0001069157us-gaap:~~CommercialPortfolioSegmentMemberus-gaap:FinancingReceivables30To59DaysPastDueMemberewbc:ConstructionAndLandLoanMember2020-12-31~~FinancingReceivables60To89DaysPastDueMemberus-gaap:ConsumerPortfolioSegmentMember2021-12-31

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, ~~2021~~2022

ORor

☐ 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

(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)

Registrant’s telephone number, including area code:

(626) 768-6000

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.001 per share

EWBC

The 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ 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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

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 ☒

Number of shares outstanding of the issuer’s common stock on the latest practicable date: ~~141,907,491~~140,946,569 shares as of October 31, ~~2021~~2022.

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3

	Item 1.	Consolidated Financial Statements	3
		Consolidated Balance Sheet (Unaudited)	3
		Consolidated Statement of Income (Unaudited)	4
		Consolidated Statement of Comprehensive Income (Unaudited)	5
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited)	6
		Consolidated Statement of Cash Flows (Unaudited)	7
		Notes to Consolidated Financial Statements (Unaudited)	9
		1 — Basis of Presentation ~~and Current Accounting Developments~~	9
		2 — Current Accounting Developments and Summary of Significant Accounting Policies	10
		3 — Fair Value Measurement and Fair Value of Financial Instruments	11
		34 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements	21
		45 — Securities	2223
		56 — Derivatives	2629
		67 — Loans Receivable and Allowance for Credit Losses	3336
		78 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities	4550
		9 — Goodwill	52
		~~8 — Goodwill and Other Intangible Assets~~	47
		910 — Commitments and Contingencies	4852


		1011 — Stock Compensation Plans	49
		~~11 — Stockholders’ Equity and Earnings Per Share~~	51
		~~12 — Accumulated Other Comprehensive Income (Loss)~~	51
		~~13 — Business Segments~~	53
		1412 — ~~Subsequent Events~~Stockholders’ Equity and Earnings Per Share	55
		13 — Accumulated Other Comprehensive Income (Loss)	56
		14 — Business Segments	58


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5661










	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~111~~106

	Item 4.	Controls and Procedures	~~111~~106


PART II — OTHER INFORMATION			~~112~~107

	Item 1.	Legal Proceedings	~~112~~107
	Item 1A.	Risk Factors	~~112~~107
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~112~~107



	Item 6.	Exhibits	~~113~~108

GLOSSARY OF ACRONYMS			~~114~~109

SIGNATURE			~~115~~110

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

($ in thousands, except shares)

(Unaudited)


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	594,631	$	592,117	Cash and due from banks	$	554,260	$	527,317
Interest-bearing cash with banks	Interest-bearing cash with banks	4,258,270		3,425,854		Interest-bearing cash with banks	1,609,093		3,385,618
Cash and cash equivalents	Cash and cash equivalents	4,852,901		4,017,971		Cash and cash equivalents	2,163,353		3,912,935
Interest-bearing deposits with banks	Interest-bearing deposits with banks	855,162		809,728		Interest-bearing deposits with banks	630,543		736,492
Assets purchased under resale agreements (“resale agreements”)	Assets purchased under resale agreements (“resale agreements”)	2,596,142		1,460,000		Assets purchased under resale agreements (“resale agreements”)	892,986		2,353,503
Securities:	Securities:					Securities:
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $9,783,180 in 2021 and $5,470,523 in 2020; includes assets pledged as collateral of $859,901 in 2021 and $588,484 in 2020)		9,713,006		5,544,658
Restricted equity securities, at cost		77,200		83,046
Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,771,354 and $10,087,179)						Available-for-sale (“AFS”) debt securities, at fair value (amortized cost of $6,771,354 and $10,087,179)	5,906,090		9,965,353
Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,459,135)						Held-to-maturity (“HTM”) debt securities, at amortized cost (fair value of $2,459,135)	3,012,667		—

Loans held-for-sale	Loans held-for-sale	—		1,788		Loans held-for-sale	14,500		635
Loans held-for-investment (net of allowance for loan losses of $560,404 in 2021 and $619,983 in 2020; includes assets pledged as collateral of $24,551,177 in 2021 and $23,263,517 in 2020)		39,921,301		37,770,972
Investments in qualified affordable housing partnerships, net		297,367		213,555
Investments in tax credit and other investments, net		367,428		266,525
Premises and equipment (net of accumulated depreciation of $136,796 in 2021 and $127,884 in 2020)		96,956		103,251
Loans held-for-investment (net of allowance for loan losses of $582,517 and $541,579)						Loans held-for-investment (net of allowance for loan losses of $582,517 and $541,579)	46,859,738		41,152,202
Investments in qualified affordable housing partnerships, tax credit and other investments, net						Investments in qualified affordable housing partnerships, tax credit and other investments, net	725,254		628,263

Premises and equipment (net of accumulated depreciation of $146,073 and $139,358)						Premises and equipment (net of accumulated depreciation of $146,073 and $139,358)	91,587		97,302
Goodwill	Goodwill	465,697		465,697		Goodwill	465,697		465,697
Operating lease right-of-use assets	Operating lease right-of-use assets	99,785		95,460		Operating lease right-of-use assets	105,411		98,632
Other assets	Other assets	1,616,165		1,324,262		Other assets	1,708,235		1,459,687
TOTAL	TOTAL	$	60,959,110	$	52,156,913	TOTAL	$	62,576,061	$	60,870,701
LIABILITIES	LIABILITIES					LIABILITIES
Deposits:	Deposits:					Deposits:
Noninterest-bearing	Noninterest-bearing	$	23,175,471	$	16,298,301	Noninterest-bearing	$	21,645,394	$	22,845,464
Interest-bearing	Interest-bearing	30,180,719		28,564,451		Interest-bearing	32,211,968		30,505,068
Total deposits	Total deposits	53,356,190		44,862,752		Total deposits	53,857,362		53,350,532
Short-term borrowings		—		21,009

Federal funds purchased						Federal funds purchased	200,000		—
Federal Home Loan Bank (“FHLB”) advances	Federal Home Loan Bank (“FHLB”) advances	248,898		652,612		Federal Home Loan Bank (“FHLB”) advances	324,920		249,331
Assets sold under repurchase agreements (“repurchase agreements”)	Assets sold under repurchase agreements (“repurchase agreements”)	300,000		300,000		Assets sold under repurchase agreements (“repurchase agreements”)	611,785		300,000
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	151,795		151,739		Long-term debt and finance lease liabilities	152,610		151,997
Operating lease liabilities	Operating lease liabilities	107,107		102,830		Operating lease liabilities	113,477		105,534
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,104,919		796,796		Accrued expenses and other liabilities	1,655,239		876,089
Total liabilities	Total liabilities	55,268,909		46,887,738		Total liabilities	56,915,393		55,033,483
COMMITMENTS AND CONTINGENCIES (Note 9)		0		0
COMMITMENTS AND CONTINGENCIES (Note 10)						COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 200,000,000 shares authorized; 167,764,049 and 167,240,600 shares issued in 2021 and 2020, respectively		168		167
Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,227 and 167,790,645 shares issued						Common stock, $0.001 par value, 200,000,000 shares authorized; 168,427,227 and 167,790,645 shares issued	168		168
Additional paid-in capital	Additional paid-in capital	1,883,871		1,858,352		Additional paid-in capital	1,926,393		1,893,557
Retained earnings	Retained earnings	4,513,321		4,000,414		Retained earnings	5,302,897		4,683,659
Treasury stock, at cost 25,880,318 shares in 2021 and 25,675,371 shares in 2020		(649,591)		(634,083)
Accumulated other comprehensive (loss) income (“AOCI”), net of tax		(57,568)		44,325
Treasury stock, at cost 27,509,715 and 25,882,691 shares						Treasury stock, at cost 27,509,715 and 25,882,691 shares	(768,758)		(649,785)
Accumulated other comprehensive loss (“AOCI”), net of tax						Accumulated other comprehensive loss (“AOCI”), net of tax	(800,032)		(90,381)
Total stockholders’ equity	Total stockholders’ equity	5,690,201		5,269,175		Total stockholders’ equity	5,660,668		5,837,218
TOTAL	TOTAL	$	60,959,110	$	52,156,913	TOTAL	$	62,576,061	$	60,870,701

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

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

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
INTEREST AND DIVIDEND INCOME	INTEREST AND DIVIDEND INCOME									INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	Loans receivable, including fees	$	363,503	$	336,542	$	1,057,964	$	1,115,804	Loans receivable, including fees	$	560,452	$	363,503	$	1,376,978	$	1,057,964
AFS debt securities		37,826		18,493		101,616		59,639
Debt securities										Debt securities	51,092		37,826		139,935		101,616

Resale agreements	Resale agreements	8,957		5,295		23,077		16,434		Resale agreements	6,769		8,957		23,705		23,077
Restricted equity securities	Restricted equity securities	500		353		1,588		1,100		Restricted equity securities	843		500		2,274		1,588
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	4,521		5,045		11,781		20,717		Interest-bearing cash and deposits with banks	9,080		4,521		17,127		11,781
Total interest and dividend income	Total interest and dividend income	415,307		365,728		1,196,026		1,213,694		Total interest and dividend income	628,236		415,307		1,560,019		1,196,026
INTEREST EXPENSE	INTEREST EXPENSE									INTEREST EXPENSE
Deposits	Deposits	15,970		33,798		55,790		156,600		Deposits	68,894		15,970		104,371		55,790
Short-term borrowings		—		407		42		1,228
Federal funds purchased and other short-term borrowings										Federal funds purchased and other short-term borrowings	1,177		—		1,427		42
FHLB advances	FHLB advances	857		3,146		6,025		10,655		FHLB advances	392		857		1,529		6,025
Repurchase agreements	Repurchase agreements	2,012		2,155		5,981		9,686		Repurchase agreements	4,421		2,012		8,855		5,981
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	762		2,092		2,314		4,913		Long-term debt and finance lease liabilities	1,543		762		3,463		2,314
Total interest expense	Total interest expense	19,601		41,598		70,152		183,082		Total interest expense	76,427		19,601		119,645		70,152
Net interest income before provision for credit losses		395,706		324,130		1,125,874		1,030,612
(Reversal of) provision for credit losses		(10,000)		10,000		(25,000)		186,313
Net interest income after provision for credit losses		405,706		314,130		1,150,874		844,299
Net interest income before provision for (reversal of) credit losses										Net interest income before provision for (reversal of) credit losses	551,809		395,706		1,440,374		1,125,874
Provision for (reversal of) credit losses										Provision for (reversal of) credit losses	27,000		(10,000)		48,500		(25,000)
Net interest income after provision for (reversal of) credit losses										Net interest income after provision for (reversal of) credit losses	524,809		405,706		1,391,874		1,150,874
NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Lending fees	Lending fees	17,516		18,736		56,965		56,455		Lending fees	20,289		17,516		59,869		56,965
Deposit account fees	Deposit account fees	18,508		12,573		51,233		33,892		Deposit account fees	23,636		18,508		66,323		51,233
Interest rate contracts and other derivative income	Interest rate contracts and other derivative income	7,156		5,538		20,981		18,718		Interest rate contracts and other derivative income	8,761		7,156		29,695		20,981
Foreign exchange income	Foreign exchange income	13,101		3,310		35,634		15,691		Foreign exchange income	10,083		13,101		34,143		35,634
Wealth management fees	Wealth management fees	5,598		4,553		20,460		12,997		Wealth management fees	8,903		5,598		21,494		20,460
Net gains on sales of loans	Net gains on sales of loans	3,329		361		6,601		1,443		Net gains on sales of loans	2,129		3,329		5,968		6,601
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	354		698		1,178		11,867		Gains on sales of AFS debt securities	—		354		1,306		1,178

Other investment income		5,349		5,239		13,870		6,652
Other investment (loss) income										Other investment (loss) income	(580)		5,349		5,910		13,870
Other income	Other income	2,198		3,495		7,484		8,000		Other income	2,331		2,198		9,031		7,484
Total noninterest income	Total noninterest income	73,109		54,503		214,406		165,715		Total noninterest income	75,552		73,109		233,739		214,406
NONINTEREST EXPENSE	NONINTEREST EXPENSE									NONINTEREST EXPENSE
Compensation and employee benefits	Compensation and employee benefits	105,751		99,756		318,985		298,671		Compensation and employee benefits	127,580		105,751		357,213		318,985
Occupancy and equipment expense	Occupancy and equipment expense	15,851		16,648		47,150		49,941		Occupancy and equipment expense	15,920		15,851		46,853		47,150
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	4,641		4,006		12,791		11,133		Deposit insurance premiums and regulatory assessments	4,875		4,641		14,519		12,791
Deposit account expense	Deposit account expense	4,136		3,113		11,845		10,029		Deposit account expense	6,707		4,136		17,071		11,845
Data processing	Data processing	3,575		3,590		12,088		11,896		Data processing	3,725		3,575		10,876		12,088
Computer software expense	Computer software expense	8,426		8,539		23,106		22,006		Computer software expense	6,889		8,426		20,755		23,106
Consulting expense	Consulting expense	1,635		1,224		4,978		3,854		Consulting expense	1,620		1,635		5,474		4,978
Legal expense	Legal expense	2,363		1,366		5,840		6,093		Legal expense	689		2,363		2,454		5,840
Other operating expense	Other operating expense	20,998		17,122		58,544		57,489		Other operating expense	28,094		20,998		78,315		58,544
Amortization of tax credit and other investments	Amortization of tax credit and other investments	38,008		17,209		90,657		57,819		Amortization of tax credit and other investments	19,874		38,008		48,753		90,657
Repurchase agreements’ extinguishment cost		—		—		—		8,740

Total noninterest expense	Total noninterest expense	205,384		172,573		585,984		537,671		Total noninterest expense	215,973		205,384		602,283		585,984
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	273,431		196,060		779,296		472,343		INCOME BEFORE INCOME TAXES	384,388		273,431		1,023,330		779,296
INCOME TAX EXPENSE	INCOME TAX EXPENSE	47,982		36,523		124,111		68,630		INCOME TAX EXPENSE	89,049		47,982		232,010		124,111
NET INCOME	NET INCOME	$	225,449	$	159,537	$	655,185	$	403,713	NET INCOME	$	295,339	$	225,449	$	791,320	$	655,185
EARNINGS PER SHARE (“EPS”)	EARNINGS PER SHARE (“EPS”)									EARNINGS PER SHARE (“EPS”)
BASIC	BASIC	$	1.59	$	1.13	$	4.62	$	2.83	BASIC	$	2.10	$	1.59	$	5.59	$	4.62
DILUTED	DILUTED	$	1.57	$	1.12	$	4.58	$	2.82	DILUTED	$	2.08	$	1.57	$	5.55	$	4.58
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING	WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING									WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC	BASIC	141,880		141,498		141,799		142,595		BASIC	140,917		141,880		141,453		141,799
DILUTED	DILUTED	143,143		142,043		143,051		143,082		DILUTED	142,011		143,143		142,601		143,051

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net income $ 225,449 $ 159,537 $ 655,185 $ 403,713
Other comprehensive income (loss), net of tax:
Net changes in unrealized (losses) gains on AFS debt securities (41,178) 4,634 (101,577) 49,903
Net changes in unrealized gains (losses) on cash flow hedges 51 87 551 (1,246)
Foreign currency translation adjustments (1,752) 5,459 (867) 3,065
Other comprehensive (loss) income (42,879) 10,180 (101,893) 51,722
COMPREHENSIVE INCOME $ 182,570 $ 169,717 $ 553,292 $ 455,435



	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	295,339	$	225,449	$	791,320	$	655,185
Other comprehensive loss, net of tax:
Net changes in unrealized losses on AFS debt securities	(161,445)		(41,178)		(523,593)		(101,577)
Net changes in unrealized gains (losses) on securities transferred from AFS to HTM	3,256		—		(103,674)		—
Net changes in unrealized (losses) gains on cash flow hedges	(33,269)		51		(64,372)		551
Foreign currency translation adjustments	(7,926)		(1,752)		(18,012)		(867)
Other comprehensive loss	(199,384)		(42,879)		(709,651)		(101,893)
COMPREHENSIVE INCOME	$	95,955	$	182,570	$	81,669	$	553,292

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands, except shares)

(Unaudited)


		Common Stock and Additional Paid-in Capital			Retained Earnings				Treasury Stock		AOCI, Net of Tax				Total Stockholders’ Equity					Common Stock and Additional Paid-in Capital				Retained Earnings			Treasury Stock			AOCI, Net of Tax			Total Stockholders’ Equity
		Shares	Amount											Shares					Amount
BALANCE, JULY 1, 2020		141,486,397	$	1,841,915			$	3,755,649					$	(633,455)			$	23,134		$	4,987,243

BALANCE, JULY 1, 2021																		BALANCE, JULY 1, 2021		141,877,505		$	1,876,247		$	4,335,327		$	(649,337)		$	(14,689)		$	5,547,548
Net income	Net income	—	—		159,537				—		—				159,537			Net income		—		—		225,449			—			—			225,449
Other comprehensive income		—	—		—				—		10,180				10,180

Other comprehensive loss																		Other comprehensive loss		—		—		—			—			(42,879)			(42,879)
Issuance of common stock pursuant to various stock compensation plans and agreements																		Issuance of common stock pursuant to various stock compensation plans and agreements		9,643		7,792		—			—			—			7,792
Repurchase of common stock pursuant to various stock compensation plans and agreements																		Repurchase of common stock pursuant to various stock compensation plans and agreements		(3,417)		—		—			(254)			—			(254)
Cash dividends on common stock ($0.33 per share)																		Cash dividends on common stock ($0.33 per share)		—		—		(47,455)			—			—			(47,455)
BALANCE, SEPTEMBER 30, 2021																		BALANCE, SEPTEMBER 30, 2021		141,883,731		$	1,884,039	$	4,513,321		$	(649,591)		$	(57,568)		$	5,690,201
BALANCE, JULY 1, 2022																		BALANCE, JULY 1, 2022		140,917,389		$	1,914,232	$	5,064,650		$	(768,752)		$	(600,648)		$	5,609,482
Net income																		Net income		—		—		295,339			—			—			295,339
Other comprehensive loss																		Other comprehensive loss		—		—		—			—			(199,384)			(199,384)
Issuance of common stock pursuant to various stock compensation plans and agreements	Issuance of common stock pursuant to various stock compensation plans and agreements	21,968	8,648		—				—		—				8,648			Issuance of common stock pursuant to various stock compensation plans and agreements		206		12,329		—			—			—			12,329
Repurchase of common stock pursuant to various stock compensation plans and agreements	Repurchase of common stock pursuant to various stock compensation plans and agreements	(935)	—		—				(31)		—				(31)			Repurchase of common stock pursuant to various stock compensation plans and agreements		(83)		—		—			(6)			—			(6)

Cash dividends on common stock ($0.275 per share)		—	—		(39,471)				—		—				(39,471)
BALANCE, SEPTEMBER 30, 2020		141,507,430	$	1,850,563	$	3,875,715			$	(633,486)	$	33,314			$	5,126,106
BALANCE, JULY 1, 2021		141,877,505	$	1,876,247	$	4,335,327			$	(649,337)	$	(14,689)			$	5,547,548
Cash dividends on common stock ($0.40 per share)																		Cash dividends on common stock ($0.40 per share)		—		—		(57,092)			—			—			(57,092)
BALANCE, SEPTEMBER 30, 2022																		BALANCE, SEPTEMBER 30, 2022		140,917,512		$	1,926,561	$	5,302,897		$	(768,758)		$	(800,032)		$	5,660,668

Net income		—	—		225,449				—		—				225,449
Other comprehensive loss		—	—		—				—		(42,879)				(42,879)

Issuance of common stock pursuant to various stock compensation plans and agreements		9,643	7,792		—				—		—				7,792
Repurchase of common stock pursuant to various stock compensation plans and agreements		(3,417)	—		—				(254)		—				(254)

Cash dividends on common stock ($0.330 per share)		—	—		(47,455)				—		—				(47,455)
BALANCE, SEPTEMBER 30, 2021		141,883,731	$	1,884,039	$	4,513,321			$	(649,591)	$	(57,568)			$	5,690,201

Common Stock and
Additional Paid-in Capital Retained Earnings Treasury Stock AOCI,
Net of Tax Total
Stockholders’ Equity
Shares Amount
BALANCE, JANUARY 1, 2020 145,625,385 $ 1,826,512 $ 3,689,377 $ (479,864) $ (18,408) $ 5,017,617
Cumulative-effect of change in accounting principle related to credit losses (1)
— — (97,967) — — (97,967)
Net income — — 403,713 — — 403,713
Other comprehensive income — — — — 51,722 51,722
Issuance of common stock pursuant to various stock compensation plans and agreements 543,287 24,051 — — — 24,051
Repurchase of common stock pursuant to various stock compensation plans and agreements (189,560) — — (7,656) — (7,656)
Repurchase of common stock pursuant to the Stock Repurchase Program (4,471,682) — — (145,966) — (145,966)
Cash dividends on common stock ($0.825 per share) — — (119,408) — — (119,408)
BALANCE, SEPTEMBER 30, 2020 141,507,430 $ 1,850,563 $ 3,875,715 $ (633,486) $ 33,314 $ 5,126,106
BALANCE, JANUARY 1, 2021 141,565,229 $ 1,858,519 $ 4,000,414 $ (634,083) $ 44,325 $ 5,269,175
Net income — — 655,185 — — 655,185
Other comprehensive loss — — — — (101,893) (101,893)
Issuance of common stock pursuant to various stock compensation plans and agreements 523,449 25,520 — — — 25,520
Repurchase of common stock pursuant to various stock compensation plans and agreements (204,947) — — (15,508) — (15,508)
Cash dividends on common stock ($0.990 per share) — — (142,278) — — (142,278)
BALANCE, SEPTEMBER 30, 2021 141,883,731 $ 1,884,039 $ 4,513,321 $ (649,591) $ (57,568) $ 5,690,201

~~(1)Represents the impact of the adoption of Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments~~ — ~~Credit Losses~~ ~~(Topic 326) on January 1, 2020.~~



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

Net income	—	—		655,185		—		—		655,185
Other comprehensive loss	—	—		—		—		(101,893)		(101,893)



Issuance of common stock pursuant to various stock compensation plans and agreements	523,449	25,520		—		—		—		25,520
Repurchase of common stock pursuant to various stock compensation plans and agreements	(204,947)	—		—		(15,508)		—		(15,508)

Cash dividends on common stock ($0.99 per share)	—	—		(142,278)		—		—		(142,278)
BALANCE, SEPTEMBER 30, 2021	141,883,731	$	1,884,039	$	4,513,321	$	(649,591)	$	(57,568)	$	5,690,201
BALANCE, JANUARY 1, 2022	141,907,954	$	1,893,725	$	4,683,659	$	(649,785)	$	(90,381)	$	5,837,218

Net income	—	—		791,320		—		—		791,320
Other comprehensive loss	—	—		—		—		(709,651)		(709,651)



Issuance of common stock pursuant to various stock compensation plans and agreements	640,053	32,836		—		—		—		32,836
Repurchase of common stock pursuant to various stock compensation plans and agreements	(244,978)	—		—		(18,983)		—		(18,983)

Repurchase of common stock pursuant to the Stock Repurchase Plan	(1,385,517)	—		—		(99,990)		—		(99,990)
Cash dividends on common stock ($1.20 per share)	—	—		(172,082)		—		—		(172,082)
BALANCE, SEPTEMBER 30, 2022	140,917,512	$	1,926,561	$	5,302,897	$	(768,758)	$	(800,032)	$	5,660,668

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net income	Net income	$	655,185	$	403,713	Net income	$	791,320	$	655,185
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	116,371		96,089		Depreciation and amortization	81,980		116,371
Amortization of premiums and accretion of discount, net	Amortization of premiums and accretion of discount, net	17,392		(17,974)		Amortization of premiums and accretion of discount, net	26,336		17,392
Stock compensation costs	Stock compensation costs	24,047		22,201		Stock compensation costs	29,338		24,047
Deferred income tax benefit (expense)		787		(91)
(Reversal of) provision for credit losses		(25,000)		186,313
Deferred income tax (benefit) expense						Deferred income tax (benefit) expense	(6,107)		787
Provision for (reversal of) credit losses						Provision for (reversal of) credit losses	48,500		(25,000)
Net gains on sales of loans	Net gains on sales of loans	(6,601)		(1,443)		Net gains on sales of loans	(5,968)		(6,601)
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	(1,178)		(11,867)		Gains on sales of AFS debt securities	(1,306)		(1,178)

Impairment on other real estate owned ("OREO") and other foreclosed assets		4,843		—
Net gains on sales of OREO and other foreclosed assets		(1,954)		—

Loans held-for-sale:	Loans held-for-sale:					Loans held-for-sale:
Originations and purchases	Originations and purchases	(9,323)		(53,911)		Originations and purchases	(447)		(9,323)
Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	11,337		50,339		Proceeds from sales and paydowns/payoffs of loans originally classified as held-for-sale	461		11,337

Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	7,624		4,934		Proceeds from distributions received from equity method investees	5,642		7,624
Net change in accrued interest receivable and other assets	Net change in accrued interest receivable and other assets	(78,649)		(467,077)		Net change in accrued interest receivable and other assets	56,958		(78,649)
Net change in accrued expenses and other liabilities	Net change in accrued expenses and other liabilities	30,179		220,343		Net change in accrued expenses and other liabilities	584,655		30,179
Other net operating activities		771		529
Other operating activities, net						Other operating activities, net	5,057		3,660
Total adjustments	Total adjustments	90,646		28,385		Total adjustments	825,099		90,646
Net cash provided by operating activities	Net cash provided by operating activities	745,831		432,098		Net cash provided by operating activities	1,616,419		745,831
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in:
Net change in:						Net change in:
Investments in qualified affordable housing partnerships, tax credit and other investments	Investments in qualified affordable housing partnerships, tax credit and other investments	(141,882)		(102,190)		Investments in qualified affordable housing partnerships, tax credit and other investments	(91,710)		(141,882)
Interest-bearing deposits with banks	Interest-bearing deposits with banks	4,576		(503,187)		Interest-bearing deposits with banks	105,479		4,576
Resale agreements:	Resale agreements:					Resale agreements:
Proceeds from paydowns and maturities	Proceeds from paydowns and maturities	698,274		400,000		Proceeds from paydowns and maturities	1,719,076		698,274
Purchases	Purchases	(1,834,416)		(500,000)		Purchases	(258,559)		(1,834,416)
AFS debt securities:	AFS debt securities:					AFS debt securities:
Proceeds from sales	Proceeds from sales	236,967		494,877		Proceeds from sales	129,181		236,967
Proceeds from repayments, maturities and redemptions						Proceeds from repayments, maturities and redemptions	711,950		1,346,839
Purchases						Purchases	(769,007)		(5,884,389)
HTM debt securities:						HTM debt securities:
Proceeds from repayments, maturities and redemptions	Proceeds from repayments, maturities and redemptions	1,346,839		1,532,411		Proceeds from repayments, maturities and redemptions	60,140		—
Purchases	Purchases	(5,884,389)		(3,167,863)		Purchases	(50,000)		—
Loans held-for-investment:	Loans held-for-investment:					Loans held-for-investment:
Proceeds from sales of loans originally classified as held-for-investment	Proceeds from sales of loans originally classified as held-for-investment	416,426		254,035		Proceeds from sales of loans originally classified as held-for-investment	453,315		416,426
Purchases	Purchases	(746,395)		(163,861)		Purchases	(599,660)		(746,395)
Other changes in loans held-for-investment, net	Other changes in loans held-for-investment, net	(1,798,011)		(2,764,867)		Other changes in loans held-for-investment, net	(5,675,012)		(1,798,011)

Proceeds from sales of OREO and other foreclosed assets		28,560		—

Proceeds from sales of OREO						Proceeds from sales of OREO	—		28,560
Purchase of bank-owned life insurance	Purchase of bank-owned life insurance	(150,000)		—		Purchase of bank-owned life insurance	—		(150,000)
Proceeds from distributions received from equity method investees	Proceeds from distributions received from equity method investees	5,626		2,601		Proceeds from distributions received from equity method investees	13,557		5,626
Other net investing activities		(61)		(2,223)

Other investing activities, net						Other investing activities, net	920		(61)
Net cash used in investing activities	Net cash used in investing activities	(7,817,886)		(4,520,267)		Net cash used in investing activities	(4,250,330)		(7,817,886)

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

($ in thousands)

(Unaudited)

(Continued)

Nine Months Ended September 30,
2021 2020
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 8,486,734 4,337,096
Net (decrease) increase in short-term borrowings (21,143) 30,916
FHLB advances:
Proceeds — 10,200
Repayment (405,000) (100,200)
Repurchase agreements:
Proceeds from repurchase agreements — 48,063
Repayment of repurchase agreements — (150,000)
Repurchase agreements’ extinguishment cost — (8,740)
Long-term debt and lease liabilities:
Proceeds from long-term debt — 1,437,269
Repayment of long-term debt and lease liabilities (909) (10,609)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program — (145,966)
Proceeds from issuance pursuant to various stock compensation plans and agreements 1,180 1,170
Stocks tendered for payment of withholding taxes (15,508) (7,656)
Cash dividends paid (141,911) (119,185)
Net cash provided by financing activities 7,903,443 5,322,358
Effect of exchange rate changes on cash and cash equivalents 3,542 11,603
NET INCREASE IN CASH AND CASH EQUIVALENTS 834,930 1,245,792
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,017,971 3,261,149
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,852,901 $ 4,506,941
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 70,833 $ 188,657
Income taxes, net $ 137,452 $ 82,114
Noncash investing and financing activities:
Loans transferred from held-for-investment to held-for-sale $ 411,416 $ 253,302
Loans transferred to OREO and other foreclosed assets $ 49,122 $ 19,504



	Nine Months Ended September 30,
	2022		2021



















































CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	623,025		8,486,734
Net change in federal funds purchased and short-term borrowings	200,006		(21,143)

FHLB advances:
Proceeds	4,600,200		—
Repayment	(4,525,200)		(405,000)
Repurchase agreements:
Proceeds from repurchase agreements	311,785		—


Long-term debt and lease liabilities:

Repayment of long-term debt and lease liabilities	(710)		(909)
Common stock:
Repurchase of common stocks pursuant to the Stock Repurchase Program	(99,990)		—
Proceeds from issuance pursuant to various stock compensation plans and agreements	1,444		1,180
Stocks tendered for payment of withholding taxes	(18,983)		(15,508)
Cash dividends paid	(171,991)		(141,911)
Net cash provided by financing activities	919,586		7,903,443
Effect of exchange rate changes on cash and cash equivalents	(35,257)		3,542
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(1,749,582)		834,930
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	3,912,935		4,017,971
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,163,353	$	4,852,901

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	107,146	$	70,833
Income taxes, net	$	233,082	$	137,452
Noncash investing and financing activities:

Securities transferred from AFS to HTM debt securities	$	3,010,003	$	—
Loans transferred from held-for-investment to held-for-sale	$	463,769	$	411,416




Loans transferred to other real estate owned (“OREO”) and other foreclosed assets	$	—	$	49,122

See accompanying Notes to Consolidated Financial Statements.

EAST WEST BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation ~~and Current Accounting Developments~~

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”) ~~and its subsidiaries.~~. The unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q (“this Form 10-Q”) include the accounts of East West, East West Bank and East West’s subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. As of September 30, ~~2021,~~2022, East West also has 6six wholly-owned subsidiaries that are statutory business trusts (the “Trusts”). In accordance with Financial Accounting Standards Board ~~(“FASB”)~~ Accounting Standards Codification (“ASC”) Topic 810, Consolidation, the Trusts are not included on the Consolidated Financial Statements.

The unaudited interim Consolidated Financial Statements are presented in accordance with United States (“U.S.”) ~~generally accepted accounting principles~~Generally Accepted Accounting Principles (“GAAP”), applicable guidelines prescribed by regulatory authorities and general practices in the banking industry. While the unaudited interim Consolidated Financial Statements reflect all adjustments that, in the opinion of management, are necessary for fair presentation, they primarily serve to update the most recently filed annual report on Form 10-K, and may not include all the information and notes necessary to constitute a complete set of financial statements. Accordingly, they should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the U.S. Securities and Exchange Commission on February ~~26, 2021~~28, 2022 (the “Company’s ~~2020~~2021 Form 10-K”). In addition, certain items on the Consolidated Financial Statements and notes for the prior periods have been reclassified to conform to the current period presentation.

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

~~New Accounting Pronouncements Adopted~~


~~Standard~~	~~Required Date of Adoption~~	~~Description~~	~~Effect on Financial Statements~~
~~Standards Adopted in 2021~~
~~ASU 2020-08,~~ ~~Codification~~ ~~Improvements to~~ ~~Subtopic 310-20,~~ ~~Receivables—~~ ~~Nonrefundable~~ ~~Fees and Other~~ ~~Costs~~	~~January 1, 2021~~ Early adoption is not permitted.	~~The amendments in this ASU updates ASU 2017-08,~~ ~~Receivables — Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~, by clarifying that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. If the security contained additional future call dates, an entity should consider whether the amortized cost basis exceeded the amount repayable by the issuer at the next call date. If so, the excess should be amortized to the next call date. This ASU also clarifies if there is no remaining premium or if there are no further call dates, the entity shall reset the effective yield using the payment terms of the debt security. ~~The amendments of this guidance should be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.~~	The Company adopted this guidance on a prospective basis in January 2021. The adoption of this guidance did not have an impact on the Company’s Consolidated Financial Statements.

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

Recent Accounting Pronouncements

Standard

Required Date of Adoption

Description

Effect on Financial Statements

Standards Not Yet Adopted ~~in 2021 (continued)~~

~~ASU 2020-04,~~Accounting Standards Update (“ASU”) 2022-02, ~~Reference Rate Reform (Topic 848)~~Financial Instruments - Credit Losses(Topic 326): ~~Facilitation of~~Troubled Debt Restructurings and the ~~Effects of Reference Rate Reform on Financial Reporting~~ ~~and subsequent related ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848): Scope~~Vintage Disclosures

~~Effective~~January 1, 2023

ASU 2022-02 eliminates the troubled debt restructuring (“TDRs”) accounting model for creditors and instead requires companies to apply the loan refinancing and restructuring guidance to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. In addition, companies are no longer required to use a discounted cash flow method to measure the allowance for credit losses for certain TDRs and instead allows for the use of an expected loss approach for all ~~entities from the dates of issuance through December 31, 2022.~~

In March 2020, the FASB issued an ASU related to contracts or hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or other reference rates that are expected to be discontinued due to reference rate reform. This ASU provides temporary optional expedients and exceptions regarding the accountingloans. The guidance also introduces new disclosure requirements related to ~~the modification~~restructuring of ~~certain contracts, hedging relationships~~financing receivables made to borrowers experiencing financial difficulty, and ~~other transactions that are affected~~amends vintage disclosures to require current-period gross write-off by the reference rate reform. The guidance permits the Company to make a one-time election to sell and/or transfer qualifying held-to-maturity securities, and not to apply modification accounting or remeasure lease payments in lease contracts if the changes to the contract are related to the discontinuationyear of the reference rate. If certain criteria are met, the amendments also allow exceptions to the de-designation criteria of the hedging relationships and the assessment of hedge effectiveness during the transition period. This one-time election may be made at any time after March 12, 2020, but no later than December 31, 2022. In January 2021, the FASB issued ASU 2021-01 as subsequent amendments, which expanded the scope of Topic 848 to include all affected derivatives and clarified certain optional expedients and exceptions regarding the hedge accounting for derivative contracts affected by the discounting transition.origination.

The ~~amendments of this~~ guidance ~~could~~should be ~~elected retrospectively or prospectively to new modifications made on or after the date of issuance of this ASU, January 7, 2021.~~

~~The Company adopted this guidance~~applied on a prospective basis ~~in January 2021. At~~except for amendments related to recognition and measurement of TDRs, where a modified retrospective transition method is optional.

The Company does not expect the ~~time~~adoption of ~~adoption, the~~this guidance ~~did not~~to have a material impact on the Company’s Consolidated Financial Statements. The Company ~~will continue~~expects to ~~track the exposure as of each reporting period and to assess the impact as the reference rate transition occurs through the cessation of LIBOR.~~

adopt ASU 2022-02 on January 1, 2023.

ASU ~~2019-12,~~2022-03, ~~Income Taxes~~Fair Value Measurement (Topic ~~740)~~820): ~~Simplifying the Accounting for Income Taxes~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

January 1, ~~2021~~2024

ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This ASU also requires the following disclosures for equity securities that are subject to contractual restrictions: the fair value of equity securities subject to contractual sale restrictions; nature and remaining duration of the restrictions; and circumstances that could cause a lapse in the restrictions.

~~Early adoption is permitted on January 1, 2020.~~

This ASU simplifies the accounting for income taxes by removing certain exceptions to the existing guidance. This includes removing exceptions to: 1) the incremental approach for intraperiod tax allocation, 2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) the ability not to recognize a deferred tax liability when a foreign equity method investment becomes a subsidiary, and 4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

In addition, this ASU simplifies the accounting for income taxes related to franchise taxes, the tax basis of goodwill and the method for recognizing an enacted change in tax laws. This ASU also specifies that an entity is not required to allocate the consolidated amount of tax expense to a legal entity that is not subject to tax in its separate financial statements. This ASU also makes improvements in the accounting for income taxes related to employee stock ownership plans and equity method investments in qualified affordable housing projects.

~~This~~The guidance should be applied on ~~either~~ a ~~retrospective, modified retrospective or~~ prospective basis ~~depending~~with any adjustments from the adoption of the amendment recognized in earnings and disclosed on the ~~amendments.~~date of adoption.

The Company ~~adopted~~does not expect the adoption of this guidance ~~in January 2021 using the transition guidance prescribed by this ASU. At the time of adoption, this guidance did not~~to have ~~a material~~an impact on the Company’s Consolidated Financial Statements.

The Company expects to adopt ASU 2022-03 on January 1, 2024.

Significant Accounting Policies Update

During the first quarter of 2022, the Company transferred $3.01 billion in fair value of debt securities from AFS to HTM.

Transfer between Categories of Debt Securities— Upon transfer of a debt security from the AFS to HTM category, the security’s new amortized cost is reset to fair value, reduced by any previous write-offs but excluding any allowance for credit losses. Unrealized gains or losses at the date of transfer of these securities continue to be reported in AOCI and are amortized into interest income over the remaining life of the securities as effective yield adjustments, in a manner consistent with the amortization or accretion of the original purchase premium or discount on the associated security. For transfers of securities from the AFS to HTM category, any allowance for credit losses that was previously recorded under the AFS model is reversed and an allowance for credit losses is subsequently recorded under the HTM debt security model. The reversal and re-establishment of the allowance for credit losses are recorded in the provision for credit losses.

Held-to-Maturity Debt Securities— Debt securities that the Company has the intent and ability to hold until maturity are classified as HTM and are carried at amortized cost, net of allowance for credit losses. The criteria used to place HTM debt securities on nonaccrual are largely similar to those described for loans. The amortized cost of the Company’s HTM debt securities excludes accrued interest, which is included in Other assets on the Consolidated Balance Sheet. The Company has made an accounting policy election not to recognize an allowance for credit losses for accrued interest receivables on HTM debt securities, as the Company reverses any accrued interest against interest income if a debt security is placed on nonaccrual status. Any cash collected on nonaccrual HTM securities is applied to reduce the security’s amortized cost basis and not as interest income. Generally, the Company returns an HTM security to accrual status when all delinquent interest and principal become current under the contractual terms of the security, and the collectability of remaining principal and interest is no longer doubtful.

Allowance for Credit Losses on Held-to-Maturity Debt Securities—For each major HTM debt security type, the allowance for credit losses is estimated collectively for groups of securities with similar risk characteristics. For securities that do not share similar risk characteristics, the losses are estimated individually. The Company applies a zero credit loss assumption to certain HTM debt securities, including debt securities that are either guaranteed or issued by the U.S. government or government-sponsored enterprises, are highly rated by nationally recognized statistical rating organizations (“NRSROs”), and have a long history of no credit losses. Any expected credit loss is recorded through the allowance for credit losses on HTM debt securities and deducted from the amortized cost basis of the security, reflecting the net amount the Company expects to collect.

Note 23 — Fair Value Measurement and Fair Value of Financial Instruments

Fair Value Determination

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

•Level 1 — Valuation is based on quoted prices for identical instruments traded in active markets.

•Level 2 — Valuation is based on quoted prices for similar instruments traded in active markets; quoted prices for identical or similar instruments traded in markets that are not active; and model-derived valuations whose inputs are observable and can be corroborated by market data.

•Level 3 — Valuation is based on significant unobservable inputs for determining the fair value of assets or liabilities. These significant unobservable inputs reflect assumptions that market participants may use in pricing the assets or liabilities.

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following section describes the valuation methodologies used by the Company to measure financial assets and liabilities on a recurring basis, as well as the general classification of these instruments ~~within~~pursuant to the fair value hierarchy.

Available-for-Sale Debt Securities — The fair value of AFS debt securities is 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 ~~expectation~~expectations and reference data obtained from market research publications. Inputs used by the third-party pricing service providers in valuing collateralized mortgage obligations and other securitization structures also include new issue data, monthly payment information, whole loan collateral performance, tranche evaluation and “To Be Announced” prices. In valuing securities issued by state and political subdivisions, inputs used by third-party pricing service providers also include material event notices.

On a monthly basis, the Company validates the valuations provided by third-party pricing service providers to ensure that the fair value determination is consistent with the applicable accounting guidance and the financial instruments are properly classified in the fair value hierarchy. To perform this validation, the Company ~~compares~~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 ~~documentation received from the third-party pricing service providers regarding the~~ valuation inputs and methodology ~~used~~ for each security category ~~of securities.~~furnished by third-party pricing service providers.

When available, the Company uses quoted market prices to determine the fair value of AFS debt securities that are classified as Level 1. Level 1 AFS debt securities consist of U.S. Treasury securities. When pricing is unavailable from third-party pricing service providers for certain securities, the Company requests market quotes from various independent external brokers and utilizes the average quoted market prices. In addition, the Company obtains market quotes from other official published sources. As these valuations are based on observable inputs in the current marketplace, they are classified as Level 2. The Company periodically communicates with the independent external brokers to validate their pricing methodology. Information such as pricing sources, pricing assumptions, data inputs and valuation techniques are reviewed periodically.

Equity Securities — Equity securities consisted of mutual funds as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company invested in these mutual funds for Community Reinvestment Act (“CRA”) purposes. The Company uses net asset value (“NAV”) information to determine the fair value of these equity securities. When NAV is available periodically and the equity securities can be put back to the transfer agents at the publicly available NAV, the fair value of the equity securities is classified as Level 1. When NAV is available periodically, but the equity securities may not be readily marketable at its periodic NAV in the secondary market, the fair value of these equity securities is classified as Level 2.

Interest Rate Contracts — The Company enters into interest rate swap and option contracts that are not designated as hedging instruments with its borrowers to lock in attractive intermediate and long-term interest rates, resulting in the customer obtaining a synthetic fixed-rate loan. To economically hedge against the interest rate risks in the products offered to its customers, the Company enters into mirrored offsetting interest rate contracts with third-party financial institutions. The Company also enters into interest rate swap or interest rate collar contracts with institutional counterparties to hedge against certain variable interest rate ~~borrowings.~~borrowings and variable interest rate loans. These interest rate ~~swap~~ contracts with institutional counterparties ~~were~~are designated as cash flow hedges. The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The fair value of the interest rate options, which consist of floors and caps, is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fall below (rise above) the strike rate of the floors (caps). 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 utilized, the Company classifies these derivative instruments as Level 2.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts to accommodate the business needs of its customers. For a majority of the foreign exchange contracts entered with its customers, the Company entered into offsetting foreign exchange contracts with third-party financial institutions to manage its exposure. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign currency on-balance sheet assets and liabilities, primarily foreign currency denominated deposits that it offers to its customers. The fair value of foreign exchange contracts is determined at each reporting period based on changes in the foreign exchange 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. Due to the short-term nature of the majority of these contracts, the counterparties’ credit risks are considered nominal and result in no adjustments to the valuation of the foreign exchange contracts. Due to the observable nature of the inputs used in deriving the fair value of these contracts, the valuation of foreign exchange contracts ~~are~~is classified as Level 2. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Bank held foreign currency non-deliverable forward contracts to hedge its net investment in its China subsidiary, East West Bank (China) Limited, a non-U.S. dollar (“USD”) functional currency subsidiary in China. These foreign currency non-deliverable forward contracts were designated as net investment hedges. The fair value of foreign currency non-deliverable forward contracts is determined by comparing the contracted foreign exchange rate to the current market foreign exchange rate. Key inputs of the current market exchange rate include spot rates and forward rates of the contractual currencies. Foreign exchange forward curves are used to determine which forward rate pertains to a specific maturity. Due to the observable nature of the inputs used in deriving the estimated fair value, these instruments are classified as Level 2.

Credit Contracts — The Company may periodically enter into credit risk participation agreements (“RPAs”) to manage the credit exposure on interest rate contracts associated with the syndicated loans. The Company may enter into protection sold or protection purchased RPAs with institutional counterparties. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. ~~The~~Since the majority of the inputs used to value the RPAs are ~~observable; accordingly,~~observable, RPAs are classified as Level 2.

Equity Contracts — As part of the loan origination process, the Company ~~periodically obtains~~may obtain warrants to purchase preferred and/or common stock of the borrowers, which are mainly in the technology and life sciences ~~companies to which it provides loans.~~sectors. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the warrants included on the Consolidated Financial Statements were from both public and private companies. The Company values these warrants based on the Black-Scholes option pricing model. For warrants from public companies, the model uses the underlying stock price, stated strike price, warrant expiration date, risk-free interest rate based on a duration-matched U.S. Treasury rate, and market-observable company-specific option volatility as inputs to value the warrants. Due to the observable nature of the inputs used in deriving the estimated fair value, warrants from public companies are classified as Level 2. For warrants from private companies, the model uses inputs such as the offering price observed in the most recent round of funding, stated strike price, warrant expiration date, risk-free interest rate based on duration-matched U.S. Treasury rate and option volatility. The Company applies proxy volatilities based on the industry sectors of the private companies. The model values are then adjusted for a general lack of liquidity due to the private nature of the underlying companies. Since both option volatility and liquidity discount assumptions are subject to management’s judgment, measurement uncertainty is inherent in the valuation of private ~~companies’~~company warrants. Due to the unobservable nature of the option volatility and liquidity discount assumptions used in deriving the estimated fair value, warrants from private companies are classified as Level 3. On a quarterly basis, the changes in the fair value of warrants from private companies are reviewed for reasonableness, and a measurement of uncertainty analysis on the option volatility and liquidity discount assumptions is performed.

Commodity Contracts — The Company enters into energy commodity contracts ~~in the form~~consisting of swaps and options with its oil and gas loan customers, towhich allow them to hedge against the risk of fluctuation in energy commodity prices. 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.

The following tables present financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2021								($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2022
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:	AFS debt securities:									AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	941,724	$	—	$	—	$	941,724	U.S. Treasury securities	$	600,677	$	—	$	—	$	600,677
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	—		1,363,109		—		1,363,109		U.S. government agency and U.S. government-sponsored enterprise debt securities	—		260,424		—		260,424
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:									U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		1,274,467		—		1,274,467		Commercial mortgage-backed securities	—		521,885		—		521,885
Residential mortgage-backed securities	Residential mortgage-backed securities	—		2,791,064		—		2,791,064		Residential mortgage-backed securities	—		1,793,429		—		1,793,429
Municipal securities	Municipal securities	—		501,489		—		501,489		Municipal securities	—		249,502		—		249,502
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:									Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		464,770		—		464,770		Commercial mortgage-backed securities	—		397,975		—		397,975
Residential mortgage-backed securities	Residential mortgage-backed securities	—		901,256		—		901,256		Residential mortgage-backed securities	—		671,538		—		671,538
Corporate debt securities	Corporate debt securities	—		618,671		—		618,671		Corporate debt securities	—		529,565		—		529,565
Foreign government bonds	Foreign government bonds	—		254,848		—		254,848		Foreign government bonds	—		225,810		—		225,810
Asset-backed securities	Asset-backed securities	—		76,799		—		76,799		Asset-backed securities	—		64,870		—		64,870
Collateralized loan obligations (“CLOs”)	Collateralized loan obligations (“CLOs”)	—		524,809		—		524,809		Collateralized loan obligations (“CLOs”)	—		590,415		—		590,415
Total AFS debt securities	Total AFS debt securities	$	941,724	$	8,771,282	$	—	$	9,713,006	Total AFS debt securities	$	600,677	$	5,305,413	$	—	$	5,906,090

Investments in tax credit and other investments:	Investments in tax credit and other investments:									Investments in tax credit and other investments:
Equity securities ~~(1)~~	Equity securities ~~(1)~~	$	22,289	$	4,496	$	—	$	26,785	Equity securities ~~(1)~~	$	19,637	$	4,200	$	—	$	23,837
Total investments in tax credit and other investments	Total investments in tax credit and other investments	$	22,289	$	4,496	$	—	$	26,785	Total investments in tax credit and other investments	$	19,637	$	4,200	$	—	$	23,837

Derivative assets:	Derivative assets:									Derivative assets:
Interest rate contracts	Interest rate contracts	$	—	$	298,831	$	—	$	298,831	Interest rate contracts	$	—	$	430,038	$	—	$	430,038
Foreign exchange contracts	Foreign exchange contracts	—		31,875		—		31,875		Foreign exchange contracts	—		81,874		—		81,874
Credit contracts		—		15		—		15

Equity contracts	Equity contracts	—		6		220		226		Equity contracts	—		1		345		346
Commodity contracts	Commodity contracts	—		363,063		—		363,063		Commodity contracts	—		369,146		—		369,146
Gross derivative assets	Gross derivative assets	$	—	$	693,790	$	220	$	694,010	Gross derivative assets	$	—	$	881,059	$	345	$	881,404
Netting adjustments ~~(2)~~(1)	Netting adjustments ~~(2)~~(1)	$	—	$	(165,483)	$	—	$	(165,483)	Netting adjustments ~~(2)~~(1)	$	—	$	(605,957)	$	—	$	(605,957)
Net derivative assets	Net derivative assets	$	—	$	528,307	$	220	$	528,527	Net derivative assets	$	—	$	275,102	$	345	$	275,447

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	—	$	213,328	$	—	$	213,328	Interest rate contracts	$	—	$	615,327	$	—	$	615,327
Foreign exchange contracts	Foreign exchange contracts	—		24,313		—		24,313		Foreign exchange contracts	—		64,049		—		64,049
Credit contracts	Credit contracts	—		120		—		120		Credit contracts	—		27		—		27
Commodity contracts	Commodity contracts	—		324,027		—		324,027		Commodity contracts	—		350,198		—		350,198
Gross derivative liabilities	Gross derivative liabilities	$	—	$	561,788	$	—	$	561,788	Gross derivative liabilities	$	—	$	1,029,601	$	—	$	1,029,601
Netting adjustments ~~(2)~~(1)	Netting adjustments ~~(2)~~(1)	$	—	$	(342,619)	$	—	$	(342,619)	Netting adjustments ~~(2)~~(1)	$	—	$	(239,206)	$	—	$	(239,206)
Net derivative liabilities	Net derivative liabilities	$	—	$	219,169	$	—	$	219,169	Net derivative liabilities	$	—	$	790,395	$	—	$	790,395


($ in thousands)	($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2020								($ in thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2021
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
AFS debt securities:	AFS debt securities:									AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	50,761	$	—	$	—	$	50,761	U.S. Treasury securities	$	1,032,681	$	—	$	—	$	1,032,681
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	—		814,319		—		814,319		U.S. government agency and U.S. government-sponsored enterprise debt securities	—		1,301,971		—		1,301,971
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:									U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		1,153,770		—		1,153,770		Commercial mortgage-backed securities	—		1,228,980		—		1,228,980
Residential mortgage-backed securities	Residential mortgage-backed securities	—		1,660,894		—		1,660,894		Residential mortgage-backed securities	—		2,928,283		—		2,928,283
Municipal securities	Municipal securities	—		396,073		—		396,073		Municipal securities	—		523,158		—		523,158
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:									Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	—		239,842		—		239,842		Commercial mortgage-backed securities	—		496,443		—		496,443
Residential mortgage-backed securities	Residential mortgage-backed securities	—		289,775		—		289,775		Residential mortgage-backed securities	—		881,931		—		881,931
Corporate debt securities	Corporate debt securities	—		405,968		—		405,968		Corporate debt securities	—		649,665		—		649,665
Foreign government bonds	Foreign government bonds	—		182,531		—		182,531		Foreign government bonds	—		257,733		—		257,733
Asset-backed securities	Asset-backed securities	—		63,231		—		63,231		Asset-backed securities	—		74,558		—		74,558
CLOs	CLOs	—		287,494		—		287,494		CLOs	—		589,950		—		589,950
Total AFS debt securities	Total AFS debt securities	$	50,761	$	5,493,897	$	—	$	5,544,658	Total AFS debt securities	$	1,032,681	$	8,932,672	$	—	$	9,965,353

Investments in tax credit and other investments:	Investments in tax credit and other investments:									Investments in tax credit and other investments:
Equity securities ~~(1)~~	Equity securities ~~(1)~~	$	22,548	$	8,724	$	—	$	31,272	Equity securities ~~(1)~~	$	22,130	$	4,474	$	—	$	26,604
Total investments in tax credit and other investments	Total investments in tax credit and other investments	$	22,548	$	8,724	$	—	$	31,272	Total investments in tax credit and other investments	$	22,130	$	4,474	$	—	$	26,604

Derivative assets:	Derivative assets:									Derivative assets:
Interest rate contracts	Interest rate contracts	$	—	$	489,132	$	—	$	489,132	Interest rate contracts	$	—	$	240,222	$	—	$	240,222
Foreign exchange contracts	Foreign exchange contracts	—		30,300		—		30,300		Foreign exchange contracts	—		21,033		—		21,033
Credit contracts		—		13		—		13

Equity contracts	Equity contracts	—		585		273		858		Equity contracts	—		5		215		220
Commodity contracts	Commodity contracts	—		82,451		—		82,451		Commodity contracts	—		222,709		—		222,709
Gross derivative assets	Gross derivative assets	$	—	$	602,481	$	273	$	602,754	Gross derivative assets	$	—	$	483,969	$	215	$	484,184
Netting adjustments ~~(2)~~(1)	Netting adjustments ~~(2)~~(1)	$	—	$	(101,512)	$	—	$	(101,512)	Netting adjustments ~~(2)~~(1)	$	—	$	(100,953)	$	—	$	(100,953)
Net derivative assets	Net derivative assets	$	—	$	500,969	$	273	$	501,242	Net derivative assets	$	—	$	383,016	$	215	$	383,231

Derivative liabilities:	Derivative liabilities:									Derivative liabilities:
Interest rate contracts	Interest rate contracts	$	—	$	317,698	$	—	$	317,698	Interest rate contracts	$	—	$	179,962	$	—	$	179,962
Foreign exchange contracts	Foreign exchange contracts	—		22,759		—		22,759		Foreign exchange contracts	—		15,501		—		15,501
Credit contracts	Credit contracts	—		206		—		206		Credit contracts	—		141		—		141
Commodity contracts	Commodity contracts	—		84,165		—		84,165		Commodity contracts	—		194,567		—		194,567
Gross derivative liabilities	Gross derivative liabilities	$	—	$	424,828	$	—	$	424,828	Gross derivative liabilities	$	—	$	390,171	$	—	$	390,171
Netting adjustments ~~(2)~~(1)	Netting adjustments ~~(2)~~(1)	$	—	$	(184,697)	$	—	$	(184,697)	Netting adjustments ~~(2)~~(1)	$	—	$	(232,727)	$	—	$	(232,727)
Net derivative liabilities	Net derivative liabilities	$	—	$	240,131	$	—	$	240,131	Net derivative liabilities	$	—	$	157,444	$	—	$	157,444

(1)~~Equity securities consist of mutual funds with readily determinable fair values. The Company invested in these mutual funds for CRA purposes.~~

~~(2)~~Represents balance sheet netting of derivative assets and liabilities and related cash collateral under master netting agreements or similar agreements. See Note 56 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.

For the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, Level 3 fair value measurements that were measured on a recurring basis consisted of ~~warrants~~equity contracts issued by private companies. The following table provides a reconciliation of the beginning and ending balances of these equity contracts for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Equity Contracts
Equity contracts										Equity contracts
Beginning balance	Beginning balance	$	223	$	316	$	273	$	421	Beginning balance	$	357	$	223	$	215	$	273

Total (losses) gains included in earnings (1)	Total (losses) gains included in earnings (1)	(9)		(6)		37		8,262		Total (losses) gains included in earnings (1)	(12)		(9)		39		37

Issuances	Issuances	12		—		12		—		Issuances	—		12		91		12

Settlements										Settlements	—		—		—		(96)

Settlements		—		—		(96)		—
Transfers out of Level 3 (2)	Transfers out of Level 3 (2)	(6)		—		(6)		(8,373)		Transfers out of Level 3 (2)	—		(6)		—		(6)
Ending balance	Ending balance	$	220	$	310	$	220	$	310	Ending balance	$	345	$	220	$	345	$	220

(1)~~Include both realized and unrealized gain (losses) recorded in~~ ~~Lending fees~~ ~~on the Consolidated Statement of Income. The~~Includes unrealized (losses) gains ~~were $(9)~~of $(12) thousand and ~~$(6)~~$(9) thousand for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$(38)~~$39 thousand and ~~$8.3 million~~$(38) thousand for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. The realized/unrealized gains (losses) of equity contracts are recorded in Lending feeson the Consolidated Statement of Income.

(2)During the three and nine months ended September 30, 2021, the Company transferred $6 thousand of equity contracts measured on a recurring basis out of Level 3 into Level 2 after the corresponding issuer of the equity contracts, which was previously a private company completed its initial public offering and became a public company. ~~In comparison, zero and $8.4 million were transferred out of Level 3 for the same reason during the three and nine months ended September 30, 2020, respectively.~~

The following table presents quantitative information about the significant unobservable inputs used in the valuation of Level 3 fair value measurements as of September 30, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021. The significant unobservable inputs presented in the table below are those that the Company considers significant to the fair value of the Level 3 assets. The Company considers unobservable inputs to be significant if, by their exclusion, the fair value of the Level 3 assets would be impacted by a predetermined percentage change.

($ in thousands)

Fair Value
Measurements
(Level 3)

Valuation
Technique

Unobservable
Inputs

Range of Inputs

Weighted-

Average of Inputs (1)

($ in thousands)

Fair Value
Measurements
(Level 3)

Valuation
Technique

Unobservable
Inputs

Range of Inputs

Weighted-

Average of Inputs (1)

September 30, 2021

September 30, 2022

Derivative assets:

Equity contracts

220

Black-Scholes option pricing model

Equity volatility

45% — 54%

49%

Equity contracts

345

Black-Scholes option pricing model

Equity volatility

49% — 70%

59%

Liquidity discount

47%

Liquidity discount

47%

December 31, 2020

December 31, 2021

Derivative assets:

Equity contracts

273

Black-Scholes option pricing model

Equity volatility

46% — 61%

53%

Equity contracts

215

Black-Scholes option pricing model

Equity volatility

44% — 54%

49%

Liquidity discount

47%

Liquidity discount

47%

(1)Weighted-average of inputs is calculated based on the fair value of equity contracts as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

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

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

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

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

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

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

All available ~~evidence~~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 only be recognized in earnings for a decline in value that is determined to be other-than-temporary.

Other Real Estate Owned — The Company’s OREO represents properties acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. These OREO properties are recorded at estimated fair value less the costs to sell at the time of foreclosure and 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 similar loans and therefore, are classified as Level 2.

