disclosures on January 1, 2023.

(2)Represents the impact of the adoption of ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method on January 1, 2024. Refer to Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies in this Form 10-Q for additional information.
See accompanying Notes to Consolidated Financial Statements.


8



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS
($ in thousands)
(Unaudited)
Three Months Ended March 31,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$285,075 $322,439 
Adjustments to reconcile net income to net cash provided by operating activities:  
Provision for credit losses25,000 20,000 
Depreciation and amortization50,998 32,567 
Amortization of premiums (accretion of discount), net648 (4,497)
Stock compensation costs12,988 11,075 
Deferred income tax (benefit) expense(6,905)609 
Net losses on sales of loans41 22 
Net (gains) losses on AFS debt securities(49)10,000 
Loans held-for-sale:
Originations and purchases(850)— 
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale992 — 
Distributions received from equity method investees978 1,718 
Net change in accrued interest receivable and other assets75,815 (75,163)
Net change in accrued expenses and other liabilities(177,732)(93,948)
Other operating activities, net(760)(1,921)
Total adjustments(18,836)(99,538)
Net cash provided by operating activities266,239 222,901 
CASH FLOWS FROM INVESTING ACTIVITIES  
Net (increase) decrease in:  
Affordable housing partnership, tax credit and CRA investments(106,536)(27,358)
Interest-bearing deposits with banks(14,252)128,772 
Assets purchased under resale agreements:
Proceeds from paydowns and maturities300,000 150,629 
Purchases— (12,725)
AFS debt securities:
Proceeds from sales537,195 — 
Proceeds from repayments, maturities and redemptions577,750 321,913 
Purchases(3,337,121)(532,758)
HTM debt securities:
Proceeds from repayments, maturities and redemptions11,270 12,387 
Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment241,907 179,237 
Purchases(108,174)(155,016)
Other changes in loans held-for-investment, net110,120 (695,646)
Redemption of trust preferred securities3,558 — 
Proceeds from sales of other real estate owned (“OREO”) and other foreclosed assets— 1,976 
Distributions received from equity method investees847 2,244 
Purchases of FHLB stock(84,294)— 
Other investing activities, net(3,846)(6,501)
Net cash used in investing activities(1,871,576)(632,846)
 
  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.


9



EAST WEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTSSTATEMENT 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
     


Three Months Ended March 31,
20242023
CASH FLOWS FROM FINANCING ACTIVITIES  
Net change in deposits2,475,059 (1,246,189)
Net change in short-term borrowings(4,480,827)4,500,017 
FHLB advances:
Proceeds3,500,000 6,000,000 
Repayment— (6,000,000)
Repurchase agreements:
Repayment— (300,000)
Extinguishment cost— (3,872)
Long-term debt and lease liabilities:
Repayment of junior subordinated debt and lease liabilities(116,798)(203)
Common stock:
Stock tendered for payment of withholding taxes(13,702)(21,791)
Repurchase of common stocks pursuant to the stock repurchase program(82,441)— 
Cash dividends paid(79,304)(70,776)
Net cash provided by financing activities1,201,987 2,857,186 
Effect of exchange rate changes on cash and cash equivalents(833)5,169 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(404,183)2,452,410 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD4,614,984 3,481,784 
CASH AND CASH EQUIVALENTS, END OF PERIOD$4,210,801 $5,934,194 
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest$600,438 $227,504 
Income taxes, net$38,619 $— 
Noncash investing and financing activities:
Loans transferred from held-for-investment to held-for-sale$199,974 $160,476 
Loans transferred to OREO and other foreclosed assets$5,551 $— 



See accompanying Notes to Consolidated Financial Statements.


10



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 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 30, 2017,March 31, 2024, East West also has sixone wholly-owned subsidiariessubsidiary that areis a statutory business truststrust (the “Trusts”“Trust”). In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts areTrust is not included on the Consolidated Financial Statements.


The unaudited interim Consolidated Financial Statements are presented in accordance with United StatesU.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 statementpresentation, 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 audited Consolidated Financial Statements and notes thereto included in the Company’s 2023 Form 10-K.

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 periods, and the related disclosures. Although our estimates consider 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 future interim period Consolidated Financial Statements.or for the year as a whole. Certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.

The current period’s results of operations are not necessarily indicative of results that may be expected for any other 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 2024

StandardRequired Date of AdoptionDescriptionEffect on Financial Statements
ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

January 1, 2024
ASU 2023-02 expands the scope of the proportional amortization method (“PAM”) to equity tax credit investment programs if certain conditions are met. Previously, PAM could only be used for investments in low-income housing tax credit structures. Under this guidance, companies are able to elect, on a tax credit program-by-tax credit program basis, to apply PAM to all equity investments meeting the criteria in ASC 323-740-25-1.

The amendments in this guidance must be applied on a modified retrospective or a retrospective basis.
The Company adopted ASU 2023-02 on January 1, 2024, for all tax credit investments under a modified retrospective basis. The impact of the adoption decreased opening retained earnings on January 1, 2024 by $9 million.
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 Companyfollowing standards were 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
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which clarifies the principles for recognizing revenue for contracts to provide goods or services to customers and will replace most existing revenue recognition guidance in the U.S. GAAP when it becomes effective. Quantitative and qualitative disclosures regarding 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 to determine the revenue streams that are in the scope of the guidance and the review of its contracts 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 is2024, but they did not expected to have a material impact on its Consolidated Balance Sheets or Consolidated Statements of Income. The next phase 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, 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 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 financial 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. 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, the 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 StatementsFinancial Statements:

•ASU 2023-01, Leases (Topic 842): Common Control Arrangements
•ASU 2022-03, Fair Value Measurement (Topic 820) Fair Value Measurement of Income.Equity Securities Subject to Contractual Sale Restrictions



11


Significant Accounting Policies Update
In February 2016,
Income Taxes — The Company has elected to apply PAM to qualifying affordable housing partnership, new markets, historic, production and renewable energy tax credit investments. Under PAM, the FASB issued ASU 2016-02, Leases (Topic 842), which is intendedCompany amortizes the initial cost of the investment in proportion to increase transparencythe income tax credits and comparabilityother income tax benefits received, and recognizes the amortization 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 monthsIncome tax expense 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 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, as the Company will be required to recognize operating leases on its Consolidated Balance Sheets. The Company does not expect a material impact to its recognition of operating lease expense on its Consolidated Statements of Income. Upon completion of the contract reviews and consideration of system requirements, the Company will evaluate the impacts of adopting the new accounting guidance on its disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of 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 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 in the allowance for credit losses due to the following factors: 1) the allowance for credit losses provides for expected credit losses over the remaining expected life of the loan portfolio, and will consider expected future changes in macroeconomic conditions; 2) the nonaccretable difference on 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. The 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.Income.


In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, whichrequires the Company 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.



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

In determining the fair value of financial instruments,Under applicable accounting standards, 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 ormeasures a liability. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the useportion of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy noted 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 data lacking transparency. The fair value of the Company’sits 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—Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities.at fair value. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.

In determining the appropriate hierarchy levels, the Company performs an analysis of the assets and liabilities that are subject to fair value disclosure. The Company’s assets and liabilities are classified in their entirety based on the lowest level of input that is significant to theirpredominantly recorded at fair value measurements.



The following tables present financialon a recurring basis. From time to time, certain 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-maturitynonrecurring basis; that is, they are subject 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 duringonly as required through the period on certain non-PCI impaired loans, application of fair value less cost to sell on OREO and application of thean accounting method such as lower of cost or fair value on loans held-for-sale.



or write-down of individual assets. The following tables present the carrying amounts ofCompany categorizes its assets includedand liabilities into three levels based on the Consolidated Balance Sheets that hadestablished fair value changes measuredhierarchy and conducts a review of fair value hierarchy classifications 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 quantitativequarterly basis. For more 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 perregarding the fair value hierarchy of certain financial instruments, excluding those measured atand how the Company measures fair value, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Fair Value to the Consolidated Financial Statements in the Company’s 2023 Form 10-K.

Assets and Liabilities Measured at Fair Value on a recurring basis, as of September 30, 2017 and December 31, 2016:Recurring Basis
 
($ 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 ofsection describes the valuation methodologies and significant assumptions used by the Company to measure financial assets and liabilities at fair value, and to estimate fair value for certain financialon a recurring basis, as well as the general classification of these instruments not recorded at fair value. The description also includes the level ofwithin the fair value hierarchy in which the assets or liabilities are classified.hierarchy.

Cash and Cash EquivalentsAvailable-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 agreementsAFS 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 newly issued data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In obtaining such valuationvaluing securities issued by state and political subdivisions, inputs used by third-party pricing service providers also include material event notices. The valuations provided by the brokers incorporate information from third parties,their trading desks, research and other market data.

On a monthly basis, the Company reviewedvalidates the methodologiesvaluations 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 ascertain the reliability of these sources. On a quarterly basis, the Company reviews the valuation inputs and methodology furnished by third-party pricing service providers for each security category. On an annual basis, the Company assesses the reasonableness of broker pricing by reviewing the related pricing methodologies. This review includes corroborating pricing with market data, performing pricing input reviews under current market-related conditions, and investigating security pricing by instrument as needed.

When a quoted price in an active market exists for the identical security, this price is used to developdetermine the resulting fair values.  The available-for-sale investmentvalue and the AFS debt security is classified as Level 1. Level 1 AFS debt securities valued using such methodsconsist 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 based on observable inputs in the current marketplace, they are classified as Level 2.



Loans Held-for-SaleEquity Securities — The Company’s loans held-for-sale are carried at the lower Equity securities consisted of cost or fair value. Loans held-for-sale were comprised of single-family residential loansmutual funds as of September 30, 2017,both March 31, 2024 and were primarily comprised of consumer loans as of December 31, 2016.2023. The Company invested in these mutual funds for CRA purposes. The Company uses net asset value (“NAV”) information to determine the fair value of loans held-for-salethese equity securities. When NAV is derived from current market pricesavailable periodically and comparative current sales. The Company records any fair value adjustments on a nonrecurring basis. Loans held-for-sale are classified as Level 2.
Non-PCI Impaired Loans — The fair value of non-PCI impaired loans is measured using 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 ortransfer 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 approximates1. 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 areequity securities is classified as Level 2.

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Interest Rate Swaps and OptionsContracts— The Company enters intoInterest rate contracts consist of interest rate swapswaps and option contracts with institutional counterparties to hedge against interest rate swap and option products offered to bank customers. These products allow 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 rate loan. The Company also enters into interest rate swap contracts with institutional counterparties to hedge against certificates of deposit issued. This product allows the Company to lock in attractive floating rate funding.options. 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, consistingwhich consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that wouldwill occur if variable interest rates fellfall 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 the2.

Foreign Exchange Contracts— The fair value hierarchy due to the observable nature of the significant inputs utilized.
Foreign Exchange Contracts — The Company enters into short-term foreign exchange contracts to purchase/sell foreign currencies at set rates in the future.  These contracts economically hedge against foreign exchange rate fluctuations. The Company also enters into contracts with institutional counterparties to hedge against foreign exchange products offered to bank customers. These products allow customers to hedge the 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 resultedresult 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 30, 2017, foreign exchange forward contracts used to economically hedgeIn addition, 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 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, the Company began entering intomanaged its foreign currency forward contracts to hedge itsexposure in the net investment in its China subsidiary, East West Bank (China) Limited. Previously, theLimited, a non-U.S. dollar (“USD”) functional currency subsidiary, with foreign currency non-deliverable forward contracts. 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 valueddetermined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. InputsKey inputs of the current market exchange rate include the spot rates,and forward rates and the interest rate curves of the domestic and foreign currency. Interest ratecontractual 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 into RPAs, under which Credit contracts utilized by the Company assumes its pro-rata shareare comprised of credit risk participation agreements (“RPAs”) entered into by the credit exposure associatedCompany with the borrower’s performance related to interest rate derivative contracts.institutional counterparties. The fair value of the 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 spreadsDue to the observable nature of the borrowersall other significant inputs used in deriving 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 that the majority of the inputs used to value RPAs are observable. Accordingly, RPAs fall within Level 2 of the fair value, hierarchy.credit contracts are classified as Level 2.


Warrants Equity Contracts — The Company obtained Equity contracts consist of warrants to purchase common or 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.companies, and any liability-classified contingently issuable shares of the Company. The Company valued thesefair value of the warrants is 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 optionequity 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 optionequity volatility. The option volatility assumption wasCompany applies proxy volatilities based on public market indices that include members that operate in similar industries as the companies in ourindustry sectors of the private company portfolio.companies. The model values were furtherare then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both equity 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 optionequity 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 sensitivitymeasurement of uncertainty analysis on the optionequity volatility and liquidity discount assumptions is performed.


In connection with the Company’s acquisition of a 49.99% equity interest in Rayliant Global Advisors Limited (“Rayliant”) during the third quarter of 2023, the Company granted 349,138 shares of performance-based restricted stock units (“RSUs”) as part of its consideration, in addition to $95 million in cash. The vesting of these equity contracts on September 1, 2028, is contingent on Rayliant meeting certain financial performance targets during the performance period. The fair value estimates presented herein areof liability-classified equity contracts varies based on pertinentthe operating revenue and operating EBITDA of Rayliant to be achieved during the future performance period, and these performance-based RSUs are expected to vest into a variable number of the Company’s common stock, ranging from 20% to 200% of the target performance-based RSUs granted. Due to the unobservable nature of the input assumptions, these equity contracts are classified as Level 3. For additional information availableon the equity contracts, refer to managementNote 6— Derivatives to the Consolidated Financial Statements in this Form 10-Q.

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Commodity Contracts — Commodity contracts consist of swaps and options referencing commodity products. The fair value 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 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 the observable nature of the significant inputs utilized.

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The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of each reporting date. AlthoughMarch 31, 2024 and December 31, 2023:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of March 31, 2024
($ in thousands)Level 1Level 2Level 3Total
Fair Value
AFS debt securities:
U.S. Treasury securities$621,094 $— $— $621,094 
U.S. government agency and U.S. government-sponsored enterprise debt securities— 360,802 — 360,802 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (1):
Commercial mortgage-backed securities— 455,619 — 455,619 
Residential mortgage-backed securities— 4,992,399 — 4,992,399 
Municipal securities— 258,495 — 258,495 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— 333,996 — 333,996 
Residential mortgage-backed securities— 519,657 — 519,657 
Corporate debt securities— 502,647 — 502,647 
Foreign government bonds— 227,196 — 227,196 
Asset-backed securities— 40,712 — 40,712 
Collateralized loan obligations (“CLOs”)— 87,851 — 87,851 
Total AFS debt securities$621,094 $7,779,374 $— $8,400,468 
Affordable housing partnership, tax credit and CRA investments, net:
Equity securities$20,402 $4,137 $— $24,539 
Total affordable housing partnership, tax credit and CRA investments, net$20,402 $4,137 $— $24,539 
Derivative assets:
Interest rate contracts$— $484,794 $— $484,794 
Foreign exchange contracts— 60,499 — 60,499 
Equity contracts— — 330 330 
Commodity contracts— 76,615 — 76,615 
Gross derivative assets$— $621,908 $330 $622,238 
Netting adjustments (2)
$— $(489,262)$— $(489,262)
Net derivative assets$— $132,646 $330 $132,976 
Derivative liabilities:
Interest rate contracts$— $518,330 $— $518,330 
Foreign exchange contracts— 53,153 — 53,153 
Equity contracts (3)
— — 15,119 15,119 
Credit contracts— 16 — 16 
Commodity contracts— 106,930 — 106,930 
Gross derivative liabilities$— $678,429 $15,119 $693,548 
Netting adjustments (2)
$— $(134,963)$— $(134,963)
Net derivative liabilities$— $543,466 $15,119 $558,585 
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
as of December 31, 2023
($ in thousands)Level 1Level 2Level 3Total
Fair Value
AFS debt securities:
U.S. Treasury securities$1,060,375 $— $— $1,060,375 
U.S. government agency and U.S. government-sponsored enterprise debt securities— 364,446 — 364,446 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (1):
Commercial mortgage-backed securities— 468,259 — 468,259 
Residential mortgage-backed securities— 1,727,594 — 1,727,594 
Municipal securities— 261,016 — 261,016 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— 367,516 — 367,516 
Residential mortgage-backed securities— 553,671 — 553,671 
Corporate debt securities— 502,425 — 502,425 
Foreign government bonds— 227,874 — 227,874 
Asset-backed securities— 42,300 — 42,300 
CLOs— 612,861 — 612,861 
Total AFS debt securities$1,060,375 $5,127,962 $— $6,188,337 
Affordable housing partnership, tax credit and CRA investments, net:
Equity securities$20,509 $4,150 $— $24,659 
Affordable housing partnership, tax credit and CRA investments, net$20,509 $4,150 $— $24,659 
Derivative assets:
Interest rate contracts$— $473,907 $— $473,907 
Foreign exchange contracts— 57,072 — 57,072 
Credit contracts— 1 — 1 
Equity contracts— — 336 336 
Commodity contracts— 79,604 — 79,604 
Gross derivative assets$— $610,584 $336 $610,920 
Netting adjustments (2)
$— $(312,792)$— $(312,792)
Net derivative assets$— $297,792 $336 $298,128 
Derivative liabilities:
Interest rate contracts$— $433,936 $— $433,936 
Foreign exchange contracts— 42,564 — 42,564 
Equity contracts (3)
— — 15,119 15,119 
Credit contracts— 25 — 25 
Commodity contracts— 121,670 — 121,670 
Gross derivative liabilities$— $598,195 $15,119 $613,314 
Netting adjustments (2)
$— $(76,170)$— $(76,170)
Net derivative liabilities$— $522,025 $15,119 $537,144 
(1)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $4.4 billion and $1.2 billion of fair value as of March 31, 2024 and December 31, 2023, respectively.
(2)Represents the 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.
(3)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.

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For the three months ended March 31, 2024 and 2023, Level 3 fair value measurements that were measured on a recurring basis consisted of warrant equity contracts issued by private companies and liability-classified contingently issuable shares of the Company. The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
($ in thousands)20242023
Derivative assets:
Equity contracts
Beginning balance$336 $323 
Total losses included in earnings (1)
(6)(46)
Ending balance$330 $277 
Derivative liabilities:
Equity contracts (2)
Beginning balance$15,119 $— 
Total gains (losses) included in earnings— — 
Ending balance$15,119 $— 
(1)Includes unrealized losses recorded in Lending fees on the Consolidated Statement of Income.
(2)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of March 31, 2024 and December 31, 2023. 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 TechniqueUnobservable InputsRange of InputsWeighted-Average of Inputs
March 31, 2024
Derivative assets:
Equity contracts$330 Black-Scholes option pricing modelEquity volatility39% — 50%46 %(1)
Liquidity discount47%47 %
Derivative liabilities:
Equity contracts (2)
$15,119 Internal modelPayout % designated based on operating revenue and operating EBITDA of investee84%84 %
December 31, 2023
Derivative assets:
Equity contracts$336 Black-Scholes option pricing modelEquity volatility37% — 48%45 %(1)
Liquidity discount47%47 %
Derivative liabilities:
Equity contracts (2)
$15,119 Internal modelPayout % designated based on operating revenue and operating EBITDA of investee84%84 %
(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of both March 31, 2024 and December 31, 2023.
(2)Equity contracts classified as derivative liabilities consist of performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.
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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, affordable housing partnership, tax credit and CRA 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 affordable housing partnership, tax credit and CRA investments, from the 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 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 awarerequired by regulations, or is unavailable. An internal valuation utilizes one or more valuation techniques such as the income, market and/or cost approaches.

Affordable Housing Partnership, Tax Credit and CRA Investments, Net — The Company conducts due diligence on its affordable housing partnership, tax credit and CRA 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 reviewing the investment entity’s quarterly financial statements and annual tax returns, the annual financial statements of anythe guarantor (if any) and a comparison of the actual performance of the investment against the financial projections prepared at the time the investment was made. The Company assesses its tax credit and other investments for possible other-than-temporary impairment 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;
•the potential for tax credit recapture; 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 theonly 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 such as an acceptance of a deed-in-lieu of foreclosure. These OREO properties are recorded at estimated fair value amounts, such amounts have not been comprehensively revaluedless the costs to sell at the time of foreclosure or at the lower of cost or estimated fair value 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.

Loans Held-for-Sale— Loans held-for-investment subsequently transferred to held-for-sale are recorded at the lower of cost or fair value upon transfer. Loans held-for-sale may be measured at fair value on a nonrecurring basis when fair value is less than cost. Fair value is generally determined based on available market data for purposes of these Consolidated Financial Statements since that date,similar loans and therefore, current estimates ofloans held-for-sale are classified as Level 2.

18

Other Nonperforming Assets—Other nonperforming assets are recorded at fair value may differ significantlyupon 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 March 31, 2024 and December 31, 2023:
Assets Measured at Fair Value on a Nonrecurring Basis
as of March 31, 2024
($ in thousands)Level 1Level 2Level 3Fair Value Measurements
Loans held-for-investment:
Commercial:
Commercial and industrial (“C&I”)$— $— $25,914 $25,914 
Commercial real estate (“CRE”):
CRE— — 10,028 10,028 
Construction and land— — 12,236 12,236 
Total commercial— — 48,178 48,178 
Consumer:
Residential mortgage:
Single-family residential— — 116 116 
Total consumer— — 116 116 
Total loans held-for-investment$— $— $48,294 $48,294 
Assets Measured at Fair Value on a Nonrecurring Basis
as of December 31, 2023
($ in thousands)Level 1Level 2Level 3Fair Value Measurements
Loans held-for-investment:
Commercial:
C&I$— $— $22,035 $22,035 
CRE:
CRE— — 22,653 22,653 
Total commercial— — 44,688 44,688 
Consumer:
Residential mortgage:
Home equity lines of credit (“HELOCs”)— — 1,204 1,204 
Total consumer— — 1,204 1,204 
Total loans held-for-investment$— $— $45,892 $45,892 
Affordable housing partnership, tax credit and CRA investments, net$— $— $868 $868 

19

The following table presents the (decrease) increase in the 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 months ended March 31, 2024 and 2023:
Three Months Ended March 31,
($ in thousands)20242023
Loans held-for-investment:
Commercial:
C&I$(12,843)$(1,255)
CRE:
CRE(2,006)— 
Construction and land(1,224)— 
Total commercial(16,073)(1,255)
Consumer:
Residential mortgage:
Single-family residential(1,384)— 
Total consumer(1,384)— 
Total loans held-for-investment$(17,457)$(1,255)
Affordable housing partnership, tax credit and CRA investments, net$— $174 

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 March 31, 2024 and December 31, 2023:
($ in thousands)Fair Value Measurements (Level 3)Valuation TechniquesUnobservable InputsRange of InputsWeighted-Average of Inputs
March 31, 2024
Loans held-for-investment$6,917 Fair value of collateralDiscount20%20%
$8,471 Fair value of collateralContract valueNMNM
$32,906 Fair value of propertySelling cost8%8%
December 31, 2023
Loans held-for-investment$16,328 Fair value of collateralDiscount15% — 75%45%(1)
$3,009 Fair value of collateralContract valueNMNM
$26,555 Fair value of propertySelling cost8%8%
Affordable housing partnership, tax credit and CRA investments, net$868 Individual analysis of each investmentExpected future tax benefits and distributionsNMNM
NM — Not meaningful.
(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of December 31, 2023.

20

Disclosures about the Fair Value of Financial Instruments

The following tables present the fair value estimates for financial instruments as of March 31, 2024 and December 31, 2023, 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 instruments are measured on an amortized cost basis on the Company’s Consolidated Balance Sheet.

March 31, 2024
($ in thousands)Carrying AmountLevel 1Level 2Level 3Estimated Fair Value
Financial assets:
Cash and cash equivalents$4,210,801 $4,210,801 $— $— $4,210,801 
Interest-bearing deposits with banks$24,593 $— $24,593 $— $24,593 
Resale agreements$485,000 $— $391,403 $— $391,403 
HTM debt securities$2,948,642 $485,400 $1,929,078 $— $2,414,478 
Restricted equity securities, at cost$164,402 $— $164,402 $— $164,402 
Loans held-for-sale$13,280 $— $13,280 $— $13,280 
Loans held-for-investment, net$51,322,224 $— $— $49,849,727 $49,849,727 
Mortgage servicing rights$6,234 $— $— $10,787 $10,787 
Accrued interest receivable$336,428 $— $336,428 $— $336,428 
Financial liabilities:
Demand, checking, savings and money market deposits$37,789,344 $— $37,789,344 $— $37,789,344 
Time deposits$20,771,280 $— $20,715,628 $— $20,715,628 
Short-term borrowings$19,173 $— $19,173 $— $19,173 
FHLB advances$3,500,000 $— $3,500,000 $— $3,500,000 
Long-term debt$31,768 $— $30,201 $— $30,201 
Accrued interest payable$63,470 $— $63,470 $— $63,470 

December 31, 2023
($ in thousands)Carrying AmountLevel 1Level 2Level 3Estimated Fair Value
Financial assets:
Cash and cash equivalents$4,614,984 $4,614,984 $— $— $4,614,984 
Interest-bearing deposits with banks$10,498 $— $10,498 $— $10,498 
Resale agreements$785,000 $— $699,056 $— $699,056 
HTM debt securities$2,956,040 $488,551 $1,965,420 $— $2,453,971 
Restricted equity securities, at cost$79,811 $— $79,811 $— $79,811 
Loans held-for-sale$116 $— $116 $— $116 
Loans held-for-investment, net$51,542,039 $— $— $50,256,565 $50,256,565 
Mortgage servicing rights$6,602 $— $— $9,470 $9,470 
Accrued interest receivable$331,490 $— $331,490 $— $331,490 
Financial liabilities:
Demand, checking, savings and money market deposits$38,048,974 $— $38,048,974 $— $38,048,974 
Time deposits$18,043,464 $— $18,004,951 $— $18,004,951 
BTFP borrowings$4,500,000 $— $4,500,000 $— $4,500,000 
Long-term debt$148,249 $— $150,896 $— $150,896 
Accrued interest payable$205,430 $— $205,430 $— $205,430 

21

Note 54 —Securities Purchased under Resale Agreements

The Company’s resale agreements expose it to credit risk from both the counterparties and the underlying collateral. The Company manages credit exposure from certain transactions by entering into master netting agreements and collateral arrangements with the counterparties. The relevant agreements allow for an efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is 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 did not hold any reserves for credit impairment with respect to these agreements as of both March 31, 2024 and December 31, 2023.

Securities Purchased under Resale Agreements and Sold— Total securities purchased under Repurchase Agreements

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 the resale agreements, including accrued interest, are monitored. Additional collateral may be requested by the Company from the counterparty when deemed appropriate. Gross resale agreements were $1.65 billion$485 million and $2.10 billion$785 million as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The weighted average interest ratesweighted-average yields were 2.30%3.39% and 1.84% as of September 30, 2017 and December 31, 2016, respectively.


Repurchase Agreements

Long-term repurchase agreements are accounted for as collateralized financing transactions and recorded at the balances at which the securities were sold. The collateral2.50% for the repurchase agreements is primarily comprised of U.S. Treasury securities, U.S. government agencythree months ended March 31, 2024 and U.S. government sponsored enterprise mortgage-backed securities, and U.S. government agency and U.S. government sponsored enterprise debt securities. The Company may have to provide additional collateral for the repurchase agreements, as necessary. Gross repurchase agreements were $450.0 million as of each of September 30, 2017 and December 31, 2016. The weighted average interest rates were 3.56% and 3.15% as of September 30, 2017 and December 31, 2016,2023, respectively.


Balance Sheet Offsetting

The Company’s resale and repurchase agreements are transacted under legally enforceable master repurchasenetting 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 SheetsSheet 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 acceptedreceived 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 SheetsSheet against the related collateralized liability. Collateral acceptedSecurities 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 isand are usually delivered to and held by the third partythird-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 presenttable presents the resale and repurchase agreements included on the Consolidated Balance SheetsSheet as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
Gross Amounts of Recognized AssetsGross Amounts Offset on the Consolidated Balance SheetNet Amounts of Assets Presented on the Consolidated Balance SheetGross Amounts  Not Offset on the Consolidated  Balance Sheet
($ in thousands)
Collateral Received (1)
Net Amount
Resale agreements as of March 31, 2024$485,000 $— $485,000 $(404,004)$80,996 
Resale agreements as of December 31, 2023$785,000 $— $785,000 $(715,358)$69,642 
 
($ in thousands) As of September 30, 2017
  
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 $1,650,000
 $(400,000) $1,250,000
 $—
 $(1,240,568)
(2) 
$9,432
             
  
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
 $(400,000) $50,000
 $—
 $(50,000)
(3) 
$—
 
(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) 
$—
 
(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.

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



22



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 investmentAFS 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 30, 2017March 31, 2024 and December 31, 2016:2023:
March 31, 2024
($ in thousands)
Amortized Cost (1)
Gross Unrealized GainsGross Unrealized LossesFair Value
AFS debt securities:
U.S. Treasury securities$676,290 $— $(55,196)$621,094 
U.S. government agency and U.S. government-sponsored enterprise debt securities410,676 — (49,874)360,802 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (2):
Commercial mortgage-backed securities513,159 129 (57,669)455,619 
Residential mortgage-backed securities5,229,549 4,212 (241,362)4,992,399 
Municipal securities296,360 47 (37,912)258,495 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities373,834 — (39,838)333,996 
Residential mortgage-backed securities609,705 — (90,048)519,657 
Corporate debt securities653,501 — (150,854)502,647 
Foreign government bonds238,592 605 (12,001)227,196 
Asset-backed securities41,287 — (575)40,712 
CLOs89,000 — (1,149)87,851 
Total AFS debt securities9,131,953 4,993 (736,478)8,400,468 
HTM debt securities:
U.S. Treasury securities530,921 — (45,521)485,400 
U.S. government agency and U.S. government-sponsored enterprise debt securities1,002,697 — (196,898)805,799 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (3):
Commercial mortgage-backed securities491,842 — (93,850)397,992 
Residential mortgage-backed securities734,577 — (153,299)581,278 
Municipal securities188,605 — (44,596)144,009 
Total HTM debt securities2,948,642 — (534,164)2,414,478 
Total debt securities$12,080,595 $4,993 $(1,270,642)$10,814,946 

23

 
  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.