Other Nonperforming Assets — Other nonperforming assets are recorded at fair value upon ~~transfers~~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 ~~estimates~~estimated recovery of the foreclosed asset. The Company records an impairment when the foreclosed asset’s fair value declines below its carrying value. ~~Other~~The fair value measurement of other nonperforming assets ~~are~~is classified within one of the three levels in a valuation hierarchy based upon the observability of inputs to the valuation as ~~Level 3.~~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 September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 2021								($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of September 30, 2022
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
Commercial and industrial (“C&I”)	Commercial and industrial (“C&I”)	$	—	$	—	$	123,233	$	123,233	Commercial and industrial (“C&I”)	$	—	$	—	$	57,696	$	57,696
Commercial real estate (“CRE”):	Commercial real estate (“CRE”):									Commercial real estate (“CRE”):
CRE	CRE	—		—		9,400		9,400		CRE	—		—		30,359		30,359
Multifamily residential	Multifamily residential	—		—		2,958		2,958		Multifamily residential	—		—		1,008		1,008

Total commercial	Total commercial	—		—		135,591		135,591		Total commercial	—		—		89,063		89,063
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

Home equity lines of credit (“HELOCs”)	Home equity lines of credit (“HELOCs”)	—		—		2,739		2,739		Home equity lines of credit (“HELOCs”)	—		—		1,235		1,235

Total consumer	Total consumer	—		—		2,739		2,739		Total consumer	—		—		1,235		1,235
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	138,330	$	138,330	Total loans held-for-investment	$	—	$	—	$	90,298	$	90,298

Other nonperforming assets		$	—	$	—	$	699	$	699


($ in thousands)	($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2020								($ in thousands)	Assets Measured at Fair Value on a Nonrecurring Basis as of December 31, 2021
		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurements
Loans held-for-investment:	Loans held-for-investment:									Loans held-for-investment:
Commercial:	Commercial:									Commercial:
C&I	C&I	$	—	$	—	$	143,331	$	143,331	C&I	$	—	$	—	$	102,349	$	102,349
CRE:	CRE:									CRE:
CRE	CRE	—		—		42,894		42,894		CRE	—		—		21,891		21,891

Total commercial	Total commercial	—		—		186,225		186,225		Total commercial	—		—		124,240		124,240
Consumer:	Consumer:									Consumer:
Residential mortgage:	Residential mortgage:									Residential mortgage:

HELOCs	HELOCs	—		—		1,146		1,146		HELOCs	—		—		2,744		2,744

Other consumer		—		—		2,491		2,491

Total consumer	Total consumer	—		—		3,637		3,637		Total consumer	—		—		2,744		2,744
Total loans held-for-investment	Total loans held-for-investment	$	—	$	—	$	189,862	$	189,862	Total loans held-for-investment	$	—	$	—	$	126,984	$	126,984
Investments in tax credit and other investments, net		$	—	$	—	$	3,140	$	3,140
OREO (1)		$	—	$	—	$	15,824	$	15,824

Other nonperforming assets										Other nonperforming assets	$	391	$	—	$	—	$	391

~~(1)Amounts are included in~~ ~~Other assets~~ ~~on the Consolidated Balance Sheet and represent the carrying value of OREO properties that were written down subsequent to their initial classification as OREO.~~

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

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Loans held-for-investment (1):
Commercial:
C&I $ (4,977) $ (24,928) $ (13,590) $ (38,855)
CRE:
CRE (106) (15) (7,186) (292)
Multifamily residential 16 — — —
Total commercial (5,067) (24,943) (20,776) (39,147)
Consumer:
Residential mortgage:
HELOCs 3 3 (6) (178)
Other consumer — — (2,491) 2,491
Total consumer 3 3 (2,497) 2,313
Total loans held-for-investment $ (5,064) $ (24,940) $ (23,273) $ (36,834)
Investments in tax credit and other investments, net $ — $ — $ 877 $ (583)
Other nonperforming assets $ (43) $ — $ (3,933) $ —

~~(1) Excludes loans fully charged off.~~



($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Loans held-for-investment:
Commercial:
C&I	$	(15,265)	$	(4,977)	$	(30,011)	$	(13,590)
CRE:
CRE	(118)		(106)		2,212		(7,186)
Multifamily residential	(5,931)		16		(5,939)		—


Total commercial	(21,314)		(5,067)		(33,738)		(20,776)
Consumer:
Residential mortgage:

HELOCs	81		3		166		(6)

Other consumer	—		—		—		(2,491)
Total consumer	81		3		166		(2,497)
Total loans held-for-investment	$	(21,233)	$	(5,064)	$	(33,572)	$	(23,273)

Investments in tax credit and other investments, net	$	—	$	—	$	—	$	877

Other nonperforming assets	$	—	$	(43)	$	(6,861)	$	(3,933)

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 September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

($ in thousands) Fair Value
Measurements
(Level 3) Valuation
Techniques Unobservable
Inputs Range of
Inputs
Weighted-
Average of Inputs (1)
September 30, 2021
Loans held-for-investment $ 89,442 Discounted cash flows Discount 4% — 15% 7%
$ 32,636 Fair value of collateral Discount 15% — 81% 40%
$ 1,000 Fair value of collateral Contract value NM NM
$ 15,252 Fair value of property Selling cost 8% 8%
Other nonperforming assets $ 699 Fair value of collateral Contract value NM NM
December 31, 2020
Loans held-for-investment $ 104,783 Discounted cash flows Discount 3% — 15% 11%
$ 22,207 Fair value of collateral Discount 10% — 26% 15%
$ 15,879 Fair value of collateral Contract value NM NM
$ 46,993 Fair value of property Selling cost 7% — 26% 10%
Investments in tax credit and other investments, net $ 3,140 Individual analysis of each investment Expected future tax benefits and distributions NM NM
OREO $ 15,824 Fair value of property Selling cost 8% 8%

~~NM — Not meaningful.~~



($ in thousands)	Fair Value Measurements (Level 3)		Valuation Techniques	Unobservable Inputs	Range of Inputs	Weighted- Average of Inputs (1)
September 30, 2022
Loans held-for-investment	$	40,559	Discounted cash flows	Discount	4% — 6%	4%
	$	18,372	Fair value of collateral	Discount	40% — 94%	52%

	$	31,367	Fair value of property	Selling cost	8%	8%




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

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

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

(1)Weighted-average of inputs is based on the relative fair value of the respective assets as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Disclosures about Fair Value of Financial Instruments

The following tables present the fair value estimates for financial instruments as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, excluding financial instruments recorded at fair value on a recurring basis as they are included in the tables presented elsewhere in this Note. The carrying amounts in the following tables are recorded on the Consolidated Balance Sheet under the indicated captions, except for accrued interest receivable, restricted equity securities, at cost, and mortgage servicing rights that are included in Other assets, and accrued interest payable which is included in Accrued expenses and other liabilities. These financial assets and liabilities are measured aton an amortized cost basis on the Company’s Consolidated Balance Sheet.


($ in thousands)	($ in thousands)	September 30, 2021										($ in thousands)	September 30, 2022
		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value			Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,852,901	$	4,852,901	$	—	$	—	$	4,852,901	Cash and cash equivalents	$	2,163,353	$	2,163,353	$	—	$	—	$	2,163,353
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	855,162	$	—	$	855,162	$	—	$	855,162	Interest-bearing deposits with banks	$	630,543	$	—	$	630,543	$	—	$	630,543
Resale agreements	Resale agreements	$	2,596,142	$	—	$	2,580,845	$	—	$	2,580,845	Resale agreements	$	892,986	$	—	$	790,239	$	—	$	790,239

HTM debt securities												HTM debt securities	$	3,012,667	$	466,085	$	1,993,050	$	—	$	2,459,135
Restricted equity securities, at cost	Restricted equity securities, at cost	$	77,200	$	—	$	77,200	$	—	$	77,200	Restricted equity securities, at cost	$	78,254	$	—	$	78,254	$	—	$	78,254
Loans held-for-sale	Loans held-for-sale	$	—	$	—	$	—	$	—	$	—	Loans held-for-sale	$	14,500	$	—	$	14,500	$	—	$	14,500
Loans held-for-investment, net	Loans held-for-investment, net	$	39,921,301	$	—	$	—	$	39,953,031	$	39,953,031	Loans held-for-investment, net	$	46,859,738	$	—	$	—	$	46,147,082	$	46,147,082
Mortgage servicing rights	Mortgage servicing rights	$	5,620	$	—	$	—	$	8,858	$	8,858	Mortgage servicing rights	$	6,523	$	—	$	—	$	10,532	$	10,532
Accrued interest receivable	Accrued interest receivable	$	151,826	$	—	$	151,826	$	—	$	151,826	Accrued interest receivable	$	208,520	$	—	$	208,520	$	—	$	208,520
Financial liabilities:	Financial liabilities:											Financial liabilities:
Demand, checking, savings and money market deposits	Demand, checking, savings and money market deposits	$	45,117,548	$	—	$	45,117,548	$	—	$	45,117,548	Demand, checking, savings and money market deposits	$	43,498,799	$	—	$	43,498,799	$	—	$	43,498,799
Time deposits	Time deposits	$	8,238,642	$	—	$	8,248,717	$	—	$	8,248,717	Time deposits	$	10,358,563	$	—	$	10,256,100	$	—	$	10,256,100

Federal funds purchased												Federal funds purchased	$	200,000	$	—	$	200,000	$	—	$	200,000
FHLB advances	FHLB advances	$	248,898	$	—	$	250,635	$	—	$	250,635	FHLB advances	$	324,920	$	—	$	325,000	$	—	$	325,000
Repurchase agreements	Repurchase agreements	$	300,000	$	—	$	312,264	$	—	$	312,264	Repurchase agreements	$	611,785	$	—	$	617,513	$	—	$	617,513
Long-term debt	Long-term debt	$	147,586	$	—	$	149,625	$	—	$	149,625	Long-term debt	$	147,875	$	—	$	140,902	$	—	$	140,902
Accrued interest payable	Accrued interest payable	$	11,275	$	—	$	11,275	$	—	$	11,275	Accrued interest payable	$	23,934	$	—	$	23,934	$	—	$	23,934


($ in thousands)	($ in thousands)	December 31, 2020										($ in thousands)	December 31, 2021
		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value			Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,017,971	$	4,017,971	$	—	$	—	$	4,017,971	Cash and cash equivalents	$	3,912,935	$	3,912,935	$	—	$	—	$	3,912,935
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	809,728	$	—	$	809,728	$	—	$	809,728	Interest-bearing deposits with banks	$	736,492	$	—	$	736,492	$	—	$	736,492
Resale agreements	Resale agreements	$	1,460,000	$	—	$	1,464,635	$	—	$	1,464,635	Resale agreements	$	2,353,503	$	—	$	2,335,901	$	—	$	2,335,901

Restricted equity securities, at cost	Restricted equity securities, at cost	$	83,046	$	—	$	83,046	$	—	$	83,046	Restricted equity securities, at cost	$	77,434	$	—	$	77,434	$	—	$	77,434
Loans held-for-sale	Loans held-for-sale	$	1,788	$	—	$	1,788	$	—	$	1,788	Loans held-for-sale	$	635	$	—	$	635	$	—	$	635
Loans held-for-investment, net	Loans held-for-investment, net	$	37,770,972	$	—	$	—	$	37,803,940	$	37,803,940	Loans held-for-investment, net	$	41,152,202	$	—	$	—	$	41,199,599	$	41,199,599

Mortgage servicing rights	Mortgage servicing rights	$	5,522	$	—	$	—	$	8,435	$	8,435	Mortgage servicing rights	$	5,706	$	—	$	—	$	9,104	$	9,104
Accrued interest receivable	Accrued interest receivable	$	150,140	$	—	$	150,140	$	—	$	150,140	Accrued interest receivable	$	159,833	$	—	$	159,833	$	—	$	159,833
Financial liabilities:	Financial liabilities:											Financial liabilities:

Demand, checking, savings and money market deposits	Demand, checking, savings and money market deposits	$	35,862,403	$	—	$	35,862,403	$	—	$	35,862,403	Demand, checking, savings and money market deposits	$	45,388,550	$	—	$	45,388,550	$	—	$	45,388,550
Time deposits	Time deposits	$	9,000,349	$	—	$	9,016,884	$	—	$	9,016,884	Time deposits	$	7,961,982	$	—	$	7,966,116	$	—	$	7,966,116
Short-term borrowings		$	21,009	$	—	$	21,009	$	—	$	21,009

FHLB advances	FHLB advances	$	652,612	$	—	$	659,631	$	—	$	659,631	FHLB advances	$	249,331	$	—	$	250,372	$	—	$	250,372
Repurchase agreements	Repurchase agreements	$	300,000	$	—	$	317,850	$	—	$	317,850	Repurchase agreements	$	300,000	$	—	$	310,525	$	—	$	310,525
Long-term debt	Long-term debt	$	147,376	$	—	$	150,131	$	—	$	150,131	Long-term debt	$	147,658	$	—	$	151,020	$	—	$	151,020
Accrued interest payable	Accrued interest payable	$	11,956	$	—	$	11,956	$	—	$	11,956	Accrued interest payable	$	11,435	$	—	$	11,435	$	—	$	11,435

Note 34 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements

Assets Purchased under Resale Agreements

InWith resale agreements, the Company is exposed to credit risk for both the counterparties and the underlying collateral. The Company manages credit exposure from certain transactions by entering into master netting agreements and collateral arrangements with the counterparties. The relevant agreements allow for the efficient closeout of the transaction, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. It is also the Company’s policy to take possession, where possible, of the assets underlying resale agreements. As a result of the Company’s credit risk mitigation practices with respect to resale agreements as described above, the Company did not hold any reserves for credit impairment with respect to these agreements as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Securities Purchased under Resale Agreements — Total securities purchased under resale agreements were ~~$1.34 billion and $1.16 billion~~$885.0 million as of September 30, ~~2021~~2022, and $1.33 billion as of December 31, ~~2020, respectively.~~2021. The weighted-average yields were ~~1.50%~~2.41% and ~~1.72%~~1.50% for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively; and ~~1.53%~~1.96% and ~~2.09%~~1.53% for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Loans Purchased under Resale Agreements — ~~The Company participated in resale agreements collateralized with loans with multiple counterparties starting in the fourth quarter of 2020.~~ Total loans purchased under resale agreements were $~~1.26 billion and $300.0~~8.0 million as of September 30, ~~2021~~2022, and $1.02 billion as of December 31, ~~2020, respectively.~~2021. The weighted-average yields were 3.87% and 1.48% for the three months ended September 30, 2022 and 2021, respectively; and 2.10% and 1.57% for the ~~three and~~ nine months ended September 30, 2022 and 2021, respectively.

Assets Sold under Repurchase Agreements — As of September 30, ~~2021 and December 31, 2020,~~2022, securities sold under ~~the~~ repurchase agreements consisted of ~~U.S. Treasury securities and~~ U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, and U.S. Treasury securities. Gross repurchase agreements were $611.8 million as of September 30, 2022, and $300.0 million as of ~~both September 30, 2021 and~~ December 31, ~~2020.~~2021. The weighted-average interest rates were ~~2.57%~~2.81% and ~~2.70%~~2.57% for the three months ended September 30, 2022 and 2021, respectively; and ~~2020, respectively,~~2.73% and 2.62% ~~and 3.64%~~ for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of September 30, ~~2021, all~~2022, $311.8 million and $300.0 million of the securities sold under repurchase agreements will mature in ~~2023.~~2022 and 2023, respectively.

Balance Sheet Offsetting

The Company’s resale and repurchase agreements are transacted under legally enforceable master ~~netting~~repurchase agreements that, 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 Sheet when it has a legally enforceable master netting agreement and the transactions are eligible for netting under ASC 210-20-45-11, Balance Sheet Offsetting Repurchase and Reverse Repurchase Agreements. Collateral received includes securities and loans that are not recognized on the Consolidated Balance Sheet. Collateral pledged consists of securities that are not netted on the Consolidated Balance Sheet against the related collateralized liability. Securities received or pledged as collateral in resale and repurchase agreements with other financial institutions may also be sold or re-pledged by the secured party, and are usually delivered to and held by the third-party trustees.

The following tables present the resale and repurchase agreements included on the Consolidated Balance Sheet as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021														($ in thousands)			September 30, 2022

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

							Collateral Received															Collateral Received
Resale agreements	Resale agreements			$	2,596,142					$	—		$	2,596,142						$	(2,580,187)		(1)		$	15,955		Resale agreements		$	892,986		$	—		$	892,986		$	(810,574)	(1)	$	82,412

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

							Collateral Pledged																	Collateral Pledged
Repurchase agreements	Repurchase agreements	$	300,000				$	—					$	300,000		$	(300,000)	(2)		$	—		Repurchase agreements				$	611,785		$	—		$	611,785		$	(606,766)	(2)	$	5,019


($ in thousands)	($ in thousands)	December 31, 2020																($ in thousands)			December 31, 2021

		Gross Amounts of Recognized Assets			Gross Amounts Offset on the Consolidated Balance Sheet			Net Amounts of Assets Presented on the Consolidated Balance Sheet				Gross Amounts Not Offset on the Consolidated Balance Sheet									Gross Amounts of Recognized Assets					Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts of Assets Presented on the Consolidated Balance Sheet					Gross Amounts Not Offset on the Consolidated Balance Sheet
Assets	Assets									Net Amount			Assets																Net Amount
			Gross Amounts of Recognized Assets			Gross Amounts Offset on the Consolidated Balance Sheet						Net Amounts of Assets Presented on the Consolidated Balance Sheet			Collateral Received								Gross Amounts of Recognized Assets											Gross Amounts Offset on the Consolidated Balance Sheet		Net Amounts of Assets Presented on the Consolidated Balance Sheet			Collateral Received
Resale agreements	Resale agreements							$	1,460,000	$	—		$	1,460,000		$	(1,458,700)	(1)	$	1,300							Resale agreements				$	2,353,503							$	—		$	2,353,503		$	(2,327,687)		(1)			$	25,816

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

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

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

In addition to the amounts included in the tables above, the Company also has balance sheet netting related to derivatives. Refer to Note 56 — Derivatives to the Consolidated Financial Statements in this Form 10-Q for additional information.

Note 45 — Securities

The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of AFS and HTM debt securities as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021						($ in thousands)			September 30, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:	AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	950,260	$	233	$	(8,769)		$	941,724		U.S. Treasury securities	$	676,312	$	—	$	(75,635)	$	600,677
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	1,386,236		4,401		(27,528)			1,363,109			U.S. government agency and U.S. government-sponsored enterprise debt securities	319,070		—		(58,646)		260,424
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:											U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	1,277,989		19,063		(22,585)			1,274,467			Commercial mortgage-backed securities	595,342		—		(73,457)		521,885
Residential mortgage-backed securities	Residential mortgage-backed securities	2,814,111		13,875		(36,922)			2,791,064			Residential mortgage-backed securities	2,043,791		58		(250,420)		1,793,429
Municipal securities	Municipal securities	500,907		8,194		(7,612)			501,489			Municipal securities	307,084		—		(57,582)		249,502
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:											Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	463,358		4,704		(3,292)			464,770			Commercial mortgage-backed securities	448,790		173		(50,988)		397,975
Residential mortgage-backed securities	Residential mortgage-backed securities	902,002		2,490		(3,236)			901,256			Residential mortgage-backed securities	784,700		—		(113,162)		671,538
Corporate debt securities	Corporate debt securities	626,531		9,445		(17,305)			618,671			Corporate debt securities	673,502		—		(143,937)		529,565
Foreign government bonds	Foreign government bonds	258,119		657		(3,928)			254,848			Foreign government bonds	238,720		528		(13,438)		225,810
Asset-backed securities	Asset-backed securities	76,417		437		(55)			76,799			Asset-backed securities	66,793		—		(1,923)		64,870
CLOs	CLOs	527,250		5		(2,446)			524,809			CLOs	617,250		—		(26,835)		590,415
Total AFS debt securities	Total AFS debt securities	$	9,783,180	$	63,504	$	(133,678)		$	9,713,006		Total AFS debt securities	6,771,354		759		(866,023)		5,906,090
HTM debt securities:												HTM debt securities:
U.S. Treasury securities												U.S. Treasury securities	522,713		—		(56,628)		466,085
U.S. government agency and U.S. government-sponsored enterprise debt securities												U.S. government agency and U.S. government-sponsored enterprise debt securities	998,233		—		(215,616)		782,617
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:												U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities												Commercial mortgage-backed securities	509,139		—		(92,507)		416,632
Residential mortgage-backed securities												Residential mortgage-backed securities	792,685		—		(142,978)		649,707
Municipal securities												Municipal securities	189,897		—		(45,803)		144,094
Total HTM debt securities												Total HTM debt securities	3,012,667		—		(553,532)		2,459,135
Total debt securities												Total debt securities	$	9,784,021	$	759	$	(1,419,555)	$	8,365,225

2223


($ in thousands)	($ in thousands)	December 31, 2020						($ in thousands)			December 31, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
AFS debt securities:	AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	50,310	$	451	$	—		$	50,761		U.S. Treasury securities	$	1,049,238	$	130	$	(16,687)	$	1,032,681
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	806,814		8,765		(1,260)			814,319			U.S. government agency and U.S. government-sponsored enterprise debt securities	1,333,984		2,697		(34,710)		1,301,971
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:											U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	1,125,174		34,306		(5,710)			1,153,770			Commercial mortgage-backed securities	1,242,043		15,791		(28,854)		1,228,980
Residential mortgage-backed securities	Residential mortgage-backed securities	1,634,553		27,952		(1,611)			1,660,894			Residential mortgage-backed securities	2,968,789		8,629		(49,135)		2,928,283
Municipal securities	Municipal securities	382,573		13,588		(88)			396,073			Municipal securities	519,381		10,065		(6,288)		523,158
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:											Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	234,965		6,107		(1,230)			239,842			Commercial mortgage-backed securities	498,920		3,000		(5,477)		496,443
Residential mortgage-backed securities	Residential mortgage-backed securities	288,520		1,761		(506)			289,775			Residential mortgage-backed securities	889,937		971		(8,977)		881,931
Corporate debt securities	Corporate debt securities	406,323		3,493		(3,848)			405,968			Corporate debt securities	657,516		8,738		(16,589)		649,665
Foreign government bonds	Foreign government bonds	183,828		163		(1,460)			182,531			Foreign government bonds	260,447		767		(3,481)		257,733
Asset-backed securities	Asset-backed securities	63,463		10		(242)			63,231			Asset-backed securities	74,674		185		(301)		74,558
CLOs	CLOs	294,000		—		(6,506)			287,494			CLOs	592,250		52		(2,352)		589,950
Total AFS debt securities	Total AFS debt securities	$	5,470,523	$	96,596	$	(22,461)		$	5,544,658		Total AFS debt securities	$	10,087,179	$	51,025	$	(172,851)	$	9,965,353

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

~~The~~As of September 30, 2022 and December 31, 2021, the amortized cost of ~~AFS~~ debt securities ~~excludes~~excluded accrued interest receivables of $33.8 million and $33.1 million, respectively, which are ~~a component of~~included in Other assets on the Consolidated Balance Sheet. ~~The accrued interest receivables for AFS debt securities were~~ ~~$27.0 million and $22.3 million as of September 30, 2021 and December 31, 2020, respectively.~~ For the Company’s accounting policy related to ~~AFS~~ debt securities’ accrued interest ~~receivables,~~receivable, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securitiesto the Consolidated Financial Statements in the Company’s ~~2020~~2021 Form ~~10-K.~~10-K and Note 2 — Current Accounting Developments and Summary of Significant Accounting Policies to the Consolidated Financial Statements in this Form 10-Q.

2324

Unrealized Losses of Available-for-Sale Debt Securities

The following tables present the fair value and the associated gross unrealized losses of the Company’s AFS debt securities, aggregated by investment category and the length of time that the securities have been in a continuous unrealized loss position as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.


($ in thousands)	($ in thousands)	September 30, 2021												($ in thousands)	September 30, 2022
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:	AFS debt securities:													AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	768,909	$	(8,769)	$	—	$	—	$	768,909	$	(8,769)	U.S. Treasury securities	$	263,772	$	(25,232)	$	336,905	$	(50,403)	$	600,677	$	(75,635)
U.S. government agency and U.S. government- sponsored enterprise debt securities		1,008,979		(21,747)		144,196		(5,781)		1,153,175		(27,528)
U.S. government agency and U.S. government sponsored enterprise debt securities														U.S. government agency and U.S. government sponsored enterprise debt securities	88,168		(16,401)		172,256		(42,245)		260,424		(58,646)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:													U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	603,554		(17,164)		107,752		(5,421)		711,306		(22,585)		Commercial mortgage-backed securities	334,460		(39,330)		187,425		(34,127)		521,885		(73,457)
Residential mortgage-backed securities	Residential mortgage-backed securities	1,904,559		(35,792)		17,591		(1,130)		1,922,150		(36,922)		Residential mortgage-backed securities	700,318		(72,088)		1,085,253		(178,332)		1,785,571		(250,420)
Municipal securities	Municipal securities	249,055		(7,612)		—		—		249,055		(7,612)		Municipal securities	203,157		(46,271)		46,345		(11,311)		249,502		(57,582)
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:													Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	151,915		(2,158)		40,233		(1,134)		192,148		(3,292)		Commercial mortgage-backed securities	170,101		(8,351)		218,124		(42,637)		388,225		(50,988)
Residential mortgage-backed securities	Residential mortgage-backed securities	561,635		(3,233)		8,145		(3)		569,780		(3,236)		Residential mortgage-backed securities	188,584		(23,168)		482,954		(89,994)		671,538		(113,162)
Corporate debt securities	Corporate debt securities	207,861		(6,139)		178,833		(11,166)		386,694		(17,305)		Corporate debt securities	247,533		(24,969)		282,032		(118,968)		529,565		(143,937)
Foreign government bonds	Foreign government bonds	54,228		(3,514)		84,977		(414)		139,205		(3,928)		Foreign government bonds	68,733		(336)		36,899		(13,102)		105,632		(13,438)
Asset-backed securities	Asset-backed securities	21,631		(55)		—		—		21,631		(55)		Asset-backed securities	54,811		(1,579)		10,059		(344)		64,870		(1,923)
CLOs	CLOs	183,192		(58)		291,612		(2,388)		474,804		(2,446)		CLOs	190,370		(8,730)		400,045		(18,105)		590,415		(26,835)
Total AFS debt securities	Total AFS debt securities	$	5,715,518	$	(106,241)	$	873,339	$	(27,437)	$	6,588,857	$	(133,678)	Total AFS debt securities	$	2,510,007	$	(266,455)	$	3,258,297	$	(599,568)	$	5,768,304	$	(866,023)


($ in thousands)	($ in thousands)	December 31, 2020												($ in thousands)	December 31, 2021
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
AFS debt securities:	AFS debt securities:													AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	352,521	$	(1,260)	$	—	$	—	$	352,521	$	(1,260)	U.S. Treasury securities	$	935,776	$	(14,689)	$	47,881	$	(1,998)	$	983,657	$	(16,687)

U.S. government agency and U.S. government-sponsored enterprise debt securities														U.S. government agency and U.S. government-sponsored enterprise debt securities	773,647		(18,000)		402,907		(16,710)		1,176,554		(34,710)
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:													U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	292,596		(5,656)		3,543		(54)		296,139		(5,710)		Commercial mortgage-backed securities	440,734		(13,589)		257,745		(15,265)		698,479		(28,854)
Residential mortgage-backed securities	Residential mortgage-backed securities	342,561		(1,611)		—		—		342,561		(1,611)		Residential mortgage-backed securities	2,138,542		(37,691)		330,522		(11,444)		2,469,064		(49,135)
Municipal securities	Municipal securities	24,529		(88)		—		—		24,529		(88)		Municipal securities	177,065		(5,682)		17,003		(606)		194,068		(6,288)
Non-agency mortgage-backed securities:	Non-agency mortgage-backed securities:													Non-agency mortgage-backed securities:
Commercial mortgage-backed securities	Commercial mortgage-backed securities	58,738		(1,230)		7,920		—		66,658		(1,230)		Commercial mortgage-backed securities	301,925		(4,158)		40,013		(1,319)		341,938		(5,477)
Residential mortgage-backed securities	Residential mortgage-backed securities	90,156		(506)		—		—		90,156		(506)		Residential mortgage-backed securities	707,792		(8,966)		6,431		(11)		714,223		(8,977)
Corporate debt securities	Corporate debt securities	251,674		(3,645)		9,798		(203)		261,472		(3,848)		Corporate debt securities	183,916		(3,084)		251,494		(13,505)		435,410		(16,589)
Foreign government bonds	Foreign government bonds	106,828		(1,460)		—		—		106,828		(1,460)		Foreign government bonds	27,097		(5)		133,279		(3,476)		160,376		(3,481)
Asset-backed securities	Asset-backed securities	—		—		34,104		(242)		34,104		(242)		Asset-backed securities	24,885		(301)		—		—		24,885		(301)
CLOs	CLOs	—		—		287,494		(6,506)		287,494		(6,506)		CLOs	221,586		(64)		291,712		(2,288)		513,298		(2,352)
Total AFS debt securities	Total AFS debt securities	$	1,519,603	$	(15,456)	$	342,859	$	(7,005)	$	1,862,462	$	(22,461)	Total AFS debt securities	$	5,932,965	$	(106,229)	$	1,778,987	$	(66,622)	$	7,711,952	$	(172,851)

2425

As of September 30, ~~2021,~~2022, the Company had a total of ~~359~~557 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of ~~150~~262 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, ~~48 U.S. government agency and U.S. government-sponsored enterprise debt~~100 non-agency mortgage-backed securities, and 2268 corporate debt securities. In comparison, as of December 31, ~~2020,~~2021, the Company had a total of ~~104~~431 AFS debt securities in a gross unrealized loss position with no credit impairment, consisting primarily of 46180 U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities, 50 U.S. government agency and 17U.S. government-sponsored agency debt securities, 21 U.S. Treasury securities, and 30 corporate debt securities.

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

Each reporting period, the Company assesses each AFS debt security that is in an unrealized loss position to determine whether the decline in fair value below the amortized cost basis resulted from a credit loss or other factors. For a discussion of the factors and criteria the Company uses in analyzing securities for impairment related to credit losses, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Allowance for Credit Losses on Available-for-Sale Debt Securitiesto the Consolidated Financial Statements in the Company’s ~~2020~~2021 Form 10-K.

The gross unrealized losses presented in the ~~above~~preceding tables were primarily attributable to interest rate movement and ~~widened~~the widening of liquidity and/or credit spreads. ~~Securities~~U.S. Treasury, U.S. government agency, U.S. government-sponsored agency, and U.S. government-sponsored enterprise mortgage-backed securities are issued, guaranteed, or otherwise supported by the U.S. government and have a zero credit loss assumption. The other securities that were in an unrealized loss ~~positions~~position as of September 30, ~~2021~~2022 were mainly comprised of the following:

•~~U.S. government agency and U.S. government-sponsored enterprise~~Non-agency mortgage-backed securities — The market value decline as of September 30, ~~2021~~2022, was primarily due to interest rate ~~movement.~~ ~~These~~movement and spread widening. Since these securities ~~(issued~~are rated investment grade by ~~Ginnie Mae, Fannie Mae, and Freddie Mac) are guaranteed~~NRSROs, or ~~sponsored by agencies of~~have high priority in the ~~U.S. government,~~cash flow waterfall within the securitization structure, and the credit profiles are strong (rated Aaa, AA+ and AAA by Moody’s Investors Service (“Moody’s”), Standard and Poor's (“S&P”) and Fitch Ratings (“Fitch”), respectively). The Company expects to receive all contractual ~~cash flows~~payments have historically been on time, ~~and~~the Company believes the risk of credit losses on these securities is ~~remote.~~low.

•~~U.S. government agency and U.S. government-sponsored enterprise~~Corporate debt securities — — The market value decline as of September 30, ~~2021 was primarily due to interest rate movement. The securities consisted of the debt securities issued by:~~

–~~Federal Farm Credit Bank, Fannie Mae, Freddie Mac, and U.S. International Development Finance Corporation (rated Aaa, AA+ and AAA by Moody’s, S&P and Fitch, respectively).~~

–~~FHLB (rated Aaa and AA+ by Moody’s and S&P, respectively).~~

These securities are guaranteed or issued by entities sponsored by the U.S. government and the credit profiles are strong. The Company expects to receive all contractual cash flows on time and believes the risk of credit losses on these securities is remote.

•~~Corporate debt securities~~ — ~~The market value decline as of September 30, 2021~~2022 was primarily due to interest rate movement and spread widening. Since ~~credit profiles of~~ these securities are nearly all rated investment grade by NRSROs or, if not, the issuer is a well-capitalized financial institution with strong ~~(rated BBB- or higher by Moody’s, S&P, Fitch, and Kroll Bond Rating Agency),~~profitability, and the contractual payments from these ~~securities~~bonds have been, and are expected to be, received on time, the Company believes that the risk of credit losses on these securities is ~~remote.~~low.

The impact of the Coronavirus Disease 2019 (“COVID-19”) pandemic has been greatly mitigated by the government’s aggressive monetary policy and economic stimulus plans, including benchmark rate cuts, and various relief measures that contributed to the gradual and steady recovery of the market to pre-pandemic levels. Overall, the Company believes that the credit support levels of the AFS debt securities are strong and, based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received, even if near-term credit performance could suffer from future unpredictable impacts of the COVID-19 pandemic, including new and more contagious variants.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had the intent to hold the AFS debt securities with unrealized losses through the anticipated recovery period and it was more-likely-than-not that the Company will not have to sell these securities before the recovery of their amortized cost. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, there was no allowance for credit losses as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 provided against these securities. In addition, there was no provision for credit losses recognized for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. If a credit loss had been identified, the Company would record an impairment through the allowance for credit losses with a corresponding Provision for credit losses on the Consolidated Statement of Income.

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

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

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

2526

Realized Gains and Losses

The following table presents the gross realized gains and tax expense related to the sales of AFS debt securities for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Gross realized gains	Gross realized gains	$	354	$	698	$	1,178	$	11,867	Gross realized gains	$	—	$	354	$	1,306	$	1,178
Related tax expense	Related tax expense	$	104	$	206	$	348	$	3,508	Related tax expense	$	—	$	104	$	386	$	348

~~Contractual Maturities of Available-for-Sale Debt Securities~~Interest Income

The following table presents the composition of interest income on debt securities for the three and nine months ended September 30, 2022 and 2021:



($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021

Taxable interest	$	46,172	$	34,755	$	125,626	$	92,909
Nontaxable interest	4,920		3,071		14,309		8,707
Total interest income on debt securities	$	51,092	$	37,826	$	139,935	$	101,616

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 AFS and HTM debt securities as of September 30, ~~2021.~~2022. Expected maturities will differ from contractual maturities on certain securities as the issuers and borrowers of the underlying collateral may have the right to call or prepay obligations with or without prepayment penalties.

($ in thousands) Amortized Cost Fair Value
Due within one year $ 1,522,146 $ 1,486,148
Due after one year through five years 845,850 848,562
Due after five years through ten years 1,618,344 1,618,061
Due after ten years 5,796,840 5,760,235
Total AFS debt securities $ 9,783,180 $ 9,713,006



($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
AFS debt securities:
U.S. Treasury securities
Amortized cost	$	—		$	576,605		$	99,707		$	—		$	676,312
Fair value	—			516,595			84,082			—			600,677
Weighted-average yield (1)	—		%	1.28		%	0.74		%	—		%	1.20		%
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	—			24,775			125,000			169,295			319,070
Fair value	—			22,787			102,540			135,097			260,424
Weighted-average yield (1)	—		%	1.47		%	1.16		%	2.10		%	1.69		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost	—			24,417			173,899			2,440,817			2,639,133
Fair value	—			23,529			157,827			2,133,958			2,315,314
Weighted-average yield (1)	—		%	3.26		%	2.71		%	2.70		%	2.71		%
Municipal securities
Amortized cost	1,511			38,079			6,855			260,639			307,084
Fair value	1,510			35,025			5,753			207,214			249,502
Weighted-average yield (1) (2)	3.13		%	2.44		%	1.85		%	2.24		%	2.26		%
Non-agency mortgage-backed securities
Amortized cost	28,574			187,564			25,832			991,520			1,233,490
Fair value	28,195			179,900			24,897			836,521			1,069,513
Weighted-average yield (1)	4.84		%	3.87		%	0.84		%	2.37		%	2.62		%
Corporate debt securities
Amortized cost	10,000			—			334,502			329,000			673,502
Fair value	9,857			—			296,184			223,524			529,565
Weighted average yield (1)	3.95		%	—		%	3.59		%	1.98		%	2.81		%
Foreign government bonds
Amortized cost	138,720			—			50,000			50,000			238,720
Fair value	139,060			—			49,851			36,899			225,810
Weighted-average yield (1)	2.15		%	—		%	2.66		%	1.50		%	2.12		%
Asset-backed securities
Amortized cost	—			—			—			66,793			66,793
Fair value	—			—			—			64,870			64,870
Weighted-average yield (1)	—		%	—		%	—		%	4.15		%	4.15		%
CLOs
Amortized cost	—			—			25,000			592,250			617,250
Fair value	—			—			24,168			566,247			590,415
Weighted average yield (1)	—		%	—		%	3.66		%	3.86		%	3.85		%
Total AFS debt securities
Amortized cost	$	178,805		$	851,440		$	840,795		$	4,900,314		$	6,771,354
Fair value	$	178,622		$	777,836		$	745,302		$	4,204,330		$	5,906,090
Weighted-average yield (1)	2.69		%	1.96		%	2.56		%	2.69		%	2.58		%



($ in thousands)	Within One Year			After One Year through Five Years			After Five Years through Ten Years			After Ten Years			Total
HTM debt securities:
U.S. Treasury securities
Amortized cost	$	—		$	285,325		$	237,388		$	—		$	522,713
Fair value	—			255,365			210,720			—			466,085
Weighted-average yield (1)	—		%	0.96		%	1.14		%	—		%	1.05		%
U.S. government agency and U.S. government-sponsored enterprise debt securities
Amortized cost	—			—			255,708			742,525			998,233
Fair value	—			—			215,684			566,933			782,617
Weighted-average yield (1)	—		%	—		%	1.94		%	1.88		%	1.90		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities
Amortized cost	—			—			96,433			1,205,391			1,301,824
Fair value	—			—			81,526			984,813			1,066,339
Weighted-average yield (1)	—		%	—		%	1.56		%	1.63		%	1.63		%
Municipal securities
Amortized cost	—			—			—			189,897			189,897
Fair value	—			—			—			144,094			144,094
Weighted-average yield (1) (2)	—		%	—		%	—		%	1.97		%	1.97		%
Total HTM debt securities
Amortized cost	$	—		$	285,325		$	589,529		$	2,137,813		$	3,012,667
Fair value	$	—		$	255,365		$	507,930		$	1,695,840		$	2,459,135
Weighted-average yield (1)	—		%	0.96		%	1.55		%	1.75		%	1.64		%

(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.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, AFS and HTM debt securities with ~~fair~~carrying values of ~~$859.9 million~~$1.22 billion and ~~$588.5~~$803.9 million, respectively, were pledged to secure public deposits, repurchase agreements and for other purposes required or permitted by law.

Restricted Equity Securities

The following table presents the restricted equity securities included in Other assets on the Consolidated Balance Sheet as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021		December 31, 2020		($ in thousands)	September 30, 2022		December 31, 2021
Federal Reserve Bank of San Francisco (“FRBSF”) stock	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	59,950	$	59,249	Federal Reserve Bank of San Francisco (“FRBSF”) stock	$	61,004	$	60,184
FHLB stock	FHLB stock	17,250		23,797		FHLB stock	17,250		17,250
Total restricted equity securities	Total restricted equity securities	$	77,200	$	83,046	Total restricted equity securities	$	78,254	$	77,434

Note 56 — Derivatives

The Company uses derivatives to manage exposure to market risk, primarily interest rate ~~and~~or foreign currency risk, as well as to assist customers with their risk management objectives. The Company’s goal is to manage interest rate sensitivity and volatility ~~so that movements in~~to mitigate the effect of interest rates ~~do not significantly affect~~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 Bank’s investment in East West Bank (China) Limited. The Company recognizes all derivatives on the Consolidated Balance Sheet at fair value. While the Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, other derivatives serve as economic hedges. For additional information on the Company’s derivatives and hedging activities, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Derivatives to the Consolidated Financial Statements of the Company’s ~~2020~~2021 Form 10-K.

2629

The following table presents the ~~total~~ notional amounts and gross fair values of the Company’s derivatives, as well as the balance sheet netting adjustments on an aggregate basis as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The derivative ~~assets~~asset and ~~liabilities~~liability 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 settlements with central clearing ~~organizations have been applied as settlement, as applicable.~~organizations. Total derivative ~~assets~~asset and ~~liabilities~~liability fair values are adjusted to take into consideration the effects of legally enforceable master netting agreements and cash collateral received or paid as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The resulting net derivative asset and liability fair values are included in Other assets and Accrued expenses and other liabilities, respectively, on the Consolidated Balance Sheet.


($ in thousands)	($ in thousands)	September 30, 2021								December 31, 2020								($ in thousands)		September 30, 2022								December 31, 2021
		Notional Amount			Fair Value					Notional Amount			Fair Value							Notional Amount			Fair Value					Notional Amount			Fair Value
				Derivative Assets			Derivative Liabilities					Derivative Assets			Derivative Liabilities				Derivative Assets				Derivative Liabilities				Derivative Assets				Derivative Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:																				Derivatives designated as hedging instruments:

Cash flow hedges:	Cash flow hedges:																	Cash flow hedges:
Interest rate contracts	Interest rate contracts	$	275,000		$	—		$	1,149	$	275,000		$	—		$	1,864	Interest rate contracts		$	2,525,000		$	533	$	24,679		$	275,000		$	—	$	57
Net investment hedges:	Net investment hedges:																	Net investment hedges:
Foreign exchange contracts	Foreign exchange contracts	85,316			158			—		84,269			—			235		Foreign exchange contracts		84,832			7,107		—			86,531			—		225
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	360,316		$	158		$	1,149	$	359,269		$	—		$	2,099	Total derivatives designated as hedging instruments		$	2,609,832		$	7,640	$	24,679		$	361,531		$	—	$	282
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:																	Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	$	17,743,446		$	298,831		$	212,179	$	18,155,678		$	489,132		$	315,834	Interest rate contracts		$	17,261,862		$	429,505	$	590,648		$	17,575,420		$	240,222	$	179,905
Foreign exchange contracts	Foreign exchange contracts	3,047,846			31,717			24,313		3,108,488			30,300			22,524		Foreign exchange contracts		2,762,150			74,767		64,049			1,874,681			21,033		15,276
Credit contracts	Credit contracts	83,693			15			120		76,992			13			206		Credit contracts		141,549			—		27			72,560			—		141
Equity contracts	Equity contracts	—		(1)	226			—		—		(1)	858			—		Equity contracts		—		(1)	346		—			—		(1)	220		—
Commodity contracts	Commodity contracts	—		(2)	363,063			324,027		—		(2)	82,451			84,165		Commodity contracts		—		(2)	369,146		350,198			—		(2)	222,709		194,567
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	20,874,985		$	693,852		$	560,639	$	21,341,158		$	602,754		$	422,729	Total derivatives not designated as hedging instruments		$	20,165,561		$	873,764	$	1,004,922		$	19,522,661		$	484,184	$	389,889
Gross derivative assets/liabilities	Gross derivative assets/liabilities				$	694,010		$	561,788				$	602,754		$	424,828	Gross derivative assets/liabilities					$	881,404	$	1,029,601					$	484,184	$	390,171
Less: Master netting agreements	Less: Master netting agreements				(102,515)			(102,515)					(93,063)			(93,063)		Less: Master netting agreements					(238,606)		(238,606)						(58,679)		(58,679)
Less: Cash collateral received/paid	Less: Cash collateral received/paid				(62,968)			(240,104)					(8,449)			(91,634)		Less: Cash collateral received/paid					(367,351)		(600)						(42,274)		(174,048)
Net derivative assets/liabilities	Net derivative assets/liabilities				$	528,527		$	219,169				$	501,242		$	240,131	Net derivative assets/liabilities					$	275,447	$	790,395					$	383,231	$	157,444

(1)The Company held equity contracts in 1one public company and 13 private companies as of September 30, 2022. In comparison, the Company held equity contracts in one public company and 12 private companies as of ~~September 30, 2021. In comparison, the Company held equity contracts in 2 public companies and 17 private companies as of~~ December 31, ~~2020.~~2021.

(2)The notional amount of the Company’s commodity contracts entered with its customers totaled ~~8,557~~8,199 thousand barrels of crude oil and ~~95,273~~113,574 thousand units of natural gas, measured in million British thermal units (“MMBTUs”), as of September 30, ~~2021.~~2022. In comparison, the notional amount of the Company’s commodity contracts entered with its customers totaled ~~6,321~~7,519 thousand barrels of crude oil and ~~109,635~~83,274 thousand MMBTUs of natural gas as of December 31, ~~2020.~~2021. The Company simultaneously entered into the offsetting commodity contracts with mirrored terms with third-party financial institutions.

Derivatives Designated as Hedging Instruments

~~Fair Value Hedges —~~ The Company entered into interest rate swaps designated as fair value hedges to hedge changes in the fair value of certain certificates of deposit due to changes in the benchmark interest rate. The interest rate swaps involved the exchange of variable-rate payments over the life of the agreements without exchanging the underlying notional amounts. During the fourth quarter of 2020, both the hedging interest rate swaps and hedged certificates of deposit were called.

As of both September 30, 2021 and December 31, 2020, there were no fair value hedges or hedged certificates of deposit outstanding. There were no gains or losses recognized on the Consolidated Statement of Income related to the derivatives designated as fair value hedges for both the three and nine months ended September 30, 2021. In comparison, the net gains recognized on interest rate swaps were $154 thousand and $3.2 million for the three and nine months ended September 30, 2020, respectively, and a net gain of $112 thousand and a net loss of $1.6 million were recognized on certificates of deposit for the three and nine months ended September 30, 2020, respectively, which were recorded in interest expense on the Consolidated Statement of Income.

Cash Flow Hedges — The Company ~~entered into~~hedges the variability of forecasted cash flows due to changes in contractually specified interest rates associated with floating-rate assets/liabilities and other forecasted transactions. As of September 30, 2022, $2.25 billion and $275.0 million in notional amounts of interest rate ~~swaps that~~contracts were designated ~~and qualified~~ as cash flow hedges to ~~limit~~modify the ~~exposure~~interest rate characteristics of certain commercial loans and borrowings, respectively, from variable to fixed. This will reduce the ~~variability~~impact of changes in future cash flows due to changes in market interest ~~payments on certain floating rate borrowings. For~~rates.Changes in the fair values of cash flow hedges ~~the entire change in the fair value of the hedging instruments is~~are recognized in AOCI and reclassified to earnings in the same period when the hedged cash flows impact earnings. ~~Reclassified gains and losses on interest rate swaps are recorded in the same line item as the interest payments of the hedged long-term borrowings within~~ ~~Interest expense~~ ~~in the Consolidated Statements of Income.~~ Considering the interest rates, yield curve and notional amounts as of September 30, ~~2021,~~2022, the Company ~~expected~~expects to reclassify an estimated ~~$625 thousand~~$26.5 million of after-tax net losses ~~on derivative instruments designated as~~related to cash flow hedges from AOCI into earnings during the next 12 months.

The following table presents the pre-tax changes in AOCI from cash flow hedges for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. The after-tax impact of cash flow hedges on AOCI is discussed in Note 1213 — Accumulated Other Comprehensive Income (Loss) to the Consolidated Financial Statements in this Form-10-Q.

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Losses) gains recognized in AOCI $ (170) $ 34 $ 150 $ (1,449)
(Losses) gains reclassified from AOCI to interest expense $ (241) $ (87) $ (619) $ 290



($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
(Losses) gains recognized in AOCI:
Interest rate contracts	$	(48,325)	$	(170)	$	(88,771)	$	150


(Losses) gains reclassified from AOCI into earnings:
Interest expense (for cash flow hedges on borrowings)	$	1,251	$	(241)	$	1,385	$	(619)
Interest and dividend income (for cash flow hedges on loans)	(2,870)		—		216		—
Total	$	(1,619)	$	(241)	$	1,601	$	(619)

Net Investment Hedges — ASC 830-20, Foreign Currency Matters — Foreign Currency Transactions and ASC 815, Derivatives and Hedging, ~~allow~~allows hedging of the foreign currency risk of a net investment in a foreign operation. The Company enters into foreign currency forward contracts to hedge a 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 Bank’s net investment in East West Bank (China) Limited, against the risk of adverse changes in the foreign currency exchange rate of the Chinese Renminbi (“RMB”). The Company may de-designate the net investment hedges when the Company expects the hedge will cease to be highly effective.

The following table presents the after-tax gains (losses) ~~gains~~ recognized in AOCI on net investment hedges for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)		Three Months Ended September 30,						Nine Months Ended September 30,
		2021		2020		2021		2020			($ in thousands)			2022			2021			2022			2021
Losses recognized in AOCI		$	(318)	$	(2,627)	$	(1,860)	$	(2,000)
Gains (losses) recognized in AOCI													Gains (losses) recognized in AOCI		$	3,093		$	(318)		$	4,293		$	(1,860)

Derivatives Not Designated as Hedging Instruments

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

The following tables present the notional amounts and the gross fair values of interest rate derivative contracts outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021																						($ in thousands)				September 30, 2022
		Customer Counterparty											($ in thousands)			Financial Counterparty												Customer Counterparty															($ in thousands)					Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount					Fair Value															Notional Amount					Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities							Assets					Liabilities						($ in thousands)									Assets					Liabilities
Purchased options																						Purchased options				$	—				$	—					$	—						Purchased options		$	1,581,174				$	33,745			$	—
Written options	Written options			$	1,103,453			$	—					$	751			Purchased options	$	1,103,453		$	757					$	—	Written options					1,548,884						—				32,253					Written options			32,290				—			1,346
Sold collars and corridors	Sold collars and corridors	179,605				2,083				198				Collars and corridors				179,605			199			2,093		Sold collars and corridors				221,287						—						8,661					Collars and corridors					221,287				8,706			—
Swaps	Swaps	7,573,811				276,902				31,316			Swaps			7,603,519			18,890			177,821		Swaps				6,814,564					159						547,728				Swaps					6,842,376					386,895				660
Total	Total	$	8,856,869			$	278,985			$	32,265		Total			$	8,886,577		$	19,846		$	179,914	Total				$	8,584,735				$	159					$	588,642			Total					$	8,677,127				$	429,346			$	2,006

2831


($ in thousands)	($ in thousands)	December 31, 2020																						($ in thousands)		December 31, 2021
		Customer Counterparty											($ in thousands)			Financial Counterparty										Customer Counterparty												($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount				Fair Value											Notional Amount			Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities					Assets					Liabilities				($ in thousands)						Assets			Liabilities
Written options	Written options			$	957,393			$	—					$	115			Purchased options	$	957,393		$	101				$	15		Written options			$	1,118,074				$	—		$	2,148		Purchased options		$	1,118,074			$	2,159	$	—
Sold collars and corridors	Sold collars and corridors	518,477				7,673				—				Collars and corridors		518,477			—			7,717		Sold collars and corridors		194,181					1,272						642			Collars and corridors	194,181			646				1,275
Swaps	Swaps	7,586,414				479,634				1,364			Swaps			7,617,524			1,724			306,623		Swaps		7,460,836					211,727				39,650			Swaps			7,490,074			24,418				136,190
Total	Total	$	9,062,284			$	487,307			$	1,479		Total			$	9,093,394		$	1,825		$	314,355	Total		$	8,773,091				$	212,999			$	42,440		Total			$	8,802,329		$	27,223			$	137,465

Included in the total notional amount of ~~$8.89~~$8.68 billion of interest rate contracts entered into with financial counterparties as of September 30, ~~2021,~~2022, was a notional amount of ~~$2.86~~$2.10 billion of interest rate swaps that cleared through London Clearing House (“LCH”). Applying variation margin payments as settlement to ~~LCH cleared~~LCH-cleared derivative transactions resulted in a reduction in the derivative asset ~~fair value~~ of ~~$16.0~~$178.4 million and a reduction in the derivative liability ~~fair value~~ of ~~$104.6 million~~a nominal amount as of September 30, ~~2021.~~2022. In comparison, included in the total notional amount of ~~$9.09~~$8.80 billion of interest rate contracts entered into with financial counterparties as of December 31, ~~2020~~2021, was a notional amount of ~~$2.98~~$2.79 billion of interest rate swaps that cleared through LCH. Applying variation margin payments as settlement to LCH cleared derivative transactions resulted in a reduction in the derivative asset ~~fair values~~ of ~~$1.3~~$18.1 million and a reduction in the derivative liability ~~fair values~~ of ~~$187.4~~$79.9 million as of December 31, ~~2020.~~2021.

Foreign Exchange Contracts — The Company enters into foreign exchange contracts with its customers, consisting of ~~forwards,~~forward, spot, swap and option contracts to accommodate the business needs of its customers. The Company enters into offsetting foreign exchange contracts with third-party financial institutions to manage its foreign exchange exposure with its customers, ~~and~~or enters into bilateral collateral and master netting agreements with certain customer counterparties to manage its credit exposure. The Company also utilizes foreign exchange contracts, which are not designated as hedging instruments, to mitigate the economic effect of currency fluctuations on certain foreign currency-denominated on-balance sheet assets and liabilities, primarily foreign currency-denominated deposits offered to its customers. A majority of the foreign exchange contracts had original maturities of one year or less as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The following tables present the notional amounts and the gross fair values of foreign exchange derivative contracts outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021																						($ in thousands)			September 30, 2022
		Customer Counterparty											($ in thousands)			Financial Counterparty											Customer Counterparty											($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount					Fair Value									Notional Amount				Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities						Assets					Liabilities				($ in thousands)					Assets				Liabilities
Forwards and spot				$	1,573,945			$	18,558					$	20,340			Forwards and spot	$	249,814		$	1,913					$	1,653
Forwards and spots																						Forwards and spots			$	1,048,541				$	24,645			$	39,173			Forwards and spots	$	220,663			$	4,260			$	2,408
Swaps	Swaps	66,696				321				76				Swaps				814,355			10,885			2,204		Swaps				127,381				897				2,606			Swaps				1,257,039				42,100		16,997
Written options		169,434				22				10			Purchased options			169,434			10			22
Purchased options																								Purchased options			49,000					2,533				—		Written options			49,000				—				2,533
Collars	Collars	2,084				—				8			Collars			2,084			8			—		Collars			5,263					—				332		Collars			5,263				332				—
Total	Total	$	1,812,159			$	18,901			$	20,434		Total			$	1,235,687		$	12,816		$	3,879	Total			$	1,230,185				$	28,075			$	42,111	Total			$	1,531,965			$	46,692			$	21,938


($ in thousands)	($ in thousands)	December 31, 2020																						($ in thousands)			December 31, 2021
		Customer Counterparty											($ in thousands)			Financial Counterparty											Customer Counterparty											($ in thousands)			Financial Counterparty
		Notional Amount				Fair Value								Notional Amount				Fair Value							Notional Amount					Fair Value									Notional Amount				Fair Value
				Assets				Liabilities				($ in thousands)						Assets			Liabilities						Assets					Liabilities				($ in thousands)					Assets				Liabilities
Forwards and spot				$	1,522,888			$	17,575					$	17,928			Forwards and spot	$	145,197		$	1,230					$	273
Forwards and spots																						Forwards and spots			$	900,290				$	13,688			$	9,446			Forwards and spots	$	267,689			$	1,564			$	2,695
Swaps	Swaps	13,590				872				91				Swaps				1,191,355			10,049			3,658		Swaps				66,474				1,034				17			Swaps				599,654				4,745		3,116
Written options		117,729				—				574			Purchased options			117,729			574			—
Purchase options																								Purchase options			20,287					2				—		Written options			20,287				—				2

Total	Total	$	1,654,207			$	18,447			$	18,593		Total			$	1,454,281		$	11,853		$	3,931	Total			$	987,051				$	14,724			$	9,463	Total			$	887,630			$	6,309			$	5,813

2932

Credit Contracts — The Company ~~may~~ periodically ~~enter~~enters into credit RPAs with institutional counterparties to manage the credit exposure of the interest rate contracts associated with ~~the syndicated~~syndication loans. The Company may enter into protection sold or protection purchased RPAs. ~~The~~A purchaser of credit protection that enters into an interest rate contract with the borrower, may in turn enter into an RPA with a seller of protection, under which the seller of protection receives a fee to accept a portion of the credit risk. AThe seller of credit protection is required to make payments to the ~~buyer~~purchaser if athe underlying borrower defaults on the related interest rate contract. Credit risk on RPAs is managed by monitoring the credit worthiness of thethe borrowers and the institutional counterparties, which is part of the normal credit review and monitoring process. The majority of the referenced entities of the protection sold RPAs were investment grade as of both September 30, 2022 and December 31, 2021. Assuming the underlying ~~borrower~~borrowers referenced in the interest rate contracts defaulted in the protection sold RPAs, there would be no maximum exposure as of September 30, ~~2021~~2022 and $3.2 million of maximum exposure as of December 31, ~~2020, the maximum exposure of protection sold RPAs would be $4.5 million and $6.0 million, respectively. As of September 30, 2021 and December 31, 2020, the~~2021. The weighted-average remaining maturities of the outstanding protection sold RPAs were ~~3.4~~2.7 years and ~~3.5~~3.2 years as of September 30, 2022 and December 31, 2021, respectively.

The notional amount of the RPAs reflects the Company’s pro-rata share of the derivative instrument. The following table presents the notional amounts and the gross fair values of RPAs sold ~~and purchased~~ outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

($ in thousands) September 30, 2021 December 31, 2020
Notional
Amount Fair Value Notional
Amount Fair Value
Assets Liabilities Assets Liabilities
RPAs - protection sold $ 72,979 $ — $ 120 $ 66,278 $ — $ 206
RPAs - protection purchased 10,714 15 — 10,714 13 —
Total RPAs $ 83,693 $ 15 $ 120 $ 76,992 $ 13 $ 206



($ in thousands)	September 30, 2022						December 31, 2021
	Notional Amount		Fair Value				Notional Amount		Fair Value
			Assets		Liabilities				Assets		Liabilities
RPAs — protection sold	$	141,549	$	—	$	27	$	72,560	$	—	$	141

Equity Contracts — ~~Periodically,~~From time to time, as part of the Company’s loan origination process, the Company obtains warrants to purchase preferred and/or common stock of technology and life ~~sciences~~science companies to which it provides loans. Warrants grant the Company the right to buy a certain class of the underlying company’s equity at a certain price before expiration. The Company held warrants in 1one public company and 13 private companies as of September 30, 2022, and held warrants in one public company and 12 private companies as of ~~September 30, 2021, and held warrants in 2 public companies and 17 private companies as of~~ December 31, ~~2020.~~2021. The total fair value of the warrants held ~~in both public and private companies~~ was ~~$226~~$346 thousand and ~~$858~~$220 thousand as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Commodity Contracts — The Company enters into energy commodity contracts in the form of swaps and options with its commercial loan customers, to allow them to hedge against the risk of energy commodity price fluctuation. To economically hedge against the risk and exposure of commodity price fluctuation in the products offered to its commercial loan customers, the Company enters into offsetting commodity contracts with third-party financial institutions, ~~to manage the exposure.~~including central clearing organizations.