December 31, 2023
($ in thousands)
Amortized Cost (1)
Gross Unrealized GainsGross Unrealized LossesFair Value
AFS debt securities:
U.S. Treasury securities$1,112,587 $101 $(52,313)$1,060,375 
U.S. government agency and U.S. government-sponsored enterprise debt securities412,086 — (47,640)364,446 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (2):
Commercial mortgage-backed securities531,377 158 (63,276)468,259 
Residential mortgage-backed securities1,956,927 380 (229,713)1,727,594 
Municipal securities297,283 75 (36,342)261,016 
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities409,578 — (42,062)367,516 
Residential mortgage-backed securities643,335 — (89,664)553,671 
Corporate debt securities653,501 — (151,076)502,425 
Foreign government bonds239,333 69 (11,528)227,874 
Asset-backed securities43,234 — (934)42,300 
CLOs617,250 — (4,389)612,861 
Total AFS debt securities6,916,491 783 (728,937)6,188,337 
HTM debt securities:
U.S. Treasury securities529,548 — (40,997)488,551 
U.S. government agency and U.S. government-sponsored enterprise debt securities1,001,836 — (186,904)814,932 
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (3):
Commercial mortgage-backed securities493,348 — (88,968)404,380 
Residential mortgage-backed securities742,436 — (142,119)600,317 
Municipal securities188,872 — (43,081)145,791 
Total HTM debt securities2,956,040 — (502,069)2,453,971 
Total debt securities$9,872,531 $783 $(1,231,006)$8,642,308 

(1)Amortized cost excludes accrued interest receivables which are presented within Other assets on the Consolidated Balance Sheet. As of March 31, 2024 and December 31, 2023, the accrued interest receivables were $40 million and $44 million, respectively. For the Company’s accounting policy related to debt securities’ accrued interest receivables, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securities and Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2023 Form 10-K.

(2)Includes GNMA AFS debt securities totaling $4.5 billion of amortized cost and $4.4 billion of fair value as of March 31, 2024, and $1.3 billion of amortized cost and $1.2 billion of fair value as of December 31, 2023.
(3)Includes GNMA HTM debt securities totaling $91 million of amortized cost and $73 million of fair value as of March 31, 2024, and $92 million of amortized cost and $75 million of fair value of as of December 31, 2023.

24

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 individualthe securities have been in a continuous unrealized loss position as of September 30, 2017March 31, 2024 and December 31, 2016:2023.
March 31, 2024
Less Than 12 Months12 Months or MoreTotal
($ in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
AFS debt securities:
U.S. Treasury securities$— $— $621,094 $(55,196)$621,094 $(55,196)
U.S. government agency and U.S. government sponsored enterprise debt securities— — 360,802 (49,874)360,802 (49,874)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities— — 450,965 (57,669)450,965 (57,669)
Residential mortgage-backed securities1,577,361 (4,504)1,642,455 (236,858)3,219,816 (241,362)
Municipal securities4,189 (6)252,268 (37,906)256,457 (37,912)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities— — 333,996 (39,838)333,996 (39,838)
Residential mortgage-backed securities— — 519,657 (90,048)519,657 (90,048)
Corporate debt securities— — 502,647 (150,854)502,647 (150,854)
Foreign government bonds18,567 (61)88,060 (11,940)106,627 (12,001)
Asset-backed securities— — 40,712 (575)40,712 (575)
CLOs— — 87,851 (1,149)87,851 (1,149)
Total AFS debt securities$1,600,117 $(4,571)$4,900,507 $(731,907)$6,500,624 $(736,478)
December 31, 2023
Less Than 12 Months12 Months or MoreTotal
($ in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
AFS debt securities:
U.S. Treasury securities$— $— $623,978 $(52,313)$623,978 $(52,313)
U.S. government agency and U.S. government-sponsored enterprise debt securities— — 364,446 (47,640)364,446 (47,640)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities— — 463,572 (63,276)463,572 (63,276)
Residential mortgage-backed securities9,402 (558)1,661,112 (229,155)1,670,514 (229,713)
Municipal securities2,825 (15)254,773 (36,327)257,598 (36,342)
Non-agency mortgage-backed securities:
Commercial mortgage-backed securities2,742 (4)364,774 (42,058)367,516 (42,062)
Residential mortgage-backed securities— — 553,671 (89,664)553,671 (89,664)
Corporate debt securities— — 502,425 (151,076)502,425 (151,076)
Foreign government bonds110,955 (144)88,616 (11,384)199,571 (11,528)
Asset-backed securities— — 42,300 (934)42,300 (934)
CLOs— — 612,861 (4,389)612,861 (4,389)
Total AFS debt securities$125,924 $(721)$5,532,528 $(728,216)$5,658,452 $(728,937)

25

 
  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)
 


For each reporting period,As of March 31, 2024, the Company examines all individualhad 560 AFS debt securities that are in ana gross unrealized loss position with no credit impairment, primarily consisting of 288 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 66 corporate debt securities, and 95 non-agency mortgage-backed securities. In comparison, as of December 31, 2023, the Company had 547 AFS debt securities in a gross unrealized loss position with no credit impairment, primarily consisting of 255 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 66 corporate debt securities, and 99 non-agency mortgage-backed securities.

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

The Company evaluates each AFS debt security where the fair value declines below amortized cost. 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 InvestmentDebt Securitiesto to the Consolidated Financial Statements ofin the Company’s 20162023 Form 10-K.


The gross unrealized losses presented in the preceding tables were primarily attributable to interest rate movement and the yield curve movement, in addition to widenedwidening of liquidity andand/or credit spreads. U.S. Treasury, U.S. government agency, U.S. government-sponsored agency, and U.S. government-sponsored enterprise debt and mortgage-backed securities are issued, guaranteed, or otherwise supported by the U.S. government and have a zero credit loss assumption. The remaining securities that were in an unrealized loss position as of March 31, 2024 were mainly comprised of the following:

•Corporate debt securities — The market value decline as of March 31, 2024 was primarily due to interest rate movement and spread widening. A portion of the corporate debt securities is comprised of subordinated debt securities issued by U.S. banks. Despite the reduction of the market value of these securities after the banking sector disruption in 2023, these securities are nearly all rated investment grade by nationally recognized statistical rating organizations (“NRSROs”) or issued by well-capitalized financial institutions with strong profitability. The contractual payments from these corporate debt securities have been and are expected to be received on time. The Company will continue to monitor the market developments in the banking sector and the credit performance of these securities.
•Non-agency mortgage-backed securities — The market value decline as of March 31, 2024 was primarily due to interest rate movement and spread 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.

As of both March 31, 2024 and December 31, 2023, the Company intended to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company would 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 Incomeallowance for the three and nine months ended September 30, 2017 and 2016. As of September 30, 2017, the Company had 146 available-for-sale investmentcredit losses provided against these 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, as of both March 31, 2024 and December 31, 2016, the Company had 170 available-for-sale investment securities in an unrealized loss position with2023. 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 OTTIprovision for credit losses were recognized for the three and nine months ended September 30, 2017March 31, 2024 and 2016.2023.


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. For additional information on the Company’s credit loss methodology, refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in the Company’s 2023 Form 10-K.

The Company monitors the credit quality of the HTM debt securities using external credit ratings. As of March 31, 2024, 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 both March 31, 2024 and December 31, 2023. 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.

26

Realized Gains and Losses


The following table presents the proceeds, gross realized gains from the sales and losses,impairment write-off of AFS debt securities and the related tax expense related to the sales of available-for-sale investment securities(benefit) included in earnings for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023:
Three Months Ended March 31,
($ in thousands)20242023
Gross realized gains from sales$49 $— 
Impairment write-off (1)
$— $(10,000)
Related tax expense (benefit)$14 $(2,956)
 
($ 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
 
(1)During the first quarter of 2023, the Company recognized a $10 millionimpairment write-off on a subordinated debt security as a component of noninterest income in the Company’s Consolidated Statement of Income.


Scheduled Maturities of Investment SecuritiesInterest Income

The following table presents the scheduledcomposition of interest income on debt securities for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
($ in thousands)20242023
Taxable interest$70,328 $61,049 
Nontaxable interest5,064 4,882 
Total interest income on debt securities$75,392 $65,931 

27

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

The following tables present the contractual maturities, amortized cost, fair value and weighted-average yields of available-for-sale investmentAFS and HTM debt securities as of September 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
 



ActualMarch 31, 2024. Expected maturities of mortgage-backed securities canwill differ from contractual maturities becauseon 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 theobligations with or without prepayment penalties.
($ in thousands)Within One Year
After One Year through Five Years
After Five Years through Ten YearsAfter Ten YearsTotal
AFS debt securities:
U.S. Treasury securities
Amortized cost$34,901 $641,389 $— $— $676,290 
Fair value33,920 587,174 — — 621,094 
Weighted-average yield (1)
1.83 %1.17 %— %— %1.20 %
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost51,238 94,159 127,833 137,446 410,676 
Fair value51,163 90,935 106,727 111,977 360,802 
Weighted-average yield (1)
4.94 %3.16 %1.60 %2.33 %2.62 %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost3,219 36,135 137,555 5,565,799 5,742,708 
Fair value3,130 34,513 125,890 5,284,485 5,448,018 
Weighted-average yield (1) (2)
2.68 %3.15 %2.73 %5.32 %5.24 %
Municipal securities
Amortized cost2,240 34,998 9,621 249,501 296,360 
Fair value2,219 32,747 8,885 214,644 258,495 
Weighted-average yield (1) (2)
3.39 %2.23 %3.22 %2.23 %2.27 %
Non-agency mortgage-backed securities
Amortized cost82,941 46,116 — 854,482 983,539 
Fair value82,055 45,322 — 726,276 853,653 
Weighted-average yield (1)
3.67 %3.70 %— %2.54 %2.69 %
Corporate debt securities
Amortized cost— — 349,501 304,000 653,501 
Fair value— — 294,845 207,802 502,647 
Weighted-average yield (1)
— %— %3.50 %1.97 %2.79 %
Foreign government bonds
Amortized cost32,724 105,868 50,000 50,000 238,592 
Fair value32,665 106,471 49,640 38,420 227,196 
Weighted-average yield (1)
3.01 %2.28 %5.72 %1.50 %2.94 %
Asset-backed securities
Amortized cost— — — 41,287 41,287 
Fair value— — — 40,712 40,712 
Weighted-average yield (1)
— %— %— %6.06 %6.06 %
CLOs
Amortized cost— — 69,000 20,000 89,000 
Fair value— — 67,924 19,927 87,851 
Weighted-average yield (1)
— %— %7.10 %6.84 %7.04 %
Total AFS debt securities
Amortized cost$207,263 $958,665 $743,510 $7,222,515 $9,131,953 
Fair value$205,152 $897,162 $653,911 $6,644,243 $8,400,468 
Weighted-average yield (1)
3.55 %1.72 %3.51 %4.67 %4.24 %
28

($ in thousands)Within One Year
After One Year through Five Years
After Five Years through Ten YearsAfter Ten YearsTotal
HTM debt securities:
U.S. Treasury securities
Amortized cost$—$530,921$—$—$530,921
Fair value—485,400——485,400
Weighted-average yield (1)
— %1.05 %— %— %1.05 %
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost——343,666659,0311,002,697
Fair value——291,586514,213805,799
Weighted-average yield (1)
— %— %1.90 %1.89 %1.90 %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost—4,85294,5361,127,0311,226,419
Fair value—4,40179,571895,298979,270
Weighted-average yield (1) (2)
— %1.40 %1.59 %1.69 %1.68 %
Municipal securities
Amortized cost———188,605188,605
Fair value———144,009144,009
Weighted-average yield (1) (2)
— %— %— %1.99 %1.99 %
Total HTM debt securities
Amortized cost$—$535,773$438,202$1,974,667$2,948,642
Fair value$—$489,801$371,157$1,553,520$2,414,478
Weighted-average yield (1)
— %1.05 %1.83 %1.79 %1.66 %
(1)Weighted-average yields are computed based on the carrying valuesamortized 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 30, 2017March 31, 2024 and December 31, 2016, 2023, AFS and HTM debt securities with carrying values of $5.8 billion and $7.0 billion, respectively, were pledged to secure borrowings, 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 30, 2017March 31, 2024 and December 31, 2016:2023:
($ in thousands)March 31, 2024December 31, 2023
Federal Reserve Bank of San Francisco (“FRBSF”) stock$62,858 $62,561 
FHLB stock101,544 17,250 
Total restricted equity securities$164,402 $79,811 

     
($ 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
     


Note 76 — Derivatives

The Company uses derivativesderivative instruments to manage exposure to market risk, primarily including interest rate risk and foreign currency risk, andrisks, 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 into mitigate the effect of interest rates are not significant torate 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’sBank’s investment in its China subsidiary, East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance SheetsSheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives consist ofserve 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 20162023 Form 10-K.

29

The following table presents the total notional amounts and fair valuevalues of the Company’s derivatives as of September 30, 2017March 31, 2024 and December 31, 2016:2023. Certain derivative contracts are cleared though central clearing organizations where variation margin is applied daily as settlement to the fair values of the contracts. The fair values are presented on a gross basis prior to the application of bilateral collateral and master netting agreements, but after the application of variation margin payments as settlement to fair values of contracts cleared through central clearing organizations. Applying variation margin payments as settlement to the fair values of derivative contracts cleared through the London Clearing House (“LCH”) and the Chicago Mercantile Exchange (“CME”) resulted in reductions in the derivative asset and liability fair values by $41 million and $47 million, respectively, as of March 31, 2024. In comparison, applying variation margin payments as settlement to LCH- and CME-cleared derivative transactions resulted in reductions in both the derivative asset and liability fair values by $43 million as of December 31, 2023. Total derivative asset and liability fair values are adjusted to reflect the effects of legally enforceable master netting agreements and cash collateral received or paid. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.
March 31, 2024December 31, 2023
Fair ValueFair Value
($ in thousands)Notional AmountAssets Liabilities Notional AmountAssets Liabilities 
Derivatives designated as hedging instruments:
Cash flow hedges:
Interest rate contracts$5,250,000 $15,707 $49,616 $5,250,000 $50,421 $13,124 
Net investment hedges:
Foreign exchange contracts— — — 81,480 3,394 — 
Total derivatives designated as hedging instruments$5,250,000 $15,707 $49,616 $5,331,480 $53,815 $13,124 
Derivatives not designated as hedging instruments:
Interest rate contracts$16,910,462 $469,087 $468,714 $17,387,909 $423,486 $420,812 
Commodity contracts (1)
— 76,615 106,930 — 79,604 121,670 
Foreign exchange contracts4,898,429 60,499 53,153 5,827,149 53,678 42,564 
Credit contracts (2)
118,144 — 16 118,391 1 25 
Equity contracts— 330 (3)15,119 (4)— 336 (3)15,119 (4)
Total derivatives not designated as hedging instruments$21,927,035 $606,531 $643,932 $23,333,449 $557,105 $600,190 
Gross derivative assets/liabilities$622,238 $693,548 $610,920 $613,314 
Less: Master netting agreements(132,555)(132,555)(75,534)(75,534)
Less: Cash collateral received(356,707)(2,408)(237,258)(636)
Net derivative assets/liabilities$132,976 $558,585 $298,128 $537,144 
 
($ 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
 
(1)
Derivative assets and derivative liabilities are included in Other assets and Accrued expenses and other liabilities, respectively,on the Consolidated Balance Sheets.
(2)The Company held four warrants in public companies and 32 warrants in private companies as of September 30, 2017.

(1)The notional amount of the Company’s commodity contracts totaled 18,468 thousand barrels of crude oil and 350,942 thousand units of natural gas, measured in million British thermal units (“MMBTUs”) as of March 31, 2024. In comparison, the notional amount of the Company’s commodity contracts totaled 18,631 thousand barrels of crude oil and 328,844 thousand MMBTUs of natural gas as of December 31, 2023.

(2)The notional amount of the credit contracts reflects the Company’s pro-rata share of the underlying derivative instruments in RPAs.

(3)The Company held warrant equity contracts in 11 private companies and one public company as of both March 31, 2024 and December 31, 2023.
(4)Equity contracts classified as derivative liabilities consist of 349,138 performance-based RSUs granted as part of EWBC’s consideration in its investment in Rayliant.

Derivatives Designated as Hedging Instruments


Interest Rate Swaps on Certificates of Deposit Cash Flow Hedges— The Company is exposeduses interest rate swaps to changeshedge the variability in the fair value ofinterest amount received on certain fixed rate certificates of depositfloating-rate commercial loans, or paid on certain floating-rate borrowings due to changes in the benchmarkcontractually specified interest rates. As of March 31, 2024, interest rate London Interbank Offered Rate. Interest rate swaps designated as fair value hedges involve the receipt of fixed rate amounts from a counterpartycontracts in exchange for the Company making variable rate payments over the life of the agreements without the exchange of the underlying notional amount.

As of September 30, 2017 and December 31, 2016, the total notional amounts of $5.3 billion were designated as cash flow hedges to convert certain variable-rate loans from floating-rate payments to fixed-rate payments. Gains and losses on the hedging derivative instruments are recognized in AOCI and reclassified to earnings in the same period the hedged cash flows impact earnings and within the same income statement line item as the hedged cash flows. Considering the interest rate swaps on certificates of deposit were $42.6 millionrates, yield curve and $48.4 million, respectively. The fair value liabilities of the interest rate swaps were $6.6 million and $6.0 millionnotional amount as of September 30, 2017 and DecemberMarch 31, 2016, respectively.2024, the Company expects to reclassify an estimated $50 million of after-tax net losses on derivative instruments designated as cash flow hedges from AOCI into earnings during the next 12 months.


30

The following table presents the net gains (losses) recognized on the Consolidated Statements of Income related to the derivatives designated as fair valuepre-tax changes in AOCI from cash flow hedges for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023. The after-tax impact of cash flow hedges on AOCI is shown in Note 14 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.
Three Months Ended March 31,
($ in thousands)20242023
 (Losses) gains recognized in AOCI:
Interest rate contracts$(90,376)$29,843 
 (Losses) gains reclassified from AOCI into earnings:
Interest expense (for cash flow hedges on borrowings)$— $696 
Interest and dividend income (for cash flow hedges on loans)(24,605)(12,954)
Noninterest income— 1,614 (1)
Total$(24,605)$(10,644)
 
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Gains (losses) recorded in interest expense:        
  Recognized on interest rate swaps $37
 $(1,327) $(1,486) $3,044
  Recognized on certificates of deposit $(116) $674
 $1,236
 $(2,688)
 
(1)Represents the amounts in AOCI reclassified into earnings as a result that the forecasted cash flows were no longer probable to occur.


Net Investment Hedges — ASC 830-20, Foreign Currency Matters — Foreign Currency Transactions and ASC 815, Derivatives and Hedging, allow hedging of the foreign currency risk of a net investment in a foreign operation. During the fourth quarter of 2015, theThe Company began enteringenters into foreign currency forward contracts to hedge itsa portion of the Bank’s investment in East West Bank (China) Limited, a non-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,were used to hedge against the risk of adverse changes in the foreign currency exchange rate. The Company recorded the changes in the carrying amount of its China subsidiary in the Foreign currency translation adjustment account within AOCI. Simultaneously, the effective portionrate of the hedge of this exposure was also recorded in the Foreign currency translation adjustment account and the ineffective portion, if any, was recorded in current earnings. During the first quarter of 2017, the Company discontinued hedge accounting prospectively.Chinese Renminbi (“RMB”). The cumulative effective portion of the net investment hedges recorded through the point of dedesignation remainedhedge in the Foreign currency translation adjustment account within AOCI, and will be reclassified into earnings only upon the sale or liquidation of the China subsidiary. The Company continues to economically hedge its foreign currency exposure in its China subsidiary through foreign exchange forward contracts, which were includedplace as part of the Derivatives Not Designated as Hedging Instruments — “Foreign Exchange Contracts” caption as of September 30, 2017.

As of September 30, 2017, there were no derivative contracts designated as net investment hedges. As of December 31, 2016,2023 expired during the total notional amount and fair value of the foreign currency forward contracts designated as net investment hedges were $83.0 million and a $4.3 million asset, respectively.three months ended March 31, 2024. The following table presents the pre-tax gains (losses) recordedor losses recognized in the Foreign currency translation adjustment account within AOCI related to the effective portion of theon net investment hedges and the ineffective portion recorded on the Consolidated Statements of Income for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023:
Three Months Ended March 31,
($ in thousands)20242023
Gains (losses) recognized in AOCI$586 $(1,076)
 
($ in thousands) Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Gains (losses) recognized in AOCI on net investment hedges (effective portion) $—
 $69
 $(648) $296
Losses recognized in foreign exchange income (ineffective portion) $—
 $(236) $(1,953) $(667)
 




Derivatives Not Designated as Hedging Instruments


Interest Rate SwapsCustomer-Related Positions and OptionsEconomic Hedge Derivatives —The Company enters into interest rate, commodity, and foreign exchange derivatives including interest rate swaps and options withat the request of its customers to allow them to hedge against the risk of rising interest rates on their variable rate loans. To economically hedge against the interest rate risks in the products offered to its customers, the Companyand generally enters into mirrored interest rateoffsetting derivative contracts with institutional counterparties. As of September 30, 2017,third-party financial institutions to mitigate 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 were 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 value of interest rate swap and option contracts with institutional counterparties and the Company’s customers amounted to a $64.8 million asset and a $64.2 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.
Foreign Exchange Contracts —inherent market risk. The Company enters intoalso utilizes foreign exchange contracts with its customers, primarily comprisedto mitigate the effect of forward, swap and spot contracts to enable 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 inon certain foreign currency-denominated on-balance sheet assets and liabilities, primarily 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 acustomers. A majority of the foreign exchange transactions entered with its customers, the Company enters into offsetting foreign exchange contracts with institutional counterparties to mitigate the foreign exchange risk. A majority of these contracts havehad original maturities of one year or less. Asless as of September 30, 2017both March 31, 2024 and December 31, 2016,2023.

31

The following table presents the total notional amounts ofand the foreign exchange contracts were $1.13 billion and $767.8 million, respectively.  Thegross fair values of the interest rate and foreign exchange contracts recorded were a $14.2 million assetderivatives entered into with customers and a $20.1 million liabilitywith third-party financial institutions as economic hedges to customers’ positions as of September 30, 2017. March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
Fair ValueFair Value
($ in thousands)Notional AmountAssetsLiabilitiesNotional AmountAssetsLiabilities
Customer-related positions:
Interest rate contracts:
Swaps$6,874,132 $9,521 $442,960 $6,835,822 $25,649 $377,388 
Written options1,287,121 — 11,909 1,522,531 — 12,756 
Collars and corridors281,117 130 3,371 322,732 440 4,481 
Subtotal8,442,370 9,651 458,240 8,681,085 26,089 394,625 
Foreign exchange contracts:
Forwards and spot643,298 4,124 7,548 956,618 9,466 6,756 
Swaps1,577,082 19,020 24,839 1,588,491 5,801 18,118 
Purchased options129,000 2,580 — 136,000 1,839 — 
Subtotal2,349,380 25,724 32,387 2,681,109 17,106 24,874 
Total$10,791,750 $35,375 $490,627 $11,362,194 $43,195 $419,499 
Economic hedges:
Interest rate contracts:
Swaps$6,899,692 $444,094 $10,337 $6,861,561 $380,123 $25,731 
Purchased options1,287,283 11,962 — 1,522,531 12,783 — 
Collars and corridors281,117 3,380 137 322,732 4,491 456 
Subtotal8,468,092 459,436 10,474 8,706,824 397,397 26,187 
Foreign exchange contracts:
Forwards and spot33,003 42 18 148,003 292 94 
Swaps2,387,046 34,733 18,168 2,862,037 36,280 15,757 
Written options129,000 — 2,580 136,000 — 1,839 
Subtotal2,549,049 34,775 20,766 3,146,040 36,572 17,690 
Total$11,017,141 $494,211 $31,240 $11,852,864 $433,969 $43,877 

32

The Company enters into energy commodity contracts with its customers in the oil and gas sector, which allow them to hedge against the risk of fluctuation in energy commodity prices. Offsetting contracts entered with third-party financial institutions are used as economic hedges to manage the Company’s exposure on its customer-related positions. The following table presents the notional amounts in units and the gross fair values of the foreign exchange contracts recorded were an $11.9 million assetcommodity derivatives issued for customer-related positions and an $11.2 million liabilityeconomic hedges as of March 31, 2024 and December 31, 2016.2023:

March 31, 2024December 31, 2023
Fair ValueFair Value
($ and unit in thousands)Notional UnitsAssetsLiabilitiesNotional UnitsAssetsLiabilities
Customer-related positions:
Commodity contracts:
Crude oil:
Swaps3,608 Barrels$15,370 $685 3,277 Barrels$3,735 $15,445 
Collars5,576 Barrels11,901 115 5,966 Barrels1,820 5,103 
Subtotal9,184 Barrels27,271 800 9,243 Barrels5,555 20,548 
Natural gas:
Swaps127,102 MMBTUs1,420 70,028 118,325 MMBTUs438 73,793 
Collars47,953 MMBTUs672 17,107 45,854 MMBTUs21 20,400 
Written options1,976 MMBTUs132 33 1,874 MMBTUs— 233 
Subtotal177,031 MMBTUs2,224 87,168 166,053 MMBTUs459 94,426 
Total$29,495 $87,968 $6,014 $114,974 
Economic hedges:
Commodity contracts:
Crude oil:
Swaps3,708 Barrels$1,788 $12,997 3,422 Barrels$9,166 $4,924 
Collars5,576 Barrels1 4,902 5,966 Barrels1,685 1,467 
Subtotal9,284 Barrels1,789 17,899 9,388 Barrels10,851 6,391 
Natural gas:
Swaps124,582 MMBTUs37,170 629 116,463 MMBTUs49,941 305 
Collars47,353 MMBTUs8,120 318 44,454 MMBTUs12,565 — 
Purchased options1,976 MMBTUs41 116 1,874 MMBTUs233 — 
Subtotal173,911 MMBTUs45,331 1,063 162,791 MMBTUs62,739 305 
Total$47,120 $18,962 $73,590 $6,696 

Credit Risk Participation AgreementsContracts — The Company has enteredperiodically enters into credit RPAs under whichwith institutional counterparties to manage the Company assumed its pro-rata sharecredit exposure of the interest rate contracts associated with syndication loans. Under the RPAs, a portion of the credit exposure associated withis transferred from one party (the purchaser of credit protection) to another party (the seller of credit protection). The seller of credit protection is required to make payments to the borrower’s performancepurchaser of credit protection if the underlying borrower defaults on the related to interest rate derivative contracts. contract. The Company may enter into protection sold 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 or receive payments under the RPAs if the borrower defaults on its obligation to perform under the interest rate derivative contract. The Company manages its creditprotection purchased RPAs.Credit risk on the RPAs is managed by monitoring the credit worthiness of the borrowers and the institutional counterparties, which is based ona part of the Company’s normal credit review and monitoring process. The notional amountAll referenced entities of the protection sold RPAs reflectwere investment grade and the Company’s pro-rata shareweighted-average remaining maturity was 2.6 years and 2.8 years as of the derivative instrument. As of September 30, 2017, the notional amountMarch 31, 2024 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,2023, respectively. Assuming allthe underlying borrowers referenced in the interest rate derivative contracts defaulted, the maximum exposure in the protection sold RPAs would be $82 thousand and $177 thousand as of September 30, 2017March 31, 2024 and December 31, 2016, the exposures from the RPAs purchased would be $92 thousand and $179 thousand,2023, respectively.

As of September 30, 2017both March 31, 2024 and December 31, 2016,2023, the weighted average remaining maturitiesCompany had one outstanding protection purchased RPA with notional amount of the outstanding RPAs were 3.0 years$25 million and 3.7 years, respectively.minimal fair value.


Warrants
33

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. As of September 30, 2017,process, the Company held fourmay obtain warrants in public companies and 32 warrants in private companies. The fair valuesto purchase the preferred and/or common stock of the warrants for publicborrowers’ companies, which are mainly in the technology and private companies were an $856 thousand assetlife sciences sectors. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. In connection with the Company’s investment in Rayliant during the third quarter of 2023, the Company granted performance-based RSUs as part of its consideration. The vesting of these equity contracts is contingent on Rayliant meeting certain financial performance targets during the future performance period. For additional information on these equity contracts, refer to Note 3— Fair Value Measurement and a $599 thousand asset, respectively, totaling $1.5 million asFair Value of September 30, 2017.Financial Instruments to the Consolidated Financial Statements in this Form 10-Q.




The following table presents the net gains (losses) recognized on the Company’s Consolidated StatementsStatement of Income related to derivatives not designated as hedging instruments for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023:
Three Months Ended March 31,
($ in thousands)Classification on Consolidated Statement of Income20242023
Derivatives not designated as hedging instruments:
Interest rate contractsCustomer derivative income$484 $(2,484)
Foreign exchange contractsForeign exchange income12,780 10,442 
Credit contractsCustomer derivative income(5)(5)
Equity contracts - warrantsLending fees(6)(45)
Commodity contractsCustomer derivative income134 6 
Net gains$13,387 $7,914 
 
($ 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
 


Credit-Risk-Related Contingent Features— Certain of the Company’s over-the-counter derivative contracts of the Company contain early termination provisions that may require the Company to settle any outstanding balances upon the occurrence of a specified credit-risk-related event. These events, which are defined by the existing derivative contracts,Such an event primarily relaterelates to a downgrade inof the credit rating of East West Bank to below investment grade.grade. As of March 31, 2024, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $2 million, for which $2 million collateral was posted to cover these positions. In comparison, as of December 31, 2023, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $9 thousand, for which no collateral was posted to cover these positions. In the event that the credit rating of East West Bank’s credit rating isBank had been downgraded to below investment grade, nothe Company would have been required to post minimal additional collateral would be required to be posted, since the liabilities related to such contracts were fully collateralized as of September 30, 2017both March 31, 2024 and December 31, 2016.2023.



34


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 derivativesderivative fair values, the balance sheet netting adjustments, and the resulting net fair values recorded on the Consolidated Balance SheetsSheet, 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 inapplication of variation margin payments as settlements to the formfair values of other financial instruments, which are generally marketable securities and/or cash.contracts cleared through central clearing organizations, where applicable. The collateral amounts in thesethe following tables are limited to the outstanding balances of the related asset or liability (after netting is applied); thusliability. Therefore, instances of overcollateralizationover-collateralization are not shown:
($ in thousands)As of March 31, 2024
Gross Amounts Recognized (1)
Gross Amounts Offset on the Consolidated Balance SheetNet Amounts Presented on the Consolidated Balance SheetGross Amounts Not Offset on the Consolidated Balance SheetNet Amount
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral Received (5)
Derivative assets$622,238 $(132,555)$(356,707)$132,976 $(99,877)$33,099 
 Gross Amounts Recognized (2)
Gross Amounts Offset on the Consolidated Balance SheetNet Amounts Presented on the Consolidated Balance SheetGross Amounts Not Offset on the Consolidated Balance SheetNet Amount
Master Netting Arrangements
Cash Collateral Pledged (4)
Security Collateral Pledged (5)
Derivative liabilities$693,548 $(132,555)$(2,408)$558,585 $— $558,585 
 
  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, 2023
 Gross Amounts Recognized (1)
Gross Amounts Offset on the Consolidated Balance SheetNet Amounts Presented on the Consolidated Balance SheetGross Amounts Not Offset on the Consolidated Balance SheetNet Amount
Master Netting Arrangements
Cash Collateral Received (3)
Security Collateral Received (5)
Derivative assets$610,920 $(75,534)$(237,258)$298,128 $(246,259)$51,869 
 Gross Amounts Recognized (2)
Gross Amounts Offset on the Consolidated Balance SheetNet Amounts Presented on the Consolidated Balance SheetGross Amounts Not Offset on the Consolidated Balance SheetNet Amount
Master Netting Arrangements
Cash Collateral Pledged (4)
Security Collateral Pledged (5)
Derivative liabilities$613,314 $(75,534)$(636)$537,144 $— $537,144 
(1)Includes $2 million and $3 million of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of March 31, 2024 and December 31, 2023, 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
 
(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.