The following tables present the notional amounts and fair values of the commodity derivative positions outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ and units in thousands)	($ and units in thousands)	September 30, 2021																		($ and units in thousands)			September 30, 2022
		Customer Counterparty								($ and units in thousands)		Financial Counterparty											Customer Counterparty											($ and units in thousands)		Financial Counterparty
		Notional Unit			Fair Value						Notional Unit			Fair Value							Notional Unit						Fair Value								Notional Unit				Fair Value
				Assets			Liabilities						Assets	($ and units in thousands)			Liabilities									Assets		Liabilities					Assets					($ and units in thousands)		Liabilities
Crude oil:	Crude oil:											Crude oil:												Crude oil:												Crude oil:
Written options	Written options	212	Barrels		$	302		$	1	Purchased options		212	Barrels					$	278	Written options			841			Barrels		$	1,593		$	—		Purchased options		841			Barrels				$	1,451
Collars	Collars	3,070	Barrels		35,941			—		Collars		3,126	Barrels				—			35,575		Collars			2,898		Barrels			22,072			7,148		Collars		2,903		Barrels			2,179			20,503
Swaps	Swaps	5,275	Barrels		82,563			2		Swaps		8,219	Barrels		30,604			98,712		Swaps			4,460			Barrels		54,906			22,314			Swaps		3,425		Barrels		15,052			41,978
Total	Total	8,557			$	118,806		$	3	Total		11,557			$	30,604		$	134,565	Total			8,199					$	78,571		$	29,462		Total		7,169				$	17,231		$	63,932

Natural gas:	Natural gas:									Natural gas:										Natural gas:														Natural gas:
Written options		2,668	MMBTUs		$	—		$	—	Purchased options		2,668	MMBTUs		$	—		$	—

Collars	Collars	25,224	MMBTUs		30,542			62		Collars		29,242	MMBTUs		5,236			32,005		Collars			26,363			MMBTUs		$	28,318		$	3,684		Collars		26,839		MMBTUs		$	2,320		$	24,916
Swaps	Swaps	67,381	MMBTUs		106,653			14,756		Swaps		127,419	MMBTUs		71,222			142,636		Swaps			87,211			MMBTUs		216,050			73,012			Swaps		70,817		MMBTUs		26,656			155,192
Total	Total	95,273			$	137,195		$	14,818	Total		159,329			$	76,458		$	174,641	Total			113,574					$	244,368		$	76,696		Total		97,656				$	28,976		$	180,108

Total	Total				$	256,001		$	14,821	Total					$	107,062		$	309,206	Total								$	322,939		$	106,158		Total						$	46,207		$	244,040

3033


($ and units in thousands)	($ and units in thousands)	December 31, 2020																			($ and units in thousands)				December 31, 2021
		Customer Counterparty								($ and units in thousands)		Financial Counterparty													Customer Counterparty											($ and units in thousands)		Financial Counterparty
		Notional Unit			Fair Value						Notional Unit			Fair Value									Notional Unit						Fair Value								Notional Unit				Fair Value
				Assets			Liabilities						Assets	($ and units in thousands)			Liabilities											Assets		Liabilities					Assets					($ and units in thousands)		Liabilities
Crude oil:	Crude oil:											Crude oil:														Crude oil:												Crude oil:

Written options																					Written options				—			Barrels		$	87		$	—		Purchased options		—		Barrels		$	—		$	81
Collars	Collars	2,022	Barrels		$	2,344		$	2,193	Collars		2,022	Barrels				$	2,217			$	2,402		Collars			2,837		Barrels			33,826			106		Collars		2,888		Barrels			—			33,399
Swaps	Swaps	4,299	Barrels		9,282			14,283		Swaps		4,299	Barrels				8,220				7,135			Swaps			4,682		Barrels			71,242			60		Swaps		7,517		Barrels			27,524			82,723
Total	Total	6,321			$	11,626		$	16,476	Total		6,321			$	10,437			$	9,537	Total				7,519					$	105,155		$	166		Total		10,405				$	27,524		$	116,203

Natural gas:	Natural gas:									Natural gas:											Natural gas:															Natural gas:
Written options		597	MMBTUs		$	—		$	59	Purchased options		597	MMBTUs		$	59			$	—

Collars	Collars	12,733	MMBTUs		1,063			205		Collars		16,293	MMBTUs		205				813		Collars				24,315			MMBTUs		$	10,903		$	458		Collars		25,929		MMBTUs		$	1,136		$	10,936
Swaps	Swaps	96,305	MMBTUs		32,074			27,238		Swaps		103,973	MMBTUs		26,988				29,837		Swaps				58,959			MMBTUs		49,188			3,775			Swaps		109,567		MMBTUs		28,803			63,029
Total	Total	109,635			$	33,137		$	27,502	Total		120,863			$	27,252			$	30,650	Total				83,274					$	60,091		$	4,233		Total		135,496				$	29,939		$	73,965

Total	Total				$	44,763		$	43,978	Total					$	37,689			$	40,187	Total									$	165,246		$	4,399		Total						$	57,463		$	190,168

As of September 30, ~~2021,~~2022, the notional ~~quantities~~amounts that cleared through the Chicago Mercantile Exchange (“CME”) totaled ~~1,070~~773 thousand barrels of crude oil and ~~15,740~~5,530 thousand MMBTUs of natural gas. Applying the variation margin payments as settlement to ~~CME-cleared derivative transactions resulted in reductions to~~ the gross derivative asset fair value of $8.8 million and to the liability fair value of $41.2 million as of September 30, 2021, to a net fair value liability of $7.5 million. In comparison, the notional quantities that cleared through CME totaled 1,275 thousand barrels of crude oil and 29,733 thousand MMBTUs of natural gas as of December 31, 2020. Applying the variation margin payments as settlement to CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of ~~$7.9~~$6.7 million and a reduction to the liability fair value of ~~$3.7~~$21.4 million as of September 30, 2022. In comparison, the notional amounts that cleared through CME totaled 1,036 thousand barrels of crude oil and 11,490 thousand MMBTUs of natural gas as of December 31, 2021. Applying the variation margin payments as settlement to the CME-cleared derivative transactions resulted in a reduction to the gross derivative asset fair value of $2.2 million and a reduction to the liability fair value of $25.8 million as of December 31, ~~2020, to a net fair value of zero.~~2021.

The following table presents the net gains (losses) recognized on the Company’s Consolidated Statement of Income related to derivatives not designated as hedging instruments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Classification on Consolidated Statement of Income		Three Months Ended September 30,						Nine Months Ended September 30,					($ in thousands)		Classification on Consolidated Statement of Income		Three Months Ended September 30,				Nine Months Ended September 30,
			2021			2020			2021			2020				2022			2021		2022		2021
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:																	Derivatives not designated as hedging instruments:
Interest rate contracts	Interest rate contracts	Interest rate contracts and other derivative income		$	2,467		$	(3,013)		$	11,030		$	(15,385)	Interest rate contracts		Interest rate contracts and other derivative income		$	4,870	$	2,467	$	18,439	$	11,030
Foreign exchange contracts	Foreign exchange contracts	Foreign exchange income		11,820			5,255			34,035			14,317		Foreign exchange contracts		Foreign exchange income		3,831		11,820		6,596		34,035
Credit contracts	Credit contracts	Interest rate contracts and other derivative income		(20)			26			175			(72)		Credit contracts		Interest rate contracts and other derivative income (loss)		50		(20)		114		175
Equity contracts	Equity contracts	Lending fees		3			3,592			388			11,971		Equity contracts		Lending fees		(13)		3		175		388
Commodity contracts	Commodity contracts	Interest rate contracts and other derivative income		32			34			13			(13)		Commodity contracts		Interest rate contracts and other derivative income (loss)		(156)		32		139		13
Net gains	Net gains			$	14,302		$	5,894		$	45,641		$	10,818	Net gains				$	8,582	$	14,302	$	25,463	$	45,641

Credit Risk-Related Contingent Features — ~~Certain of the~~The Company’s over-the-counter derivative contracts may contain early termination provisions that ~~may~~ require the Company to settle any outstanding balances upon the occurrence of a specified credit risk-related event. Such event primarily relates to a downgrade in the credit rating of East West Bank to below investment grade. As of September 30, 2022, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $9.8 million, in which $8.4 million of collateral was posted to cover these positions. In comparison, as of December 31, 2021, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled ~~$82.4~~$66.8 million, in which ~~$81.1 million of collateral was posted to cover these positions.~~ As of December 31, 2020, the aggregate fair value amounts of all derivative instruments with credit risk-related contingent features that were in a net liability position totaled $107.4 million, in which $106.8$66.6 million of collateral was posted to cover these positions. In the event that the credit rating of East West Bank had been downgraded to below investment grade, a minimal additional collateral would have been required to be posted as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

3134

Offsetting of Derivatives

The following tables present the gross derivative asset and liability fair values, the balance sheet netting adjustments and the resulting net fair values recorded on the ~~Consolidated Balance Sheet,~~consolidated balance sheet, as well as the cash and noncash collateral associated with master netting arrangements. The gross amounts of derivative ~~assets~~asset and ~~liabilities~~liability fair values are presented after the application of variation margin payments as settlements with central counterparties, where applicable. The collateral amounts in the following tables are limited to the outstanding balances of the related asset or liability, after the application of netting; therefore, instances of overcollateralization are not shown:


($ in thousands)	($ in thousands)	As of September 30, 2021															($ in thousands)				As of September 30, 2022

		Gross Amounts Recognized (1)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount					Gross Amounts Recognized (1)		Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements			Cash Collateral Received (3)					Security Collateral Received (5)							Master Netting Arrangements					Cash Collateral Received (3)				Security Collateral Received (5)
Derivative assets	Derivative assets		$	694,010		$	(102,515)	$	(62,968)		$	528,527		$	—				$	528,527		Derivative assets	$	881,404	$	(238,606)		$	(367,351)	$	275,447	$	(64,703)	$	210,744
		Gross Amounts Recognized (2)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount					Gross Amounts Recognized (2)		Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements			Cash Collateral Pledged (4)					Security Collateral Pledged (5)							Master Netting Arrangements					Cash Collateral Pledged (4)				Security Collateral Pledged (5)
Derivative liabilities	Derivative liabilities		$	561,788		$	(102,515)	$	(240,104)		$	219,169		$	(157,315)				$	61,854		Derivative liabilities	$	1,029,601	$	(238,606)		$	(600)	$	790,395	$	(151,535)	$	638,860


($ in thousands)	($ in thousands)	As of December 31, 2020															($ in thousands)				As of December 31, 2021

		Gross Amounts Recognized (1)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount					Gross Amounts Recognized (1)		Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements			Cash Collateral Received (3)					Security Collateral Received (5)							Master Netting Arrangements					Cash Collateral Received (3)				Security Collateral Received (5)
Derivative assets	Derivative assets		$	602,754		$	(93,063)	$	(8,449)		$	501,242		$	(35)				$	501,207		Derivative assets	$	484,184	$	(58,679)		$	(42,274)	$	383,231	$	—	$	383,231
		Gross Amounts Recognized (2)			Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet			Gross Amounts Not Offset on the Consolidated Balance Sheet			Net Amount					Gross Amounts Recognized (2)		Gross Amounts Offset on the Consolidated Balance Sheet					Net Amounts Presented on the Consolidated Balance Sheet		Gross Amounts Not Offset on the Consolidated Balance Sheet		Net Amount
			Master Netting Arrangements			Cash Collateral Pledged (4)					Security Collateral Pledged (5)							Master Netting Arrangements					Cash Collateral Pledged (4)				Security Collateral Pledged (5)
Derivative liabilities	Derivative liabilities		$	424,828		$	(93,063)	$	(91,634)		$	240,131		$	(221,150)				$	18,981		Derivative liabilities	$	390,171	$	(58,679)		$	(174,048)	$	157,444	$	(106,598)	$	50,846

(1)~~Included $1.2~~Includes $4.6 million and ~~$1.1 million~~$587 thousand of gross fair value assets with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(2)~~Included $1.4~~Includes $1.8 million and ~~$220~~$666 thousand of gross fair value liabilities with counterparties that were not subject to enforceable master netting arrangements or similar agreements as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(3)Gross cash collateral received under master netting arrangements or similar agreements ~~were $67.1~~was $369.7 million and ~~$15.8~~$47.0 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Of the gross cash collateral received, ~~$63.0~~$367.4 million and ~~$8.4~~$42.3 million were used to offset against derivative ~~assets~~asset fair values as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(4)Gross cash collateral pledged under master netting arrangements or similar agreements ~~were $240.1 million and $91.6 million~~was $600 thousand, of which $600 thousand was used to offset against derivative liability fair value as of September 30, ~~2021 and December 31, 2020, respectively. Of the~~2022. In comparison, gross cash collateral pledged ~~$240.1~~under master netting arrangements or similar agreements was $176.5 million, ~~and $91.6~~of which $174.0 million were used to offset against derivative ~~liabilities~~liability fair value as of ~~September 30, 2021 and~~ December 31, ~~2020, respectively.~~2021.

(5)Represents the fair value of security collateral received and pledged limited to derivative ~~assets~~asset and ~~liabilities~~liability fair values 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~~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. Refer to Note 34 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q for additional information. Refer to Note 23 — 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.

3235

Note 67 — Loans Receivable and Allowance for Credit Losses

The following table presents the composition of the Company’s loans held-for-investment outstanding as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021		December 31, 2020		($ in thousands)	September 30, 2022		December 31, 2021
Commercial:	Commercial:					Commercial:
C&I (1)	C&I (1)	$	13,831,649	$	13,631,726	C&I (1)	$	15,625,072	$	14,150,608
CRE:	CRE:					CRE:
CRE	CRE	11,818,065		11,174,611		CRE	13,573,157		12,155,047
Multifamily residential	Multifamily residential	3,340,378		3,033,998		Multifamily residential	4,559,302		3,675,605
Construction and land	Construction and land	376,921		599,692		Construction and land	556,894		346,486
Total CRE	Total CRE	15,535,364		14,808,301		Total CRE	18,689,353		16,177,138
Total commercial	Total commercial	29,367,013		28,440,027		Total commercial	34,314,425		30,327,746
Consumer:	Consumer:					Consumer:
Residential mortgage:	Residential mortgage:					Residential mortgage:
Single-family residential	Single-family residential	9,021,801		8,185,953		Single-family residential	10,855,345		9,093,702
HELOCs	HELOCs	1,963,622		1,601,716		HELOCs	2,184,924		2,144,821
Total residential mortgage	Total residential mortgage	10,985,423		9,787,669		Total residential mortgage	13,040,269		11,238,523
Other consumer	Other consumer	129,269		163,259		Other consumer	87,561		127,512
Total consumer	Total consumer	11,114,692		9,950,928		Total consumer	13,127,830		11,366,035
Total loans held-for-investment (2)	Total loans held-for-investment (2)	$	40,481,705	$	38,390,955	Total loans held-for-investment (2)	$	47,442,255	$	41,693,781
Allowance for loan losses	Allowance for loan losses	(560,404)		(619,983)		Allowance for loan losses	(582,517)		(541,579)
Loans held-for-investment, net (2)	Loans held-for-investment, net (2)	$	39,921,301	$	37,770,972	Loans held-for-investment, net (2)	$	46,859,738	$	41,152,202

(1)Includes Paycheck Protection Program ~~(“PPP”)~~ loans of~~$807.3~~ $110.9 million and $~~1.57 billion~~534.2 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(2)Includes $(60.3) million and $(50.7) million of net deferred loan fees ~~unearned fees,~~and net unamortized premiums ~~and unaccreted discounts of $(54.3) million and $(58.8) million~~ as of September 30, ~~2021~~2022 and December 31, ~~2020, respectively. Net origination fees related to PPP loans were $(13.5) million and $(12.7) million as of September 30,~~ 2021, ~~and December 31, 2020,~~ respectively.

Loans held-for-investment accrued interest receivable was ~~$102.7~~$165.5 million and ~~$107.5~~$107.4 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and ~~is presented~~was included in Other assets on the Consolidated Balance Sheet. The interest income reversed was insignificant for the three and nine months ended September 30, 2022 and 2021. For the Company’s accounting policy on accrued interest receivable related to loans held-for-investment, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies to the Consolidated Financial Statements of the Company’s ~~2020~~2021 Form 10-K.

The Company’s FRBSF and FHLB borrowings are primarily secured by loans held-for-investment. Loans held-for-investment totaling $~~24.55~~25.01 billion and ~~$23.26~~$27.67 billion, ~~as of September 30, 2021 and December 31, 2020,~~ respectively, were pledged to secure borrowings and provide additional borrowing capacity ~~from the FRBSF~~as of September 30, 2022 and ~~the FHLB.~~December 31, 2021.

Credit Quality Indicators

All loans are subject to the Company’s credit review and monitoring process. For the commercial loan portfolio, loans are risk rated based on an analysis of the borrower’s current payment performance or delinquency, repayment sources, financial and liquidity factors, including industry and geographic considerations. For ~~a majority of~~ the consumer loan portfolio, payment performance or delinquency is typically the driving indicator for ~~the~~ risk ratings.

The Company utilizes internal credit risk ratings to assign each individual loan a risk rating of ~~one~~1 through ~~ten. Loans~~10:

•Pass — loans risk rated ~~one~~1 through ~~five~~5 are assigned an internal risk rating category of “Pass.” Loans risk rated ~~one~~1 are typically loans fully secured by cash. Pass loans have sufficient sources of repayment to repay the loan in full, in accordance with all terms and conditions. ~~Loans~~

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

•Substandard — loans assigned a risk rating of ~~seven~~7 or ~~eight~~8 have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.” ~~Loans~~

•Doubtful — loans assigned a risk rating of ~~nine~~9 have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.” ~~Loans~~

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

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

The following tables summarize the Company’s loans held-for-investment ~~as of September 30, 2021 and December 31, 2020, presented~~ by loan portfolio segments, internal risk ratings and vintage ~~year.~~year as of September 30, 2022 and December 31, 2021. The vintage year is the year of origination, renewal or major modification.

($ in thousands) September 30, 2021
Term Loans Revolving Loans
Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis Total
Amortized Cost Basis by Origination Year
2021 2020 2019 2018 2017 Prior
Commercial:
C&I:
Pass $ 3,136,513 $ 1,454,547 $ 787,238 $ 279,254 $ 175,669 $ 244,616 $ 7,069,657 $ 29,053 $ 13,176,547
Criticized (accrual) 75,943 168,029 110,500 13,700 1,475 4,489 183,809 — 557,945
Criticized (nonaccrual) 5,171 338 17,889 20,148 12,538 1,356 39,717 — 97,157
Total C&I 3,217,627 1,622,914 915,627 313,102 189,682 250,461 7,293,183 29,053 13,831,649
CRE:
CRE:
Pass 1,956,957 2,181,275 2,288,701 1,965,724 1,181,060 1,869,183 148,077 6,427 11,597,404
Criticized (accrual) 77,286 8,095 9,206 31,093 25,136 55,609 — — 206,425
Criticized (nonaccrual) 4,425 — — 4,648 4,752 411 — — 14,236
Subtotal CRE 2,038,668 2,189,370 2,297,907 2,001,465 1,210,948 1,925,203 148,077 6,427 11,818,065
Multifamily residential:
Pass 611,439 752,178 692,580 432,959 316,412 451,180 19,420 — 3,276,168
Criticized (accrual) — — 725 23,512 7,121 31,729 — — 63,087
Criticized (nonaccrual) — — — — — 1,123 — — 1,123
Subtotal multifamily residential 611,439 752,178 693,305 456,471 323,533 484,032 19,420 — 3,340,378
Construction and land:
Pass 102,619 99,857 111,607 16,986 — 1,252 — — 332,321
Criticized (accrual) 3,398 — — 22,156 — 19,046 — �� 44,600
Criticized (nonaccrual) — — — — — — — — —
Subtotal construction and land 106,017 99,857 111,607 39,142 — 20,298 — — 376,921
Total CRE 2,756,124 3,041,405 3,102,819 2,497,078 1,534,481 2,429,533 167,497 6,427 15,535,364
Total commercial 5,973,751 4,664,319 4,018,446 2,810,180 1,724,163 2,679,994 7,460,680 35,480 29,367,013
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)
2,131,943 2,214,125 1,465,612 1,169,483 825,120 1,203,031 — — 9,009,314
Criticized (accrual) — — 374 490 1,633 1,214 — — 3,711
Criticized (nonaccrual) (1)
— 397 2,178 1,712 1,168 3,321 — — 8,776
Subtotal single-family residential 2,131,943 2,214,522 1,468,164 1,171,685 827,921 1,207,566 — — 9,021,801
HELOCs:
Pass 20 1,799 258 1,295 3,343 12,578 1,710,540 223,057 1,952,890
Criticized (accrual) 7 — — 200 — 222 2 1,570 2,001
Criticized (nonaccrual) — — 151 188 3,523 1,579 — 3,290 8,731
Subtotal HELOCs 27 1,799 409 1,683 6,866 14,379 1,710,542 227,917 1,963,622
Total residential mortgage 2,131,970 2,216,321 1,468,573 1,173,368 834,787 1,221,945 1,710,542 227,917 10,985,423
Other consumer:
Pass 16,737 5,382 — — 1,741 51,529 51,389 — 126,778
Criticized (accrual) — — — — — — — — —
Criticized (nonaccrual) — — — — 2,491 — — — 2,491
Total other consumer 16,737 5,382 — — 4,232 51,529 51,389 — 129,269
Total consumer 2,148,707 2,221,703 1,468,573 1,173,368 839,019 1,273,474 1,761,931 227,917 11,114,692
Total $ 8,122,458 $ 6,886,022 $ 5,487,019 $ 3,983,548 $ 2,563,182 $ 3,953,468 $ 9,222,611 $ 263,397 $ 40,481,705

($ in thousands) December 31, 2020
Term Loans Revolving Loans
Amortized Cost Basis Revolving Loans Converted to Term Loans Amortized Cost Basis Total
Amortized Cost Basis by Origination Year
2020 2019 2018 2017 2016 Prior
Commercial:
C&I:
Pass $ 3,912,147 $ 1,477,740 $ 483,725 $ 245,594 $ 69,482 $ 245,615 $ 6,431,003 $ 29,487 $ 12,894,793
Criticized (accrual) 120,183 74,601 56,785 19,426 1,487 5,872 324,640 — 602,994
Criticized (nonaccrual) 2,125 25,267 22,240 18,787 4,964 1,592 58,964 — 133,939
Total C&I 4,034,455 1,577,608 562,750 283,807 75,933 253,079 6,814,607 29,487 13,631,726
CRE:
CRE:
Pass 2,296,649 2,402,136 2,310,748 1,328,251 732,694 1,529,681 173,267 19,064 10,792,490
Criticized (accrual) 47,459 63,654 43,447 98,259 2,094 80,662 — — 335,575
Criticized (nonaccrual) — — 42,067 1,115 — 3,364 — — 46,546
Subtotal CRE 2,344,108 2,465,790 2,396,262 1,427,625 734,788 1,613,707 173,267 19,064 11,174,611
Multifamily residential:
Pass 783,671 783,589 479,959 411,945 181,213 348,751 5,895 — 2,995,023
Criticized (accrual) — 735 22,330 6,101 264 5,877 — — 35,307
Criticized (nonaccrual) — — 1,475 — — 2,193 — — 3,668
Subtotal multifamily residential 783,671 784,324 503,764 418,046 181,477 356,821 5,895 — 3,033,998
Construction and land:
Pass 224,924 172,707 156,712 — 20,897 1,028 — — 576,268
Criticized (accrual) 3,524 — — — — 19,900 — — 23,424
Criticized (nonaccrual) — — — — — — — — —
Subtotal construction and land 228,448 172,707 156,712 — 20,897 20,928 — — 599,692
Total CRE 3,356,227 3,422,821 3,056,738 1,845,671 937,162 1,991,456 179,162 19,064 14,808,301
Total commercial 7,390,682 5,000,429 3,619,488 2,129,478 1,013,095 2,244,535 6,993,769 48,551 28,440,027
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)
2,385,853 1,813,200 1,501,660 1,021,707 523,170 921,714 — — 8,167,304
Criticized (accrual) — 1,429 — — 119 1,034 — — 2,582
Criticized (nonaccrual) (1)
— 226 812 1,789 1,994 11,246 — — 16,067
Subtotal single-family residential 2,385,853 1,814,855 1,502,472 1,023,496 525,283 933,994 — — 8,185,953
HELOCs:
Pass 1,131 880 2,879 5,363 8,433 13,475 1,328,919 225,810 1,586,890
Criticized (accrual) — — 200 — 996 — 1,328 606 3,130
Criticized (nonaccrual) — 151 285 4,617 164 1,962 — 4,517 11,696
Subtotal HELOCs 1,131 1,031 3,364 9,980 9,593 15,437 1,330,247 230,933 1,601,716
Total residential mortgage 2,386,984 1,815,886 1,505,836 1,033,476 534,876 949,431 1,330,247 230,933 9,787,669
Other consumer:
Pass 9,531 — — 1,830 — 83,255 66,136 — 160,752
Criticized (accrual) 16 — — — — — — — 16
Criticized (nonaccrual) — — — 2,491 — — — — 2,491
Total other consumer 9,547 — — 4,321 — 83,255 66,136 — 163,259
Total consumer 2,396,531 1,815,886 1,505,836 1,037,797 534,876 1,032,686 1,396,383 230,933 9,950,928
Total $ 9,787,213 $ 6,816,315 $ 5,125,324 $ 3,167,275 $ 1,547,971 $ 3,277,221 $ 8,390,152 $ 279,484 $ 38,390,955

~~(1)As of September 30, 2021 and December 31, 2020, $647 thousand and $747 thousand of nonaccrual~~ Revolving loans ~~whose payments were guaranteed by the Federal Housing Administration, respectively, were classified with a “Pass” rating.~~

~~Revolving loans~~that are converted to term loans presented in the ~~table above~~tables below are excluded from ~~the~~ term loans by vintage year columns. ~~During~~



($ in thousands)	September 30, 2022
	Term Loans by Origination Year												Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total



	2022		2021		2020		2019		2018		Prior
Commercial:
C&I:
Pass	$	2,620,973	$	2,422,523	$	683,312	$	414,503	$	158,867	$	118,118	$	8,796,933	$	28,332	$	15,243,561
Criticized (accrual)	38,538		51,206		62,356		45,068		21,776		17,115		97,464		—		333,523
Criticized (nonaccrual)	16,039		3,250		11,174		—		5,622		11,903		—		—		47,988


Total C&I	2,675,550		2,476,979		756,842		459,571		186,265		147,136		8,894,397		28,332		15,625,072
CRE:

Pass	3,431,039		2,447,553		1,640,819		1,856,673		1,505,134		2,098,417		149,902		14,425		13,143,962
Criticized (accrual)	1,324		111,024		124,132		38,478		91,981		33,005		1,455		16,761		418,160
Criticized (nonaccrual)	—		4,126		—		—		—		6,909		—		—		11,035


Subtotal CRE	3,432,363		2,562,703		1,764,951		1,895,151		1,597,115		2,138,331		151,357		31,186		13,573,157
Multifamily residential:
Pass	1,365,406		933,013		659,063		555,270		364,552		635,396		10,417		—		4,523,117
Criticized (accrual)	—		—		—		711		—		35,300		—		—		36,011
Criticized (nonaccrual)	—		—		—		—		—		174		—		—		174


Subtotal multifamily residential	1,365,406		933,013		659,063		555,981		364,552		670,870		10,417		—		4,559,302
Construction and land:
Pass	151,429		254,059		61,231		60,919		2,784		233		—		—		530,655
Criticized (accrual)	—		—		4,477		—		21,762		—		—		—		26,239
Criticized (nonaccrual)	—		—		—		—		—		—		—		—		—
Subtotal construction and land	151,429		254,059		65,708		60,919		24,546		233		—		—		556,894
Total CRE	4,949,198		3,749,775		2,489,722		2,512,051		1,986,213		2,809,434		161,774		31,186		18,689,353
Total commercial	7,624,748		6,226,754		3,246,564		2,971,622		2,172,478		2,956,570		9,056,171		59,518		34,314,425
Consumer:
Residential mortgage:
Single-family residential:
Pass (2)	2,989,092		2,487,082		1,824,666		1,134,087		841,743		1,559,127		—		—		10,835,797
Criticized (accrual)	142		1,568		394		1,784		2,888		1,247		—		—		8,023
Criticized (nonaccrual) (2)	—		—		203		2,327		3,639		5,356		—		—		11,525
Subtotal single-family residential mortgage	2,989,234		2,488,650		1,825,263		1,138,198		848,270		1,565,730		—		—		10,855,345
HELOCs:
Pass	—		1,735		2,278		1,778		748		9,683		2,012,190		144,021		2,172,433
Criticized (accrual)	—		—		—		—		—		774		230		919		1,923
Criticized (nonaccrual)	—		—		2,910		—		1,017		3,011		300		3,330		10,568
Subtotal HELOCs	—		1,735		5,188		1,778		1,765		13,468		2,012,720		148,270		2,184,924
Total residential mortgage	2,989,234		2,490,385		1,830,451		1,139,976		850,035		1,579,198		2,012,720		148,270		13,040,269
Other consumer:
Pass	15,613		57		5,259		—		—		15,170		51,425		—		87,524
Criticized (accrual)	—		—		—		—		—		—		—		—		—
Criticized (nonaccrual)	—		—		—		—		—		—		37		—		37
Total other consumer	15,613		57		5,259		—		—		15,170		51,462		—		87,561
Total consumer	3,004,847		2,490,442		1,835,710		1,139,976		850,035		1,594,368		2,064,182		148,270		13,127,830
Total by Risk Rating:
Pass	10,573,552		8,546,022		4,876,628		4,023,230		2,873,828		4,436,144		11,020,867		186,778		46,537,049
Criticized (accrual)	40,004		163,798		191,359		86,041		138,407		87,441		99,149		17,680		823,879
Criticized (nonaccrual)	16,039		7,376		14,287		2,327		10,278		27,353		337		3,330		81,327



Total	$	10,629,595	$	8,717,196	$	5,082,274	$	4,111,598	$	3,022,513	$	4,550,938	$	11,120,353	$	207,788	$	47,442,255



($ in thousands)	December 31, 2021
	Term Loans by Origination Year												Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total



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


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

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


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


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



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

(1)$0 and $26.4 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and nine months ended September 30, 2022, respectively. In comparison, $1.5 million and $6.5 million of total commercial loans, primarily comprised of CRE revolving loans, converted to term loans during the three and nine months ended September 30, 2021, respectively. $375 thousand of total consumer loans, comprised of HELOCs, ~~totaling $4.1 million and $62.7 million, respectively,~~ were converted to term ~~loans. In comparison,~~loans during the three and nine months ended September 30, ~~2020, HELOCs totaling $59.8~~2022. In comparison, $4.1 million and ~~$118.2~~$62.7 million ~~respectively,~~of total consumer loans, comprised of HELOCs, were converted to term ~~loans. During~~loans during the three and nine months ended September 30, 2021, ~~1 C&I revolving loan~~respectively.

(2)As of ~~$82 thousand was converted to a term loan. In comparison, during the three and nine months ended~~ September 30, ~~2020, 1 C&I revolving loan~~2022 and December 31, 2021, $1.2 million and $1.6 million, respectively, of ~~$250 thousand was converted to~~nonaccrual loans whose payments are guaranteed by the Federal Housing Administration were classified with a term loan. NaN CRE revolving loan of $1.4 million was converted to a term loan during the three months ended September 30, 2021. NaN CRE revolving loans totaling $6.4 million were converted to term loans during the nine months ended September 30, 2021. In comparison, there were no conversions of CRE revolving loans to term loans during both the three and nine months ended September 30, 2020.“Pass” rating.

Nonaccrual and Past Due Loans

Loans that are 90 or more days past due are generally placed on nonaccrual status unless the loan is well-collateralized and in the process of collection. Loans 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. ~~Payment deferral activities instituted in response to the COVID-19 pandemic could delay the recognition of delinquencies for customers who otherwise would have moved into nonaccrual status.~~ The following tables present the aging analysis of total loans held-for-investment as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021								($ in thousands)	September 30, 2022
		Current Accruing Loans (1)		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans				Total Nonaccrual Loans		Total Loans		($ in thousands)	Current Accruing Loans		Accruing Loans 30-59 Days Past Due		Accruing Loans 60-89 Days Past Due		Total Accruing Past Due Loans		Total Nonaccrual Loans		Total Loans
Commercial:	Commercial:
C&I	C&I	$	13,717,788	$	6,597	$	10,107	$	16,704			$	97,157	$	13,831,649	C&I	$	15,556,124	$	20,877	$	83	$	20,960	$	47,988	$	15,625,072
CRE:	CRE:															CRE:
CRE	CRE	11,803,236		438		155		593				14,236		11,818,065		CRE	13,561,499		489		134		623		11,035		13,573,157
Multifamily residential	Multifamily residential	3,337,341		1,914		—		1,914				1,123		3,340,378		Multifamily residential	4,558,333		795		—		795		174		4,559,302
Construction and land	Construction and land	376,921		—		—		—				—		376,921		Construction and land	556,894		—		—		—		—		556,894
Total CRE	Total CRE	15,517,498		2,352		155		2,507				15,359		15,535,364		Total CRE	18,676,726		1,284		134		1,418		11,209		18,689,353
Total commercial	Total commercial	29,235,286		8,949		10,262		19,211				112,516		29,367,013		Total commercial	34,232,850		22,161		217		22,378		59,197		34,314,425
Consumer:	Consumer:															Consumer:
Residential mortgage:	Residential mortgage:															Residential mortgage:
Single-family residential	Single-family residential	8,995,226		13,442		3,711		17,153				9,422		9,021,801		Single-family residential	10,820,365		13,914		8,325		22,239		12,741		10,855,345
HELOCs	HELOCs	1,950,594		2,298		1,999		4,297				8,731		1,963,622		HELOCs	2,169,440		2,992		1,924		4,916		10,568		2,184,924
Total residential mortgage	Total residential mortgage	10,945,820		15,740		5,710		21,450				18,153		10,985,423		Total residential mortgage	12,989,805		16,906		10,249		27,155		23,309		13,040,269
Other consumer	Other consumer	126,594		180		4		184				2,491		129,269		Other consumer	87,444		43		37		80		37		87,561
Total consumer	Total consumer	11,072,414		15,920		5,714		21,634				20,644		11,114,692		Total consumer	13,077,249		16,949		10,286		27,235		23,346		13,127,830
Total	Total	$	40,307,700	$	24,869	$	15,976	$	40,845			$	133,160	$	40,481,705	Total	$	47,310,099	$	39,110	$	10,503	$	49,613	$	82,543	$	47,442,255



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

3640

($ in thousands) December 31, 2020
Current
Accruing
Loans (1)
Accruing
Loans
30-59 Days
Past Due Accruing
Loans
60-89 Days
Past Due Total
Accruing
Past Due
Loans Total
Nonaccrual
Loans Total
Loans
Commercial:
C&I $ 13,488,070 $ 8,993 $ 724 $ 9,717 $ 133,939 $ 13,631,726
CRE:
CRE 11,127,690 375 — 375 46,546 11,174,611
Multifamily residential 3,028,512 1,818 — 1,818 3,668 3,033,998
Construction and land 579,792 19,900 — 19,900 — 599,692
Total CRE 14,735,994 22,093 — 22,093 50,214 14,808,301
Total commercial 28,224,064 31,086 724 31,810 184,153 28,440,027
Consumer:
Residential mortgage:
Single-family residential 8,156,645 9,911 2,583 12,494 16,814 8,185,953
HELOCs 1,583,968 2,922 3,130 6,052 11,696 1,601,716
Total residential mortgage 9,740,613 12,833 5,713 18,546 28,510 9,787,669
Other consumer 160,534 217 17 234 2,491 163,259
Total consumer 9,901,147 13,050 5,730 18,780 31,001 9,950,928
Total $ 38,125,211 $ 44,136 $ 6,454 $ 50,590 $ 215,154 $ 38,390,955

~~(1)~~As of September 30, 2021 and December 31, 2020, loans in payment deferral programs offered in response to the COVID-19 pandemic that are performing according to their modified terms are generally not considered delinquent, and are included in the “Current Accruing Loans” column.

The following table presents the amortized cost of loans on nonaccrual status for which there was no related allowance for loan losses as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Nonaccrual loans may not have an allowance for credit losses if the ~~loss expectation is zero because the~~ loan balances are ~~supported~~well-secured by the collateral ~~value.~~value and there is no loss expectation.


($ in thousands)	($ in thousands)	September 30, 2021		December 31, 2020		($ in thousands)	September 30, 2022		December 31, 2021

Commercial:	Commercial:					Commercial:
C&I	C&I	$	15,270	$	62,040	C&I	$	4,368	$	22,967
CRE:

CRE	CRE	13,826		45,537		CRE	10,725		9,102
Multifamily residential		—		2,519

Total CRE		13,826		48,056

Total commercial	Total commercial	29,096		110,096		Total commercial	15,093		32,069
Consumer:	Consumer:					Consumer:
Residential mortgage:

Single-family residential	Single-family residential	1,534		6,013		Single-family residential	2,909		5,785
HELOCs	HELOCs	5,608		8,076		HELOCs	7,609		5,033
Total residential mortgage		7,142		14,089
Other consumer		—		2,491

Total consumer	Total consumer	7,142		16,580		Total consumer	10,518		10,818
Total nonaccrual loans with no related allowance for loan losses	Total nonaccrual loans with no related allowance for loan losses	$	36,238	$	126,676	Total nonaccrual loans with no related allowance for loan losses	$	25,611	$	42,887

Foreclosed Assets

The Company acquires assets from borrowers through loan restructurings, workouts, and foreclosures. Assets acquired may include real properties (e.g., residential 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 ~~$39.5 million~~no in foreclosed assets as of September 30, ~~2021,~~2022, compared with ~~$19.7~~$10.3 million as of December 31, ~~2020.~~2021. The Company commences the foreclosure process on consumer mortgage loans after a borrower becomes more than 120 days delinquent in accordance with the Consumer Financial Protection Bureau guidelines. The carrying value of consumer real estate loans that were in ~~the process of~~an active or suspended foreclosure process was ~~$8.7~~$7.6 million and ~~$4.1~~$7.3 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~The Company~~ ~~suspended certain mortgage foreclosure activities in connection with its actions to support its customers during the COVID-19 pandemic.~~ ~~In addition, certain other foreclosures are awaiting for the end of government-mandated foreclosure moratoriums in certain states.~~

Troubled Debt Restructurings

~~Troubled debt restructurings (“TDRs”)~~TDRs are individually evaluated, and the type of restructuring is selected based on the loan type and the circumstances of the borrower’s financial difficulties. A TDR is a modification of the terms of a loan when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not have otherwise considered. ~~Since March 2020, the Company has implemented various commercial and consumer loan modification programs to provide its borrowers relief from the economic impacts of the COVID-19 pandemic. These~~The COVID-related modifications ~~are~~that occurred between March 1, 2020 and January 1, 2022, were generally not classified as TDRs due to the relief under the Coronavirus Aid, Relief, and Economic Security Act, ~~(“CARES Act”)~~as amended by the Consolidated Appropriations Act, 2021, and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised), and therefore are not included in the discussion below. Assistance provided in response to the COVID-19 pandemic could delay the recognition of delinquencies, nonaccrual status, and net charge-offs for those borrowers who would have otherwise moved into past due or nonaccrual status. See Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Troubled Debt Restructurings to the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form ~~10-K.~~10-K for additional information.

The following tables present the additions to TDRs for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Loans Modified as TDRs During the Three Months Ended September 30,														($ in thousands)	Loans Modified as TDRs During the Three Months Ended September 30,
		2021							2020								2022							2021
		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)			Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:	Commercial:															Commercial:
C&I	C&I	7	$	26,248	$	27,111	$	5,688	6	$	43,378	$	35,568	$	12,108	C&I	1	$	499	$	496	$	98	7	$	26,248	$	27,111	$	5,688
CRE:	CRE:															CRE:
CRE		—	—		—		—		2	21,429		21,242		21

Multifamily residential	Multifamily residential	1	1,101		1,118		—		1	1,220		1,226		—		Multifamily residential	—	—		—		—		1	1,101		1,118		—

Total CRE	Total CRE	1	1,101		1,118		—		3	22,649		22,468		21		Total CRE	—	—		—		—		1	1,101		1,118		—
Total commercial	Total commercial	8	27,349		28,229		5,688		9	66,027		58,036		12,129		Total commercial	1	499		496		98		8	27,349		28,229		5,688
Consumer:																Consumer:
Residential mortgage:																Residential mortgage:

HELOCs																HELOCs	1	62		69		2		—	—		—		—
Total residential mortgage																Total residential mortgage	1	62		69		2		—	—		—		—

Total consumer																Total consumer	1	62		69		2		—	—		—		—
Total	Total	8	$	27,349	$	28,229	$	5,688	9	$	66,027	$	58,036	$	12,129	Total	2	$	561	$	565	$	100	8	$	27,349	$	28,229	$	5,688


($ in thousands)	($ in thousands)	Loans Modified as TDRs During the Nine Months Ended September 30,														($ in thousands)	Loans Modified as TDRs During the Nine Months Ended September 30,
		2021							2020								2022							2021
		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)			Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)		Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Financial Impact (2)
Commercial:	Commercial:															Commercial:
C&I	C&I	11	$	46,144	$	45,954	$	7,662	11	$	93,235	$	79,713	$	12,507	C&I	4	$	30,633	$	17,802	$	16,729	11	$	46,144	$	45,954	$	7,662
CRE:	CRE:															CRE:
CRE		—	—		—		—		2	21,429		21,242		21

Multifamily residential	Multifamily residential	1	1,101		1,118		—		1	1,220		1,226		—		Multifamily residential	—	—		—		—		1	1,101		1,118		—

Total CRE	Total CRE	1	1,101		1,118		—		3	22,649		22,468		21		Total CRE	—	—		—		—		1	1,101		1,118		—
Total commercial	Total commercial	12	47,245		47,072		7,662		14	115,884		102,181		12,528		Total commercial	4	30,633		17,802		16,729		12	47,245		47,072		7,662
Consumer:																Consumer:
Residential mortgage:																Residential mortgage:

HELOCs																HELOCs	1	62		69		2		—	—		—		—
Total residential mortgage																Total residential mortgage	1	62		69		2		—	—		—		—

Total consumer																Total consumer	1	62		69		2		—	—		—		—
Total	Total	12	$	47,245	$	47,072	$	7,662	14	$	115,884	$	102,181	$	12,528	Total	5	$	30,695	$	17,871	$	16,731	12	$	47,245	$	47,072	$	7,662

(1)Includes subsequent payments after modification and reflects the balance as of September 30, ~~2021~~2022 and ~~2020.~~2021.

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

3842

The following tables present the TDR post-modification outstanding balances by the primary modification type for the three and nine months ended September 30, ~~2021~~2022 and ~~2020 by modification type:~~2021:


($ in thousands)	($ in thousands)	Modification Type During the Three Months Ended September 30,																		($ in thousands)		Modification Type During the Three Months Ended September 30,
		2021								2020												2022								2021
		Principal (1)		Principal and Interest		Interest Deferments		Interest Rate Reduction		Total		Principal (1)		Principal and Interest (2)		Interest Deferments		Interest Rate Reduction						Total		($ in thousands)	Principal (1)					Interest Rate Reduction		Other				Total		Principal (1)				Interest Rate Reduction			Other		Total
Commercial:	Commercial:
C&I	C&I	$	27,111	$	—	$	—	$	—	$	27,111	$	19,025	$	—	$	16,543	$	—					$	35,568		$	496				$	—	$	—			$	496	$	27,111			$	—		$	—	$	27,111
CRE:	CRE:																									CRE:
CRE		—		—		—		—		—		21,242		—		—		—						21,242

Multifamily residential	Multifamily residential	1,118		—		—		—		1,118		1,226		—		—		—						1,226		Multifamily residential	—					—		—				—		1,118				—			—		1,118

Total CRE	Total CRE	1,118		—		—		0		1,118		22,468		—		—		—						22,468		Total CRE	—							—				—		1,118				—			—		1,118
Total commercial	Total commercial	28,229		—		—		—		28,229		41,493		—		16,543		—						58,036		Total commercial	496					—		—				496		28,229				—			—		28,229
Consumer:																					Consumer:
Residential mortgage:																					Residential mortgage:

HELOCs																					HELOCs		69						—		—					69	—					—	—			—
Total residential mortgage																					Total residential mortgage		69						—		—					69	—					—	—			—

Total consumer																					Total consumer		69						—		—					69	—					—	—			—
Total	Total	$	28,229	$	—	$	—	$	—	$	28,229	$	41,493	$	—	$	16,543	$	—					$	58,036	Total	$	565				$	—	$	—			$	565	$	28,229			$	—		$	—	$	28,229


($ in thousands)	($ in thousands)	Modification Type During the Nine Months Ended September 30,																		($ in thousands)		Modification Type During the Nine Months Ended September 30,
		2021								2020												2022							2021
		Principal (1)		Principal and Interest		Interest Deferments		Interest Rate Reduction		Total		Principal (1)		Principal and Interest (2)		Interest Deferments		Interest Rate Reduction						Total		($ in thousands)	Principal (1)					Interest Rate Reduction			Other (2)			Total		Principal (1)				Interest Rate Reduction			Other		Total
Commercial:	Commercial:
C&I	C&I	$	28,780	$	—	$	—	$	17,174	$	45,954	$	36,043	$	10,819	$	32,851	$	—					$	79,713		$	9,609				$	—		$	8,193		$	17,802	$	28,780			$	17,174		$	—	$	45,954
CRE:	CRE:																									CRE:
CRE		—		—		—		—		—		21,242		—		—		—						21,242

Multifamily residential	Multifamily residential	1,118		—		—		—		1,118		1,226		—		—		—						1,226		Multifamily residential	—					—			—			—		1,118				—			—		1,118

Total CRE	Total CRE	1,118		—		—		—		1,118		22,468		—		—		—						22,468		Total CRE	—					—			—			—		1,118				—			—		1,118
Total commercial	Total commercial	29,898		—		—		17,174		47,072		58,511		10,819		32,851		—						102,181		Total commercial	9,609					—			8,193			17,802		29,898				17,174			—		47,072
Consumer:																					Consumer:
Residential mortgage:																					Residential mortgage:

HELOCs																					HELOCs		69							—	—			69			—					—	—			—
Total residential mortgage																					Total residential mortgage		69							—	—			69			—					—	—			—

Total consumer																					Total consumer		69							—	—			69			—					—	—			—
Total	Total	$	29,898	$	—	$	—	$	17,174	$	47,072	$	58,511	$	10,819	$	32,851	$	—					$	102,181	Total	$	9,678				$	—		$	8,193		$	17,871	$	29,898			$	17,174		$	—	$	47,072

(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)~~Include principal and interest deferments or reductions.~~Includes increase in new commitment.

After a loan is modified as a TDR, the Company continues to monitor its performance under its most recent restructured terms. A TDR may become delinquent and result in payment default (generally 90 days past due) subsequent to restructuring. The following table presents ~~the~~ information on loans that entered into ~~payment~~ default during the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021, that were modified in as TDRs during the 12 months preceding payment default:


($ in thousands)	($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted												($ in thousands)	Loans Modified as TDRs that Subsequently Defaulted
		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,					Nine Months Ended September 30,
		2021			2020			2021			2020					($ in thousands)	2022			2021			2022			2021
		Loan Count	Recorded Investment		Loan Count	Recorded Investment		Loan Count	Recorded Investment		Loan Count	Recorded Investment					Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial:	Commercial:
C&I	C&I	—	$	—	—	$	—	1	$	11,431	1	$	16,309				—	$	—	—	$	—	2	$	13,901	1	$	11,431
CRE:																CRE:

Multifamily residential																Multifamily residential	—	—		—	—		1	1,008		—	—

Total CRE																Total CRE	—	—		—	—		1	1,008		—	—
Total commercial																Total commercial	—	—		—	—		3	14,909		1	11,431

Total	Total	—	$	—	—	$	—	1	$	11,431	1	$	16,309			Total	—	$	—	—	$	—	3	$	14,909	1	$	11,431

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the remaining commitments to lend ~~additional funds~~ to borrowers whose terms of their outstanding owed balances were modified as TDRs ~~was $6.8~~were $6.4 million and ~~$3.0~~$5.0 million, respectively.

Allowance for Credit Losses

The Company has an allowance framework under ASU 2016-13 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, ~~inherent in~~and periodic evaluation of the ~~Company’s~~loan portfolio, lending-related commitments, and other relevant ~~financial assets.~~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 ~~and~~ are collectively evaluated. The collectively evaluated loans ~~cover~~include performing ~~risk-rated~~ loans and unfunded credit commitments. If an exposure does not share risk characteristics with other exposures, the Company generally estimates expected credit losses on an individual basis. These individually assessed loans include TDR and nonaccrual loans.

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 ~~allowance for~~Company applies quantitative methods to estimate loan losses ~~is estimated using quantitative methods that consider~~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, ~~applied over the forecasted life of the loans. The forward-looking information is limited to the reasonable and supportable period. These macroeconomic scenarios~~which include variables that are considered key drivers of increases and decreases in credit losses. The Company utilizes a probability-weighted, multiple-scenario forecast approach. These scenarios may consist of a base forecast representing management's view of the most likely outcome, ~~and~~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 lives of the loans to estimate the allowance for loan losses.

There were no changes to the overall model methodology. For ~~both~~ the three and nine months ended September 30, ~~2021 and 2020,~~2022, there were no changes to the reasonable and supportable forecast period ~~except~~and reversion to the ~~C&I segment, which changed from eight to 11 quarters, and no changes to the reversion to~~ historical loss experience method. The change in the reasonable and supportable period for the C&I segment was due to model enhancement, including updates to certain macroeconomic variable inputs. There was no change to the overall model methodology.

The following table provides key credit risk characteristics and macroeconomic variables that the Company uses to estimate the expected credit losses by portfolio segment:

Portfolio Segment

Risk Characteristics

Macroeconomic Variables

C&I

Age,~~(1)~~, size and spread at origination, and ~~internal~~ risk rating

Volatility Index ~~(“VIX”)~~ and BBB yield to 10-year U.S. Treasury spread ~~(“BBB Spread”)~~ ~~(1)~~

CRE, Multifamily residential, and Construction and land

Delinquency status, maturity date, collateral value, property type, and geographic location

Unemployment rate, Gross Domestic Product (“GDP”), and U.S. Treasury rates

Single-family residential and HELOCs

FICO score, delinquency status, maturity date, collateral value, and geographic location

Unemployment rate, GDP, and home price index

Other consumer

Historical loss experience

Immaterial ~~(2)~~(1)

(1)Due to model enhancements, risk characteristic related to “time-to-maturity” was changed to “age”; while macroeconomic variables related to “unemployment rate and two- and ten-year U.S. Treasury spread” were changed to “VIX and BBB Spread” during the three months ended September 30, 2021.

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

Allowance for Loan Losses for the Commercial Loan Portfolio

The Company’s C&I ~~loan~~ lifetime loss rate model estimates credit losses by estimating a 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 ~~eleven~~11 quarters, thereafter immediately reverting to the historical average loss rate, expressed through the loan-level lifetime loss rate.

~~For~~To generate estimates of expected loss at the loan level for CRE, multifamily residential, and construction and land loans, projected ~~probability~~probabilities of ~~defaults~~default (“PDs”) and loss given defaults (“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.~~loan. The forecast of future economic conditions returns to long-run historical economic trends ~~after~~within the reasonable and supportable period.

In order 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.

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. ~~In order to~~To estimate the life of a loan for the single-family residential and HELOC ~~portfolio,~~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 also 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~~

— loan growth trends;

–~~The~~— the volume and severity of past due financial assets, and the volume and severity of adversely classified financial assets;

–~~The~~— the Company’s lending policies and procedures, including changes in lending strategies, underwriting standards, collection, write-off and recovery practices;

–~~Knowledge~~— knowledge of a borrower’s operations;

–~~The~~— the quality of the Company’s credit review system;

–~~The~~— the experience, ability and depth of the Company’s management ~~lending associates~~ and ~~other relevant~~ associates;

–~~The~~— the effect of other external factors such as the regulatory and legal environments, ~~and~~or changes in technology;

–~~Actual~~— actual and expected changes in international, national, regional, and local economic and business conditions in which the Company operates; and

–~~Risk~~— 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 dependent on whether they are already reflected in quantitative loss estimates during the current period and the extent to which changes in these factors diverge from period to period.

While the Company’s allowance methodologies strive to reflect all relevant 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 obtaining 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 the case of certain nonaccrual or TDR loans, the Company estimates the allowance for loan losses on an individual loan basis. The allowance for loan losses for individually evaluated loans is measured as 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; and (3) the loan's observable market price. If an individually evaluated loan is determined to be collateral dependent, the Company applies the fair value of the collateral less costs to sell method. If an individually evaluated loan is determined not to be collateral dependent, the Company uses the present value of future cash flows or the observable market value of the loan.

•Collateral-Dependent Loans — The allowance of a collateral-dependent loan is limited to the difference between the recorded value and fair value of the collateral less cost of disposal or sale. As of September 30, ~~2021,~~2022, collateral-dependent commercial and consumer loans totaled ~~$45.4~~$36.4 million and ~~$10.4~~$13.6 million, respectively. In comparison, collateral-dependent commercial and consumer loans totaled ~~$97.2~~$37.0 million and ~~$17.3~~$14.0 million, respectively, as of December 31, ~~2020.~~2021. The Company's ~~commercial~~ collateral-dependent loans were secured by ~~real estate or other collateral. The Company's consumer collateral-dependent loans were all residential mortgage loans, secured by the underlying~~ real estate. As of both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the collateral value of the properties securing ~~each of these~~the collateral-dependent loans, net of selling costs, exceeded the recorded value of the ~~individual~~ loans.

The following tables summarize the ~~activity~~activities in the allowance for loan losses by portfolio segments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

($ in thousands) Three Months Ended September 30, 2021
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 362,528 $ 161,962 $ 21,925 $ 15,643 $ 16,530 $ 2,938 $ 4,198 $ 585,724
(Reversal of) provision for credit losses on loans (a) (23,365) 2,129 (2,660) 9,058 2,537 435 130 (11,736)
Gross charge-offs (1,154) (14,229) — (2,674) (912) — (10) (18,979)
Gross recoveries 4,203 187 652 267 137 19 — 5,465
Total net recoveries (charge-offs) 3,049 (14,042) 652 (2,407) (775) 19 (10) (13,514)
Foreign currency translation adjustment (70) — — — — — — (70)
Allowance for loan losses, end of period $ 342,142 $ 150,049 $ 19,917 $ 22,294 $ 18,292 $ 3,392 $ 4,318 $ 560,404
($ in thousands) Three Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 380,723 $ 176,040 $ 25,058 $ 18,551 $ 25,314 $ 3,867 $ 2,518 $ 632,071
Provision for (reversal of) credit losses on loans (a) 31,691 (8,301) (1,916) (8,180) (2,692) (637) (76) 9,889
Gross charge-offs (25,111) (1,414) — — — — (124) (26,649)
Gross recoveries 1,218 485 665 30 — 43 — 2,441
Total net (charge-offs) recoveries (23,893) (929) 665 30 — 43 (124) (24,208)
Foreign currency translation adjustment 500 — — — — — — 500
Allowance for loan losses, end of period $ 389,021 $ 166,810 $ 23,807 $ 10,401 $ 22,622 $ 3,273 $ 2,318 $ 618,252



($ in thousands)		Three Months Ended September 30, 2022
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	363,282	$	140,245	$	26,552	$	6,682	$	21,840	$	3,220	$	1,449	$	563,270
Provision for credit losses on loans	(a)	9,575		5,299		5,047		817		6,182		99		255		27,274
Gross charge-offs		(6,894)		(288)		(5,938)		—		(775)		—		(10)		(13,905)
Gross recoveries		7,172		45		19		7		16		5		—		7,264
Total net recoveries (charge-offs)		278		(243)		(5,919)		7		(759)		5		(10)		(6,641)
Foreign currency translation adjustment		(1,386)		—		—		—		—		—		—		(1,386)
Allowance for loan losses, end of period		$	371,749	$	145,301	$	25,680	$	7,506	$	27,263	$	3,324	$	1,694	$	582,517



($ in thousands)		Three Months Ended September 30, 2021
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	362,528	$	161,962	$	21,925	$	15,643	$	16,530	$	2,938	$	4,198	$	585,724

(Reversal of) provision for credit losses on loans	(a)	(23,364)		2,129		(2,660)		9,058		2,537		435		130		(11,735)

Gross charge-offs		(1,154)		(14,229)		—		(2,674)		(912)		—		(10)		(18,979)
Gross recoveries		4,203		187		652		267		137		19		—		5,465
Total net recoveries (charge-offs)		3,049		(14,042)		652		(2,407)		(775)		19		(10)		(13,514)
Foreign currency translation adjustment		(71)		—		—		—		—		—		—		(71)
Allowance for loan losses, end of period		$	342,142	$	150,049	$	19,917	$	22,294	$	18,292	$	3,392	$	4,318	$	560,404



($ in thousands)		Nine Months Ended September 30, 2022
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	338,252	$	150,940	$	14,400	$	15,468	$	17,160	$	3,435	$	1,924	$	541,579
Provision for (reversal of) credit losses on loans	(a)	37,867		(5,013)		16,680		(8,027)		10,569		59		(140)		51,995
Gross charge-offs		(18,322)		(1,357)		(5,947)		—		(775)		(193)		(90)		(26,684)
Gross recoveries		16,688		731		547		65		309		23		—		18,363
Total net (charge-offs) recoveries		(1,634)		(626)		(5,400)		65		(466)		(170)		(90)		(8,321)
Foreign currency translation adjustment		(2,736)		—		—		—		—		—		—		(2,736)
Allowance for loan losses, end of period		$	371,749	$	145,301	$	25,680	$	7,506	$	27,263	$	3,324	$	1,694	$	582,517

4247

($ in thousands) Nine Months Ended September 30, 2021
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 398,040 $ 163,791 $ 27,573 $ 10,239 $ 15,520 $ 2,690 $ 2,130 $ 619,983
(Reversal of) provision for credit losses on loans (a) (42,112) 11,227 (9,436) 14,407 3,522 707 2,226 (19,459)
Gross charge-offs (20,162) (25,558) (130) (2,954) (1,046) (45) (43) (49,938)
Gross recoveries 6,301 589 1,910 602 296 40 5 9,743
Total net (charge-offs) recoveries (13,861) (24,969) 1,780 (2,352) (750) (5) (38) (40,195)
Foreign currency translation adjustment 75 — — — — — — 75
Allowance for loan losses, end of period $ 342,142 $ 150,049 $ 19,917 $ 22,294 $ 18,292 $ 3,392 $ 4,318 $ 560,404
($ in thousands) Nine Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 238,376 $ 40,509 $ 22,826 $ 19,404 $ 28,527 $ 5,265 $ 3,380 $ 358,287
Impact of ASU 2016-13 adoption 74,237 72,169 (8,112) (9,889) (3,670) (1,798) 2,221 125,158
Allowance for loan losses, January 1, 2020 312,613 112,678 14,714 9,515 24,857 3,467 5,601 483,445
Provision for (reversal of) credit losses on loans (a) 130,171 46,449 7,273 828 (2,659) (20) (3,197) 178,845
Gross charge-offs (57,466) (2,688) — — — (221) (180) (60,555)
Gross recoveries 3,395 10,371 1,820 58 424 47 94 16,209
Total net (charge-offs) recoveries (54,071) 7,683 1,820 58 424 (174) (86) (44,346)
Foreign currency translation adjustment 308 — — — — — — 308
Allowance for loan losses, end of period $ 389,021 $ 166,810 $ 23,807 $ 10,401 $ 22,622 $ 3,273 $ 2,318 $ 618,252

~~The following table summarizes the activities in the allowance for unfunded credit commitments for the three and nine months ended September 30, 2021~~ ~~and 2020~~:

($ in thousands) Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period $ 26,300 $ 28,972 $ 33,577 $ 11,158
Impact of ASU 2016-13 adoption — — — 10,457
Provision for (reversal of) credit losses on unfunded credit commitments (b) 1,736 111 (5,541) 7,468
Allowance for unfunded credit commitments, end of period $ 28,036 $ 29,083 $ 28,036 $ 29,083
(Reversal of) provision for credit losses (a) + (b) $ (10,000) $ 10,000 $ (25,000) $ 186,313

The allowance for credit losses as of September 30, 2021, was $588.4 million, a decrease of $65.2 million compared with $653.6 million as of December 31, 2020. The change in the allowance for credit losses was comprised of a net decrease of $59.6 million in the allowance for loan losses and a $5.6 million decrease in the allowance for unfunded credit commitments. An improved macroeconomic outlook resulted in the overall decrease in the required allowance for credit losses as of September 30, 2021, leading to a $10.0 million and $25.0 million reversal of credit losses for the three and nine months ended September 30, 2021, respectively.