(2)Includes $17 million and $16 million of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of March 31, 2024 and December 31, 2023, respectively.
(3)Gross cash collateral received under master netting arrangements or similar agreements was $362 million and $244 million as of March 31, 2024 and December 31, 2023, respectively. Of the gross cash collateral received, $357 million and $237 million were used to offset derivative assets as of March 31, 2024 and December 31, 2023, respectively.
(4)Gross cash collateral pledged under master netting arrangements or similar agreements was $3 million and $1 million as of March 31, 2024 and December 31, 2023, respectively. Of the gross cash collateral pledged, $2 million and $1 millionwere used to offset derivative liabilities as of March 31, 2024 and December 31, 2023, respectively.
(5)Represents the fair value of security collateral received or pledged limited to derivative assets or liabilities that are subject to enforceable master netting arrangements or similar agreements. U.S. 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 resale and repurchase agreements, referagreements. Refer to Note 54 — Securities 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.

35




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 30, 2017March 31, 2024 and December 31, 2016:2023:
($ in thousands)March 31, 2024December 31, 2023
Commercial:
C&I$16,350,191 $16,581,079 
CRE:
CRE14,609,655 14,777,081 
Multifamily residential5,010,245 5,023,163 
Construction and land673,939 663,868 
Total CRE20,293,839 20,464,112 
Total commercial36,644,030 37,045,191 
Consumer:
Residential mortgage:
Single-family residential13,563,738 13,383,060 
HELOCs1,731,233 1,722,204 
Total residential mortgage15,294,971 15,105,264 
Other consumer53,503 60,327 
Total consumer15,348,474 15,165,591 
Total loans held-for-investment (1)
$51,992,504 $52,210,782 
Allowance for loan losses(670,280)(668,743)
Loans held-for-investment, net (1)
$51,322,224 $51,542,039 
 
($ 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)(1)Includes $63 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 loans include income producing real estate, construction and land loans where the interest rates may be fixed, variable or hybrid. Included in CRE loans are owner occupied$71 million of net deferred loan fees 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 spectrumnet unamortized premiums 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 30, 2017March 31, 2024 and December 31, 2016, the Company’s HELOCs were the largest component2023, respectively.

Accrued interest receivable on loans held-for-investment was $268 million and $267 million as of the consumer loan portfolio, and were secured by one-to-four unit residential properties located in its primary lending areas. The HELOCs loan portfolio is largely comprised 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 30, 2017March 31, 2024 and December 31, 2016,2023, respectively, and was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for both the three months ended March 31, 2024 and 2023. 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 — Loans Held-for-Investment to the Consolidated Financial Statements of the Company’s 2023 Form 10-K. The Company also has loans held-for-sale. For the Company’s accounting policy on loans held-for-sale, 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 2023 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$37.1 billion and $16.44$37.2 billion, respectively, were pledged to secure borrowings and to provide additional borrowing capacity from the Federal Reserve Bankas of March 31, 2024 and the FHLB.December 31, 2023.


Credit Quality Indicators


All loans are subject to the Company’s internal and external credit review and monitoring. Loansmonitoring 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, currentrepayment sources, financial and liquidity statusfactors, 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 — loans risk rated 1 through 5 are assigned an internal risk rating category of “Pass.” Loans risk rated 1 are typically loans fully secured by cash. Pass Watch, Special Mention, Substandard, Doubtful and Loss. The risk ratings reflect the relative strength of the repayment sources.

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 Mentionmention — loans are considered toassigned a risk rating of 6 have potential weaknesses that warrant closer attention by management. Special Mention is consideredmanagement; 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 Passrisk 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. Substandardloan; these are assigned an internal risk rating category of “Substandard.”
•Doubtful — loans haveassigned a distinct possibilityrisk 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.”
36

•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. Theseassets; 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 routinelyof its loan portfolio on a regular basis, and adjustedadjusts the ratings based on changes in the borrowers’ financial status and the loans’ collectability.collectability of the loans.




The following tables presentsummarize the creditCompany’s loans held-for-investment and year-to-date gross write-offs by loan portfolio segments, internal risk ratings for non-PCIand vintage year as of the periods presented. The vintage year is the year of loan origination, renewal or major modification. Revolving loans that are converted to term loans presented in the tables below are excluded from term loans by portfolio segment asvintage year columns.
March 31, 2024
Term Loans by Origination Year
($ in thousands)20242023202220212020PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Commercial:
C&I:
Pass$494,511 $2,181,627 $1,390,042 $1,162,380 $290,790 $357,396 $9,858,874 $23,801 $15,759,421 
Criticized (accrual)15 80,137 146,122 126,563 8,378 61,936 118,657 — 541,808 
Criticized (nonaccrual)— 15,676 10,179 631 4,193 17,313 970 — 48,962 
Total C&I494,526 2,277,440 1,546,343 1,289,574 303,361 436,645 9,978,501 23,801 16,350,191 
Gross write-offs for the three months ended March 31, 2024 (2)
— 221 11,550 3,047 488 1,528 (56)(3)— 16,778 
CRE:
Pass310,715 2,415,104 3,940,346 2,125,414 1,412,088 3,815,741 90,300 48,880 14,158,588 
Criticized (accrual)— 66,187 54,141 26,402 53,926 200,610 — 14,795 416,061 
Criticized (nonaccrual)— 1,750 — — — 33,256 — — 35,006 
Subtotal CRE310,715 2,483,041 3,994,487 2,151,816 1,466,014 4,049,607 90,300 63,675 14,609,655 
Gross write-offs for the three months ended March 31, 2024— — — — — 2,398 — — 2,398 
Multifamily residential:
Pass43,746 652,947 1,482,963 794,023 645,391 1,329,341 6,831 1,275 4,956,517 
Criticized (accrual)— 13,939 — 31,882 — 3,261 — — 49,082 
Criticized (nonaccrual)— — — — — 4,646 — — 4,646 
Subtotal multifamily residential43,746 666,886 1,482,963 825,905 645,391 1,337,248 6,831 1,275 5,010,245 
Gross write-offs for the three months ended March 31, 2024— — — — — 6 — — 6 
Construction and land:
Pass2,980 266,224 234,093 124,830 1,603 6,290 8,795 — 644,815 
Criticized (accrual)— — 16,888 — — — — — 16,888 
Criticized (nonaccrual)— — 12,236 — — — — — 12,236 
Subtotal construction and land2,980 266,224 263,217 124,830 1,603 6,290 8,795 — 673,939 
Gross write-offs for the three months ended March 31, 2024— — 1,224 — — — — — 1,224 
Total CRE357,441 3,416,151 5,740,667 3,102,551 2,113,008 5,393,145 105,926 64,950 20,293,839 
Total CRE gross write-offs for the three months ended March 31, 2024— — 1,224 — — 2,404 — — 3,628 
Total commercial$851,967 $5,693,591 $7,287,010 $4,392,125 $2,416,369 $5,829,790 $10,084,427 $88,751 $36,644,030 
Total commercial gross write-offs for the three months ended March 31, 2024 (2)
$— $221 $12,774 $3,047 $488 $3,932 $(56)(3)$— $20,406 
37

March 31, 2024
Term Loans by Origination Year
($ in thousands)20242023202220212020PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (4)
$547,073 $3,077,628 $3,285,262 $2,236,107 $1,553,848 $2,814,348 $— $— $13,514,266 
Criticized (accrual)— 3,196 — 1,764 3,910 5,583 — — 14,453 
Criticized (nonaccrual) (4)
— 7,860 5,874 3,389 3,718 14,178 — — 35,019 
Subtotal single-family residential mortgage547,073 3,088,684 3,291,136 2,241,260 1,561,476 2,834,109 — — 13,563,738 
HELOCs:
Pass4,798 3,655 3,394 2,817 5,107 9,288 1,561,308 123,131 1,713,498 
Criticized (accrual)— 808 2,435 360 — 670 718 1,246 6,237 
Criticized (nonaccrual)— 65 518 219 — 5,906 — 4,790 11,498 
Subtotal HELOCs4,798 4,528 6,347 3,396 5,107 15,864 1,562,026 129,167 1,731,233 
Total residential mortgage551,871 3,093,212 3,297,483 2,244,656 1,566,583 2,849,973 1,562,026 129,167 15,294,971 
Other consumer:
Pass2,132 632 18,101 134 — 6,861 22,481 — 50,341 
Criticized (accrual)— — — — — — 3,000 — 3,000 
Criticized (nonaccrual)— — — — — — 162 — 162 
Total other consumer2,132 632 18,101 134 — 6,861 25,643 — 53,503 
Gross write-offs for the three months ended March 31, 2024 (2)
— — — — — — 2 — 2 
Total consumer$554,003 $3,093,844 $3,315,584 $2,244,790 $1,566,583 $2,856,834 $1,587,669 $129,167 $15,348,474 
Total consumer gross write-offs for the three months ended March 31, 2024 (2)
$— $— $— $— $— $— $2 $— $2 
Total loans held-for-investment:
Pass$1,405,955 $8,597,817 $10,354,201 $6,445,705 $3,908,827 $8,339,265 $11,548,589 $197,087 $50,797,446 
Criticized (accrual)15 164,267 219,586 186,971 66,214 272,060 122,375 16,041 1,047,529 
Criticized (nonaccrual)— 25,351 28,807 4,239 7,911 75,299 1,132 4,790 147,529 
Total$1,405,970 $8,787,435 $10,602,594 $6,636,915 $3,982,952 $8,686,624 $11,672,096 $217,918 $51,992,504 
Total loans held-for-investment gross write-offs for the three months ended March 31, 2024 (2)
$— $221 $12,774 $3,047 $488 $3,932 $(54)(3)$— $20,408 
















38


December 31, 2023
Term Loans by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Commercial:
C&I:
Pass$2,314,463 $1,628,560 $1,296,936 $331,982 $245,173 $164,159 $10,053,757 $20,143 $16,055,173 
Criticized (accrual)105,119 67,899 120,574 15,064 40,920 22,098 117,196 — 488,870 
Criticized (nonaccrual)2,104 7,916 131 4,819 2,979 18,137 950 — 37,036 
Total C&I2,421,686 1,704,375 1,417,641 351,865 289,072 204,394 10,171,903 20,143 16,581,079 
Gross write-offs for the year ended December 31, 2023 (2)
350 10,454 424 3,758 9,748 2,648 1,593 — 28,975 
CRE:
Pass2,492,915 4,086,385 2,216,257 1,428,724 1,600,844 2,494,382 92,851 62,771 14,475,129 
Criticized (accrual)36,855 34,485 30,336 48,250 24,437 104,340 — — 278,703 
Criticized (nonaccrual)— — — — 444 22,805 — — 23,249 
Subtotal CRE2,529,770 4,120,870 2,246,593 1,476,974 1,625,725 2,621,527 92,851 62,771 14,777,081 
Gross write-offs for the year ended December 31, 2023 (2)
— — — — — 1,329 — — 1,329 
Multifamily residential:
Pass665,780 1,481,161 808,333 612,408 498,491 857,713 8,690 1,281 4,933,857 
Criticized (accrual)— 3,356 54,614 — 693 25,974 — — 84,637 
Criticized (nonaccrual)— — — — — 4,669 — — 4,669 
Subtotal multifamily residential665,780 1,484,517 862,947 612,408 499,184 888,356 8,690 1,281 5,023,163 
Gross write-offs for the year ended December 31, 2023— — — — — 3 — — 3 
Construction and land:
Pass209,775 280,151 120,724 39,928 808 5,501 6,981 — 663,868 
Subtotal construction and land209,775 280,151 120,724 39,928 808 5,501 6,981 — 663,868 
Total CRE3,405,325 5,885,538 3,230,264 2,129,310 2,125,717 3,515,384 108,522 64,052 20,464,112 
Total CRE gross write-offs for the year ended December 31, 2023 (2)
— — — — — 1,332 — — 1,332 
Total commercial$5,827,011 $7,589,913 $4,647,905 $2,481,175 $2,414,789 $3,719,778 $10,280,425 $84,195 $37,045,191 
Total commercial gross write-offs for the year ended December 31, 2023 (2)
350 10,454 424 3,758 9,748 3,980 1,593 — 30,307 
39

December 31, 2023
Term Loans by Origination Year
($ in thousands)20232022202120202019PriorRevolving Loans
Revolving Loans Converted to Term Loans (1)
Total
Consumer:
Residential mortgage:
Single-family residential:
Pass (4)
$3,188,830 $3,340,789 $2,279,802 $1,594,525 $980,686 $1,959,974 $— $— $13,344,606 
Criticized (accrual)2,680 4,471 566 1,440 1,503 4,167 — — 14,827 
Criticized (nonaccrual) (4)
4,466 837 3,902 2,081 3,626 8,715 — — 23,627 
Subtotal single-family residential mortgage3,195,976 3,346,097 2,284,270 1,598,046 985,815 1,972,856 — — 13,383,060 
HELOCs:
Pass3,641 3,882 1,734 3,153 729 9,251 1,551,074 126,280 1,699,744 
Criticized (accrual)565 1,219 1,872 101 185 1,470 2,548 1,089 9,049 
Criticized (nonaccrual)815 856 413 72 584 6,863 279 3,529 13,411 
Subtotal HELOCs5,021 5,957 4,019 3,326 1,498 17,584 1,553,901 130,898 1,722,204 
Gross write-offs for the year ended December 31, 2023 (2)
— — — — — 41 — 6 47 
Total residential mortgage3,200,997 3,352,054 2,288,289 1,601,372 987,313 1,990,440 1,553,901 130,898 15,105,264 
Total residential mortgage gross write-offs for the year ended December 31, 2023 (2)
— — — — — 41 — 6 47 
Other consumer:
Pass2,286 18,098 135 — — 13,244 26,432 — 60,195 
Criticized (nonaccrual)— — — — — — 132 — 132 
Total other consumer2,286 18,098 135 — — 13,244 26,564 — 60,327 
Total consumer$3,203,283 $3,370,152 $2,288,424 $1,601,372 $987,313 $2,003,684 $1,580,465 $130,898 $15,165,591 
Total consumer gross write-offs for the year ended December 31, 2023 (2)
$— $— $— $— $— $41 $— $6 $47 
Total by Risk Rating:
Pass$8,877,690 $10,839,026 $6,723,921 $4,010,720 $3,326,731 $5,504,224 $11,739,785 $210,475 $51,232,572 
Criticized (accrual)145,219 111,430 207,962 64,855 67,738 158,049 119,744 1,089 876,086 
Criticized (nonaccrual)7,385 9,609 4,446 6,972 7,633 61,189 1,361 3,529 102,124 
Total$9,030,294 $10,960,065 $6,936,329 $4,082,547 $3,402,102 $5,723,462 $11,860,890 $215,093 $52,210,782 
Total loans held-for-investment gross write-offs for the year ended December 31, 2023 (2)
$350 $10,454 $424 $3,758 $9,748 $4,021 $1,593 $6 $30,354 
(1)$7 million and $12 million of September 30, 2017total commercial loans, comprised of C&I and CRE revolving loans, converted to term loans during the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, respectively, $15 million and $5 million of total consumer loans, comprised of HELOCs, converted to term loans.
(2)Excludes gross write-offs associated with loans the Company sold or settled.
(3)Represents the remaining unamortized deferred loan fee related to a zero balance loan with no previous charge-offs.
(4)As of both March 31, 2024 and December 31, 2016:2023, $1 million of nonaccrual loans whose payments were guaranteed by the Federal Housing Administration were classified with a “Pass” rating.
40
 
($ 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, 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 of September 30, 2017 and December 31, 2016:
 
($ 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
 
 
($ 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 loansLoans that are 90 or more days past due are generally placed on nonaccrual status. Additionally, non-PCI loansstatus 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-PCIof loans held-for-investment as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
March 31, 2024
($ in thousands)Current Accruing LoansAccruing Loans 30-59 Days Past DueAccruing Loans 60-89 Days Past DueTotal Accruing Past Due LoansTotal Nonaccrual LoansTotal Loans
Commercial:
C&I$16,281,903 $4,559 $14,767 $19,326 $48,962 $16,350,191 
CRE:
CRE14,555,923 18,726 — 18,726 35,006 14,609,655 
Multifamily residential5,005,231 368 — 368 4,646 5,010,245 
Construction and land661,703 — — — 12,236 673,939 
Total CRE20,222,857 19,094 — 19,094 51,888 20,293,839 
Total commercial36,504,760 23,653 14,767 38,420 100,850 36,644,030 
Consumer:
Residential mortgage:
Single-family residential13,478,789 33,911 15,369 49,280 35,669 13,563,738 
HELOCs1,699,628 13,877 6,230 20,107 11,498 1,731,233 
Total residential mortgage15,178,417 47,788 21,599 69,387 47,167 15,294,971 
Other consumer53,224 60 57 117 162 53,503 
Total consumer15,231,641 47,848 21,656 69,504 47,329 15,348,474 
Total$51,736,401 $71,501 $36,423 $107,924 $148,179 $51,992,504 
December 31, 2023
($ in thousands)Current Accruing LoansAccruing Loans 30-59 Days Past DueAccruing Loans 60-89 Days Past DueTotal Accruing Past Due LoansTotal Nonaccrual LoansTotal Loans
Commercial:
C&I$16,508,394 $28,550 $7,099 $35,649 $37,036 $16,581,079 
CRE:
CRE14,750,315 1,719 1,798 3,517 23,249 14,777,081 
Multifamily residential5,017,897 597 — 597 4,669 5,023,163 
Construction and land650,617 13,251 — 13,251 — 663,868 
Total CRE20,418,829 15,567 1,798 17,365 27,918 20,464,112 
Total commercial36,927,223 44,117 8,897 53,014 64,954 37,045,191 
Consumer:
Residential mortgage:
Single-family residential13,313,455 29,285 15,943 45,228 24,377 13,383,060 
HELOCs1,687,301 12,266 9,226 21,492 13,411 1,722,204 
Total residential mortgage15,000,756 41,551 25,169 66,720 37,788 15,105,264 
Other consumer56,930 3,123 142 3,265 132 60,327 
Total consumer15,057,686 44,674 25,311 69,985 37,920 15,165,591 
Total$51,984,909 $88,791 $34,208 $122,999 $102,874 $52,210,782 

41

 
($ 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, 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 onThe following table presents the policy for recording payments received and resuming accrualamortized cost 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. As of September 30, 2017 and December 31, 2016, PCI loans on nonaccrual status totaled $5.7 million and $11.7 million, respectively.



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

As of September 30, 2017both March 31, 2024 and December 31, 2016,2023. Nonaccrual loans may not have an allowance for credit losses if the loan balances are well secured by collateral values and there is no loss expectation.
($ in thousands)March 31, 2024December 31, 2023
Commercial:
C&I$40,617 $33,089 
CRE34,431 22,653 
Multifamily residential4,235 4,235 
Construction and land12,236 — 
Total commercial91,519 59,977 
Consumer:
Single-family residential15,380 4,852 
HELOCs6,287 7,256 
Total consumer21,667 12,108 
Total nonaccrual loans with no related allowance for loan losses$113,186 $72,085 

Foreclosed Assets

The Company acquires assets from borrowers through loan restructurings, workouts, or foreclosures. Assets acquired may include real properties (e.g., real estate, land, and buildings) and commercial and personal properties. The Company recognizes foreclosed assets upon receiving assets in satisfaction of a loan (e.g., taking legal title or physical possession).

Foreclosed assets, consisting of OREO and other nonperforming assets, are included in Other assets on the Consolidated Balance Sheet. The Company had $6.3$17 million and $3.1 million, respectively, of recorded investments in residential and consumer mortgage loans secured by residential real estate properties, for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions, which were not included in OREO. A foreclosed residential real estate property with a carrying amount of $391 thousand was included in total net OREO of $2.3 millionassets as of September 30, 2017. In comparison, foreclosed residential real estate propertiesMarch 31, 2024, compared with a carrying amount of $401 thousand were included in total net OREO of $6.7$11 million as of December 31, 2016.

Troubled Debt Restructurings

Potential troubled debt restructurings (“TDRs”) are individually evaluated and2023. The Company commences the type of restructuring is selected basedforeclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the loan type and the circumstancesCFPB guidelines. The carrying value of the borrower’s financial difficultyconsumer real estate loans that were in orderan active or suspended foreclosure process was $8 million as of both March 31, 2024 and December 31, 2023.

Loan Modifications to maximizeBorrowers Experiencing Financial Difficulty

As part of the Company’s recovery. A TDR is a modification ofloss mitigation efforts, the Company may agree to modify the contractual terms of a loan when theto assist borrowers experiencing financial difficulty. The Company for economic or legal reasons relatednegotiates loan modifications on a case-by-case basis to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial difficulties, grantsneeds. The Company considers various factors to identify borrowers experiencing financial difficulty. The primary factor for consumer borrowers is delinquency status. For commercial loan borrowers, these factors include credit risk ratings, the probability of loan risk rating downgrades, and overall risk profile changes. The modification may include, but is not limited to, payment deferrals, interest rate reductions, term extensions, principal forgiveness, or a concession tocombination of such modifications. Commercial loan borrowers that require immaterial modifications such as insignificant interest rate changes, short-term extensions (90 days or less) from the borrower that itoriginal maturity date, or temporary waivers or extensions of financial covenants which would not have otherwise considered.constitute material credit actions, are generally not considered to be experiencing financial difficulty and are not included in the disclosure. Insignificant payment deferrals (three months or less in the last 12 months) are also not included in the disclosure.


42

The following tables present the additions to non-PCI TDRs foramortized cost of loans that were modified during the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023 by loan class and modification type:
Three Months Ended March 31, 2024
Modification Type
($ in thousands)Term ExtensionPayment DelayCombination: Rate Reduction/ Payment DelayTotalModification as a % of Loan Class
Commercial:
C&I$4,013 $22,155 $— $26,168 0.16 %
CRE24,488 — 19,325 43,813 0.22 %
Total commercial28,501 22,155 19,325 69,981 
Consumer:
Single-family residential— 3,996 — 3,996 0.03 %
HELOCs— 5,501 517 6,018 0.35 %
Total consumer— 9,497 517 10,014 
Total$28,501 $31,652 $19,842 $79,995 
 
  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
 
Three Months Ended March 31, 2023
Modification Type
($ in thousands)Term ExtensionPayment DelayCombination: Rate Reduction/ Payment DelayTotalModification as a % of Loan Class
Commercial:
C&I$19,974 $14,364 $— $34,338 0.22 %
CRE543 — — 543 — %
Total commercial20,517 14,364 — 34,881 
Consumer:
HELOCs738 — — 738 0.04 %
Total consumer738 — — 738 
Total$21,255 $14,364 $— $35,619 
 
  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.




The following tables present the non-PCI TDRfinancial effects of the loan modifications for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 by loan class and modification type:
Financial Effects of Loan Modifications
Three Months Ended March 31, 2024
($ in thousands)Weighted-Average Interest Rate ReductionWeighted-Average Term Extension
(in years)		Weighted-Average Payment Delay
(in years)
Commercial:
C&I— 1.81.7
CRE2.75 %1.51.7
Consumer:
Single-family residential— 0.00.7
HELOCs0.25 %0.03.2
43

Financial Effects of Loan Modifications
Financial Effects of Loan Modifications
Financial Effects of Loan Modifications
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
($ in thousands)
($ in thousands)
($ in thousands)
Commercial:
Commercial:
Commercial:
C&I
C&I
C&I
CRE
CRE
CRE
($ in thousands) Modification Type During the Three Months Ended September 30, 2017
Principal (1)
 
Principal
and
Interest (2)
 
Interest
Rate
Reduction
 
Interest
Deferments
 Other Total
CRE $172
 $—
 $—
 $—
 $—
 $172
C&I 14,903
 24
 —
 —
 —
 14,927
Total $15,075
 $24
 $—
 $—
 $—
 $15,099
 
Consumer:
Consumer:
Consumer:
HELOCs
HELOCs
HELOCs

 
($ 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
  
 
($ 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
            
(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.



Subsequent to restructuring,A modified loan may become delinquent and result in a TDR that becomes delinquent, generally beyondpayment default (generally 90 days is consideredpast due) subsequent to have defaulted. As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the allowance for loan losses.modification. The following tables presenttable presents information foron loans modified as TDRs withinthat defaulted during the previousthree months ended March 31, 2024 that received modifications during the 12 months preceding payment default:
Loans Modified Subsequently Defaulted
Three Months Ended March 31, 2024
($ in thousands)Term ExtensionPayment DelayCombination: Term Extension/ Payment DelayTotal
Commercial:
C&I$7,828 $— — $7,828 
Total commercial7,828 — — 7,828 
Consumer:
Single-family residential— 3,972 383 4,355 
Total consumer— 3,972 383 4,355 
Total$7,828 $3,972 $383 $12,183 

In comparison, there were no loans that havereceived modifications, which subsequently defaulted during the three and nine months ended September 30, 2017 and 2016, and were still in default at the respective period end:March 31, 2023.
 
($ in thousands) Loans Modified as TDRs that Subsequently Defaulted During the Three Months Ended September 30,
 2017 2016
 Number of
Loans		 Recorded
Investment		 Number of
Loans		 Recorded
Investment
CRE:  
  
  
  
Income producing —
 $—
 1
 $1,000
C&I:        
Commercial business 1
 $9,386
 —
 $—
 
 
($ in thousands) Loans Modified as TDRs that Subsequently Defaulted During the Nine Months Ended September 30,
 2017 2016
 Number of
Loans		 Recorded
Investment		 Number of
Loans		 Recorded
Investment
CRE:  
  
  
  
Income producing —
 $—
 1
 $1,000
C&I:  
  
  
  
Commercial business 1
 $9,386
 2
 $119
Consumer 1
 $48
 —
 $—
 


The amountCompany closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following tables present the performance of loans that were modified in the twelve months ended March 31, 2024. For the comparative period, the amounts represent the performance of loans that were modified in the three months ended March 31, 2023, subsequent to the adoption of ASU 2022-02 on January 1, 2023:
Payment Performance as of March 31, 2024
($ in thousands)Current30 - 89 Days Past Due90+ Days Past DueTotal
Commercial:
C&I$75,193 $— $7,829 $83,022 
CRE76,028 — — 76,028 
Total commercial151,221 — 7,829 159,050 
Consumer:
Single-family residential8,455 4,239 5,075 17,769 
HELOCs6,994 2,536 — 9,530 
Total consumer15,449 6,775 5,075 27,299 
Total$166,670 $6,775 $12,904 $186,349 
44

Payment Performance as of March 31, 2023
($ in thousands)Current30 - 89 Days Past Due90+ Days Past DueTotal
Commercial:
C&I$27,393 $6,945 $— $34,338 
CRE543 — — 543 
Total commercial27,936 6,945 — 34,881 
Consumer:
HELOCs738 — — 738 
Total consumer738 — — 738 
Total$28,674 $6,945 $— $35,619 

As of March 31, 2024 and December 31, 2023, commitments to lend additional funds committed to lend to borrowers whose terms have beenloans were modified was $612 thousandwere $10 million and $9.9$4 million, as of September 30, 2017 and December 31, 2016, respectively.


Impaired LoansAllowance for Credit Losses


The Company has a current expected credit losses framework for all financial assets measured at amortized cost and certain off-balance sheet credit exposures. The Company’s allowance for credit losses, which includes both the allowance for loan losses and the allowance for unfunded credit commitments, is calculated with the objective of maintaining a reserve sufficient to absorb losses inherent in our credit portfolios. The measurement of the allowance for credit losses is based on management’s best estimate of lifetime expected credit losses, periodic evaluation of the loan portfolio, lending-related commitments and other relevant factors.

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

The allowance for credit losses estimation involves procedures to consider the unique risk characteristics of the portfolio segments. The majority of the Company’s credit exposures that share risk characteristics with other similar exposures are collectively evaluated. The collectively evaluated loans are grouped into heterogeneousinclude performing loans and homogeneous (mostly consumer loans) categories. Classified loans inunfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the heterogeneous category are identified and evaluated for impairmentCompany generally estimates expected credit losses on an individual basis. A

Allowance for Collectively Evaluated Loans

The allowance for collectively evaluated loans consists of a quantitative component that assesses the different risk factors considered in our models and a qualitative component that considers risk factors external to the models. Each of these components are described below.

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 informationkey drivers of increases and events, it is probabledecreases 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 the loans extends beyond the reasonable and supportable forecast period, the Company will consider historical experience or long-run macroeconomic trends over the remaining life of the loans to estimate the allowance for loan losses.

There were no changes to the reasonable and supportable forecast period, except to the C&I segment, and no changes to the reversion to the historical loss experience method for the three months ended March 31, 2024 and 2023. The reasonable and supportable forecast period for the C&I segment changed from 11 quarters to eight quarters due to model redevelopment during the third quarter of 2023.
45

The following table provides key credit risk characteristics and macroeconomic variables that the Company willuses to estimate the expected credit losses by portfolio segment:
Portfolio SegmentRisk CharacteristicsMacroeconomic Variables
C&IAge percentage, size at origination, delinquency status, sector and risk rating
Unemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates (1)
CRE, Multifamily residential, and Construction and landDelinquency status, maturity date, collateral value, property type, and geographic locationUnemployment rate, GDP, and U.S. Treasury rates
Single-family residential and HELOCsFICO score, delinquency status, maturity date, collateral value, and geographic locationUnemployment rate, GDP, and Home Price Indices
Other consumerLoss rate approach
Immaterial (2)
(1)Macroeconomic variables were updated due to model redevelopment.
(2)Macroeconomic variables are included in the qualitative estimate.

Quantitative Component — Allowance for Loan Losses for the Commercial Loan Portfolio

The Company’s C&I lifetime loss rate model estimates the loss rate expected over the life of a loan. This loss rate is applied to the amortized cost basis, excluding accrued interest receivable, to determine expected credit losses. The lifetime loss rate model’s reasonable and supportable period spans eight quarters, thereafter immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate.

To generate estimates of expected loss at the loan level for CRE, multifamily residential, and construction and land loans, projected probabilities of default (“PDs”) and loss given defaults (“LGDs”) are applied to the estimated exposure at default, considering the term and payment structure of the loan. The forecast of future economic conditions returns to long-run historical economic trends within the reasonable and supportable period.

To estimate the life of a loan under both models, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience.

Quantitative Component — Allowance for Loan Losses for the Consumer Loan Portfolio

For single-family residential and HELOC loans, projected PDs and LGDs are applied to the estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. The forecast of future economic conditions returns to long-run historical economic trends after the reasonable and supportable period. To estimate the life of a loan for the single-family residential and HELOC loan portfolios, the contractual term of the loan is adjusted for estimated prepayments based on historical prepayment experience. For other consumer loans, the Company uses a loss rate approach.

Qualitative Component — The Company considers the following qualitative factors in the determination of the collectively evaluated allowance if these factors have not already been captured by the quantitative model. Such qualitative factors may include, but are not limited to:

•loan growth trends;
•the volume and severity of past due financial assets, and criticized or adversely classified financial assets;
•the Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;
•knowledge of a borrower’s operations;
•the quality of the Company’s credit review system;
•the experience, ability and depth of the Company’s management and associates;
•the effect of other external factors such as the regulatory and legal environments, or changes in technology;
•actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and
•risk factors in certain industry sectors not captured by the quantitative models.

The magnitude of the impact of these factors on the Company’s qualitative assessment of the allowance for credit losses changes from period to period according to changes made by management in its assessment of these factors. The extent to which these factors change may be abledependent on whether they are already reflected in quantitative loss estimates during the current period and the extent to collectwhich changes in these factors diverge from period to period.
46

While the Company’s allowance methodologies strive to reflect all scheduled paymentsrelevant credit risk factors, there continues to be uncertainty associated with, but not limited to, potential imprecision in the estimation process due to the inherent time lag of principal or interest dueobtaining information and normal variations between expected and actual outcomes. The Company may hold additional qualitative reserves that are designed to provide coverage for losses attributable to such risk.

Allowance for Individually Evaluated Loans

When a loan no longer shares similar risk characteristics with other loans, such as in accordance with the original contractual terms. Impairedcase of certain nonaccrual loans, arethe Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured based onas the difference between the recorded value of the loans and their fair value. For loans evaluated individually, the Company uses one of three different asset valuation measurement methods: (1) the fair value of collateral less costs to sell; (2) the present value of expected future cash flows discounted atflows; or (3) the loan’s effective interest rate or, as expedient, at the loan’sloan's observable market price orprice. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral if the loan is collateral dependent, less costs to sell. Whensell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of an impairedfuture cash flows or the observable market value of the loan.

•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is less thanlimited to the difference between the recorded investmentvalue and fair value of the loan is classifiedcollateral less cost of disposal or sale. As of March 31, 2024, collateral-dependent commercial and consumer loans totaled $63 million and $23 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled $30 million and $12 million, respectively, as nonperformingof December 31, 2023. The Company's collateral-dependent loans were secured by real estate. As of both March 31, 2024 and uncollectible,December 31, 2023, the deficiency is charged-off againstcollateral value of the allowance for loan losses. Impairedproperties securing the collateral-dependent loans, excludenet of selling costs, exceeded 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.recorded value of the majority of the loans.




The following tables present information onsummarize the non-PCI impaired loans as of September 30, 2017 and December 31, 2016:
 
($ in thousands) September 30, 2017
 
Unpaid
Principal
Balance
 
Recorded
Investment
With No
Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded
Investment
 
Related
Allowance
CRE:  
  
  
  
  
Income producing $35,133
 $28,908
 $6,241
 $35,149
 $1,011
Land 4,183
 4,173
 10
 4,183
 1
C&I:  
  
  
  
  
Commercial business 89,233
 50,700
 38,392
 89,092
 18,183
Trade finance 4,786
 —
 4,708
 4,708
 786
Residential:  
  
  
  
  
Single-family 15,868
 1,867
 14,032
 15,899
 572
Multifamily 12,224
 6,062
 6,170
 12,232
 194
Consumer 4,298
 1,303
 2,998
 4,301
 4
Total $165,725
 $93,013
 $72,551
 $165,564
 $20,751
 
 
($ in thousands) December 31, 2016
 
Unpaid
Principal
Balance
 
Recorded
Investment
With No
Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded
Investment
 
Related
Allowance
CRE:  
  
  
  
  
Income producing $50,718
 $32,507
 $14,001
 $46,508
 $1,263
Land 6,457
 5,427
 443
 5,870
 63
C&I:  
  
  
    
Commercial business 162,239
 78,316
 42,137
 120,453
 10,443
Trade finance 5,227
 —
 5,166
 5,166
 34
Residential:  
  
  
    
Single-family 15,435
 —
 14,335
 14,335
 687
Multifamily 11,181
 5,684
 4,357
 10,041
 180
Consumer 4,016
 —
 3,682
 3,682
 31
Total $255,273
 $121,934
 $84,121
 $206,055
 $12,701
 



The following table presents the average recorded investment and interest income recognized on non-PCI impaired loans 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
 Average
Recorded
Investment		 
Recognized
Interest
   Income (1)
 Average
Recorded
Investment		 
Recognized
Interest
   Income (1)
 
Average
Recorded
Investment
 
Recognized
Interest
   Income (1)
 Average
Recorded
Investment		 
Recognized
Interest
   Income (1)
CRE:                
Income producing $37,489
 $179
 $52,116
 $464
 $37,238
 $535
 $52,221
 $1,368
Land 4,337
 —
 6,622
 9
 4,484
 —
 6,777
 26
C&I:                
Commercial business 93,278
 242
 91,290
 258
 94,709
 799
 92,805
 648
Trade finance 4,216
 53
 9,005
 33
 4,444
 122
 10,028
 166
Residential:                
Single-family 16,124
 111
 13,438
 72
 16,141
 325
 13,517
 220
Multifamily 12,532
 108
 20,585
 77
 12,540
 324
 20,646
 231
Consumer 4,492
 14
 1,571
 16
 4,455
 41
 1,575
 48
Total non-PCI impaired loans $172,468
 $707
 $194,627
 $929
 $174,011
 $2,146
 $197,569
 $2,707
 
(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.



Allowance for Credit Losses

The following tables present a summary of activitiesactivity in the allowance for loan losses by portfolio segmentsegments for the three and nine months ended September 30, 2017 March 31, 2024 and 2016:2023:
Three Months Ended March 31, 2024
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
Allowance for loan losses, beginning of period$392,685 $170,592 $34,375 $10,469 $55,018 $3,947 $1,657 $668,743 
Provision for (reversal of) credit losses on loans(a)275 18,939 3,032 1,574 899 (432)(132)24,155 
Gross charge-offs(20,998)(2,398)(6)(1,224)— — (58)(24,684)
Gross recoveries1,710 327 17 — 5 48 — 2,107 
Total net (charge-offs) recoveries(19,288)(2,071)11 (1,224)5 48 (58)(22,577)
Foreign currency translation adjustment(41)— — — — — — (41)
Allowance for loan losses, end of period$373,631 $187,460 $37,418 $10,819 $55,922 $3,563 $1,467 $670,280 
47

 
($ 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
 
Three Months Ended March 31, 2023
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICREMultifamily ResidentialConstruction and LandSingle-Family ResidentialHELOCsOther ConsumerTotal
Allowance for loan losses, December 31, 2022$371,700 $149,864 $23,373 $9,109 $35,564 $4,475 $1,560 $595,645 
Impact of ASU 2022-02 adoption5,683 337 6 — 1 1 — 6,028 
Allowance for loan losses, January 1, 2023377,383 150,201 23,379 9,109 35,565 4,476 1,560 601,673 
 (Reversal of) provision for credit losses on loans(a)(678)4,676 1,135 210 12,442 580 155 18,520 
Gross charge-offs(1,900)(6)— — — (91)(40)(2,037)
Gross recoveries1,211 196 12 3 — 6 — 1,428 
Total net (charge-offs) recoveries(689)190 12 3 — (85)(40)(609)
Foreign currency translation adjustment309 — — — — — — 309 
Allowance for loan losses, end of period$376,325 $155,067 $24,526 $9,322 $48,007 $4,971 $1,675 $619,893 

 
($ 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
 

For further information on accounting policies and the methodologies usedIn addition to estimate the allowance for loan losses, the Company maintains an allowance for unfunded credit losses and loan charge-offs, see Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.



commitments. The following table presents a summary of activities inCompany has three general areas for which it provides the allowance for unfunded credit reservescommitments: (1) recourse obligations for the threeloans sold, (2) letters of credit, 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
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
         

(3) unfunded lending commitments. The allowance for unfunded credit reservescommitments is maintained at a level that management believes to be sufficient to absorb estimated probableexpected credit losses related to unfunded credit facilities. The allowance for unfunded credit reserves is included in Accrued expense and other liabilities on the Consolidated Balance Sheets. See Note 11 — Commitments and Contingenciesto the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit reserves.commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,
($ in thousands)20242023
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period$37,699 $26,264 
Provision for credit losses on unfunded credit commitments(b)845 1,480 
Foreign currency translation adjustment— (3)
Allowance for unfunded credit commitments, end of period$38,544 $27,741 
Provision for credit losses(a) + (b)$25,000 $20,000 

The following tables presentallowance for credit losses was $709 million as of March 31, 2024, an increase of $3 million, compared with $706 million as of December 31, 2023. The slight increase in the allowance for credit losses was primarily driven by the Company’s qualitative risk assessment and economic forecasts that reflected continued caution regarding inflation, the high interest rate environment and the CRE market outlook, while recognizing negative loan growth.

The Company considers multiple economic scenarios to develop the estimate of the allowance for loan losseslosses. The scenarios may consist of a baseline forecast representing management's view of the most likely outcome, and recorded investments by portfolio segmentdownside or upside scenarios that reflect possible worsening or improving economic conditions. As of March 31, 2024, the Company assigned the same weightings to its baseline, upside and impairment methodologydownside scenarios as of September 30, 2017 andcompared with December 31, 2016:
 
($ 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
 
(1)Loans net of ASC 310-30 discount.



Purchased Credit Impaired Loans

At2023. The current baseline economic forecast continues to reflect key risks such as high inflation, high interest rates, concerns over global conflicts and oil prices. Compared to December 2023, the dateMarch 2024 baseline forecast for GDP growth and unemployment rate showed a slight improvement in the near term (full year 2024) while longer-term forecasts (2025 and beyond) slightly worsened for GDP growth. The downside scenario assumed the economy falls into recession in the second quarter of acquisition, PCI loans are pooled and accounted for at fair value, which represents the discounted value of the expected cash flows of the loan portfolio. A pool is accounted for2024 as a single asset withresult of an extended federal shutdown, global and domestic political tensions, high inflation, and increased unemployment. The upside scenario assumed a single interest rate, cumulative loss ratemore optimistic economic outlook for 2024, including stronger growth, stable financial market, and cash flow expectation. The cash flows expected over the life of the pools are estimated by an internal cash flow model that projects cash flows and calculates the carrying values of the pools, book yields, effective interest income and impairment, if any, based on pool level events. Assumptions as to cumulative loss rates, loss curves and prepayment speeds are utilized to calculate the expected cash flows. The amount of expected cash flows over the initial investmentfull employment starting in the loan represents the “accretable yield,” which is recognized as interest income on a level yield basis over the lifesecond quarter of the loan. Prepayments affect the estimated life of PCI loans, which may change the amount of interest income,2024.

48

Loan Transfers, Sales and possibly principal, expected to be collected. The excess of total contractual cash flows over the cash flows expected to be received at origination is deemed to be the “nonaccretable difference.”Purchases


The following table presentsCompany’s primary business focus is on directly originated loans. The Company also purchases loans and participates in loan financing with other banks. In the changesnormal course of doing business, the Company also provides other financial institutions with the ability to participate in accretable yield for PCIcommercial loans 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
Beginning balance $118,625
 $166,777
 $136,247
 $214,907
Accretion (10,747) (14,827) (32,108) (53,510)
Changes in expected cash flows 2,078
 311
 5,817
 (9,136)
Ending balance $109,956
 $152,261
 $109,956
 $152,261
 

Loans Held-for-Sale
Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate or purchase loans as held-for-investment,that it is the Company’s intent to hold theseoriginates, by selling 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 aremay 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 lowercarrying value of cost or fair value.

As of September 30, 2017, loans held-for-sale amounted to $178 thousand, which were comprised of single-family residential loans. In comparison, as of December 31, 2016, loans held-for-sale amounted to $23.1 million, which were primarily comprised of consumer loans. Loans transferred, fromsold and purchased for the held-for-investment to held-for-sale were $74.5 million and $418.5 millionportfolio, during the three and nine months ended September 30, 2017, respectively. These loan transfers were primarily comprisedMarch 31, 2024 and 2023:
Three Months Ended March 31, 2024
CommercialConsumer
Residential Mortgage
($ in thousands)C&ISingle-Family ResidentialTotal
Loans transferred from held-for-investment to held-for-sale (1)
$199,974 $— $199,974 
Sales (2)(3)
$187,202 $965 $188,167 
Purchases$33,344 (4)$74,736 $108,080 
Three Months Ended March 31, 2023
CommercialConsumer
CREResidential Mortgage
($ in thousands)C&ICRESingle-Family ResidentialTotal
Loans transferred from held-for-investment to held-for-sale (1)
$156,876 $3,600 $— $160,476 
Sales (2)(3)
$175,932 $3,600 $— $179,532 
Purchases$22,683 (4)$— $131,999 $154,682 
(1)Includes write-downs of C&I loans for both periods. In comparison, $144.9$1 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$273 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,March 31, 2024, and 2023, respectively. In comparison, there were no write-downs
(2)Includes originated loans sold of $92 million and $1.9$111 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 threeMarch 31, 2024 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,2023, respectively. Originated loans sold during these periods wereconsisted primarily comprised of C&I loans for both periods.
(3)Includes $96 million and CRE loans. In comparison,$69 million of purchased loans sold in the Company sold $107.3 million in originated loans duringsecondary market for the three months ended September 30, 2016, resulting in net gainsMarch 31, 2024 and 2023, respectively.
(4)C&I loan purchases were comprised primarily of $2.2 million. Originated loans sold during this period were primarily comprised ofsyndicated C&I and CREterm 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 CRE and C&I loans, resulted in net gains of $8.2 million.




During the threeNote 8 — Affordable Housing Partnership, Tax Credit 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 (“CRA”) 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.


Note 9 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net


The CRA encourages banks to meet the credit needs of their communities, for housingparticularly 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 partnershipsThese entities are formed to develop and operate apartment complexes designed as high-quality affordable housing for lower income tenants throughout the U.S. EachTo fully utilize the available tax credits, each of the partnershipsthese entities must meet the affordable housing regulatory requirements for affordable housing for a 15-year minimum 15-year compliance period to fully utilize the tax credits. In addition to affordable housing limited partnerships, theperiod. The Company also invests in small business investment companies and new marketmarkets tax credit projects that qualify for CRA credits andconsideration, as well as eligible projects that qualify for production, historic and renewable energy and historic tax credits. Investments in new markets tax credits promote development in low-income communities, investments in production and renewable energy tax credits help promote the development of renewable energy sources, while theand investments in historic tax credits promote the rehabilitation of historic buildings and economic revitalization of the surrounding areas.


InvestmentsThe majority of affordable housing partnership, tax credit and CRA investments discussed above are variable interest entities where the Company is a limited partner in Qualified Affordable Housing Partnerships, Netthese investments, and an unrelated third party is typically the general partner or managing member who has control over the significant activities of these 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 investments 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.


49

The Company records its investments in qualifiedqualifying affordable housing partnerships, net, using PAM. Following the proportional amortization method. Under the proportional amortization method,adoption of ASU 2023-02 on January 1, 2024, the Company amortizeselects to account for its tax credit investments using PAM on a program-by-program basis if certain conditions are met. For the initial costCompany’s accounting policies on PAM, see Note 2— Current Accounting Developments and Summary of the investment in proportion Significant Accounting Policies — Significant Accounting Policies Update — Income Taxes to the tax credits and other tax benefits received, and recognizes the amortizationConsolidated Financial Statements in Income tax expensethis Form 10-Q. For discussion on the Company’s impairment evaluation and monitoring process of tax credit investments, refer to Note 3 — Fair Value Measurement and Fair Value of Financial Instruments— Affordable Housing Partnerships, Tax Credit and Community Reinvestment Act Investments, Net to the Consolidated Financial Statements of Income.in this Form 10-Q.


The following table presents the balancesinvestments and unfunded commitments of the Company’s investments in qualified affordable housing partnerships,partnership, tax credit, and CRA investments, net and related unfunded commitments as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
($ in thousands)Assets
Liabilities - Unfunded Commitments (1)
Assets
Liabilities - Unfunded Commitments (1)
PAM:
Affordable housing partnership investments$432,073 $255,217 $419,785 $251,746 
Tax credit and CRA investments228,901 117,022 — — 
Equity method of accounting and other:
Tax credits and CRA investments272,213 147,147 485,251 298,990 
Total$933,187 $519,386 $905,036 $550,736 
(1)Included in Accrued expenses and other liabilities on the periods indicated:Consolidated Balance Sheet.
 
($ 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’sinvestments in affordable housing partnership, tax credit and CRA investments for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
($ in thousands)20242023
Tax credits and benefits(1):
PAM:
Affordable housing partnership investments$18,419 $16,094 
Tax credit and CRA investments27,149 — 
Equity method of accounting and other:
Tax credit and CRA investments12,594 14,498 
Total tax credits and benefits$58,162 $30,592 
Amortization:
PAM:
Affordable housing partnership investments (2)
$13,869 $12,666 
Tax credit and CRA investments (3)
23,301 — 
Equity method of accounting and other:
Tax credit and CRA investments (4)
13,207 10,110 
Total amortization$50,377 $22,776 
(1)Included in Income tax expense on the Consolidated Statement of Income for the three months ended March 31, 2024 and 2023.
(2)Amortization related to investments in qualified affordable housing partnerships net,under PAM was recorded in Income tax expense on the Consolidated Statement of Income for the periods indicated:three months ended March 31, 2024 and 2023.
(3)Due to the adoption of ASU 2023-02 on January 1, 2024, amortization related to qualifying tax credit investments under PAM was recorded in Income tax expense on the Consolidated Statement of Income for the three months ended March 31, 2024.
         
($ 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

Investments in(4)Amortization related to tax credit and otherCRA investments net, were $203.8 million and $173.3 million as of September 30, 2017 and December 31, 2016, respectively. The Company is not the primary beneficiarywas recognized in these 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 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 on the Consolidated Balance Sheets. Amortization of tax credit and otherCRA investments was $23.8 million and $32.6 million as part of noninterest expense on the Consolidated Statement Income for the three months ended September 30, 2017March 31, 2024 and 2016,2023.

The Company also held equity securities without readily determinable fair values totaling $147 million and $146 million as of March 31, 2024 and December 31, 2023, respectively. Amortization ofEquity securities without readily determinable fair values are included in Other Assets and Affordable housing partnership, tax credit and otherCRA investments, was $66.1 million and $60.8 million fornet on the nine months ended September 30, 2017 and 2016, respectively.Consolidated Balance Sheet.

50


Note 9—Goodwill
Note 10—Goodwill and Other Intangible Assets

Goodwill

Total goodwill of $469.4was $466 million remained unchanged as of September 30, 2017 compared toboth March 31, 2024 and December 31, 2016. Goodwill2023. The Company’s goodwill impairment test is tested for impairment on an annual basisperformed annually, as of December 31,st, or more frequently as events occur or circumstances change that would more likely than notmore-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 tovalue. 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 analysistest as of December 31, 2016 and concluded that2023, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill impairment as the fair valuesis 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 20162023 Form 10-K for10-K. The Company performed an analysis of goodwill during the first quarter of 2024 that consisted of a qualitative assessment to determine if it was more likely than not that the carrying values of each reporting unit exceeded their estimated fair values. The results of this analysis indicated that no impairment of goodwill existed as of March 31, 2024.

The Company has an equity method investment in Rayliant and its carrying value was $110 million as of March 31, 2024, of which $101 million was comprised of equity method goodwill. For additional details relatedinformation on this investment, Note 7 - Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in the Company’s annual goodwill impairment analysis.2023 Form 10-K.

Core Deposit Intangibles

Note 10 — Short-Term Borrowings and Long-Term Debt
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 details of the gross carrying value of intangible assetsCompany’s short-term and accumulated amortizationBTFP borrowings, FHLB advances, and long-term debt as of September 30, 2017March 31, 2024 and December 31, 2016:2023:
March 31, 2024December 31, 2023
($ in thousands)Interest RatesMaturity DatesAmountAmount
Bank
Short-term borrowings4.75% — 4.83%April 2024$19,173 $— 
BTFP borrowings4.37%3/19/2024$— $4,500,000 
FHLB advances (1) — floating (2)
5.49% — 5.56%2024 — 2025$3,500,000 $— 
Parent company
Junior subordinated debt (3) — floating (2)
 7.14%12/15/2035$31,768 $148,249 
 
($ 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
 
(1)The weighted-average interest rates for FHLB advances were 5.52% as of March 31, 2024.

Amortization Expense

The Company amortizes the core deposit intangibles(2)Floating interest rates are based on the projected useful livesSecured Overnight Financing Rate plus the established spread.
(3)The weighted-average interest rates for junior subordinated debt were 7.14% and 6.87% as of March 31, 2024 and December 31, 2023, respectively.

The Bank’s available borrowing capacity from FHLB advances totaled $7.6 billion as of March 31, 2024. The Bank’s available borrowing capacity from the related deposits. The amortization expense relatedFHLB is derived from its portfolio of loans that are pledged to the intangible assets was $1.7FHLB, reduced by any outstanding FHLB advances. As of March 31, 2024, all advances were secured by real estate loans.

During the first quarter of 2024, the Company redeemed approximately $117 million of junior subordinated debt and $2.0 million forrepaid $4.5 billion of BTFP borrowings upon maturity. For additional information on the three months ended September 30, 2017BTFP and 2016, respectively,junior subordinated debt, refer to Note 10— Short-Term Borrowings and $5.3 million and $6.2 million forLong-Term Debt to the nine months ended September 30, 2017 and 2016, respectively.Consolidated Financial Statements in the Company’s 2023 Form 10-K.




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 11—Commitments and Contingencies

Commitments to Extend Credit Extensions — In the normal course of business, the Company has variousprovides loan commitments and letters of credit to customers 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 offrom these transactions, commitments to extend credit are included in determining the appropriate level of the allowance for unfunded commitments, and outstanding commercial and standby letters of credit (“SBLCs”). commitments.


51

The following table presents the Company’s credit-related commitments as of the periods indicated:March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
($ in thousands)Expire in One Year or LessExpire After One Year Through Three YearsExpire After Three Years Through Five YearsExpire After Five YearsTotalTotal
Loan commitments$4,794,033 $3,622,191 $799,699 $151,877 $9,367,800 $9,141,447 
Commercial letters of credit and standby letters of credit (“SBLCs”)1,025,797 434,373 143,006 1,140,456 2,743,632 2,610,761 
Total$5,819,830 $4,056,564 $942,705 $1,292,333 $12,111,432 $11,752,208 
 
($ 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 customercustomers 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.commitment fees. 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 30, 2017,March 31, 2024, total letters of credit which amounted to $1.76of $2.7 billion were comprisedconsisted of SBLCs of $1.70$2.7 billion and commercial letters of credit of $59.1$26 million. In comparison, as of December 31, 2023, total letters of credit of $2.6 billion consisted of SBLCs of $2.6 billion and commercial letters of credit of $24 million. As of both March 31, 2024 and December 31, 2023, substantially all letters of credit were graded “Pass” using the Bank’s internal credit risk rating system.


The Company usesapplies the same credit underwriting criteria in extendingto 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 thea customer’s credit.credit risk. Collateral may include cash, accounts receivable, inventory, personal property, plant and equipment, and income-producing commercialreal estate property.

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit reserves,commitments and amounted to $14.0$39 million and $38 million as of September 30, 2017March 31, 2024 and $15.7 million as of December 31, 2016. These amounts are included in Accrued expenses2023, 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 securitizedmultifamily 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. Asand the guarantor, the Company is obligated to makemaximum potential future payments when the loans default. Asas of September 30, 2017March 31, 2024 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 $150.5 million, respectively. 2023:
Maximum Potential Future PaymentsCarrying Value
March 31, 2024December 31, 2023March 31, 2024December 31, 2023
($ in thousands)Expire in One Year or LessExpire After One Year Through Three YearsExpire After Three Years Through Five YearsExpire After Five YearsTotalTotalTotalTotal
Single-family residential loans sold or securitized with recourse$7 $17 $26 $5,363 $5,413 $5,888 $5,413 $5,888 
Multifamily residential loans sold or securitized with recourse— — 160 14,836 14,996 14,996 18,756 19,020 
Total$7 $17 $186 $20,199 $20,409 $20,884 $24,169 $24,908 
52

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit reserves,commitments and totaled $256 thousand and $373$40 thousand as of September 30, 2017both March 31, 2024 and December 31, 2016, respectively.2023. The allowance for unfunded credit reservescommitments 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 commitmentsWhile it is impossible to invest in qualified affordable housing partnerships, tax credit and other investments as discussed in Note 9 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net ascertain the ultimate resolution or range of financial liability, based on information known to the Consolidated Financial Statements. These commitmentsCompany as of March 31, 2024, the Company does not believe there are payable on demand. As of September 30, 2017 and December 31, 2016, these commitments were $166.6 million and $174.3 million, respectively. These commitments are includedany pending legal proceedings to which the Company is a party that, individually or in Accrued expenses and other liabilitiesthe aggregate, would reasonably be expected to have a material adverse effect on the Consolidated Balance Sheets.Company’s financial condition. In light of the inherent uncertainty in legal proceedings, however, there can be no assurance that the ultimate resolution will not exceed established reserves and it is possible that the outcome of a particular matter, or a combination of matters, may be material to the Company’s financial condition for a particular period, depending upon the size of the loss and the Company’s income for that particular period.



Note 12—Stock Compensation Plans


Pursuant to the Company’s 20162021 Stock Incentive Plan, as amended, the Company may issue stock, stock options, restricted stock, awards (“RSAs”),RSUs including performance-based RSUs, stock purchase warrants, stock appreciation rights, stock purchase warrants, phantom stock and dividend equivalents to certaineligible employees, and non-employee directors, consultants, and other service providers of the CompanyEast West and its subsidiaries. The Company has granted RSUs as its primary incentive awards. There were no outstanding stock options or unvested RSAsawards other than RSUs as of September 30, 2017both March 31, 2024 and 2016.December 31, 2023.

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 benefitbenefits associated with the Company’s various employee share-based compensation plans for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023:
Three Months Ended March 31,
($ in thousands)20242023
Stock compensation costs$12,988 $11,075 
Related net tax benefits for stock compensation plans$783 $8,290 
 
($ 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
 


Effective January 1, 2017,Restricted Stock Units — RSUs are granted under the Company adopted ASU 2016-09, Compensation — Stock Compensation (Topic 718): ImprovementsCompany’s long-term incentive plan at no cost to Employee Share-Based Payment Accounting. As a resultthe recipient. RSUs generally cliff vest after three years of continued employment from the date of the adoptiongrant, and are authorized to settle in shares of this new guidance, all excess tax benefitsthe Company’s common stock. Dividends are accrued during the vesting period and deficiencies on share-based paymentpaid at the time of vesting. While a portion of RSUs are time-based vesting awards, were recognized within Income tax expenseothers vest subject to the attainment of additional specified performance goals, referred to as “performance-based RSUs.” Performance-based RSUs are granted annually upon approval by the Company’s Compensation and Management Development 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 percent 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. For information on accounting on stock-based compensation plans, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of Income for the three and nine months ended September 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.Company’s 2023 Form 10-K.


53

The following table presents a summary of the activityactivities for the Company’s time-basedtime- and performance-based RSUs that were settled in shares for the ninethree months ended September 30, 2017 basedMarch 31, 2024. The number of performance-based RSUs stated below reflects the number of awards granted on the target amount of awards:grant date.
Time-Based RSUsPerformance-Based RSUs
SharesWeighted-Average Grant Date Fair ValueSharesWeighted-Average Grant Date Fair Value
Outstanding, January 1, 20241,206,518 $74.29 276,223 $78.59 
Granted515,235 75.79 97,798 80.28 
Vested(299,381)71.68 (91,960)77.67 
Forfeited(12,163)75.24 — — 
Outstanding, March 31, 20241,410,209 $75.39 282,061 $79.48 
 
  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 30, 2017, totalMarch 31, 2024, there were $51 million of unrecognized compensation costs related to unvested time-based and performance-based RSUs amounted to $28.2 million and $15.3 million, respectively. These costs are expected to be recognized over a weighted averageweighted-average period of 2.002.3 years, and 2.02 years, respectively.$25 million of unrecognized compensation costs related to unvested performance-based RSUs expected to be recognized over a weighted-average period of 2.3 years.



Note 13 — Stockholders’ Equity and Earnings Per Share


Warrant — The Company acquired MetroCorp Bancshares, Inc., (“MetroCorp”)following table presents the basic and diluted EPS calculations for the three months ended March 31, 2024 and 2023. For more information 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 resultEPS, see Note 1 — Summary 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 — CurrentSignificant Accounting Developments Policies— Significant Accounting Policies —Earnings Per Shareto the Consolidated Financial Statements for additional information.in the Company’s 2023 Form 10-K.

($ and shares in thousands, except per share data)Three months ended March 31,
20242023
Basic:
Net income$285,075 $322,439 
Weighted-average number of shares outstanding139,409 141,112 
Basic EPS$2.04 $2.28 
Diluted:
Net income$285,075 $322,439 
Weighted-average number of shares outstanding139,409 141,112 
Add: Dilutive impact of unvested RSUs852 801 
Diluted weighted-average number of shares outstanding140,261 141,913 
Diluted EPS$2.03 $2.27 



The following table presents the EPS calculations for the three and nine months ended September 30, 2017 and 2016:
 
  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 months ended September 30, 2017, 4Approximately 170 thousand and 6417 thousand weighted averageweighted-average shares of anti-dilutive shares from RSUs respectively, were excluded from the diluted EPS computation.computations for the three months ended March 31, 2024 and 2023, respectively.

Stock Repurchase Program — In 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500 million of the Company’s common stock. For the three and nine months ended September 30, 2016, 2 thousand and 7 thousand weightedMarch 31, 2024, the Company repurchased 1,181,851 shares at an average anti-dilutiveprice of $69.76 per share at $82 million. The Company did not repurchase any shares from RSUs, respectively, were excluded fromduring the diluted EPS computation.three months ended March 31, 2023. As of March 31, 2024, the Company had approximately $89 million available for repurchases under its stock repurchase program.