($ in thousands)		Nine Months Ended September 30, 2021
		Commercial								Consumer						Total
		C&I		CRE						Residential Mortgage				Other Consumer
				CRE		Multifamily Residential		Construction and Land		Single- Family Residential		HELOCs
Allowance for loan losses, beginning of period		$	398,040	$	163,791	$	27,573	$	10,239	$	15,520	$	2,690	$	2,130	$	619,983
(Reversal of) provision for credit losses on loans	(a)	(42,127)		11,227		(9,436)		14,407		3,522		707		2,226		(19,474)
Gross charge-offs		(20,162)		(25,558)		(130)		(2,954)		(1,046)		(45)		(43)		(49,938)
Gross recoveries		6,301		589		1,910		602		296		40		5		9,743
Total net (charge-offs) recoveries		(13,861)		(24,969)		1,780		(2,352)		(750)		(5)		(38)		(40,195)
Foreign currency translation adjustment		90		—		—		—		—		—		—		90
Allowance for loan losses, end of period		$	342,142	$	150,049	$	19,917	$	22,294	$	18,292	$	3,392	$	4,318	$	560,404

The allowance for unfunded credit commitments is maintained at a level that management believes to be sufficient to absorb estimated expected credit losses related to unfunded credit facilities. See Note 910 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q for additional information related to unfunded credit commitments. The following table summarizes the activities in the allowance for unfunded credit commitments for the three and nine months ended September 30, 2022 and 2021:



($ in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period		$	24,304	$	26,300	$	27,514	$	33,577

(Reversal of) provision for credit losses on unfunded credit commitments	(b)	(274)		1,735		(3,495)		(5,526)
Foreign currency translation adjustment		11		1		22		(15)
Allowance for unfunded credit commitments, end of period		24,041		28,036		24,041		28,036

Provision for (reversal of) credit losses	(a) + (b)	$	27,000	$	(10,000)	$	48,500	$	(25,000)

The allowance for credit losses was $606.6 million as of September 30, 2022, an increase of $37.5 million, compared with $569.1 million as of December 31, 2021. The increase in the allowance for credit losses was primarily driven by the current economic outlook, which reflected ongoing concerns with inflation, global supply chain disruptions and rising interest rates, as well as loan growth.

Loans Held-for-Sale

AsLoans held-for-sale consisted of a $14.5 million multifamily residential loan and $635 thousand in single-family residential loans as of September 30, ~~2021, the Company had no loans held-for-sale. As of~~2022 and December 31, ~~2020, loans held-for-sale of $1.8 million consisted of single-family residential loans.~~2021, respectively. Refer to Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Sale to the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form 10-K for additional ~~details related to the Company’s loans held-for-sale.~~details.

Loan Transfers, Sales and Purchases

The Company’s primary business focus is on directly originated loans. The Company also purchases loans and ~~sells~~participates in loans inwith other banks. In the ~~secondary market in the ordinary~~normal course of ~~business.~~doing business, the Company also provides other financial institutions with the ability to participate in commercial loans that it originates, by selling loans to such institutions. Purchased loans may be transferred from held-for-investment to held-for-sale, and write-downs to allowance for loan losses are recorded, when appropriate. The following tables provide information ~~about~~on the carrying value of loans transferred, loans sold and purchased for the held-for-investment portfolio, during the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30, 2021																	($ in thousands)		Three Months Ended September 30, 2022
		Commercial											Consumer									Total	($ in thousands)			Commercial																Consumer										Total
		C&I				CRE							Residential Mortgage													C&I				CRE																Residential Mortgage
				CRE						Construction and Land			Single-Family Residential							Total	($ in thousands)			C&I						CRE						Multifamily Residential										Single-Family Residential							Total
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)			$	117,196			$	24,120				$	17,226			$	5,238																$	33,616					$	14,500						$	5,178						$	112,363

Sales (2)(3)(4)	Sales (2)(3)(4)	$	118,851			$	24,120				$	19,900			$	6,959										$	169,830		Sales (2)(3)(4)			$	87,597					$	33,616					$	—					$	5,952							$	127,165
Purchases (5)	Purchases (5)	$	65,354			$	—				$	—			$	137,937									$	203,291		Purchases (5)			$	56,507					$	—					$	—					$	1,155						$	57,662


($ in thousands)	($ in thousands)	Three Months Ended September 30, 2020										($ in thousands)					Three Months Ended September 30, 2021
		Commercial							Consumer										Total	($ in thousands)		Commercial											Consumer											Total
		C&I					CRE							Residential Mortgage									($ in thousands)			C&I			CRE									Residential Mortgage								Total
						Multifamily Residential					Single-Family Residential					Total					($ in thousands)	C&I		CRE									Construction and Land				Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)			$	89,394				$	—							$	—													$	117,196			$	24,120						$	17,226				$	5,238				$	163,780

Sales (2)(3)(4)	Sales (2)(3)(4)	$	92,237				$	—						$	31,847												Sales (2)(3)(4)		$	118,851			$	24,120						$	19,900			$	6,959					$	169,830
Purchases (5)	Purchases (5)	$	—				$	838				$	17,294											$	18,132	Purchases (5)		$	65,354			$	—						$	—			$	137,937					$	203,291


($ in thousands)	($ in thousands)	Nine Months Ended September 30, 2021										($ in thousands)	Nine Months Ended September 30, 2022
		Commercial								Consumer						($ in thousands)		Commercial												Consumer				Total
				CRE						Residential Mortgage								C&I				CRE								Residential Mortgage
		C&I		CRE		Multifamily Residential		Construction and Land		Single-Family Residential				Total						CRE				Multifamily Residential					Single-Family Residential
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)	$	327,781	$	61,171	$	—	$	17,226	$	5,238				$		411,416			$	378,841			$	65,250		$	14,500				$	5,178			$	463,769
Loans transferred from held-for-sale to held-for-investment																	Loans transferred from held-for-sale to held-for-investment		$	—			$	—		$	—				$	631			$	631

Sales (2)(3)(4)	Sales (2)(3)(4)	$	329,233	$	61,171	$	—	$	19,900	$	17,123				$	427,427	Sales (2)(3)(4)		$	375,100			$	65,250		$	—				$	6,403			$	446,753
Purchases (5)	Purchases (5)	$	310,447	$	—	$	370	$	—	$	434,900				$	745,717	Purchases (5)		$	361,169			$	—		$	—				$	238,253			$	599,422

4449


($ in thousands)	($ in thousands)	Nine Months Ended September 30, 2020									($ in thousands)	Nine Months Ended September 30, 2021
		Commercial						Consumer					($ in thousands)			Commercial																							Consumer												Total
				CRE				Residential Mortgage								C&I					CRE																		Residential Mortgage
		C&I		CRE		Multifamily Residential			Single-Family Residential					Total	($ in thousands)				C&I					CRE						Multifamily Residential						Construction and Land						Single-Family Residential										Total
Loans transferred from held-for-investment to held-for-sale (1)	Loans transferred from held-for-investment to held-for-sale (1)	$	246,052	$	7,250	$	—		$	—								Loans transferred from held-for-investment to held-for-sale (1)			$	327,781					$	61,171					$	—					$	17,226					$	5,238							$	411,416

Sales (2)(3)(4)	Sales (2)(3)(4)	$	248,895	$	7,250	$	—		$	50,197										Sales (2)(3)(4)					$	329,233					$	61,171					$	—					$	19,900					$	17,123							$	427,427
Purchases (5)	Purchases (5)	$	143,086	$	—	$	2,358		$	18,378						$	163,822		Purchases (5)				$	310,447					$	—					$	370					$	—					$	434,900							$	745,717

(1)Includes write-downs of ~~$3.6~~$8.7 million and ~~$4.9~~$8.9 million 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, ~~2021, respectively. There were $2.8~~2022, respectively, and $3.6 million ~~of write-downs~~and $4.9 million for ~~each of~~ the three and nine months ended September 30, ~~2020.~~2021, respectively.

(2)Includes originated loans sold of $86.2 million and $253.9 million for the three and nine months ended September 30, 2022, respectively, and $143.3 million and $341.9 million for the three and nine months ended September 30, 2021, ~~respectively, and $112.3 million and $294.6 million for the three and nine months ended September 30, 2020,~~ respectively. Originated loans sold consisted primarily of C&I and CRE loans ~~during~~for each of the three and nine months ended September 30, ~~2021. In comparison, originated loans sold consisted primarily of C&I~~2022 and ~~single-family residential loans for the three and nine months ended September 30, 2020.~~2021.

(3)Includes ~~$26.5~~$40.9 million and ~~$85.5~~$192.9 million of purchased loans sold in the secondary market for the three and nine months ended September 30, ~~2021, respectively. There were $11.8~~2022, respectively and $26.5 million ~~of purchased loans sold in the secondary market~~and $85.5 million for ~~each of~~ the three and nine months ended September 30, ~~2020.~~2021, respectively.

(4)Net gains on sales of loans were $2.1 million and $6.0 million for the three and nine months ended September 30, 2022, respectively, and $3.3 million and $6.6 million for the three and nine months ended September 30, 2021, ~~respectively, and $361 thousand and $1.4 million for the three and nine months ended September 30, 2020,~~ respectively.

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

Note 78 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities

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

Investments in Qualified Affordable Housing Partnerships, Net

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

~~The following table presents the Company’s investments in qualified affordable housing partnerships, net, and related unfunded commitments as of September 30, 2021 and December 31, 2020:~~

($ in thousands) September 30, 2021 December 31, 2020
Investments in qualified affordable housing partnerships, net $ 297,367 $ 213,555
Accrued expenses and other liabilities — Unfunded commitments $ 148,171 $ 77,444

The following table presents additional information related to the Company’s investments in qualified affordable housing partnerships, net, for the three and nine months ended September 30, 2021 and 2020:

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Tax credits and other tax benefits recognized $ 7,503 $ 11,402 $ 28,583 $ 34,205
Amortization expense included in income tax expense $ 9,147 $ 8,975 $ 25,595 $ 26,507

Investments in Tax Credit and Other Investments, Net

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

~~The following table presents~~values, the ~~Company’s investments in tax credit and other investments, net, and related unfunded commitments as of September 30, 2021 and December 31, 2020:~~

($ in thousands) September 30, 2021 December 31, 2020
Investments in tax credit and other investments, net $ 367,428 $ 266,525
Accrued expenses and other liabilities — Unfunded commitments $ 194,796 $ 105,282

~~The following table presents additional information related to the Company’s investments in tax credit and other investments, net, for the three and nine months ended September 30, 2021 and 2020:~~

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Amortization of tax credit and other investments 38,008 17,209 90,657 57,819

~~The~~ Company held equity securities that are mutual funds with readily determinable fair values of $26.8 million and $31.3 million, as of September 30, 2021 and December 31, 2020, respectively. The Company invested in these mutual funds for CRA purposes. These equity securities were measured at fair value with changes in fair value recorded in net income. The Company recorded unrealized losses of $88 thousand and $515 thousand related to these equity securities for the three and nine months ended September 30, 2021, respectively, and unrealized gains of $55 thousand and $813 thousand, respectively, for the same periods in 2020. Equity securities with readily determinable fair value were included in ~~Investments in tax credit and other investments, net~~ ~~on the Consolidated Balance Sheet.~~

The Company held equity securities without readily determinable fair values totaling $29.3 million and $23.7 million as of September 30, 2021 and December 31, 2020, respectively, which were measured usingelected the measurement alternative under ASU 2016-01 valuing them at cost less impairment ~~and~~ adjusted for observable price changes. ~~For the three and nine months ended September 30, 2021 and 2020, there were no adjustments made to these securities. Equity securities without readily determinable fair values were included in~~ ~~Investments in tax credit and other investments, net~~ ~~and~~ ~~Other assets~~ ~~on the Consolidated Balance Sheet.~~

Tax credit and other investments are evaluated for possible OTTI on an annual basis or when events or changes in circumstances suggest that the carrying amount of the tax credit investments may not be realizable. OTTI charges and impairment recoveries are recorded within Amortization of tax credit and other investments on the Consolidated Statement of Income. Refer to Note 23 — Fair Value Measurement and Fair Value of Financial Instruments to the Consolidated Financial Statements in this Form 10-Q for a discussion on the Company’s impairment evaluation and monitoring process of tax credit investments.

The following table presents investments and unfunded commitments of the Company’s qualified affordable housing partnerships, tax credit, and other investments as of September 30, 2022 and December 31, 2021:



	September 30, 2022				December 31, 2021
($ in thousands)	Assets		Liabilities - Unfunded Commitments (1)		Assets		Liabilities - Unfunded Commitments (1)

Investments in qualified affordable housing partnerships, net	$	400,871	$	254,700	$	289,741	$	146,152
Investments in tax credit and other investments, net	324,383		153,840		338,522		163,464
Total	$	725,254	$	408,540	$	628,263	$	309,616

(1)Included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Investments in tax credit and other investments, net presented in the table above include equity securities that are mutual funds with readily determinable fair values of $23.8 million and $26.6 million as of September 30, 2022 and December 31, 2021, respectively. The Company invests in these mutual funds for CRA purposes. These equity securities were measured at fair value with changes in fair value recorded in Other investment income on the Consolidated Statement of Income. Equity securities with readily determinable fair values were included in Investments in qualified affordable housing partnerships, tax credit and other investments, net on the Consolidated Balance Sheet.

The Company also held equity securities without readily determinable fair values totaling $34.6 million and $33.1 million as of September 30, 2022 and December 31, 2021, respectively, which were measured using the measurement alternative of cost less impairment and adjusted for observable price changes. For the three and nine months ended September 30, 2022 and 2021, ~~and 2020, the Company recorded~~there were no adjustments ~~related~~made to these securities. Equity securities without readily determinable fair values were included in Investments in qualified affordable housing partnerships, tax credit and other ~~investments.~~ investments, net and Other assets on the Consolidated Balance Sheet.

The following table presents additional information related to the investments in qualified affordable housing partnerships, tax credit and other investments for the three and nine months ended September 30, 2022 and 2021:



($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Investments in qualified housing partnerships, net
Tax credits and other tax benefits recognized	$	13,180	$	11,361	$	38,764	$	34,083
Amortization expense included in income tax expense	$	10,431	$	9,147	$	30,498	$	25,595
Investments in tax credit and other investments, net
Amortization of tax credit and other investments	$	19,874	$	38,008	$	48,753	$	90,657
Unrealized losses on equity securities with readily determinable values	$	(1,014)	$	(88)	$	(2,958)	$	(515)
Impairment recoveries (1)	$	—	$	—	$	—	$	1,250

(1)For the nine months ended September 30, 2021, ~~the Company recorded $1.3 million of impairment recoveries. In comparison, the Company recorded~~ impairment recoveries ~~of $259 thousand~~were related to one historic tax credit and ~~OTTI charges of $733 thousand for the nine months ended September 30, 2020.~~two energy tax credits.

Variable Interest Entities

The ~~Company invests~~majority of both the investments in ~~unconsolidated limited~~affordable housing partnerships and ~~similar entities that construct, own~~tax credit and ~~operate affordable housing, historic rehabilitation, and wind and solar energy projects, of which the majority of such~~other investments discussed above are variable interest entities (“VIEs”)~~. As~~ where the Company is a limited partner in these partnerships, ~~these investments are designed to generate a return primarily through the realization of federal tax credits~~ and ~~tax benefits. An~~an unrelated third party is typically the general partner or managing member who has control over the significant activities of ~~such~~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 structures due to the general partner’s or managing member’s ability to manage the entity, which is indicative of the general partner’s or managing member’s power over the entity. The Company’s ~~expected~~ maximum exposure to loss in connection with these partnerships consists of the unamortized investment balance and any tax credits claimed that may become subject to recapture.

Special purpose entities formed in connection with securitization transactions are generally considered VIEs. A CLO is a VIE that ~~manages~~purchases a pool of assets consisting primarily of ~~broadly syndicated~~non-investment grade corporate loans, ~~where~~and issues multiple tranches of notes ~~are issued~~ to ~~investors.~~investors to fund the asset purchases and pay upfront expenses associated with forming the CLO. The Company served as the collateral manager of a CLO that closed in 2019 and subsequently ~~sold~~reassigned its portfolio ~~management contract~~manager responsibilities in ~~2020 but~~2020. The Company retained the top three investment grade-rated tranches issued by the CLO, for which ~~had a~~the total carrying amount ~~of $291.6~~was $281.2 million and ~~$287.5~~$291.7 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Note 89 — Goodwill ~~and Other Intangible Assets~~

~~Goodwill~~

Total goodwill was $465.7 million as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company’s ~~annual~~ goodwill impairment ~~testing~~test is performed annually, as of December 31, ~~of each year,~~ or more frequently asif events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. Based on the Company’s annual goodwill impairment testing as of December 31, 2021, there was no impairment. Additional information pertaining to the Company’s accounting policy for goodwill is summarized in Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Goodwill and Other Intangible Assetsto the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form 10-K. ~~The Company completed its annual goodwill impairment testing as of December 31, 2020, and determined there was no goodwill impairment.~~ As of September 30, ~~2021,~~2022, the Company reviewed ~~the macroeconomic conditions, including the impacts of the COVID-19 pandemic on~~recent market movements, as well as its business performance and market capitalization, and concluded that goodwill was not impaired.

~~Core Deposit Intangibles~~

~~The following table presents the gross carrying amount of core deposit intangible assets and accumulated amortization as of September 30, 2021 and December 31, 2020:~~

($ in thousands) September 30, 2021 December 31, 2020
Gross balance (1)
$ 86,099 $ 86,099
Accumulated amortization (1)
(81,869) (79,722)
Net carrying balance (1)
$ 4,230 $ 6,377

~~(1)Excludes fully amortized core deposit intangible assets.~~

~~There were no impairment write-downs on core deposit intangibles during the three and nine months ended September 30, 2021 and 2020.~~

~~Amortization Expense~~

The Company amortizes the core deposit intangibles based on the projected useful lives of the related deposits. The amortization expense related to the core deposit intangible assets was $706 thousand and $927 thousand for the three months ended September 30, 2021 and 2020, respectively, and $2.1 million and $2.8 million for the nine months ended September 30, 2021 and 2020, respectively.

~~The following table presents the estimated future amortization expense of core deposit intangibles as of September 30, 2021:~~

($ in thousands) Amount
Remainder of 2021 $ 602
2022 1,865
2023 1,199
2024 553
2025 11
Total $ 4,230

Note 910 — Commitments and Contingencies

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

The following table presents the Company’s credit-related commitments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021										December 31, 2020			September 30, 2022										December 31, 2021
($ in thousands)	($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total		($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total
Loan commitments	Loan commitments	$	3,043,712	$	127,951	$	2,678,519	$	654,213	$	6,504,395	$	5,690,847	Loan commitments	$	2,961,900	$	2,103,347	$	1,130,044	$	1,614,124	$	7,809,415	$	6,911,398
Commercial letters of credit and SBLCs	Commercial letters of credit and SBLCs	983,663		475,826		142,714		590,644		2,192,847		2,240,813		Commercial letters of credit and SBLCs	689,949		438,336		55,015		1,085,513		2,268,813		2,221,699
Total	Total	$	4,027,375	$	603,777	$	2,821,233	$	1,244,857	$	8,697,242	$	7,931,660	Total	$	3,651,849	$	2,541,683	$	1,185,059	$	2,699,637	$	10,078,228	$	9,133,097

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

Commercial letters of credit are issued to facilitate domestic and foreign trade transactions, while SBLCs are generally contingent upon the failure of the customers to perform according to the terms of the underlying contract with the third party. As a result, the total contractual amounts do not necessarily represent future funding requirements. The Company’s historical experience is that SBLCs typically expire without being funded. Additionally, in many cases, the Company holds collateral in various forms against these SBLCs. As 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, ~~2021,~~2022, total letters of credit of ~~$2.19~~$2.27 billion consisted of SBLCs of ~~$2.15~~$2.23 billion and commercial letters of credit of ~~$43.6~~$39.4 million. As of December 31, ~~2020,~~2021, total letters of credit of ~~$2.24~~$2.22 billion consisted of SBLCs of ~~$2.12~~$2.14 billion and commercial letters of credit of ~~$124.9~~$78.9 million. As of both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, substantially all SBLCs were rated as “Pass” by the Bank’s internal credit risk rating system.

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

Estimated exposure to loss from these commitments is included in the allowance for unfunded credit commitments and amounted to ~~$28.0~~$24.0 million and ~~$33.5~~$27.5 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Guarantees — From time to time, the Company sells or securitizes single-family and multifamily residential loans with recourse in the ordinary course of business. The Company is obligated to repurchase up to the recourse ~~percentage~~component of the loans if the loans default. The following table presents the carrying amounts of loans sold or securitized with recourse and the maximum potential future payments as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		Maximum Potential Future Payments												Carrying Value
		September 30, 2021										December 31, 2020		September 30, 2021		December 31, 2020
($ in thousands)	($ in thousands)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Total		Total		Total					($ in thousands)		Maximum Potential Future Payments																						Carrying Value
($ in thousands)																			September 30, 2022														December 31, 2021				September 30, 2022				December 31, 2021
																			Expire in One Year or Less				Expire After One Year Through Three Years				Expire After Three Years Through Five Years		Expire After Five Years				Total				Total				Total				Total
	Single-family residential loans sold or securitized with recourse	$	48	$	341	$	95	$	7,840	$	8,324	$	10,526	$	8,324	$	10,526					Single-family residential loans sold or securitized with recourse			$	25					$	126			$	31			$	6,752			$	6,934			$	7,926			$	6,934			$	7,926
Multi-family residential loans sold or securitized with recourse		—		192		—		14,996		15,188		15,672		23,889		26,619
Multifamily residential loans sold or securitized with recourse																		Multifamily residential loans sold or securitized with recourse		—					—			—			14,996				14,996				14,996				21,624				23,169
Total	Total	$	48	$	533	$	95	$	22,836	$	23,512	$	26,198	$	32,213	$	37,145				Total		$	25					$	126			$	31			$	21,748			$	21,930			$	22,922			$	28,558			$	31,095

The Company’s recourse reserve related to these guarantees is included in the allowance for unfunded credit commitments and totaled ~~$45~~$36 thousand and ~~$88~~$29 thousand as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The allowance for unfunded credit commitments is included in Accrued expenses and other liabilities on the Consolidated Balance Sheet. The Company continues to experience minimal losses from the single-family and multifamily residential loan portfolios sold or securitized with recourse.

Litigation — The Company is a party to various legal actions arising in the ordinary course of its business. In accordance with ASC 450, Contingencies, the Company accrues reserves for outstanding lawsuits, claims and proceedings when a loss contingency is probable and can be reasonably estimated. The Company estimates the amount of loss contingencies using current available information from legal proceedings, advice from legal counsel and available insurance coverage. Due to the inherent subjectivity of the assessments and unpredictability of the outcomes of the legal proceedings, any amounts accrued or included in this aggregate amount may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s exposure and ultimate losses may be higher, and possibly significantly more, than the amounts accrued.

Other Commitments — The Company has commitments to invest in qualified affordable housing partnerships, tax credit and other investments as discussed in Note 78 — Investments in Qualified Affordable Housing Partnerships, Tax Credit and Other Investments, Net and Variable Interest Entities to the Consolidated Financial Statements in this Form 10-Q. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, these commitments were ~~$343.0~~$408.5 million and ~~$182.7~~$309.6 million, respectively. These commitments are included in Accrued expenses and other liabilities on the Consolidated Balance Sheet.

Note 1011 — Stock Compensation Plans

Pursuant to the Company’s ~~2016~~2021 Stock Incentive Plan, as amended, the Company may issue stocks, stock options, restricted stock, restricted stock units (“RSUs”), including performance-based RSUs, stock purchase warrants, stock appreciation rights, phantom stock and dividend equivalents to eligible employees, non-employee directors, consultants, and other service providers of the Company and its subsidiaries. ~~The Company has granted~~There were no outstanding awards other than RSUs ~~as its primary incentive awards. Stock options have not been issued since 2011 and no stock options were outstanding~~ as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

4953

The following table presents a summary of the total share-based compensation expense and the related net tax benefits ~~(deficiencies)~~ associated with the Company’s various employee share-based compensation plans for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Stock compensation costs	Stock compensation costs	$	8,022	$	7,921	$	24,047	$	22,201	Stock compensation costs	$	12,329	$	8,022	$	29,338	$	24,047
Related net tax benefits (deficiencies) for stock compensation plans		$	42	$	(14)	$	1,699	$	(1,589)
Related net tax benefits for stock compensation plans										Related net tax benefits for stock compensation plans	$	1	$	42	$	5,269	$	1,699

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

Compensation costs are calculated using the quoted market price of the Company’s common stock at the grant date. Compensation costs for certain time-based awards that will be settled in cash are adjusted to fair value based on changes in the share price of the Company’s common stock up to the settlement date. For performance-based RSUs, the compensation costs are based on grant date fair value which considers both performance and market conditions, and is subject to subsequent adjustments based on the Company’s outcome in meeting the performance criteria at the end of the performance period. Compensation costs of both ~~time-based~~time and performance-based awards are estimated based on awards ultimately expected to vest, and are recognized net of estimated forfeitures on a straight-line basis from the grant date until the vesting date of each grant. For accounting on stock-based compensation plans, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Stock-Based Compensation to the Consolidated Financial Statements of the Company’s ~~2020~~2021 Form 10-K for additional information.

During the nine months ended September 30, 2022, the Company modified 31,523 time-based RSUs held by 119 foreign employees from vesting in cash to vesting in shares without changing any of the other terms. There was no incremental compensation expense recognized as a result of the modification for the three and nine months ended September 30, 2022.

The following table presents a summary of the activities for the Company’s time-based and performance-based RSUs that will be settled in shares for the nine months ended September 30, ~~2021.~~2022. The number of performance-based RSUs stated below reflects the number of awards granted on the grant date.


		Time-Based RSUs	Performance-Based RSUs							Time-Based RSUs	Performance-Based RSUs
			Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value					Shares	Weighted- Average Grant Date Fair Value		Shares	Weighted- Average Grant Date Fair Value
Outstanding, January 1, 2021			1,345,524	$	50.22	398,057	$	53.66
Outstanding, January 1, 2022									Outstanding, January 1, 2022			1,329,946	$	52.65	369,731	$	54.28
Modified from cash-settled RSUs									Modified from cash-settled RSUs			31,523	77.28		—	—
Granted	Granted		396,002	71.47		91,960	77.67		Granted			430,815	78.42		91,874	77.91
Vested	Vested		(295,156)	67.13		(120,286)	70.13		Vested			(371,032)	53.12		(125,213)	54.64
Forfeited	Forfeited		(106,245)	55.65		—	—		Forfeited			(106,562)	61.76		—	—
Outstanding, September 30, 2021			1,340,125	$	52.35	369,731	$	54.28
Outstanding, September 30, 2022									Outstanding, September 30, 2022			1,314,690	$	60.81	336,392	$	60.60

The following table presents a summary of the activities for the Company’s time-based RSUs that ~~will be vested in cash~~are cash-settled for the nine months ended September 30, ~~2021:~~2022. During the nine months ended September 30, 2022, the amount of cash paid to settle the RSUs that vested was $318 thousand.

Outstanding, January 1, ~~2021~~2022

32,647

Modified to share-settled RSUs

~~21,802~~ (31,523)

Granted

~~15,803~~2,668

Vested

— (3,471)

Forfeited

~~(9,106)~~(321)

Outstanding, September 30, ~~2021~~2022

~~28,499~~—

As of September 30, ~~2021,~~2022, there were ~~$28.3~~$28.5 million and ~~$16.6~~$17.0 million of total unrecognized compensation costs related to unvested time-based and performance-based RSUs, respectively. Both of these costs are expected to be recognized over a weighted-average period of 1.92 ~~years.~~years and 1.93 years, respectively.

Note 1112 — Stockholders’ Equity and Earnings Per Share

The following table presents the basic and diluted EPS calculations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. For more information on the calculation of EPS, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Earnings Per Share to the Consolidated Financial Statements of the Company’s ~~2020~~2021 Form 10-K.

($ and shares in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Basic:
Net income $ 225,449 $ 159,537 $ 655,185 $ 403,713
Basic weighted-average number of shares outstanding 141,880 141,498 141,799 142,595
Basic EPS $ 1.59 $ 1.13 $ 4.62 $ 2.83
Diluted:
Net income $ 225,449 $ 159,537 $ 655,185 $ 403,713
Basic weighted-average number of shares outstanding 141,880 141,498 141,799 142,595
Diluted potential common shares (1)
1,263 545 1,252 487
Diluted weighted-average number of shares outstanding (1)
143,143 142,043 143,051 143,082
Diluted EPS $ 1.57 $ 1.12 $ 4.58 $ 2.82

~~(1)Includes dilutive shares from RSUs for the three and nine months ended September 30, 2021 and 2020.~~



($ and shares in thousands, except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Basic:
Net income	$	295,339	$	225,449	$	791,320	$	655,185
Weighted-average number of shares outstanding	140,917		141,880		141,453		141,799
Basic EPS	$	2.10	$	1.59	$	5.59	$	4.62
Diluted:
Net income	$	295,339	$	225,449	$	791,320	$	655,185
Weighted-average number of shares outstanding	140,917		141,880		141,453		141,799
Add: Dilutive impact of unvested RSUs	1,094		1,263		1,148		1,252
Diluted weighted-average number of shares outstanding	142,011		143,143		142,601		143,051
Diluted EPS	$	2.08	$	1.57	$	5.55	$	4.58

For the three and nine months ended September 30, ~~2021, 2000 and 6000 weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS computation. In comparison, 124~~2022, approximately 61 thousand and ~~123~~58 thousand weighted-average shares of anti-dilutive RSUs, respectively, were excluded from the diluted EPS ~~computation~~computations. In comparison, two thousand and six thousand weighted-average shares of anti-dilutive RSUs were excluded from the diluted EPS computations for the three and nine months ended September 30, ~~2020~~.2021, respectively.

Stock Repurchase Program— In 2020, the Company’s Board of Directors authorized a stock repurchase program to buy back up to $500.0 million of the Company’s common ~~stock, and~~stock. For the three months ended September 30, 2022, there were no share repurchases. For the nine months ended September 30, 2022, the Company repurchased ~~4,471,682~~1,385,517 shares at an average price of ~~$32.64~~$72.17 per share ~~for~~at a total cost of ~~$146.0~~$100.0 million. ~~In comparison, the~~The Company did not repurchase any shares during the three and nine months ended September 30, 2021.

Note 1213 — Accumulated Other Comprehensive Income (Loss)

The following ~~table presents~~tables present the changes in the components of AOCI balances for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	AFS Debt Securities		Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total		($ in thousands)	Debt Securities			Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
Balance, July 1, 2020		$	42,850	$	(1,333)	$	(18,383)	$	23,134
Net unrealized gains arising during the period		5,126		25		5,459		10,610
Amounts reclassified from AOCI		(492)		62		—		(430)
Changes, net of tax		4,634		87		5,459		10,180
Balance, September 30, 2020		$	47,484	$	(1,246)	$	(12,924)	$	33,314

Balance, July 1, 2021	Balance, July 1, 2021	$	(8,152)	$	(730)	$	(5,807)	$	(14,689)	Balance, July 1, 2021	$	(8,152)		$	(730)	$	(5,807)	$	(14,689)
Net unrealized losses arising during the period	Net unrealized losses arising during the period	(40,928)		(121)		(1,752)		(42,801)		Net unrealized losses arising during the period	(40,928)			(121)		(1,752)		(42,801)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(250)		172		—		(78)		Amounts reclassified from AOCI	(250)			172		—		(78)
Changes, net of tax	Changes, net of tax	(41,178)		51		(1,752)		(42,879)		Changes, net of tax	(41,178)			51		(1,752)		(42,879)
Balance, September 30, 2021	Balance, September 30, 2021	$	(49,330)	$	(679)	$	(7,559)	$	(57,568)	Balance, September 30, 2021	$	(49,330)		$	(679)	$	(7,559)	$	(57,568)

Balance, July 1, 2022										Balance, July 1, 2022	$	(554,781)		$	(30,846)	$	(15,021)	$	(600,648)
Net unrealized losses arising during the period										Net unrealized losses arising during the period	(161,445)			(34,423)		(7,926)		(203,794)
Amounts reclassified from AOCI										Amounts reclassified from AOCI	3,256			1,154		—		4,410
Changes, net of tax										Changes, net of tax	(158,189)			(33,269)		(7,926)		(199,384)
Balance, September 30, 2022										Balance, September 30, 2022	$	(712,970)	(2)	$	(64,115)	$	(22,947)	$	(800,032)


($ in thousands)	($ in thousands)	AFS Debt Securities		Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total		($ in thousands)	Debt Securities			Cash Flow Hedges		Foreign Currency Translation Adjustments (1)		Total
Balance, January 1, 2020		$	(2,419)	$	—	$	(15,989)	$	(18,408)
Net unrealized gains (losses) arising during the period		58,262		(1,038)		3,065		60,289
Amounts reclassified from AOCI		(8,359)		(208)		—		(8,567)
Changes, net of tax		49,903		(1,246)		3,065		51,722
Balance, September 30, 2020		$	47,484	$	(1,246)	$	(12,924)	$	33,314

Balance, January 1, 2021	Balance, January 1, 2021	$	52,247	$	(1,230)	$	(6,692)	$	44,325	Balance, January 1, 2021	$	52,247		$	(1,230)	$	(6,692)	$	44,325
Net unrealized (losses) gains arising during the period	Net unrealized (losses) gains arising during the period	(100,747)		108		(867)		(101,506)		Net unrealized (losses) gains arising during the period	(100,747)			108		(867)		(101,506)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(830)		443		—		(387)		Amounts reclassified from AOCI	(830)			443		—		(387)
Changes, net of tax	Changes, net of tax	(101,577)		551		(867)		(101,893)		Changes, net of tax	(101,577)			551		(867)		(101,893)
Balance, September 30, 2021	Balance, September 30, 2021	$	(49,330)	$	(679)	$	(7,559)	$	(57,568)	Balance, September 30, 2021	$	(49,330)		$	(679)	$	(7,559)	$	(57,568)

Balance, January 1, 2022										Balance, January 1, 2022	$	(85,703)		$	257	$	(4,935)	$	(90,381)
Net unrealized losses arising during the period										Net unrealized losses arising during the period	(635,664)			(63,232)		(18,012)		(716,908)
Amounts reclassified from AOCI										Amounts reclassified from AOCI	8,397			(1,140)		—		7,257
Changes, net of tax										Changes, net of tax	(627,267)			(64,372)		(18,012)		(709,651)
Balance, September 30, 2022										Balance, September 30, 2022	$	(712,970)	(2)	$	(64,115)	$	(22,947)	$	(800,032)

(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~~is RMB and USD, respectively.

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

The following ~~table presents~~tables present 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, ~~2021~~2022 and ~~2020:~~2021:

($ in thousands) Three Months Ended September 30,
2021 2020
Before-Tax Tax Effect Net-of-Tax Before-Tax Tax Effect Net-of-Tax
AFS debt securities:
Net unrealized (losses) gains arising during the period $ (58,138) $ 17,210 $ (40,928) $ 7,304 $ (2,178) $ 5,126
Net realized (gains) reclassified into net income (1)
(354) 104 (250) (698) 206 (492)
Net change (58,492) 17,314 (41,178) 6,606 (1,972) 4,634
Cash flow hedges:
Net unrealized (losses) gains arising during the period (170) 49 (121) 34 (9) 25
Net realized losses reclassified into net income (2)
241 (69) 172 87 (25) 62
Net change 71 (20) 51 121 (34) 87
Foreign currency translation adjustments, net of hedges:
Net unrealized (losses) gains arising during the period (1,878) 126 (1,752) 4,419 1,040 5,459
Net change (1,878) 126 (1,752) 4,419 1,040 5,459
Other comprehensive (loss) income $ (60,299) $ 17,420 $ (42,879) $ 11,146 $ (966) $ 10,180



($ in thousands)	Three Months Ended September 30,
	2022						2021
	Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
Debt securities:
Net unrealized losses arising during the period	$	(229,246)	$	67,801	$	(161,445)	$	(58,138)	$	17,210	$	(40,928)
Reclassification adjustments:
Net realized gains reclassified into net income (1)	—		—		—		(354)		104		(250)
Amortization of unrealized losses on transferred securities (2)	4,623		(1,367)		3,256		—		—		—
Net change	(224,623)		66,434		(158,189)		(58,492)		17,314		(41,178)
Cash flow hedges:
Net unrealized losses arising during the period	(48,325)		13,902		(34,423)		(170)		49		(121)
Net realized losses reclassified into net income (3)	1,619		(465)		1,154		241		(69)		172
Net change	(46,706)		13,437		(33,269)		71		(20)		51
Foreign currency translation adjustments, net of hedges:
Net unrealized losses arising during the period	(6,676)		(1,250)		(7,926)		(1,878)		126		(1,752)
Net change	(6,676)		(1,250)		(7,926)		(1,878)		126		(1,752)
Other comprehensive loss	$	(278,005)	$	78,621	$	(199,384)	$	(60,299)	$	17,420	$	(42,879)


($ in thousands)	($ in thousands)	Nine Months Ended September 30,												($ in thousands)	Nine Months Ended September 30,
		2021						2020							2022						2021
		Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax			Before-Tax		Tax Effect		Net-of-Tax		Before-Tax		Tax Effect		Net-of-Tax
AFS debt securities:
Net unrealized (losses) gains arising during the period		$	(143,131)	$	42,384	$	(100,747)	$	82,767	$	(24,505)	$	58,262
Net realized (gains) reclassified into net income (1)		(1,178)		348		(830)		(11,867)		3,508		(8,359)
Debt securities:														Debt securities:
Net unrealized losses arising during the period														Net unrealized losses arising during the period	$	(902,548)	$	266,884	$	(635,664)	$	(143,131)	$	42,384	$	(100,747)
Reclassification adjustments:														Reclassification adjustments:
Net realized gains reclassified into net income (1)														Net realized gains reclassified into net income (1)	(1,306)		386		(920)		(1,178)		348		(830)
Amortization of unrealized losses on transferred securities (2)														Amortization of unrealized losses on transferred securities (2)	13,228		(3,911)		9,317		—		—		—
Net change	Net change	(144,309)		42,732		(101,577)		70,900		(20,997)		49,903		Net change	(890,626)		263,359		(627,267)		(144,309)		42,732		(101,577)
Cash flow hedges:	Cash flow hedges:													Cash flow hedges:
Net unrealized gains (losses) arising during the period		150		(42)		$	108	(1,449)		411		(1,038)
Net realized losses (gains) reclassified into net income (2)		619		(176)		443		(290)		82		(208)
Net unrealized (losses) gains arising during the period														Net unrealized (losses) gains arising during the period	(88,771)		25,539		(63,232)		150		(42)		108
Net realized (gains) losses reclassified into net income (3)														Net realized (gains) losses reclassified into net income (3)	(1,601)		461		(1,140)		619		(176)		443
Net change	Net change	769		(218)		551		(1,739)		493		(1,246)		Net change	(90,372)		26,000		(64,372)		769		(218)		551
Foreign currency translation adjustments, net of hedges:	Foreign currency translation adjustments, net of hedges:													Foreign currency translation adjustments, net of hedges:
Net unrealized (losses) gains arising during the period		(1,603)		736		(867)		2,274		791		3,065
Net unrealized losses arising during the period														Net unrealized losses arising during the period	(16,276)		(1,736)		(18,012)		(1,603)		736		(867)
Net change	Net change	(1,603)		736		(867)		2,274		791		3,065		Net change	(16,276)		(1,736)		(18,012)		(1,603)		736		(867)
Other comprehensive (loss) income		$	(145,143)	$	43,250	$	(101,893)	$	71,435	$	(19,713)	$	51,722
Other comprehensive loss														Other comprehensive loss	$	(997,274)	$	287,623	$	(709,651)	$	(145,143)	$	43,250	$	(101,893)

(1)~~For the three and nine months ended September 30, 2021 and 2020, pre-tax~~Pre-tax amounts were reported in Gains on sales of AFS debt securities on the Consolidated Statement of Income.

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

(3)Pre-tax amounts related to cash flow hedges on CRE loans and ~~nine months ended September 30, 2021 and 2020, pre-tax amounts~~long-term borrowings were reported in Interest and dividend income andin Interest expense,respectively, on the Consolidated Statement of Income.

Note 1314 — Business Segments

The Company organizes its operations into 3three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served, and the related products and services provided. The segments reflect how financial information is currently evaluated by management. Operating segment results are based on the Company’s internal management reporting process, which reflects assignments and allocations of certain balance sheet and income statement items. The information presented is not indicative of how the segments would perform if they operated as independent entities due to the interrelationships among the segments.

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch network and digital banking platform. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises through the Company’s branch network. Other products and services provided by this segment include wealth management, treasury management, interest rate risk hedging and foreign exchange services.

The Commercial Banking segment primarily generates commercial ~~loans~~loan and ~~deposits.~~deposit products. Commercial loan products include ~~commercial business loans and~~CRE lending, construction finance, working capital lines of credit, trade finance, ~~loans and~~ letters of credit, ~~CRE loans, construction and land loans,~~commercial business lending, affordable housing ~~loans and letters of credit,~~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 support to the 2two core segments, namely the Consumer and Business Banking and the Commercial Banking segments.

The Company utilizes an internal reporting process to measure the performance of the 3three operating segments within the Company. The internal reporting process derives operating segment results by utilizing allocation methodologies for revenues and expenses. Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process. Noninterest income and noninterest expense directly attributable to a business segment are assigned to that segment. Indirect costs, including technology-related costs and corporate overhead, are allocated based on a segment’s estimated usage using factors including but not limited to, full-time equivalent employees, net interest income, and loan and deposit volume. Charge-offs are recorded to the segment directly associated with the respective loans charged off, and provision for credit losses is recorded to the segments based on the related loans for which allowances are evaluated. The Company’s internal reporting process utilizes a full-allocation methodology. Under this methodology, corporate and indirect expenses incurred by the Other segment are allocated to the Consumer and Business Banking and the Commercial Banking segments, except certain corporate treasury-related expenses and insignificant unallocated expenses.

The corporate treasury function within the Other segment is responsible for the Company’s liquidity and interest rate management. The Company’s internal FTP process is also managed by the corporate treasury function within the Other segment. The 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’ net interest margins and profitability. The FTP process charges a cost to fund loans (“FTP charges for loans”) and allocates credits for funds provided from deposits (“FTP credits for deposits”) using internal FTP rates. FTP charges for loans are determined based on a matched cost of funds, which is tied to the pricing and term characteristics of the loans. FTP credits for deposits are based on matched funding credit rates, which are tied to the implied or stated maturity of the deposits. FTP credits for deposits reflect the long-term value generated by the deposits. The net spread between the total internal FTP charges and credits is recorded as part of net interest income in the Other segment. The FTP process transfers the corporate interest rate risk exposure to the treasury function within the Other segment, where such exposures are centrally managed. The Company’s internal FTP assumptions and methodologies are reviewed at least annually to ensure that the process is reflective of current market conditions.

The following tables present the operating results and other key financial measures for the individual operating segments as of and for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Three Months Ended September 30, 2021
Net interest income before provision for (reversal of) credit losses $ 176,678 $ 189,791 $ 29,237 $ 395,706
Provision for (reversal of) credit losses 1,293 (11,293) — (10,000)
Noninterest income 22,446 42,925 7,738 73,109
Noninterest expense 90,575 66,688 48,121 205,384
Segment income (loss) before income taxes 107,256 177,321 (11,146) 273,431
Segment net income $ 76,825 $ 126,767 $ 21,857 $ 225,449
As of September 30, 2021
Segment assets $ 14,687,023 $ 27,861,690 $ 18,410,397 $ 60,959,110



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






Net interest income before provision for credit losses	$	326,411	$	222,996	$	2,402	$	551,809
Provision for credit losses	8,974		18,026		—		27,000
Noninterest income (loss)	30,819		48,641		(3,908)		75,552
Noninterest expense	104,005		81,386		30,582		215,973
Segment income (loss) before income taxes	244,251		172,225		(32,088)		384,388

Segment net income (loss)	$	173,982	$	122,869	$	(1,512)	$	295,339
As of September 30, 2022

Segment assets	$	17,002,000	$	32,836,381	$	12,737,680	$	62,576,061



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






Net interest income before provision for (reversal of) credit losses	$	176,678	$	189,791	$	29,237	$	395,706
Provision for (reversal of) credit losses	1,293		(11,293)		—		(10,000)
Noninterest income (1)	22,099		43,272		7,738		73,109
Noninterest expense	90,575		66,731		48,078		205,384
Segment income (loss) before income taxes (1)	106,909		177,625		(11,103)		273,431

Segment net income (1)	$	76,577	$	126,984	$	21,888	$	225,449
As of September 30, 2021

Segment assets	$	14,687,023	$	27,861,690	$	18,410,397	$	60,959,110


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






Net interest income (loss) before provision for credit losses	$	823,998	$	662,037	$	(45,661)	$	1,440,374
Provision for credit losses	14,976		33,524		—		48,500
Noninterest income	84,402		145,750		3,587		233,739
Noninterest expense	294,395		235,804		72,084		602,283
Segment income (loss) before income taxes	599,029		538,459		(114,158)		1,023,330

Segment net income (loss)	$	426,695	$	384,237	$	(19,612)	$	791,320
As of September 30, 2022

Segment assets	$	17,002,000	$	32,836,381	$	12,737,680	$	62,576,061

5459

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Three Months Ended September 30, 2020
Net interest income before provision for (reversal of) credit losses $ 120,969 $ 162,884 $ 40,277 $ 324,130
(Reversal of) provision for credit losses (3,470) 13,470 — 10,000
Noninterest income 17,426 28,984 8,093 54,503
Noninterest expense 81,419 61,863 29,291 172,573
Segment income before income taxes 60,446 116,535 19,079 196,060
Segment net income $ 43,310 $ 83,340 $ 32,887 $ 159,537
As of September 30, 2020
Segment assets $ 12,838,625 $ 26,526,173 $ 11,006,679 $ 50,371,477
($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Nine Months Ended September 30, 2021
Net interest income before reversal of credit losses $ 500,352 $ 559,579 $ 65,943 $ 1,125,874
(Reversal of) credit losses (598) (24,402) — (25,000)
Noninterest income 67,728 125,487 21,191 214,406
Noninterest expense 267,511 200,109 118,364 585,984
Segment income (loss) before income taxes 301,167 509,359 (31,230) 779,296
Segment net income $ 215,720 $ 364,632 $ 74,833 $ 655,185
As of September 30, 2021
Segment assets $ 14,687,023 $ 27,861,690 $ 18,410,397 $ 60,959,110

($ in thousands) Consumer and
Business
Banking Commercial
Banking Other Total
Nine Months Ended September 30, 2020
Net interest income before provision for credit losses $ 398,486 $ 530,181 $ 101,945 $ 1,030,612
Provision for credit losses 9,908 176,405 — 186,313
Noninterest income 47,771 95,327 22,617 165,715
Noninterest expense 248,547 196,889 92,235 537,671
Segment income before income taxes 187,802 252,214 32,327 472,343
Segment net income $ 134,563 $ 180,649 $ 88,501 $ 403,713
As of September 30, 2020
Segment assets $ 12,838,625 $ 26,526,173 $ 11,006,679 $ 50,371,477


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






Net interest income before reversal of credit losses	$	500,352	$	559,579	$	65,943	$	1,125,874
Reversal of credit losses	(598)		(24,402)		—		(25,000)
Noninterest income (1)	69,873		123,342		21,191		214,406
Noninterest expense	267,511		204,042		114,431		585,984
Segment income (loss) before income taxes (1)	303,312		503,281		(27,297)		779,296

Segment net income (1)	$	217,257	$	360,275	$	77,653	$	655,185
As of September 30, 2021

Segment assets	$	14,687,023	$	27,861,690	$	18,410,397	$	60,959,110

(1)

~~Note 14 — Subsequent Events~~

~~On October 21,~~During the fourth quarter of 2021, the ~~Company’s Board~~Company enhanced its segment allocation methodology related to the fair values of ~~Directors declared~~interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, ~~cash dividends~~have since been reclassified between “Consumer and Business Banking” and “Commercial Banking”. Balances for the ~~Company’s common stock. The common stock cash dividend~~third quarter and nine months of ~~$0.33 per share is payable on November 15,~~ 2021 have been reclassified to ~~stockholders of record as of November 1, 2021.~~reflect these allocation changes for comparability.

5560

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

5661

Forward-Looking Statements

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

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

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

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

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

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

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

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

•changes in the commercial and consumer real estate markets;

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

•fluctuations in the Company’s stock price;

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

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

•the soundness of other financial institutions;

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

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

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

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

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

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

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

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

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

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

•impact of adverse judgments or settlements in litigation;

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

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

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

•the impact of regulatory investigations and enforcement actions;

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

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

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

•any future strategic acquisitions or divestitures;

•changes in the equity and debt securities markets;

•fluctuations in foreign currency exchange rates;

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

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

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

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

Overview

The following discussion provides information about the results of operations, financial condition, liquidity and capital resources of ~~East West Bancorp, Inc. (referred to herein on an unconsolidated basis as “East West” and on a consolidated basis as~~ the ~~“Company,” “we” or “EWBC”),~~Company and its subsidiaries, including its subsidiary bank, East West Bank and its subsidiaries (referred to herein as “East West Bank” or the “Bank”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to the Company’s results of operations and financial condition. This discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the accompanying notes presented elsewhere in this report, and the Company’s ~~Annual Report on~~2021 Form ~~10-K for the year ended December 31, 2020, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 26, 2021 (the “Company’s 2020 Form 10-K”).~~10-K.

~~Company Overview~~Organization and Strategy

East West is a bank holding company incorporated in Delaware on August 26, 1998 and is registered under the Bank Holding Company ~~Act.~~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 that ~~has a focus~~focuses on the financial service needs of the Asian-American community. Through over 120 locations in the U.S. and China, the Company provides a full range of consumer and commercial products and services through the following three business segments: (1) Consumer and Business Banking, and (2) Commercial Banking, with the remaining operations recorded in (3) Other. The Company’s principal activity is lending to and accepting deposits from businesses and individuals. The primary source of revenue is net interest income, which is principally derived from the difference between interest earned on loans and debt securities and interest paid on deposits and other funding sources. As of September 30, 2021, the Company had $60.96 billion in assets and approximately 3,100 full-time equivalent employees. For additional information on products and services provided by the Bank, see ~~Item 1. Business — Banking Services~~ ~~of the Company’s 2020 Form 10-K.~~

~~Corporate Strategy~~

We are committed to enhancing long-term ~~shareholder~~stockholder value by growing loans, deposits and revenue, improving profitability, and investing for the future while managing risks, expenses and capital. Our business model is built on promoting customer loyalty and engagement, understanding our customers’ financial goals, and meeting ~~our customers’~~their financial needs through our diverse products and services. The Company’s approach focuses on seeking out and deepening client relationships that meet our risk/return parameters. This guides our decision-making across every aspect of our operations: the products we develop, the expertise we cultivate, and the infrastructure we build to help our customers conduct their businesses. We expect our relationship-focused business model to continue to generate organic growth from existing customers and to expand our targeted customer bases. We continually invest in technology to improve the customer user experience, strengthen critical business infrastructure, and streamline core processes, while appropriately managing operating expenses. Our risk management activities are focused on ensuring thatAs of September 30, 2022, the Company ~~identifies~~had $62.58 billion in assets and ~~manages risks to maintain safety~~approximately 3,200 full-time equivalent employees. For additional information on our strategy, and ~~soundness while maximizing profitability.~~the products and services provided by the Bank, see Item 1. Business — Strategy and Banking Services in the Company’s 2021 Form 10-K.

~~Coronavirus Disease 2019 Global Pandemic~~Developments

~~The Coronavirus Disease 2019 (“COVID-19”)~~Economic Developments

Heightened inflationary pressures caused by rising oil and other commodity prices due to Russia’s invasion of Ukraine, and global supply chain disruptions related to the COVID-19 pandemic ~~has created~~continue to weigh on the economy. Concerns of a ~~historic public health crisis and caused unprecedented disruptions~~potential recession have increased as the federal government continues to ~~global economies. Since the beginning of~~hike interest rates to slow down inflation. Although U.S. economic conditions have continued to recover from the COVID-19 pandemic, the ~~U.S. government has taken various steps to combat the disease and enacted a number~~ongoing effects of monetary and fiscal policies to provide fiscal stimulus and relief. Although the COVID-19 pandemic continues to present public health challenges, including the emergence of new variants, great progress has been made and continues to be made in virus containment and vaccination efforts. While these responses have largely mitigated the impact from the COVID-19 pandemic and propelled the U.S. economy to recovery, the resurgence of the pandemic, the adoption and long-term effectiveness of the vaccines, and other factors including the continuingits impact on ~~global supply chains~~the macroeconomic environment may slow down such progress. As a result, we are unable to quantify all the specific impacts, and the extent to which the COVID-19 pandemic may negatively affect our business, financial condition and results of operations, regulatory capital, and liquidity ratiospersist for ~~the remainder of 2021. The Company has been, and may continue to be, impacted by the pandemic.~~

~~Throughout the COVID-19 pandemic, the Company has been focusing on serving our customers and communities and maintaining the well-being of our employees.~~

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”) to provide additional relief for individuals and businesses affected by the COVID-19 pandemic, including additional funding for the Paycheck Protection Program (“PPP”). The PPP Extension Act of 2021, enacted on March 30, 2021, extended the PPP through May 31, 2021. The Company has been a participating lender in the PPP since 2020. As of September 30, 2021, the Company had approximately 3,600 PPP loans outstanding with balances totaling $807.3 million, which were recorded in the commercial and industrial (“C&I”) loan portfolio. During the first nine months of 2021, the Company submitted and received Small Business Administration (“SBA”) approval for the forgiveness of approximately 7,800 PPP loans, totaling $1.64 billion.

The Company also participated in the Board of Governors of the Federal Reserve System’s (the “Federal Reserve”) Main Street Lending Program (“MSLP”) and funded $233.6 million in MSLP loans as of December 31, 2020. As part of the MSLP, the related Main Street special purpose vehicle purchased 95% participations in the loans originated. The portion retained by the Company totaled $9.9 million and $9.5 million as of September 30, 2021 and December 31, 2020, respectively. The MSLP was terminated on January 8, 2021.

In response to the COVID-19 pandemic, the Company has implemented protocols and processes to execute its business continuity plans to protect its employees and support its customers. As state and local governments have relaxed restrictions on temporary business closures, we have started phasing in the return of our U.S.-based corporate associates to the office.some time. The Company continues to closely monitor the ~~external environment~~economy and ~~make changes to~~ its ~~safety protocols as appropriate. For additional information~~effects on ~~the PPP~~its business, customers, employees, communities and other U.S. government facilities, programs and loan modification relief as established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and our response to the COVID-19 pandemic, refer to ~~Overview~~ — ~~Coronavirus Disease 2019 Global Pandemic~~ ~~section in the Company’s 2020 Form 10-K.~~markets.

Further discussion of the potential impacts on ~~our~~the Company’s business due to ~~the COVID-19 pandemic is~~interest rate hikes have been provided in Item 1A1A. — Risk Factors — Risks Related to Financial Matters ofin the ~~the~~ Company’s ~~2020~~2021 Form 10-K.

LIBOR Transition

LIBOR is a widely referenced benchmark rate that is intended to reflect the rate at which banks can borrow wholesale funds from other banks on an unsecured and short-term basis. In March 2021, the United Kingdom’s Financial Conduct Authority and Intercontinental Exchange Benchmark Administration announced that the one-week and two-month USD LIBOR settings and non-USD LIBOR settings would cease to be published after December 31, 2021. The publication of the overnight, one-, three-, six- and 12-month USD LIBOR settings has been extended through June 30, 2023, which will provide additional time to wind down or renegotiate existing contracts that reference these LIBOR settings.

In March 2022, President Biden signed into law the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”). The LIBOR Act provides a clear and uniform federal solution to transition legacy LIBOR-based contracts that either contain insufficient contractual fallback provisions addressing the LIBOR cessation and its transition to a benchmark selected by the Federal Reserve or lack contractual fallback provisions entirely. The LIBOR Act also establishes a safe harbor for lenders, shielding lenders from potential litigation resulting from their choice of a replacement rate, under certain situations including the use of a Federal Reserve-selected replacement rate based on the Secured Overnight Financing Rate (“SOFR”). The Federal Reserve published its proposed rulemaking that implements the LIBOR Act in the Federal Register in July 2022, which establishes benchmark replacement recommendations for various product types.

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

The Company started offering loans based on alternative reference rates, including SOFR and the Bloomberg Short-Term Bank Yield Index during the fourth quarter of 2021, and ceased offering new LIBOR loans and LIBOR loan renewals beginning January 1, 2022. The Company continues to engage with customers to proactively modify LIBOR-based product contracts and transition to a benchmark replacement prior to June 30, 2023. The Company will leverage relevant contractual and statutory solutions, if necessary, including the LIBOR Act and other relevant legislation, to transition any residual LIBOR-based product exposures maturing after June 2023 to appropriate benchmark replacements. The Company’s LIBOR transition is anticipated to continue through June 30, 2023.

The Company will continue to monitor potential risks and impacts associated with the transition. For additional information related to the potential impact surrounding the transition from LIBOR on the Company’s business, see Item 1A. Risk Factors — Risks Related to Financial Matters in the Company’s 2021 Form 10-K.

Deposit Insurance Assessment Rates

In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment rate schedules uniformly for insured depository institutions by two basis points (“bps”), beginning in the first quarterly assessment period of 2023. The increase in the assessment rate schedules is intended to: (1) increase the likelihood that the reserve ratio of the Deposit Insurance Fund (“DIF”) will reach at least 1.35 percent by the statutory deadline of September 30, 2028; (2) reduce the FDIC’s need to consider a potentially pro-cyclical assessment rate increase, and (3) support growth in the DIF in progressing towards the FDIC’s long-term goal of a 2 percent Designated Reserve Ratio. The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2 percent. As a result of the adoption of the assessment rate schedules, the FDIC insurance costs of the Bank will likely increase but not have a material impact on its consolidated financial statements.

Community Reinvestment Act

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

Inflation Reduction Act

On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act of 2022. The bill contains numerous tax provisions, including a 15 percent corporate minimum tax. At this point, the legislation is not expected to have a material impact on the Company’s consolidated financial statements.

~~Selected Financial Data~~

($ and shares in thousands, except per share, ratio and headcount data) Three Months Ended Nine Months Ended
September 30,
2021 June 30,
2021 September 30,
2020 September 30,
2021 September 30,
2020
Summary of operations:
Net interest income before provision for credit losses (1)
$ 395,706 $ 376,473 $ 324,130 $ 1,125,874 $ 1,030,612
Noninterest income 73,109 68,431 54,503 214,406 165,715
Total revenue 468,815 444,904 378,633 1,340,280 1,196,327
(Reversal of) provision for credit losses (10,000) (15,000) 10,000 (25,000) 186,313
Noninterest expense 205,384 189,523 172,573 585,984 537,671
Income before income taxes 273,431 270,381 196,060 779,296 472,343
Income tax expense 47,982 45,639 36,523 124,111 68,630
Net income (1)
$ 225,449 $ 224,742 $ 159,537 $ 655,185 $ 403,713
Per common share:
Basic earnings $ 1.59 $ 1.58 $ 1.13 $ 4.62 $ 2.83
Diluted earnings $ 1.57 $ 1.57 $ 1.12 $ 4.58 $ 2.82
Dividends declared $ 0.330 $ 0.330 $ 0.275 $ 0.990 $ 0.825
Book value $ 40.10 $ 39.10 $ 36.22 $ 40.10 $ 36.22
Non-Generally Accepted Accounting Principles (“GAAP”) tangible common equity (2)
$ 36.75 $ 35.75 $ 32.85 $ 36.75 $ 32.85
Weighted-average number of shares outstanding:
Basic 141,880 141,868 141,498 141,799 142,595
Diluted 143,143 143,040 142,043 143,051 143,082
Common shares outstanding at period-end 141,884 141,878 141,507 141,884 141,507
Performance metrics:
Return on average assets (“ROA”) 1.46 % 1.56 % 1.26 % 1.50 % 1.13 %
Return on average equity (“ROE”) 15.75 % 16.61 % 12.50 % 15.98 % 10.73 %
Return on average non-GAAP tangible equity (2)
17.25 % 18.28 % 13.88 % 17.56 % 11.95 %
Total average equity to total average assets 9.26 % 9.39 % 10.11 % 9.41 % 10.53 %
Common dividend payout ratio 21.05 % 21.11 % 24.74 % 21.72 % 29.58 %
Net interest margin 2.70 % 2.75 % 2.72 % 2.72 % 3.05 %
Efficiency ratio (3)
43.81 % 42.60 % 45.58 % 43.72 % 44.94 %
Non-GAAP efficiency ratio (2)
35.55 % 36.30 % 40.79 % 36.80 % 39.14 %
At period end:
Total assets $ 60,959,110 $ 59,854,876 $ 50,371,477
Interest-earning assets $ 57,981,485 $ 57,050,261 $ 47,972,639
Total loans (4)
$ 40,481,705 $ 40,073,318 $ 37,441,277
Available-for-sale (“AFS”) debt securities $ 9,713,006 $ 8,399,460 $ 4,539,160
Total deposits $ 53,356,190 $ 52,582,575 $ 41,680,555
Long-term debt
$ 147,586 $ 147,515
$ 1,574.765 (5)
Federal Home Loan Bank (“FHLB”) advances $ 248,898 $ 248,464 $ 657,185
Stockholders’ equity $ 5,690,201 $ 5,547,548 $ 5,126,106
Non-GAAP tangible common equity (2)
$ 5,214,655 $ 5,071,542 $ 4,648,040
Head count (full-time equivalent) 3,085 3,161 3,208
EWBC capital ratios:
Common Equity Tier 1 (“CET1”) capital 12.8 % 12.8 % 12.8 %
Tier 1 capital 12.8 % 12.8 % 12.8 %
Total capital 14.2 % 14.3 % 14.5 %
Tier 1 leverage capital 8.8 % 9.1 % 9.8 %
Total stockholders’ equity to total assets 9.3 % 9.3 % 10.2 %
Non-GAAP tangible common equity to tangible assets (2)
8.6 % 8.5 % 9.3 %

~~(1)~~Includes $15.2 million, $15.4 million and $7.8 million of interest income related to PPP loans for the second and third quarter of 2021, and third quarter of 2020, respectively, and $45.6 million and $29.1 million for the first nine months of 2021 and 2020, respectively.

~~(2)~~For a discussion of non-GAAP tangible common equity per share, return on average non-GAAP tangible equity, non-GAAP efficiency ratio, non-GAAP tangible common equity and non-GAAP tangible common equity to tangible assets, 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 Quarterly Report on Form 10-Q (“this Form 10-Q”).~~

~~(3)The efficiency ratio is noninterest expense divided by total revenue.~~

~~(4)Includes $807.3 million, $1.43 billion and $1.77 billion of PPP loans as of September 30, 2021, June 30, 2021 and September 30, 2020, respectively.~~

~~(5)Includes $1.43 billion of advances from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”) as of September 30, 2020.~~

Financial Review



($ and shares in thousands, except per share, and ratio data)	Three Months Ended September 30,			Nine Months Ended September 30,
	2022			2021			2022			2021
Summary of operations:
Net interest income before provision for (reversal of) credit losses	$	551,809		$	395,706		$	1,440,374		$	1,125,874
Noninterest income	75,552			73,109			233,739			214,406
Total revenue	627,361			468,815			1,674,113			1,340,280
Provision for (reversal of) credit losses	27,000			(10,000)			48,500			(25,000)


Noninterest expense	215,973			205,384			602,283			585,984
Income before income taxes	384,388			273,431			1,023,330			779,296
Income tax expense	89,049			47,982			232,010			124,111

Net income	$	295,339		$	225,449		$	791,320		$	655,185

Per common share:
Basic earnings	$	2.10		$	1.59		$	5.59		$	4.62
Diluted earnings	$	2.08		$	1.57		$	5.55		$	4.58
Dividends declared	$	0.40		$	0.33		$	1.20		$	0.99



Weighted-average number of shares outstanding:
Basic	140,917			141,880			141,453			141,799
Diluted	142,011			143,143			142,601			143,051


Performance metrics:
Return on average assets (“ROA”)	1.86		%	1.46		%	1.70		%	1.50		%
Return on average equity (“ROE”)	20.30		%	15.75		%	18.35		%	15.98		%
Tangible return on average tangible equity (1)	22.16		%	17.25		%	20.04		%	17.56		%

Common dividend payout ratio	19.33		%	21.05		%	21.75		%	21.72		%
Net interest margin	3.68		%	2.70		%	3.27		%	2.72		%
Efficiency ratio (2)	34.43		%	43.81		%	35.98		%	43.72		%
Adjusted efficiency ratio (1)	31.18		%	35.55		%	32.98		%	36.80		%


At period end:	September 30, 2022		December 31, 2021
Total assets	$	62,576,061	$	60,870,701
Total loans	$	47,456,755	$	41,694,416
Total deposits	$	53,857,362	$	53,350,532
Common shares outstanding at period-end	140,918		141,908
Book value per common share	$	40.17	$	41.13
Tangible equity per common share (1)	$	36.80	$	37.79

(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 Operation (“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 third quarter 2022 net income ~~for the third quarter 2021~~ was ~~$225.4~~$295.3 million, an increase of $69.9 million or ~~$1.57 per diluted share,~~31%, compared with third quarter ~~2020~~2021 net income of ~~$159.5 million or $1.12 per diluted share, an increase of $65.9 million or 41%.~~$225.4 million. Net income for the first nine months of ~~2021~~2022 was ~~$655.2~~$791.3 million, an increase of $136.1 million or ~~$4.58 per diluted share,~~21%, compared with the first nine months of ~~2020~~2021 net income of ~~$403.7 million or $2.82 per diluted share, an increase of $251.5 million or 62%.~~$655.2 million. The year-over-year increases in both periods were primarily due to higher net interest income, ~~and noninterest income, reversals of provision for credit losses in the second and third quarter of 2021,~~ partially offset by higher ~~noninterest~~income tax expense and ~~income tax expense.~~

provision for credit losses. Noteworthy items about the Company’s third quarter and first nine months of 2022 performance included:

•Net interest income growth and net interest margin expansion. Third quarter 2022 net interest income before provision for (reversal of) credit losses was $551.8 million, an increase of $156.1 million or 39% from the third quarter of 2021. Third quarter 2022 net interest margin of 3.68% expanded 98 bps year-over-year. For the first nine months of 2022, net interest income before provision for (reversal of) credit losses was $1.44 billion, an increase of $314.5 million or 28% year-over-year. The net interest margin for the first nine months of 2022 was 3.27%, up 55 bps year-over-year.

•Improved efficiency. Efficiency ratios of 34.43% and 35.98% for the third quarter and first nine months of ~~2021 included:~~

• As2022, respectively, both improved year-over-year. The adjusted efficiency ratios of ~~September 30, 2021, total assets were $60.96 billion, an increase of $8.80 billion or 17% from $52.16 billion as of December 31, 2020.~~

• Total loans were $40.48 billion as of September 30, 2021, an increase of $2.09 billion or 5% from $38.39 billion as of December 31, 2020. Total loan growth was well-diversified across the Company’s major loan portfolios, including residential mortgage, commercial real estate (“CRE”)31.18% and ~~C&I.~~

• Total deposits were $53.36 billion as of September 30, 2021, an increase of $8.50 billion or 19% from $44.86 billion as of December 31, 2020. Total deposits’ growth was primarily driven by growth in noninterest-bearing demand deposits and money market accounts.

• Asset quality metrics improved. As of September 30, 2021, criticized loans totaled $1.01 billion or 2.50% of loans held-for-investment, a decrease of $207.2 million or 17%, compared with $1.22 billion or 3.17% of loans held-for-investment as of December 31, 2020. Nonperforming assets were $172.6 million or 0.28% of total assets as of September 30, 2021, a decrease of $62.3 million or 26%, compared with $234.9 million or 0.45% of total assets as of December 31, 2020.

• ~~The Company recorded a reversal of provision~~32.98% for ~~credit losses in 2021, primarily due to an improved macroeconomic outlook. During~~ the third quarter and first nine months of ~~2021,~~2022, respectively, both improved year-over-year. For additional details, see the ~~Company recorded a reversal~~reconciliation of ~~credit losses~~non-GAAP measures presented under Item 2. MD&A — Reconciliation of ~~$10.0 million and $25.0 million, respectively, compared with a provision for credit losses of $10.0 million and $186.3 million for the same periods~~GAAP to Non-GAAP Financial Measures in ~~2020, respectively.~~this Form 10-Q.

• ~~Profitability expanded in 2021.~~Expanding profitability. Third quarter ~~2021~~2022 ROA, ~~was 1.46%~~ROE and the tangible return on average tangible equity of 1.86%, 20.30% and 22.16%, respectively, all expanded compared with ~~1.26% for the~~ third quarter ~~of 2020. First nine months of 2021 ROA was 1.50%, compared with 1.13%~~2021. Likewise, for the first nine months of ~~2020. Third quarter 2021~~2022, ROA, ROE ~~was 15.75%~~and the tangible return on average tangible equity of 1.70%, ~~compared with 12.50% for~~18.35% and 20.04%, respectively, all expanded year-over-year. For additional details, see the ~~third quarter~~reconciliation of ~~2020. First nine months~~non-GAAP measures presented under Item 2. MD&A — Reconciliation of ~~2021 ROE was 15.98%, compared with 10.73% for the first nine months of 2020.~~GAAP to Non-GAAP Financial Measures in this Form 10-Q.

•Total assets reached $62.58 billion, growing by $1.71 billion or 3% from December 31, 2021, primarily driven by loan growth.

60•Total loans were $47.46 billion as of September 30, 2022, an increase of $5.76 billion or 14% from $41.69 billion as of December 31, 2021. This was primarily driven by well-diversified growth across the commercial real estate (“CRE”), residential mortgage, and commercial and industrial (“C&I”) loan segments.

•Total deposits were $53.86 billion as of September 30, 2022, an increase of $506.8 million or 1% from $53.35 billion as of December 31, 2021. Growth was primarily driven by increased time deposits, partially offset by decreases in noninterest-bearing demand and money market accounts.

Results of Operations

Net Interest Income

The Company’s primary source of revenue is net interest income, which is the interest income earned on interest-earning assets less interest expense paid on interest-bearing liabilities. Net interest margin is the ratio of net interest income to average interest-earning assets. Net interest income and net interest margin are impacted by several factors, including changes in average balances and the composition of interest-earning assets and funding sources, market interest rate fluctuations and the slope of the yield curve, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities, the volume of noninterest-bearing sources of funds, and asset quality.

Third quarter ~~2021~~2022 net interest income before provision for credit losses was ~~$395.7~~$551.8 million, an increase of ~~$71.6~~$156.1 million or ~~22%~~39%, compared with $395.7 million for the third quarter ~~2020~~2021. For the first nine months of 2022, net interest income was $1.44 billion, an increase of ~~$324.1 million.~~$314.5 million or 28%, compared with $1.13 billion for the first nine months of 2021. Third quarter ~~2021~~2022 net interest margin was ~~2.70%~~3.68%, ~~a decrease~~an increase of ~~two basis points (“bps”)~~98 bps from ~~2.72%~~2.70% for the third quarter of ~~2020.~~2021. The ~~change~~year-over-year changes in net interest income and net interest margin primarily reflected higher ~~interest income from loans~~loan yields, strong loan growth and ~~AFS~~higher debt securities ~~due to volume growth, and a lower cost of time and money market deposits. Net interest income for~~yields. For the first nine months of ~~2021~~2022, net interest margin was ~~$1.13 billion,~~3.27%, an increase of ~~$95.3 million or 9%, compared with $1.03 billion for the first nine months of 2020. Net interest margin was~~55 bps from 2.72% for the first nine months of ~~2021, a decrease of 33 bps from 3.05% for the first nine months of 2020.~~2021. The year-over-year changes in net interest income and net interest margin primarily ~~benefited from a lower cost of time~~reflected higher loan yields, strong loan growth and ~~money market deposits,~~ higher ~~interest income from AFS~~ debt securities ~~due to~~ volume ~~growth, partially offset by lower~~and yields. The changes in yields and rates reflected rising benchmark interest income on loans due to yield compression. The increase in average interest-bearing cash and deposits with banks, which earned an average yield of 0.25% and 0.26% for the third quarter and first nine months of 2021, respectively, also contributed to net interest margin compression.rates.

Average interest-earning assets were $59.48 billion for the third quarter of 2022, an increase of $1.24 billion or 2% from $58.24 billion for the third quarter of ~~2021, an increase of $10.81 billion or 23% from $47.43 billion for the third quarter of 2020.~~2021. For the first nine months of ~~2021,~~2022, the average interest-earning assets were ~~$55.35~~$58.95 billion, an increase of ~~$10.27~~$3.60 billion or ~~23%~~7% from ~~$45.08~~$55.35 billion for the first nine months of ~~2020.~~2021. The ~~year-over-year~~ increases in average interest-earning assets ~~for~~in both periods ~~reflect~~primarily reflected growth in ~~the average balances of AFS~~loans and debt securities, ~~loans, and~~partially offset by a decrease in interest-bearing cash and deposits with banks.

The yield on average interest-earning assets for the third quarter of ~~2021~~2022 was ~~2.83%~~4.19%, ~~a decrease~~an increase of 24136 bps from ~~3.07%~~2.83% for the third quarter of ~~2020, primarily reflecting an increase in lower yielding AFS debt securities and interest-bearing cash and deposits with banks in the earnings asset mix.~~2021. The yield on average interest-earning assets for the first nine months of ~~2021~~2022 was ~~2.89%~~3.54%, ~~a decrease~~an increase of 7165 bps from ~~3.60%~~2.89% for the first nine months of ~~2020,~~2021. The year-over-year changes in the yield on average interest-bearing assets primarily ~~reflecting compression~~resulted from rising benchmark interest rates and a changed earning asset mix in ~~average loan yields.~~favor of higher-yielding assets.

6168

~~Average~~The average loan yield for the third quarter of 2022 was 4.75%, an increase of 114 bps from 3.61% for the third quarter of ~~2021, an increase of one bp from 3.60% for the third quarter of 2020. Average~~2021. The average loan yield for the first nine months of ~~2021~~2022 was ~~3.59%~~4.13%, ~~a decrease~~an increase of 4954 bps from ~~4.08%~~3.59% for the first nine months of ~~2020. Excluding~~2021. The year-over-year changes in the ~~impacts of PPP loans, the adjusted~~ average loan yield ~~was 3.56%~~reflect the loan portfolio’s sensitivity to rising benchmark interest rates. Approximately 62% and 3.70% for the third quarters of 2021 and 2020, respectively, and 3.58% and 4.10% for the first nine months of 2021 and 2020, respectively. For additional details, see the reconciliations of non-GAAP measures presented under ~~Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures~~ ~~in this Form 10-Q. Approximately~~ 65% of loans held-for-investment were variable-rate or hybrid loans in their ~~adjustable rate~~adjustable-rate period asas of ~~both~~ September 30, 2022 and 2021, ~~and 2020.~~respectively.

Deposits are an important source of funds and impact both net interest income and net interest margin. Average deposits were $54.05 billion for the third quarter of 2022, an increase of $554.9 million or 1% from $53.50 billion for the third quarter of 2021. For the first nine months of 2022, average deposits were $54.07 billion, an increase of $3.54 billion or 7% from $50.53 billion for the first nine months of 2021. Average noninterest-bearing deposits were $22.42 billion for the third quarter of 2022, a decrease of $745.7 million or 3% from $23.17 billion for the third quarter of 2021. For the first nine months of 2022, average noninterest-bearing deposits were $23.24 billion, an increase of $2.90 billion or 14% from $20.35 billion for the first nine months of 2021. Average noninterest-bearing deposits made up 41% and 43% of average deposits for the third quarters of 2022 and 2021, respectively, and 43% and 40% for the first nine months of 2022 and 2021, respectively.

The average cost of deposits was 0.51% for the third quarter of 2022, a 39 bps increase from 0.12% for the third quarter of ~~2021, a 21 bp decrease from 0.33%~~2021. The average cost of interest-bearing deposits was 0.86% for the third quarter of ~~2020.~~2022, a 65 bps increase from 0.21% for the third quarter of 2021. The average cost of deposits was 0.26% for the first nine months of 2022, an increase of 11 bps from 0.15% for the first nine months of 2021, a 38 bp decrease from 0.53% for the same period in 2020. The year-over-year decreases reflected a lower interest rate environment in 2021, as well as the year-over-year run-off of higher rate time deposits. The higher proportion of noninterest-bearing demand deposits, which comprised 43% and 40% of average total deposits for the third quarter and first nine months of 2021, compared with 35% and 33% for the same periods of 2020, respectively, also contributed to the decrease in the average cost of deposits.2021. The average cost of interest-bearing deposits was ~~0.21%~~0.45% for the ~~third quarter~~first nine months of ~~2021,~~2022, a ~~29 bp decrease~~20 bps increase from ~~0.50% for the third quarter of 2020. The average cost of interest-bearing deposits was~~ 0.25% for the first nine months of ~~2021, a 54 bp decrease from 0.79% for the same period in 2020.~~2021. The year-over-year increases primarily reflected higher rates paid on money market accounts and time deposits.

The average cost of funds calculation includes deposits, Federal Home Loan Bank (“FHLB”) advances, repurchase agreements, long-term debt and short-term borrowings. For the third quarter of 2022, the average cost of funds was 0.55%, a 41 bps increase from 0.14% for the third quarter of ~~2021, a decrease of 24 bps from 0.38% for the third quarter of 2020.~~2021. For the first nine months of ~~2021,~~2022, the average cost of funds was ~~0.18%~~0.29%, ~~a decrease of 41~~an 11 bps increase from ~~0.59%~~0.18% for the first nine months of ~~2020.~~2021. The ~~decrease~~year-over-year changes in the average cost of funds ~~reflected~~were driven by the ~~lower~~changes in the cost of deposits as well as decreases in other sources of funding due to changes in the interest rate environment. Other sources of funding included FHLB advances, assets sold under repurchase agreements (“repurchase agreements”), long-term debt and short-term borrowings.discussed above.

The Company utilizes various tools to manage interest rate risk. Refer to the Interest Rate Risk Management section of Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.

6370

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 third quarters of ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,													($ in thousands)	Three Months Ended September 30,
		2021						2020								2022						2021
		Average Balance		Interest		Average Yield/Rate (1)		Average Balance			Interest		Average Yield/Rate (1)			Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)
ASSETS	ASSETS														ASSETS
Interest-earning assets:	Interest-earning assets:														Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	7,036,823	$	4,521	0.25	%	$	4,904,394		$	5,045	0.41	%	Interest-bearing cash and deposits with banks	$	2,287,010	$	9,080	1.58	%	$	7,036,823	$	4,521	0.25	%
Assets purchased under resale agreements (“resale agreements”)		2,382,741		8,957		1.49	%	1,225,217			5,295		1.72	%
AFS debt securities (2)(3)		8,782,682		37,826		1.71	%	4,059,456			18,493		1.81	%
Loans (4)(5)		39,960,151		363,503		3.61	%	37,160,445			336,542		3.60	%
Resale agreements															Resale agreements	1,037,292		6,769		2.59	%	2,382,741		8,957		1.49	%
Available-for-sale (“AFS”) debt securities (2)(3)															Available-for-sale (“AFS”) debt securities (2)(3)	6,204,729		38,383		2.45	%	8,782,682		37,826		1.71	%
Held-to-maturity (“HTM”) debt securities (2)(4)															Held-to-maturity (“HTM”) debt securities (2)(4)	3,017,063		12,709		1.67	%	—		—		—	%
Loans (5)(6)															Loans (5)(6)	46,854,541		560,452		4.75	%	39,960,151		363,503		3.61	%

Restricted equity securities	Restricted equity securities	77,083		500		2.57	%	79,074			353		1.78	%	Restricted equity securities	78,054		843		4.28	%	77,083		500		2.57	%
Total interest-earning assets	Total interest-earning assets	$	58,239,480	$	415,307	2.83	%	$	47,428,586		$	365,728	3.07	%	Total interest-earning assets	$	59,478,689	$	628,236	4.19	%	$	58,239,480	$	415,307	2.83	%
Noninterest-earning assets:	Noninterest-earning assets:														Noninterest-earning assets:
Cash and due from banks	Cash and due from banks	627,640						522,699							Cash and due from banks	615,836						627,640
Allowance for loan losses	Allowance for loan losses	(584,827)						(632,216)							Allowance for loan losses	(566,369)						(584,827)
Other assets	Other assets	3,077,240						2,928,190							Other assets	3,551,288						3,077,240
Total assets	Total assets	$	61,359,533					$	50,247,259						Total assets	$	63,079,444					$	61,359,533
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY														LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:	Interest-bearing liabilities:														Interest-bearing liabilities:
Checking deposits	Checking deposits	$	6,646,515	$	3,186	0.19	%	$	5,663,873		$	4,345	0.31	%	Checking deposits	$	6,879,632	$	8,493	0.49	%	$	6,646,515	$	3,186	0.19	%
Money market deposits	Money market deposits	12,604,827		3,446		0.11	%	9,981,704			6,837		0.27	%	Money market deposits	12,351,571		33,101		1.06	%	12,604,827		3,446		0.11	%
Savings deposits	Savings deposits	2,792,702		1,943		0.28	%	2,259,788			1,481		0.26	%	Savings deposits	2,961,634		2,268		0.30	%	2,792,702		1,943		0.28	%
Time deposits	Time deposits	8,283,265		7,395		0.35	%	9,008,907			21,135		0.93	%	Time deposits	9,435,063		25,032		1.05	%	8,283,265		7,395		0.35	%
Short-term borrowings		620		—		—	%	84,858			407		1.91	%
Federal funds purchased and other short-term borrowings															Federal funds purchased and other short-term borrowings	211,794		1,177		2.20	%	620		—		—	%
FHLB advances	FHLB advances	248,614		857		1.37	%	656,906			3,146		1.91	%	FHLB advances	86,243		392		1.80	%	248,614		857		1.37	%
Repurchase agreements	Repurchase agreements	310,997		2,012		2.57	%	317,097			2,155		2.70	%	Repurchase agreements	624,821		4,421		2.81	%	310,997		2,012		2.57	%
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	151,870		762		1.99	%	1,579,623		(6)	2,092		0.53	%	Long-term debt and finance lease liabilities	152,565		1,543		4.01	%	151,870		762		1.99	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	31,039,410	$	19,601	0.25	%	$	29,552,756		$	41,598	0.56	%	Total interest-bearing liabilities	$	32,703,323	$	76,427	0.93	%	$	31,039,410	$	19,601	0.25	%
Noninterest-bearing liabilities and stockholders’ equity:	Noninterest-bearing liabilities and stockholders’ equity:														Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	Demand deposits	23,169,323						14,296,475							Demand deposits	22,423,633						23,169,323
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,470,494						1,318,677							Accrued expenses and other liabilities	2,179,850						1,470,494
Stockholders’ equity	Stockholders’ equity	5,680,306						5,079,351							Stockholders’ equity	5,772,638						5,680,306
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	61,359,533					$	50,247,259						Total liabilities and stockholders’ equity	$	63,079,444					$	61,359,533
Interest rate spread	Interest rate spread					2.58	%						2.51	%	Interest rate spread					3.26	%					2.58	%
Net interest income and net interest margin	Net interest income and net interest margin			$	395,706	2.70	%				$	324,130	2.72	%	Net interest income and net interest margin			$	551,809	3.68	%			$	395,706	2.70	%

(1)Annualized.

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

(3)Includes the amortization of premiums on AFS debt securities of ~~$22.6~~$16.5 million and ~~$8.1~~$22.6 million for the third quarters of ~~2021~~2022 and ~~2020,~~2021, respectively.

(4)Includes the amortization of premiums on HTM debt securities of $189 thousand for the third quarter of 2022.

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

~~(5)~~(6)Loans include the accretion of net deferred loan fees ~~unearned fees~~ and amortization of net premiums, which totaled ~~$17.0~~$12.5 million and ~~$7.7~~$17.0 million for the third quarters of 2022 and 2021, ~~and 2020,~~ respectively.

~~(6)Includes average PPPLF balances, which were repaid in full during the fourth quarter of 2020.~~

6471


($ in thousands)	($ in thousands)	Nine Months Ended September 30,													($ in thousands)	Nine Months Ended September 30,
		2021						2020								2022						2021
		Average Balance		Interest		Average Yield/Rate (1)		Average Balance			Interest		Average Yield/Rate (1)			Average Balance		Interest		Average Yield/ Rate (1)		Average Balance		Interest		Average Yield/ Rate (1)
ASSETS	ASSETS														ASSETS
Interest-earning assets:	Interest-earning assets:														Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	6,078,982	$	11,781	0.26	%	$	3,775,242		$	20,717	0.73	%	Interest-bearing cash and deposits with banks	$	3,175,596	$	17,127	0.72	%	$	6,078,982	$	11,781	0.26	%
Resale agreements ~~(2)~~	Resale agreements ~~(2)~~	1,994,776		23,077		1.55	%	1,048,923			16,434		2.09	%	Resale agreements ~~(2)~~	1,588,452		23,705		2.00	%	1,994,776		23,077		1.55	%
AFS debt securities ~~(4)~~(3)	AFS debt securities ~~(4)~~(3)	7,755,029		101,616		1.75	%	3,685,837			59,639		2.16	%	AFS debt securities ~~(4)~~(3)	6,886,268		106,290		2.06	%	7,755,029		101,616		1.75	%
HTM debt securities (2)(4)															HTM debt securities (2)(4)	2,672,797		33,645		1.68	%	—		—		—	%
Loans (5)(6)	Loans (5)(6)	39,441,751		1,057,964		3.59	%	36,487,859			1,115,804		4.08	%	Loans (5)(6)	44,548,520		1,376,978		4.13	%	39,441,751		1,057,964		3.59	%

Restricted equity securities	Restricted equity securities	80,107		1,588		2.65	%	78,873			1,100		1.86	%	Restricted equity securities	77,824		2,274		3.91	%	80,107		1,588		2.65	%
Total interest-earning assets	Total interest-earning assets	$	55,350,645	$	1,196,026	2.89	%	$	45,076,734		$	1,213,694	3.60	%	Total interest-earning assets	$	58,949,457	$	1,560,019	3.54	%	$	55,350,645	$	1,196,026	2.89	%
Noninterest-earning assets:	Noninterest-earning assets:														Noninterest-earning assets:
Cash and due from banks	Cash and due from banks	602,830						510,750							Cash and due from banks	656,772						602,830
Allowance for loan losses	Allowance for loan losses	(603,523)						(563,912)							Allowance for loan losses	(551,818)						(603,523)
Other assets	Other assets	2,913,050						2,729,458							Other assets	3,307,207						2,913,050
Total assets	Total assets	$	58,263,002					$	47,753,030						Total assets	$	62,361,618					$	58,263,002
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY														LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:	Interest-bearing liabilities:														Interest-bearing liabilities:
Checking deposits	Checking deposits	$	6,571,231	$	11,177	0.23	%	$	5,119,568		$	19,995	0.52	%	Checking deposits	$	6,747,711	$	13,073	0.26	%	$	6,571,231	$	11,177	0.23	%
Money market deposits	Money market deposits	12,262,173		11,869		0.13	%	9,630,918			37,178		0.52	%	Money market deposits	12,526,222		45,196		0.48	%	12,262,173		11,869		0.13	%
Savings deposits	Savings deposits	2,715,114		5,762		0.28	%	2,162,365			4,743		0.29	%	Savings deposits	2,954,098		5,836		0.26	%	2,715,114		5,762		0.28	%
Time deposits	Time deposits	8,635,250		26,982		0.42	%	9,633,582			94,684		1.31	%	Time deposits	8,596,728		40,266		0.63	%	8,635,250		26,982		0.42	%
Short-term borrowings		1,871		42		3.00	%	128,846			1,228		1.27	%
Federal funds purchased and other short-term borrowings															Federal funds purchased and other short-term borrowings	93,370		1,427		2.04	%	1,871		42		3.00	%
FHLB advances	FHLB advances	457,273		6,025		1.76	%	667,935			10,655		2.13	%	FHLB advances	128,137		1,529		1.60	%	457,273		6,025		1.76	%
Repurchase agreements (2)		304,745		5,981		2.62	%	355,923			9,686		3.64	%
Repurchase agreements															Repurchase agreements	433,340		8,855		2.73	%	304,745		5,981		2.62	%
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	152,018		2,314		2.04	%	807,599		(7)	4,913		0.81	%	Long-term debt and finance lease liabilities	152,259		3,463		3.04	%	152,018		2,314		2.04	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	31,099,675	$	70,152	0.30	%	$	28,506,736		$	183,082	0.86	%	Total interest-bearing liabilities	$	31,631,865	$	119,645	0.51	%	$	31,099,675	$	70,152	0.30	%
Noninterest-bearing liabilities and stockholders’ equity:	Noninterest-bearing liabilities and stockholders’ equity:														Noninterest-bearing liabilities and stockholders’ equity:
Demand deposits	Demand deposits	20,345,370						12,987,813							Demand deposits	23,244,247						20,345,370
Accrued expenses and other liabilities	Accrued expenses and other liabilities	1,335,252						1,230,359							Accrued expenses and other liabilities	1,719,869						1,335,252
Stockholders’ equity	Stockholders’ equity	5,482,705						5,028,122							Stockholders’ equity	5,765,637						5,482,705
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	58,263,002					$	47,753,030						Total liabilities and stockholders’ equity	$	62,361,618					$	58,263,002
Interest rate spread	Interest rate spread					2.59	%						2.74	%	Interest rate spread					3.03	%					2.59	%
Net interest income and net interest margin	Net interest income and net interest margin			$	1,125,874	2.72	%				$	1,030,612	3.05	%	Net interest income and net interest margin			$	1,440,374	3.27	%			$	1,125,874	2.72	%

(1)Annualized.

(2)~~Average balances of resale and repurchase agreements for the nine months ended September 30, 2020 have been reported net, pursuant to Accounting Standards Codification (“ASC”) 210-20-45-11,~~ ~~Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. The weighted-average yields of gross resale and gross repurchase agreements for the nine months ended September 30, 2020 were 2.09% and 3.48%, respectively.~~

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

(3)Includes the amortization of premiums on AFS debt securities of $60.3 million and $62.7 million for the first nine months of 2022 and 2021, respectively.

(4)Includes the amortization of premiums on HTM debt securities of ~~$62.7 million and $17.3 million~~$423 thousand for the first nine months of ~~2021 and 2020, respectively.~~2022.

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

(6)Loans include the accretion of net deferred loan fees ~~unearned fees~~ and amortization of net premiums, which totaled $36.3 million and $46.8 million ~~and $36.8 million~~ for the first nine months of ~~2021~~2022 and ~~2020,~~2021, respectively.

~~(7)Includes average PPPLF balances, which were repaid in full during the fourth quarter of 2020.~~

6572

The following table summarizes the extent to which changes in (1) interest ~~rate,~~rates, and (2) volume of average interest-earning assets and average interest-bearing liabilities affected the Company’s net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average rate.


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,										($ in thousands)		Three Months Ended September 30,												Nine Months Ended September 30,
		2021 vs. 2020								2021 vs. 2020								($ in thousands)	2022 vs. 2021						2022 vs. 2021
		Total Change			Changes Due to					Total Change			Changes Due to								Total Change			Changes Due to									Total Change				Changes Due to
				Volume			Yield/Rate					Volume			Yield/Rate							Total Change				Volume								Total Change				Volume				Yield/Rate
Interest-earning assets:	Interest-earning assets:
Interest-bearing cash and deposits with banks	Interest-bearing cash and deposits with banks	$	(524)		$	1,763		$	(2,287)	$	(8,936)		$	8,656		$	(17,592)										Interest-bearing cash and deposits with banks			$	4,559				$	(4,874)			$	9,433			$	5,346			$	(7,746)		$	13,092
Resale agreements	Resale agreements	3,662			4,446			(784)		6,643			11,798			(5,155)											Resale agreements			(2,188)				(6,674)				4,486				628				(5,263)			5,891
AFS debt securities	AFS debt securities	19,333			20,448			(1,115)		41,977			55,098			(13,121)											AFS debt securities			557				(13,051)				13,608				4,674				(12,166)			16,840
HTM debt securities																					HTM debt securities			12,709					12,709				—				33,645				33,645				—
Loans	Loans	26,961			26,369			592		(57,840)			85,446			(143,286)											Loans			196,949				69,707				127,242				319,014				146,568			172,446
Restricted equity securities	Restricted equity securities	147			(9)			156		488			17			471											Restricted equity securities			343				6				337				686				(46)			732
Total interest and dividend income	Total interest and dividend income	$	49,579		$	53,017		$	(3,438)	$	(17,668)		$	161,015		$	(178,683)										Total interest and dividend income			$	212,929			$	57,823			$	155,106			$	363,993			$	154,992		$	209,001
Interest-bearing liabilities:	Interest-bearing liabilities:																										Interest-bearing liabilities:
Checking deposits	Checking deposits	$	(1,159)		$	670		$	(1,829)	$	(8,818)		$	4,589		$	(13,407)										Checking deposits			$	5,307			$	116			$	5,191			$	1,896			$	307		$	1,589
Money market deposits	Money market deposits	(3,391)			1,478			(4,869)		(25,309)			8,107			(33,416)											Money market deposits			29,655				(71)				29,726				33,327				261			33,066
Savings deposits	Savings deposits	462			370			92		1,019			1,173			(154)											Savings deposits			325				122				203				74				488			(414)
Time deposits	Time deposits	(13,740)			(1,579)			(12,161)		(67,702)			(8,933)			(58,769)											Time deposits			17,637				1,162				16,475				13,284				(121)			13,405
Short-term borrowings		(407)			(203)			(204)		(1,186)			(1,900)			714
Federal funds purchased and other short-term borrowings																					Federal funds purchased and other short-term borrowings		1,177					—				1,177				1,385				1,403				(18)
FHLB advances	FHLB advances	(2,289)			(1,574)			(715)		(4,630)			(2,988)			(1,642)											FHLB advances			(465)				(680)				215				(4,496)				(3,975)			(521)
Repurchase agreements	Repurchase agreements	(143)			(39)			(104)		(3,705)			(1,263)			(2,442)											Repurchase agreements			2,409				2,204				205				2,874				2,619			255
Long-term debt and finance lease liabilities	Long-term debt and finance lease liabilities	(1,330)			(3,188)			1,858		(2,599)			(6,087)			3,488											Long-term debt and finance lease liabilities			781				4				777				1,149				4			1,145
Total interest expense	Total interest expense	$	(21,997)		$	(4,065)		$	(17,932)	$	(112,930)		$	(7,302)		$	(105,628)										Total interest expense			$	56,826			$	2,857			$	53,969			$	49,493			$	986		$	48,507
Change in net interest income	Change in net interest income	$	71,576		$	57,082		$	14,494	$	95,262		$	168,317		$	(73,055)										Change in net interest income			$	156,103			$	54,966			$	101,137			$	314,500			$	154,006		$	160,494

Noninterest Income

The following table presents the components of noninterest income for the third quarters and first nine months of ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)															($ in thousands)		Three Months Ended September 30,										Nine Months Ended September 30,
	($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,						($ in thousands)
		2021		2020		% Change		2021		2020			% Change				2022				2021				% Change		2022				2021				% Change
Lending fees	Lending fees	$	17,516	$	18,736	(7)	%	$	56,965	$	56,455		1	%		Lending fees			$	20,289			$	17,516		16%			$	59,869			$	56,965		5%
Deposit account fees	Deposit account fees	18,508		12,573		47	%	51,233		33,892			51	%	Deposit account fees		23,636				18,508				28%		66,323				51,233				29%
Interest rate contracts and other derivative income	Interest rate contracts and other derivative income	7,156		5,538		29	%	20,981		18,718			12	%	Interest rate contracts and other derivative income		8,761				7,156				22%		29,695				20,981				42%
Foreign exchange income	Foreign exchange income	13,101		3,310		296	%	35,634		15,691			127	%	Foreign exchange income		10,083				13,101				(23)%		34,143				35,634				(4)%
Wealth management fees	Wealth management fees	5,598		4,553		23	%	20,460		12,997			57	%	Wealth management fees		8,903				5,598				59%		21,494				20,460				5%
Net gains on sales of loans	Net gains on sales of loans	3,329		361		822	%	6,601		1,443			357	%	Net gains on sales of loans		2,129				3,329				(36)%		5,968				6,601				(10)%
Gains on sales of AFS debt securities	Gains on sales of AFS debt securities	354		698		(49)	%	1,178		11,867			(90)	%	Gains on sales of AFS debt securities		—				354				(100)%		1,306				1,178				11%

Other investment income		5,349		5,239		2	%	13,870		6,652			109	%
Other investment (loss) income															Other investment (loss) income		(580)				5,349				(111)%		5,910				13,870				(57)%
Other income	Other income	2,198		3,495		(37)	%	7,484		8,000			(6)	%	Other income		2,331				2,198				6%		9,031				7,484				21%
Total noninterest income	Total noninterest income	$	73,109	$	54,503	34	%	$	214,406	$	165,715		29	%	Total noninterest income		$	75,552			$	73,109			3%		$	233,739			$	214,406			9%

6673

Noninterest income comprised ~~16%~~12% and 14% of total revenue for the third quarter and the first nine months of 2022, respectively, compared with 16% for both the third quarter and first nine months of 2021, ~~compared with 14% for the same periods in 2020.~~respectively. Third quarter ~~2021~~2022 noninterest income was ~~$73.1~~$75.6 million, an increase of ~~$18.6~~$2.4 million or ~~34%~~3%, compared with ~~$54.5~~$73.1 million for the same period in ~~2020.~~2021. This increase was primarily due to increases in deposit account fees, wealth management fees and lending fees, partially offset by other investment loss and a decrease in foreign exchange ~~income and deposit account fees.~~income. Noninterest income for the first nine months of ~~2021~~2022 was ~~$214.4~~$233.7 million, an increase of ~~$48.7~~$19.3 million or ~~29%~~9%, compared with ~~$165.7~~$214.4 million for the same period in ~~2020.~~2021. This increase was primarily due to increases in ~~foreign exchange income,~~ deposit account fees, ~~wealth management~~interest rate contracts and other derivative income; and lending fees, partially offset by lower other investment ~~income,~~income.

Lending fees were $20.3 million for the third quarter of 2022, an increase of $2.8 million or 16% compared with $17.5 million for the same period in 2021. This was primarily due to increased syndication, unused commitment and ~~gains on sales~~other loan fees. For the first nine months of ~~loans,~~2022, lending fees were $59.9 million, an increase of $2.9 million or 5%, compared with $57.0 million for the same period in 2021. This was primarily due to increased unused commitment and other loan fees, partially offset by a decrease in ~~gains on sales of AFS debt securities.~~syndication fees.

Deposit account fees ~~increased $5.9 million or 47% to $18.5~~were $23.6 million for the third quarter of ~~2021, and increased $17.3~~2022, an increase of $5.1 million or ~~51% to $51.2~~28%, compared with $18.5 million for the same period in 2021. For the first nine months of ~~2021,~~2022, deposit account fees were $66.3 million, an increase of $15.1 million or 29%, compared with $51.2 million for the same period in 2021. These increases were primarily driven by growth in treasury management fees from commercial deposits.

Interest rate contracts and other derivative income was $8.8 million forthe third quarter of 2022, an increase of $1.6 million or 22%, compared with $7.2 million for the same period in 2021. For the first nine months of 2022, interest rate contracts and other derivative income was $29.7 million, an increase of $8.7 million or 42%, compared with $21.0 million for the same period in 2021. These increases were primarily due to higher favorable credit valuation adjustments during the third quarter and first nine months of 2022, compared with the same periods in ~~2020. These increases primarily reflected an increase in treasury management service fees resulting from commercial deposit growth.~~2021.

Foreign exchange income ~~increased $9.8~~was $10.1 million forthe third quarter of 2022, a decrease of $3.0 million or ~~296% to~~23%, compared with $13.1 million for the ~~third quarter~~same period in 2021. For the first nine months of ~~2021, and increased $19.9~~2022, foreign exchange income was $34.1 million, a decrease of $1.5 million or ~~127% to~~4%, compared with $35.6 million for the first nine months of ~~2021,~~2021. The decreases for the third quarter and first nine months of 2022, compared with the ~~same~~prior year periods, ~~in 2020. These increases~~primarily reflected ~~new customer acquisitions and growth in customer-driven transactions,~~increased losses on foreign exchange trades, partially offset by the favorable ~~revaluation of foreign currency transactions, as well as remeasurement~~valuation of certain foreign ~~currency-denominated~~currency denominated balance sheet items.

Wealth management fees ~~increased $1.0~~were $8.9 million ~~or 23% to $5.6 million~~ forthe third quarter of ~~2021, and increased $7.5~~2022, an increase of $3.3 million or ~~57% to~~59%, compared with $5.6 million for the same period in 2021. For the first nine months of 2022, wealth management fees were $21.5 million, an increase of $1.0 million or 5%, compared with $20.5 million for the first nine months of ~~2021, compared with the same periods in 2020. These increases were primarily due to growth in customer-driven transactions.~~

~~Net gains on sales of loans increased $3.0 million or 822% to $3.3 million forthe third quarter of 2021, and increased $5.2 million or 357% to $6.6 million for the first nine months of 2021, compared with the same periods in 2020.~~2021. These increases were primarily due to a higher volume of ~~SBA loan sold.~~customer activity.

~~Gains on sales of AFS debt securities decreased $344~~Other investment loss was $580 thousand ~~or 49% to $354 thousand~~ forthe third quarter of ~~2021,~~2022, compared with income of $5.3 million for the same period in ~~2020. Gains on sales of AFS debt securities decreased $10.7 million or 90% to $1.2 million for~~2021. For the first nine months of ~~2021, compared with the same period in 2020. The decrease for the first nine months of 2021, compared with the same period in 2020, was primarily due to a lower volume of AFS debt securities sold.~~

~~Other~~2022, other investment income ~~increased $110 thousand or 2% to $5.3~~was $5.9 million, ~~for the third quarter~~a decrease of ~~2021, and increased $7.2~~$8.0 million or ~~109% to~~57% from $13.9 million for the first nine months of ~~2021,~~2021. These decreases primarily reflected unfavorable equity valuation adjustments in the Company’s CRA investments in 2022, compared with the same ~~periods in 2020. These increases primarily reflected higher earnings from equity method investments.~~year-ago periods.

Noninterest Expense

The following table presents the components of noninterest expense for the third quarters and first nine months of ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,								($ in thousands)		Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			% Change		2021			2020				% Change		($ in thousands)	2022		2021		%		2022		2021		%
Compensation and employee benefits	Compensation and employee benefits	$	105,751		$	99,756		6	%	$	318,985		$	298,671			7	%		$	127,580	$	105,751	21	%	$	357,213	$	318,985	12	%
Occupancy and equipment expense	Occupancy and equipment expense	15,851			16,648			(5)	%	47,150			49,941				(6)	%	Occupancy and equipment expense	15,920		15,851		0	%	46,853		47,150		(1)	%
Deposit insurance premiums and regulatory assessments	Deposit insurance premiums and regulatory assessments	4,641			4,006			16	%	12,791			11,133				15	%	Deposit insurance premiums and regulatory assessments	4,875		4,641		5	%	14,519		12,791		14	%
Deposit account expense	Deposit account expense	4,136			3,113			33	%	11,845			10,029				18	%	Deposit account expense	6,707		4,136		62	%	17,071		11,845		44	%
Data processing	Data processing	3,575			3,590			0	%	12,088			11,896				2	%	Data processing	3,725		3,575		4	%	10,876		12,088		(10)	%
Computer software expense	Computer software expense	8,426			8,539			(1)	%	23,106			22,006				5	%	Computer software expense	6,889		8,426		(18)	%	20,755		23,106		(10)	%
Consulting expense	Consulting expense	1,635			1,224			34	%	4,978			3,854				29	%	Consulting expense	1,620		1,635		(1)	%	5,474		4,978		10	%
Legal expense	Legal expense	2,363			1,366			73	%	5,840			6,093				(4)	%	Legal expense	689		2,363		(71)	%	2,454		5,840		(58)	%
Other operating expense	Other operating expense	20,998			17,122			23	%	58,544			57,489				2	%	Other operating expense	28,094		20,998		34	%	78,315		58,544		34	%
Amortization of tax credit and other investments	Amortization of tax credit and other investments	38,008			17,209			121	%	90,657			57,819				57	%	Amortization of tax credit and other investments	19,874		38,008		(48)	%	48,753		90,657		(46)	%
Repurchase agreements’ extinguishment cost		—			—			—	%	—			8,740				(100)	%

Total noninterest expense	Total noninterest expense	$	205,384		$	172,573		19	%	$	585,984		$	537,671			9	%	Total noninterest expense	$	215,973	$	205,384	5	%	$	602,283	$	585,984	3	%
Efficiency ratio		43.81		%	45.58		%			43.72		%	44.94		%

Third quarter ~~2021~~2022 noninterest expense was ~~$205.4~~$216.0 million, an increase of ~~$32.8~~$10.6 million or ~~19%~~5%, compared with ~~$172.6~~$205.4 million for the same period in ~~2020. This~~2021. First nine months of 2022 noninterest expense was $602.3 million, an increase ~~was~~of $16.3 million or 3%, compared with $586.0 million for the same period in 2021. These increases were primarily due to higher ~~amortization of tax credit and other investments,~~ compensation and employee benefits and other operating ~~expense. First nine months of 2021 noninterest~~ expense, ~~was $586.0 million, an increase of $48.3 million or 9%, compared with $537.7 million for~~partially offset by a decrease in the ~~same period in 2020. The increase primarily reflected higher~~ amortization of tax credit and other ~~investments, and compensation and employee benefits.~~investments.

Compensation and employee benefits ~~increased $6.0 million or 6% to $105.8~~were $127.6 million for the third quarter of ~~2021, and increased $20.3~~2022, an increase of $21.8 million or ~~7% to $319.0~~21%, compared with $105.8 million for the same period in 2021. For the first nine months of ~~2021,~~2022, compensation and employee benefits were $357.2 million, an increase of $38.2 million or 12%, compared with $319.0 million for the same ~~periods~~period in ~~2020.~~2021. These increases were primarily due to ~~higher bonus accruals.~~headcount growth and the year-over-year change in deferred loan costs.

~~The increase in other~~Other operating expense ~~of $3.9 million or 23% to $21.0~~was $28.1 million for the third quarter of ~~2021,~~2022, an increase of $7.1 million or 34%, compared with $21.0 million for the same period in ~~2020, was~~2021, primarily due to ~~higher charitable contributions. Other operating~~a reduction in foreclosure related gains and interest expense ~~was $58.5 million and $57.5 million for~~paid on cash collateral. For the first nine months of 2022, other operating expense was $78.3 million, an increase of $19.8 million or 34%, compared with $58.5 million for the same period in 2021, primarily due to increased charitable contributions, foreclosure expenses, miscellaneous operational losses and ~~2020, respectively.~~travel-related expenses.

Amortization of tax credit and other investments ~~increased $20.8 million or 121% to $38.0~~was $19.9 million for the third quarter of ~~2021, and increased $32.9~~2022, a decrease of $18.1 million or ~~57% to $90.7~~48%, compared with $38.0 million for the same period in 2021. For the first nine months of 2021, compared with the same periods in 2020. These increases were primarily due to the timing of the tax credit recognition in each period, based on when new tax credit projects were put into service.

During the second quarter of 2020, the Company prepaid $150.0 million of repurchase agreements and incurred a debt extinguishment cost of $8.7 million. No such expense was incurred in either the third quarter or first nine months of 2021.

Efficiency ratio, calculated as noninterest expense divided by total revenue, was 43.81% and 45.58% for the third quarters of 2021 and 2020, respectively, and 43.72% and 44.94% for the first nine months of 2021 and 2020, respectively. Non-GAAP efficiency ratio, adjusted for the2022, amortization of tax credit and other investments ~~and the amortization~~was $48.8 million, a decrease of ~~core deposit intangibles, improved 524 bps to 35.55%~~$41.9 million or 46%, compared with $90.7 million for the ~~third quarter~~same period in 2021. The year-over-year change reflects the mix of ~~2021, and improved 234 bps to 36.80% for~~tax credits being recognized, which have differing amortization periods, as well as the ~~first nine months~~impact of ~~2021, compared with the same periods~~investments that close in ~~2020. For additional details, see the reconciliations of non-GAAP measures presented under~~ ~~Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures~~ ~~in this Form 10-Q.~~a given period.

Income Taxes


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,				($ in thousands)			Three Months Ended September 30,							Nine Months Ended September 30,
		2021			2020			% Change			2021				2020			% Change		($ in thousands)	2022			2021			% Change		2022			2021			% Change
Income before income taxes	Income before income taxes	$	273,431		$	196,060		39	%		$	779,296			$	472,343		65	%		$	384,388		$	273,431		41	%	$	1,023,330		$	779,296		31	%
Income tax expense	Income tax expense	$	47,982		$	36,523		31	%		$	124,111			$	68,630		81	%	Income tax expense	$	89,049		$	47,982		86	%	$	232,010		$	124,111		87	%
Effective tax rate	Effective tax rate	17.5		%	18.6		%				15.9		%		14.5		%			Effective tax rate	23.2		%	17.5		%			22.7		%	15.9		%

Third quarter ~~2021~~2022 income tax expense was ~~$48.0~~$89.0 million and the effective tax rate was ~~17.5%~~23.2%, compared with third quarter ~~2020~~2021 income tax expense of ~~$36.5~~$48.0 million and an effective tax rate of ~~18.6%~~17.5%. ~~The decrease in effective tax rate for the third quarter of 2021, compared with the same period in 2020 was primarily due to the relative impact of tax credit investments on income tax expense.~~ For the first nine months of ~~2021,~~2022, income tax expense was ~~$124.1~~$232.0 million and the effective tax rate was ~~15.9%~~22.7%, compared with income tax expense of ~~$68.6~~$124.1 million and an effective tax rate of ~~14.5%~~15.9% for the same period in ~~2020.~~2021. The year-over-year ~~increase~~increases in the income tax expense and the effective tax rate ~~was predominantly driven by~~reflected a higher level of income before income taxes ~~as well as the relative impact of~~and a decrease in tax ~~credit investments on income tax expense~~credits recognized in ~~each period.~~2022.

Operating Segment Results

The Company organizes its operations into three reportable operating segments: (1) Consumer and Business Banking; (2) Commercial Banking; and (3) Other. These segments are defined by the type of customers served and the related products and services provided. The segments reflect how financial information is currently evaluated by management. For additional description of the Company’s internal management reporting process, including the segment cost allocation methodology, see Note 1314 — 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 segment, adjusted for funding charges or credits through the Company’s internal funds transfer pricing (“FTP”) process.

The following tables present the results by operating segment for the periods indicated:


($ in thousands)	($ in thousands)	Three Months Ended September 30,												($ in thousands)	Three Months Ended September 30,
		Consumer and Business Banking				Commercial Banking				Other					Consumer and Business Banking				Commercial Banking				Other
		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021
Total revenue		$	199,124	$	138,395	$	232,716	$	191,868	$	36,975	$	48,370
Total revenue (loss) (1)														Total revenue (loss) (1)	$	357,230	$	198,777	$	271,637	$	233,063	$	(1,506)	$	36,975
Provision for (reversal of) credit losses	Provision for (reversal of) credit losses	1,293		(3,470)		(11,293)		13,470		—		—		Provision for (reversal of) credit losses	8,974		1,293		18,026		(11,293)		—		—

Noninterest expense	Noninterest expense	90,575		81,419		66,688		61,863		48,121		29,291		Noninterest expense	104,005		90,575		81,386		66,731		30,582		48,078
Segment income (loss) before income taxes(1)	Segment income (loss) before income taxes(1)	107,256		60,446		177,321		116,535		(11,146)		19,079		Segment income (loss) before income taxes(1)	244,251		106,909		172,225		177,625		(32,088)		(11,103)

Segment net income		$	76,825	$	43,310	$	126,767	$	83,340	$	21,857	$	32,887
Segment net income (loss) (1)														Segment net income (loss) (1)	$	173,982	$	76,577	$	122,869	$	126,984	$	(1,512)	$	21,888


($ in thousands)	($ in thousands)	Nine Months Ended September 30,												($ in thousands)	Nine Months Ended September 30,
		Consumer and Business Banking				Commercial Banking				Other					Consumer and Business Banking				Commercial Banking				Other
		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021
Total revenue		$	568,080	$	446,257	$	685,066	$	625,508	$	87,134	$	124,562
(Reversal of) provision for credit losses		(598)		9,908		(24,402)		176,405		—		—
Total revenue (loss) (1)														Total revenue (loss) (1)	$	908,400	$	570,225	$	807,787	$	682,921	$	(42,074)	$	87,134
Provision for (reversal of) credit losses														Provision for (reversal of) credit losses	14,976		(598)		33,524		(24,402)		—		—

Noninterest expense	Noninterest expense	267,511		248,547		200,109		196,889		118,364		92,235		Noninterest expense	294,395		267,511		235,804		204,042		72,084		114,431
Segment income (loss) before income taxes(1)	Segment income (loss) before income taxes(1)	301,167		187,802		509,359		252,214		(31,230)		32,327		Segment income (loss) before income taxes(1)	599,029		303,312		538,459		503,281		(114,158)		(27,297)

Segment net income		$	215,720	$	134,563	$	364,632	$	180,649	$	74,833	$	88,501
Segment net income (loss) (1)														Segment net income (loss) (1)	$	426,695	$	217,257	$	384,237	$	360,275	$	(19,612)	$	77,653

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the third quarter and nine months of 2021 have been reclassified to reflect these allocation changes for comparability.

Consumer and Business Banking

The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company’s domestic branch ~~network and digital banking platform.~~network. This segment offers consumer and commercial deposits, mortgage and home equity loans, and other products and services. It also originates commercial loans for small- and medium-sized enterprises. Other products and services provided by this segment include wealth management, treasury management, interest rate risk hedging and foreign exchange services.

The following tables present additional financial information for the Consumer and Business Banking segment for the periods indicated:

($ in thousands) Three Months Ended September 30,
Change from 2020
2021 2020 $ %
Net interest income before provision for credit losses $ 176,678 $ 120,969 $ 55,709 46 %
Noninterest income 22,446 17,426 5,020 29 %
Total revenue 199,124 138,395 60,729 44 %
Provision for (reversal of) credit losses 1,293 (3,470) 4,763 (137) %
Noninterest expense 90,575 81,419 9,156 11 %
Segment income before income taxes 107,256 60,446 46,810 77 %
Income tax expense 30,431 17,136 13,295 78 %
Segment net income $ 76,825 $ 43,310 $ 33,515�� 77 %
Average loans $ 14,186,630 $ 12,267,993 $ 1,918,637 16 %
Average deposits $ 32,516,678 $ 27,596,090 $ 4,920,588 18 %



($ in thousands)	Three Months Ended September 30,
					Change from 2021
	2022		2021		$		%
Net interest income before provision for credit losses	$	326,411	$	176,678	$	149,733	85	%
Noninterest income (1)	30,819		22,099		8,720		39	%
Total revenue (1)	357,230		198,777		158,453		80	%
Provision for credit losses	8,974		1,293		7,681		594	%
Noninterest expense	104,005		90,575		13,430		15	%
Segment income before income taxes (1)	244,251		106,909		137,342		128	%
Income tax expense	70,269		30,332		39,937		132	%
Segment net income (1)	$	173,982	$	76,577	$	97,405	127	%
Average loans	$	16,405,433	$	14,186,630	$	2,218,803	16	%
Average deposits	$	33,271,717	$	32,516,678	$	755,039	2	%



($ in thousands)	Nine Months Ended September 30,
					Change from 2021
	2022		2021		$		%
Net interest income before provision for (reversal of) credit losses	$	823,998	$	500,352	$	323,646	65	%
Noninterest income (1)	84,402		69,873		14,529		21	%
Total revenue (1)	908,400		570,225		338,175		59	%
Provision for (reversal of) credit losses	14,976		(598)		15,574		2604	%
Noninterest expense	294,395		267,511		26,884		10	%
Segment income before income taxes (1)	599,029		303,312		295,717		97	%
Income tax expense	172,334		86,055		86,279		100	%
Segment net income (1)	$	426,695	$	217,257	$	209,438	96	%
Average loans	$	15,448,874	$	13,787,675	$	1,661,199	12	%
Average deposits	$	33,272,271	$	31,304,335	$	1,967,936	6	%

(1)

($ in thousands) Nine Months Ended September 30,
Change from 2020
2021 2020 $ %
Net interest income before provision for credit losses $ 500,352 $ 398,486 $ 101,866 26 %
Noninterest income 67,728 47,771 19,957 42 %
Total revenue 568,080 446,257 121,823 27 %
(Reversal of) provision for credit losses (598) 9,908 (10,506) (106) %
Noninterest expense 267,511 248,547 18,964 8 %
Segment income before income taxes 301,167 187,802 113,365 60 %
Income tax expense 85,447 53,239 32,208 60 %
Segment net income $ 215,720 $ 134,563 $ 81,157 60 %
Average loans $ 13,787,675 $ 11,851,089 $ 1,936,586 16 %
Average deposits $ 31,304,335 $ 26,734,437 $ 4,569,898 17 %
During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter of 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the third quarter and nine months of 2021 have been reclassified to reflect these allocation changes for comparability.

~~For~~Consumer and Business Banking segment net income increased $97.4 million or 127% year-over-year to $174.0 million for the third quarter of ~~2021, segment net income increased~~ ~~$33.5~~2022, and $209.4 million or ~~77%~~96% year-over-year to ~~$76.8~~$426.7 million~~, driven by revenue growth, partially offset by increases in income tax expense, noninterest expense, and the provision~~ for ~~credit losses. Net interest income before provision for credit losses increased~~ ~~$55.7 million~~ ~~or 46% to~~ ~~$176.7 million~~, driven by lower interest expense, primarily due to lower interest rates and growth in noninterest-bearing demand deposits; and higher interest income, primarily due to growth in residential mortgage loans. Noninterest income increased $5.0 million or 29% to $22.4 million, primarily due to higher foreign exchange income and deposit account fees, reflecting growth in customer-driven transactions. Noninterest expense increased $9.2 million or 11% to $90.6 million, primarily due to higher allocated corporate overhead, and compensation and employee benefits.