54

Note 14 — Accumulated Other Comprehensive Income (Loss)


The following tables presenttable presents the changes in the components of AOCI balances for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023:
($ 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) $(1,712)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
($ in thousands)
Debt Securities (1)
Cash Flow Hedges
Foreign Currency Translation Adjustments (2)
Total
Balance, January 1, 2023
Net unrealized gains arising during the period
Amounts reclassified from AOCI
Changes, net of tax
Balance, March 31, 2023
Balance, January 1, 2024
Balance, January 1, 2024
Balance, January 1, 2024
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)
Changes, net of tax
Balance, March 31, 2024
 
($ 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)
             
(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.

(1)Includes after-tax unamortized losses related to AFS debt securities that were transferred to HTM in 2022.

(2)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.


The following tables presenttable presents the components of other comprehensive income (loss), reclassifications to net income and the related tax effects for the three and nine months ended September 30, 2017March 31, 2024 and 2016:2023:
Three Months Ended March 31,
20242023
($ in thousands)Before-TaxTax EffectNet-of-TaxBefore-TaxTax EffectNet-of-Tax
Debt securities:
Net unrealized (losses) gains on AFS debt securities arising during the period$(3,282)$1,000 $(2,282)$62,860 $(18,585)$44,275 
Reclassification adjustments:
Net realized (gains) losses on AFS debt securities reclassified into net income (1)
(49)14 (35)10,000 (2)(2,956)7,044 
Amortization of unrealized losses on transferred debt securities (3)
3,816 (1,128)2,688 3,921 (1,159)2,762 
Net change485 (114)371 76,781 (22,700)54,081 
Cash flow hedges:
Net unrealized (losses) gains arising during the period(90,376)26,714 (63,662)29,843 (8,757)21,086 
Net realized losses reclassified into net income (4)
24,605 (7,273)17,332 10,644 (3,117)7,527 
Net change(65,771)19,441 (46,330)40,487 (11,874)28,613 
Foreign currency translation adjustments, net of hedges:
Net unrealized gains arising during the period3,995 (173)3,822 2,626 315 2,941 
Net change3,995 (173)3,822 2,626 315 2,941 
Other comprehensive (loss) income$(61,291)$19,154 $(42,137)$119,894 $(34,259)$85,635 
(1)Pre-tax amounts were reported in Net gains (losses) on AFS debt securities on the Consolidated Statement of Income.
(2)Represents the loss related to an AFS debt security that was written off in the first quarter of 2023.
(3)Represents unrealized losses amortized over the remaining lives of securities that were transferred from the AFS to HTM portfolio in 2022.
(4)Pre-tax amounts related to cash flow hedges on variable rate loans and long-term borrowings, where applicable, were reported in Interest and dividend income andin Interest expense, respectively, on the Consolidated Statement of Income. In the first quarter of 2023, the pre-tax amount also included the terminated cash flow hedge where the forecasted cash flows were no longer probable to occur and was reported in Noninterest income on the Consolidated Statement of Income.

55
 
($ 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 15—Business Segments

The Company utilizes an internal reporting system to measure the performance of variousorganizes its operations into three reportable operating segments within the Banksegments: (1) Consumer and the Company. The Company has identified three operating segments for purposes of management reporting: (1) RetailBusiness 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 revieweddefined by the Company’s chief operating decision-maker to render decisions about resources to be allocated totype of customers served, and the related products and services provided. The segments and assess its performance; and discretereflect 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 operatingbalance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities.

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking platforms. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises through the Company’s branch network. Other products and services provided by this segment include wealth management, 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 financing, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services and interest rate and commodity risk hedging.

The 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 costssupport to the two core segments, namely the Consumer and Business Banking and the provisionCommercial Banking segments.

The Company utilizes an internal reporting process to measure the performance of the three 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 basedof 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 businessthat segment. Indirect costs, including technology-related costs and corporate overhead, expense, are allocated to the segments based on severala segment’s estimated usage using factors including but not limited to, full-time equivalent employees, net interest income, and loan volume and deposit volume. TheCharge-offs are recorded to the segment directly associated with the respective loans charged off, and provision for credit losses is allocatedrecorded to the segments based on actual charge-offsthe 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 assumptionsreporting process utilizes a full-allocation methodology. Under this methodology, corporate and indirect expenses incurred by the Other segment are intendedallocated to promote core deposit growththe Consumer and to reflectBusiness Banking and the current risk profiles of various loan categoriesCommercial 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 thatOther segment is responsible for the Company’s process is reflective of current market conditions.liquidity and interest rate management, and the internal FTP process. The internal funds transfer pricingFTP 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 provideproviding a reasonable and consistent basis for the measurement of the Company’sits business segments and productsegments’ net interest margins.

Changesmargins 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 reportinginternal FTP assumptions and methodologies may result in changes inare reviewed at least annually to ensure that the measurementprocess 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.

56

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 months ended September 30, 2017March 31, 2024 and 2016:2023:
($ in thousands)Consumer and Business BankingCommercial BankingOtherTotal
Three Months Ended March 31, 2024
Net interest income before provision for credit losses$291,764 $260,349 $13,026 $565,139 
Provision for credit losses2,565 22,435 — 25,000 
Noninterest income25,542 46,466 6,980 78,988 
Noninterest expense119,300 106,307 21,268 246,875 
Segment income (loss) before income taxes195,441 178,073 (1,262)372,252 
Segment net income$137,672 $125,581 $21,822 $285,075 
As of March 31, 2024
Segment assets$19,629,076 $35,049,899 $16,196,695 $70,875,670 
($ in thousands)Consumer and Business BankingCommercial BankingOtherTotal
Three Months Ended March 31, 2023
Net interest income before provision for credit losses$304,242 $236,723 $58,896 $599,861 
Provision for credit losses15,012 4,988 — 20,000 
Noninterest income (loss)26,002 43,599 (9,623)59,978 
Noninterest expense113,823 87,248 17,376 218,447 
Segment income before income taxes201,409 188,086 31,897 421,392 
Segment net income$142,247 $134,457 $45,735 $322,439 
As of March 31, 2023
Segment assets$17,880,525 $33,647,465 $15,716,908 $67,244,898 

57
 
($ 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) 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, the Company’s Board of Directors declared fourth quarter 2017 cash dividends for the Company’s common stock. The common stock cash dividend of $0.20 is payable on November 15, 2017 to stockholders of record as of November 1, 2017.




ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Page
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ITEM 2.Financial ReviewMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of 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”), and its various subsidiaries, including theits 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,Quarterly Report on Form 10-Q (this “Form 10-Q”), and the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 20162023, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 27, 201729, 2024 (the “Company’s 20162023 Form 10-K”).

Organization and 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 focusfocuses on the financial service needs of the Chinese American community. The Bank operatesindividuals and businesses that operate in 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. With over 130Asia. Through 120 locations in the U.S. and Greater China, andAsia, the Company provides a full range of cross-borderconsumer and commercial products and services through the Company continuesfollowing 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 ofand accepting deposits from businesses and individuals. We are committed to enhancing long-term shareholder value by growing loans, deposits and revenue, and improving profitability, whileand investing for the future andwhile managing risk,risks, expenses and capital. Our business model is built on customer loyalty and engagement, understanding our customers’ financial goals, and meeting theirour customers’ financial needs through our offering of diverse products and services. We expect our relationship-focused business model to continue generating organic growth from existing customers and to expand our targeted customer bases. As of March 31, 2024, the Company had $70.9 billion in total 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 2023 Form 10-K.

Current Developments

Economic Developments

Recent external data indicate that inflation has not progressed closer to the Board of Governors of the Federal Reserve System’s (“Federal Reserve”) 2% target. In response to the persistent inflation, the Federal Reserve has communicated the appropriateness of its current restrictive policy, which has lowered expectations of rate cuts by midyear 2024. The Company’s approach is concentrated on organically growinghigher interest rate environment continues to negatively impact the market value of banking organizations’ investment securities, while the commercial real estate (“CRE”) market remains under pressure from tighter credit conditions and deepening client relationshipsdecreased demand. Factors such as the economic impacts of unrest, wars, and acts of terrorism could lead to higher oil prices and increased inflationary pressures, along with the likelihood that meet our risk/return measures.

Financial Highlights

the Federal Reserve will cut interest rates slower than anticipated. The Company delivered strong financial performancemonitors changes in the third quarter of 2017 across key measures of loan growth, revenueeconomic and net income growth,industry conditions and credit quality. It is the Company’s priority to focus on strengthening its risk management infrastructure and compliance in order to meet increasing regulatory expectations, while still providing strong returns to stockholders.



Financial Performance

Noteworthy itemstheir impacts on the Company’s performance included:business, customers, employees, communities and markets.


Net income totaled $132.7 millionFurther discussion of the potential impacts on the Company’s business due to the higher interest rate environment has been provided in Item 1A. — Risk Factors — Risks Related to Financial Matters in the Company’s 2023 Form 10-K.

Federal Deposit Insurance Corporation Special Assessment

In November 2023, the Federal Deposit Insurance Corporation (“FDIC”) approved a final rule to implement a special deposit insurance assessment to recover losses to the Deposit Insurance Fund (“DIF”) arising from the protection of uninsured depositors following the receiverships of failed institutions in the spring of 2023. Under the final rule, the assessment base for the three monthsspecial assessment is equal to an insured depository institution’s estimated uninsured deposits, reported for the quarter ended September 30, 2017,December 31, 2022, minus the first $5 billion in estimated uninsured deposits. The FDIC will collect the special assessment over eight quarterly assessment periods starting with the first quarter of 2024, at a quarterly rate of 3.36 basis points (“bps”). The Company recognized the entire assessment expense of approximately $70 million in the fourth quarter of 2023. However, depending on future adjustments to the DIF’s estimated loss, the FDIC retained the ability to cease collection early, extend the special assessment collection period, or impose a final shortfall special assessment.
59

As of the publication of the final rule, the FDIC estimated that losses to the DIF totaled $16.3 billion. In February 2024, the FDIC updated its estimate of the DIF’s losses to $20.4 billion before the $1.7 billion residual interest in the Silicon Valley Bridge Bank, N.A. receivership’s trust. In the first quarter of 2024, the Company updated its estimate to recognize an anticipated additional FDIC special assessment charge (“FDIC charge”) of $10 million, which represents the proportional increase in the FDIC’s estimated loss.

Climate Accountability

On March 6, 2024, the SEC adopted final rules requiring registrants to disclose certain climate-related information in registration statements and annual reports. The final rules include disclosures related to climate-related risks and risk management as well as the board and management’s governance of $22.5such risks. The rules also incorporate requirements to disclose the financial effects of certain severe weather events and other natural conditions in the audited financial statements. Larger registrants will also be required to disclose information about greenhouse gas emissions, to the extent material, which will be subject to a phased-in third-party assurance requirement.

On April 4, 2024, the SEC voluntarily stayed implementation of the rules pending the completion of judicial review of consolidated legal challenges to the rules by the United States Court of Appeals for the Eighth Circuit. The Company is evaluating the impact of the climate disclosure rules and monitoring the outcome of the litigation regarding their adoption.

Financial Review

Three Months Ended March 31,
($ and shares in thousands, except per share, and ratio data)20242023
Summary of operations:
Net interest income before provision for credit losses$565,139 $599,861 
Noninterest income78,988 59,978 
Total revenue644,127 659,839 
Provision for credit losses25,000 20,000 
Noninterest expense246,875 218,447 
Income before income taxes372,252 421,392 
Income tax expense87,177 98,953 
Net income$285,075 $322,439 
Per share:
Basic earnings$2.04 $2.28 
Diluted earnings$2.03 $2.27 
Adjusted diluted earnings (1)
$2.08 $2.32 
Dividends declared$0.55 $0.48 
Weighted-average number of shares outstanding:
Basic139,409 141,112 
Diluted140,261 141,913 
Performance metrics:
Return on average assets (“ROA”)1.60 %2.01 %
Return on average common equity (“ROE”)16.40 %21.15 %
Return on average tangible common equity (“TCE”) (1)
17.60 %22.94 %
Common dividend payout ratio27.33 %21.22 %
Net interest margin3.34 %3.96 %
Efficiency ratio (2)
38.33 %33.11 %
Adjusted efficiency ratio (1)
34.68 %30.46 %
60

At period end:March 31, 2024December 31, 2023
Total assets$70,875,670 $69,612,884 
Total loans$52,005,784 $52,210,898 
Total deposits$58,560,624 $56,092,438 
Common shares outstanding at period-end139,121 140,027 
Book value per share$50.48 $49.64 
Tangible book value per share (1)
$47.09 $46.27 
(1)For additional information regarding the reconciliation of these non-U.S. Generally Accepted Accounting Principles (“GAAP”) financial measures, refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.
(2)Efficiency ratio is calculated as noninterest expense divided by total revenue.

The Company’s first quarter 2024 net income was $285 million, a decrease of $37 million or 20%12%, from $110.1 million for the same period in 2016. This increasecompared with first quarter 2023 net income of $322 million. The decrease was primarily due to higherlower net interest income and higher noninterest expense, partially offset by higher noninterest income and lower income tax expense reflecting a higher effective tax rate. Net income totaled $420.7 million for the nine months ended September 30, 2017, an increase of $99.8 million or 31%, from $320.9 million for the same period in 2016. This increase was primarily due to higher 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 inquarter. Noteworthy items about 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 duringCompany’s performance for the first quarter of 2017 and2024 included:

•Asset growth. Total assets reached $70.9 billion as of March 31, 2024, an increase of $1.3 billion or 2% from December 31, 2023, primarily driven by a $2.2 billion or 36% increase in available-for-sale (“AFS”) debt securities mainly funded by a $2.5 billion increase in deposits, partially offset by decreases in cash and cash equivalents and securities purchased under resale agreements (“resale agreements”).

•Deposit growth. Total deposits were $58.6 billion as of March 31, 2024, an increase of $2.5 billion or 4%, from $56.1 billion as of December 31, 2023, primarily reflecting an increase in customer deposits related to a successful branch-based certificates of deposit (“CD”) campaign for the Lunar New Year.

•Borrowings. Total borrowings and long-term debt decreased $1.1 billion to $3.6 billion as of March 31, 2024, compared with December 31, 2023. The net decrease was primarily driven by the $4.5 billion payoff of Bank Term Funding Program (“BTFP”) borrowings and the $117 million after-tax net gain recognized from the saleredemption of East West Insurance Services, Inc.’sCapital Trust securities, partially offset by a $3.5 billion increase in Federal Home Loan Bank (“EWIS”FHLB”) business during the third quarteradvances.

•Strong capital levels. Stockholders’ equity was $7.0 billion as of 2017.
Diluted earningsMarch 31, 2024, up 1% compared with December 31, 2023. Book value and tangible book value per share (“EPS”) was $0.91of $50.48 and $0.76 for$47.09, respectively, as of March 31, 2024, were both up 2% compared with December 31, 2023. Tangible book value per share is a non-GAAP financial measure. For additional details, see the three months ended September 30, 2017reconciliation of non-GAAP financial measures presented under Item 2. MD&A - Reconciliation of GAAP to non-GAAP Financial Measures in this Form 10-Q.

•Net interest income and 2016, respectively, which reflected an increase of $0.15 or 20%net interest margin. 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 First 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 of2024 net interest income before provision for credit losses and noninterest income, increased $49.3was $565 million, a decrease of $35 million or 16% to $352.8 million for6% from the three months ended September 30, 2017, compared tofirst quarter of 2023. First quarter 2024 net interest margin of 3.34% was down 62 basis points (“bps”) year-over-year.

•Profitability ratios. First quarter 2024 ROA, ROE and the same period in 2016,return on average TCE were 1.60%, 16.40% 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%17.60%, respectively, compared to 10.8% and 21.9%, respectively, for the same periods in 2016.
respectively. Return on average assets increased 13 and 28 basis pointsTCE is a non-GAAP financial measure. For additional details, see the reconciliation of non-GAAP financial measures presented under Item 2. MD&A — Reconciliation of GAAP 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 periodsNon-GAAP Financial Measures 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.this Form 10-Q.


Balance Sheet and Liquidity

The Company experienced growth of $1.52 billion or 4% in total assets as of September 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 billion or 12% to $28.53 billion as of September 30, 2017, compared to $25.50 billion as of December 31, 2016, while the allowance for 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 $31.31 billion as of September 30, 2017, compared to $29.89 billion as of December 31, 2016, consisting of a $1.24 billion or 5% increase in core deposits and a $179.3 million or 3% increase in time deposits. Core deposits comprised 81% of total deposits as of each of September 30, 2017 and December 31, 2016.



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 annualizedratio of net interest income byto average interest-earning assets. Net interest income and net interest margin are affectedimpacted 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.


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726

Net interest income for the three months ended September 30, 2017 was $303.2 million, an increase of $49.0 million or 19% compared to $254.1 million for the same period in 2016. Net interest income for the nine months ended September 30, 2017 was $865.4 million, an increase of $105.4 million or 14% compared to $759.9 million for the same period in 2016. The notable increases in net interest income for the three 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, partially offset by a 16 and 12 basis point increase 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 threefirst quarter of 2024 decreased year-over-year, which primarily reflected the higher cost of interest-bearing deposits, shifts in the deposit mix to time deposits and nine months ended September 30, 2017 were due to higher average balances of short-term and BTFP borrowings, partially offset by higher loan yields, from interest-earning assets (primarily due toloan growth and 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 banksbanks. The changes in yields and investment securities during the nine months ended September 30, 2017), as a result of the short-termrates reflected higher benchmark interest rate increases in 2017. The higher loan yieldsrates.

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Average interest-earning assets were $68.1 billion for the three and nine months ended September 30, 2017 were partially offset by lower accretion incomefirst quarter of 2024, an increase of $6.6 billion or 11% 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,$61.5 billion for the same periodsfirst quarter of 2023. The increase in 2016.

For the three months ended September 30, 2017, 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 increase was primarily due to increases of $3.22 billion or 13% in average loans,reflected loan growth, and $751.0 million or 47% in averagehigher 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. For the nine months ended September 30, 2017,banks.

The yield on average interest-earning assets increased $2.73 billion or 9% to $33.54 billion from $30.81 billion for the same periodfirst quarter of 2024 was 6.04%, an increase of 53 bps from 5.51% for the first quarter of 2023. The year-over-year increase in 2016. Thisthe yield on average interest-earning assets primarily resulted from higher benchmark interest rates.

2374
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The average loan yield for the first quarter of 2024 was 6.71%, an increase was primarily dueof 57 bps from 6.14% for the first quarter of 2023. The year-over-year increase in the average loan yield reflected the loan portfolio’s sensitivity to increaseshigher benchmark interest rates and loan growth. Approximately 57% and 59% of $2.78 billion or 12% in average loans held-for-investment were variable-rate as of March 31, 2024 and $305.1 million or 17% in average interest-bearing cash and deposits with banks, partially offset by a $228.3 million or 7% decrease in average investment securities.2023, respectively.


Customer depositsNoninterest-_and_Interest-bearing_Deposit_Mix_($_in_billions) v2.jpg
M130-8_AVG cost of dep relative to EFFR Q124 v2.jpg

Deposits are an important source of fundingfunds and affectimpact both net interest income and net interest margin. Deposits are comprisedAverage deposits were $57.4 billion for the first quarter of 2024, which increased $2.5 billion or 5% from $55.0 billion for the first quarter of 2023. Average noninterest-bearing demand, interest-bearing checking, money market, savings anddeposits were $15.0 billion for the first quarter of 2024, a decrease of $4.7 billion or 24% from $19.7 billion for the first quarter of 2023, which reflected the deposit mix shift to time deposits. Average noninterest-bearing deposits increased $2.79 billion or 10% to $31.07 billionmade up 26% and 36% of average deposits for the three months ended September 30, 2017, compared to $28.28 billionfirst quarters of 2024 and 2023, respectively.

The average cost of deposits was 2.84% for the same period in 2016. The ratiofirst quarter of average noninterest-bearing demand deposits to total deposits increased to 34%2024, a 124 bps increase from 1.60% for the three months ended September 30, 2017, from 33%first quarter of 2023. The average cost of interest-bearing deposits was 3.85% for the three months ended September 30, 2016. Average deposits increased $2.27 billion or 8% to $30.33 billionfirst quarter of 2024, a 136 bps increase from 2.49% for the nine months ended September 30, 2017, comparedfirst quarter of 2023. The year-over-year increase primarily reflected higher rates paid on time deposits, money market and checking deposits in response to $28.06 billion for the same period in 2016. The ratio of average noninterest-bearing demand deposits to total deposits increased to 34% for the nine months ended September 30, 2017, from 32% for the nine months ended September 30, 2016. higher interest rate environment.

The average loans to average deposits ratio increased to 89% for the three months ended September 30, 2017, from 86% for the three months ended September 30, 2016. The average loans to average deposits ratio increased to 88% for the nine months ended September 30, 2017, from 86% for the nine months ended September 30, 2016. In addition, cost of funds increased 10 basis points to 0.46%calculation includes deposits, short-term and BTFP borrowings, FHLB advances, assets sold under repurchase agreements (“repurchase agreements”), and long-term debt. For the first quarter of 2024, the average cost of funds was 2.97%, a 128 bps increase from 1.69% for the three months ended September 30, 2017 from 0.36% forfirst quarter of 2023. The year-over year increase was mainly driven by the same period in 2016. Costincreased cost of funds increased eight basis points to 0.43% for the nine months ended September 30, 2017 from 0.35% for the same period in 2016.deposits discussed above.


The Company utilizes various tools to manage interest rate risk. Refer to the “InterestInterest 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.



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The following table presents the interest spread, net interest margin, average balances, interest income and expense, and the average yield/rate by asset and liability component for the three months ended September 30, 2017first quarters of 2024 and 2016:2023:
Three Months Ended March 31,
20242023
($ in thousands)Average BalanceInterest
Average Yield/
Rate (1)
Average BalanceInterest
Average Yield/
Rate (1)
ASSETS
Interest-earning assets:
Interest-bearing cash and deposits with banks$5,861,517 $74,382 5.10 %$3,449,626 $35,647 4.19 %
Assets purchased under resale agreements (2)
725,659 6,115 3.39 %688,778 4,503 2.65 %
Debt securities:
AFS debt securities (3)(4)
6,566,368 62,858 3.85 %6,108,825 53,197 3.53 %
Held-to-maturity (“HTM”) debt securities (3)
2,950,686 12,534 1.71 %2,995,677 12,734 1.72 %
Total debt securities (3)
9,517,054 75,392 3.19 %9,104,502 65,931 2.94 %
Loans:
C&I16,251,622 325,810 8.06 %15,400,996 275,573 7.26 %
CRE20,413,584 324,087 6.39 %19,207,899 282,464 5.96 %
Residential mortgage15,202,345 215,674 5.71 %13,468,255 169,494 5.10 %
Other consumer57,289 818 5.74 %72,687 855 4.77 %
Total loans (5)(6)
51,924,840 866,389 6.71 %48,149,837 728,386 6.14 %
Restricted equity securities92,975 1,339 5.79 %90,790 1,039 4.64 %
Total interest-earning assets$68,122,045 $1,023,617 6.04 %$61,483,533 $835,506 5.51 %
Noninterest-earning assets:
Cash and due from banks445,767 621,104 
Allowance for loan losses(679,116)(602,754)
Other assets3,789,700 3,611,721 
Total assets$71,678,396 $65,113,604 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Checking deposits$7,695,429 $53,821 2.81 %$6,493,865 $23,174 1.45 %
Money market deposits13,636,210 134,661 3.97 %11,260,715 76,102 2.74 %
Savings deposits1,809,568 4,120 0.92 %2,436,587 3,669 0.61 %
Time deposits19,346,243 213,597 4.44 %15,052,762 113,849 3.07 %
Short-term and BTFP borrowings3,864,525 42,106 4.38 %811,551 8,825 4.41 %
Repurchase agreements2,549 35 5.52 %106,785 1,052 4.00 %
FHLB advances554,946 7,739 5.61 %500,000 6,430 5.22 %
Long-term debt and finance lease liabilities125,818 2,399 7.67 %152,420 2,544 6.77 %
Total interest-bearing liabilities$47,035,288 $458,478 3.92 %$36,814,685 $235,645 2.60 %
Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits14,954,953 19,709,980 
Accrued expenses and other liabilities2,695,597 2,405,615 
Stockholders’ equity6,992,558 6,183,324 
Total liabilities and stockholders’ equity$71,678,396 $65,113,604 
Interest rate spread2.12 %2.91 %
Net interest income and net interest margin$565,139 3.34 %$599,861 3.96 %
 
($ 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.
(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)
(2)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 and interest income for securities and expense, and the average yield/rates by asset and liability componentloans purchased under resale agreements for the nine months ended September 30, 2017first quarter of 2023.
(3)Yields on tax-exempt securities are not presented on a tax-equivalent basis.
(4)Includes the amortization of net premiums on AFS debt securities of $7 million and 2016:$9 million for the first quarters of 2024 and 2023, respectively.
(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 $14 million for each of the first quarters of 2024 and 2023.
64
             
($ 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 affectedimpacted 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 changechanges 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 yield/rate. Nonaccrual
Three Months Ended March 31,
2024 vs. 2023
Changes Due to
($ in thousands)Total ChangeVolumeYield/Rate
Interest-earning assets:
Interest-bearing cash and deposits with banks$38,735 $29,533 $9,202 
Assets purchased under resale agreements (1)
1,612 260 1,352 
Debt securities:
AFS debt securities9,661 4,384 5,277 
HTM debt securities(200)(125)(75)
Total debt securities9,461 4,259 5,202 
Loans:
C&I50,237 16,678 33,559 
CRE41,623 19,582 22,041 
Residential mortgage46,180 24,098 22,082 
Other consumer(37)(198)161 
Total loans138,003 60,160 77,843 
Restricted equity securities300 27 273 
Total interest and dividend income$188,111 $94,239 $93,872 
Interest-bearing liabilities:
Checking deposits$30,647 $5,024 $25,623 
Money market deposits58,559 18,715 39,844 
Savings deposits451 (1,103)1,554 
Time deposits99,748 38,819 60,929 
Short-term and BTFP borrowings33,281 33,338 (57)
FHLB advances1,309 776 533 
Repurchase agreements(1,017)(1,314)297 
Long-term debt and finance lease liabilities(145)(469)324 
Total interest expense$222,833 $93,786 $129,047 
Change in net interest income$(34,722)$453 $(35,175)
(1)Includes the impact of securities and loans are included in average loans used to computepurchased under resale agreements for the table below:first quarter of 2023.
65
 
($ 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:
first quarters of 2024 and 2023:
 
($ 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 %
 
Three Months Ended March 31,
($ in thousands)20242023% Change
Deposit account fees$24,948 $23,054 8%
Lending fees22,925 20,586 11%
Foreign exchange income11,469 11,309 1%
Wealth management fees8,592 6,304 36%
Customer derivative income3,750 2,564 46%
Net losses on sales of loans(41)(22)(86)%
Net gains (losses) on AFS debt securities49 (10,000)NM
Other investment income2,815 1,921 47%
Other income4,481 4,262 5%
Total noninterest income$78,988 $59,978 32%
NM — Not Meaningful.meaningful.


The following discussion providesNoninterest income comprised 12% of total revenue for the compositionfirst quarter of 2024, compared with 9% for the major changes in noninterestfirst quarter of 2023. Noninterest income andfor the factors contributing to the changes.

Net gains on salesfirst quarter of fixed assets increased $71.22024 was $79 million, to $74.1an increase of $19 million or 32%, compared with $60 million for the nine months ended September 30, 2017, compared to $2.9 million for the same period in 2016. Thisfirst quarter of 2023. The increase was primarily due to the $71.7net gains on AFS debt securities and increases in lending, wealth management and deposit account fees.

Deposit account fees were $25 million of pre-tax gain recognized from the sale of the commercial property in California duringfor the first quarter of 2017. In2024, an increase of $2 million or 8%, compared with $23 million for the first quarter of 2017, East West Bank completed the sale2023. The increase was primarily related to analysis charges, which reflected customer growth and leaseback of a commercial property in Californiafee increases.

Lending fees were $23 million 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 term2024, an increase 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$2 million or 52% to $3.711%, compared with $21 million for the three months ended September 30, 2017 from $7.6 million for the same period in 2016, and decreased $4.5 million or 23% to $15.3 million for the nine months ended September 30, 2017 from $19.7 million for the same period in 2016. 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.2023. The $4.5 million decrease for the nine months ended September 30, 2017, compared to the same period in 2016,increase was largelyprimarily due to a decreasehigher unused commitment and trade finance fees driven by an increase in rental income as a result of sale of the commercial property duringcustomers.

Wealth management fees were $9 million for the first quarter of 2017.2024, an increase of approximately $2 million or 36%, compared with $6 million for the first quarter of 2023. The increase reflected customer demand for higher-yielding products in response to the interest rate environment and potential rate cuts.




Net gains on AFS debt securities were $49 thousand forthe first quarter of 2024. In comparison, net losses on AFS debt securities were $10 million for the first quarter of 2023 due to the write-off of an impaired subordinated AFS debt security.

Noninterest Expense


NoninterestThe following table presents the components of noninterest expense totaled $164.5for the first quarters of 2024 and 2023:
Three Months Ended March 31,
($ in thousands)20242023% Change
Compensation and employee benefits$141,812 $129,654 9 %
Occupancy and equipment expense15,230 15,587 (2)%
Deposit insurance premiums and regulatory assessments19,649 7,910 148 %
Deposit account expense12,188 9,609 27 %
Computer software and data processing expenses11,344 10,707 6 %
Other operating expense33,445 34,870 (4)%
Amortization of tax credit and CRA investments13,207 10,110 31 %
Total noninterest expense$246,875 $218,447 13 %

66

First quarter 2024 noninterest expense was $247 million, an increase of $28 million or 13%, compared with $218 million for the three months ended September 30, 2017, a decreasefirst quarter of $6.0 million or 4%, compared to $170.5 million for the same period in 2016. This decrease was primarily due to an $8.8 million decrease in 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 and employee benefits. Noninterest expense totaled $486.7 million for the nine months ended September 30, 2017, an increase of $20.7 million or 4%, compared to $466.0 million for the same period in 2016. This2023. The increase was primarily due to a $24.8 million increaseincreases in compensation and employee benefits and a $5.3 million increase in amortization of tax creditdeposit insurance premiums and other investments, partially offset by an $8.3 million decrease in consulting expense and a $3.8 million decrease in legal expense.regulatory assessments.