~~For~~ the first nine months of ~~2021, segment net income increased $81.2 million or 60% year-over-year to $215.7 million, due to~~2022. The increases in both periods reflected revenue growth, ~~and a lower provision for credit losses,~~ partially offset by higher income tax expense and noninterest expense. Net interest income before provision for credit losses increased ~~$101.9~~$149.7 million or ~~26%~~85% year-over-year to ~~$500.4~~$326.4 million for the third quarter of 2022, and $323.6 million or 65% year-over-year to $824.0 million for the first nine months of 2022. The increases in both periods were primarily driven by higher deposit fund transfer pricing credits due to noninterest-bearing deposit growth, and higher loan interest income, primarily ~~due to~~from growth in residential mortgage loans; and lower interest expense, primarily due to growth in noninterest-bearing demand deposits and lower interest rates. Noninterest income increased $20.0 million or 42% to $67.7 million, primarily due to higher foreign exchange income, deposit account fees, and wealth management fees, partially offset by lower interest rate contracts and other derivative income.loans. Noninterest expense increased ~~$19.0~~$13.4 million or 8%15% year-over-year to ~~$267.5~~$104.0 million for the third quarter of 2022, and $26.9 million or 10% year-over-year to $294.4 million for the first nine months of 2022. The increases in both periods primarily ~~from increased~~reflected higher compensation and employee benefits ~~and allocated corporate overhead.~~expense.

Commercial Banking

The Commercial Banking segment primarily ~~offers~~generates commercial loan and deposit products. Commercial loan products include ~~commercial business loans and~~CRE lending, construction finance, working capital lines of credit, trade finance, ~~loans and~~ letters of credit, ~~CRE loans, construction and land~~commercial business lending, affordable housing ~~loans and letters of credit,~~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.

7077

The following tables present additional financial information for the Commercial Banking segment for the periods indicated:


($ in thousands)	($ in thousands)	Three Months Ended September 30,								($ in thousands)	Three Months Ended September 30,
						Change from 2020									Change from 2021
		2021		2020		$		%			2022		2021		$		%
Net interest income before provision for credit losses		$	189,791	$	162,884	$	26,907	17	%
Net interest income before provision for (reversal of) credit losses										Net interest income before provision for (reversal of) credit losses	$	222,996	$	189,791	$	33,205	17	%
Noninterest income(1)	Noninterest income(1)	42,925		28,984		13,941		48	%	Noninterest income(1)	48,641		43,272		5,369		12	%
Total revenue(1)	Total revenue(1)	232,716		191,868		40,848		21	%	Total revenue(1)	271,637		233,063		38,574		17	%
(Reversal of) provision for credit losses		(11,293)		13,470		(24,763)		(184)	%
Provision for (reversal of) credit losses										Provision for (reversal of) credit losses	18,026		(11,293)		29,319		260	%
Noninterest expense	Noninterest expense	66,688		61,863		4,825		8	%	Noninterest expense	81,386		66,731		14,655		22	%
Segment income before income taxes(1)	Segment income before income taxes(1)	177,321		116,535		60,786		52	%	Segment income before income taxes(1)	172,225		177,625		(5,400)		(3)	%
Income tax expense	Income tax expense	50,554		33,195		17,359		52	%	Income tax expense	49,356		50,641		(1,285)		(3)	%
Segment net income		$	126,767	$	83,340	$	43,427	52	%
Segment net income (1)										Segment net income (1)	$	122,869	$	126,984	$	(4,115)	(3)	%
Average loans	Average loans	$	25,773,521	$	24,892,452	$	881,069	4	%	Average loans	$	30,449,108	$	25,773,521	$	4,675,587	18	%
Average deposits	Average deposits	$	18,275,884	$	10,766,677	$	7,509,207	70	%	Average deposits	$	16,627,353	$	18,275,884	$	(1,648,531)	(9)	%


($ in thousands)	($ in thousands)	Nine Months Ended September 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2020									Change from 2021
		2021		2020		$		%			2022		2021		$		%
Net interest income before provision for credit losses		$	559,579	$	530,181	$	29,398	6	%
Net interest income before provision for (reversal of) credit losses										Net interest income before provision for (reversal of) credit losses	$	662,037	$	559,579	$	102,458	18	%
Noninterest income(1)	Noninterest income(1)	125,487		95,327		30,160		32	%	Noninterest income(1)	145,750		123,342		22,408		18	%
Total revenue(1)	Total revenue(1)	685,066		625,508		59,558		10	%	Total revenue(1)	807,787		682,921		124,866		18	%
(Reversal of) provision for credit losses		(24,402)		176,405		(200,807)		(114)	%
Provision for (reversal of) credit losses										Provision for (reversal of) credit losses	33,524		(24,402)		57,926		237	%
Noninterest expense	Noninterest expense	200,109		196,889		3,220		2	%	Noninterest expense	235,804		204,042		31,762		16	%
Segment income before income taxes(1)	Segment income before income taxes(1)	509,359		252,214		257,145		102	%	Segment income before income taxes(1)	538,459		503,281		35,178		7	%
Income tax expense	Income tax expense	144,727		71,565		73,162		102	%	Income tax expense	154,222		143,006		11,216		8	%
Segment net income		$	364,632	$	180,649	$	183,983	102	%
Segment net income (1)										Segment net income (1)	$	384,237	$	360,275	$	23,962	7	%
Average loans	Average loans	$	25,654,076	$	24,636,770	$	1,017,306	4	%	Average loans	$	29,099,646	$	25,654,076	$	3,445,570	13	%
Average deposits	Average deposits	$	16,611,906	$	10,197,018	$	6,414,888	63	%	Average deposits	$	17,296,919	$	16,611,906	$	685,013	4	%

(1)During the fourth quarter of 2021, the Company enhanced its segment allocation methodology related to the fair values of interest rate and commodity derivative contracts, which are included in noninterest income. These fair values, which were previously allocated to the “Commercial Banking” segment prior to the fourth quarter 2021, have since been reclassified between “Consumer and Business Banking” and “Commercial Banking.” Balances for the third quarter and nine months of 2021 have been reclassified to reflect these allocation changes for comparability.

~~For~~Commercial Banking segment net income decreased $4.1 million or 3%, year-over-year to $122.9 million for the third quarter of ~~2021, segment net income increased $43.4 million or 52% year-over-year~~2022, due to ~~$126.8 million, driven by revenue growth and a lower~~increases in provision for credit losses and noninterest expense, partially offset by revenue growth. For the first nine months of 2022, this segment’s net income increased $24.0 million or 7% year-over-year to $384.2 million. This increase reflected revenue growth, partially offset by higher ~~income tax expense~~provision for credit losses and noninterest expense. Net interest income before provision for credit losses increased ~~$26.9~~$33.2 million or 17% year-over-year to ~~$189.8~~$223.0 million for the third quarter of 2022, and $102.5 million or 18% year-over-year to $662.0 million for the first nine months of 2022. The increases in both periods were primarily due to higher loan interest income from commercial loan growth. Provision for credit losses increased $29.3 million or 260% year-over-year to $18.0 million for the third quarter of 2022, and $57.9 million or 237% year-over-year to $33.5 million for the first nine months of 2022, primarily driven by ~~higher interest income, due to more PPP loan-related income~~the current macroeconomic outlook and ~~growth in~~ commercial loans; and lower interest expense due to growth in noninterest-bearing demand deposits. Noninterest income increased $13.9 million or 48% to $42.9 million, reflecting higher foreign exchange income, deposit account fees, gains on sales of loans, and interest rate contracts and other derivative income.loan growth. Noninterest expense increased ~~$4.8~~$14.7 million or 8%22% year-over-year to ~~$66.7~~$81.4 million for the third quarter of 2022, primarily due to higher compensation and employee ~~benefits.~~

benefits and higher corporate overhead allocations. For the first nine months of ~~2021, segment net income~~2022, this segment’s noninterest expense increased ~~$184.0~~$31.8 million or ~~102%~~16% year-over-year to $364.6 million, reflecting a lower provision for credit losses and revenue growth, partially offset by higher income tax expense and noninterest expense. Net interest income before provision for credit losses increased $29.4 million or 6% to $559.6$235.8 million, driven by lower interest expense, due to lower interest rates and growth in noninterest-bearing demand deposits; partially offset by lower interest income, due to compression in commercial loan yields. Noninterest income increased $30.2 million or 32% to $125.5 million, reflecting higher foreign exchange income, deposit account fees, interest rate contracts and other derivative income, and gains on sales of loans. Noninterest expense increased $3.2 million or 2% to $200.1 million, due to increases in compensation and employee benefits, corporate overhead allocations and ~~deposit related expenses, partially offset by a decrease in loan related expense.~~other operating expenses.

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.

7178

The following tables present additional financial information for the Other segment for the periods indicated:


($ in thousands)	($ in thousands)	Three Months Ended September 30,								($ in thousands)	Three Months Ended September 30,
						Change from 2020									Change from 2021
		2021		2020		$		%			2022		2021		$		%
Net interest income before provision for credit losses	Net interest income before provision for credit losses	$	29,237	$	40,277	$	(11,040)	(27)	%	Net interest income before provision for credit losses	$	2,402	$	29,237	$	(26,835)	(92)	%
Noninterest income		7,738		8,093		(355)		(4)	%
Total revenue		36,975		48,370		(11,395)		(24)	%
Noninterest (loss) income										Noninterest (loss) income	(3,908)		7,738		(11,646)		(151)	%
Total (loss) revenue										Total (loss) revenue	(1,506)		36,975		(38,481)		(104)	%

Noninterest expense	Noninterest expense	48,121		29,291		18,830		64	%	Noninterest expense	30,582		48,078		(17,496)		(36)	%
Segment (loss) income before income taxes		(11,146)		19,079		(30,225)		(158)	%
Segment loss before income taxes										Segment loss before income taxes	(32,088)		(11,103)		(20,985)		189	%
Income tax benefit	Income tax benefit	(33,003)		(13,808)		(19,195)		139	%	Income tax benefit	(30,576)		(32,991)		2,415		(7)	%
Segment net income		$	21,857	$	32,887	$	(11,030)	(34)	%
Segment net (loss) income										Segment net (loss) income	$	(1,512)	$	21,888	$	(23,400)	(107)	%

Average deposits	Average deposits	$	2,704,070	$	2,847,980	$	(143,910)	(5)	%	Average deposits	$	4,152,463	$	2,704,070	$	1,448,393	54	%


($ in thousands)	($ in thousands)	Nine Months Ended September 30,								($ in thousands)	Nine Months Ended September 30,
						Change from 2020									Change from 2021
		2021		2020		$		%			2022		2021		$		%
Net interest income before provision for credit losses		$	65,943	$	101,945	$	(36,002)	(35)	%
Net interest (loss) income before provision for credit losses										Net interest (loss) income before provision for credit losses	$	(45,661)	$	65,943	$	(111,604)	(169)	%
Noninterest income	Noninterest income	21,191		22,617		(1,426)		(6)	%	Noninterest income	3,587		21,191		(17,604)		(83)	%
Total revenue		87,134		124,562		(37,428)		(30)	%
Total (loss) revenue										Total (loss) revenue	(42,074)		87,134		(129,208)		(148)	%

Noninterest expense	Noninterest expense	118,364		92,235		26,129		28	%	Noninterest expense	72,084		114,431		(42,347)		(37)	%
Segment (loss) income before income taxes		(31,230)		32,327		(63,557)		(197)	%
Segment loss before income taxes										Segment loss before income taxes	(114,158)		(27,297)		(86,861)		318	%
Income tax benefit	Income tax benefit	(106,063)		(56,174)		(49,889)		89	%	Income tax benefit	(94,546)		(104,950)		10,404		(10)	%
Segment net income		$	74,833	$	88,501	$	(13,668)	(15)	%
Segment net (loss) income										Segment net (loss) income	$	(19,612)	$	77,653	$	(97,265)	(125)	%

Average deposits	Average deposits	$	2,612,897	$	2,602,791	$	10,106	0	%	Average deposits	$	3,499,816	$	2,612,897	$	886,919	34	%

~~Segment~~The Other segment reported segment loss before income taxes of $32.1 million and segment net ~~income decreased $11.0 million or 34% year-over-year to $21.9~~loss of $1.5 million for the third quarter of ~~2021. Net~~2022, reflecting an income tax benefit of $30.6 million. For the first nine months of 2022, the Other segment reported segment loss before income taxes of $114.2 million and segment net loss of $19.6 million, reflecting an income tax benefit of $94.5 million. The increases in segment losses before income taxes for both periods were primarily driven by lower revenue, partially offset by decreases in noninterest expense. The $26.8 million and $111.6 million decreases in net interest income before provision for credit losses ~~decreased $11.0 million or 27%~~for the third quarter and first nine months of 2022, respectively, compared to ~~$29.2 million. The decrease was~~the same prior year periods, were primarily driven by lower FTP spread income absorbed by the Other segment, partially offset by ~~growth~~an increase in interest income from investments due to a higher yield on debt securities for the third quarter of 2022, and a higher volume of ~~AFS~~ debt ~~securities.~~securities for the first nine months of 2022. Noninterest expense ~~increased $18.8~~decreased $17.5 million ~~or 64%~~year-over-year to ~~$48.1~~$30.6 million for the third quarter of 2022, and $42.3 million year-over-year to $72.1 million for the first nine months of 2022, primarily due to ~~higher~~lower amortization of tax credits and other investments.

~~Segment net~~The income ~~decreased $13.7 million~~tax expense or 15% year-over-year to $74.8 million for the first nine months of 2021. Net interest income before provision for credit losses decreased $36.0 million or 35% to $65.9 million. The decrease was primarily driven by lower FTP spread income absorbed bybenefit in the Other segment ~~partially offset~~consists of the remaining unallocated income tax expense or benefit after allocating income tax expense to the two core segments. Income tax expense is allocated to the Consumer and Business Banking and the Commercial Banking segments by ~~growth in interest~~applying statutory income ~~from investments due~~tax rates to ~~a higher volume of AFS debt securities. Noninterest expense increased $26.1 million or 28% to $118.4 million, primarily driven by higher amortization of tax credits and other investments.~~the segment income before income taxes.

Balance Sheet Analysis

Debt Securities

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

•interest income for earnings and yield enhancement;

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

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

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

7279

~~Available-for-Sale Debt Securities~~

~~Debt~~While the Company intends to hold its debt securities ~~classified as~~indefinitely, it may sell AFS ~~are carried at their fair value with the corresponding~~securities in response to changes in ~~fair value recorded in~~ ~~Accumulated other comprehensive income (loss), net of tax,~~ ~~as a component of~~ ~~Stockholders’ equity~~ on the ~~Consolidated Balance Sheet.~~balance sheet and related interest rate risk to meet liquidity, regulatory and strategic requirements.

The following table presents the distribution of the Company’s AFS and HTM debt securities ~~portfolio by fair value and percentage of~~ portfolio as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, and by credit ratings as of September 30, ~~2021:~~2022:


($ in thousands)	($ in thousands)	September 30, 2021				December 31, 2020					Ratings as of September 30, 2021 (2)								($ in thousands)		September 30, 2022										December 31, 2021													Ratings as of September 30, 2022 (1)
		Fair Value		% of Total			Fair Value		% of Total			AAA/AA		A		BBB						No Rating				($ in thousands)	Amortized Cost				Fair Value					% of Fair Value		Amortized Cost				Fair Value		% of Fair Value							AAA/AA				A				BBB			BB and Lower		No Rating (2)
AFS debt securities:	AFS debt securities:
U.S. Treasury securities	U.S. Treasury securities	$	941,724	10	%		$	50,761	1	%		100	%	—	%	—	%					—	%			U.S. Treasury securities	$	676,312			$	600,677				10	%	$	1,049,238			$	1,032,681	10	%						100		%		—		%		—		%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise debt securities	U.S. government agency and U.S. government-sponsored enterprise debt securities	1,363,109		14	%		814,319		15	%		100	%	—	%	—	%					—	%			U.S. government agency and U.S. government-sponsored enterprise debt securities	319,070				260,424					5	%	1,333,984				1,301,971		13	%						100		%		—		%		—		%	—	%	—	%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	4,065,531		42	%		2,814,664		51	%		100	%	—	%	—	%					—	%			U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	2,639,133				2,315,314					39	%	4,210,832				4,157,263		42	%						100		%		—		%		—		%	—	%	—	%
Municipal securities ~~(1)~~	Municipal securities ~~(1)~~	501,489		5	%		396,073		7	%		94	%	3	%	—	%					3	%			Municipal securities ~~(1)~~	307,084				249,502					4	%	519,381				523,158		5	%						91		%		5		%		—		%	—	%	4	%
Non-agency mortgage-backed securities ~~(1)~~	Non-agency mortgage-backed securities ~~(1)~~	1,366,026		14	%		529,617		10	%		88	%	—	%	—	%					12	%			Non-agency mortgage-backed securities ~~(1)~~	1,233,490				1,069,513					18	%	1,388,857				1,378,374		14	%						82		%		—		%		—		%	—	%	18	%
Corporate debt securities ~~(1)~~	Corporate debt securities ~~(1)~~	618,671		6	%		405,968		7	%		—	%	23	%	77	%					—	%			Corporate debt securities ~~(1)~~	673,502				529,565					9	%	657,516				649,665		6	%						—		%		31		%		67		%	2	%	—	%
Foreign government bonds ~~(1)~~	Foreign government bonds ~~(1)~~	254,848		3	%		182,531		3	%		46	%	54	%	—	%					—	%			Foreign government bonds ~~(1)~~	238,720				225,810					4	%	260,447				257,733		3	%						47		%		53		%		—		%	—	%	—	%
Asset-backed securities ~~(1)~~	Asset-backed securities ~~(1)~~	76,799		1	%		63,231		1	%		100	%	—	%	—	%					—	%			Asset-backed securities ~~(1)~~	66,793				64,870					1	%	74,674				74,558		1	%						100		%		—		%		—		%	—	%	—	%
Collateralized loan obligations (CLOs) (1)		524,809		5	%		287,494		5	%		95	%	5	%	—	%					—	%
Collateralized loan obligations (“CLOs”)																		Collateralized loan obligations (“CLOs”)		617,250				590,415					10	%			592,250		589,950					6	%					96	%	4	%	—		%		—		%		—		%
Total AFS debt securities	Total AFS debt securities	$	9,713,006	100	%		$	5,544,658	100	%		90	%	3	%	5	%					2	%			Total AFS debt securities	$	6,771,354			$	5,906,090				100	%	$	10,087,179			$	9,965,353	100	%						85		%		5		%		6		%	0	%	4	%

HTM debt securities:																		HTM debt securities:
U.S. Treasury securities																		U.S. Treasury securities		$	522,713			$	466,085				19	%			$	—	$	—				—	%					100	%	—	%	—		%		—		%		—		%
U.S. government agency and U.S. government-sponsored enterprise debt securities																		U.S. government agency and U.S. government-sponsored enterprise debt securities		998,233				782,617					32	%			—		—					—	%					100	%	—	%	—		%		—		%		—		%
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities																		U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities		1,301,824				1,066,339					43	%			—		—					—	%					100	%	—	%	—		%		—		%		—		%
Municipal securities																		Municipal securities		189,897				144,094					6	%			—		—					—	%					100	%	—	%	—		%		—		%		—		%
Total HTM debt securities																		Total HTM debt securities		$	3,012,667			$	2,459,135				100	%			$	—	$	—				—	%					100	%	—	%	—		%		—		%		—		%
Total debt securities																		Total debt securities		$	9,784,021			$	8,365,225								$	10,087,179	$	9,965,353

(1)~~There were no securities~~Credit ratings express opinions about the credit quality of a ~~single non-federal governmental agency issuer that exceeded 10%~~debt security. The Company determines the credit rating of ~~stockholder’s equity as of both September 30, 2021 and December 31, 2020.~~

~~(2)Primarily based upon~~a security according to the lowest ofcredit 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 ~~ratings issued by Standard and Poor's (“S&P”), Moody’s Investors Service (“Moody’s”) or Fitch~~risk. Ratings ~~(“Fitch”). Rating~~ percentages are allocated based on fair value.

(2)

~~The fair value of AFS~~For debt securities ~~totaled $9.71 billion as of September 30, 2021, an increase of $4.17 billion or 75% from $5.54 billion as of December 31, 2020. The largest changes came from U.S. government agency~~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 U.S. government-sponsored enterprise mortgage-backed securities, which increased $1.25 billion, followed by U.S. Treasury securities, which increased $891.0 million, and non-agency mortgage-backed securities, which increased $836.4 million.whether the contractual payments have historically been on time.

The Company’s AFS and HTM debt securities ~~portfolio~~portfolios had an effective duration, defined as the sensitivity of the value of the portfolio to interest rate changes, of 5.3 as of September 30, ~~2021.~~2022. This increased from ~~4.2~~5.0 as of December 31, ~~2020,~~2021, primarily due to both the upshifting and steepening of the yield curve.

Available-for-Sale Debt Securities

The fair value of the AFS debt securities portfolio totaled $5.91 billion as of September 30, 2022, a decrease of $4.06 billion or 41% from $9.97 billion as of December 31, 2021. The decrease was primarily due to the ~~steepening~~Company’s transfer of $3.01 billion of AFS securities to HTM securities during the ~~yield curve. As~~first quarter of ~~September 30, 2021, 90% of~~2022 and a decline in the ~~carrying value of~~portfolio valuation within the Company’s debt securities portfolio was rated “AA-,” “Aa3” or higher by nationally recognized credit rating agencies, compared with 88% as of December 31, 2020. Credit ratings of BBB- or higher by S&P and Fitch, or Baa3 or higher by Moody’s, are considered investment grade.

rising interest rate environment. For further discussion regarding the transfer, refer to the
Held-to-Maturity Debt Securities

section below. The Company’s AFS debt securities are carried at fair value with ~~non-credit related~~noncredit-related unrealized gains and losses, net of tax, reported in Other comprehensive (loss) income ~~(loss)~~ on the Consolidated Statement of Comprehensive Income. Pre-tax net unrealized losses on AFS debt securities were ~~$70.2~~$865.3 million as of September 30, ~~2021,~~2022, compared with ~~pre-tax net unrealized gains on AFS debt securities of $74.1~~$121.8 million as of December 31, ~~2020. This change was primarily due to interest rate movement and the widening of liquidity spreads.~~ 2021.

As of September 30, ~~2021,~~2022, 96% of the ~~Company had no intention to sell~~carrying value of the AFS debt securities portfolio was rated investment grade by NRSROs, compared with ~~unrealized losses and believed it is more-likely-than-not that it would not be required to sell such securities before recovery~~98% as of ~~their amortized costs.~~

December 31, 2021. Of the AFS debt securities with gross unrealized losses, substantially all were rated investment grade as of ~~both~~ September 30, ~~2021~~2022 and December 31, 2020, based upon the lowest of the credit ratings issued by S&P, Moody’s, or Fitch. The Company believes that the gross unrealized losses were due to non-credit related factors, and were primarily attributable to yield curve movement. The impact of the COVID-19 pandemic has been reduced by the government’s aggressive monetary policy, including benchmark rate cuts and various relief measures that contributed to the gradual and steady recovery of the market to pre-pandemic levels. The Company believes that the credit support levels of its AFS debt securities are strong and, based on current assessments and macroeconomic forecasts, expects that full contractual cash flows will be received.

~~The Company assesses individual security for credit losses for each reporting period. If a credit loss is identified, the Company records an impairment related to credit losses through the~~2021. There was no allowance for credit losses ~~with a corresponding~~ ~~Provision for credit losses~~ onas of September 30, 2022 and December 31, 2021, provided against the ~~Consolidated Statement of Income. There~~AFS debt securities. Additionally, there were no credit losses recognized in earnings for both the third quarters and first nine months of ~~2021~~2022 and ~~2020.~~2021. For ~~a description of the policies, methodologies and judgments used to determine~~additional discussion on the allowance for credit losses, see ~~Item 7. MD&A~~Note 5 — ~~Critical Accounting Policies~~Securities — Allowance for Credit Losses on Available-for-Sale Debt Securities to the Consolidated Financial Statements in this Form 10-Q.

Held-to-Maturity Debt Securities

During the first quarter of 2022, the Company transferred $3.01 billion in aggregate fair value of U.S. Treasury, government agency and ~~Estimates~~government-sponsored enterprise debt and mortgage-back securities, and municipal securities from AFS to HTM. In comparison, there were no HTM debt securities as of December 31, 2021. The Company’s HTM debt securities are carried at amortized cost. The unrealized gains or losses at the date of transfer of these securities continue to be reported in Accumulated other comprehensive income (loss) (“AOCI”), net of tax on the Consolidated Balance Sheet and are amortized over the remaining life of the ~~Company’s 2020~~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 September 30, 2022. For additional discussion on the allowance for credit losses, see Note 5 — Securities — Allowance for Credit Losses on Held-to-Maturity Debt Securities to the Consolidated Financial Statements in this Form ~~10-K~~10-Q.

For additional information on AFS and HTM securities, see Note 1 — Summary of Significant Accounting Policies~~— Allowance for Credit Losses on Available-for-Sale Debt Securities~~ to the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form ~~10-K.~~10-K and Note 2— Current Accounting Developments and Summary of Significant Accounting Policies, Note 3 — Fair Value Measurement and Fair Value of Financial Instruments and Note 5 — Securities to the Consolidated Financial Statements in this Form 10-Q.

The following table presents the weighted-average yields and contractual maturity distribution, excluding periodic principal payments, of the Company’s AFS debt securities as of September 30, 2021 and December 31, 2020. Actual maturities of certain securities can differ from contractual maturities as the borrowers have the right to prepay obligations with or without prepayment penalties. In addition, factors such as prepayments and interest rates may affect the yields on the carrying values of these securities.

($ in thousands) September 30, 2021 December 31, 2020
Amortized
Cost Fair
Value
Yield (1)
Amortized
Cost Fair
Value
Yield (1)
AFS debt securities:
U.S. Treasury securities:
Maturing in one year or less $ 25,015 $ 25,040 1.27 % $ 50,310 $ 50,761 1.26 %
Maturing after one year through five years 25,662 25,466 0.82 % — — — %
Maturing after five years through ten years 899,583 891,218 0.96 % — — — %
Total 950,260 941,724 0.97 % 50,310 50,761 1.26 %
U.S. government agency and U.S. government- sponsored enterprise debt securities:
Maturing in one year or less 1,210,105 1,185,286 1.74 % 640,153 640,366 1.78 %
Maturing after one year through five years 60,608 60,750 2.20 % 118,053 122,012 2.38 %
Maturing after five years through ten years 32,372 32,138 1.70 % 11,091 11,697 2.54 %
Maturing after ten years 83,151 84,935 2.53 % 37,517 40,244 2.74 %
Total 1,386,236 1,363,109 1.81 % 806,814 814,319 1.92 %
U.S. government agency and U.S. government- sponsored enterprise mortgage-backed securities:
Maturing in one year or less 10,438 10,489 2.77 % 4,185 4,232 3.46 %
Maturing after one year through five years 18,439 19,360 2.78 % 21,566 22,668 2.72 %
Maturing after five years through ten years 305,909 310,107 2.32 % 216,332 222,905 2.17 %
Maturing after ten years 3,757,314 3,725,575 1.73 % 2,517,644 2,564,859 2.11 %
Total 4,092,100 4,065,531 1.78 % 2,759,727 2,814,664 2.12 %
Municipal securities (2):
Maturing in one year or less 11,641 11,775 2.71 % 18,663 18,868 3.04 %
Maturing after one year through five years 37,766 38,769 2.65 % 36,000 37,716 2.89 %
Maturing after five years through ten years 238,245 242,526 2.21 % 230,851 239,883 2.07 %
Maturing after ten years 213,255 208,419 1.99 % 97,059 99,606 2.08 %
Total 500,907 501,489 2.16 % 382,573 396,073 2.20 %
Non-agency mortgage-backed securities:
Maturing in one year or less 7,920 7,914 1.84 % 7,920 7,920 0.63 %
Maturing after one year through five years 164,752 165,184 3.10 % 49,704 49,870 3.80 %
Maturing after five years through ten years 53,235 53,230 1.15 % 21,332 21,376 1.50 %
Maturing after ten years 1,139,453 1,139,698 1.91 % 444,529 450,451 2.48 %
Total 1,365,360 1,366,026 2.03 % 523,485 529,617 2.48 %
Corporate debt securities:
Maturing in one year or less 180,028 172,157 1.80 % 126,250 124,846 1.71 %
Maturing after one year through five years 407,503 407,906 3.26 % 276,073 277,103 3.56 %
Maturing after five years through ten years 39,000 38,608 2.56 % 4,000 4,019 4.50 %
Total 626,531 618,671 2.80 % 406,323 405,968 2.99 %
Foreign government bonds:
Maturing in one year or less 76,999 73,487 1.21 % 45,681 45,655 0.85 %
Maturing after one year through five years 131,120 131,127 2.40 % 138,147 136,876 2.41 %
Maturing after five years through ten years 50,000 50,234 0.42 % — — — %
Total 258,119 254,848 1.66 % 183,828 182,531 2.02 %
Asset-backed securities:
Maturing after ten years 76,417 76,799 0.77 % 63,463 63,231 0.85 %
CLOs:
Maturing after ten years 527,250 524,809 1.06 % 294,000 287,494 1.34 %
Total AFS debt securities $ 9,783,180 $ 9,713,006 1.77 % $ 5,470,523 $ 5,544,658 2.13 %
Total aggregated by maturities:
Maturing in one year or less $ 1,522,146 $ 1,486,148 1.73 % $ 893,162 $ 892,648 1.72 %
Maturing after one year through five years 845,850 848,562 2.91 % 639,543 646,245 3.05 %
Maturing after five years through ten years 1,618,344 1,618,061 1.45 % 483,606 499,880 2.12 %
Maturing after ten years 5,796,840 5,760,235 1.71 % 3,454,212 3,505,885 2.08 %
Total AFS debt securities $ 9,783,180 $ 9,713,006 1.77 % $ 5,470,523 $ 5,544,658 2.13 %

~~(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.~~

Loan Portfolio

The Company offers a broad range of financial products designed to meet the credit needs of its borrowers. The Company’s loan portfolio segments include commercial loans, which consist of C&I, CRE, multifamily residential, ~~and~~ construction and land ~~loans;~~loans, and consumer loans, which consist of single-family residential, home equity lines of credit (“HELOCs”), and other consumer loans. Total net loans were ~~$39.92~~$46.87 billion as of September 30, ~~2021,~~2022, an increase of ~~$2.15~~$5.72 billion or 6%14% from ~~$37.77~~$41.15 billion as of December 31, ~~2020.~~2021. This increase was primarily driven by well-diversified growth ~~across~~throughout our ~~key~~major loan ~~portfolios~~categories including ~~$1.20~~increases of $2.53 billion or ~~12%~~16% in total CRE loans, $1.80 billion or 16% in residential mortgage loans, ~~$727.1 million~~and $1.47 billion or ~~5% in total CRE loans, and $199.9 million or 1%~~10% in C&I loans. The composition of the loan portfolio ~~was largely similar~~ as of September 30, ~~2021 and~~2022 was similar to the composition as of December 31, ~~2020.~~2021.

The following table presents the composition of the Company’s total loan portfolio by loan type as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021				December 31, 2020				($ in thousands)		September 30, 2022						December 31, 2021
		Amount		%		Amount		%			($ in thousands)			Amount			%			Amount			%
Commercial:	Commercial:
C&I (1)	C&I (1)	$	13,831,649	35	%	$	13,631,726	36	%				C&I (1)		$	15,625,072		33	%		$	14,150,608		34	%
CRE:	CRE:												CRE:
CRE	CRE	11,818,065		29	%	11,174,611		29	%				CRE		13,573,157			28	%		12,155,047			29	%
Multifamily residential	Multifamily residential	3,340,378		8	%	3,033,998		8	%				Multifamily residential		4,559,302			10	%		3,675,605			9	%
Construction and land	Construction and land	376,921		1	%	599,692		2	%				Construction and land		556,894			1	%		346,486			1	%
Total CRE	Total CRE	15,535,364		38	%	14,808,301		39	%				Total CRE		18,689,353			39	%		16,177,138			39	%
Total commercial	Total commercial	29,367,013		73	%	28,440,027		75	%				Total commercial		34,314,425			72	%		30,327,746			73	%
Consumer:	Consumer:												Consumer:
Residential mortgage:	Residential mortgage:												Residential mortgage:
Single-family residential	Single-family residential	9,021,801		22	%	8,185,953		21	%				Single-family residential		10,855,345			23	%		9,093,702			22	%
HELOCs	HELOCs	1,963,622		5	%	1,601,716		4	%				HELOCs		2,184,924			5	%		2,144,821			5	%
Total residential mortgage	Total residential mortgage	10,985,423		27	%	9,787,669		25	%				Total residential mortgage		13,040,269			28	%		11,238,523			27	%
Other consumer	Other consumer	129,269		0	%	163,259		0	%				Other consumer		87,561			0	%		127,512			0	%
Total consumer	Total consumer	11,114,692		27	%	9,950,928		25	%				Total consumer		13,127,830			28	%		11,366,035			27	%
Total loans held-for-investment (2)	Total loans held-for-investment (2)	40,481,705		100	%	38,390,955		100	%				Total loans held-for-investment (2)		47,442,255			100	%		41,693,781			100	%
Allowance for loan losses	Allowance for loan losses	(560,404)				(619,983)							Allowance for loan losses		(582,517)						(541,579)
Loans held-for-sale (3)	Loans held-for-sale (3)	—				1,788							Loans held-for-sale (3)		14,500						635
Total loans, net	Total loans, net	$	39,921,301			$	37,772,760						Total loans, net		$	46,874,238					$	41,152,837

(1)Includes ~~$807.3~~$110.9 million and ~~$1.57 billion~~$534.2 million of ~~PPP~~Paycheck Protection Program (“PPP”) loans as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(3)Consists of a multi-family residential loan as of September 30, 2022 and single-family residential loans as of December 31, ~~2020.~~2021.

~~Actions to Support Customers during the COVID-19 Pandemic~~

In response to the COVID-19 pandemic, the Company assisted customers by offering SBA PPP loans in 2020 and 2021 to help struggling businesses in our communities pay their employees and sustain their businesses. The SBA stopped accepting new loan applications on May 31, 2021. For more information on PPP loans, refer to ~~Item 7. MD&A — Overview — Regulatory Developments Relating to the COVID-19 Pandemic — Paycheck Protection Program~~ ~~of the Company’s Form 10-K and~~ ~~Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Paycheck Protection Program~~ ~~to the Consolidated Financial Statements of the Company’s 2020 Form 10-K.~~

In addition, the Company also provides payment relief through various loan modification programs. For a summary of the loans that the Company has modified in response to the COVID-19 pandemic, refer to ~~Item 2. MD&A — Risk Management — Credit Risk Management~~ ~~in this Form 10-Q.~~

Commercial

The commercial loan portfolio ~~made up~~comprised 72% and 73% ~~and 75%~~ of total loans as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The Company actively monitors ~~this~~the commercial lending portfolio for elevated levels of credit risk and reviews credit exposures for sensitivity to changing economic conditions.

Commercial — Commercial and Industrial Loans. Total C&I loan commitments (loans outstanding plus unfunded credit commitments, excluding issued letters of credit) were ~~$19.70 billion and $18.69~~$22.21 billion as of September 30, ~~2021 and December 31, 2020, respectively,~~2022, an increase of ~~5% year-to-date.~~$1.92 billion or 9% from $20.29 billion as of December 31, 2021. Total C&I loans were ~~$13.83~~$15.63 billion as of September 30, 2022, an increase of $1.47 billion or ~~35%~~10% from $14.15 billion. Total C&I loans made up 33% and 34% of total loans held-for-investment as of September 30, ~~2021, which grew by $199.9 million or 1% from $13.63 billion or 36% of total loans held-for-investment as of~~2022 and December 31, ~~2020.~~2021, respectively. The C&I loan portfolio includes loans and financing for businesses in a wide spectrum of industries, ~~including asset-based lending, equipment financing, project-based finance, revolving~~comprised of working capital lines of credit, ~~SBA~~trade finance, letters of credit, affordable housing lending, ~~structured~~asset-based lending, asset-backed finance, ~~term loans~~project finance and ~~trade finance.~~equipment financing. The C&I loan portfolio also includes PPP loans. Additionally, the Company has a portfolio of broadly syndicated C&I loans, which represent revolving or term loan facilities that are marketed and sold primarily to institutional ~~investors, that~~investors. This portfolio totaled ~~$962.7~~$948.2 million and ~~$892.1~~$939.4 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The majority of the C&I loans ~~have~~had variable interest ~~rates.~~rates as of both September 30, 2022 and December 31, 2021.

The C&I portfolio is well-diversified by industry. The Company monitors concentrations within the C&I loan portfolio by customer exposure and industry classification, setting diversification targets and exposure limits by industry or loan product. The following charts illustrate the industry mix within our C&I portfolio as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Commercial — Total Commercial Real Estate Loans. Total CRE loans outstanding ~~was $15.54~~were $18.69 billion ~~or 38% of total loans held-for-investment~~ as of September 30, ~~2021,~~2022, which grew by ~~$727.1 million~~$2.51 billion or 5%16% from ~~$14.81~~$16.18 billion oras of December 31, 2021, and accounted for 39% of total loans held-for-investment as of both September 30, 2022 and December 31, ~~2020.~~2021. The total CRE loan portfolio consists of ~~income-producing~~ CRE, multifamily residential, and construction and land loans. ~~Year-to-date~~The year-to-date growth in total CRE loans was primarily driven by ~~growth in income-producing CRE~~multifamily and ~~multifamily residential loans, partially offset by declines in construction and land loans.~~industrial property types.

The Company’s total CRE portfolio is ~~granular and~~ diversified by property ~~type. The~~type with an average CRE loan ~~balance was $2.4~~size of $2.7 million and $2.5 million as of ~~both~~ September 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively. The following table summarizes the Company’s total CRE ~~loan portfolio~~loans by property type as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021				December 31, 2020				($ in thousands)	September 30, 2022				December 31, 2021
		Amount		%		Amount		%			Amount		%		Amount		%
Property types:	Property types:									Property types:
Retail(1)	Retail(1)	$	3,570,761	23	%	$	3,466,141	23	%	Retail(1)	$	3,991,541	21	%	$	3,685,900	23	%
Multifamily	Multifamily	3,340,378		21	%	3,033,998		20	%	Multifamily	4,559,302		24	%	3,675,605		23	%
Offices		2,850,289		18	%	2,747,082		19	%
Office (1)										Office (1)	2,943,391		16	%	2,804,006		17	%
Industrial(1)	Industrial(1)	2,738,653		18	%	2,407,594		16	%	Industrial(1)	3,474,909		19	%	2,807,325		18	%
Hospitality(1)	Hospitality(1)	1,959,192		13	%	1,888,797		13	%	Hospitality(1)	2,099,226		11	%	1,993,995		12	%
Construction and land	Construction and land	376,921		2	%	599,692		4	%	Construction and land	556,894		3	%	346,486		2	%
Other(1)	Other(1)	699,170		5	%	664,997		5	%	Other(1)	1,064,090		6	%	863,821		5	%
Total CRE loans	Total CRE loans	$	15,535,364	100	%	$	14,808,301	100	%	Total CRE loans	$	18,689,353	100	%	$	16,177,138	100	%

(1)Included in CRE loan category.

The weighted-average loan-to-value (“LTV”) ratio of the total CRE portfolio was 51% as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The low weighted-average LTV ratio was consistent byacross CRE property ~~type.~~types. Approximately ~~90%~~87% and 89% of total CRE loans had an LTV ratio of 65% or lower as of September 30, ~~2021, compared with 89% as of~~2022 and December 31, ~~2020.~~2021, respectively. The consistency of the Company’s low LTV underwriting standards has historically resulted in lower credit losses for ~~income-producing~~ CRE and multifamily residential loans.

The following tables provide a summary of the Company’s ~~income-producing~~ CRE, multifamily residential, and construction and land loans by geography as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The distribution of the total CRE loan portfolio reflects the Company’s ~~geographical~~geographic footprint, which is primarily concentrated in California:


($ in thousands)	($ in thousands)	September 30, 2021																($ in thousands)	September 30, 2022
		CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%			CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:	Geographic markets:																	Geographic markets:
Southern California	Southern California	$	6,273,314			$	1,977,190			$	174,483			$	8,424,987			Southern California	$	7,022,529			$	2,257,999			$	203,939			$	9,484,467
Northern California	Northern California	2,575,357				704,213				117,616				3,397,186				Northern California	2,802,337				871,497				209,083				3,882,917
California	California	8,848,671		75	%	2,681,403		80	%	292,099		76	%	11,822,173		76	%	California	9,824,866		72	%	3,129,496		69	%	413,022		74	%	13,367,384		72	%
Texas																		Texas	1,140,975		8	%	412,316		9	%	3,037		1	%	1,556,328		8	%
New York	New York	659,068		6	%	151,393		5	%	73,076		19	%	883,537		6	%	New York	684,810		5	%	214,032		5	%	82,135		15	%	980,977		5	%
Texas		977,865		8	%	244,963		7	%	1,907		1	%	1,224,735		8	%
Washington	Washington	383,806		3	%	98,440		3	%	—		—	%	482,246		3	%	Washington	467,321		4	%	170,864		4	%	13,132		2	%	651,317		3	%
Nevada																		Nevada	160,055		1	%	110,203		2	%	23,693		4	%	293,951		2	%
Arizona	Arizona	114,522		1	%	30,280		1	%	—		—	%	144,802		1	%	Arizona	226,931		2	%	99,367		2	%	407		0	%	326,705		2	%
Nevada		116,132		1	%	101,033		3	%	—		—	%	217,165		1	%
Other markets	Other markets	718,001		6	%	32,866		1	%	9,839		4	%	760,706		5	%	Other markets	1,068,199		8	%	423,024		9	%	21,468		4	%	1,512,691		8	%
Total loans	Total loans	$	11,818,065	100	%	$	3,340,378	100	%	$	376,921	100	%	$	15,535,364	100	%	Total loans	$	13,573,157	100	%	$	4,559,302	100	%	$	556,894	100	%	$	18,689,353	100	%


($ in thousands)	($ in thousands)	December 31, 2020																($ in thousands)	December 31, 2021
		CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%			CRE		%		Multifamily Residential		%		Construction and Land		%		Total CRE		%
Geographic markets:	Geographic markets:																	Geographic markets:
Southern California	Southern California	$	5,884,691			$	1,867,646			$	249,282			$	8,001,619			Southern California	$	6,406,609			$	2,030,938			$	138,953			$	8,576,500
Northern California	Northern California	2,476,510				674,813				197,195				3,348,518				Northern California	2,622,398				748,631				109,483				3,480,512
California	California	8,361,201		75	%	2,542,459		84	%	446,477		74	%	11,350,137		77	%	California	9,029,007		75	%	2,779,569		77	%	248,436		70	%	12,057,012		75	%
Texas																		Texas	1,005,455		8	%	308,652		8	%	1,896		1	%	1,316,003		8	%
New York	New York	696,712		6	%	137,114		4	%	93,806		16	%	927,632		6	%	New York	630,442		5	%	157,099		4	%	78,368		23	%	865,909		5	%
Texas		864,639		8	%	116,367		4	%	2,581		0	%	983,587		7	%
Washington	Washington	341,374		3	%	91,824		3	%	22,724		4	%	455,922		3	%	Washington	408,913		3	%	116,047		3	%	9,865		3	%	534,825		3	%
Nevada																		Nevada	128,395		1	%	115,163		3	%	5,775		2	%	249,333		2	%
Arizona	Arizona	147,187		1	%	12,406		0	%	—		—	%	159,593		1	%	Arizona	122,164		1	%	49,836		1	%	—		—	%	172,000		1	%
Nevada		88,959		1	%	86,644		3	%	22,384		4	%	197,987		1	%
Other markets	Other markets	674,539		6	%	47,184		2	%	11,720		2	%	733,443		5	%	Other markets	830,671		7	%	149,239		4	%	2,146		1	%	982,056		6	%
Total loans	Total loans	$	11,174,611	100	%	$	3,033,998	100	%	$	599,692	100	%	$	14,808,301	100	%	Total loans	$	12,155,047	100	%	$	3,675,605	100	%	$	346,486	100	%	$	16,177,138	100	%

~~Since 76%~~Because 72% and ~~77%~~75% of total CRE loans were concentrated in California as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, changes in California’s economy and real estate values could have a significant impact on the collectability of these loans and the required level of allowance for loan losses. For additional information related to the higher degree of risk offrom a downturn in the California real estate ~~markets in California,~~market, see Item 1A. Risk Factors — Risks Related to Geopolitical Uncertainties to the Company’s ~~2020~~2021 Form 10-K.

Commercial — ~~Income-Producing~~ Commercial Real Estate Loans. The Company ~~provides~~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. ~~Income-producing~~ CRE loans totaled ~~$11.82~~$13.57 billion as of September 30, ~~2021,~~2022, compared with ~~$11.17~~$12.16 billion as of December 31, ~~2020,~~2021. CRE loans made up 28% and ~~accounted for~~ 29% of total loans held-for-investment as of ~~both dates.~~September 30, 2022 and December 31, 2021, respectively. Interest rates on CRE loans may be fixed, variable or hybrid. As of September 30, 2022, 66% of our CRE portfolio was variable rate, of which 48% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2021, 75% of our CRE portfolio was variable rate, of which 52% had customer-level interest rate derivative contracts in place. Loans are underwritten with conservative standards for cash flows, debt service coverage and LTV.

Owner-occupied properties comprised 19% and 20% of the ~~income-producing~~ CRE loans as of ~~both~~ September 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively. The remainder were non-owner-occupied properties, where 50% or more of the debt service for the loan is typically provided by rental income from an unaffiliated third party.

Commercial — Multifamily Residential Loans. The multifamily residential loan portfolio is largely ~~made up~~comprised of loans secured by residential properties with five or more units. Multifamily residential loans totaled ~~$3.34~~$4.56 billion as of September 30, ~~2021,~~2022, compared with ~~$3.03~~$3.68 billion as of December 31, ~~2020,~~2021, and accounted for 8%10% and 9% of total loans held-for-investment as of ~~both dates.~~September 30, 2022 and December 31, 2021, respectively. 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~~fixed rate period of three to ten years. As of September 30, 2022, 56% of our multifamily residential portfolio was variable rate, of which 35% had customer-level interest rate derivative contracts in place. These are hedging contracts offered by the Company to help our customers manage their interest rate risk while the Bank's own exposure remained variable rate. In comparison, as of December 31, 2021, 66% of our multifamily residential portfolio was variable rate, of which 39% had customer-level interest rate derivative contracts in place.

Commercial — Construction and Land Loans. Construction and land loans provide financing for a portfolio of projects diversified by real estate property type. ~~These~~Construction and land loans totaled ~~$376.9~~$556.9 million oras of September 30, 2022, compared with $346.5 million as of December 31, 2021, and accounted for 1% of total loans held-for-investment as of ~~September 30, 2021, compared with $599.7 million or 2%~~both dates. Construction loan exposure was made up of ~~total loans held-for-investment as of December 31, 2020. Construction loans exposure consisted of $332.7~~$452.2 million in loans outstanding, ~~and $306.9~~plus $613.8 million in unfunded commitments as of September 30, ~~2021,~~2022, compared with ~~$554.7~~$297.9 million in loans outstanding, ~~and $288.2~~plus $361.2 million in unfunded commitments as of December 31, ~~2020.~~2021. Land loans totaled ~~$44.2~~$104.7 million as of September 30, ~~2021,~~2022, compared with ~~$45.0~~$48.6 million as of December 31, ~~2020.~~2021.

Consumer

The following tables summarize the Company’s single-family residential and HELOC loan portfolios by geography as of September 30, 2022 and December 31, 2021:



($ in thousands)	September 30, 2022
	Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:
Southern California	$	4,021,598			$	974,763			$	4,996,361
Northern California	1,252,150				512,356				1,764,506
California	5,273,748		48	%	1,487,119		68	%	6,760,867		52	%
New York	3,849,305		35	%	295,946		14	%	4,145,251		32	%
Washington	621,347		6	%	247,570		11	%	868,917		7	%
Massachusetts	291,154		3	%	90,052		4	%	381,206		3	%
Georgia	282,611		3	%	24,212		1	%	306,823		2	%
Texas	300,007		3	%	—		—	%	300,007		2	%
Other markets	237,173		2	%	40,025		2	%	277,198		2	%
Total	$	10,855,345	100	%	$	2,184,924	100	%	$	13,040,269	100	%
Lien priority:
First mortgage	$	10,855,345	100	%	$	1,855,057	85	%	$	12,710,402	97	%
Junior lien mortgage	—		—	%	329,867		15	%	329,867		3	%
Total	$	10,855,345	100	%	$	2,184,924	100	%	$	13,040,269	100	%

~~Consumer~~

~~The primary consumer portfolios for the Company were single-family residential mortgages and HELOCs, which are summarized by geography as of September 30, 2021 and December 31, 2020:~~

($ in thousands) September 30, 2021
Single-Family
Residential % HELOCs % Total Residential
Mortgage %
Geographic markets:
Southern California $ 3,531,157 $ 882,500 $ 4,413,657
Northern California 1,029,914 465,579 1,495,493
California 4,561,071 50 % 1,348,079 69 % 5,909,150 53 %
New York 3,000,065 33 % 280,822 14 % 3,280,887 30 %
Washington 552,507 6 % 214,112 11 % 766,619 7 %
Massachusetts 260,730 3 % 59,570 3 % 320,300 3 %
Texas 226,814 3 % — — % 226,814 2 %
Georgia 281,109 3 % 22,279 1 % 303,388 3 %
Other markets 139,505 2 % 38,760 2 % 178,265 2 %
Total $ 9,021,801 100 % $ 1,963,622 100 % $ 10,985,423 100 %
Lien priority:
First mortgage $ 9,021,801 100 % $ 1,725,535 88 % $ 10,747,336 98 %
Junior lien mortgage — — % 238,087 12 % 238,087 2 %
Total $ 9,021,801 100 % $ 1,963,622 100 % $ 10,985,423 100 %


($ in thousands)	($ in thousands)	December 31, 2020												($ in thousands)	December 31, 2021
		Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%			Single-Family Residential		%		HELOCs		%		Total Residential Mortgage		%
Geographic markets:	Geographic markets:													Geographic markets:
Southern California	Southern California	$	3,462,067			$	728,733			$	4,190,800			Southern California	$	3,520,010			$	971,731			$	4,491,741
Northern California	Northern California	1,059,832				354,014				1,413,846				Northern California	1,024,564				506,310				1,530,874
California	California	4,521,899		55	%	1,082,747		68	%	5,604,646		57	%	California	4,544,574		49	%	1,478,041		68	%	6,022,615		54	%
New York	New York	2,277,722		28	%	244,425		15	%	2,522,147		26	%	New York	3,102,129		34	%	292,540		14	%	3,394,669		30	%
Washington	Washington	597,231		7	%	180,765		11	%	777,996		8	%	Washington	526,721		6	%	230,294		11	%	757,015		7	%
Massachusetts	Massachusetts	259,368		3	%	44,633		3	%	304,001		3	%	Massachusetts	258,372		3	%	75,815		4	%	334,187		3	%
Georgia														Georgia	279,328		3	%	25,208		1	%	304,536		3	%
Texas	Texas	209,737		3	%	—		—	%	209,737		2	%	Texas	230,402		3	%	—		—	%	230,402		2	%

Other markets	Other markets	319,996		4	%	49,146		3	%	369,142		4	%	Other markets	152,176		2	%	42,923		2	%	195,099		1	%
Total	Total	$	8,185,953	100	%	$	1,601,716	100	%	$	9,787,669	100	%	Total	$	9,093,702	100	%	$	2,144,821	100	%	$	11,238,523	100	%
Lien priority:	Lien priority:													Lien priority:
First mortgage	First mortgage	$	8,185,953	100	%	$	1,372,270	86	%	$	9,558,223	98	%	First mortgage	$	9,093,702	100	%	$	1,872,440	87	%	$	10,966,142	98	%
Junior lien mortgage	Junior lien mortgage	—		—	%	229,446		14	%	229,446		2	%	Junior lien mortgage	—		—	%	272,381		13	%	272,381		2	%
Total	Total	$	8,185,953	100	%	$	1,601,716	100	%	$	9,787,669	100	%	Total	$	9,093,702	100	%	$	2,144,821	100	%	$	11,238,523	100	%

Consumer — Single-Family Residential Mortgages. Single-family residential loans totaled ~~$9.02~~$10.86 billion or 23% of total loans held-for-investment as of September 30, 2022, compared with $9.09 billion or 22% of total loans held-for-investment as of ~~September 30, 2021, compared with $8.19 billion or 21% of total loans held-for-investment as of~~ December 31, ~~2020.~~2021. Year-to-date, single-family residential mortgages ~~grew by $835.8 million~~increased $1.76 billion or ~~10%~~19%, primarily driven by net growth in California and New York. The Company was in a first lien position for all of its single-family residential loans as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically 65% or less. These loans have historically experienced low delinquency and loss rates. The Company offers a variety of single-family residential first lien mortgage loan programs, including fixed- and variable-rate loans, as well as hybrid loans with interest rates that adjust ~~annually~~on a regular basis, typically each year, after an initial ~~fixed-rate~~fixed rate period.

Consumer — Home Equity Lines of Credit. Total HELOC commitments were ~~$2.23~~$3.27 billion as of September 30, ~~2021,~~2022, which grew by ~~$478.3~~$775.2 million or ~~27%~~31% from ~~$1.75~~$2.49 billion as of December 31, ~~2020.~~2021. Unfunded HELOC commitments are unconditionally cancellable. HELOCs outstanding totaled ~~$1.96~~$2.18 billion oras of September 30, 2022, compared with $2.14 billion as of December 31, 2021, and accounted for 5% of total loans held-for-investment as of ~~September 30, 2021, compared with $1.60 billion or 4% of total loans held-for-investment as of December 31, 2020.~~both dates. Year-to-date, HELOCs increased ~~by $361.9~~$40.1 million or ~~23%~~2%, primarily driven by growth in Washington, Massachusetts, and California. The Company was in a first lien position for ~~88%~~85% and ~~86%~~87% of total outstanding HELOCs as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Many of these loans are reduced documentation loans, for which a substantial down payment is required, resulting in a low LTV ratio at origination, typically ~~60%~~65% or less. These loans have historically experienced low delinquency and loss rates. Substantially all of the Company’s HELOCs were variable-rate ~~loans.~~loans as of both September 30, 2022 and December 31, 2021.

All originated commercial and consumer loans ~~originated by the Company~~ 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 the Company is ~~compliant~~in compliance with these requirements.

~~Loans Held-for-Sale~~

As of September 30, 2021, the Company had no loans held-for-sale. In comparison, as of December 31, 2020, loans held-for-sale of $1.8 million consisted of single-family residential loans. At the time of commitment to originate or purchase a loan, a loan is determined to be held-for-investment if it is the Company’s intent to hold the loan to maturity or for the foreseeable future, subject to periodic reviews under the Company’s evaluation processes, including liquidity and credit risk management. If the Company subsequently changes its intent to hold certain loans, those loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value.

~~Sales of Originated Loans and Purchased Loans~~

All loans originated by the Company are underwritten pursuant to the Company’s policies and procedures. Although the Company’s primary focus is on directly originated loans, in certain circumstances, the Company also purchases loans and participates in loans with other banks. In the normal course of business, the Company also participates out interests in directly originated commercial loans to other financial institutions and sells loans.

~~The following tables provide information on loan sales during the third quarters and first nine months of 2021 and 2020. Refer to~~ ~~Note 6 — Loans Receivable and Allowance for Credit Losses~~ ~~to the Consolidated Financial Statements in this Form 10-Q for additional information on loan purchases and transfers.~~

($ in thousands) Three Months Ended September 30, 2021
Commercial Consumer Total
C&I Total CRE Residential Mortgage
CRE Construction
and Land Single-Family Residential
Loans sold:
Originated loans:
Amount $ 92,372 $ 24,120 $ 19,900 $ 6,959 $ 143,351
Net gains $ 161 $ 3,107 $ — $ 46 $ 3,314
Purchased loans:
Amount $ 26,479 $ — $ — $ — $ 26,479
Net gains $ 15 $ — $ — $ — $ 15

($ in thousands) Three Months Ended September 30, 2020
Commercial Consumer Total
C&I Residential Mortgage
Single-Family Residential
Loans sold:
Originated loans:
Amount $ 80,457 $ 31,847 $ 112,304
Net gains $ — $ 361 $ 361
Purchased loans:
Amount (1)
$ 11,780 $ — $ 11,780

($ in thousands) Nine Months Ended September 30, 2021
Commercial Consumer Total
C&I Total CRE Residential Mortgage
CRE Construction
and Land Single-Family Residential
Loans sold:
Originated loans:
Amount $ 243,729 $ 61,171 $ 19,900 $ 17,123 $ 341,923
Net gains $ 557 $ 5,609 $ — $ 326 $ 6,492
Purchased loans:
Amount $ 85,504 $ — $ — $ — $ 85,504
Net gains $ 109 $ — $ — $ — $ 109

($ in thousands) Nine Months Ended September 30, 2020
Commercial Consumer Total
C&I Total CRE Residential Mortgage
CRE Single-Family Residential
Loans sold:
Originated loans:
Amount $ 237,115 $ 7,250 $ 50,197 $ 294,562
Net gains $ 235 $ 665 $ 543 $ 1,443
Purchased loans:
Amount (1)
$ 11,780 $ — $ — $ 11,780

~~(1)Net gains on sales of purchased loans were insignificant or none.~~

8286

Foreign Outstandings

The Company’s overseas offices, which include the branch in Hong Kong and the subsidiary bank in China, are subject to the general risks inherent in conducting business in foreign countries, such as regulatory, ~~risk and~~ economic and political uncertainties. As such, the Company’s international operation risk exposure is largely concentrated in China and Hong Kong. In addition, the Company’s financial assets held in the Hong Kong branch and the subsidiary bank in China may be affected by fluctuations in currency exchange rates or other factors. The ~~Company’s international operation risk exposure is largely concentrated in these locations. The~~ following table presents the major financial assets held in the Company’s overseas offices as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021				December 31, 2020				($ in thousands)	September 30, 2022				December 31, 2021
		Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets			Amount		% of Total Consolidated Assets		Amount		% of Total Consolidated Assets
Hong Kong branch:	Hong Kong branch:									Hong Kong branch:
Cash and cash equivalents	Cash and cash equivalents	$	624,855	1	%	$	647,883	1	%	Cash and cash equivalents	$	871,196	1	%	$	831,283	1	%

AFS debt securities, at fair value (1)		$	266,163	0	%	$	66,170	0	%
Interest-bearing deposits with banks										Interest-bearing deposits with banks	$	72,245	0	%	$	—	—	%
AFS debt securities (1)										AFS debt securities (1)	$	280,817	0	%	$	242,926	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	843,787	1	%	$	704,415	1	%	Loans held-for-investment (2)	$	907,153	1	%	$	849,573	1	%
Total assets	Total assets	$	1,747,329	3	%	$	1,426,479	3	%	Total assets	$	2,152,110	3	%	$	1,933,164	3	%
Subsidiary bank in China:	Subsidiary bank in China:									Subsidiary bank in China:
Cash and cash equivalents	Cash and cash equivalents	$	499,078	1	%	$	611,088	1	%	Cash and cash equivalents	$	539,133	1	%	$	543,134	1	%
Interest-bearing deposits with banks	Interest-bearing deposits with banks	$	119,913	0	%	$	74,079	0	%	Interest-bearing deposits with banks	$	13,049	0	%	$	51,243	0	%
AFS debt securities (3)	AFS debt securities (3)	$	138,864	0	%	$	152,219	0	%	AFS debt securities (3)	$	120,178	0	%	$	141,404	0	%
Loans held-for-investment (2)	Loans held-for-investment (2)	$	897,511	1	%	$	796,153	2	%	Loans held-for-investment (2)	$	1,192,883	2	%	$	984,591	2	%
Total assets	Total assets	$	1,639,312	3	%	$	1,634,896	3	%	Total assets	$	1,850,531	3	%	$	1,709,640	3	%

(1)Comprised ~~of U.S. Treasury securities, corporate debt securities and foreign government bonds as of September 30, 2021; comprised~~ of U.S. Treasury securities and foreign government bonds as of both September 30, 2022 and December 31, ~~2020.~~2021.

(2)Primarily comprised of C&I loans as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

(3)Comprised of foreign government bonds as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

The following table presents the total revenue generated by the Company’s overseas offices for the third ~~quarters~~quarter and first nine months of ~~2021~~2022 and ~~2020:~~2021:


($ in thousands)	($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,								($ in thousands)	Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020					2022				2021				2022				2021
		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue			Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue		Amount		% of Total Consolidated Revenue
Hong Kong branch:
Hong Kong Branch:																		Hong Kong Branch:
Total revenue	Total revenue	$	5,912	1	%	$	4,967	1	%	$	18,252	1	%	$	19,157	2	%	Total revenue	$	14,296	2	%	$	5,912	1	%	$	32,405	2	%	$	18,252	1	%
Subsidiary bank in China:
Subsidiary Bank in China:																		Subsidiary Bank in China:
Total revenue	Total revenue	$	7,592	2	%	$	3,859	1	%	$	20,271	2	%	$	16,644	1	%	Total revenue	$	11,616	2	%	$	7,592	2	%	$	30,652	2	%	$	20,271	2	%

Capital

The Company maintains a strong capital base to support its anticipated asset growth, operating needs, and credit risks, and to ensure that the Company and the Bank are in compliance with ~~applicable~~all regulatory capital ~~requirements.~~guidelines. The Company ~~regularly conducts~~engages in regular capital planning processes on at ~~a minimum on~~least an annual basis to optimize the use of available capital and to appropriately plan for future capital needs, ~~and to allocate~~allocating capital to existing and future business activities. Furthermore, the Company ~~performs~~conducts capital stress tests as part of its 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.

InOn March 3, 2020, the Company’s Board of Directors authorized the repurchase of ~~up to~~ $500.0 million of the Company’s common ~~stock. This $500.0~~stock, of which $254.0 million repurchase authorization was inclusive of the Company’s $100.0 million stock repurchase authorization previously outstanding. The Company determines the timing and amount of stock repurchases, based on its assessment of various factors, including prevailing market conditions, alternate uses of capital, liquidity and the economic environment.remains available. During the ~~first~~second quarter of ~~2020,~~2022, the Company repurchased ~~4,471,682~~$100.0 million of common stock or 1,385,517 shares, at an average price of ~~$32.64~~$72.17 per ~~share for a total cost of $146.0 million.~~share. The Company did not repurchase ~~any~~ shares during the ~~remainder~~third quarter of ~~2020 or~~2022. For additional information about the share repurchases, see Part II, Item 2.— Unregistered Sales of Equity Securities and Use of Proceeds in ~~the first nine months of 2021. As of September 30, 2021, the total remaining available capital authorized for repurchase was $354.0 million.~~this Form 10-Q.

The Company’s stockholders’ equity was ~~$5.69~~$5.66 billion as of September 30, ~~2021, an increase~~2022, a decrease of ~~$421.0~~$176.6 million or 8%3% from ~~$5.27~~$5.84 billion as of December 31, ~~2020.~~2021. The ~~increase~~year-to-date decrease in the Company’s stockholders’ equity was primarily due to ~~net income~~a negative change in AOCI of ~~$655.2~~$709.7 million, ~~for the first nine months of 2021,~~$172.1 million in common dividends declared, and $100.0 million in common stock repurchases, partially offset by ~~cash dividends declared of $142.3~~$791.3 million ~~and an increase~~ in ~~other comprehensive loss of $101.9 million during the first nine months of 2021.~~net income. The negative change in AOCI was primarily due to increased unrealized losses in AFS debt securities. For other factors that contributed to the changes in stockholders’ equity, refer to Item 1. Consolidated Financial Statements — Consolidated Statement of Changes in Stockholders’ Equity in this Form 10-Q.

Book value was ~~$40.10~~$40.17 per common share as of September 30, ~~2021, an increase~~2022, a decrease of 8%2% from ~~$37.22~~$41.13 per common share as of December 31, ~~2020.~~ 2021, primarily as a result of the factors described above. Tangible equity per common share was $36.80 as of September 30, 2022, compared with $37.79 as of December 31, 2021. For additional details, see the reconciliation of non-GAAP measures presented under Item 2. MD&A — Reconciliation of GAAP to Non-GAAP Financial Measures in this Form 10-Q.

The Company paid a quarterly cash ~~dividends~~dividend of ~~$0.33~~$0.40 and ~~$0.275~~$0.33 per common share ~~for~~during the third quarters of ~~2021~~2022 and ~~2020,~~2021, respectively. In October ~~2021,~~2022, the Company’s Board of Directors declared fourth quarter ~~2021~~2022 cash ~~dividends~~dividend of ~~$0.33~~$0.40 per common share. The dividend is payable on November 15, ~~2021~~2022, to stockholders of record as of November 1, ~~2021.~~2022.

Deposits and Other Sources of ~~Funds~~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 September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	September 30, 2021				December 31, 2020				Change				($ in thousands)	September 30, 2022				December 31, 2021				Change
		Amount		%		Amount		%		$		%			Amount		%		Amount		%		$		%
Deposits
Deposits:														Deposits:

Noninterest-bearing demand	Noninterest-bearing demand	$	23,175,471	44	%	$	16,298,301	36	%	$	6,877,170	42	%	Noninterest-bearing demand	$	21,645,394	40	%	$	22,845,464	43	%	$	(1,200,070)	(5)	%
Interest-bearing checking	Interest-bearing checking	6,530,601		12	%	6,142,193		14	%	388,408		6	%	Interest-bearing checking	6,822,343		13	%	6,524,721		12	%	297,622		5	%
Money market	Money market	12,555,879		24	%	10,740,667		24	%	1,815,212		17	%	Money market	12,113,292		23	%	13,130,300		25	%	(1,017,008)		(8)	%
Savings	Savings	2,855,597		5	%	2,681,242		6	%	174,355		7	%	Savings	2,917,770		5	%	2,888,065		5	%	29,705		1	%

Time deposits	Time deposits	8,238,642		15	%	9,000,349		20	%	(761,707)		(8)	%	Time deposits	10,358,563		19	%	7,961,982		15	%	2,396,581		30	%
Total deposits	Total deposits	$	53,356,190	100	%	$	44,862,752	100	%	$	8,493,438	19	%	Total deposits	$	53,857,362	100	%	$	53,350,532	100	%	$	506,830	1	%
Other Funds
Short-term borrowings		$	—			$	21,009			$	(21,009)	(100)	%
Other Funds:														Other Funds:

Federal funds purchased														Federal funds purchased	$	200,000			$	—			$	200,000	100	%
FHLB advances	FHLB advances	248,898				652,612				(403,714)		(62)	%	FHLB advances	324,920				249,331				75,589		30	%
Repurchase agreements	Repurchase agreements	300,000				300,000				—		—	%	Repurchase agreements	611,785				300,000				311,785		104	%
Long-term debt	Long-term debt	147,586				147,376				210		0	%	Long-term debt	147,875				147,658				217		0	%
Total other funds	Total other funds	$	696,484			$	1,120,997			$	(424,513)	(38)	%	Total other funds	$	1,284,580			$	696,989			$	587,591	84	%
Total sources of funds	Total sources of funds	$	54,052,674			$	45,983,749			$	8,068,925	18	%	Total sources of funds	$	55,141,942			$	54,047,521			$	1,094,421	2	%

Deposits

The Company offers a wide variety of deposit products to consumer and commercial customers. To provide a stable and low-cost source of funding and liquidity, the Company’s strategy is to grow and retain relationship-based deposits.

Total deposits were ~~$53.36~~$53.86 billion as of September 30, ~~2021,~~2022, an increase of ~~$8.49 billion~~$506.8 million or ~~19%~~1% from ~~$44.86~~$53.35 billion as of December 31, ~~2020. Deposit growth~~2021. The increase in deposits was ~~attributable~~primarily due to ~~strong~~ growth in ~~non-maturity~~time deposits, partially offset by ~~a reduction in higher-cost time deposits, from both commercial and consumer customers. The strongest growth was~~decreases in noninterest-bearing demand and money market deposits. This move from noninterest-bearing and lower paying non-maturity deposits ~~which grew~~to time deposits was largely driven by ~~$6.88 billion or 42% from December 31, 2020.~~continued increases in benchmark rates. Noninterest-bearing demand deposits ~~were $23.18 billion or 44%~~comprised 40% and 43% of total deposits as of September 30, ~~2021, up from $16.30 billion or 36% of total deposits as of~~2022 and December 31, ~~2020.~~ 2021, respectively.

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 at Item 2. MD&A — Liquidity Risk Management — Liquidity in this Form 10-Q.

Other Sources of Funding

~~There were no short-term borrowings~~The Company had an outstanding overnight federal funds purchase of $200.0 million, with a fixed interest rate of 3.11% as of September 30, ~~2021. Short-term borrowings~~2022. There was no outstanding overnight federal funds purchase as of ~~$21.0~~December 31, 2021.

As of September 30, 2022, the Company had FHLB advances of $324.9 million, compared with advances totaling $249.3 million as of December 31, ~~2020 consisted of borrowings entered into by the Company’s subsidiary, East West Bank (China) Limited.~~

~~FHLB advances were $248.9 million as of September 30, 2021, a decrease of $403.7 million from $652.6 million as of December 31, 2020.~~2021. As of September 30, ~~2021,~~2022, the FHLB advances ~~had~~were comprised of an overnight advance of $250.0 million with a fixed interest rate of 3.22% and a term advance of $74.9 million with a floating interest ~~rates ranging from 0.52% to 0.56% and remaining maturities between five months and 1.1 years.~~rate of 3.25% that matures in November 2022.

Gross repurchase agreements totaled $611.8 million and $300.0 million as of ~~both~~ September 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively. Resale and repurchase agreements are reported net, pursuant to ~~ASC~~Accounting Standards Codification (“ASC”) 210-20-45-11, Balance Sheet Offsetting: Repurchase and Reverse Repurchase Agreements. As of both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company did not have any gross resale agreements that were eligible for ~~netting.~~netting pursuant to ASC 210-20-45-11. The weighted-average interest rates were 2.81% and 2.57% for the third quarters of 2022 and 2021, respectively; and 2.73% and 2.62% for the first nine months of 2022 and 2021, respectively. As of September 30, ~~2021,~~2022, gross repurchase agreements had ~~interest rates ranging from 2.35% to 2.40%, with~~ original terms between ~~4.0 years~~six months and ~~8.5~~nine years and remaining maturities between ~~1.8 years~~three months and ~~1.9 years.~~11 months.

Repurchase agreements are accounted for as collateralized financing transactions and recorded as liabilities based on the values at which the assets are sold. As of September 30, ~~2021,~~2022, the collateral for the repurchase agreements was comprised of U.S. ~~Treasury securities, and U.S.~~ government agency and U.S. government-sponsored enterprise mortgage-backed securities, and U.S. Treasury securities. To ensure 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 ~~the~~ repurchase agreements. The Company manages liquidity risks related to the repurchase agreements by sourcing funds from a diverse group of counterparties, and entering into repurchase agreements with longer durations, when appropriate. For additional details, see Note 34 — Assets Purchased under Resale Agreements and Sold under Repurchase Agreements to the Consolidated Financial Statements in this Form 10-Q.

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 totaled ~~$147.6~~$147.9 million and ~~$147.4~~$147.7 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Long-term debt consists of junior subordinated debt, which qualifies as Tier 2 capital for regulatory ~~capital~~ purposes. The junior subordinated debt was issued in connection with the Company’s various pooled trust preferred securities offerings, as well as with common stock issued by the six wholly-owned subsidiaries of the Company in conjunction with these offerings. The junior subordinated debt had a weighted-average interest ~~rate~~rates of ~~1.74%~~2.86% and ~~2.41%~~1.74% for the first nine months of ~~2021~~2022 and ~~2020,~~2021, respectively, with remaining maturities ranging between ~~13.2~~12.2 years and ~~16.0~~15.0 years as of September 30, ~~2021.~~2022.

Regulatory Capital and Ratios

The federal banking agencies have risk-based capital adequacy requirements intended to ensure that banking organizations maintain capital that is commensurate with the degree of risk associated with ~~a banking organization’s~~their operations. The Company and the Bank are each subject to these regulatory capital adequacy requirements. The Bank is a member bank of the Federal Reserve System and is primarily regulated by the Federal Reserve and the California Department of Financial Protection and Innovation (“DFPI”). The Company and the Bank are required to comply with the Basel III Capital Rules adopted by the federal banking agencies. Both the Company and the Bank are standardized approach institutions under Basel III Capital Rules. See Item 1. Business — Supervision and Regulation — Regulatory Capital Requirements and ~~— Recent~~ Regulatory Capital-Related Development ofin the Company’s ~~2020~~2021 Form 10-K for additional details.

The Company adopted Accounting Standards Update (“ASU”) 2016-13 on January 1, ~~2020.~~2020, which requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The Company has elected the phase-in option provided by a final rule that delays an estimate of the ~~regulatory guidance, which delays the estimated impact of Current Expected Credit Losses~~current expected credit losses methodology (“CECL”) effect on regulatory capital for two years and phases in the impact over three years. AsThe rule permits certain banking organizations to exclude from regulatory capital the initial adoption impact of CECL, plus 25% of the cumulative changes in the allowance for credit losses under CECL for each period until December 31, 2021, followed by a ~~result,~~three-year phase-out period in which the ~~effects~~aggregate benefit is reduced by 25% in 2022, 50% in 2023 and 75% in 2024. Accordingly, the capital ratios as of September 30, 2022 delayed 75% of the estimated impact of CECL on ~~the Company’s and the Bank’s~~ regulatory capital ~~will be delayed~~ through the year 2021, after which the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024. In April 2020, in recognition of the CARES Act requirements, and to facilitate the use of the PPPLF, the U.S. banking agencies issued an interim final rule that banking organizations may exclude from leverage and risk-based capital requirements any eligible assets sold or pledged to the Federal Reserve on a non-recourse basis as part of the PPPLF. In addition, under the CARES Act, loans originated by a banking organization under the PPP (whether or not sold or pledged in the PPPLF) will be risk-weighted at zero percent for regulatory capital purposes. Accordingly, the September 30, 2021 capital ratios exclude the impact of the increased allowance for loan losses due to CECL, and PPP loans are risk-weighted at zero percent. As of September 30, 2021, the Company did not have any PPPLF outstanding. Accordingly, there were no PPP loans pledged as collateral. The PPPLF ceased extending credit on July 30, 2021.

The following table presents the Company’s and the Bank’s capital ratios as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021, under the Basel III Capital Rules, and those required by regulatory agencies for capital adequacy and well-capitalized classification purposes:


		Basel III Capital Rules																	Basel III Capital Rules
		September 30, 2021				December 31, 2020				Minimum Regulatory Requirements		Fully Phased-in Minimum Regulatory Requirements (2)		Well- Capitalized Requirements					September 30, 2022				December 31, 2021					Minimum Regulatory Requirements			Minimum Regulatory Requirements including Capital Conservation Buffer		Well- Capitalized Requirements
		Company		East West Bank		Company		East West Bank								Company			Bank		Company		Bank		Minimum Regulatory Requirements		Minimum Regulatory Requirements including Capital Conservation Buffer			Well- Capitalized Requirements
Risk-based capital ratios:	Risk-based capital ratios:																	Risk-based capital ratios:
CET1 capital (1)		12.8	%	12.3	%	12.7	%	12.1	%	4.5	%	7.0	%	6.5	%
Common Equity Tier 1 capital																	Common Equity Tier 1 capital		12.3	%	12.1	%	12.8	%	12.3	%		4.5	%		7.0	%	6.5	%
Tier 1 capital(1)	Tier 1 capital(1)	12.8	%	12.3	%	12.7	%	12.1	%	6.0	%	8.5	%	8.0	%		Tier 1 capital(1)		12.3	%	12.1	%	12.8	%	12.3	%		6.0	%		8.5	%	8.0	%
Total capital	Total capital	14.2	%	13.3	%	14.3	%	13.4	%	8.0	%	10.5	%	10.0	%		Total capital		13.6	%	13.1	%	14.1	%	13.2	%		8.0	%		10.5	%	10.0	%
Tier 1 leverage (1)	Tier 1 leverage (1)	8.8	%	8.5	%	9.4	%	9.0	%	4.0	%	4.0	%	5.0	%		Tier 1 leverage (1)		9.6	%	9.4	%	9.0	%	8.6	%		4.0	%		4.0	%	5.0	%

(1)The ~~CET1 capital and~~ Tier 1 leverage ~~components of the “well-capitalized” requirements apply~~well-capitalized requirement applies only to the Bank since there is no ~~CET1 or~~ Tier 1 leverage ratio component in the ~~regulatory~~ definition of a well-capitalized ~~bank-holding~~bank holding company. ~~In addition, the~~The minimum Tier 1 risk-based capital ratio requirement for the Company to be considered well-capitalized is 6.0%.

~~(2)~~As of January 1, 2019, the 2.5% capital conservation buffer above the minimum risk-based capital ratios was required in order to avoid limitations on distributions, including dividend payments and certain discretionary bonus payments to executive officers.

The Company is committed to maintaining strong capital levels to assure ~~the Company’s~~its investors, customers and regulators that the Company and the Bank are financially sound. As of both September 30, ~~2021~~2022 and December 31, ~~2020, both~~2021, the Company and the Bank continued to exceed all “well-capitalized” capital requirements and the ~~fully phased-in~~ required minimum capital requirements under the Basel III Capital Rules. Total risk-weighted assets were ~~$42.13~~$49.27 billion as of September 30, ~~2021,~~2022, an increase of ~~$3.72~~$5.68 billion or ~~10%~~13% from ~~$38.41~~$43.59 billion as of December 31, ~~2020.~~2021. The increase in the risk-weighted assets was primarily due to loan ~~growth and increased AFS debt securities.~~growth.

~~Other Matters~~

~~London Interbank Offered Rate Transition~~

On March 5, 2021, the United Kingdom’s Financial Conduct Authority (“FCA”) confirmed that the one-week and two-month U.S. dollar (“USD”) London Interbank Offered Rate (“LIBOR”) settings will permanently cease following the LIBOR publication on December 31, 2021, and that the overnight, one-month, three-month, six-month and 12-month USD LIBOR settings will permanently cease following the LIBOR publication on June 30, 2023. The federal banking agencies have continued to encourage banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR, although the adoption of SOFR remains voluntary. The ARRC has also formally recommended the CME Group’s forward-looking SOFR term rates. The ARRC supports the use of SOFR term rates for business loan activity and continues to recommend using forms of overnight and averages of SOFR where possible. On October 6, 2021, the ARRC released a summary of its spread-adjusted fallback recommendations for contracts referencing USD LIBOR.

A majority of the Company’s LIBOR-based loans, derivatives, debt securities, resale agreements, junior subordinated debt and repurchase agreements are indexed to LIBOR tenors that will cease to be published after June 30, 2023. The volume of the Company’s LIBOR-based products that mature after June 30, 2023 is significant and, if not sufficiently planned for, the discontinuation of LIBOR could result in financial, operational, legal, reputational or compliance risks to the Company.

The transition is anticipated to span several reporting periods through mid-2023 with the confirmed LIBOR cessation dates. The Company created a cross-functional team to manage the communication of the Company’s transition plans with both internal and external stakeholders and to ensure that the Company appropriately updates its business processes, analytical tools, information systems and contract language to minimize disruptions during and after the LIBOR transition. The Company has taken steps to transition LIBOR contracts maturing after the LIBOR cessation dates to alternative rates. Beginning in the fourth quarter of 2021, the Company will no longer extend new LIBOR-based loans as a primary offering to customers. The Company will offer new variable rate loans based on alternative reference rates. For additional information related to the potential impact surrounding the transition from LIBOR on the Company’s business, see ~~Item 1A. Risk Factors~~ ~~in the Company’s 2020 Form 10-K.~~

~~Off-Balance Sheet Arrangements~~

In the ordinary 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 Sheet and are considered to be off-balance sheet arrangements. Off-balance sheet arrangements are any contractual arrangements to which a nonconsolidated entity is a party and 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 a nonconsolidated 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.

~~Commitments to Extend Credit~~

As a financial service provider, the Company routinely enters into 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. 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.

~~Guarantees~~

In the ordinary course of business, the Company periodically enters into various guarantee agreements in which the Company sells or securitizes loans with recourse. Under these guarantee arrangements, the Company is contingently obligated to repurchase the recourse component of the loans when the loans default.

Further information and discussion about the Company’s loan commitments, commercial letters of credit, SBLCs, guarantees, and significant contractual arrangements under which the Company may be held contingently liable is included in ~~Note 9~~—~~Commitments and Contingencies~~ ~~to the Consolidated Financial Statements in this Form 10-Q. In addition, the Company has commitments and obligations under post-retirement benefit plans as described in~~ ~~Note 14 — Employee Benefit Plans~~ ~~to the Consolidated Financial Statements of the Company’s 2020 Form 10-K, and has contractual obligations for future payments on debts, borrowings and lease obligations as detailed in~~ ~~Item 7. MD&A — Off-Balance Sheet Arrangements and Contractual Obligations~~ ~~of the Company’s 2020 Form 10-K.~~

Risk Management

Overview

In the normal course of conducting its ~~businesses,~~business, the Company is exposed to a variety of risks, some of which are inherent to the financial services industry and others of which are more specific to the Company’s businesses. The Company operates under a Board-approved ~~Enterprise Risk Management~~enterprise risk management (“ERM”) framework, which outlines the company-wide approach to risk management and oversight, and describes the structures and practices employed to manage the current and emerging risks inherent to the Company. The Company’s ERM program incorporates risk management throughout the organization in identifying, managing, monitoring, and reporting risks. It identifies the Company’s major risk categories as credit ~~risk;~~risk, liquidity ~~risk;~~risk, capital ~~risk;~~risk, market ~~risk;~~risk, operational ~~risk;~~risk, compliance and regulatory ~~risks;~~risks, legal ~~risks;~~risks, strategic ~~risks;~~risks, and reputational risks.

The Risk Oversight Committee of the Board of Directors monitors the ERM program through ~~stated~~established risk categories and provides oversight of the Company’s risk appetite and control environment. The Risk Oversight Committee provides focused oversight of the Company’s identified enterprise risk categories on behalf of the full Board of Directors. Under the direction of the Risk Oversight Committee, management committees apply targeted strategies to reduce the risks to which the Company’s operations are exposed.

The Company’s ERM program is executed along the three lines of defense model, which provides for a consistent and standardized risk management control environment across the enterprise. The first line of defense is comprised of production, operational, and support units. The second line of defense is comprised of various risk management and control functions charged with monitoring and managing specific major risk categories and/or risk subcategories. The third line of defense is comprised of the Internal Audit function and Independent Asset ~~Review.~~Review (“IAR”). Internal Audit and IAR provides assurance and evaluates the effectiveness of risk management, control and governance processes as established by the Company. ~~Internal Audit has organizational independence and objectivity, reporting~~Reporting directly to the Board’s Audit ~~Committee.~~Committee, Internal Audit maintains organizational independence and objectivity. Further discussion and analysis of ~~each major~~the primary risk ~~area~~areas are ~~included~~detailed in the following ~~sub-sections~~subsections of Risk Management.

Credit Risk Management

Credit risk is the risk that a borrower or a counterparty will fail to perform according to the terms and conditions of a loan or investment and expose the Company to loss. Credit risk exists with many of the Company’s assets and exposures such as loans and certain derivatives. The majority of the Company’s credit risk is associated with lending activities.

The Risk Oversight Committee has primary oversight responsibility for ~~overseeing~~identified enterprise risk categories including credit risk. The Risk Oversight Committee monitors management’s assessment of asset quality, ~~and~~ credit risk trends, credit quality administration, ~~and~~ underwriting standards, ~~as well as~~and portfolio credit risk management strategies and processes, such as diversification and concentration limits, all of which enable management to control credit risk. At the management level, the Credit Risk Management Committee has primary oversight responsibility for credit risk. The Senior Credit Supervision function manages credit policy ~~and provides the resources to manage~~for the line of business transactional credit risk, assuring that all exposure is risk-rated according to the requirements of the credit risk rating policy. The Senior Credit Supervision function evaluates and reports the overall credit risk exposure to senior management and the Risk Oversight Committee. ~~The Independent Asset Review function reports~~Reporting directly to the Board’s Risk Oversight Committee, ~~and supports a~~the Independent Asset Review function provides additional support to the Company’s strong credit risk management culture by providing an independent and objective assessment of underwriting and ~~asset quality of the loan portfolio.~~documentation quality. A key focus of ~~the Company’s~~our credit risk management is adherence to a well-controlled underwriting process.

The Company assesses the overall credit quality performance of the ~~loan~~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, Troubled Debt Restructurings (“~~TDRs”~~TDR”) and Allowance for Credit Losses.

Credit Quality

The Company utilizes a credit risk rating system to assist in monitoring credit quality. Loans are evaluated using the Company’s internal credit risk rating of ~~one~~1 through ten. Loans risk rated one through five are assigned an internal risk rating category of “Pass.” Loans assigned with a credit risk rating of six have potential weaknesses that warrant closer attention by management and are assigned an internal risk rating category of “Special mention.” Loans assigned a credit risk rating of seven or eight have well-defined weaknesses that may jeopardize the full and timely repayment of the loan; these are assigned an internal risk rating category of “Substandard.” Loans assigned a credit risk rating of nine have insufficient sources of repayment and a high probability of loss; these are assigned an internal risk rating category of “Doubtful.” Loans assigned a credit risk rating of ten are uncollectible and of such little value that they are no longer considered bankable assets; these are assigned an internal risk rating category of “Loss.” Exposures categorized as criticized consist of “Special mention,” “Substandard,” “Doubtful” and “Loss” categories. Exposures categorized as classified consist of “Substandard,” “Doubtful” and “Loss” categories.10. For more information on the Company’s credit quality indicators and internal credit risk ratings, refer to Note 67 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

The following table presents the Company’s criticized loans as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)							Change				($ in thousands)							Change
		September 30, 2021			December 31, 2020			$		%			September 30, 2022			December 31, 2021			$		%
Criticized loans
Criticized loans:												Criticized loans:

Special mention loans	Special mention loans	$	448,497		$	564,555		$	(116,058)	(21)	%	Special mention loans	$	470,964		$	384,694		$	86,270	22	%
Classified loans	Classified loans	561,787			652,880			(91,093)		(14)	%	Classified loans	434,242			448,362			(14,120)		(3)	%
Total criticized loans(1)	Total criticized loans(1)	$	1,010,284		$	1,217,435		$	(207,151)	(17	%)	Total criticized loans(1)	$	905,206		$	833,056		$	72,150	9	%

Special mention loans to loans held-for-investment	Special mention loans to loans held-for-investment	1.11		%	1.47		%					Special mention loans to loans held-for-investment	0.99		%	0.92		%
Classified loans to loans held-for-investment	Classified loans to loans held-for-investment	1.39		%	1.70		%					Classified loans to loans held-for-investment	0.92		%	1.08		%
Criticized loans to loans held-for-investment	Criticized loans to loans held-for-investment	2.50		%	3.17		%					Criticized loans to loans held-for-investment	1.91		%	2.00		%

(1)Excludes loans held-for-sale.

Nonperforming Assets

Nonperforming assets are comprised of nonaccrual loans, other real estate owned (“OREO”) and other nonperforming assets. Other nonperforming assets and OREO are repossessed assets and properties, respectively, acquired through foreclosure, or through full or partial satisfaction of loans held-for-investment. Nonperforming assets were $97.0 million or 0.16% of total assets as of September 30, 2022, a decrease of $6.4 million or 6%, compared with $103.5 million or 0.17% of total assets as of December 31, 2021.

The following table presents nonperforming assets information as of September 30, 2022 and December 31, 2021:



($ in thousands)							Change
	September 30, 2022			December 31, 2021			$		%
Commercial:
C&I	$	47,988		$	59,023		$	(11,035)	(19)	%
CRE:
CRE	11,035			9,498			1,537		16	%
Multifamily residential	174			444			(270)		(61)	%

Total CRE	11,209			9,942			1,267		13	%
Consumer:
Residential mortgage:
Single-family residential	12,741			15,720			(2,979)		(19)	%
HELOCs	10,568			8,444			2,124		25	%
Total residential mortgage	23,309			24,164			(855)		(4)	%
Other consumer	37			52			(15)		(29)	%
Total nonaccrual loans	82,543			93,181			(10,638)		(11)	%
OREO, net	—			363			(363)		(100)	%
Other nonperforming assets	—			9,938			(9,938)		(100)	%
Nonperforming loans HFS	14,500			—			14,500		100	%
Total nonperforming assets	$	97,043		$	103,482		$	(6,439)	(6)	%
Nonperforming assets to total assets	0.16		%	0.17		%
Nonaccrual loans to loans held-for-investment	0.17		%	0.22		%
Allowance for loan losses to nonaccrual loans	705.71		%	581.21		%

TDRs included in nonperforming loans	$	32,688		$	30,383

Loans are generally placed on nonaccrual status when they become 90 days past due or when the full collection of principal or interest becomes uncertain regardless of the length of past due status. Collectability is generally assessed based on economic and business conditions, the borrower’s financial condition, and the adequacy of collateral, if any. For additional details regarding the Company’s nonaccrual loan policy, see Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies — Loans Held-for-Investment to the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form 10-K.

~~The following table presents information regarding nonperforming assets~~Nonaccrual loans were $82.5 million as of ~~the periods indicated:~~

($ in thousands) Change
September 30, 2021 December 31, 2020 $ %
Commercial:
C&I $ 97,157 $ 133,939 $ (36,782) (27) %
CRE:
CRE 14,236 46,546 (32,310) (69) %
Multifamily residential 1,123 3,668 (2,545) (69) %
Total CRE 15,359 50,214 (34,855) (69) %
Consumer:
Residential mortgage:
Single-family residential 9,422 16,814 (7,392) (44) %
HELOCs 8,731 11,696 (2,965) (25) %
Total residential mortgage 18,153 28,510 (10,357) (36) %
Other consumer 2,491 2,491 — 0 %
Total nonaccrual loans 133,160 215,154 (81,994) (38) %
OREO, net 28,800 15,824 12,976 82 %
Other nonperforming assets 10,681 3,890 6,791 175 %
Total nonperforming assets $ 172,641 $ 234,868 $ (62,227) (26) %
Nonperforming assets to total assets
0.28 % 0.45 %
Nonaccrual loans to loans held-for-investment 0.33 % 0.56 %
Allowance for loan losses to nonaccrual loans 420.85 % 288.16 %
TDRs included in nonperforming loans $ 77,583 $ 71,924

~~Nonaccrual loans decreased $82.0~~September 30, 2022, a decrease of $10.6 million or ~~38%~~11% from ~~$215.2~~$93.2 million as of December 31, ~~2020 to $133.2 million as of September 30,~~ 2021. This decrease was predominantly ~~due to resolutions~~the result of ~~C&I oil~~charge-offs and ~~gas exposures and CRE~~paydowns of commercial loans.

As of September 30, 2021, C&I comprised 73% and CRE comprised 12% of total nonaccrual loans. As of December 31, 2020, C&I and total CRE loans comprised 62% and 23% of total nonaccrual loans, respectively. As of September 30, 2021, $101.92022, $54.4 million or ~~77%~~66% of nonaccrual loans were less than 90 days delinquent. In comparison, ~~$106.4~~$54.2 million or ~~49%~~58%, of nonaccrual loans were less than 90 days delinquent as of December 31, ~~2020.~~

OREO was $28.8 million as of September 30, 2021, an increase of $13.0 million or 82% from $15.8 million as of December 31, 2020. The increase was due to an addition of a CRE office property totaling $28.8 million, which the Company took possession of during the third quarter of 2021, offset by a sale of a retail CRE property.

Other nonperforming assets totaled $10.7 million and $3.9 million as of September 30, 2021 and December 31, 2020, respectively, a net increase of $6.8 million or 175%, due to transfers from oil and gas loans to foreclosed assets, partially offset by sales and write-downs of oil and gas foreclosed assets.2021.

9092

The following table presents the accruing loans past due by portfolio segment as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Respective Loan Portfolios				($ in thousands)	Total Accruing Past Due Loans (1)				Change				Percentage of Total Loans Outstanding
		September 30, 2021		December 31, 2020		$		%		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021		$		%		September 30, 2022		December 31, 2021
Commercial:	Commercial:													Commercial:
C&I	C&I	$	16,704	$	9,717	$	6,987	72	%	0.12	%	0.07	%	C&I	$	20,960	$	11,069	$	9,891	89	%	0.13	%	0.08	%
CRE:	CRE:													CRE:
CRE	CRE	593		375		218		58	%	0.01	%	0.00	%	CRE	623		3,722		(3,099)		(83)	%	0.00	%	0.03	%
Multifamily residential	Multifamily residential	1,914		1,818		96		5	%	0.06	%	0.06	%	Multifamily residential	795		5,342		(4,547)		(85)	%	0.02	%	0.15	%
Construction and land		—		19,900		(19,900)		(100	%)	0.00	%	3.32	%

Total CRE	Total CRE	2,507		22,093		(19,586)		(89	%)	0.02	%	0.15	%	Total CRE	1,418		9,064		(7,646)		(84)	%	0.01	%	0.06	%
Total commercial	Total commercial	19,211		31,810		(12,599)		(40	%)	0.07	%	0.11	%	Total commercial	22,378		20,133		2,245		11	%	0.07	%	0.07	%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	17,153		12,494		4,659		37	%	0.19	%	0.15	%	Single-family residential	22,239		18,760		3,479		19	%	0.20	%	0.21	%
HELOCs	HELOCs	4,297		6,052		(1,755)		(29	%)	0.22	%	0.38	%	HELOCs	4,916		5,854		(938)		(16)	%	0.22	%	0.27	%
Total residential mortgage	Total residential mortgage	21,450		18,546		2,904		16	%	0.20	%	0.19	%	Total residential mortgage	27,155		24,614		2,541		10	%	0.21	%	0.22	%
Other consumer	Other consumer	184		234		(50)		(21	%)	0.14	%	0.14	%	Other consumer	80		108		(28)		(26)	%	0.09	%	0.08	%
Total consumer	Total consumer	21,634		18,780		2,854		15	%	0.19	%	0.19	%	Total consumer	27,235		24,722		2,513		10	%	0.21	%	0.22	%
Total	Total	$	40,845	$	50,590	$	(9,745)	(19	%)	0.10	%	0.13	%	Total	$	49,613	$	44,855	$	4,758	11	%	0.10	%	0.11	%

(1)There were no accruing loans past due 90 days or more as of both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Troubled Debt Restructurings

TDRs are loans for which contractual terms have been modified by the Company for economic or legal reasons related to a borrower’s financial difficulties, and for which a concession to the borrower was granted that the Company would not otherwise consider. The Company’s loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The following table presents the performing and nonperforming TDRs by portfolio segment as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The allowance for loan losses for TDRs was $~~12.3~~16.9 million as of September 30, ~~2021~~2022 and $~~10.3~~4.8 million as of December 31, ~~2020.~~2021.


($ in thousands)	($ in thousands)	September 30, 2021						December 31, 2020						($ in thousands)	September 30, 2022						December 31, 2021
		Performing TDRs		Nonperforming TDRs		Total		Performing TDRs		Nonperforming TDRs		Total			Performing TDRs		Nonperforming TDRs		Total		Performing TDRs		Nonperforming TDRs		Total
Commercial:	Commercial:													Commercial:
C&I	C&I	$	65,998	$	75,415	$	141,413	$	85,767	$	68,451	$	154,218	C&I	$	58,273	$	32,121	$	90,394	$	77,256	$	28,239	$	105,495
CRE:	CRE:													CRE:
CRE	CRE	23,544		—		23,544		24,851		—		24,851		CRE	22,768		—		22,768		23,379		—		23,379
Multifamily residential	Multifamily residential	5,302		204		5,506		3,310		1,448		4,758		Multifamily residential	3,876		174		4,050		4,042		197		4,239
Construction and land		—		—		—		19,900		—		19,900

Total CRE	Total CRE	28,846		204		29,050		48,061		1,448		49,509		Total CRE	26,644		174		26,818		27,421		197		27,618
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	6,640		1,113		7,753		6,748		1,169		7,917		Single-family residential	4,786		68		4,854		6,585		1,102		7,687
HELOCs	HELOCs	2,579		851		3,430		2,631		856		3,487		HELOCs	2,244		325		2,569		2,553		845		3,398
Total residential mortgage	Total residential mortgage	9,219		1,964		11,183		9,379		2,025		11,404		Total residential mortgage	7,030		393		7,423		9,138		1,947		11,085

Total TDRs	Total TDRs	$	104,063	$	77,583	$	181,646	$	143,207	$	71,924	$	215,131	Total TDRs	$	91,947	$	32,688	$	124,635	$	113,815	$	30,383	$	144,198

Performing TDRs were $91.9 million as of September 30, ~~2021, performing TDRs were $104.1 million,~~2022, a decrease of ~~$39.1~~$21.9 million or ~~27%~~19% from ~~$143.2~~$113.8 million as of December 31, ~~2020.~~2021. This decrease ~~mainly~~primarily reflected the payoffs and paydowns of performing C&I and ~~construction TDRs, partially offset by the transfers of C&I TDRs from nonperforming to performing status.~~ single-family residential TDR loans. Approximately~~Over 95% and 85%~~ 94% of the performing TDRs were current as of both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Nonperforming TDRs were ~~$77.6~~$32.7 million as of September 30, ~~2021,~~2022, an increase of ~~$5.7~~$2.3 million or 8% from ~~$71.9~~$30.4 million as of December 31, ~~2020~~2021. This increase ~~mainly~~ primarily reflected newly designated nonperforming C&I TDR loans, partially offset by ~~paydowns,~~ payoffs and ~~transfers~~paydowns of ~~certain~~ C&I ~~TDRs from~~and single-family residential nonperforming ~~to performing status.~~TDR loans.

Existing TDRs that were subsequently modified in response to the COVID-19 pandemic continue to be classified as TDRs. Customers who require further assistance upon exiting from the COVID-19 deferral programs may receive further modifications which may be classified as TDRs. As of September 30, ~~2021,~~2022, there were no TDRs that were provided ~~subsequent~~ modifications related to the COVID-19 ~~pandemic. As~~pandemic, and the amount of TDRs that were provided modification related to the COVID-19 pandemic were insignificant as of December 31, ~~2020~~2021~~, there were four TDRs totaling $11.8 million that were provided subsequent modifications related to the COVID-19 pandemic.~~.

Loan Modifications Due to COVID-19 Pandemic

~~Since late March 2020, under various forbearance programs, the~~The Company has granted a range of commercial and consumer loan accommodations, predominantly in the form of payment deferrals, to provide relief to borrowers experiencing financial hardship due to the COVID-19 pandemic. For COVID-19 related loan modifications, which occurred between March 1, 2020 through January 1, 2022, that have met the loan modification criteria under Section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act, 2021, ~~(“CAA”), permits a financial institution to elect to temporarily suspend TDR accounting~~or under ASC Subtopic 310-40 in certain circumstances. To be eligible under Section 4013 of the CARES Act, as modified by the CAA, a loan modification must be (1) related to the COVID-19 pandemic; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the federal National Emergency or (b) January 1, 2022. The federal banking regulators, in consultation with the Financial Accounting Standards Board (“FASB”), issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with ~~Customer~~Customers Affected by the Coronavirus (Revised) ~~(the “Interagency Statement”) on April 7, 2020 confirming that, for loans not subject~~, the Company elected to Section 4013 of the CARES Act, short-term modifications (i.e., six months or less) made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current as of the implementation date of a loan modification, or modifications granted under government mandated modification programs, are not considered as TDRstemporarily suspend TDR accounting under ASC Subtopic ~~310-40. See additional information in~~ 310-40,~~Note 1 — Summary of Significant Accounting Policies — Significant Accounting Policies~~ Receivables — Troubled Debt Restructurings by Creditors. ~~to the Consolidated Financial Statements of the Company’s 2020 Form 10-K.~~

The delinquency aging of loans modified related to the COVID-19 pandemic is frozen at the time of the modification. As a result, the recognition of delinquent loans, nonaccrual status and loan net charge-offs may be delayed for certain borrowers who are enrolled in these loan modification programs, which would have otherwise moved into past due or nonaccrual status. Interest income continues to be recognized over the accommodation periods.

~~The following table provides a summary of the COVID-19 pandemic-related loan modifications that remained under their modified terms as of September 30, 2021 and~~ ~~December 31, 2020~~. These amounts represent loan modifications that meet the criteria under Section 4013 of the CARES Act, as amended by the CAA, or the Interagency Statement and therefore are not considered as TDRs. These amounts also exclude loan modifications related to the COVID-19 pandemic made on existing TDRs. A loan is counted once in the table regardless of the number of accommodations the borrower has received.

($ in thousands) September 30, 2021 December 31, 2020
Number of Loans Outstanding Balance % of Balance
to Respective Loan Portfolio Number of Loans Outstanding Balance % of Balance
to Respective Loan Portfolio
Payment deferral and forbearance
Commercial:
C&I 8 $ 11,156 0 % 16 $ 54,215 0 %
CRE:
CRE 39 465,282 4 % 63 597,972 5 %
Multifamily residential 6 113,506 3 % 4 17,111 1 %
Construction and land 1 54,077 14 % 3 66,629 11 %
Total CRE 46 632,865 4 % 70 681,712 5 %
Total commercial 54 644,021 2 % 86 735,927 3 %
Consumer:
Residential mortgage:
Single-family residential 198 80,456 1 % 498 207,797 3 %
HELOCs 42 22,510 1 % 102 39,469 2 %
Total residential mortgage 240 102,966 1 % 600 247,266 3 %
Total consumer 240 102,966 1 % 600 247,266 2 %
Total payment deferral and forbearance 294 $ 746,987 2 % 686 $ 983,193 3 %

The above table excludes loan modifications related to the COVID-19 pandemic that did not meet the criteria provided under Section 4013 of the CARES Act, as amended by the CAA, or the Interagency Statement, and that were evaluated and deemed to not be classified as TDRs. The determination to not consider a modification a TDR was made on the premise that the amount of the delayed restructured payments was insignificant relative to the unpaid principal or the collateral value of the loan, resulting in an insignificant shortfall in the contractual amount due from the borrower, or an insignificant delay in the timing of the restructured payment period relative to the payment frequency under the loan’s original contractual maturity or expected duration.

The COVID-19 pandemic-related loan modifications primarily consisted of payment deferrals six months or less in duration, in the form of either principal payment deferrals, where the borrower was still paying interest, or full principal and interest payment deferrals. Other forbearance programs consisted of interest rate concessions. The deferred payments for commercial loans are either repaid at contractual maturity or spread over the remaining contractual term of the loan. The deferred payments for consumer loans are repaid under defined payment plans between six to 72 months after the deferral period ends, or the loan term is extended beyond the contractual maturity by the number of payments deferred.

As of September 30, ~~2021, the Company had $747.0 million of~~2022, COVID-19 loans under payment deferral and forbearance programs ~~a decrease of $236.2~~totaled $42.4 million, or ~~24% from $983.2~~0.1% of total loans, compared with $363.1 million, or 0.9% of total loans as of December 31, 2020. The loans on deferral as of September 30, 2021 and December 31, 2020, largely consisted of CRE and residential mortgage loans. The year-to-date decrease in loans on deferral reflected the lifting of COVID-19 related business shutdowns and restrictions on travel and restaurant dining. The increase of ~~CRE COVID-19 related loan deferrals that were making at least partial payments from 73% as of December 31, 2020~~ ~~to 92% as of~~ ~~September 30,~~ 2021 ~~also signaled improvements in the economy.~~ . Loans that have exited the modification program were ~~predominantly~~substantially all current as of September 30, 2021. The Company monitors the delinquency status of loans exiting relief programs on an ongoing basis. The impacts of the COVID-19 loan modifications were considered in the determination of the allowance for credit loss.2022.

Allowance for Credit Losses

~~The Company’s~~ASU 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires the measurement of the allowance for credit losses isto be based on management’s best estimate of lifetime expected credit losses inherent in the Company’s relevant financial assets. The allowance for credit losses estimate uses various models and estimation techniques based on historical loss experience, current borrower characteristics, current conditions, reasonable and supportable forecasts, and other relevant factors.

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: (1) recourse obligations for loans sold, (2) letters of credit, and (3) unfunded lending commitments. The Company’s methodology for determining the allowance calculation for unfunded lending commitments uses the lifetime loss rates of the on-balance sheet commitment. Recourse obligations for loans sold and letters of credit use the weighted loss rates for the applicable segment of the individual credit.

In the case of loans and securities, allowance for credit losses are contra-asset valuation accounts that are deducted from the amortized cost basis of these assets to present the net amount expected to be collected. In the case of unfunded credit commitments, the allowance for credit losses is a liability account that is reported as a component of Accrued expenses and other liabilities in our Consolidated Balance Sheet.

In addition to the allowance for loan losses, the Company maintains an allowance for unfunded credit commitments. The Company has three general areas for which it provides the allowance for unfunded credit commitments: 1) recourse obligations for loans sold, 2) letters of credit, and 3) unfunded lending commitments. The Company’s methodology for determining the allowance calculation for unfunded lending commitments uses the lifetime loss rates of the on-balance sheet commitment. Recourse obligations for loans sold and letters of credit use the weighted loss rates for the applicable segment of the individual credit.

The Company is committed to maintaining the allowance for credit losses at a level that is commensurate with the estimated inherent losses in the loan portfolio, including unfunded credit facilities. While the Company believes that the allowance for credit losses as of September 30, ~~2021~~2022 was appropriate to absorb losses inherent in the loan portfolio and in unfunded credit commitments based on the information available, future allowance levels may increase or decrease based on a variety of factors, including but not limited to, accounting standard and regulatory changes, loan growth, portfolio performance and general economic conditions. This evaluation is inherently subjective as it requires numerous estimates and judgements. For a description of the policies, methodologies and judgments used to determine the allowance for credit losses, see Item 7. MD&A — Critical Accounting ~~Policies and~~ Estimates~~of the Company’s 2020 Form 10-K~~ and Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form 10-K, and Note 67 — Loans Receivable and Allowance for Credit Losses to the Consolidated Financial Statements in this Form 10-Q.

The following table presents an allocation of the allowance for loan losses by loan portfolio segments and unfunded credit commitments as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021:


($ in thousands)	($ in thousands)	September 30, 2021						December 31, 2020						($ in thousands)	September 30, 2022						December 31, 2021
		Allowance Allocation			% of Loan Type to Total Loans			Allowance Allocation			% of Loan Type to Total Loans				Allowance Allocation			% of Loan Type to Total Loans			Allowance Allocation			% of Loan Type to Total Loans
Allowance for loan losses	Allowance for loan losses													Allowance for loan losses
Commercial:	Commercial:													Commercial:
C&I	C&I	$	342,142		35		%	$	398,040		36		%	C&I	$	371,749		33		%	$	338,252		34		%
CRE:	CRE:													CRE:
CRE	CRE	150,049			29		%	163,791			29		%	CRE	145,301			29		%	150,940			29		%
Multifamily residential	Multifamily residential	19,917			8		%	27,573			8		%	Multifamily residential	25,680			10		%	14,400			9		%
Construction and land	Construction and land	22,294			1		%	10,239			2		%	Construction and land	7,506			1		%	15,468			1		%
Total CRE	Total CRE	192,260			38		%	201,603			39		%	Total CRE	178,487			40		%	180,808			39		%
Total commercial	Total commercial	534,402			73		%	599,643			75		%	Total commercial	550,236			73		%	519,060			73		%
Consumer:	Consumer:													Consumer:
Residential mortgage:	Residential mortgage:													Residential mortgage:
Single-family residential	Single-family residential	18,292			22		%	15,520			21		%	Single-family residential	27,263			23		%	17,160			22		%
HELOCs	HELOCs	3,392			5		%	2,690			4		%	HELOCs	3,324			4		%	3,435			5		%
Total residential mortgage	Total residential mortgage	21,684			27		%	18,210			25		%	Total residential mortgage	30,587			27		%	20,595			27		%
Other consumer	Other consumer	4,318			0		%	2,130			0		%	Other consumer	1,694			0		%	1,924			0		%
Total consumer	Total consumer	26,002			27		%	20,340			25		%	Total consumer	32,281			27		%	22,519			27		%
Total allowance for loan losses	Total allowance for loan losses	$	560,404		100		%	$	619,983		100		%	Total allowance for loan losses	$	582,517		100		%	$	541,579		100		%
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	$	28,036					$	33,577					Allowance for unfunded credit commitments	$	24,041					$	27,514
Total allowance for credit losses	Total allowance for credit losses	$	588,440					$	653,560					Total allowance for credit losses	$	606,558					$	569,093

Loans held-for-investment	Loans held-for-investment	$	40,481,705					$	38,390,955					Loans held-for-investment	$	47,442,255					$	41,693,781
Allowance for loan losses to loans held-for-investment	Allowance for loan losses to loans held-for-investment	1.38		%				1.61		%				Allowance for loan losses to loans held-for-investment	1.23		%				1.30		%

		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
Average loans held-for-investment	Average loans held-for-investment	$	39,959,972		$	37,157,095		$	39,441,410		$	36,485,980		Average loans held-for-investment	$	46,845,030		$	39,959,972		$	44,544,863		$	39,441,410

Annualized net charge-offs to average loans held-for-investment	Annualized net charge-offs to average loans held-for-investment	0.13		%	0.26		%	0.14		%	0.16		%	Annualized net charge-offs to average loans held-for-investment	0.06		%	0.13		%	0.02		%	0.14		%

The allowance for loan losses was ~~$560.4~~$582.5 million as of September 30, ~~2021, a decrease~~2022, an increase of ~~$59.6~~$40.9 million from ~~$620.0~~$541.6 million as of December 31, ~~2020, primaril~~2021, primarily~~y driven by~~ reflecting of our current macroeconomic outlook and loan growth. Third quarter 2022 net charge-offs were $6.6 million, or annualized 0.06% of average loans held-for-investment, compared with net charge-offs of $13.5 million, or annualized 0.13% of average loans held-for-investment, for the third quarter of 2021. The decrease in net charge-offs for the third quarter of 2022 compared with the same period in 2021 was primarily due to a ~~reduction~~decrease in ~~the allowance against the C&I loan portfolio. The change in the allowance reflects year-to-date improvement in the macroeconomic forecast,~~CRE charge-offs, partially offset by ~~loan growth.~~increases in multifamily residential and C&I charge-offs. In the first nine months of 2022, net charge-offs were $8.3 million, or annualized 0.02% of average loans held-for investment, compared with $40.2 million or annualized 0.14% of average loans held-for-investment for the first nine months of 2021. The decrease in net charge-offs for the first nine months of 2022, compared with the same period in 2021, was mainly due to a decrease in CRE charge-offs and an increase in C&I recoveries.

The Company considers multiple economic scenarios to develop the estimate of the allowance for ~~loans.~~loan losses. The scenarios may consist of a ~~base~~baseline forecast representing management's view of the most likely outcome, and downside or upside scenarios reflecting possible worsening or improving economic conditions. ~~The base forecast assumed an end~~As of September 30, 2022, the Company assigned a lower weighting to its downside scenario and higher weightings to the ~~worst~~baseline and upside scenarios, compared with the weightings assigned as of December 31, 2021. The current forecast as of September 30, 2022 incorporates an updated impact of high inflation, lower than previously expected annual Gross Domestic Product (“GDP”) growth, rising interest rates, and continued global oil and supply chain issues caused by the ~~COVID-19 pandemic and continuing improvement in~~Russian invasion of Ukraine. Macroeconomic assumptions underlying the ~~economic outlook, with~~baseline forecast include annual GDP growth ~~estimated at 6.0%~~of 1.6% and ~~4.3%~~1.4% for ~~2021~~2022 and ~~2022,~~2023, respectively, and the ~~projected~~ unemployment rate ~~declining~~ to ~~3.4% by the end of 2022.~~average 3.7% and 3.9% for 2022 and 2023, respectively. The downside scenario assumed annual GDP growth of 1.5% in 2022 dropping to a ~~pullback in~~2.0% decline for 2023, and the ~~expected economic recovery due~~unemployment rate to ~~rising concerns with COVID-19 variants and~~rise from a ~~rise in unemployment.~~4.2% average for 2022 to a 7.3% average for 2023. The upside scenario assumed ~~a more optimistic view for the economic recovery, including higher~~annual GDP growth ~~through next year~~of 1.9% and ~~a faster return~~4.1% for 2022 and 2023, respectively, and the unemployment rate to ~~full employment.~~improve from an average of 3.6% for 2022 to 3.3% for 2023.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, PPP loans outstanding were ~~$807.3~~$110.9 million and ~~$1.57 billion,~~$534.2 million, respectively. ~~Since PPP~~Because these loans are ~~100%~~fully guaranteed by the ~~SBA,~~Small Business Administration, there ~~were~~was no allowance for loan losses ~~provided~~established for these loans as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021.

Third quarter 2021 net charge-offs were $13.5 million or annualized 0.13% of average loans-held-for-investment, compared with $24.2 million or annualized 0.26% of average loans held-for-investment for the same period of 2020. In the first nine months of 2021, net charge-offs were $40.2 million or annualized 0.14% of average loans held-for-investment, compared with $44.3 million or annualized 0.16% of average loans held-for-investment for the first nine months of 2020. The year-over-year decreases for both periods were primarily due to a decrease in C&I charge-offs, partially offset by higher CRE charge-offs. The recognition of certain loan charge-offs could be delayed due to payment deferral activities instituted in response to the COVID-19 pandemic.

~~The following tables summarize activities in the allowance for loan losses for loans by portfolio segments for the third quarters and first nine months of 2021 and 2020:~~

($ in thousands) Three Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 380,723 $ 176,040 $ 25,058 $ 18,551 $ 25,314 $ 3,867 $ 2,518 $ 632,071
Provision for (reversal of) credit losses on loans (a) 31,691 (8,301) (1,916) (8,180) (2,692) (637) (76) 9,889
Gross charge-offs (25,111) (1,414) — — — — (124) (26,649)
Gross recoveries 1,218 485 665 30 — 43 — 2,441
Total net (charge-offs) recoveries (23,893) (929) 665 30 — 43 (124) (24,208)
Foreign currency translation adjustment 500 — — — — — — 500
Allowance for loan losses, end of period $ 389,021 $ 166,810 $ 23,807 $ 10,401 $ 22,622 $ 3,273 $ 2,318 $ 618,252

($ in thousands) Nine Months Ended September 30, 2020
Commercial Consumer Total
C&I CRE Residential Mortgage Other
Consumer
CRE Multifamily
Residential Construction
and Land Single-
Family
Residential HELOCs
Allowance for loan losses, beginning of period $ 238,376 $ 40,509 $ 22,826 $ 19,404 $ 28,527 $ 5,265 $ 3,380 $ 358,287
Impact of ASU 2016-13 adoption 74,237 72,169 (8,112) (9,889) (3,670) (1,798) 2,221 125,158
Allowance for loan losses, January 1, 2020 312,613 112,678 14,714 9,515 24,857 3,467 5,601 483,445
Provision for (reversal of) credit losses on loans (a) 130,171 46,449 7,273 828 (2,659) (20) (3,197) 178,845
Gross charge-offs (57,466) (2,688) — — — (221) (180) (60,555)
Gross recoveries 3,395 10,371 1,820 58 424 47 94 16,209
Total net (charge-offs) recoveries (54,071) 7,683 1,820 58 424 (174) (86) (44,346)
Foreign currency translation adjustment 308 — — — — — — 308
Allowance for loan losses, end of period $ 389,021 $ 166,810 $ 23,807 $ 10,401 $ 22,622 $ 3,273 $ 2,318 $ 618,252

~~The following table summarizes activity in the allowance for unfunded credit commitments for the third quarters and first nine months of 2021 and 2020:~~

($ in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Unfunded credit facilities
Allowance for unfunded credit commitments, beginning of period $ 26,300 $ 28,972 $ 33,577 $ 11,158
Impact of ASU 2016-13 adoption — — — 10,457
Provision for (reversal of) credit losses on unfunded credit commitments (b) 1,736 111 (5,541) 7,468
Allowance for unfunded credit commitments, end of period $ 28,036 $ 29,083 $ 28,036 $ 29,083
(Reversal of) provision for credit losses (a) + (b) $ (10,000) $ 10,000 $ (25,000) $ 186,313

The allowance for unfunded credit commitments was ~~$28.0~~$24.0 million as of September 30, ~~2021,~~2022, compared with ~~$33.6~~$27.5 million as of December 31, ~~2020.~~2021.

Liquidity Risk Management

Liquidity

Liquidity is a financial institution’s capacity to meet its deposit and obligations to other counterparties as they come due, or to obtain adequate funding at a reasonable cost to meet those obligations. The objective of liquidity management is to manage the potential mismatch of asset and liability cash flows. Maintaining an adequate level of liquidity depends on the institution’s ability to efficiently meet both expected and unexpected cash flows, and collateral needs without adversely affecting daily operations or the financial condition of the institution. To achieve this objective, the Company analyzes its liquidity risk, maintains readily available liquid assets, and utilizes diverse funding sources including its stable core deposit base.

The Board of Directors’ Risk Oversight Committee has primary oversight responsibility over liquidity risk management. At the management level, the Company’s Asset/Liability Committee (“ALCO”) establishes the liquidity guidelines that govern the day-to-day active management of the Company’s liquidity position by requiring sufficient asset-based liquidity to cover potential funding requirements and 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 ~~financial~~ strength for its subsidiaries. The ALCO regularly monitors the Company’s liquidity status and related management processes, providing regular reports to the Board of Directors. The ~~Company believes its~~Company’s liquidity management practices have been effective under normal operating and stressed market conditions.

Liquidity Risk — Liquidity Sources. The Company’s primary source of funding is from deposits generated by its banking business, which are relatively stable and low-cost. Total deposits amounted to ~~$53.36~~$53.86 billion as of September 30, ~~2021,~~2022, compared with ~~$44.86~~$53.35 billion as of December 31, ~~2020.~~2021. The Company’s loan-to-deposit ratio was ~~76%~~88% as of September 30, ~~2021,~~2022, compared with ~~86%~~78% as of December 31, ~~2020.~~2021.

In addition to deposits, the Company has access to various sources of wholesale ~~funding, as well as~~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. Economic conditions and the stability of capital markets impact the Company’s access to and the cost of wholesale financing. The Company’s access to capital markets is also affected by the ratings received from various credit rating agencies. ~~See~~ ~~Item 2— MD&A — Balance Sheet Analysis — Deposits and Other Sources of Funds~~ ~~in this Form 10-Q for further detail related to the Company’s funding sources.~~

The Company maintains liquidity in the form of cash and cash equivalents, interest-bearing deposits with banks, short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the Company’s liquid assets asAs of September 30, ~~2021 and December 31, 2020:~~

($ in thousands) September 30, 2021 December 31, 2020
Encumbered Unencumbered Total Encumbered Unencumbered Total
Cash and cash equivalents $ — $ 4,852,901 $ 4,852,901 $ — $ 4,017,971 $ 4,017,971
Interest-bearing deposits with banks — 855,162 855,162 — 809,728 809,728
Short-term resale agreements — 1,961,142 1,961,142 — 900,000 900,000
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities 378,213 1,926,620 2,304,833 91,637 773,443 865,080
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities 481,425 3,584,106 4,065,531 494,132 2,320,532 2,814,664
Foreign government bonds — 254,848 254,848 — 182,531 182,531
Municipal securities — 501,489 501,489 1,033 395,040 396,073
Non-agency mortgage-backed securities, asset-backed securities and CLOs 261 1,967,373 1,967,634 434 879,908 880,342
Corporate debt securities — 618,671 618,671 1,249 404,719 405,968
Total $ 859,899 $ 16,522,312 $ 17,382,211 $ 588,485 $ 10,683,872 $ 11,272,357

Unencumbered liquid assets totaled $16.52 billion as of September 30, 2021, compared with $10.68 billion as of December 31, 2020. AFS debt securities, included as part of liquidity sources, consist of high quality and liquid securities with moderate durations to minimize overall interest rate and liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging.