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 million or 6% to $79.6were $142 million for the three months ended September 30, 2017,first quarter of 2024, an increase of $12 million or 9%, compared to $75.0with $130 million for the same period in 2016, and increased $24.8 million or 11% to $244.9 million for the nine months ended September 30, 2017, compared to $220.2 million for the same period in 2016. The increases for the three 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 severance expenses.

Amortization of tax credit and other investments decreased $8.8 million or 27% to $23.8 million for the three months ended September 30, 2017, compared to $32.6 million for the same period in 2016, and increased $5.3 million or 9% to $66.1 million for the nine months ended September 30, 2017, compared to $60.8 million for the same period in 2016. The decrease in the thirdfirst 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, the2023. The increase in the first nine months of 2017, compared with the prior year period, was primarily driven by additional renewable energystaffing growth and historical rehabilitation tax credit investments placed in service during the nine months ended September 30, 2017.annual merit increases.


Legal expense decreased $2.0 million or 38% to $3.3Deposit insurance premiums and regulatory assessments were $20 million for the three months ended September 30, 2017,first quarter of 2024, an increase of $12 million or 148%, compared to $5.4with $8 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.first quarter of 2023. The decreases for the three and nine months ended September 30, 2017 were predominantlyincrease was primarily due to lower legal fees and litigation expense followingan additional $10 million FDIC charge. For additional information about the resolution of previously outstanding litigation.FDIC special assessment, refer to Item 2. MD&A — Overview —Current Developments in this Form 10-Q.




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
Three Months Ended March 31,
($ in thousands)20242023% Change
Income before income taxes$372,252 $421,392 (12)%
Income tax expense$87,177 $98,953 (12)%
Effective tax rate23.4 %23.5 %
Income
First quarter 2024 income tax expense was $42.6$87 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%23.4%, compared with first quarter 2023 income tax expense of $99 million and 25.0%an effective tax rate of 23.5%. The decrease in income tax expense for the three and nine months ended September 30, 2017, respectively,first quarter of 2024 compared to 10.8% and 21.9%, respectively, forwith the same periods in 2016.

The higher effective tax rates for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were mainlyyear-ago period was primarily due to higher projected income before income taxes that was partially offset by increases 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.lower pre-tax income.


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 definesorganizes its operating segments based on its core strategy and has identifiedoperations into three reportable operating segments: Retail Banking,(1) Consumer and Business Banking; (2) Commercial BankingBanking; and (3) Other.

The Retail Banking segment focuses primarily on retail operations through These segments are defined by the Bank’s branch network. The Commercial Banking segment, which includes commercialtype of customers served and industrial (“C&I”)the related products 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,services provided. For a description of 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 activitiessegment cost allocation methodology, see Note 15 — 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 insegment, 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. 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 presenttable presents the selectedresults by operating segment for the periods indicated:
Three Months Ended March 31,
Consumer and Business BankingCommercial BankingOther
($ in thousands)202420232024202320242023
Total revenue$317,306 $330,244 $306,815 $280,322 $20,006 $49,273 
Provision for credit losses2,565 15,012 22,435 4,988 — — 
Noninterest expense119,300 113,823 106,307 87,248 21,268 17,376 
Segment income (loss) before income taxes195,441 201,409 178,073 188,086 (1,262)31,897 
Segment net income$137,672 $142,247 $125,581 $134,457 $21,822 $45,735 

Consumer and Business Banking

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking 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.
67

The following table presents additional financial information for the threeConsumer 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 RetailBusiness Banking segment reported pre-taxfor the periods indicated:
Three Months Ended March 31,
Change from 2023
($ in thousands)20242023$%
Net interest income before provision for credit losses$291,764 $304,242 $(12,478)(4)%
Noninterest income25,542 26,002 (460)(2)%
Total revenue317,306 330,244 (12,938)(4)%
Provision for credit losses2,565 15,012 (12,447)(83)%
Noninterest expense119,300 113,823 5,477 5 %
Segment income before income taxes195,441 201,409 (5,968)(3)%
Income tax expense57,769 59,162 (1,393)(2)%
Segment net income$137,672 $142,247 $(4,575)(3)%
Average loans$19,137,292 $17,110,917 $2,026,375 12 %
Average deposits$33,786,818 $33,848,051 $(61,233)0 %

Consumer and Business Banking segment net income of $68.6decreased by $5 million and $204.6or 3% year-over-year to $138 million for the three and nine months ended September 30, 2017, respectively, compared to $32.3 million and $114.5 million, respectively, for the same periods in 2016. The increases in pre-tax income for this segment for the three and nine months ended September 30, 2017, compared to the same periods in 2016, werefirst quarter of 2024. This decrease was primarily driven by an increasea decrease in net interest income partially offset byand an increase in provision for credit losses.
Net interest income for this segment increased $40.8 million or 38% to $147.5 million for the three months ended September 30, 2017, compared to $106.6 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. The increases in net interest income for the three and nine months ended September 30, 2017, compared to the same 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 in compensation and employee benefits, occupancy and equipment expense, and data processing expense, partially offset by a decrease in consulting expense.provision for credit losses. Net interest income before provision for credit losses decreased by $12 million or 4% year-over-year to $292 million for the first quarter of 2024. This decrease was primarily driven by a higher cost of interest-bearing deposits and continued deposit mix shift. Provision for credit losses decreased by $12 million or 83% year-over-year to $3 million for the first quarter of 2024. This decrease was primarily driven by the substantial residential mortgage loan growth from the Bridge To Home Ownership program that required higher provision for credit losses in the first quarter of 2023. Noninterest expense increased $5 million or 5% year-over-year to $119 million for the first quarter of 2024, primarily due to an increase in deposit insurance premiums and regulatory assessments largely resulting from the FDIC charge.

Commercial Banking

The Commercial Banking segment reported pre-taxprimarily generates commercial loan and deposit products. Commercial loan products include CRE lending, construction finance, commercial business lending, working capital lines of credit, trade finance, letters of credit, affordable housing lending, asset-based lending, asset-backed finance, project finance and equipment financing. Commercial deposit products and other financial services include treasury management, foreign exchange services, and interest rate and commodity risk hedging.

The following table presents additional financial information for the Commercial Banking segment for the periods indicated:
Three Months Ended March 31,
Change from 2023
($ in thousands)20242023$%
Net interest income before provision for credit losses$260,349 $236,723 $23,626 10 %
Noninterest income46,466 43,599 2,867 7 %
Total revenue306,815 280,322 26,493 9 %
Provision for credit losses22,435 4,988 17,447 350 %
Noninterest expense106,307 87,248 19,059 22 %
Segment income before income taxes178,073 188,086 (10,013)(5)%
Income tax expense52,492 53,629 (1,137)(2)%
Segment net income$125,581 $134,457 $(8,876)(7)%
Average loans$32,787,548 $31,038,920 $1,748,628 6 %
Average deposits$21,054,189 $17,282,964 $3,771,225 22 %

68

Commercial Banking segment net income of $99.0decreased by $9 million and $284.2or 7% year-over-year to $126 million for the threefirst quarter of 2024. This decrease was due to higher noninterest expense and nine months ended September 30, 2017, respectively, compared to $80.4 million and $268.4 million, respectively,provision for the same periods in 2016. The increases in pre-tax income for this segment for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were attributable to increases incredit losses, partially offset by higher net interest income and noninterest income.
Net interest income before provision for this segmentcredit losses increased $6.8$24 million or 5%10% year-over-year to $138.2$260 million for the three months ended September 30, 2017, comparedfirst quarter of 2024. This increase was primarily due to $131.3higher loan interest income from commercial loan growth. Provision for credit losses increased $17 million or 350% year-over-year to $22 million for the same period in 2016. Net interest incomefirst quarter of 2024, primarily driven by continued caution regarding the CRE market outlook. Noninterest expense increased $19.0$19 million or 5%22% year-over-year to $408.6$106 million for the nine months ended September 30, 2017, compared to $389.6 million for the same period in 2016. The increases in net interest income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, were due to the growth in commercial loans and commercial core deposits, for which the segment receives interest income credit under 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 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 same periods in 2016, werefirst quarter of 2024, 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 inhigher compensation and employee benefits, deposit insurance premiums and consulting expense, partially offset by a decrease in legalregulatory assessments, and deposit account expense.

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 table presents additional financial information for the Other segment for the periods indicated:
Three Months Ended March 31,
Change from 2023
($ in thousands)20242023$%
Net interest income before provision for credit losses$13,026 $58,896 $(45,870)(78)%
Noninterest income (loss)6,980 (9,623)16,603 173 %
Total revenue20,006 49,273 (29,267)(59)%
Noninterest expense21,268 17,376 3,892 22 %
Segment (loss) income before income taxes(1,262)31,897 (33,159)(104)%
Income tax benefit23,084 13,838 9,246 67 %
Segment net income$21,822 $45,735 $(23,913)(52)%
Average deposits$2,601,396 $3,822,894 $(1,221,498)(32)%

The Other segment includes the activitiesreported segment loss before income taxes of the treasury function, which is responsible for liquidity$1 million 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 insegment net interest income. The Other segment reported pre-tax income of $7.7$22 million, and $72.2reflecting an income tax benefit of $23 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.first quarter of 2024. The decrease in pre-taxsegment net 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 income and internal funds transfer pricing credits, partially offset by a decrease in noninterest expense and an increase inlower 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 drivenpartially offset by an increase in noninterest income as the result of the net gain on sale of the commercial property, partially offset by aincome. The $46 million decrease in net interest income before provision for credit losses was primarily driven by the higher cost of BTFP borrowings. Noninterest income increased by $17 million for the first quarter of 2024, mainly due to a $10 million write-off of an impaired AFS debt security during the first quarter of 2023 and an increase in noninterest expense.foreign exchange income.
Net interest
The income for thistax expense or benefit in the Other segment increased $1.4 millionconsists of the remaining unallocated income tax expense 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 interestbenefit after allocating 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, comparedtax expense to the same period in 2016, was primarily due to an increase in interest income from investments. The decrease in net interest income fortwo core segments, and reflects the nine months ended September 30, 2017, compared to the same period in 2016, was due to increases in interest expense on borrowings and deposits.


Noninterest income for this segment decreased $5.3 million or 63% to $3.1 million for the three months ended September 30, 2017, compared to $8.4 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, was 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 in amortizationimpact of tax credit and other investments, partially offset by increases of $2.5 million in compensation and employee benefits. The increase in noninterestinvestment activity. Income tax expense for the nine months ended September 30, 2017, comparedis allocated to the same period in 2016, was primarily attributableConsumer and Business Banking and the Commercial Banking segments by applying statutory income tax rates to increases of $5.3 million inthe segment income before income taxes. Tax credit investment amortization of tax credit and other investments, and $6.5 million in compensation and employee benefits.is allocated to the Other segment.


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.



InvestmentDebt Securities

The Company aims to maintain an investmentmaintains a portfolio that consists of high quality and liquid debt securities with relatively short durations to minimizea moderate duration profile. It closely manages the overall portfolio credit, interest rate and liquidity risks. The Company’s available-for-sale investmentdebt securities provide:


•interest income for earnings and yield enhancement;
•funding availability for funding needs arising during the normal course of business;
•the ability to execute interest rate risk management strategies duein response to changes in economic or market conditions, which influence loan origination, prepayment speeds, or deposit balancesconditions; 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 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-maturity to available-for-sale. The transfer reflects the Company’s intentdoes not intend to sell the security under active liquidity management.

Available-for-sale investmentits debt securities,

As of September 30, 2017 and December 31, 2016, the Company’s available-for-sale investment it may sell AFS debt 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 correspondingin response to 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.

69

The following table presents the breakoutdistribution of the Company’s AFS and HTM debt securities portfolio as of March 31, 2024 and December 31, 2023, and by credit ratings as of March 31, 2024:
March 31, 2024December 31, 2023
Ratings as of March 31, 2024 (1)
($ in thousands)Amortized CostFair Value% of Fair ValueAmortized CostFair Value% of Fair ValueAAA/AAABBBBB and Lower
No Rating (2)
AFS debt securities:
U.S. Treasury securities$676,290 $621,094 7 %$1,112,587 $1,060,375 17 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise debt securities410,676 360,802 4 %412,086 364,446 6 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (3)
5,742,708 5,448,018 65 %2,488,304 2,195,853 35 %100 %— %— %— %— %
Municipal securities296,360 258,495 3 %297,283 261,016 4 %98 %— %— %— %2 %
Non-agency mortgage-backed securities983,539 853,653 10 %1,052,913 921,187 15 %86 %— %— %— %14 %
Corporate debt securities653,501 502,647 6 %653,501 502,425 8 %— %31 %66 %3 %— %
Foreign government bonds238,592 227,196 3 %239,333 227,874 4 %47 %53 %— %— %— %
Asset-backed securities41,287 40,712 1 %43,234 42,300 1 %100 %— %— %— %— %
Collateralized loan obligations89,000 87,851 1 %617,250 612,861 10 %72 %28 %— %— %— %
Total AFS debt securities$9,131,953 $8,400,468 100 %$6,916,491 $6,188,337 100 %91 %4 %4 %0 %1 %
HTM debt securities:
U.S. Treasury securities$530,921 $485,400 20 %$529,548 $488,551 20 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise debt securities1,002,697 805,799 33 %1,001,836 814,932 33 %100 %— %— %— %— %
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities (4)
1,226,419 979,270 41 %1,235,784 1,004,697 41 %100 %— %— %— %— %
Municipal securities188,605 144,009 6 %188,872 145,791 6 %100 %— %— %— %— %
Total HTM debt securities$2,948,642 $2,414,478 100 %$2,956,040 $2,453,971 100 %100 %— %— %— %— %
Total debt securities$12,080,595 $10,814,946 $9,872,531 $8,642,308 
(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.
(3)Includes Government National Mortgage Association (“GNMA”) AFS debt securities totaling $4.5 billion of amortized cost and $4.4 billion of fair value as of March 31, 2024, and $1.3 billion of amortized cost and $1.2 billion of fair value as of December 31, 2023.
(4)Includes GNMA HTM debt securities totaling $91 million of amortized cost and $73 million of fair value as of March 31, 2024, and $92 million of amortized cost and $75 million of fair value of available-for-sale investment securities by major categories as of September 30, 2017 and December 31, 2016:2023.

 
($ 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.

As of March 31, 2024, the Company’s AFS and HTM debt securities portfolios had an effective duration (defined as the sensitivity of the value of the portfolio to interest rate changes) of 2.8 and 7.4, respectively, compared with 3.6 and 7.5, respectively, as of December 31, 2023. The decrease in the AFS effective duration was primarily due to the purchases of floating rate GNMA securities. The decrease in the HTM effective duration was due to the portfolio seasoning.



Available-for-Sale Debt Securities

The fair value of the available-for-sale investmentAFS debt securities totaled $2.96$8.4 billion as of September 30, 2017, compared to $3.34March 31, 2024, an increase of $2.2 billion or 36% from $6.2 billion as of December 31, 2016.2023. The decrease of $379.0 million or 11%increase was primarily reflecteddue to 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. The decrease was partially offset by purchases of U.S. government agency and U.S. government sponsored enterprise mortgage-backedGNMA securities, foreign bonds, U.S. government agency and U.S. government sponsored enterprise debt securities, U.S. Treasury securities and municipal securities; and the transfer of a non-agency commercial mortgage-backed security from held-to-maturity security.

which were mainly funded by an increase in deposits. The Company’s available-for-sale investmentAFS debt securities are carried at fair value with changesnon-credit related unrealized gains and losses, net of tax, reported in fair value reflected in Other comprehensive income (loss) unless a security is deemed to be other-than-temporarily impaired. Ason the Consolidated Statement of September 30, 2017, the Company’sComprehensive Income. Pre-tax net unrealized losses on available-for-sale investmentAFS debt securities were $36.0$731 million as of March 31, 2024, compared to $49.6with $728 million as of December 31, 2016. The favorable change2023.

70

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

Held-to-Maturity Debt Securities

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

For additional information on AFS and HTM securities, see Note 1— Summary of Significant Accounting Policies to the Consolidated Financial Statements in the net unrealized losses was primarily attributed to the flattening in the yield curve 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 as of December 31, 2016. As of September 30, 2017, the Company had no intention to sell securities with unrealized lossesCompany’s2023 Form 10-K and believes it is more likely than not that it would not be required to sell such securities before recovery of their amortized cost. No other-than-temporary impairment was recognized for the three and nine months ended September 30, 2017 and 2016. For a complete discussion and disclosure, see 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, and construction and land loans, as well as consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”) and other consumer loans. Net loans, including loans held-for-sale, increased $2.97Loans held-for-investment totaled $52.0 billion or 12% to $28.24and $52.2 billion as of September 30, 2017March 31, 2024 and December 31, 2023, respectively, and the composition of the loan portfolio as of March 31, 2024 was similar to the composition as of December 31, 2023.

The following table presents the composition of the Company’s total loan portfolio by loan type as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
($ in thousands)Amount%Amount%
Commercial:
C&I$16,350,191 31 %$16,581,079 32 %
CRE:
CRE14,609,655 28 %14,777,081 28 %
Multifamily residential5,010,245 10 %5,023,163 10 %
Construction and land673,939 1 %663,868 1 %
Total CRE20,293,839 39 %20,464,112 39 %
Total commercial36,644,030 70 %37,045,191 71 %
Consumer:
Residential mortgage:
Single-family residential13,563,738 26 %13,383,060 26 %
HELOCs1,731,233 4 %1,722,204 3 %
Total residential mortgage15,294,971 30 %15,105,264 29 %
Other consumer53,503 0 %60,327 0 %
Total consumer15,348,474 30 %15,165,591 29 %
Total loans held-for-investment (1)
51,992,504 100 %52,210,782 100 %
Allowance for loan losses(670,280)(668,743)
Loans held-for-sale (2)
13,280 116 
Total loans, net$51,335,504 $51,542,155 
(1)Includes $63 million and $71 million of net deferred loan fees and net unamortized premiums as of March 31, 2024 and December 31, 2023, respectively.
(2)Consists of C&I loans as of March 31, 2024 and a single family-residential loan as of December 31, 2023.

71

Commercial

The commercial loan portfolio comprised 70% and 71% of total loans as of March 31, 2024 and December 31, 2023, respectively. The Company actively monitors the commercial lending portfolio for credit risk and reviews credit exposures for sensitivity to changing economic conditions.

Commercial — Commercial and Industrial Loans. Total C&I loan commitments were $24.7 billion and $24.6 billion as of March 31, 2024 and December 31, 2023, respectively, with a utilization rate of 66% as of March 31, 2024, compared with 67% as of December 31, 2023. Total C&I loans were $16.4 billion as of March 31, 2024, a decrease of $231 million or 1% from $25.27$16.6 billion as of December 31, 2016. The increase was broad based and driven by strong increases of $1.14 billion or 22% in residential loans, $1.00 billion or 10% in2023. Total C&I loans $836.3 million or 10% in CREmade up 31% and 32% of total 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% of the total loan portfolioheld-for-investment as of September 30, 2017March 31, 2024 and December 31, 2016, respectively, and are discussed further below.

C&I Loans. C&I loans of $10.65 billion and $9.64 billion, which accounted for 37% and 38% of the total loan portfolio as of September 30, 2017 and December 31, 2016, respectively, include commercial business and trade finance 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 as private equity, energy, entertainment and structured specialty finance. As of September 30, 2017 and December 31, 2016, specialized lending verticals comprised 42% and 37% of total C&I loans,2023, 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 across a wide spectrum of industries. The Company offers a variety of C&I products, including commercial business lending, working capital lines of credit, trade finance, letters of credit, asset-based lending, asset-backed finance, project finance and equipment financing. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional investors. This portfolio totaled $627.9$502 million and $758.5$645 million as of September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The majority of the C&I loans had variable interest rates as of both March 31, 2024 and December 31, 2023.

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

March 31, 2024
December 31, 2023 (1)
($ in thousands)Amount%($ in thousands)Amount%
Industry:Industry:
Real estate investment & management$2,067,855 13 %Capital call lending$2,171,367 13 %
Capital call lending1,944,730 12 %Real estate investment & management1,970,713 12 %
Media & entertainment1,801,303 11 %Media & entertainment1,891,199 11 %
Manufacturing & wholesale1,084,648 7 %Financial services1,136,731 7 %
Financial services1,041,937 6 %Manufacturing & wholesale1,110,544 7 %
Infrastructure & clean energy986,436 6 %Infrastructure & clean energy1,023,662 6 %
Food production & distribution686,035 4 %Tech & telecom729,922 4 %
Tech & telecom679,839 4 %Food production & distribution655,340 4 %
Consumer finance584,290 4 %Consumer finance586,468 4 %
Oil & gas581,122 3 %Hospitality & leisure576,328 3 %
Other4,891,996 30 %Other4,728,805 29 %
Total C&I$16,350,191 100 %Total C&I$16,581,079 100 %

(1)Revised segmentation to conform with the current presentation.


CRECommercial — Total Commercial Real Estate Loans. Total CRE loans include income producing real estate,totaled $20.3 billion and $20.5 billion as of March 31, 2024 and December 31, 2023, respectively, and accounted for 39% of total loans held-for-investment as of both March 31, 2024 and December 31, 2023. The total CRE portfolio consists of CRE, multifamily residential, and construction and land loans, where the interest rates may be fixed, variable or hybrid.and affordable housing lending. The Company focuses on providing financing to experienced real estate investors and developers whoCompany’s underwriting parameters for CRE loans are long-time customers and have moderate levels of leverage. Loans are generally underwrittenestablished in compliance with high standards for cash flows, debt service coverage ratiossupervisory guidance, including property type, geography and loan-to-value ratios. Due to the nature(“LTV”). The consistency of the Company’s geographical footprint and market presence, the Companylow LTV underwriting standards has CRE loan concentrations primarilyhistorically resulted in California, which comprised 74% of thelower credit losses.

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The Company’s total CRE loan portfolio is well-diversified by property type with an average CRE loan size of $3 million as of each of September 30, 2017both March 31, 2024 and December 31, 2016. Accordingly, changes2023. The following table summarizes the Company’s total CRE loans by property type as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
($ in thousands)Amount%Amount%
Property types:
Multifamily$5,010,245 25 %$5,023,164 25 %
Retail (1)
4,256,919 21 %4,297,569 21 %
Industrial (1)
4,028,488 20 %3,997,764 20 %
Hotel (1)
2,431,463 12 %2,446,504 12 %
Office (1)
2,245,781 11 %2,271,508 11 %
Healthcare (1)
724,422 4 %852,362 4 %
Construction and land673,939 3 %663,868 3 %
Other (1)
922,582 4 %911,373 4 %
Total CRE loans$20,293,839 100 %$20,464,112 100 %
(1)Included in CRE loans, which is a subset of Total CRE loans.

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

The following tables provide a summary of the Company’s CRE, multifamily residential, and construction and land loans by geography as of March 31, 2024 and December 31, 2023. The distribution of the total CRE loan portfolio largely reflects the Company’s geographical branch footprint, which is primarily concentrated in California.
March 31, 2024
($ in thousands)CRE%Multifamily Residential%Construction and Land%Total CRE%
Geographic markets:
Southern California$7,545,016 51 %$2,340,771 47 %$264,824 39 %$10,150,611 50 %
Northern California2,729,200 19 %1,059,018 21 %159,425 24 %3,947,643 19 %
California10,274,216 70 %3,399,789 68 %424,249 63 %14,098,254 69 %
Texas1,103,921 8 %443,215 9 %62,992 9 %1,610,128 8 %
New York703,714 5 %261,894 5 %43,406 6 %1,009,014 5 %
Washington492,470 3 %163,383 3 %10,380 2 %666,233 3 %
Arizona368,389 2 %148,591 3 %46,259 7 %563,239 3 %
Nevada256,218 2 %141,975 3 %11,244 2 %409,437 2 %
Other markets1,410,727 10 %451,398 9 %75,409 11 %1,937,534 10 %
Total loans$14,609,655 100 %$5,010,245 100 %$673,939 100 %$20,293,839 100 %
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December 31, 2023
($ in thousands)CRE%Multifamily Residential%Construction and Land%Total CRE%
Geographic markets:
Southern California$7,604,053 51 %$2,295,592 46 %$294,879 44 %$10,194,524 50 %
Northern California2,737,635 19 %1,055,852 21 %147,031 22 %3,940,518 19 %
California10,341,688 70 %3,351,444 67 %441,910 66 %14,135,042 69 %
Texas1,122,428 8 %445,391 9 %41,768 6 %1,609,587 8 %
New York696,950 5 %287,961 6 %43,227 7 %1,028,138 5 %
Washington495,577 3 %173,367 3 %10,375 2 %679,319 3 %
Arizona355,047 2 %148,970 3 %38,897 6 %542,914 3 %
Nevada257,105 2 %142,133 3 %6,325 1 %405,563 2 %
Other markets1,508,286 10 %473,897 9 %81,366 12 %2,063,549 10 %
Total loans$14,777,081 100 %$5,023,163 100 %$663,868 100 %$20,464,112 100 %

As of both March 31, 2024 and December 31, 2023, 69% of total CRE loans were concentrated in California. Changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. 19%For additional information related to the higher degree of risk from a downturn in the California economic and real estate markets, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s2023 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 $14.6 billion as of March 31, 2024, compared with $14.8 billion as of December 31, 2023, and accounted for 28% of total loans held-for-investment as of both dates. Interest rates on CRE loans may be fixed, variable or hybrid. As of March 31, 2024, 57% of our CRE portfolio had variable rates, of which 52% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s exposure remained variable rate.In comparison, as of December 31, 2023, 58% of our CRE portfolio had variable rates, of which 50% had customer-level interest rate derivative contracts in place. The Company seeks to underwrite loans with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 20% of the CRE loans as of each of September 30, 2017both March 31, 2024 and December 31, 20162023. The remainder were owner occupiednon-owner-occupied properties, while the remaining 81% were non-owner occupied properties (wherewhere 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 hadincome 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 multifamilyresidential properties ranging from 5 to 15 units in its primary lending areas. 71% and 73% of the Company’swith five or more units. Multifamily residential loans were concentrated in Californiatotaled $5.0 billion and accounted for 10% of total loans held-for-investment as of September 30, 2017both March 31, 2024 and December 31, 2016,2023. The Company offers a variety of first lien mortgages, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust annually after an initial fixed rate period of three to ten years. As of both March 31, 2024 and December 31, 2023, 48% of our multifamily residential portfolio had variable rates, of which 40% had customer-level interest rate derivative contracts in place. These were hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank’s own exposure remained variable rate.

Commercial —Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. Construction and land loans totaled $674 million as of March 31, 2024, compared with $664 million as of December 31, 2023, and accounted for 1% of total loans held-for-investment as of both dates. Construction loan exposure was made up of $538 million in loans outstanding, plus $641 million in unfunded commitments as of March 31, 2024, compared with $526 million in loans outstanding, plus $672 million in unfunded commitments as of December 31, 2023. Land loans totaled $136 million as of March 31, 2024, compared with $138 million as of December 31, 2023.

74

Consumer

Residential mortgage loans are primarily originated through the Bank’s branch network. The average total residential loan size was $435 thousand and $436 thousand as of March 31, 2024 and December 31, 2023, respectively. ManyThe following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of theMarch 31, 2024 and December 31, 2023:
March 31, 2024
($ in thousands)Single-Family Residential%HELOCs%Total Residential Mortgage%
Geographic markets:
Southern California$5,041,793 37 %$812,239 47 %$5,854,032 38 %
Northern California1,701,556 13 %372,302 21 %2,073,858 14 %
California6,743,349 50 %1,184,541 68 %7,927,890 52 %
New York4,396,997 33 %247,026 14 %4,644,023 30 %
Washington691,594 5 %182,112 11 %873,706 6 %
Massachusetts409,538 3 %65,516 4 %475,054 3 %
Georgia448,234 3 %18,879 1 %467,113 3 %
Nevada422,840 3 %31,658 2 %454,498 3 %
Texas435,538 3 %— — %435,538 3 %
Other markets15,648 0 %1,501 0 %17,149 0 %
Total$13,563,738 100 %$1,731,233 100 %$15,294,971 100 %
Lien priority:
First mortgage$13,563,738 100 %$1,324,007 76 %$14,887,745 97 %
Junior lien mortgage— — %407,226 24 %407,226 3 %
Total$13,563,738 100 %$1,731,233 100 %$15,294,971 100 %
December 31, 2023
($ in thousands)Single-Family Residential%HELOCs%Total Residential Mortgage%
Geographic markets:
Southern California$4,990,848 37 %$799,571 46 %$5,790,419 38 %
Northern California1,650,905 13 %370,989 22 %2,021,894 13 %
California6,641,753 50 %1,170,560 68 %7,812,313 51 %
New York4,376,416 33 %247,202 14 %4,623,618 31 %
Washington696,028 5 %184,843 11 %880,871 6 %
Massachusetts391,666 3 %67,016 4 %458,682 3 %
Georgia432,258 3 %17,123 1 %449,381 3 %
Nevada404,837 3 %33,959 2 %438,796 3 %
Texas423,972 3 %— — %423,972 3 %
Other markets16,130 0 %1,501 0 %17,631 0 %
Total$13,383,060 100 %$1,722,204 100 %$15,105,264 100 %
Lien priority:
First mortgage$13,383,060 100 %$1,331,509 77 %$14,714,569 97 %
Junior lien mortgage— — %390,695 23 %390,695 3 %
Total$13,383,060 100 %$1,722,204 100 %$15,105,264 100 %

75

Consumer — Single-Family Residential Loans. Single-family residential loans totaled $13.6 billion as of March 31, 2024, compared with $13.4 billion as of December 31, 2023, and accounted for 26% of total loans held-for-investment as of both dates. The Company was in a first lien position for all of its single-family residential loans within the Company’s portfolioas of both March 31, 2024 and December 31, 2023. Many of these loans are reduced documentation loans, wherefor which a substantial down payment is required, resulting in a low loan-to-valueLTV ratio at origination, typically 60%65% or less. The weighted-average LTV ratio was 52% as of March 31, 2024 and 53% as of December 31, 2023. These loans have historically experienced low delinquency and defaultloss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust on a regular basis, typically annually, after an initial fixed rate period.