~~As a means to generate incremental liquidity,~~2022, the Company ~~maintains~~had available borrowing capacity ~~under secured~~of $20.51 billion. The available borrowing ~~lines~~capacity included $10.88 billion with the FHLB, ~~and~~$2.17 billion with the FRBSF, unsecured federal funds lines of credit with ~~various~~ correspondent banks ~~and several master repurchase agreements with major brokerage companies. As~~ of ~~September 30, 2021, the Company had available~~$936.0 million, and borrowing capacity from unpledged debt securities of $22.40 billion, including $9.67 billion with the FHLB and $3.88 billion with the FRBSF. The Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term needs.$6.52 billion. 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. The ~~Bank’s unsecured federal funds lines~~Company believes that its liquidity sources are sufficient to meet all reasonably foreseeable short-term needs. See Item 2— MD&A — Balance Sheet Analysis — Deposits and Other Sources of ~~credit~~Funding in this Form 10-Q for further detail related to the Company’s funding sources.

The Company maintains a certain level of liquid assets in the form of cash and cash equivalents, interest-bearing deposits with ~~correspondent~~ banks, ~~subject to availability,~~short-term resale agreements and unencumbered high-quality and liquid AFS debt securities. The following table presents the Company’s liquid assets as of September 30, 2022 and December 31, 2021:



($ in thousands)	September 30, 2022						December 31, 2021
	Encumbered		Unencumbered		Total		Encumbered		Unencumbered		Total
Cash and cash equivalents	$	—	$	2,163,353	$	2,163,353	$	—	$	3,912,935	$	3,912,935
Interest-bearing deposits with banks	—		630,543		630,543		—		736,492		736,492
Resale agreements due to mature in one year	—		407,986		407,986		—		1,818,503		1,818,503
AFS debt securities:
U.S. Treasury, and U.S. government agency and U.S. government-sponsored enterprise debt securities	273,735		587,366		861,101		384,895		1,949,757		2,334,652
U.S. government agency and U.S. government-sponsored enterprise mortgage-backed securities	189,722		2,125,592		2,315,314		418,761		3,738,502		4,157,263
Foreign government bonds	—		225,810		225,810		—		257,733		257,733
Municipal securities	—		249,502		249,502		—		523,158		523,158
Non-agency mortgage-backed securities, asset-backed securities and CLOs	181		1,724,617		1,724,798		240		2,042,642		2,042,882
Corporate debt securities	—		529,565		529,565		—		649,665		649,665
Total	$	463,638	$	8,644,334	$	9,107,972	$	803,896	$	15,629,387	$	16,433,283

Unencumbered liquid assets totaled ~~$1.01~~$8.64 billion as of September 30, 2022, compared with $15.63 billion as of December 31, 2021. ~~Estimated borrowing capacity from unpledged~~ AFS debt securities, ~~totaled $7.84~~included as part of liquidity sources, consist of high quality and liquid securities with moderate durations to minimize overall interest rate and liquidity risks. The Company believes these AFS debt securities provide quick sources of liquidity to obtain financing, regardless of market conditions, through sale or pledging. The decrease in liquid assets was primarily related to the transfer of $3.01 billion of debt securities from AFS to HTM during the first quarter of 2022, a decrease in cash and cash equivalents driven by loan funding activities, a decrease in resale agreements primarily due to repayments, and a decrease in fair value of AFS debt securities primarily due to interest rate increases.

Management believes that the Company’s excess cash, unencumbered AFS debt securities, borrowing capacity and access to sufficient sources of capital are adequate to meet its short- and long-term liquidity needs in the foreseeable future. In addition, the Company may use debt and equity issuances when costs are deemed attractive, should longer term needs arise.

Liquidity Risk — Cash Requirements. In the ordinary course of the Company’s business, the Company enters into contractual obligations that require future cash payments, including funding for customer deposit withdrawals, repayments for short- and long-term borrowings, leases obligations and other cash commitments. The Company also has off-balance sheet arrangements which represent transactions that are not recorded on the Consolidated Balance Sheet. The Company’s off-balance sheet arrangements include (1) commitments to extend credit, such as loan commitments, commercial letters of ~~September 30,~~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. Since many of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future funding requirements. Information about the Company’s loan commitments, commercial letters of credit and SBLCs is provided in Note 10 — Commitments and Contingencies to the Consolidated Financial Statements in this Form 10-Q. The Company’s liquidity sources have been, and are expected to be, sufficient to meet all such cash requirements.

The Consolidated Statement of Cash Flows summarizes the Company’s sources and uses of cash by type of activities for the first nine months of 2022 and 2021. Excess cash generated by operating and investing activities may be used to repay outstanding debt or invest in liquid assets.

Liquidity Risk — Liquidity for East West. In addition to bank level liquidity management, the Company manages liquidity at the parent company level for various operating needs including payment of dividends, repurchases of common stock, principal and interest payments on its borrowings, acquisitions and additional investments in its subsidiaries. East West’s primary source of liquidity is from cash dividends distributed by its subsidiary, East West Bank. The Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends as discussed in Item 1. Business — Supervision and Regulation — Dividends and Other Transfers of Funds of the Company’s ~~2020~~2021 Form 10-K. East West held ~~$344.4~~$226.5 million and ~~$439.1~~$345.0 million in cash and cash equivalents as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~As of September 30, 2021, management~~Management believes that East West has sufficient cash and cash equivalents to ~~service its operating needs.~~meet the projected cash obligations for the current year.

Liquidity Risk — Liquidity Stress Testing. ~~Liquidity~~The Company utilizes liquidity stress ~~testing is performed~~analysis to determine the appropriate amounts of liquidity to maintain at the Company, ~~level, as well as at the~~ foreign subsidiary and foreign branch ~~levels. Stress tests~~levels needed to meet contractual and ~~scenario analyses are intended to quantify the potential impact~~contingent cash outflows under a range of ~~a liquidity event on the financial and liquidity position of the entity.~~scenarios. Scenario analyses include assumptions about significant changes in key funding sources, market triggers, ~~and~~ 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 a variety of time horizons, both immediate and longer term, and over a variety of stressed conditions. Given the range of potential stresses, the Company maintains contingency funding plans on a consolidated basis and for individual entities.

As of September 30, ~~2021,~~2022, the Company was not aware of any material commitments for capital expenditures in the foreseeable future and believes it has adequate liquidity resources to conduct operations and meet other needs in the ordinary course of business. Given the uncertainty and the rapidly changing market and economic conditions, ~~related to the COVID-19 pandemic,~~ the Company will continue to actively evaluate ~~the nature and extent of~~ the impact on its business and financial position. For more information ofon how ~~the COVID-19 pandemic~~economic conditions may impact our liquidity, see Item ~~1A.~~ 1A. Risk Factors ~~— Risks Related to the COVID-19 Pandemic~~of the Company’s ~~2020~~2021 Form 10-K.

~~Consolidated Cash Flows Analysis~~

The following table presents a summary of the Company’s Consolidated Statement of Cash Flows for the periods indicated. While this information may be helpful to highlight business strategies and certain macroeconomic trends, the cash flow analysis may not be as relevant when analyzing changes in the Company’s net earnings and assets. The Company believes that in addition to this traditional cash flow analysis, the discussion related to liquidity in ~~Item 2. MD&A — Risk Management — Liquidity Risk Management — Liquidity~~ ~~in this Form 10-Q may provide a useful context in evaluating the Company’s liquidity position and related activity.~~

($ in thousands) Nine Months Ended September 30,
2021 2020
Net cash provided by operating activities $ 745,831 $ 432,098
Net cash used in investing activities (7,817,886) (4,520,267)
Net cash provided by financing activities 7,903,443 5,322,358
Effect of exchange rate changes on cash and cash equivalents 3,542 11,603
Net increase in cash and cash equivalents 834,930 1,245,792
Cash and cash equivalents, beginning of period 4,017,971 3,261,149
Cash and cash equivalents, end of period $ 4,852,901 $ 4,506,941

~~Operating Activities —~~ During the first nine months of 2021, net cash provided by operating activities mainly reflected inflow of $655.2 million from net income, plus net income adjusted for certain noncash items of $128.7 million, and a $30.2 million increase in accrued expenses and other liabilities, partially offset by a $78.6 million increase in accrued interest receivable and other assets. In comparison, during the same period in 2020, net cash provided by operating activities mainly reflected inflow of $403.7 million from net income, net income adjusted for certain noncash items of $273.2 million and a $220.3 million increase in accrued expenses and other liabilities, partially offset by a $467.1 million increase in accrued interest receivable and other assets.

~~Investing Activities —~~During the first nine months of 2021, cash used in investing activities primarily reflected $4.30 billion of net AFS debt securities purchases (net of sales, maturities and redemptions), $2.13 billion in cash used for growth in the loan portfolio, and $1.14 billion in net resale agreements purchases (net of paydowns and maturities). During the same period in 2020, net cash used in investing activities primarily reflected cash outflows of $2.67 billion from loans held-for-investment, $1.14 billion of net AFS debt securities purchases (net of sales, maturities and redemptions), and $503.2 million in cash used for interest-bearing deposits with banks.

~~Financing Activities —~~During the first nine months of 2021, net cash provided by financing activities primarily reflected a net increase of $8.49 billion in deposits, partially offset by $405.0 million in repayment of FHLB advances, and $141.9 million in cash dividends paid. During the same period in 2020, net cash provided by financing activities primarily reflected net increases of $4.34 billion in deposits and $1.43 billion in PPPLF advances, partially offset by $146.0 million in shares repurchased and $119.2 million in cash dividends paid.

Market Risk Management

Market risk is the risk that the Company’s financial condition may change resulting from adverse movements in market rates or prices, including interest rates, foreign exchange rates, interest rate contracts prices, investment securities prices, credit spreads, and related risk ~~resulting from~~due to mismatches in rate sensitive assets and liabilities. In the event of market stress, the risk could have a material impact on ~~our~~the Company’s results of operations and financial condition.

The Board’s Risk Oversight Committee has primary oversight responsibility over market risk management. At the management level, the ALCO establishes and monitors compliance with the policies and risk limits pertaining to market risk management activities. Corporate Treasury supports the ALCO in measuring, monitoring, and managing interest rate risk as well as all other market risks.

~~100~~98

Interest Rate Risk Management

Interest rate risk results primarily from the Company’s traditional banking activities of gathering deposits and extending loans, which are the primary areas of market risk for the Company. Economic and financial conditions, movements in interest rates, and consumer preferences impact the level of noninterest-bearing funding sources at the Company, as well as affect the difference between the interest the Company earns on interest-earning assets and pays on interest-bearing liabilities. In addition, changes in interest rates can influence the rate of principal prepayments on loans and the speed of deposit withdrawals. Due to the pricing term mismatches and the embedded options inherent in certain products, changes in market interest rates affect not only ~~affect~~the expected near-term earnings, but also the economic value of these interest-earning assets and interest-bearing liabilities. Other market risks include foreign currency exchange risk and equity price risk. These risks are not considered significant to the Company and no separate quantitative information concerning these risks is presented herein.

~~With~~Under the oversight byof the Company’s Board of Directors, the ALCO coordinates the overall management of the Company’s interest rate risk. The ALCO meets regularly and is responsible for reviewing the Company’s open market positions and establishing policies to monitor and limit ~~exposure~~exposures to market risk. Management of interest rate risk is carried out primarily through strategies involving the Company’s debt securities portfolio, loan portfolio, available funding channels, and capital market activities. In addition, the Company’s policies permit the use of derivative instruments to assist in managing interest rate risk.

The interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under ~~multiple~~various interest rate scenarios. The model incorporates the Company’s cash instruments, loans, debt securities, resale agreements, deposits, borrowings and repurchase agreements, as well as financial instruments from the Company’s foreign operations. The Company uses both a static balance sheet and a forward growth balance sheet to perform ~~these~~the interest rate sensitivity analyses. The simulated interest rate scenarios include aan instantaneous non-parallel shift in the yield curve ~~(“rate shock”)~~ and a gradual non-parallel shift in the yield curve (“rate ramp”). over a static balance sheet. In addition, the Company also performs simulations using other alternative interest rate scenarios, including various permutations of the yield curve flattening, steepening or inverting. Results of these various simulations are used to formulate and gauge strategies to achieve a desired risk profile within the Company’s capital and liquidity guidelines.

The net interest income simulation model is based on the actual maturity and repricing characteristics of the Company’s interest-rate sensitive assets, liabilities, and related derivative contracts. It also incorporates various assumptions, which management believes to be reasonable but may have a significant impact on the results. These assumptions include, but are not limited to, the timing and magnitude of changes in interest rates, the yield curve evolution and shape, the correlation between various interest rate indices, financial ~~instrument~~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 deposit decay and deposit beta assumptions, which are derived from a regression analysis of the Company’s historical deposit data. The Company used full- through-the-economic-cycle betas with each incremental rate increase in the rate ramp scenarios, and did not assume lags in repricing. Deposit beta commonly refers to the correlation of the changes in interest rates paid on deposits to changes in the benchmark interest rates. The model is also sensitive to the loan and investment prepayment assumptions that are based on an independent model and the Company’s historical prepayment data, which consider anticipated prepayments under different interest rate environments.

Simulation results are highly dependent on input assumptions. To the extent the actual behavior is different from the assumptions used in the models, there could be a material ~~change~~changes in interest rate ~~sensitivity.~~sensitivity results. The assumptions applied in the model are documented, ~~and~~ supported, ~~for reasonableness,~~ and periodically back-tested to assess ~~their~~the reasonableness and effectiveness. The Company makes appropriate calibrations to the model as needed and continually ~~refining~~validates the model, methodology and results. Changes to key model assumptions are reviewed by the ALCO. Scenario results do not reflect strategies that the management could employ to limit the impact of changing interest rate expectations.

~~Since the federal funds rate range was lowered to near zero in~~In March ~~2020 and~~2022, the Federal Reserve ~~has committed its resources to support~~raised the ~~U.S. economy, it is not expected that rates will decline further, nor is it expected that rates will enter into the negative territory. Consequently, the simulation results~~target range for the ~~downward~~fed funds rate to 0.25% to 0.50% to address concerns about inflation, which reflected supply and demand imbalances due to the pandemic, higher energy prices, and broader price pressures. The Federal Reserve has continued its aggressive approach in responding to inflation and raised the target range for the fed funds rate to 3.75% to 4.00% on November 2, 2022. The market estimates that interest ~~rate scenarios as~~rates are likely to continue to rise, potentially reaching 4.25% to 4.5% by the end of ~~September 30, 2021 are not provided.~~2022.

~~101~~99

Twelve-Month Net Interest Income Simulation

Net interest income simulation modeling ~~looks at~~measures interest rate risk through ~~earnings. It~~earnings volatility. The simulation projects the cash flow changes in interest rate sensitive ~~asset~~assets and ~~liability cash flows,~~liabilities, expressed in terms of net interest income, over a specified time horizon for defined interest ~~rates~~rate scenarios. Net interest income simulations ~~generate~~provide insight into the impact of market rates changes on earnings, ~~and~~which help guide risk management decisions. The Company assesses interest rate risk by comparing the changes of net interest income ~~using~~in different interest rate scenarios.

The federal funds target rate range was 0.25% as of both September 30, 2021 and December 31, 2020. After lowering the range to between 0.00% and 0.25% in March 2020, the Federal Open Market Committee (“FOMC”) pledged to maintain monetary support for the economy. In the September 2021 meeting, the FOMC held the federal funds target rate at between 0.00% and 0.25%. The FOMC statement repeated language that inflation was transitory, but also acknowledged the inflation was elevated. In November 2021 meeting, the FOMC voted to continue to hold the federal funds target rate at between 0.00% and 0.25% and to begin tapering its asset purchases in mid-November. The Bank anticipates the first rate hike will take place in 2022.

The following table presents the Company’s net interest income sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates ofby 100 and 200 bps ~~in upward direction~~ as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021, based on a static balance sheet as of the date of the analysis.


Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	Net Interest Income Volatility (1)				Change in Interest Rates (in bps)		Net Interest Income Volatility (1)
		September 30, 2021		December 31, 2020			Change in Interest Rates (in bps)			September 30, 2022			December 31, 2021
+200	+200	16.3	%	12.6	%					11.7	%		19.5	%
+100	+100	7.8	%	5.6	%				+100		6.0	%		9.4	%
-100	-100	NM		NM					-100		(5.2)	%		NM
-200	-200	NM		NM					-200		(10.2)	%		NM

NM — Not meaningful.

(1)The percentage change represents net interest income change over 12 ~~months~~month period in a stable interest rate environment versus ~~net interest income~~ in the various interest rate scenarios.

The composition of the Company’s loan portfolio creates sensitivity to interest rate movements due to the faster repricing of the floating-rate loan portfolio than the deposit products. Growth and/or contraction in the Company’s loans, other earning assets, deposits, and borrowings may lead to changes in the sensitivity to interest rate movements. Year-to-date decreases in cash and cash equivalents, resale agreements, and short-term investments, together with growth in fixed-rate loans, as well as the interest rate hedging activities and changes in the funding mix have decreased the Company’s asset sensitivity. In the table above, net interest income volatility is expressed in relation to the base-case net interest income, which increased between September 30, 2022 and December 31, 2021, due to balance sheet growth and an expanded base-case net interest margin.

While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraph, the Company also models scenarios based on gradual shifts in interest rates and assesses the corresponding impacts. These interest rate scenarios provide additional information to estimate the Company’s underlying interest rate risk. The rate ramp table below shows the net interest income volatility under a gradual non-parallel shift of the yield curve, in even monthly increments over the first 12 months, followed by rates held constant thereafter based on a static balance sheet as of the date of the analysis. Actual results will vary based on the timing and pace of interest rate changes, as well as changes in the balance sheet.



Change in Interest Rates (in bps)	Net Interest Income Volatility
	September 30, 2022		December 31, 2021
+200 Rate Ramp	5.2	%	9.2	%
+100 Rate Ramp	2.6	%	4.1	%
-100 Rate Ramp	(2.2)	%	NM
-200 Rate Ramp	(4.9)	%	NM

NM — Not meaningful.

As of September 30, 2022, the Company’s net interest income profile ~~as of September 30, 2021~~ reflects an asset sensitive position. Net interest income is expected to increase ifwhen interest rates rise, ~~and to decrease if interest rates decline. The potential impact of rate decreases is partially reduced due to~~as the ~~current low rate environment with the federal funds rate floored and the federal funds rate range between 0.00% and 0.25%. The~~ Company ~~is naturally asset sensitive due to the~~has a large share of variable rate loans in its loan portfolio, ~~which are~~ primarily linked to Prime ~~and~~or LIBOR indices. The Company’s interest income is ~~vulnerable~~sensitive to changes in short-term interest ~~rates. However, given the current low level of interest rates, the potential for further rate decreases is limited, which reduces the Bank’s exposure to risks associated with falling~~ rates. The Company’s deposit portfolio is primarily ~~comprised~~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 ~~Company’s estimated twelve-month~~modeled results are highly sensitive to reinvestment yield and deposit beta assumptions. Actual results in terms of net interest income ~~sensitivity as~~growth during a period of ~~September 30, 2021 was slightly higher as compared with~~rising interest rates will also reflect earning asset growth and deposit mix changes based on customer preferences relative to the ~~sensitivity as of December 31, 2020 under both higher~~interest rate ~~scenarios. This reflects both an increased rate sensitivity in the Company’s assets and an increase in noninterest bearing deposits.~~environment.

~~102~~100

While an instantaneous and sustained non-parallel shift in market interest rates was used in the simulation model described in the preceding paragraphs, the Company believes that any shift in interest rates would likely be more gradual and would therefore, have a more modest impact. The rate ramp table below shows the net income volatility under a gradual non-parallel shift of the yield curve upward direction, in even quarterly increments over the first 12 months, followed by rates held constant thereafter:

Change in Interest Rates
(in bps)
Net Interest Income Volatility (1)
September 30, 2021 December 31, 2020
+200 Rate Ramp 7.1 % 4.9 %
+100 Rate Ramp 3.0 % 2.2 %
-100 Rate Ramp NM NM
-200 Rate Ramp NM NM

~~NM — Not meaningful.~~

~~(1)The percentage change represents net interest income under a gradual non-parallel shift in even quarterly increments over 12 months.~~

The Company believes that the rate ramp table, shown above, when evaluated together with the results of the rate shock simulation, presents a more meaningful indication of the potential impact of rising interest rates to the Company’s twelve-month net interest income. During the third quarter of 2021, the Company’s modeled asset sensitivity increased under simulations for the up 200 and up 100 bps ramp scenarios.

Economic Value of Equity at Risk

Economic value of equity (“EVE”) is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used for asset/liability management and measures changes in the economic value of the bank. The ~~fair market values of a bank's assets and liabilities are directly linked to interest rates. The~~ economic value approach provides a comparatively broader scope than the net interest income volatility approach since it captures all anticipated cash flows.

The EVE simulation reflects the ~~effect~~sensitivity of the EVE to interest rate shifts on the value of the Company and is used to assess the degree of interest rate risk exposure. In contrast to the earnings perspective, the economic perspective identifies risks arising from repricing or maturity gaps over the life of the balance sheet. Changes in economic value indicate anticipated changes in the value of the Bank’s future cash flows. Thus, the economic perspective can provide a leading indicator of the Bank’s future earnings and capital values. The economic value method also reflects sensitivity across the full maturity spectrum of the ~~Bank’s~~Company’s assets and liabilities. It identifies risks arising from repricing, prepayment and maturity gaps between assets and liabilities on the balance sheet, as well as from derivative exposures that are off-balance sheet. The simulation provides long-term economic perspective into the Bank’s interest rate risk profile, which allows the Bank to manage anticipated negative effects of interest rate fluctuations.

The following table presents the Company’s EVE sensitivity related to an instantaneous and sustained non-parallel shift in market interest rates ofby 100 and 200 bps ~~in an upward direction~~ as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


Change in Interest Rates (in bps)	Change in Interest Rates (in bps)	EVE Volatility (1)				Change in Interest Rates (in bps)	EVE Volatility (1)
		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
+200	+200	4.5	%	9.6	%	+200	1.0	%	7.1	%
+100	+100	2.6	%	4.8	%	+100	1.0	%	3.5	%
-100	-100	NM		NM		-100	0.0 %		NM
-200	-200	NM		NM		-200	(0.3)	%	NM

NM — Not meaningful.

(1)The percentage change represents net portfolio value change of the Company in a stable interest rate environment versus ~~net portfolio value~~ in the various interest rate scenarios.

The Company’s EVE sensitivity for the upward interest rate scenarios decreased as of September 30, ~~2021,~~2022, compared with the results as of December 31, ~~2020.~~2021. The changes in EVE sensitivity ~~during this period~~ were primarily due tofaster deposit decay and higher deposit beta assumptions used in the model, changes in the level and shape of the yield curve, and ~~changes in balance sheet mix.~~lower cash balances as of September 30, 2022.

The Company’s EVE profile as of September 30, ~~2021~~2022 reflects an asset sensitive EVE position under the higher interest rate scenarios. Given the uncertainty of the magnitude, timing and direction of future interest rate movements, ~~and~~as well as the shape of the yield curve, actual results may vary from those predicted by the Company’s model.

~~103~~

Derivatives

It is the Company’s policy not to speculate on the future direction of interest rates, foreign currency exchange rates and energy commodity prices. However, the Company ~~will~~ periodically ~~enter~~enters into derivative transactions in order to reduce its exposure to market risks, primarily interest rate risk and foreign currency risk. The Company believes that these derivative transactions, when properly structured and managed, ~~may provide~~provides a hedge against inherent risk in certain assets and liabilities ~~and~~or against risk in specific transactions. Hedging transactions may be implemented using a variety of derivative instruments such as swaps, forwards, options, and ~~options.~~collars. Prior to entering into any hedging activities, the Company analyzes the costs and benefits of the hedge in comparison to alternative strategies. In addition, the Company enters into derivative transactions in order to assist customers with their risk management objectives, such as managing exposure to fluctuations in interest rates, foreign currencies and energy commodity prices. To economically hedge against the derivative contracts entered ~~into~~ with the Company’s customers, the Company enters into mirrored derivative contracts with third-party financial institutions. The exposures from derivative transactions are collateralized by cash and/or eligible securities based on limits as set forth in the respective agreements entered between the Company and counterparty financial institutions.

101

The Company is subject to credit risk associated with the counterparties to the derivative contracts. This counterparty credit risk is a multi-dimensional form of 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 risks and the Company has guidelines in place to manage counterparty concentration, tenor limits, and collateral. The Company manages the credit risk of its derivative ~~positions~~exposures by diversifying its positions among various counterparties, by entering into legally enforceable master netting arrangements, and by requiring collateral arrangements, where possible. The Company may also transfer counterparty credit ~~risk-related~~risk related to interest rate swaps to ~~institutional third parties~~third-party financial institutions through the use of credit risk participation agreements. Certain derivative contracts are required to be centrally cleared through clearinghouses, towhich further ~~mitigate counterparty~~mitigates credit risk. The Company incorporates credit value adjustments and other market standard methodologies to appropriately reflect its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of its derivatives.

The following table summarizes certain information about ~~the~~ derivative financial instruments utilized by the Company in its management of interest rate risk and foreign currency risk as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021				December 31, 2020					September 30, 2022				December 31, 2021
($ in thousands)	($ in thousands)	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts		($ in thousands)	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:	Cash Flow Hedges		Net Investment Hedges		Cash Flow Hedges		Net Investment Hedges		Derivatives designated as hedging instruments:	Cash Flow Hedges		Net Investment Hedges		Cash Flow Hedges		Net Investment Hedges
Notional amounts:		$	275,000	$	85,316	$	275,000	$	84,269
Notional amounts										Notional amounts	$	2,525,000	$	84,832	$	275,000	$	86,531
Fair value:	Fair value:									Fair value:
Recognized as an asset	Recognized as an asset	—		158		—		—		Recognized as an asset	533		7,107		—		—
Recognized as a liability	Recognized as a liability	1,149		—		1,864		235		Recognized as a liability	24,679		—		57		225
Net fair value	Net fair value	$	(1,149)	$	158	$	(1,864)	$	(235)	Net fair value	$	(24,146)	$	7,107	$	(57)	$	(225)
Weighted-average interest rates:	Weighted-average interest rates:									Weighted-average interest rates:
Pay fixed (receive floating)		0.351% (3-month USD-LIBOR)		NM		0.483% (3-month USD-LIBOR)		NM
Variable-rate borrowings — Pay fixed (receive floating)										Variable-rate borrowings — Pay fixed (receive floating)	0.483% (3-month USD-LIBOR)		NA		0.483% (3-month USD-LIBOR)		NA
Variable-rate loans — Receive fixed (pay floating)										Variable-rate loans — Receive fixed (pay floating)	1.09% (1-month USD-LIBOR)		NA		NA		NA
Variable-rate loans — Receive fixed (pay floating)										Variable-rate loans — Receive fixed (pay floating)	6.475% (USD-PRIME)		NA		NA		NA
Variable-rate loans — Sell cap-buy floor (floating rate )										Variable-rate loans — Sell cap-buy floor (floating rate )	4.575%-1.500% (1-month USD-SOFR)		NA		NA		NA
Weighted-average remaining term to maturity (in months):	Weighted-average remaining term to maturity (in months):	16.9		2.7		25.8		2.6		Weighted-average remaining term to maturity (in months):	39.6		5.7		13.9		2.7
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts		Derivatives not designated as hedging instruments:	Interest Rate Contracts		Foreign Exchange Contracts		Interest Rate Contracts		Foreign Exchange Contracts
Notional amounts:		$	17,743,446	$	3,047,846	$	18,155,678	$	3,108,488
Notional amounts										Notional amounts	$	17,261,862	$	2,762,150	$	17,575,420	$	1,874,681
Fair value:	Fair value:									Fair value:
Recognized as an asset	Recognized as an asset	298,831		31,717		489,132		30,300		Recognized as an asset	429,505		74,767		240,222		21,033
Recognized as a liability	Recognized as a liability	212,179		24,313		315,834		22,524		Recognized as a liability	590,648		64,049		179,905		15,276
Net fair value	Net fair value	$	86,652	$	7,404	$	173,298	$	7,776	Net fair value	$	(161,143)	$	10,718	$	60,317	$	5,757

NMNA — Not ~~meaningful.~~applicable.

~~104~~

Derivatives Designated as Hedging Instruments — Interest rate and foreign exchange derivative contracts are utilized in ~~our~~the Company’s asset and liability management activities and serve as an efficient tool to manage the Company’s interest rate risk and foreign exchange risk. ~~We use~~The Company uses interest rate derivatives to hedge the risk of variable cash flows ~~that the Company is exposed to from~~in its variable interest rate borrowings, ~~including~~which includes repurchase agreements and FHLB ~~advances.~~advances, as well as a portion of its variable interest rate CRE loans. The Company also uses foreign exchange derivatives to hedge the risk of changes in the USD equivalent value of a designated monetary amount of the Company’s net investment in East West Bank (China) Limited. For both the cash flow and the net investment hedges, the ~~change~~changes in the fair value of the hedging instruments isare recognized in ~~Accumulated other comprehensive (loss) income,~~AOCI, net of tax, on the Consolidated Balance Sheet.

The fluctuation in foreign currency translation of the hedged exposure is expected to be offset by changes in the fair value of the ~~forwards.~~forward contracts. As of September 30, ~~2021,~~2022, the outstanding foreign currency forwards effectively hedged approximately ~~50%~~44% of the net Chinese Renminbi exposure infrom East West Bank (China) Limited.

102

Changes to the composition of the Company’s derivatives designated as hedging instruments during the first nine months of 2022 reflect actions taken for interest rate risk and foreign exchange rate risk management. The ~~decisions to reposition our~~Company repositions its hedging derivatives portfolio ~~are~~ based on the current assessment of economic and financial conditions, including the interest rate and foreign currency environments, balance sheet composition and trends, and the relative mix of ~~our~~its cash and derivative positions.

Derivatives Not Designated as Hedging Instruments — The Company enters into interest rate, foreign exchange and energy commodity contracts to support the business needs of its customers. When derivative transactions are executed with its customers, the derivative contracts are offset by paired trades with third-party financial institutions. The Company may enter into derivative contracts that are either exchange-traded, centrally cleared through a clearinghouse or over-the-counter.

The Company offers various interest rate derivative contracts to its customers. For the interest rate contracts entered into with its customers, the Company managed its interest rate risk by entering into offsetting interest rate contracts with third-party financial institutions including with central clearing organizations. Certain derivative Derivative contracts entered with central clearing organizations are settled-to-market daily to the extent the central clearing organizations’ ~~rulebooks~~rulebook legally characterize ~~the~~daily payments of variation margin as a settlement. ~~Derivative~~

The Company offers various interest rate derivative contracts to its customers and enters into offsetting contracts with third-party financial institutions, including central clearing organizations, to manage its interest risk. Interest rate derivative contracts allow borrowers to lock in attractive intermediate and long-term fixed rate financing while not increasing the interest rate risk to the Company. These transactions are not linked to any specific Company assets or liabilities on the Consolidated Balance Sheet, or to forecasted transactions in a hedging relationship, and are therefore classified as economic hedges. The contracts are marked-to-market at each reporting period. The changes in fair values of the derivative contracts traded with third-party financial institutions are expected to be largely comparable to the changes in fair values of the derivative transactions executed with customers throughout the terms of these contracts, except for the credit valuation adjustment component. The Company records credit valuation adjustments on derivatives to properly reflect the variances of credit worthiness between the Company and the counterparties, considering the effects of enforceable master netting agreements and collateral arrangements.

The Company enters into foreign exchange contracts with its customers ~~consisting of forward, spot, swap and option contracts~~ to accommodate ~~the~~their business ~~needs of its customers. For~~needs. The foreign exchange contracts include forward and spot contracts, swaps and options. To manage the foreign exchange risk and credit exposures from the contracts ~~entered into~~ with its customers, the Company ~~managed its foreign exchange and credit exposures by entering~~enters into offsetting foreign exchange contracts with third-party financial institutions and/or ~~entering~~enters into bilateral collateral and master netting agreements with certain customer counterparties. The changes in the fair values of contracts entered with third-party financial institutions are expected to be largely comparable to the changes in fair values of the foreign exchange transactions executed with the customers throughout the terms of these contracts. As of September 30, ~~2021,~~2022, the Company anticipates performance by all counterparties and has not experienced nonperformance by any of its counterparties, and therefore did not incur any related losses. The Company also utilizes foreign exchange contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in certain foreign ~~currency~~currency-denominated on-balance sheet ~~items,~~assets and liabilities, primarily foreign ~~currency denominated~~currency-denominated deposits offered to its customers. The Company’s policies permit taking proprietary currency positions within approved limits, in compliance with exemptions to proprietary trading restrictions provided under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Volcker Rule. The Company does not speculate in the foreign exchange markets, and actively manages its foreign exchange exposures within prescribed risk limits and defined controls.

The Company enters into energy commodity contracts with its customers to allow them to hedge against the risk of ~~fluctuation in~~ energy commodity ~~prices.~~price fluctuations. To economically hedge against the risk of fluctuation in energy commodity prices in the products offered to its customers, the Company enters into offsetting energy commodity contracts with third-party financial institutions, including ~~with~~ central clearing organizations. Certain derivative contracts entered into with central clearing organizations are settled-to-market daily, to the extent the central clearing organizations’ rulebooks legally characterize the variation margin as settlement. The changes in fair values of the energy commodity contracts traded with third-party financial institutions are expected to be largely comparable to the changes in fair values of the energy commodity transactions executed with customers throughout the terms of these contracts.

~~105~~

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 ~~2020~~2021 Form 10-K, andNote 23 — Fair Value Measurement and Fair Value of Financial Instruments and Note 56 — Derivatives to the Consolidated Financial Statements in this Form 10-Q.

~~Impact of Inflation~~

103

The primary impact of inflation on our operations is reflected in increased operating costs and in the effect that inflation may have on both short- and long-term interest rates. Since almost all the assets and liabilities of a financial institution are monetary in nature, interest rates generally have a more significant impact on a financial institution's performance than inflation. While inflation expectations do affect interest rates, interest rates do not necessarily move in the same direction, or to the same extent, as the prices of goods and services.

Critical Accounting Policies and Estimates

The Company’s significant accounting policies (are described in Note 1 — Summary of Significant Accounting Policies to the Consolidated Financial Statements ofin the Company’s ~~2020~~2021 Form ~~10-K)~~10-K. Certain of these policies include critical accounting estimates, which are ~~fundamental~~subject to ~~understanding our results of operations and financial condition. Some accounting policies, by their nature,~~valuation assumptions, subjective or complex judgments about matters that are inherently ~~subject to estimation techniques, valuation~~uncertain, and it is likely that materially different amounts could be reported under different assumptions and other subjective assessments and may require significant judgments in applying complex accounting principles to individual transactions, where actual results could differ materially from the Company’s estimates.conditions. The Company has procedures and processes in place to facilitate making these judgments. In addition, certain accounting policies are more likely than others to have a critical effect on the Company’s Consolidated Financial Statements, and may apply to areas of relatively greater business importance. The following accounting policies are critical to the Company’s Consolidated Financial Statements:

•~~fair value of financial instruments;~~

•allowance for ~~loan losses and unfunded~~ credit ~~commitments;~~losses;

•fair value estimates;

•goodwill impairment; and

•income taxes.

~~Recently Issued Accounting Standards~~

For ~~a detailed discussion and disclosure~~additional information on ~~new~~the Company’s critical accounting ~~pronouncements adopted,~~estimates involving significant judgments, see ~~Note 1~~Item 7. MD&A — Critical Accounting Estimates —~~Basis of Presentation and Current Accounting Developments~~ toin the ~~Consolidated Financial Statements in this~~Company’s 2021 Form ~~10-Q.~~10-K.

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 that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. A non-GAAP financial measure may also be a financial metric that is not required by U.S. GAAP or other applicable requirements. The Company believes these non-GAAP financial measures, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding its performance, and allow comparability to prior periods. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

~~106~~

The following tables present the reconciliations of U.S. GAAP to non-GAAP financial measures for the ~~periods presented:~~third quarters and first nine months of 2022 and 2021:

($ in thousands) Three Months Ended Nine Months Ended
September 30, 2021 June 30,
2021 September 30, 2020 September 30, 2021 September 30, 2020
Net interest income before provision for credit losses (a) $ 395,706 $ 376,473 $ 324,130 $ 1,125,874 $ 1,030,612
Total noninterest income (1)
73,109 68,431 54,503 214,406 165,715
Total revenue (b) $ 468,815 $ 444,904 $ 378,633 $ 1,340,280 $ 1,196,327
Total noninterest expense (1)
(c) $ 205,384 $ 189,523 $ 172,573 $ 585,984 $ 537,671
Less: Amortization of tax credit and other investments (1)
(38,008) (27,291) (17,209) (90,657) (57,819)
Amortization of core deposit intangibles (705) (710) (927) (2,147) (2,811)
Repurchase agreements’ extinguishment cost — — — — (8,740)
Non-GAAP noninterest expense (d) $ 166,671 $ 161,522 $ 154,437 $ 493,180 $ 468,301
Efficiency ratio (c)/(b) 43.81 % 42.60 % 45.58 % 43.72 % 44.94 %
Non-GAAP efficiency ratio (d)/(b) 35.55 % 36.30 % 40.79 % 36.80 % 39.14 %

~~(1)Starting fourth quarter of 2020, the Company reclassified certain income/losses from equity-method investments from~~ ~~Amortization of tax credit and other investments~~ to ~~Other investment income, with no effect on net income. Prior-period amounts have been revised to conform with the current presentation.~~

($ and shares in thousands, except per share data) September 30, 2021 June 30, 2021 September 30, 2020
Stockholders’ equity (a) $ 5,690,201 $ 5,547,548 $ 5,126,106
Less: Goodwill (465,697) (465,697) (465,697)
Other intangible assets (1)
(9,849) (10,309) (12,369)
Non-GAAP tangible common equity (b) $ 5,214,655 $ 5,071,542 $ 4,648,040
Total assets (c) $ 60,959,110 $ 59,854,876 $ 50,371,477
Less: Goodwill (465,697) (465,697) (465,697)
Other intangible assets (1)
(9,849) (10,309) (12,369)
Non-GAAP tangible assets (d) $ 60,483,564 $ 59,378,870 $ 49,893,411
Total stockholders’ equity to total assets (a)/(c) 9.33 % 9.27 % 10.18 %
Non-GAAP tangible common equity to tangible assets (b)/(d) 8.62 % 8.54 % 9.32 %
Number of common shares at period-end (e) 141,884 141,878 141,507
Non-GAAP tangible common equity per share (b)/(e) $ 36.75 $ 35.75 $ 32.85

~~(1)Includes core deposit intangibles and mortgage servicing assets.~~

~~107~~


($ in thousands)	($ in thousands)		Three Months Ended									Nine Months Ended						($ in thousands)		Three Months Ended September 30,			Nine Months Ended September 30,
			September 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020					2022			2021			2022			2021
Net income	Net income		$	225,449		$	224,742		$	159,537		$	655,185		$	403,713		Net income	(a)	$	295,339		$	225,449		$	791,320		$	655,185
Add: Amortization of core deposit intangibles	Add: Amortization of core deposit intangibles		705			710			927			2,147			2,811			Add: Amortization of core deposit intangibles		485			705			1,484			2,147
Amortization of mortgage servicing assets	Amortization of mortgage servicing assets		430			420			450			1,264			1,492			Amortization of mortgage servicing assets		340			430			1,096			1,264
Tax effect of adjustments (1)			(322)			(321)			(390)			(968)			(1,220)
Non-GAAP tangible net income		(a)	$	226,262		$	225,551		$	160,524		$	657,628		$	406,796
Tax effect of amortization adjustments (1)																		Tax effect of amortization adjustments (1)		(237)			(322)			(742)			(968)
Tangible net income																		Tangible net income	(b)	$	295,927		$	226,262		$	793,158		$	657,628

Average stockholders’ equity	Average stockholders’ equity		$	5,680,306		$	5,425,952		$	5,079,351		$	5,482,705		$	5,028,122		Average stockholders’ equity	(c)	$	5,772,638		$	5,680,306		$	5,765,637		$	5,482,705
Less: Average goodwill	Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)			(465,697)			Less: Average goodwill		(465,697)			(465,697)			(465,697)			(465,697)
Average other intangible assets (2)	Average other intangible assets (2)		(10,135)			(10,827)			(13,083)			(10,847)			(14,302)			Average other intangible assets (2)		(8,379)			(10,135)			(8,801)			(10,847)
Average non-GAAP tangible equity		(b)	$	5,204,474		$	4,949,428		$	4,600,571		$	5,006,161		$	4,548,123
Average tangible equity																		Average tangible equity	(d)	$	5,298,562		$	5,204,474		$	5,291,139		$	5,006,161

Return on average non-GAAP tangible equity (3)		(a)/(b)	17.25		%	18.28		%	13.88		%	17.56		%	11.95		%
Return on average equity (3)																		Return on average equity (3)	(a)/(c)	20.30		%	15.75		%	18.35		%	15.98		%
Tangible return on average tangible equity (3)																		Tangible return on average tangible equity (3)	(b)/(d)	22.16		%	17.25		%	20.04		%	17.56		%

(1)Applied statutory tax rate of 28.77% for the third quarter and first nine months of 2022. Applied statutory tax rate of 28.37% for the third quarter and first nine months of ~~2021, and the second quarter of~~ 2021. ~~Applied statutory tax rate of 28.35% for the third quarter and first nine months of 2020.~~

(2)Includes core deposit intangibles and mortgage servicing assets.

(3)Annualized.

Three Months Ended Nine Months Ended
Yield on Average Loans
($ in thousand) September 30,
2021 June 30,
2021 September 30,
2020 September 30,
2021 September 30,
2020
Interest income on loans (a) $ 363,503 $ 352,453 $ 336,542 $ 1,057,964 $ 1,115,804
Less: Interest income on PPP loans (15,212) (15,377) (7,778) (45,606) (29,067)
Adjusted interest income on loans (b) $ 348,291 $ 337,076 $ 328,764 $ 1,012,358 $ 1,086,737
Average loans (c) $ 39,960,151 $ 39,622,270 $ 37,160,445 $ 39,441,751 $ 36,487,859
Less: Average PPP loans (1,111,404) (1,870,385) (1,764,411) (1,634,617) (1,078,985)
Adjusted average loans (d) $ 38,848,747 $ 37,751,885 $ 35,396,034 $ 37,807,134 $ 35,408,874
Average loan yield (1)
(a)/(c) 3.61 % 3.57 % 3.60 % 3.59 % 4.08 %
Adjusted average loan yield (1)
(b)/(d) 3.56 % 3.58 % 3.70 % 3.58 % 4.10 %

~~(1)Annualized.~~

~~108~~

~~Forward-Looking Statements~~

Certain matters discussed in this Form 10-Q contain forward-looking statements that are intended to be covered by the safe harbor for such statements provided by the Private Securities Litigation Reform Act of 1995. In addition, the Company may make forward-looking statements in other documents that it files with, or furnishes to, the SEC and management may make forward-looking statements to analysts, investors, media members and others. Forward-looking statements are statements that are not historical facts, and are based on current expectations, estimates and projections about the Company’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company’s control, such as the future impacts of the COVID-19 pandemic. These statements relate to the Company’s financial condition, results of operations, plans, objectives, future performance and/or business. They usually can be identified by the use of forward-looking language, such as “likely result in,” “expects,” “anticipates,” “estimates,” “forecasts,” “projects,” “intends to,” “assumes,” “believes,” “plans,” “trend,” “objective,” “target,” “continues,” “remains,” “will,” “would,” “should,” “could,” “may,” “might,” “can,” or similar expressions, and the negative thereof. You should not place undue reliance on these statements, as they are subject to risks and uncertainties, including, but not limited to, those described in the documents incorporated by reference. When considering these forward-looking statements, you should keep in mind these risks and uncertainties, as well as any cautionary statements the Company may make. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company.

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

•~~changes in the U.S. economy, including an economic slowdown, inflation, deflation, housing prices, employment levels, rate of growth and general business conditions;~~

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

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

•changes in laws or the regulatory environment including regulatory reform initiatives and policies of the U.S. Department of Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the SEC, the Consumer Financial Protection Bureau, and the DFPI;

•~~the changes and effects thereof in trade, monetary and fiscal policies and laws, including the ongoing trade dispute between the U.S. and the People’s Republic of China;~~

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

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

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

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

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

•~~the soundness of other financial institutions;~~

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

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

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

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

•~~impact of the benchmark interest rate reform in the U.S. including the transition away from USD LIBOR to alternative reference rates;~~

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

•~~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;~~

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

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

~~109~~104

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



($ in thousands)		Three Months Ended September 30,			Nine Months Ended September 30,
		2022			2021			2022			2021
Net interest income before provision for (reversal of) credit losses		$	551,809		$	395,706		$	1,440,374		$	1,125,874
Total noninterest income		75,552			73,109			233,739			214,406
Total revenue	(a)	$	627,361		$	468,815		$	1,674,113		$	1,340,280





Total noninterest expense	(b)	$	215,973		$	205,384		$	602,283		$	585,984
Less: Amortization of tax credit and other investments		(19,874)			(38,008)			(48,753)			(90,657)
Amortization of core deposit intangibles		(485)			(705)			(1,484)			(2,147)

Adjusted noninterest expense	(c)	$	195,614		$	166,671		$	552,046		$	493,180

Efficiency ratio	(b)/(a)	34.43		%	43.81		%	35.98		%	43.72		%
Adjusted efficiency ratio	(c)/(a)	31.18		%	35.55		%	32.98		%	36.80		%



($ and shares in thousands, except per share data)		September 30, 2022		December 31, 2021
Stockholders’ equity	(a)	$	5,660,668	$	5,837,218
Less: Goodwill		(465,697)		(465,697)
Other intangible assets (1)		(8,667)		(9,334)
Tangible equity	(b)	$	5,186,304	$	5,362,187









Number of common shares at period-end	(c)	140,918		141,908
Book value per common share	(a)/(c)	$	40.17	$	41.13
Tangible equity per common share	(b)/(c)	$	36.80	$	37.79

•(1)~~heightened regulatory~~Includes core deposit intangibles and ~~governmental oversight and scrutiny of the Company’s business practices, including dealings with consumers;~~

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

•~~impact of regulatory enforcement actions;~~

•~~changes in accounting standards as may be required by the FASB or other regulatory agencies and their impact on critical accounting policies and assumptions;~~

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

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

•~~impact on the Company’s liquidity due to changes in the Company’s ability to pay dividends and repurchase common stock and to receive dividends from its subsidiaries;~~

•~~any future strategic acquisitions or divestitures;~~

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

•~~fluctuations in foreign currency exchange rates;~~

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

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

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

~~For a more detailed discussion of some of the factors that might cause such differences, see the Company’s 2020 Form 10-K under the heading~~ ~~Item 1A. Risk Factors~~ ~~and the information set forth under~~ ~~Item 1A. Risk Factors~~ in this Form 10-Q. The Company does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements to reflect the occurrence of events or circumstances after the date of such statements except as required by law.

~~110~~105

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, see Note 56 — Derivatives to the Consolidated Financial Statements in this Form 10-Q and Item 2. MD&A — Risk Management — Market Risk Management in this Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of September 30, ~~2021,~~2022, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the 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, ~~2021.~~2022.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the 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 were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended September 30, ~~2021,~~2022, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

~~111~~106

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 910 — Commitments and Contingencies — Litigation to the Consolidated Financial Statements in Part I of this Form 10-Q, incorporated herein by reference.

ITEM 1A. RISK FACTORS

The Company’s ~~2020~~2021 Form 10-K contains disclosure regarding the risks and uncertainties related to the Company’s business under the heading Item 1A. Risk Factors. There has been no material change to the Company’s risk factors as presented in the Company’s ~~2020~~2021 Form 10-K.

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

There were no unregistered sales of equity securities or repurchase activities during the ~~three months ended September 30, 2021.~~

third quarter of 2022.

~~112~~107

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/A~~S-4 filed with the Commission on ~~November 13,~~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. 000-24939).]

3.1.2						Amendment to Certificate of Incorporation to Increase Authorized Shares of the Registrant [Incorporated by reference from Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 15, 2005 (File No. 000-24939).]

3.1.3						Certificate of Amendment to Certificate of Incorporation of the Registrant [Incorporated by reference to Exhibit A from ~~the~~ Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2008 (File No. 000-24939).]

3.1.4						Certificate of Designations of 8.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series A of the Registrant [Incorporated by reference to Exhibit 3.1 from Registrant’s Current Report on Form 8-K, filed with the Commission on April 30, 2008 (File No. 000-24939).]

3.1.5						Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on December 9, 2008 (File No. 000-24939).]

3.1.6						Certificate of Designations of Mandatorily Convertible Cumulative Non-Voting Perpetual Preferred Stock, Series C of the Registrant [Incorporated by reference to Exhibit 3.1, 4.1 from Registrant’s Current Report on Form 8-K filed with the Commission on November 12, 2009 (File No. 000-24939).]

3.2						Amended and Restated Bylaws of the Registrant dated ~~January 29, 2013~~May 26, 2022 [Incorporated by reference to Exhibit ~~3.10~~3.1 from Registrant’s Current Report on Form 8-K filed with the Commission on ~~January 30, 2013~~May 27, 2022 (File No. 000-24939).]







10.1						Amendment to Employment Agreement - Irene H. Oh. Filed herewith.







31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

101.INS						The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document. Filed herewith.

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith.

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith.

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith.

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith.

104						Cover Page Interactive Data (formatted as Inline XBRL and contained in Exhibit 101 filed herewith). Filed herewith.

~~113~~108

GLOSSARY OF ACRONYMS


AFS	Available-for-sale	~~HELOC~~LCH	~~Home equity line of credit~~London Clearing House
ALCO	Asset/Liability Committee	~~LCH~~LGD	~~London Clearing House~~Loss given default
AOCI	Accumulated other comprehensive (loss) income	~~LGD~~	~~Loss given default~~
~~ARPA~~	~~American Rescue Plan Act of 2021~~	LIBOR	London Interbank Offered Rate
~~ARRC~~ASC	~~Alternative Reference Rates Committee~~Accounting Standards Codification	LIBOR Act	Adjustable Interest Rate (LIBOR) Act
ASU	Accounting Standards Update	LTV	Loan-to-value
~~ASC~~C&I	~~Accounting Standards Codification~~Commercial and industrial	MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~ASU~~	~~Accounting Standards Update~~	~~MMBTU~~	~~Million British thermal unit~~
~~C&I~~	~~Commercial and industrial~~	~~MSLP~~	~~Main Street Lending Program~~
~~CAA~~	~~Consolidated Appropriations Act, 2021~~	~~NAV~~	~~Net asset value~~
CARES Act	Coronavirus Aid, Relief, and Economic Security Act	~~OREO~~MMBTU	~~Other real estate owned~~Million British thermal unit
CECL	Current expected credit losses	NAV	Net asset value
CLO	Collateralized loan obligations	NRSRO	Nationally recognized statistical rating organizations
CME	Chicago Mercantile Exchange	OREO	Other real estate owned
COVID-19	Coronavirus Disease 2019	OTTI	Other-than-temporary impairment
~~CET1~~CRA	~~Common Equity Tier 1~~Community Reinvestment Act	PD	Probability of default
~~CLO~~CRE	~~Collateralized loan obligation~~Commercial real estate	PPP	Paycheck Protection Program
~~CME~~DIF	~~Chicago Mercantile Exchange~~	~~PPPLF~~	~~Paycheck Protection Program Liquidity Facility~~
~~COVID-19~~	~~Coronavirus Disease 2019~~Deposit Insurance Fund	RMB	Chinese Renminbi
~~CRA~~EPS	~~Community Reinvestment Act~~Earnings per share	ROA	Return on average assets
~~CRE~~ERM	~~Commercial real estate~~Enterprise risk management	ROE	Return on average equity
~~DFPI~~EVE	~~California Department~~Economic value of ~~Financial Protection and Innovation~~equity	RPA	Credit risk participation agreement
~~EPS~~FDIC	~~Earnings per share~~Federal Deposit Insurance Corporation	RSU	Restricted stock unit
~~ERM~~	~~Enterprise risk management~~	~~S&P~~	~~Standard and Poor's~~
~~EVE~~	~~Economic value of equity~~	~~SBA~~	~~Small Business Administration~~
~~FASB~~	~~Financial Accounting Standards Board~~	~~SBLC~~	~~Standby letter of credit~~
~~FCA~~	~~Financial Conduct Authority~~	~~SEC~~	~~U.S. Securities and Exchange Commission~~
FHLB	Federal Home Loan Bank	~~SOFR~~SBLC	~~Secured Overnight Financing Rate~~
~~FOMC~~	~~Federal Open Market Committee~~	~~TDR~~	~~Troubled debt restructuring~~Standby letters of credit
FRBSF	Federal Reserve Bank of San Francisco	~~U.S.~~SEC	~~United States~~U.S. Securities and Exchange Commission
FTP	Funds transfer pricing	~~USD~~SOFR	~~U.S. dollar~~Secured Overnight Financing Rate
GAAP	Generally ~~accepted accounting principles~~Accepted Accounting Principles	~~VIE~~TDR	~~Variable interest entity~~Troubled debt restructuring
GDP	Gross Domestic Product	U.S.	United States
HELOC	Home equity lines of credit	USD	U.S. dollar
HTM	Held-to-maturity	VIE	Variable interest entity

~~114~~109

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:

November 8, ~~2021~~2022

EAST WEST BANCORP, INC.
(Registrant)

/s/ IRENE H. OH

Irene H. Oh

Executive Vice President and
Chief Financial Officer

~~115~~110



($ in thousands)	September 30, 2021
	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis		Total


	Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior
Commercial:
C&I:
Pass	$	3,136,513	$	1,454,547	$	787,238	$	279,254	$	175,669	$	244,616	$	7,069,657	$	29,053	$	13,176,547
Criticized (accrual)	75,943		168,029		110,500		13,700		1,475		4,489		183,809		—		557,945
Criticized (nonaccrual)	5,171		338		17,889		20,148		12,538		1,356		39,717		—		97,157


Total C&I	3,217,627		1,622,914		915,627		313,102		189,682		250,461		7,293,183		29,053		13,831,649
CRE:
CRE:
Pass	1,956,957		2,181,275		2,288,701		1,965,724		1,181,060		1,869,183		148,077		6,427		11,597,404
Criticized (accrual)	77,286		8,095		9,206		31,093		25,136		55,609		—		—		206,425
Criticized (nonaccrual)	4,425		—		—		4,648		4,752		411		—		—		14,236


Subtotal CRE	2,038,668		2,189,370		2,297,907		2,001,465		1,210,948		1,925,203		148,077		6,427		11,818,065
Multifamily residential:
Pass	611,439		752,178		692,580		432,959		316,412		451,180		19,420		—		3,276,168
Criticized (accrual)	—		—		725		23,512		7,121		31,729		—		—		63,087
Criticized (nonaccrual)	—		—		—		—		—		1,123		—		—		1,123


Subtotal multifamily residential	611,439		752,178		693,305		456,471		323,533		484,032		19,420		—		3,340,378
Construction and land:
Pass	102,619		99,857		111,607		16,986		—		1,252		—		—		332,321
Criticized (accrual)	3,398		—		—		22,156		—		19,046		—		��		44,600
Criticized (nonaccrual)	—		—		—		—		—		—		—		—		—
Subtotal construction and land	106,017		99,857		111,607		39,142		—		20,298		—		—		376,921
Total CRE	2,756,124		3,041,405		3,102,819		2,497,078		1,534,481		2,429,533		167,497		6,427		15,535,364
Total commercial	5,973,751		4,664,319		4,018,446		2,810,180		1,724,163		2,679,994		7,460,680		35,480		29,367,013
Consumer:
Residential mortgage:
Single-family residential:
Pass (1)	2,131,943		2,214,125		1,465,612		1,169,483		825,120		1,203,031		—		—		9,009,314
Criticized (accrual)	—		—		374		490		1,633		1,214		—		—		3,711
Criticized (nonaccrual) (1)	—		397		2,178		1,712		1,168		3,321		—		—		8,776
Subtotal single-family residential	2,131,943		2,214,522		1,468,164		1,171,685		827,921		1,207,566		—		—		9,021,801
HELOCs:
Pass	20		1,799		258		1,295		3,343		12,578		1,710,540		223,057		1,952,890
Criticized (accrual)	7		—		—		200		—		222		2		1,570		2,001
Criticized (nonaccrual)	—		—		151		188		3,523		1,579		—		3,290		8,731
Subtotal HELOCs	27		1,799		409		1,683		6,866		14,379		1,710,542		227,917		1,963,622
Total residential mortgage	2,131,970		2,216,321		1,468,573		1,173,368		834,787		1,221,945		1,710,542		227,917		10,985,423
Other consumer:
Pass	16,737		5,382		—		—		1,741		51,529		51,389		—		126,778
Criticized (accrual)	—		—		—		—		—		—		—		—		—
Criticized (nonaccrual)	—		—		—		—		2,491		—		—		—		2,491
Total other consumer	16,737		5,382		—		—		4,232		51,529		51,389		—		129,269
Total consumer	2,148,707		2,221,703		1,468,573		1,173,368		839,019		1,273,474		1,761,931		227,917		11,114,692
Total	$	8,122,458	$	6,886,022	$	5,487,019	$	3,983,548	$	2,563,182	$	3,953,468	$	9,222,611	$	263,397	$	40,481,705



($ in thousands)	Amount
Remainder of 2021	$	602
2022	1,865
2023	1,199
2024	553
2025	11

Total	$	4,230


		Page
~~Overview~~Forward-Looking Statements		5762
~~Selected Financial Data~~Overview		5964
Financial Review		6066
Results of Operations		6067
	Net Interest Income	6167
	Noninterest Income	6673
	Noninterest Expense	6775
	Income Taxes	6875
	Operating Segment Results	6876
Balance Sheet Analysis		7279
	Debt Securities	7279
	Loan Portfolio	7681
	Foreign Outstandings	8387
	Capital	8387
	Deposits and Other Sources of ~~Funds~~Funding	8488
	Regulatory Capital and Ratios	85
~~Other Matters~~		86
~~Off-Balance Sheet Arrangements~~		8789
Risk Management		8890
	Credit Risk Management	8891
	Liquidity Risk Management	9896
	Market Risk Management	~~100~~98
Critical Accounting Policies and Estimates		~~106~~104
Reconciliation of GAAP to Non-GAAP Financial Measures		~~106~~
~~Forward-Looking Statements~~		~~109~~104



		Three Months Ended									Nine Months Ended
Yield on Average Loans ($ in thousand)		September 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Interest income on loans	(a)	$	363,503		$	352,453		$	336,542		$	1,057,964		$	1,115,804
Less: Interest income on PPP loans		(15,212)			(15,377)			(7,778)			(45,606)			(29,067)
Adjusted interest income on loans	(b)	$	348,291		$	337,076		$	328,764		$	1,012,358		$	1,086,737

Average loans	(c)	$	39,960,151		$	39,622,270		$	37,160,445		$	39,441,751		$	36,487,859
Less: Average PPP loans		(1,111,404)			(1,870,385)			(1,764,411)			(1,634,617)			(1,078,985)
Adjusted average loans	(d)	$	38,848,747		$	37,751,885		$	35,396,034		$	37,807,134		$	35,408,874

Average loan yield (1)	(a)/(c)	3.61		%	3.57		%	3.60		%	3.59		%	4.08		%
Adjusted average loan yield (1)	(b)/(d)	3.56		%	3.58		%	3.70		%	3.58		%	4.10		%