Consumer Loans. Consumer loans are comprised— Home Equity Lines of home equity linesCredit. Total HELOC commitments were $5.2 billion, with a utilization rate of credit (“HELOCs”)33%, insurance premium financing loans, credit card and auto loans. Asas of September 30, 2017both March 31, 2024 and December 31, 2016,2023. Substantially all of the Company’s unfunded HELOC commitments are unconditionally cancellable. HELOCs were the largest componentoutstanding totaled $1.7 billion as of the consumer loan portfolio,both March 31, 2024 and were secured by one-to-four unit residential properties located in its primary lending areas. The HELOC loan portfolio is largely comprisedDecember 31, 2023, and accounted for 4% and 3% of total 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.held-for-investment as of March 31, 2024 and December 31, 2023, respectively. The Company iswas in a first lien position for many76% and 77% of total outstanding HELOCs as of March 31, 2024 and December 31, 2023, respectively. The weighted-average LTV ratio was 48% on HELOC commitments as of both dates. Weighted-average LTV ratio represents the loan’s balance divided by the estimated current property value. Combined LTV ratios are used for junior lien home equity loans. Many of these loans are reduced documentation HELOCs. Theseloans, resulting in a low LTV ratio at origination, typically 65% or less. As a result, these loans have historically experienced low delinquency and defaultloss rates.

The Substantially all of the Company’s total loan portfolio includes originated and purchased loans. Originated and purchasedHELOCs 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 30, 2017both March 31, 2024 and December 31, 2016, respectively. For additional details regarding PCI2023.

All originated commercial and consumer loans see Note 8 — Loans Receivable and Allowance for Credit Lossesare subject to the Consolidated Financial Statements.Company’s conservative underwriting guidelines and loan origination standards. Management believes that the Company’s underwriting criteria and procedures adequately consider the unique risks associated with these products. The Company conducts 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, 2017such, the Company’s international operation risk exposure is largely concentrated in China and December 31, 2016, loansHong 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. Thesemay 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 assetsoffices as of September 30, 2017March 31, 2024 and December 31, 2016.2023:

March 31, 2024December 31, 2023
($ in thousands)Amount% of Total Consolidated AssetsAmount% of Total Consolidated Assets
Hong Kong branch:
Cash and cash equivalents$543,831 1 %$631,487 1 %
AFS debt securities (1)
$541,262 1 %$546,495 1 %
Loans held-for-investment (2)
$807,506 1 %$934,734 1 %
Total assets$1,897,761 3 %$2,115,857 3 %
Subsidiary bank in China:
Cash and cash equivalents$753,207 1 %$719,058 1 %
AFS debt securities (3)
$120,570 0 %$120,167 0 %
Loans held-for-investment (2)
$1,358,047 2 %$1,328,383 2 %
Total assets$2,240,428 3 %$2,156,548 3 %


When a determination is made at the time(1)Comprised of commitment to originate or purchase loansU.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, U.S. Treasury securities, and foreign government bonds 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 wereMarch 31, 2024; comprised of single-family residential loans. In comparison,foreign government bonds and U.S. Treasury securities as of 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 primarily2023.
(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 30, 2017both March 31, 2024 and December 31, 2016:2023.
 
($ 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 millionforeign government bonds as of September 30, 2017 from $122.8 million as of Decemberboth March 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, 20172024 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.2023.


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.
76


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 and nonperforming TDRstotal revenue generated by loan segment as of September 30, 2017 and December 31, 2016:
 
($ 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 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 for additional information regarding the Company’s TDRs and impaired loan policies. As of September 30, 2017, the allowance for loan losses included $20.8 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 million as of December 31, 2016.

The following table presents the recorded investment balances for non-PCI impaired loans as of September 30, 2017 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 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 other liabilities on the Consolidated Balance Sheets. Net adjustments to the allowance for unfunded credit reserves are included in Provision for credit losses on the Consolidated Statements of Income.

The Company is committed 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 Consolidated Financial Statements, and Item 7. MD&A — Critical Accounting Policies and Estimates and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.

The following table presents a summary of activities in the allowance for credit lossesoverseas offices for the threefirst quarters of 2024 and nine months ended September 30, 2017 and 2016:2023:
Three Months Ended March 31,
20242023
($ in thousands)Amount% of Total Consolidated RevenueAmount% of Total Consolidated Revenue
Hong Kong Branch:
Total revenue$18,093 3 %$15,318 2 %
Subsidiary Bank in China:
Total revenue$7,444 1 %$7,885 1 %

Capital
 
($ 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-investment 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 ratio 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 rate 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, 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 as of September 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, 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 as of December 31, 2016. The allowance balances for both periods were attributed mainly to the PCI CRE loans.



Deposits
The Company offers a wide variety of deposit products to both consumer and commercial customers. Deposits are an important low-cost source of funding, and affect net interest income and net interest margin. The following table presents 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, and provide a source of low-cost funding and liquidity to the Company. Core deposits comprised 81% of total deposits as of each of September 30, 2017 and December 31, 2016. The $1.24 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 growth in total loans outpaced deposit growth.

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 30, 2017 and December 31, 2016, short-term borrowings were comprised of 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.     

FHLB advances increased by $1.7 million to $323.3 million as of September 30, 2017 from $321.6 million as of December 31, 2016. As of September 30, 2017, FHLB advances had floating interest rates ranging from 1.48% to 1.72% with remaining maturities between 1.4 and 5.1 years.    

Gross repurchase agreements totaled $450.0 million as of each of September 30, 2017 and December 31, 2016. Resale and repurchase agreements are reported net pursuant to ASC 210-20-45, Balance Sheet Offsetting. Net repurchase agreements totaled $50.0 million and $350.0 million as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, $400.0 million of repurchase agreements were eligible for netting against resale agreements, resulting in $50.0 million of net repurchase agreements reported. In comparison, $100.0 million of 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 10.0 and 16.5 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 at the balances at which the securities were sold. The collateral for the repurchase agreements is primarily comprised of U.S. Treasury securities, U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, and U.S. government agency and U.S. government sponsored enterprise debt 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 from a diverse group of counterparties and entering into repurchase agreements with longer durations, when appropriate. For additional details, see Note 5 — Securities Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements.

Long-Term Debt
The Company uses long-term debt to provide funding to acquire income earning assets and enhance liquidity. Long-term debt, which consists of junior subordinated debt and a term loan, decreased $9.8 million or 5% from $186.3 million 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.

The junior subordinated debt was issued in connection with the Company’s various pooled trust preferred securities offerings. Junior subordinated debt is recorded as a component of long-term debt and includes the value of the common stock issued by six wholly-owned subsidiaries 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. The junior subordinated debt had a weighted average interest rate of 2.73% and 2.22% for the nine months ended September 30, 2017 and 2016, respectively, and remaining maturity terms of 17.2 to 20.0 years as of September 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.

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 adequatestrong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that East Westthe 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. Theneeds, allocating capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. In addition,Furthermore, 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.


On March 3, 2020, the Company’s Board of Directors authorized the repurchase of $500 million of the Company’s common stock. During the first quarter of 2024, the Company repurchased $82 million of common stock or 1,181,851 shares at an average price of $69.76 per share. In comparison, the Company repurchased $82 million of common stock or 1,506,091 shares, at an average price of $54.56 per share in 2023. The total remaining available capital authorized for repurchase as of March 31, 2024 was $89 million.

The Company’s stockholders’ equity increased by $354.2 million or 10% to $3.78was $7.0 billion as of September 30, 2017, compared to $3.43 billion as ofboth March 31, 2024 and December 31, 2016. The Company’s primary source of capital is the retention of its operating earnings. Retained earnings2023, which increased by $333.1$72 million or 15%to $2.52 billion as1% during the first quarter of September 30, 2017, compared to $2.19 billion as of December 31, 2016.2024. The increase in the Company’s stockholders’ equity was primarily due to $285 million of net income, partially offset by $82 million of $420.7 million, reduced by $87.6common stock repurchases, $78 million of cash dividends during the nine months ended September 30, 2017. In addition, common stockdeclared, and additional paid-in capital increased by $17.7$42 million or 1.0% primarily due to the activities in employee stock compensation plans.of other comprehensive loss. For other factors that contributed to the changes in stockholders’ equity, refer to theItem 1. Consolidated Financial Statements — Consolidated Statement of Changes in Stockholders’ Equity.Equity in this Form 10-Q.

Book value per share was $26.17 per common share based on 144.5 million common shares outstanding$50.48 as of September 30, 2017, compared to $23.78March 31, 2024, an increase of 2% from $49.64 per common share based on 144.2 million common shares outstanding as of December 31, 2016. 2023, a result of both the increase in the Company’s stockholders’ equity described above and a decrease in the Company’s common shares outstanding. Tangible book value per share was $47.09 as of March 31, 2024, compared with $46.27 as of December 31, 2023. 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 Company madepaid a quarterly common stock cash dividend payments of $0.20$0.55 and $0.48 per common share in each quarter during the nine months ended September 30, 2017first quarters of 2024 and 2016.2023, respectively. In October 2017,April 2024, the Company’s Board of Directors (the “Board”) declared fourtha second quarter 2017 cash dividends for the Company’s common stock. The common stock2024 cash dividend of $0.20$0.55 per shareshare. The dividend is payable on November 15, 2017May 17, 2024, to stockholders of record as of November 1, 2017.May 3, 2024.



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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 a discussion of the Company’s liquidity management. The following table summarizes the Company’s sources of funds as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023Change
($ in thousands)Amount%Amount%$%
Deposits:
Noninterest-bearing demand$14,798,927 25 %$15,539,872 28 %$(740,945)(5)%
Interest-bearing checking7,570,427 13 %7,558,908 14 %11,519 0 %
Money market13,585,597 23 %13,108,727 23 %476,870 4 %
Savings1,834,393 3 %1,841,467 3 %(7,074)0 %
Time deposits20,771,280 36 %18,043,464 32 %2,727,816 15 %
Total deposits$58,560,624 100 %$56,092,438 100 %$2,468,186 4 %
Other Funds:
Short-term borrowings$19,173 0 %$— — %19,173 100 %
BTFP borrowings— — %4,500,000 97 %(4,500,000)(100)%
FHLB advances3,500,000 99 %— — %3,500,000 100 %
Long-term debt31,768 1 %148,249 3 %(116,481)(79)%
Total other funds$3,550,941 100 %$4,648,249 100 %$(1,097,308)(24)%
Total sources of funds$62,111,565 $60,740,687 $1,370,878 2 %

Deposits

The Company’s strategy is to grow and retain relationship-based deposits to provide a stable and low-cost source of funding and liquidity. Accordingly, the Company offers a wide variety of deposit products to meet the needs of its consumer and commercial customers. As a result, we believe our deposit base is seasoned, stable and well-diversified. The following chart presents the Company’s deposits by type as of March 31, 2024 and December 31, 2023.

Deposits by Type v2.jpg

Total deposits were $58.6 billion as of March 31, 2024, an increase of $2.5 billion or 4% from $56.1 billion as of December 31, 2023. The increase in deposits was primarily driven by an increase in customer deposits. Time deposits comprised 36% and 32% of total deposits as of March 31, 2024 and December 31, 2023, respectively. Noninterest-bearing demand deposits comprised 25% and 28% of total deposits as of March 31, 2024 and December 31, 2023, respectively. The shift in deposit mix was primarily due to continued customer migration to higher yielding deposit products.
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Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit. Management believes that presenting uninsured domestic deposits as reported on Schedule RC-OM item 2 of the Bank’s Call Report, with an adjustment to exclude collateralized and affiliate deposits provides a more accurate view of the deposits at risk, given that collateralized deposits are secured, and affiliate deposits are not customer-facing and are eliminated in consolidation.

The following table summarizes the Company’s uninsured domestic deposit balances reported on Schedule RC-OM item 2 of the Bank’s Call Report as of March 31, 2024 and December 31, 2023, after certain adjustments:
($ in thousands)March 31, 2024December 31, 2023
Uninsured deposits, per regulatory reporting requirements$29,006,693 $27,592,714 
Less: Collateralized deposits(5,258,927)(4,631,047)
Affiliate deposits(333,846)(491,992)
Uninsured deposits, excluding collateralized and affiliate deposits(a)$23,413,920 $22,469,675 
Total domestic deposits per Call Report(b)$55,684,012 $53,486,990 
Uninsured deposits, excluding collateralized and affiliate deposits, ratio(a) / (b)42 %42 %

Additional information regarding the impact of deposits on net interest income, with a comparison of average deposit balances and rates, is provided in Item 2. MD&A — Results of Operations — Net Interest Income in this Form 10-Q. See also the discussion of the impact of deposits on liquidity in Item 2. MD&A — Liquidity Risk Management — Liquidity in this Form 10-Q.

Other Sources of Funding

Short-term borrowings totaled $19 million as of March 31, 2024. Refer to Note 10—Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the short-term borrowings.

The Company had $4.5 billion of BTFP borrowings outstanding as of December 31, 2023. These borrowings were repaid upon maturity during the first quarter of 2024.

The Company had $3.5 billion of FHLB advances as of March 31, 2024, compared with no FHLB advances as of December 31, 2023. FHLB advances as of March 31, 2024 had floating interest rates of 5.49% to 5.56% with remaining maturities between six months and 1.5 years.

The Company uses long-term debt to provide funding to acquire interest-earning assets, and to enhance liquidity and regulatory capital adequacy. Long-term debt consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory capital purposes. During the first quarter of 2024, the Company redeemed approximately $117 million of junior subordinated debt. Refer to Note 10—Short-Term Borrowings and Long-Term Debt to the Consolidated Financial Statements in this Form 10-Q for additional information on the junior subordinated debt.

Regulatory Capital and Ratios

The federal banking agencies have risk-based capital adequacy guidelinesrequirements intended to ensure that are designed to reflectbanking organizations maintain capital that is commensurate with the degree of risk associated with a banking organization’s operationstheir operations. The Company and transactions. The guidelines cover transactions thatthe 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 20162023 Form 10-K for additional details.

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The Basel III Capital Rules became effective for the Company and the Bankadopted Accounting Standards Update 2016-13 on January 1, 2015 (subject2020, 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 periodsoption provided by a final rule that delays an estimate of the current expected credit losses (“CECL”) effect on regulatory capital for certain components).

two years and phases in the impact over three years. The Basel III Capital Rules require thatrule permits certain banking organizations maintain a minimum CET1 ratioto exclude from regulatory capital the initial adoption impact of 4.5%, a Tier 1 capital ratioCECL, plus 25% 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% abovecumulative changes in the capital minimums are being phased-in over four years beginning in 2016 (increasing by 0.625% onallowance for credit losses under CECL for each subsequent January 1,period until it reaches 2.5% on January 1, 2019). 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, both2021, followed by a three-year phase-out period in which the Companyaggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Accordingly, our capital ratios as of March 31, 2024 reflect a delay of 25% of the Bank were considered “well-capitalized,” and met all capital requirementsestimated impact of CECL on a fully phased-in basis under the Basel III Capital Rules.regulatory capital.


The following table presents the Company’s and the Bank’s capital ratios as of September 30, 2017March 31, 2024 and December 31, 20162023 under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:
Basel III Capital Rules
March 31, 2024December 31, 2023
CompanyBankCompanyBankMinimum Regulatory RequirementsMinimum Regulatory Requirements including Capital Conservation BufferWell-Capitalized Requirements
Risk-based capital ratios:
Common Equity Tier 1 capital (1)
13.5 %12.9 %13.3 %12.6 %4.5 %7.0 %6.5 %
Tier 1 capital (2)
13.5 %12.9 %13.3 %12.6 %6.0 %8.5 %8.0 %
Total capital14.8 %14.1 %14.8 %13.8 %8.0 %10.5 %10.0 %
Tier 1 leverage (1)
10.1 %9.6 %10.2 %9.6 %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 andCommon Equity Tier 1 capital ratios have improved by 49 basis points, while the total risk-based and Tier 1 leverage well-capitalized requirements apply only to the Bank since there is no Common Equity Tier 1 capital ratios increased by 48component or Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.
(2)The well-capitalized Tier 1 capital ratio requirements for the Company and 65 basis points, respectively, during the nine months ended September 30, 2017. Bank are 6.0% and 8.0%, respectively.

The improvement was primarily driven byCompany is committed to maintaining strong capital levels to assure its investors, customers and regulators that the increases in revenues, primarily dueCompany and the Bank are financially sound. As of both March 31, 2024 and December 31, 2023, the Company and the Bank continued to increase in net interest incomeexceed all “well-capitalized” capital requirements and net gains recorded from the sale of commercial property duringminimum capital requirements under the first quarter of 2017. The $1.82 billion or 7% increase inBasel III Capital Rules. Total risk-weighted assets increasedwere $53.4 billion as of March 31, 2024, a decrease of $217 million from $27.36$53.7 billion as of December 31, 20162023.

Risk Management

Overview

In the normal course of business, the Company is exposed to $29.18 billion asa variety of September 30, 2017 was primarily duerisks, some of which are inherent to the growthfinancial services industry and others of which are more specific to the Company’s business. 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, liquidity, capital, market, operational, compliance, legal, strategic, technology and reputational.

The Risk Oversight Committee (“ROC”) of the Board of Directors monitors the ERM program through such identified risk categories and provides oversight of the Company’s Consolidated Balance Sheets. Asrisk appetite and control environment. The ROC provides focused oversight of September 30, 2017, the Company’s CET1 risk-based capital, Tier 1 risk-based capital, total risk-based capital ratiosidentified enterprise risk categories on behalf of the full Board of Directors. Under the authority of the ROC, management committees apply targeted strategies to manage the risks to which the Company’s operations are exposed.

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The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and Tier 1 leverage capital ratios were 11.4%, 11.4%, 12.9%standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational and 9.4%, respectively, well abovesupport 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 well-capitalizedInternal Audit and Independent Asset Review (“IAR”) functions. Internal Audit reports to the Chief Audit Executive (“CAE”) who reports to the Board’s Audit Committee. Internal Audit provides assurance and evaluates the effectiveness of risk management, control, and governance processes as established by the Company. IAR serves as an internal loan review and independent credit risk monitoring function within the Bank that works under the direction of the CAE and reports to the Audit Committee. IAR provides management and the Audit Committee with an objective and independent assessment of the Bank’s credit profile and credit risk management processes. Further discussion and analysis of selected primary risk areas are discussed 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, debt securities and certain derivatives. The majority of the Company’s credit risk is associated with lending activities.

The ROC has primary oversight responsibility for the identified enterprise risk categories including credit risk. The ROC 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 liquidity, 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 6.5%, 8.0%, 10.0%the credit risk rating policy. The Senior Credit Supervision function evaluates and 5.0%, respectively.

Regulatory Matters

The Bank entered into a Written Agreement, dated November 9, 2015, withreports the Federal Reserve Bank of San Francisco (the “Written Agreement”),overall credit risk exposure to correct less than satisfactory BSA and AML programs detailed in a joint examination by the Federal Reserve Bank of San Francisco (“FRB”)senior management and the California DepartmentROC. Reporting directly to the Board’s Audit Committee, the IAR function provides additional support to the Company’s strong credit risk management culture by performing an independent and objective assessment of Business Oversight (“DBO”). underwriting and documentation quality. A key focus of our credit risk management is adherence to a well-controlled underwriting and loan monitoring process.

The Bank also entered intoCompany assesses the overall credit quality performance of the loans 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: Credit Quality, Nonperforming Assets and Allowance for Credit Losses.

Credit Quality

The Company utilizes a related Memorandumcredit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of Understanding (“MOU”) with1 through 10. For more information on the DBO in 2015. See Item 7. MD&ACompany’s credit quality indicators and internal credit risk ratings, refer to Note 7 — Regulatory Matters Loans Receivable and Note 18 — Regulatory Requirements and Matters Allowance for Credit Lossesto the Consolidated Financial Statementsof the Company’s 2016 in this Form 10-K for further details.10-Q.




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 resources to meet the monitoring and reporting obligations imposed by the Written Agreement and will continue 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 of the Written Agreement, the regulators could take further actions with respect to the Bank and, if such further actions were taken, such actions could have a material adverse effect on the Bank. The operating and other conditions in the BSA and AML program and the auditing and oversight of the program that led to the Written Agreement and MOU could also lead to an increased risk of being subject to additional actions by the DBO and FRB, an increased risk of future examinations that may downgrade 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 course of the Company’s business, the Company may enter into or be a party to transactions that are not recorded on the Consolidated Balance Sheets and are considered to be off-balance sheet arrangements. Off-balance sheet arrangements are any contractual arrangements whereby an 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 arrangement 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 provides 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, the Company routinely enters into commitments to extend credit to customers, such as loan commitments, commercial letters of credit for foreign and domestic trade, SBLCs and financial guarantees. Many of these commitments to extend credit may expire without being drawn upon. The credit policies used 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. The Company’s liquidity sources have been, and are expected to be, sufficient to meet the cash requirements of its lending activities. The following table presents the Company’s loan commitments, commercial letters of credit and SBLCscriticized loans as of September 30, 2017:March 31, 2024 and December 31, 2023:
Change
($ in thousands)March 31, 2024December 31, 2023$%
Criticized loans:
Special mention loans$543,573 $404,241 $139,332 34 %
Classified loans (1)
651,485 573,969 77,516 14 %
Total criticized loans (2)
$1,195,058 $978,210 $216,848 22 %
Special mention loans to loans held-for-investment1.05 %0.77 %
Classified loans to loans held-for-investment1.25 %1.10 %
Criticized loans to loans held-for-investment2.30 %1.87 %
(1)Consists of substandard, doubtful and loss categories.
(2)Excludes loans held-for-sale.

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($ in thousands) Commitments
Outstanding
Loan commitments $4,956,515
Commercial letters of credit and SBLCs $1,757,648
 
Criticized loans were $1.2 billion as of March 31, 2024, an increase of $217 million or 22%, compared with $978 million as of December 31, 2023. The increase was primarily driven by CRE and C&I loans.


 A discussion
Nonperforming Assets

Nonperforming assets are comprised of significant contractual arrangements under whichnonaccrual 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 $165 million or 0.23% of total assets as of March 31, 2024, an increase of $51 million or 45%, compared with $114 million or 0.16% of total assets as of December 31, 2023.

The following table presents nonperforming assets information as of March 31, 2024 and December 31, 2023:
Change
($ in thousands)March 31, 2024December 31, 2023$%
Commercial:
C&I$48,962 $37,036 $11,926 32 %
CRE:
CRE35,006 23,249 11,757 51 %
Multifamily residential4,646 4,669 (23)0 %
Construction and land12,236 — 12,236 100 %
Total CRE51,888 27,918 23,970 86 %
Consumer:
Residential mortgage:
Single-family residential35,669 24,377 11,292 46 %
HELOCs11,498 13,411 (1,913)(14)%
Total residential mortgage47,167 37,788 9,379 25 %
Other consumer162 132 30 23 %
Total nonaccrual loans148,179 102,874 45,305 44 %
OREO, net16,692 11,141 5,551 50 %
Total nonperforming assets$164,871 $114,015 $50,856 45 %
Nonperforming assets to total assets
0.23 %0.16 %
Nonaccrual loans to loans held-for-investment0.29 %0.20 %
Allowance for loan losses to nonaccrual loans452.34 %650.06 %

Loans are generally placed on nonaccrual status when they become 90 days past due or when the Company may be held contingently liablefull collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is included in 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 11 1 — Commitments and Contingencies to the Consolidated Financial Statements. In addition, the Company has commitments and obligations under post-retirement benefit plans as described in Note 15 Summary of Significant Accounting Policies — Employee Benefit Plans Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements ofin the Company’s 20162023 Form 10-K.

Nonaccrual loans were $148 million as of March 31, 2024, an increase of $45 million or 44% from $103 million as of December 31, 2023. This increase was predominantly due to increases in construction, C&I, CRE and single-family residential nonaccrual loans. As of March 31, 2024, $27 million or 18% of nonaccrual loans were less than 90 days delinquent. In comparison, $40 million or 39% of nonaccrual loans were less than 90 days delinquent as of December 31, 2023.

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The following table presents the accruing loans past due by portfolio segment as of March 31, 2024 and December 31, 2023:
Total Accruing Past Due Loans (1)
ChangePercentage of Total Loans Outstanding
($ in thousands)March 31,
2024		December 31,
2023		$%March 31,
2024		December 31,
2023
Commercial:
C&I$19,326 $35,649 $(16,323)(46)%0.12 %0.21 %
CRE:
CRE18,726 3,517 15,209 432 %0.13 %0.02 %
Multifamily residential368 597 (229)(38)%0.01 %0.01 %
Construction and land— 13,251 (13,251)(100)%— %2.00 %
Total CRE19,094 17,365 1,729 10 %0.09 %0.08 %
Total commercial38,420 53,014 (14,594)(28)%0.10 %0.14 %
Consumer:
Residential mortgage:
Single-family residential49,280 45,228 4,052 9 %0.36 %0.34 %
HELOCs20,107 21,492 (1,385)(6)%1.16 %1.25 %
Total residential mortgage69,387 66,720 2,667 4 %0.45 %0.44 %
Other consumer117 3,265 (3,148)(96)%0.22 %5.41 %
Total consumer69,504 69,985 (481)(1)%0.45 %0.46 %
Total$107,924 $122,999 $(15,075)(12)%0.21 %0.24 %
(1)There were no accruing loans past due 90 days or more as of both March 31, 2024 and December 31, 2023.

Allowance for Credit Losses

The Company maintains its allowance for credit losses at a level sufficient to provide appropriate reserves to absorb estimated future credit losses in accordance with GAAP. For additional information on the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting Estimates and Item 8. Financial Statements — Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Company’s 2023 Form 10-K, and has contractual obligations for future payments on debts, borrowings and lease obligations as detailed in ItemNote 7 — MD&A — Off-Balance Sheet ArrangementsLoans Receivable and Aggregate Contractual Obligations Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

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The following table presents an allocation of the Company’s 2016 Form 10-K.allowance for loan losses by loan portfolio segments and unfunded credit commitments as of March 31, 2024 and December 31, 2023:


March 31, 2024December 31, 2023
($ in thousands)Allowance Allocation% of Loan Type to Total LoansAllowance Allocation% of Loan Type to Total Loans
Allowance for loan losses
Commercial:
C&I$373,631 32 %$392,685 32 %
CRE:
CRE187,460 28 %170,592 28 %
Multifamily residential37,418 10 %34,375 10 %
Construction and land10,819 1 %10,469 1 %
Total CRE235,697 39 %215,436 39 %
Total commercial609,328 71 %608,121 71 %
Consumer:
Residential mortgage:
Single-family residential55,922 26 %55,018 26 %
HELOCs3,563 3 %3,947 3 %
Total residential mortgage59,485 29 %58,965 29 %
Other consumer1,467 0 %1,657 0 %
Total consumer60,952 29 %60,622 29 %
Total allowance for loan losses$670,280 100 %$668,743 100 %
Allowance for unfunded credit commitments$38,544 $37,699 
Total allowance for credit losses$708,824 $706,442 
Loans held-for-investment$51,992,504 $52,210,782 
Allowance for loan losses to loans held-for-investment1.29 %1.28 %
Three Months Ended March 31,
20242023
Average loans held-for-investment$51,924,317 $48,144,120 
Annualized net charge-offs to average loans held-for-investment0.17 %0.01 %


Asset Liability and MarketFirst quarter of 2024 net charge-offs were $23 million, or annualized 0.17% of average loans held-for-investment, compared with net charge-offs of $1 million, or annualized 0.01% of average loans held-for-investment for the first quarter of 2023. The increase in net charge-offs was primarily driven by higher losses in the C&I portfolio.

Liquidity Risk Management

Liquidity

Liquidity refers torisk arises from the Company’s abilityinability to meet its contractualcustomer deposit withdrawals and contingent financial obligations on or off-balance sheet,to other counterparties as they become due.come due, or to obtain adequate funding at a reasonable cost to meet those obligations. Liquidity risk also considers the stability of deposits. The Company’s primaryobjective of liquidity management objective is to provide sufficient funding for its businesses throughout market cyclesmanage the potential mismatch of asset and be ableliability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to manageefficiently meet both expected and unexpected cash flow needs and requirementscollateral needs without adversely impactingaffecting daily operations or the financial healthcondition of the Company.institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and accessesutilizes diverse funding sources including its stable core deposit base.

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The ROC has primary oversight responsibility over liquidity risk management. At the management level, the Company’s Asset/Liability Committee (“ALCO”) setsestablishes the liquidity guidelines that govern the day-to-day active management of the Company’s liquidity position.position by requiring sufficient asset-based liquidity to cover potential funding requirements and avoid over-dependence on volatile, less reliable funding markets. These guidelines are established and monitored for both the Bank and East West on a stand-alone basis to ensure that the Company can serve as a source of strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and related management processes, and provides regular reports on the Company’s liquidity position relative to policy limits and guidelines to the Board.Board of Directors. The liquidity management practices have been effective under normal operating and stressed market conditions.


The Company also maintains a Liquidity Contingency Plan that provides an early-warning methodology to detect liquidity problems and provide a timely response. The Liquidity Contingency Plan describes the procedures, roles and responsibilities, and communication protocols for managing any identified liquidity problem. Management monitors the early-warning indicators defined in the Liquidity Contingency Plan, which include metrics for measuring the Company’s internal liquidity status as well as company-specific and market-wide external factors. When early-warning signals are detected, the ALCO is informed, and the problem is evaluated for severity. The ALCO will determine the course of action and appropriate contingency funding sources, if any, that are needed.

Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits, generated by its banking business, which we believe is a relatively stable and low-cost source of funding. Our loans are funded by deposits, which amounted to $58.6 billion as of March 31, 2024, compared with $56.1 billion as of December 31, 2023. The Company’s loan-to-deposit ratio was 89% as of March 31, 2024, compared with 93% as of December 31, 2023.

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 (“FRBSF”), unsecured federal funds lines of credit with various correspondent banks, and several master repurchase agreements with major brokerage companies to sustain an adequate liquid asset portfolio, meet daily cash demands and allow management flexibility to execute its business strategy. However, general financial market and economic conditions could impact our access and cost of external funding. Additionally, the Company’s access to capital markets is affected by the ratings received from various credit rating agencies.

Unencumbered loans and/or debt securities were pledged to the FHLB and the FRBSF discount window as collateral. The Company has established operational procedures to enable borrowing against these assets, including regular monitoring of the total pool of loans and debt securities eligible as collateral. Eligibility of collateral is defined in guidelines from the FHLB and FRBSF and is subject to change at their discretion. See Item 2— MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funding in this Form 10-Q for further details related to the Company’s funding sources. The Company believes its cash and cash equivalents, and available borrowing capacity described below provide sufficient liquidity above its expected cash needs.

The Company maintains its source of liquidity in the form of cash and cash equivalents interest-bearing depositsand borrowing capacity with banksits eligible loans and available-for-sale investment securities. These assets totaled $5.10 billiondebt securities as collateral. The following table presents the Company’s total cash and $5.54 billion, accounting for 14%cash equivalents and 16% of total assets,collateralized borrowing capacity as of September 30, 2017March 31, 2024 and December 31, 2016, respectively. Traditional forms of funding such as customer deposits2023:
Change
($ in thousands)March 31, 2024December 31, 2023$%
Cash and cash equivalents$4,210,801 $4,614,984 $(404,183)(9)%
Interest-bearing deposits with banks24,593 10,498 14,095 134 %
Collateralized borrowing capacity:
FHLB7,617,334 12,373,002 (4,755,668)(38)%
FRBSF13,104,803 9,830,769 3,274,034 33 %
Unpledged available securities5,138,819 1,988,526 3,150,293 158 %
Total$30,096,350 $28,817,779 $1,278,571 4 %

The Company’s cash and borrowings augment these liquid assets. Total customer deposits amounted to $31.31cash equivalents and collateralized borrowing capacity totaled $30.1 billion as of September 30, 2017,March 31, 2024, compared to $29.89with $28.8 billion as of December 31, 2016, 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, the Company maintains2023. The increase was primarily related to an increase in available borrowing capacity under secured borrowing lines withat the FHLBFRBSF due to the repayment of BTFP borrowings, and FRB, unsecured federal funds’ lines 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 September 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 millionan increase in net cash inflows from operating activities between these periodsunpledged available securities. This increase 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 changedecrease in non-cash amounts. The $108.3 million increase in net changes in cash flows receivable from other assets, comparingavailable borrowing capacity at the nine months ended September 30, 2017 to the same period in 2016, wasFHLB, primarily due to a reduction in tax receivables, and anthe increase in fair value of interest rate swaps and optionsFHLB advances during the nine months ended September 30, 2016 contributingfirst quarter of 2024.

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Liquidity Risk — Cash Requirements. In the ordinary course of business, the Company enters contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, and other cash commitments. For additional information on these obligations, see Note 9 — Deposits to operating cash outflows in that period. The $76.2 million increase in net changesthe Consolidated Financial Statements in the cash flows from accrued expensesCompany’s 2023 Form 10-K, and other liabilities, comparing the nine months ended September 30, 2017 Note 8 — Affordable Housing Partnership, Tax Credit and Community Reinvestment Act Investments, Net and Note 10— Short-Term Borrowings and Long-Term Debt to the same periodConsolidated Financial Statements in 2016, was primarily duethis Form 10-Q. During the first quarter of 2024, the Company redeemed approximately $117 million of junior subordinated debt.

The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (1) 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 the financing needs of its customers, (2) future interest obligations related to customer deposits and the Company’s borrowings, and (3) transactions with unconsolidated entities that provide financing, liquidity, market risk or credit risk support to the Company, or engage in leasing, hedging or research and development services with the Company. Because many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. The Company does not expect the total commitment amounts as of March 31, 2024 to have a larger wire transfermaterial current or future impact on the Company’s financial conditions or results of operations. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in transitNote 11 — Commitments and an increaseContingencies to the Consolidated Financial Statements in tax payables.this Form 10-Q.


NetThe Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash used inby type of activity for the first quarters of 2024 and 2023. Excess cash generated by operating and 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 increasemay be used to repay outstanding debt or invest in net cash used in investing activities was primarily dueliquid assets.

Liquidity Risk — Liquidity for East West. In addition 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,bank level liquidity management, the Company experienced netmanages 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 from cash inflows from financing activitiesdividends 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 Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of $1.24 billionFunds in the Company’s 2023 Form 10-K. East West held $287 million 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$446 million in cash dividends paid. Netand cash inflows from financing activitiesequivalents as of $365.6 million duringMarch 31, 2024 and December 31, 2023, respectively. Management believes that East West has sufficient cash and cash equivalents to meet the same periodprojected cash obligations for the coming 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 to meet contractual and contingent cash outflows under a range of scenarios. Scenario analyses include assumptions about significant changes in 2016 were primarily comprisedkey funding sources, market triggers, potential uses of funding and economic conditions in certain countries. In addition, Company specific events are incorporated into the stress testing. Liquidity stress tests are conducted to ascertain potential mismatches between liquidity sources and uses over various time horizons and under a $1.13 billion net increase in customer depositsvariety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a consolidated basis 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.for individual entities.


As of September 30, 2017,March 31, 2024, the Company believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business, and is not aware of any trends, events or uncertainties that had or wereare reasonably likely to have a material adverse effect on its liquidity, position. Furthermore,capital resources or operations. Given the uncertain and rapidly changing market and economic conditions, the Company is not aware of any material commitments for capital expenditures will continue to actively evaluate the impact on its business and financial position. For more details on how economic conditions may impact our liquidity, see Item 1A. Risk Factors in the foreseeable future.Company’s 2023 Form 10-K.



Market Risk Management
East West’s liquidity has historically
Market risk refers to the risk of potential loss due to adverse movements in market risk factors, including interest rates, foreign exchange rates, commodity prices, and credit spreads. The Company is primarily exposed to interest rate risk through its core business activities of extending loans and acquiring deposits. There have been dependent on the payment of cash dividends by its subsidiary, East West Bank, subject to applicable statutes, regulations and special approval. The Bank paid total dividends of $255.0 million and $100.0 million to East West during the nine months ended September 30, 2017 and 2016, respectively. In addition,no significant changes in October 2017, the Board declared a quarterly cash dividend of $0.20 per share forour risk management practices as described in Item 7. MD&A — Market Risk Management in the Company’s common stock payable on November 15, 2017 to stockholders of record on November 1, 2017.2023 Form 10-K.


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Interest Rate Risk Management


Interest rate risk results primarily from the Company’s traditional banking activities of gathering deposits and extending loans, and is the primaryrisk that market risk for the Company. Economic and financial conditions, movements in interest rates and consumer preferences 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. In addition, changesfluctuations in interest rates can influencehave a negative impact on the Company’s earnings and capital stemming from mismatches in the Company’s asset and liability cash flows primarily arising from customer-related activities such as lending and deposit-taking. The Company is subject to interest rate of principal prepayments on loansrisk because:

•Assets and speed of deposit withdrawals. Due toliabilities may mature or reprice at different times. If assets reprice faster than liabilities and interest rates are generally rising, earnings will initially increase;
•Assets and liabilities may reprice at the pricing term mismatchessame time but by different amounts;
•Short- and embedded options inherent in certain products, changes inlong-term market interest rates not onlymay change by different amounts. For example, the shape of the yield curve may affect expected near-term earnings, but also the economicyield of new loans and funding costs differently;
•The remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. For example, if long-term mortgage interest rates increase sharply, mortgage-related products may pay down at a slower rate than anticipated, which could impact portfolio income and valuation; or
•Interest rates may have a direct or indirect effect on loan demand, collateral values, mortgage origination volume, and the fair 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 and no separate quantitative information concerning these risks is presented herein.other financial instruments.


With oversight by the Company’s Board, theThe ALCO coordinates the overall management of the Company’s interest rate risk. The ALCOrisk, meets regularly and is responsible for reviewingto review the Company’s open market positions and establishingestablishes policies to monitor and limit exposure to market risk. Management of interestInterest rate risk management is carried out primarily through strategies involving the Company’s investmentloan portfolio, 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.


TheWe measure and monitor interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analysisanalyses under multiple scenarios. The model includes the Company’s loans, investment securities, resale agreements, customer deposits and borrowing portfolios, including repurchase agreements. The 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 shiftagainst a baseline. The simulation model incorporates the market’s forward rate expectations 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 steepeningCompany’s earning assets 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.liabilities. The Company incorporatesuses both a static balance sheet and a forward growth balance sheet in order to perform these evaluations. Resultsthe interest rate sensitivity analyses. The simulated interest rate scenarios include an instantaneous non-parallel shift in the yield curve and a gradual non-parallel shift in the yield curve (“rate ramp”). In addition, the Company also performs simulations using other alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. The Company uses the results of these various simulations are used to formulate and gauge strategies to achieve a desired risk profile within the Company’sits capital and liquidity guidelines.


The net interest income simulation model is based on the actual maturity and re-pricingrepricing characteristics of the Company’s interest-rateinterest rate sensitive assets, liabilities, and related derivative contracts. This model also incorporates various assumptions, which management believes to be reasonable but that may have a significant impact on the results. These key assumptions include 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 historicalwhich we derive from a regression analysis of the Company’s internalhistorical deposit datadata.

Simulation results are highly dependent on modeled behaviors and input assumptions. To the extent that actual behaviors are different from the assumptions used in the models, there could be material changes to the interest rate sensitivity results. The key behavioral models impacting interest rate sensitivity simulations include deposit repricing, deposit balance forecasts, and mortgage prepayments. These models and assumptions are documented, supported, and periodically back-tested to assess the reasonableness and effectiveness. The Company also regularly monitors the sensitivity of the other important modeling assumptions, such as a guideloan and security prepayments and early withdrawal on fixed-rate customer liabilities. The Company makes appropriate calibrations to set deposit decay assumptions. In addition, the model is also highly sensitive to certain assumptions on the correlation of the change 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. The model is also sensitive to the loanneeded and investment prepayment assumption. The loan and investment prepayment assumption, which considers the anticipated prepayments under different interest rate environments, is based on an independent model, as well as the Company’s historical prepayment experiences.

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 incontinually validates the model, are documentedmethodology and supported for reasonableness.results. Changes to key model assumptions are reviewed by the ALCO. Due to the sensitivity of the modelScenario 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 the management could employ to limit the impact asof changing interest rate expectations. The simulation does not represent a forecast of the Company’s net interest income but is a tool utilized to assess the risk of the impact of changing market interest rates across a range of interest rate environments.

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The Company employs a variety of quantitative and qualitative approaches to capture historical deposit repricing and balance behaviors. These historical observations are performed at a granular level based on key product characteristics, including distinctions for brokered, public, and large commercial deposits, which are then combined with forward-looking market expectations change. Simulation results are highly dependent onand the competitive landscape to generate the deposit repricing and balance forecasting models. The Company uses these assumptions. Todeposit repricing models to forecast deposit interest expense. The repricing models provide sufficient granularity to reflect key behavioral differences across product and customer types. The deposit beta is a key parameter of the extent actual behavior is differentdeposit rate forecast. The deposit beta defines the sensitivity of deposit rates to changes in the Effective Fed Funds Rate.

In March 2024, the Company assumed a weighted-average beta of 52% for total deposits, an increase of approximately 1.5% from December 31, 2023, which was due to deposit product mix changes as product level deposit beta assumptions were not updated. The Company updated the deposit mix assumptions in March of 2024 to assume that noninterest-bearing deposits would migrate to interest-bearing CDs. The updated assumptions reduced the proportion of noninterest-bearing deposits for the base case and decreasing interest rate scenarios, and reduced the repricing speed of the CD portfolio to better reflect its maturity profile.

As loan and security prepayment assumptions are key components of the Company’s model, the Company incorporates third-party vendor models there could beto forecast prepayment behavior on mortgage loans and securities, which have mortgage loans as underlying collateral. These third-party vendor models have access to more comprehensive industry-level data which can capture specific borrower and collateral characteristics over a material changevariety of interest rate cycles. The Company will periodically assess and adjust the vendor models when appropriate to include its own available observations and expectations. In 2023, the Company updated its version of the vendor prepayment model to better support the transition from London Interbank Offered Rate to Secured Overnight Financing Rate (“SOFR”) indexed loans and updated tuning factors to slow prepayment speeds on single-family residential mortgages to better align them with actual and expected prepayments.

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 sensitivity.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 provide insight into the impact of market rate changes on earnings, which help guide risk management decisions. The Company assesses interest rate risk by comparing the changes 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 ofby 100 and 200 basis points in both directions:bps as of March 31, 2024 and December 31, 2023, on a balance sheet assuming flat forward rates and flat loan and deposit growth on the date of analysis. The non-parallel shift scenarios were calibrated internally based on historical analysis.
Net Interest Income Volatility (1)
Change in Interest Rates (in bps)March 31, 2024December 31, 2023
+2002.7 %1.3 %
+1002.0 %1.2 %
-100(3.2)%(1.8)%
-200(6.6)%(4.1)%
 
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)%
 
(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 change over a 12-month period in a stable interest rate environment versus in the various interest rate scenarios.

The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to a mismatch of repricing behavior between the floating-rate loan portfolio and deposit products. In the table above, net interest income volatility expressed in relation to base-case net interest income increased as of September 30, 2017 was slightly lower compared to DecemberMarch 31, 20162024. This increase reflects updated deposit product mix assumptions, which better reflect the expected repricing profile of the CD portfolio and the amount of noninterest-bearing deposits for both upwardthe shocked interest rate scenarios.

The Company also models scenarios based on gradual shifts in interest rates and assesses the corresponding impacts. These interest rate scenarios as simulated increases inprovide additional information to estimate the Company’s underlying interest rate risk. The rate ramp table below shows the net interest income are offset by an increase in the rate of repricing for the Company’s deposit portfolio. Involatility under a simulated downward interest rate scenario, sensitivity increased overall for bothgradual non-parallel shift of the downward interest rate scenarios, mainly due toyield curve, in even monthly increments over the impactfirst 12 months, followed by rates held constant thereafter based on a flat balance sheet as of the recent interest rate increases on December 14, 2016,date of the analysis.
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Net Interest Income Volatility
Change in Interest Rates (in bps)March 31, 2024December 31, 2023
+200 Rate Ramp2.8 %0.8 %
+100 Rate Ramp1.6 %0.5 %
-100 Rate Ramp(1.8)%(0.6)%
-200 Rate Ramp(3.6)%(1.3)%

As of 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 presents2024, the Company’s net interest income sensitivityprofile reflects an asset sensitive position, where assets reprice faster or more significantly than liabilities. Net interest income is expected to increase when interest rates rise as the Company has a large population of September 30, 2017 forvariable rate loans, primarily tied to Prime and Term SOFR indices. The Company’s interest income is sensitive to changes in short-term interest rates. As of March 31, 2024, the +100 and +200 basis pointsCompany designated interest rate scenarios assumingcontracts with a $1.00notional amount of $5.3 billion $2.00 billionas cash flow hedges, which reduced net interest income volatility by approximately 1.8% of the base net interest income for every 100 bps change in interest rate.

The Company’s deposit portfolio is primarily composed of non-maturity deposits, which are not directly tied to short-term interest rate indices, but are, nevertheless, sensitive to changes in short-term interest rates. The modeled results are highly sensitive to modeled behavior and $3.00 billion demandassumptions. Actual net interest income results may deviate from the model’s net interest income due to earning asset growth variation and deposit migrations:mix changes based on customer preferences relative to the interest rate environment. During a period of declining interest rates, balance sheet growth could offset headwinds to net interest income from yield compression.
 
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


The Company’s EVE sensitivity increased asEconomic value of September 30, 2017, compared to December 31, 2016,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 bothasset/liability management and measures changes in the economic value of the upward interest rate scenarios. In the simulated upward 100 basis pointsbank’s assets 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 primarilyliabilities 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.interest rates.




The Company’s net interest income and EVE profile as of September 30, 2017, as presented ineconomic value approach provides a comparatively broader scope than the net interest income volatility approach since it represents the discounted present value of cash flows over the expected life of the instruments. Due to this longer horizon, EVE is useful to identify risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from off-balance sheet derivative exposures, over their lifetime. This long-term economic perspective into the Company’s interest rate risk profile allows the Company to identify anticipated negative effects of interest rate fluctuations.However, the difference in time horizons can cause the EVE tables, reflects an asset sensitiveanalysis to diverge from the shorter-term net 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.analysis presented above. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, and the shape of the yield curve, and potential changes to the balance sheet, actual results may vary from those predicted by the Company’s model.


The following table presents the Company’s EVE sensitivity related to an instantaneous non-parallel shift in market interest rates by 100 and 200 bps as of March 31, 2024 and December 31, 2023. The non-parallel shift scenarios were calibrated internally based on historical analysis.
EVE Volatility (1)
Change in Interest Rates (in bps)March 31, 2024December 31, 2023
+200(10.4)%(10.3)%
+100(4.9)%(5.4)%
-1002.6 %3.0 %
-2005.1 %6.0 %
(1)The percentage change represents net portfolio value change of the Company in a stable interest rate environment versus in the various interest rate scenarios.

As of March 31, 2024, the Company’s EVE is expected to decrease when interest rates rise. The change in EVE sensitivity was due to changes in the structure of the balance sheet as well as changes in the underlying valuations and durations of assets and liabilities.

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Derivatives


It is the Company’s policy not to speculate on the future direction of interest rates, or foreign currency exchange rates.rates and commodity prices. However, the Company will, from time to time, enterperiodically enters into derivativesderivative transactions in order to reducemanage its exposure to market risks, includingrisk, primarily interest rate risk and foreign currency risk. The Company believes these derivative transactions, when properly structured and managed, may provide a hedge against inherent risk in certain assets orand liabilities andor 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. The Company uses interest rate swaps to hedge the variability in interest received on certain floating-rate commercial loans and interest paid on certain floating-rate borrowings. Foreign exchange derivatives are used in net investment hedging strategies to mitigate the risk of changes in the U.S. dollar equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. Prior to entering into any hedging activities,hedge accounting activity, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies.

Interest Rate Swaps on Certificates of Deposit — As of September 30, 2017 and December 31, 2016, the The Company had two cancellable interest rate swap contracts with original terms of 20 years. The objective of these interest rate swaps, which were designated as fair value hedges, was to obtain low-cost floating rate fundingalso repositions its hedging derivatives portfolio based on the Company’s brokered certificatescurrent assessment of deposit. As of September 30, 2017economic and December 31, 2016, underfinancial conditions, including the terms of the swap contracts, the Company received a fixed interest rate and paid a variable interest rate. Asforeign currency environments, balance sheet composition and trends, and the relative mix of September 30, 2017its cash and December 31, 2016,derivative positions.

In addition, 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 million as of September 30, 2017 and December 31, 2016, respectively.

Interest Rate Swaps and Options — The Company also offers various interest rate derivative products to its customers. Whenenters into derivative transactions are executedin order to accommodate its customers with itstheir business needs or to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and commodity prices. To economically hedge against the derivative contracts are offset by paired tradesentered into with registered swap dealers. These 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 specific Company assets or liabilities on the Consolidated Balance Sheets or to forecasted transactions in a hedge relationship and, therefore, are economic hedges.  The contracts are 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 fair values of the client derivative contracts.

As of September 30, 2017, 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 were 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 contracts with institutional counterparties and the Company’s customers amounted to a $64.8 million asset 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.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, primarily comprised of forward, swap and spot contracts to enable 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.

For a majority of the foreign exchange transactions entered with its customers, the Company enters into offsetting foreign exchangederivative contracts with institutional counterparties to mitigate the foreign exchange risk. Thesethird-party financial institutions, some of which are cleared through central clearing organizations. The exposures from derivative transactions are economic hedgescollateralized by cash and/or eligible securities based on limits as set forth in the respective agreements between the Company and counterparty financial institutions. The fair value changes of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the fair value changes of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component in the contracts and the Company does not apply hedge accounting. The Company’s policies also permit taking proprietary currency positions within approved limits, in compliance withspread variances between the proprietary trading exemption provided under Section 619 ofcustomer derivatives and the Dodd-Frank Act.offsetting financial counterparty positions. 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, 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 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 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 thealso utilizes foreign exchange contracts that wereare not designated as hedging instruments were $1.13 billionto mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and $767.8 million, respectively. The fair values of theliabilities, primarily foreign exchange 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.currency denominated deposits offered to its customers.


Credit Risk Participation Agreements — The Company has entered intois subject to credit risk participation agreements (“RPAs”) under which the Company assumed its pro-rata share of the credit exposure associated with the borrower’s performancecounterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of risk, affected by both the exposure and credit quality of the counterparty, both of which are sensitive to market-induced changes. The Company’s Credit Risk Management Committee provides oversight of credit risk 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 agreements, 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. The Company may or may notcontracts are required to be a partycleared through central clearinghouses, to further mitigate counterparty credit risk, where variation margin is applied daily as settlement 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 millionderivative contracts. In addition, the Company incorporates credit value adjustments and a $1 thousand liability, respectively.other market standard methodologies to appropriately reflect the counterparty’s and the Company’s own nonperformance risk in the fair value measurement of its derivatives. As of September 30, 2017,March 31, 2024, the Company anticipates performance by its counterparties and has not incurred any related credit losses.

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The following table summarizes certain information on derivative instruments designated as accounting hedges and utilized by the Company in its management of interest rate and foreign currency risks as of March 31, 2024 and December 31, 2023:
March 31, 2024December 31, 2023
($ in thousands)
Interest Rate Contracts Hedging Loans (1)(2)(3)
Interest Rate Contracts Hedging Loans (1)(2)(3)
Cash flow hedges
Notional amount$4,000,000 $4,000,000 
Weighted average:
Receive rate4.95 %4.95 %
Pay rate7.31 %7.32 %
Remaining term (in months)32.8 35.8 
($ in thousands)Foreign Exchange ContractsForeign Exchange Contracts
Net investment hedges
Notional amount$— $81,480
Hedged percentage (4)
— %44 %
Remaining term (in months)— 2.7 
NA — Not applicable.
(1)Represents receive-fixed/pay-floating interest rate swaps and excludes interest rate collars. Floating rates paid are based on SOFR or Prime.
(2)Excludes interest rate collars in total notional amount of $250 million as of both March 31, 2024 and December 31, 2023.
(3)Excludes forward-starting swaps in total notional amount of $1.0 billion not effective as of both March 31, 2024 and December 31, 2023.
(4)Represents percentage between the notional amountof outstanding foreign exchange contracts 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 —net RMB exposure from East West Bank (China) Limited. The Company obtained warrants to purchase preferred and common stockdoes not have active net investment hedges as 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.March 31, 2024.


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 20162023 Form 10-K,, 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


SignificantThe 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 20162023 Form 10-K)10-K. Certain of these policies include critical accounting estimates, which are fundamentalsubject 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, valuationuncertain, 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 consideredcritical 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 2023 Form 10-K.
Recently Issued Accounting Standards
For detailed discussion
91

Reconciliation of GAAP to Non-GAAP Financial Measures

To supplement the Company’s unaudited interim Consolidated Financial 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, or is subject to adjustments that have such an effect, that are not normally excluded or included in the most directly comparable financial measure that is calculated and disclosurepresented in accordance with U.S. GAAP. The non-GAAP financial measures discussed in this Form 10-Q are return on new accounting pronouncements adoptedaverage TCE, adjusted efficiency ratio, adjusted diluted EPS, and recent accounting pronouncements issued, see Note 2 — Current Accounting Developments tangible book value per share. Certain additional non-GAAP financial measures that are components of the foregoing non-GAAP financial measures are also set forth and reconciled in the table below. 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:
Three Months Ended March 31,
($ in thousands)20242023
Net income(a)$285,075 $322,439 
Add: Amortization of core deposit intangibles— 441 
  Amortization of mortgage servicing assets308 356 
Tax effect of amortization adjustments (1)
(91)(233)
Tangible net income (non-GAAP)(b)$285,292 $323,003 
Average stockholders’ equity(c)$6,992,558 $6,183,324 
Less: Average goodwill(465,697)(465,697)
  Average other intangible assets (2)
(6,473)(7,696)
Average tangible book value (non-GAAP)(d)$6,520,388 $5,709,931 
ROE (3)
(a)/(c)16.40 %21.15 %
Return on average TCE (3) (non-GAAP)
(b)/(d)17.60 %22.94 %
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Three Months Ended March 31,
($ in thousands)20242023
Net interest income before provision for credit losses(a)$565,139 $599,861 
Total noninterest income78,988 59,978 
Total revenue(b)$644,127 $659,839 
Noninterest income78,988 59,978 
Add: Net loss on AFS debt security (4)
— 10,000 
Adjusted noninterest income (non-GAAP)(c)78,988 69,978 
Adjusted revenue (non-GAAP)(a)+(c)=(d)$644,127 $669,839 
Total noninterest expense
(e)$246,875 $218,447 
Less: Amortization of tax credit and other investments(13,207)(10,110)
 Amortization of core deposit intangibles— (441)
 FDIC charge (5)
(10,305)— 
 Repurchase agreements’ extinguishment cost (6)
— (3,872)
Adjusted noninterest expense (non-GAAP)(f)$223,363 $204,024 
Efficiency ratio(e)/(b)38.33 %33.11 %
Adjusted efficiency ratio (non-GAAP)(f)/(d)34.68 %30.46 %
Three Months Ended March 31,
($ and shares in thousands, except per share data)20242023
Net income(a)$285,075 $322,439 
Add: FDIC charge (5)
10,305 — 
 Net loss on AFS debt security (4)
— 10,000 
Tax effect of adjustment (1)
(3,046)(2,929)
Adjusted net income (non-GAAP)(b)$292,334 $329,510 
Diluted weighted-average number of shares outstanding(c)$140,261 $141,913 
Diluted EPS(a)/(c)2.03 2.27 
Add: FDIC charge (5)
0.05 — 
  Net loss on AFS debt security (4)
— 0.05 
Adjusted diluted EPS (non-GAAP)(b)/(c)$2.08 $2.32 
(1)Applied statutory tax rate of 29.56% for the first quarter of 2024 and 29.29% for the first quarter of 2023.
(2)Includes core deposit intangibles and mortgage servicing assets.
(3)Annualized.
(4)Represents the net loss related to an AFS debt security that was written-off in the first quarter of 2023.
(5)During the first quarter of 2024, the Company recorded a $10 million pre-tax FDIC charge (included in Deposit insurance premiums and regulatory assessments on the Consolidated Financial Statements.Statement of Income).

(6)The Company prepaid $300 million of repurchase agreements and incurred a debt extinguishment cost of $4 million in the first quarter of 2023.


($ and shares in thousands, except per share data)March 31, 2024December 31, 2023
Stockholders’ equity(a)$7,023,232 $6,950,834 
Less: Goodwill(465,697)(465,697)
  Other intangible assets (1)
(6,234)(6,602)
Tangible book value (non-GAAP)(b)$6,551,301 $6,478,535 
Number of common shares at period-end(c)139,121 140,027 
Book value per share(a)/(c)$50.48 $49.64 
Tangible book value per share (non-GAAP)(b)/(c)$47.09 $46.27 
(1)Includes core deposit intangibles and mortgage servicing assets.

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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 — Derivativesin this Form 10-Q and Item 2. MD&A — Asset Liability andRisk 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 30, 2017,March 31, 2024, 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 30, 2017.March 31, 2024.


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 beenwere no changechanges 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 30, 2017,March 31, 2024, that hashave materially affected or isare reasonably likely to materially affect the Company’s internal control over financial reporting.



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PART II — OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

See Note 11—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 20162023 Form 10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors. There hashave been no material changechanges to the Company’s risk factors as presented in the Company’s 20162023 Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There wereRepurchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the Company’s common stock repurchase activity during the first quarter of 2024:
Calendar Month
Total Number of Shares Purchased (1)
Average Price Paid per Share of Common StockTotal 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)
January— $— — $172 
February1,181,851 $69.76 1,181,851 $89 
March— $— — $89 
First quarter1,181,851 $69.76 1,181,851 
(1)Excludes the repurchase of common stock pursuant to various stock compensation plans and agreements.
(2)On March 3, 2020, the Company’s Board of Directors authorized, and the Company announced, a stock repurchase program under which the Company may repurchase up to $500 million of its common stock. The stock repurchase authorization has no unregistered sales of equity securities or repurchase activities duringexpiration date.

ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2017.March 31, 2024, none of the Company’s directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of the SEC’s Regulation S-K).



96

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 September 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.
Exhibit Description 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
31.1Certificate 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[IncorporatedbyreferencetoExhibit3.1, 4.1fromRegistrant’sCurrentReportonForm8-Kfiledwith the Commission on November 12, 2009 (File No. 000-24939).]
3.2
Amended and Restated Bylaws of the Registrant dated March 14, 2023 [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on March 17, 2023 (File No. 000-24939).]
10.1
10.2
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.INSThe instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.INSXBRL Instance Document.
101.SCH
101.SCHInline XBRL Taxonomy Extension Schema Document. Filed herewith.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.
104Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.

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All other material referenced in this report which is required to be filed as an exhibit hereto has previously been submitted.





GLOSSARY OF ACRONYMS

AFSAvailable-for-saleHELOCHome equity lines of credit
ALCOAsset/Liability CommitteeHTMHeld-to-maturity
ALCOAsset/Liability Committee
AMLAnti-Money Laundering
AOCIAccumulated other comprehensive income (loss)IARIndependent Asset Review
ASCAccounting Standards CodificationLCHLondon Clearing House
ASUAccounting Standards UpdateLGDLoss given default
BPBTFPBasis pointBank Term Funding ProgramLTVLoan-to-value
BSAC&IBank Secrecy Act
C&ICommercial and industrial
CET1Common Equity Tier 1
CRAMD&ACommunity Reinvestment Act
CRECommercial real estate
DBOCalifornia Department of Business Oversight
EPSEarnings per share
EVEEconomic value of equity
EWISEast West Insurance Service, Inc.
FASBFinancial Accounting Standards Board
FHLBFederal Home Loan Bank
FRBFederal Reserve Bank of San Francisco
GAAPGenerally Accepted Accounting Principles
HELOCsHome equity lines of credit
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MOUCDMemorandumCertificate of UnderstandingdepositMMBTUMillion British thermal unit
Non-GAAPCECLNon-Generally Accepted Accounting PrinciplesCurrent expected credit lossesNAVNet asset value
Non-PCICFPBNon-purchased credit impairedConsumer Financial Protection BureauNRSRONationally recognized statistical rating organizations
OREOCLOCollateralized loan obligationsOREOOther real estate owned
OTTICMEOther-than-temporary impairmentChicago Mercantile ExchangePAMProportional amortization method
PCICRAPurchased credit impairedCommunity Reinvestment ActPDProbability of default
RPAsCRECommercial real estateRMBChinese Renminbi
DIFDeposit Insurance FundROAReturn on average assets
EPSEarnings per shareROCRisk Oversight Committee
ERMEnterprise risk managementROEReturn on average common equity
EVEEconomic value of equityRPACredit risk participation agreementsagreement
RSAsFASBFinancial Accounting Standards BoardRSURestricted stock awardsunit
RSUsFDICRestricted stock units
SBLCsFederal Deposit Insurance CorporationSBLCStandby letters of credit
S&PFHLBStandardFederal Home Loan BankSECU.S. Securities and Poor’sExchange Commission
TDRsFRBSFTroubled debt restructuringsFederal Reserve Bank of San FranciscoSOFRSecured Overnight Financing Rate
U.S.FTPUnited StatesFunds transfer pricingTCETangible Common Equity
U.S. GAAPUnited States Generally Accepted Accounting PrinciplesU.S.United States
USDGDPGross Domestic ProductUSDU.S. Dollardollar
GNMAGovernment National Mortgage Association




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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:May 9, 2024
Dated:November 7, 2017
EAST WEST BANCORP, INC.

(Registrant)
By/s/ IRENE H. OHChristopher J. Del Moral-Niles
Christopher J. Del Moral-Niles
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:
99
Exhibit No.Exhibit Description
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of 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.INSXBRL Instance Document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL 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.


96